Friday, February 24, 2017

Observations and Sample of Recent Trades (SGY:CA-ZPTAF, VWELX, BIREF): 2/24/17/GOP and Healthcare/ Economic Nationalism = Nihilistic Protectionism

The GOP and Medicare

For the past several weeks, I have seen an AARP advertisement that is a video clip showing Trump promising to protect Medicare. 

Protect Medicare - YouTube

The GOP wants to get rid of Medicare in its current form. Paul Ryan is leading the charge: Paul Ryan's Health Care Plan Would Privatize Medicare-NPRPaul Ryan is determined to kill Medicare. This time he might succeed. - LA Times;A Battle to Change Medicare Is Brewing, Whether Trump Wants It or Not - The New York Times

The GOP almost unanimously voted for a Ryan voucher plan in 2011 that would have doubled premium costs in 2022 for those then under 55.  Those numbers come from the CBO: Figure 1 at page 3

Their 2011 plan did contain more tax cuts for the wealthy in what was then called the GOP's Path to Prosperity and is now called Make America Great Again. The Achilles Heel Of The Path To Prosperity | New Republic

There would be justice given to the Trump middle class white voters when and if the GOP succeeds in replacing traditional Medicare. The rich do not need Medicare. Medicare is a program for the middle class that was signed into law in 1965. 

While more Democrats supported the Medicare's passage than Republicans, the plan did receive meaningful republican support: 

Social Security History

The republican party was far different then compare to where it is now.

The GOP is not a conservative party, and we need to quit humoring them with that label. 

My advice to the GOP is to leave your desire to dismantle Medicare on the backburner until you are able to pass your "tax reform" legislation and your "replacement" for Obamacare that will provide "better coverage" at a "lower price". If you remind people about your plans for Medicare when attempting to repeal Obamacare, you will regret your decision. 

GOP Plan Would Cover Fewer People; Blowback Grows - Bloomberg (giving people a tax credit to buy health insurance will not help those who pay no or a nominal amount of federal income taxes-45% of Americans pay no federal income tax)

Cancer patients, survivors fear GOP efforts to dismantle the Affordable Care Act - The Washington Post


GOP's Hit List

In the coming weeks, those who support the following programs that receive some federal funding may want to keep abreast of GOP efforts to eliminate or severely cut their federal funding. 

Planned Parenthood of course is at the top of that list. The GOP shut down the government due in part to the Democrats' unwillingness to defund that organization. Funding will now be cut off. 

Other programs on the GOP hit list include the following: 

Corporation for Public Broadcasting

National Endowment for the Arts and Humanities
Legal Service Corporation 
AmeriCorps and SeniorCorps 
Export Import Bank
Neighborhood Reinvestment Corporation 
Appalachian Regional Commission 

Popular Domestic Programs Face Ax Under First Trump Budget - The New York Times

AmeriCorps | Corporation for National and Community Service

Senior Corps | Corporation for National and Community Service
LSC - Legal Services Corporation: America's Partner for Equal Justice
CPB | A Private Corporation Funded by the American People
Home - NeighborWorks America
Home - Appalachian Regional Commission

None of those programs help rich people. Making rich people richer is the GOP's key to making America great again, but don't say that out loud since the middle class might not be so anxious to support the GOP's trickle down policies and elimination of programs intended for the poor and/or the middle class.

The GOP has been trying to eliminate funding for many of those programs since 1994. Now they are in the driver's seat to do so.

Funds spent on those programs can then be redirected into building the GOP's wall.  


Protestors at GOP Town Hall Meetings Are Paid Liberal Activist According to Trump's GOP

They are going to be a lot of upset people who will lose their healthcare when the GOP is finished with them. Many of them receive premium support payments and/or were unable to afford health insurance due to pre-existing conditions. 

Rather than accepting that a significant number of people are upset and concerned about what the GOP will do them, and their concerns are legitimate, many GOP politicians are avoiding Town Hall meetings or are claiming that those who show up to express their feelings and concerns are paid protesters. 

Trump explains those protests to Trump Nation as follows: 

"The so-called angry crowds in home districts of some Republicans are actually, in numerous cases, planned out by liberal activists. Sad!"

At one GOP Sen.'s town hall, protesters scoff at "paid" allegations - CBS News; Contrary to claims, backlash against GOP lawmakers at recent town halls appears organic - MarketWatch

The Alternate Fact Guy, Sean Spicer, said they were a 'very paid, AstroTurf-type movement.” Sean does not talk so good. 

Everybody who disagrees with Donald is a so-called something or another.

No criticism of the Orang King is legitimate in his mind. Just another of the many highly undesirable traits of someone suffering from acute narcissistic personality disorder.

