- Wall Street’s pipe dream… and the pipe is stuffed with hopium
- Numbers that don’t add up for Trump’s agenda
- Saving Social Security by lowering life expectancy
- The Washington Post journo-splains its sloppy smear
- Does Trump’s SecDef think Russia “hacked the election”?
- When editors disagree, revisited
Bubbles: The bigger they blow up, the harder they burst…
Yesterday, the major U.S. stock indexes posted their biggest one-day gains of the entire “Trump bump.” The Dow industrials leaped 300 points, past the 19,500 mark.
For the record, that’s nearly 1,300 Dow points since Election Day. Has anything fundamentally changed to merit a 7% increase in stock valuations over the last month?
The front page of this morning’s Wall Street Journal took a deep drag of the hopium: “Investors are embracing the prospect of tax cuts, regulatory rollbacks and fiscal stimulus under Republican leadership in Washington. Such bets have lifted shares of banks and industrial companies and sent government bonds tumbling.”
If you’ve been reading us for the last week or so, you know David Stockman thinks that’s all a (hopium) pipe dream.
As you might know, David was White House budget director during Reagan’s first term. He knows numbers. And he says Trump’s numbers don’t add up. Well, they do add up, but the totals are off the charts. Just to fund existing government programs and the planned increases in those programs will require the debt ceiling to be raised $4.5 trillion over the next four years.
“That’s before one dime of new money for any of Trump’s many promises,” says David, “with respect to defense, borders, veterans, law enforcement, tax cuts and infrastructure.”
By the way, that $4.5 trillion number relies on estimates from the Congressional Budget Office. And those estimates assume there will be no recession until at least 2026!
As a reminder, the debt ceiling is currently suspended under the “zombie budget” agreed to by President Obama and House Speaker Paul Ryan in the autumn of last year. When the debt ceiling comes back into force on March 15 — that’s Day 55 of the Trump presidency — the national debt will have topped $20 trillion.
David also knows a thing or two about getting Congress to line up behind a president’s budget priorities. So here’s another number to chew on…
“Twenty-five–forty percent of congressional Republicans will never be persuaded to vote for what would amount to a $25–$27 trillion debt ceiling just to cover the built-in red ink plus a minimal version of the Trump Stimulus for the fiscal years 2018–2021.
“Indeed, recurring battles over the debt ceiling, which will exceed $20 trillion when the current ‘holiday’ expires on March 15, will be lodged continuously and disruptively at the center of the fiscal process and will thwart timely action on anything that resembles the early stimulus jolt to the economy that Wall Street is now so mindlessly anticipating.”
Granted, that’s still more than three months in the future. But David believes something else will pop the stock bubble — or, to borrow Trump’s expression during the first debate this fall, a “big, fat, ugly bubble” — much sooner.
The last time the Federal Reserve raised interest rates, the S&P 500 dove 11% over the following eight weeks. David expects at least as big a move when the Fed acts again next Wednesday. Only this time, there won’t be any rip-roaring recovery — because of all those numbers we laid out above.
Tonight at 7:00 p.m. EST, David holds an online workshop live from his home in Aspen, Colorado. There he’ll lay out a strategy in which you could quadruple your money amid the kind of market turmoil we haven’t seen since the Panic of 2008. With go-time approaching, our available slots are filling fast. Claim yours right here and you can watch this workshop free.
The major U.S. stock indexes are catching their breath after yesterday’s run-up. They’re essentially flat compared with yesterday’s close. Treasury yields are inching back up, the 10-year approaching 2.4%.
Gold remains stuck in neutral at $1,171… but that’s good performance in light of dollar strength today. The dollar index is up nearly 1%, at 101.1, thanks to a newly weakened euro. Early this morning, the European Central Bank decided to extend its “quantitative easing” program through the end of next year, while dialing back the amount after next March to 60 billion euros a month.
Crude dipped below $50 overnight, but has recovered that level at last check.
The morning brings new affirmation of our thesis about “the awful way Social Security might be ‘saved.’”
Your editor laid out the idea 18 months ago in The Daily Reckoning, and before that in the former Apogee Advisory: Aging, well-educated high earners are staying in the workforce longer and contributing to the system. Meanwhile, less-educated low earners are dying off before they can collect much, if anything, from the system.
Now comes word from the National Center for Health Statistics that U.S. life expectancy has fallen for the first time in more than two decades — from 78.9 years to 78.8. It’s the first drop since HIV and AIDS took their heaviest toll in 1993. And it comes after the number had plateaued the preceding three years. The steady increase in U.S. life expectancy going back to the 1970s appears to be over.
The decrease can be attributed in part to a 0.9% increase in the death rate from heart disease — also a reversal after decades of gains going back to the ’70s. The increase in obesity since the 1980s is catching up with medical progress.
[Alas, the researchers didn’t go the next step and point out what we did in 2014: The increase in obesity began at the same time the government issued its first Dietary Guidelines for Americans — demonizing saturated fat and promoting carbohydrates. Oh, well…]
Significantly, the researchers also say more people are dying younger. “Old-age mortality has not changed that much, but there’s been pronounced increases in mortality in the middle ages,” says Elizabeth Arias, one of the report’s authors.
That jibes with research we cited a year ago from Princeton University — showing the death rate exploding between 1999–2014 among middle-age white Americans with no more than a high-school education. There, the causes are largely suicides and substance abuse.