Narcissistic personality disorder Symptoms - Mayo Clinic

As with other GOP Fake News, no proof is offered that this has in fact occurred anywhere. 

Given the GOP's agenda, it is inevitable that citizens will show up at town hall meetings and elsewhere who have legitimate concerns. 

Other republicans claim that George Soros is financing just about all of those protesters. Proof is not required when the GOP creates Fake News. GOP Reality Creations are the New Normal. It does work for them and will continue to do so.

Politfact is wasting its time giving that claim a Pants on Fire rating: Pants on Fire claim that George Soros money went to Women's March protesters | PolitiFact 

The people who make those charges are immune to reason and have been inoculated against receiving and processing accurate information.   

An example is a young faux blonde "reporter" who claims that George Soros funded the Women's March since he made charitable contributions to Planned Parenthood.  


Sean Spicer-The Alt-Fact Guy In An Alternate Reality Universe

White House calls U.S.-Mexico relationship 'phenomenal' as Mexican leaders lash out - POLITICO

Tillerson, Kelly head to Mexico amid deep strains in bilateral ties - The Washington Post


Maximum Optimism in the Stock Market

Goldman Sachs opines that investors are approaching the point of "maximum optimism". I would argue that that they have already arrived. Investors may be banking too much on Trump lifting earnings - MarketWatch

I am continuing to move slowly down a long ramp into my bunker.


Vanguard - Vanguard Health Care Fund Investor Shares (VGHCX)

I did add $2,350 to my VGHCX position starting on 12/27/16 and into January 2017. 

The fund paid another large year end distribution that resulted in lower prices. 

I reinvested the year end dividend to buy more shares at $185.65 (12/23/16). 

Healthcare stocks in the aggregate underperformed the S & P 500 in 2016. 

The Vanguard Health Care Index Fund ETF (VHT) had a total return of  -3.21% last year.

The SPDR® S&P 500 ETF (SPY) has a total return of 12%.

I own VGHCX shares in two Vanguard accounts. 

I may eliminate the position in one account, which has the higher cost shares, in March provided the shares continue their uptrend in price. That would be part of my ongoing stock allocation reduction

The GOP's Economic Nationalism = Nihilistic Protectionism/Mercantilism

I do not understand why investors are ignoring the protectionist talk originating from Trump and the SS Soul Brothers, Steve Bannon and Steve Miller.  

Bannon and Trump are clearly pursuing a protectionist agenda with a strong nihilistic flavor. 

Existing trade agreements are just one area where Bannon and Trump want to blow up the current world order, create a lot of chaos in the existing world trade arrangements,  and then substitute their America First agenda. 

Bannon has a new name for protectionism and 17th century Mercantilism,

Bannon calls protectionist trade policies  "economic nationalism", which does sound better than protectionism. 

Bannon and Trump are not going to fool America's trading partners with a new phrase for a policy that has failed in the past. 

I have referred many times over the past several months to Trump's seriousness on the trade issues. I simply refer to his frequent speeches and remarks that are crystal clear on this subject for anyone paying attention which of course excludes the Stock Jocks.  

I will just link a transcript of Bannon's remarks yesterday on this subject: CPAC: Steve Bannon and Reince Priebus' Interview Transcript | Time.comSteve Bannon Touts Trump's 'Economic Nationalist Agenda' - NBC News

For some reason, Bannon and Trump believe that the U.S. can push other countries around to sign new bilateral trade agreements that disadvantage them while bestowing new benefits on the U.S. We shall see how that works out soon enough.  

On Trade, Donald Trump Breaks With 200 Years of Economic Orthodoxy - The New York Times

I thought republicans liked Adam Smith.

Pooh on that guy:

Donald Trump's mercantilist trade policy was debunked by economist Adam Smith more than 200 years ago — Quartz

Steve Bannon is not a conservative. He is the antithesis of a true conservative. He is an extreme reactionary bomb throwing nihilist. The voters chose him and that other guy. So, IMO, the U.S. deserves what happens next. We need to pray that the Stock Jocks are seeing the future correctly rather than hallucinating again.


Other News

FBI refused White House request to knock down recent Trump-Russia stories - CNNWhite House adviser asked FBI to dispute Russia reports - The Washington Post

I now want to know whether the FBI had contacted the White House and told them that the NYT report was not accurate. The WH is making that claim now to explain why Priebus tried to put political heat on them to go public about their ongoing investigation.  

White House Staffers Dismissed, Failed Background Checks - NBC News

White House hints at crackdown on recreational marijuana | TheHillTrump administration signals a possible crackdown on states over marijuana - LA Times

Air Force Stumped by Trump's Claim of $1 Billion Savings on Jet - Bloomberg


1. Intermediate Term Bond Ladder Strategy-Underweighted

A. Bought 1 Northern States 2.15% First Mortgage Bond Maturing on 8/15/22:

FINRA Page: Bond Detail (prospectus linked at FINRA Page)

Moody's RatingAa3 (01/31/2014)
Standard & Poor's RatingA (08/08/2012)
Fitch RatingA+ (12/22/2016)

YTM at Total Cost (98.417) = 2.459%

Northern States Power is an electric utility that is wholly owned by Xcel Energy (XEL).   

The prospectus for this first mortgage bond has two basic modifications to a standard make whole provision:

First, the issuer may redeem on or after 7/15/20 at par value plus accrued interest.

"At any time on or after July 15, 2020, we may redeem, in whole or in part, the 2020 Bonds, at 100% of the principal amount of the bonds being redeemed plus accrued and unpaid interest thereon to but excluding the date fixed for redemption."

I doubt that the issuer will find it advantageous to exercise its optional redemption right a par plus accrued interest on or after 7/15/20. The coupon is just too low. The below par value price of this bond supports that opinion. 

The prospectus also shows the costs related to the issuance of the 2022 bond. Underwriters receive part of the proceeds through their underwriting discount, and the issuer has other costs connected to offering too: 

Second, there is a make whole provision for a redemption prior to 7/15/20, but the bond owner only receives the remaining interest payments discounted to present value as if the bond matured that day. 

"At any time prior to July 15, 2020, we may redeem, in whole or in part, the 2020 Bonds at a “make whole” redemption price equal to the greater of (i) 100% of the principal amount of such bonds being redeemed or (ii) the sum of the present values of the remaining scheduled payments of principal and interest on the bonds being redeemed that would be due if such bonds matured on July 15, 2020 (excluding the portion of any such accrued and unpaid interest to but excluding the date fixed for redemption), discounted to the date fixed for redemption on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Yield (as defined below) plus 10 basis points, plus, in each case, accrued and unpaid interest thereon to but excluding the date fixed for redemption." 

Those exceptions to a standard make whole provision are for the issuer's benefit.  

Xcel Energy SEC Filings

Xcel 2016 4th Quarter Earnings Report 

B. Bought 2 Tampa Electric 2.6% Senior Unsecured Bonds Maturing on 9/15/22:

Tampa Electric is now owned by the Canadian utility company Emera Inc. (EMA:TOR) as a result of its acquisition of TECO Energy: Emera Closes Acquisition of TECO Energy ("Tampa Electric serves nearly 725,000 customers in West Central Florida")

Vital Statistics - Tampa Electric

I bought one bond in a Roth IRA and another in my IB account where there has been a significant cash buildup. I earn zero on idle cash in that account. That is one of several reasons IMO why IB is able to offer low commissions. 

FINRA Page: Bond Detail (prospectus linked at FINRA Page)

Moody's RatingA3 (07/06/2016)
Standard & Poor's RatingBBB+ (09/22/2012)
Fitch RatingA- (05/05/2016)

Taxable Account YTM at Total Cost (98.419) = 2.909% 

Roth IRA Account YTM at Total Cost (98.517) = 2.887%

Make Whole Provision: Page S-13

The company can redeem at par plus accrued interest on or after 6/15/22 (up to 3 months prior to maturity) 

I have discussed Emera in connection with purchases of its reset equity preferred stocks: 

C. Bought 1 Federal Realty 2.55% Senior Unsecured Maturing on 1/15/21:   

Finra Page:   Bond Detail

Moody's RatingA3 (11/30/2015)
Standard & Poor's RatingA- (09/21/2015)
Fitch RatingA- (10/07/2016)

YTM at Total Cost (99.945) = 2.565%

Fitch Affirms Federal Realty Trust's IDR at 'A-'; Outlook Stable (10/7/16)

Issuer's Stock Price Quote:  Federal Realty Investment Trust (FRT)

Analyst Estimates: FRT Analyst Estimates

FRT SEC Filings

FRT 2016 Annual Report

2016 4th Quarter Report

I may buy more of this 2021 FRT senior unsecured bond when and if the price declines materially due to a rise in interest rates. I am not currently concerned about credit risk. As with other intermediate term bonds that I own, the main issue IMO is the category of interest rate risk that I call the risk of lost opportunity. I do not face interest rate risk that might arise by the need to sell one of these bonds at an inopportune time that results in a negative total return.

2. Short Term Bond/CD Ladder Basket Strategy 

A. Bought 1 Bank of India .65% CD Maturing on 5/25/17

B. Bought 1 Bank of India .8% CD Maturing on 8/23/17 

C. Added 1 UST 7/31/17 .5%

This brings me up to 3 bonds in my Schwab account and 4 altogether. 