Grim as it sounds, we’re talking about many people who might’ve paid payroll taxes for 20 or 30 years… but won’t collect a penny of old-age benefits.
Meanwhile, we see Drudge linking to a story about the British government recommending that people delay or forego retirement if they want to live longer.
“People are living longer than ever and so retirement presents a real opportunity for baby boomers to be more active than ever before,” says Dr. Sally Davies, who’s the U.K.’s equivalent of the surgeon general. “Staying in work, volunteering or joining a community group can make sure people stay physically and mentally active for longer,” she tells The Guardian. “The health benefits of this should not be underestimated.”
At 67, Davies is eating her own cooking by staying in the workforce… and that’s to her credit. But her situation reminds us of a statistic we dug up for our original article: Nearly two-thirds of American men with a professional degree ages 62–74 are still working. Not all of them are working full time… but nearly all of them are paying payroll taxes.
Hmmm… At the rate we’re going, it’s possible Social Security’s insolvency date — officially 2033, but more likely 2026 — could start being pushed back. As we say, it’s an awful way to “save” Social Security.
It took nearly two weeks but The Washington Post has finally gotten around to appending an editor’s note to the top of its sloppy smear against 200 websites for “echoing Russian propaganda” — including David Stockman’s Contra Corner.
As we pointed out a week ago Monday, the Post story relied most heavily on a blacklist of sites assembled by PropOrNot — a “research” organization whose membership and funding sources remain a mystery.
The editor’s note reads in part: “A number of those sites have objected to being included on PropOrNot’s list, and some of the sites, as well as others not on the list, have publicly challenged the group’s methodology and conclusions. The Post, which did not name any of the sites, does not itself vouch for the validity of PropOrNot’s findings regarding any individual media outlet, nor did the article purport to do so. Since publication of The Post’s story, PropOrNot has removed some sites from its list.”
So the Post “does not itself vouch for the validity” of research put out by people the Post touted as “expert analysts.” Alrighty then…
As the progressive media critic Adam Johnson paraphrases it, “This blacklist that served as the entire news basis of our piece is bull**** but we won’t retract the story.”
Nor are the elites going to let go. Certainly not Rep. Adam Schiff (D-California). Last night on Fox News, Tucker Carlson gently pushed Schiff to describe the evidence that Russia “hacked the election.” Having no such evidence, Schiff resorted to denouncing Carlson as a Kremlin tool whose show should be on RT.
And we thought we’d be done with this toxic nonsense after Mrs. Clinton lost…
Come to think of it, the Russia-bashers might have an unlikely ally in Trump’s chosen secretary of defense, retired Marine Gen. James Mattis.
The Washington Times tells us of a speech Mattis gave to the Heritage Foundation in May of last year. Among global threats, he said, “in the near term, I think the most dangerous might be Russia.
“I would just tell you that as you look at the Russia situation, I think it is much more severe and much more serious than we have acknowledged.”
Huh… That certainly doesn’t line up with Trump’s rhetoric. To be continued…
“How does The 5’s free trade stance,” a reader writes, “reckon with all of Jim’s protectionist policy recommendations in his new book, The Road to Ruin?”
The 5: At the risk of repeating ourselves: Unlike certain publishers, there’s no “company line” for our editors to toe.
Way we figure it, that would lead to editors holding their tongues — which sucks all the life out of their analysis. Too, we respect the intelligence of our readers enough to allow you to come to your own conclusions in the event of disagreement.
And as an advocate for our entire stable of editors — truly the smartest bunch of people anyone would be privileged to meet — I have no trouble speaking up for Jim Rickards’ impressive body of work; any policy disagreements I might have with him shrink into insignificance.
Really, if we all lived exclusively in our own ideological bubbles, the world would be a lot more boring…
The 5 Min. Forecast
P.S. A brief and urgent note from David Stockman we wanted to pass along…
“I’m afraid this is your last chance.
“After tonight, you will be closed out of one of the most important warnings of 2017. Remember, I’m predicting that our stock market bubble could start to pop just days from now.
“Because of the urgency, we’ve made our crash broadcast tonight free of charge to you. There’s no long video to watch or anything you need to buy. Simply read my urgent training event details and reserve your virtual seat with your email address. But hurry — your chance is gone in just a matter of hours.”
>> RSVP NOW <<
The 5’s compelled to visit our periodic theme of media malpractice — especially the elitist nature of corporate media here in the 21st century. Read More
Exposed? Media elites and other connected insiders might be colluding with finance types on lucrative trades in the markets. Read More
“Private equity companies are sitting on more than $2 trillion,” says Zach Scheidt. Here’s how these lucrative companies “make money in both good times and bad.” Read More
“There’s no legal impediment to even higher debt levels,” says Jim Rickards, “if Congress wishes.” But there’s no good way out… Read More
Social media’s swift ban hammer on “hate speech” and “misinformation” is more self-serving than you think. Read More
“SPACs right now are hot,” Ray says, “and everyone wants to get into the action somehow.” Read More
Go figure: At the time of writing, the S&P 500 is only 2% off its all-time high — which was achieved only six weeks ago. Read More
Apple’s pricey new iPhone “primes consumers for the higher cost of even more advanced connectivity that could be making its way,” Ray Blanco says. Read More
A curious mainstream narrative begs the question: Is there a 2020 version of the “Froman email” floating around Wall Street and D.C.? Read More
Regardless of the election, gold’s scarcity coupled with swelling demand — and a pandemic in the background — seem like a recipe for a Midas metal rebound. Read More