D. Bought 3 State Bank of India .65% CDs Maturing 5/30/17

E. Added 2 UST .5% Maturing on 7/31/17 (1 each in two accounts)

I own 4 of this U.S.T. issue. 

F. Bought 3 Enterprise Bank and Trust .6% CDs Maturing on 8/19/17

G. ADDED 1 UST .625% Maturing on 8/31/17

H.  Cluster of Maturities 5/1/2017 through 8/31/17 

The underlying premise of this cluster is that there will be one .25% FF increase on or before the FED's meeting on July 25-26, but I do not know which of the 4 meetings that will happen.  

FRB: Meeting calendars, statements, and minutes (2012-2017)

Stocks, Bonds & Politics: Short Term Bond Ladder: Clustering Maturities Near FED Meetings Where Increase in FF Currently Expected

There are numerous maturities outside of the clusters. The purpose of the cluster is to have a higher weighting during time frames when the FED may raise the federal fund rate. If the increase occurs, I will have funds from maturing securities to invest at higher short term rates.

An increase is possible but not likely in March. According to a Bloomberg calculation, as noted by Randall Forsyth in his Barron's column, the odds of a .25% hike in March have increased to 44%, doubling over the past two weeks. I do have some maturities in March and April.  

The most likely time is June meeting IMO. I do not believe the FED will wait until September.  

If there is no rate increase at the March meeting, then I will not reinvest the proceeds from maturing securities in May through July 26th until there is a .25% rate increase announcement.  

If the increase comes in March, then the proceeds will be reinvested into short and intermediate term bonds, as well as short term CDs, as they are received. 

SU= Senior Unsecured; U.S.T. = United States Treasury

2 Trustmark CD .6% 5/2/17
2 State Bank of India CD .65% 5/3/17  
2 MidAmerican Energy 1.1% SU 5/15/17
2 Peoples Savings CDs .55% 5/17/17
3 Citizens Bank PA CDs .65% 5/22/17
2 Citizens Bank CDs .65% 5/22/17
1 Bank of India CD .65% 5/24/17 
1 Bank of China CD .7% 5/15/17
2 Disney .875% SU 5/30/17
1 WFC 1.15% SU 6/2/17
2 FNB .6% CDs 6/5/07
1 Banc of California CD .8% 6/14/17
1 U.S.T. .635% 6/15/17 (auction)
2 Lakeside Bank .55% CD (monthly interest) 6/19/17
2 MMM 1% SU  6/26/17
1 U.S.T. .625% 6/30/17
2 People's United .7% CDs 7/11/17
2 Synovus CDs .75% 7/19/17
2 Guilford Savings CDs .65% (monthly interest) 7/24/17
1 U.S.T. .61% 7/27/17
1 U.S.T. .625% 7/31/17
4 U.S.T. .5%  7/31/17 
1 Bank of N.C. .7% CD 7/31/17 
3 Enterprise Bank & Trust CDs 8/9/17
1 Bank of China .8% CD 8/15/17
2 HBAN .8% CD  8/15/17
1 Southern 1.3% SU 8/15/17
1 CAT 1.25% SU 8/18/17
1 Bank of India .8% CD 8/23/17 
2 Merrick Bank .7% CD (monthly interest) 8/28/17 
3 U.S.T. .625% 8/31/17

Principal Amount = $54K 

One of my basic income strategies is to receive a constant flow of dividends and interest payments. 

When the market crashes again, and it will, I will invest that cash flow in whatever then looks appealing to me. I will not make pre-judgments as to what those securities may turn out to be. 

The short term bond ladder basket adds to that potential reallocation to smashed securities through a constant flow of maturities throughout each month. 

I am starting to fill out 2019 more, using mostly proceeds from stock and stock fund dispositions.       

I.  Sold 2 Aetna 1.9% SU Maturing 6/7/19 and Bought 2 WFC 1.1% CDs Maturing on 4/2/18 That Make Monthly Interest Payments:

 Aetna called this bond at 101: 

Sold at 101.034 or 100.902 after a $2 brokerage commission. I thought that 101 price was a little low since the prospectus contains a standard make whole provision.  

I received $7.81 in accrued interest and made a $21.58 profit on these bonds bough last December: 

YTM at 101.034 = 1.436%


J. Bought to FNB of PA. .6% CDs Maturing on 6/5/2017

3.  A Tiny, TINY Rotation into Canadian Energy Producers

A. Canadian E & P Lotto Tickets-Bought 100 Surge Energy at C$2.81 and 100 ZPTAF at $2.13

ZPTAF is the USD priced Surge Energy ordinary shares that trade in the U.S. Grey Market. I used a commission free trade to buy that 100 share lot. 

Website: Surge Energy Inc.

Quote Surge Energy Inc  (SGY:TOR) - MarketWatch

Surge Energy Inc. Confirms February 2017 Dividend - Feb 15, 2017

Surge Energy Inc. Announces Intended 15 Percent Increase to its Dividend - On Growing Production Volumes and Free Funds Flow - Feb 8, 2017

Surge Energy Inc. announces upward revision to 2017 production guidance - Dec 13, 2016

2016 3rd Quarter Results.pdf

December 2016 Analyst Presentation

B. Bought 50 BIRCF at $5.73 (commission free trade):

BIRCF is the USD priced ordinary shares that are traded on the U.S. pink sheet exchange.

Closing Prices 2/24/17:

Birchcliff Energy Ltd (BIREF:OTC)---$5.7403 -$0.1132 -1.93%

BIR.TO 7.58 -0.08 -1.04%

The greater percentage decline for the USD priced ordinary shares was due to a decline in CAD's value against the USD. The CAD/USD has been weak since the summer of 2014.  The exchange rate on the day of purchase was about .76 (C$1 buys USD 76 cents)

I lost money on my last round trip trade in Birchcliff so I am more hesitant now to buy shares. Buying a 100 share lot in November 2014 turned toxic due to the Infamous Double Whammy, the collapse in energy prices and the free fall in the CAD/USD exchange rate that flows into the USD priced ordinary shares.

I discussed that less than optimal purchase here: Natural Gas Super Cycle: Bought 100 Birchcliff Energy Ltd. (BIREF) At $9.7547 - South Gent | Seeking Alpha (11/19/14 Post)

I still believe in the natural gas super cycle, but I was early then and may be early now. I did say in a comment to that post that it would be best to leave these small investments alone where I am playing a long term cycle. I need to drill that deeper into my brain.

Company Website: Birchcliff Energy

Our Operations

Company Presentation February 2017

2016 Year End Reserves and Results.pdf

4. Continued Paring Stock Allocation:

A. Eliminated Vanguard Wellington Fund

Quote: Vanguard Wellington Fund-Investor Class (VWELX:MFD)

Profit Snapshot: 143+ Shares +$456.93

Dividends were used to buy additional shares.

I initiated my position with a purchase in 2013: Item # 2 Initiated Position in Vanguard Wellington Fund (VWELX) 

I added to the position slightly in 2014: Item # 3  Added $500 to VWELX at $37.78 

This is a balanced fund. Vanguard - Vanguard Wellington Fund Investor Shares

As of 1/31/17, the weightings were 65.68% in stocks, 32.12% in bonds and 2.2% in short term reserves.

I do not anticipate that the bond allocation will produce positive real returns over the next 1, 5 and 10 years which is one reason for selling this small position. Another reason is my opinion that stock valuations are frothy.  

Is the Stock Market Cheap? - dshort - Advisor Perspectives

I am deeply rooted in value and income investing using traditional and time tested valuation criteria.

I am not going to change.

That innate personality characteristic has served me well: buying in 1982, selling in 1998-2000 (total stock allocation reduction) and buying in March 2009 and thereafter. My dominant investment objective now is capital preservation. I know from experience that both the stock and bond markets can have simultaneous long term secular bear markets. The last time this occurred was between 1966 to August 1982.  That episode will repeat itself in a similar way (perhaps shorter or longer, deeper or shallower). The only question is when.

The proceeds went into the Vanguard Prime MM Fund which currently has a .79% yield. I will park the money there for awhile since I am just fine with that yield now when I make the reasonable assumption that the yield will be rising in the months ahead. 

Disclaimer: I am not a financial advisor but simply an individual investor who has been managing my own money since I was a teenager. In this post, I am acting solely as a financial journalist focusing on my own investments. The information contained in this post is not intended to be a complete description or summary of all available data relevant to making an investment decision. Instead, I am merely expressing some of the reasons underlying the purchase or sell of securities. Nothing in this post is intended to constitute investment or legal advice or a recommendation to buy or to sell. All investors need to perform their own due diligence before making any financial decision which requires at a minimum reading original source material available at the SEC and elsewhere. A failure to perform due diligence only increases what I call "error creep". Stocks, Bonds & Politics: ERROR CREEP and the INVESTING PROCESS Each investor needs to assess a potential investment taking into account their personal risk tolerances, goals and situational risks. I can only make that kind of assessment for myself and family members


  1. South Gent,

    I almost pulled the trigger to buy 50076QAY2. This KHC bond matures on 6/5/17 with ytm of 0.92% and S&P -BBB. The dividend on its common is 2.57% at the current price of $92.94. KHC has a boatload of debt. In line with your observation of high corporate debt level, it almost looks like a Ponzi scheme of borrowing low (on its bonds) to pay high dividend on its common to support the stretched high price.

    1. I own one Kraft Heinz bond. The company is debt heavy but the business produces predictable and stable revenues.

      1. Short Term Bond/CD Ladder Basket Strategy:

      A. Bought 1 Kraft Heinz Food 2% Senior Unsecured Bond Maturing on 7/2/18:

      I am not concerned about the credit risk for shorter term bonds.

  2. South Gent,

    I was excited to learn "Vanguard Prime MM Fund which currently has a .79% yield" until I found out that it is not available to buy/sell at my broker. All MM funds available at my broker carry very low yield.

    1. The expense ratio for the Vanguard Prime Money Market Fund (VMMXX) is .16% which is the primary reason for a higher yield compared to other funds.

      I have a 3 month treasury bill coming due early next month and will not reinvest. The yield on the MM fund will be higher with more flexibility.

      Three of my other brokers pay almost nothing or nothing.

      IB pays zero on idle cash. Schwab pays almost zero.

      Fidelity forced its individual customers into using one of two available low yielding MM funds.

      The highest yielding of those two funds, the Fidelity Government MM fund, is currently at .2%. The fund has a .42% expense ratio. Fidelity makes more than their customers.

      Vanguard did require its customers to open up a government MM fund for settlement purposes. However, it is easy to transfer from the Vanguard Prime to the lower yielding Vanguard Federal MM Fund or the Vanguard Treasury MM Fund.

      I use the Vanguard Federal MM fund as the settlement fund in my Vanguard Accounts and keep excess cash mostly in the Vanguard Prime Fund with a little in the Vanguard Municipal MM fund.

      Vanguard Federal Money Market Fund (VMFXX)
      Expense Ratio .11%
      Current Yield .48%

      You will not be able to buy other brokers' MM funds.


  3. "U.S. President Donald Trump on Thursday spoke positively about a border adjustment tax being pushed by Republicans in Congress as a way to boost exports, but he did not specifically endorse the proposal."

    "Trump's economic adviser reportedly said the White House doesn't support a controversial Republican tax plan"

  4. Now the White House is denying that they don't support it.

    Meaning what? That they DO support it? Or maybe they do, and maybe they don't.

    It is baffling to me that the market does not see the uncertainty and potential for instability under the current administration. Normally uncertainty makes markets jittery. They must all be heavily dosed on Xanax.

  5. Cathie: The White House did deny the report. (in an earlier version of this comment, I put the word "not" in this sentence due to a brain malfunction)

    Trump and his underlings frequently contradict each other, and Trump can have two contradictory thoughts living in the same sentence.

    Trump's strong authoritarian streak was on display today as CNN, the NYT, the L.A. Times and Politico were barred from the White House briefing, an unprecedented act by a President.

    He also repeated his charges that the press is the enemy of the American people in a speech today, spending about 1/3 of CPAC speech demonizing the free press.

    A recent Pew poll shows that 84% of republican and republican leaning voters support what Trump is doing.

    I do not believe it is possible to separate the GOP from TRUMP. Trump is the heart and soul of the GOP.

    Nashville used to have two papers. The evening paper was the Nashville Banner which was viewed as the "conservative" paper. The Nashville Tennesseean was the "liberal" morning paper.

    I knew a lot of people and heard in conversations thousands of times that the liberal paper could not be trusted to provide the facts.

    If I asked those people what exactly was being misreported, nothing really could be identified, but the fact that it was a liberal paper was sufficient, in and of itself, to make the paper untrustworthy.
    Why was it viewed as liberal back in the day? The paper supported civil rights for blacks.

    The same mindset and hostility to facts that do not fit neatly in their beliefs is far more prevalent IMO among republicans now compared to the 1960s and 1970s.

    The trend toward authoritarianism is picking up steam

  6. Thanks for the link to the Pew poll results. What was most troubling to me was the finding that 59% of Americans feel that Trump has little or no respect for democratic institutions and traditions. How can the other 40% be so blind to what is going on?

    I'm shocked that they barred those news organizations from the briefing. I guess they don't like fielding tough questions.

    "No soup for you!" (The Soup Nazi on Seinfeld)

  7. Cathie - "How can the other 40% be so blind to what is going on? "

    I can't figure that out. I can figure out Trump's actions and illness issues. I can't figure out how people like him (not the first time in history) are able to hoodwink perfectly intelligent people to the point where they can "see no negatives."

    My father appeared to -maybe- support him (my father watches FOX news so Hillary was evil in his mind, plus he likes hawkish foreign policy). Even he asked me one day a question "about the narcissist." I was relieved that he wasn't blind.

    Some people act the same way online as Trump acts (bullying, twisting to win with meanness being a delight not something to avoid). Right there explains why they don't see. But for other people, that doesn't explain it.

    I'm going to guess that it's a cognitive disassociation split. They see things that will help them. So they feel good. So they willfully block out what doesn't look right. Trump is using a classic sociopathic techniques of being vague and leaving doors open for "explanations" of his actions. For instance, it's not that he just tried to influence the FBI investigation into Russia AND HIM, it's that it's not against the law. So they want explanations to buy in order to keep the "positives" happening for them.

    For example, I conclude that Trump believe jews control things (classic antisemitism) and therefore is very supportive of Israel to "woo" us. I like a bunch of the policies and they are a breath of fresh air. It's a hard pick... do I support Trump long enough to set some of these into new standard practices (move embassy, stop funding to PAs that then is paid to literally terrorist with blood on their hands from killings)... or do I deal with how I see Trump. It's not a hard choice for me. The con artist will turn on you. But I see the sell efforts and the ploy. And I see some people fall for it. It's absolutely classic workplace manipulations. We've all worked with someone who schemes and lines up people in their corner by "supporting" their pet projects like this, while having "target people" they aim to harm, lies included.

    SG - I thought I saw something today about Obama had banned media. Yet news hasn't compared to that. Do you know how that was different? He banned FOX.

    How does border tax work in a short summary. It's a tax charged on what comes into the US from Mexico. That tax will become part of the price that Americans pay (because companies will embed it.) Or Americans will buy non-Mexican goods that don't have a border tax. Which is rude and a bad thing to do to your neighbor. No wonder you need a wall. You're ticking them off. So I'm lost on what else and how else does the border tax effect things?

    So currently the admin supports it and doesn't support it? And it will be passed or not passed by Congress, not the WH.

    Cathie - post election I thought it good to buy stock in aspirin. I see I was wrong. It's xanax that I should have bought!

    I read earlier including the bonds and selling. I came back to get on the notify list with a nearly blank email. Guess it wasn't blank.

    1. LMH: I believe the contretemps between Fox and Obama involved Fox's exclusion from a pool interview with a non-cabinet employee Kenneth Feinberg. And, that minor episode apparently did not involve Obama but his communications director.

      To my knowledge, no other president has excluded reporters from White House press briefings.

      CNN is calling Trump's actions unprecedented and I have no reason to disagree with that assessment:

      At the time Trump was slamming the use of anonymous sources at his CPAC tirade today, white house officials were communicating with the press as anonymous sources.

      The border tax would be applied to all imports including those from Mexico. The existing House plans that were in existence prior to Trump assuming office had a 20% tax applied to all imports. The tax would be paid by U.S. importers:

      The NY Fed economists who wrote that article note that it is possible that other countries will retaliate.

      I view it as a near certainty.

      The adoption of a border tax would likely make those foreign products more expensive and less competitive with those manufactured or produced within the U.S. Why wouldn't some countries retaliate in kind?

      I seriously doubt the USD would rise in value sufficiently to offset the tax.

      If the tax was 20% and the USD rose 20% as some economists postulate, then the products would not cost any more or less.

      The tax would be paid by the importer but their dollars would buy 20% more product.

      If the USD did rise 20%, that would have bad repercussions as well as I have discussed in previous comments and blogs.

      The most immediate impact would probably be on EM countries and corporations that have revenues sourced in depreciating currencies and debt denominated in USDs.

      That debt has risen in parabolic fashion since the Near Depression.

      Exports to the U.S. from those corporations and countries would likely fall due to the border tax, aggravating the situation even more.

      It would also dampen GAAP earnings for U.S. multinationals as another example of negative blowback.

      My bet is that the USD would not rise and might even fall and consequently the tax will be paid by the ultimate consumers and/or eaten in whole or in part by the importer thereby depressing their profit margins, or some of both. The tax would be regressive in that the poor and the middle class would end up paying a far higher percentage of of their disposable income. I doubt that any white blue collar worker who voted for Trump and other republicans could tell you even now about how the border tax would impact them. I would just tell them that the GOP wants to raise their taxes in order to pay for a corporate tax cut.

      Sean Spicer said that U.S. relations with Mexico were "phenomenal", just another example of why I have named him the Alternate Fact Guy.

  8. Thanks. That gives me enough on Obama and fox for me to research. With what you said, then that didn't involve the president and was resolved that day when the communicator tried to pull it that day.

    Thanks for laying out the various border tax facts. So we are now going to pay more. We have been used to cheap imports. We can not make the same goods for a mere 20% more. It's more like 500% more. (Thinking of the dollar store's items.)

    So we will have a tax, keep buying foreign goods but pay more. And our money will go to a business tax cut. Hopefully that in turn will grow their profits and the stock market (seems to be what the market is counting on). That would only be true for US non-multinationals. And you are pointing out this wasn't Trump's, it's republician.

    The more uncertain question to all of this, is how dollar will be effected.

    No wonder Trump sees everything as isolating to him, and competition with outside countries. And he doesnt' see makign them strong as feeding back positively in the world and therefore to the US. It parallels his personality difficulties at forming relationships.

  9. Trump may have surpassed even Nixon in terms of being unfit (due to personality defects) to be the so-called leader of the free world.

    The majority of his campaign rhetoric and GOP agendas (border tax, corporate tax cut, repeal of Obamacare, etc.) have yet to be enacted in practice.

    Hopefully there are still some grown-ups and cooler heads at all levels of government, industry, national security, courts, and media who will maintain some kind of balance.

    The undermining of democratic institutions such as freedom of the press, the integrity of elections, separation of church and state, and the right to due process -- among others -- are of greater concern to me.

    1. Cathie: Trump claimed credit today for the budget deficit shrinking in January. He was sworn into office on 1/20/17:

      "The media has not reported that the National Debt in my first month went down by $12 billion vs a $200 billion increase in Obama first mo."

      His tweets are the most effective method for him to spread misleading and false information that will be accepted as facts by his followers, even when they are absurd on their face.

      John Boehner may end up being correct that the GOP House members will not be able to agree upon a repeal and replace law for Obamacare and will only be "limited" modifications:

      An outline of the current plan is summarized in this CNN article:

      I see a lot of problems in that draft. Some GOP representatives want to repeal Obamacare without a replacement and others would disagree with keeping major spending provisions for another 4 years while eliminating revenue raising measures that help pay for those provisions.

      Then, a number of GOP representatives who represent districts that went for Clinton will have a hard time justifying the use of tax credits as the premium support mechanism knowing that those with pre-existing coverage and modest incomes who are now covered would have to go without coverage since it would no longer be affordable.

      There are 23 GOP congressman from districts won by Hillary and they may easily go down in 2018. Most of those districts are located in upscale suburbs. A lot of money will be going to Democrat candidates in those districts.

      This article has the list:

      Then, as a result of gerrymandering, the GOP has managed to carve out safe districts for Democrats. The gerrymandered districts were drawn to put as many Democrats as possible into one congressional district.

      They are likely to get zero votes from House Democrats on any repeal and replace bill meaning that the GOP would need to hold onto most of their members to pass legislation.

      The current breakdown is 238 republicans and 193 Democrats with 4 vacancies.

    2. Cathie - I'd like to argue with your comment :).

      "Trump may have surpassed even Nixon"

      He has, no maybe's about it. He himself said he was surprised to learn that he couldn't just do what he wants (paraphrasing). He seems unaware that there is a constitution (even though the nice Kahn man offered him his very own pocket copy.)

      It occurs to me, that even if Trump lasts 4 years, there is a way to improve the situation. If Republicans representatives stop being so afraid of their constituent's support for him... and instead stick with their own integrity and start feeding truths to their constituents (i.e. become active leaders)... both they will continue to win their seats, while making more room for them to push good checks and balances and policies. It's not an easy road, but a do-able one.

      We need to find ways to organize and to support in Republican sense of their own integrities, in Republican areas.

      Then I want to greatly improve our educational system. Now that we have the age of information, we need quality training on how to read and assess the information. People really aren't spotting the careful wordings (or less than careful wordings) that slip things in.

  10. Interest rates have fallen in 2017 and the spreads between short term rates and longer term ones has narrowed some.

    The ten year treasury closed at a 2.45% yield on 1/3/17 and at 2.31% last Friday. As that rate declined, the 3 and 6 month treasury bills remained stable.

    With an increase in the FF rate soon, the short term rates will rise and I would not assume that the seven to thirty year bonds will go up in yield and may even continue their declines.

    Gold is sending the same message as the Bond Ghouls. The gold spot price started the year at around $1148 and is presently around $1,257.

    The signal being sent by gold and bonds is not the same IMO as the signal from stock prices.

    The Bond Ghouls initially drove down bond prices significantly after Trump's election fearing that his policies would be inflationary. Something change near the start of the year. I suspect that their opinion about Trump being able to implement his plans and/or a change on his willingness to cause economic chaos that generates a flight to safety response.

    Stocks are signaling robust job and GDP growth. Bonds and gold are signaling IMO that major problems are likely in the near future. Those problems may be a major readjustment in what Trump will actually be able to accomplish, compared to his boasting, and/or a growing recognition that he is likely to create chaotic and undesirable conditions primarily through major disruptions in trade arrangements.

  11. South Gent,

    HBO's John Oliver (Last Week Tonight) has an episode on the questions between Trump and Russia/Putin.

  12. I have published a new post: