Tag: trump

Declassified FISA Abuse Memo Confirms DNC, Obama Administration & Criminal FBI Elements Engaged in Grafting, Perjury, Obstruction of Justice, Fraud, Lying to the Government, Illegal Spying & Treason

We now have final confirmation for what we knew all along:

– Trump’s campaign was spied on illegally by criminals in the FBI under Obama.

– Mueller’s criminal witch hunt was initiated based on COMPLETELY fraudulent information.

– This is Watergate x 1000

Here’s somem gems from the document:

“Neither the initial application in October 2016, nor any of the renewals, disclose or reference the role of the DNC, Clinton campaign, or any party/campaign in funding Steele’s efforts, even though the political origins of the Steele dossier were then known to senior and FBI officials.”

“The Carter Page FISA application also cited extensively a September 23, 2016, Yahoo News article by Michael Isikoff, which focuses on Page’s July 2016 trip to Moscow. This article does not corroborate the Steele dossier because it is derived from information leaked by Steele himself to Yahoo News. The Page FISA application incorrectly assesses that Steele did not directly provide information to Yahoo News. Steele has admitted in British court flings that he met with Yahoo News and several other outlets in
September 2016 at the direction of Fusion GPS. Perkins Coie was aware of Steele’s initial media contacts because they hosted at least one meeting in Washington DC in 2016 with Steele and Fusion GPS where this matter was discussed.”

“in September 2016, Steele admitted to Ohr his feelings against then-
candidate Trump when Steele said he was desperate that Donald Trump not get elected and was passionate about him not, being president. This clear evidence of Steele bias was recorded by Ohr at the time and subsequently in offcial FBI files but not reflected in any of the Page FISA applications.”

“The Ohrs’ relationship with Steele and Fusion GPS was inexplicably
concealed from the FISC.”

“Deputy Director McCabe testifed before the Committee in December 2017 that no surveillance warrant would have been sought from the FISC without the Steele dossier information.”

Read the document here:

FISA Abuse Memo

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What Does the Market’s Response to Trump’s Election Tell Us About Investor Expectations?

What I find helpful about investing in the permanent portfolio fashion, is that the assets observed together give you a good big picture overview of investors’ expectations about important macro data such as corporate profits, interest rates, and inflation.

The permanent portfolio consists of 4 equally weighted assets: stocks, gold, long government bonds, short government bonds (or cash).

We observe the following important movements since November 8th:

US stocks are now up about 6.2% since the election:

US Stocks since Trump election

Gold is down about 8.2%:

Gold price since Trump election

Long government bonds are down about 8.5%:

Long bonds since Trump election

On the short end rates are also up a bit as certainty a coming rate hike on December 14th has moved close to 100%:

To summarize: We have seen a selloff in safe haven assets like gold and bonds, and a surge in stock prices.

These are not hard and fast rules, but helpful for speculation:

Gold generally tracks consumer price inflation pretty well historically, but also becomes more desirable as a haven asset when expectations about corporate profits and interest rates on government bonds fall, diminishing the one big benefit that corporate stocks & bonds offer.

Long term government bond rates are a mix between government policy (bond buying or selling programs, future expected policy rates), corporate profit expectations (since high profit expectations encourage a move from bonds into stocks and low profit expectations do the opposite), and inflation expectations. While it is true that theoretically rates on government bonds in a sovereign floating fiat money system are entirely under the control of the sovereign government, most people including high level policy makers are unaware of this due to lots of misinformation on the topic, and we have to speculate accordingly, with that misinformation in mind. More on this in my post Why the National Debt Doesn’t Matter (And Why It Does).

Stock prices generally track investor expectations of corporate profits, but discounted by the rate on risk free government bonds. For example, you can see that since Q4 2014 corporate profits have trended down, yet stocks have actually edged up a bit over the period (even excluding the Trump effect post November 8th):

This can be explained by the observation that the rate on risk free options, namely long term government bonds, have also hit new all time lows in that same period:

Investor Expectations

So in summary, it looks like investor expectations of inflation remain low, while their expectations of corporate profits have jumped significantly, prompting them to sell gold and long bonds, while adding to their stock positions.

You can read more on the components contributing to aggregate corporate profits in this post about the Kalecki equation, which basically reveals that mathematically aggregate corporate profits can only be derived via the following spending/saving decisions made by different entities:

Corporate Profit = Investment + Dividends – Household Saving – Government Surplus + Export Surplus

There are several reasons why investors expect boosts to corporate profits, just to name a few:

Donald Trump has promised a significant corporate tax cut, which, all else being equal, will boost corporate profits noticeably. (In the equation above it would manifest itself in the form of a smaller government budget surplus or a larger deficit).

Furthermore, the elimination of arbitrary and scientifically unwarranted CO2 emission restrictions will likely boost domestic investment in oil, coal, and natural gas, which again, all else being equal, constitutes a net positive for corporate profits. (In the equation above this would affect the “Investment” component.)

It remains to be seen where household saving is headed, and also what happens to the trade balance, and other government spending programs which, if unmatched by tax hikes, could provide a further boost to corporate profits.

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Longer Maturity Bonds Coming? What Does It Mean For Investors?

ZeroHedge reported a few days ago that Trump’s pick for Treasury Secretary suggested in an interview with CNBC that he’d be open to issuing new bonds of longer term maturity:

“I think interest rates are going to stay relatively low for the next couple of years.” Mnuchin told CNBC. “We’ll look at potentially extending the maturity of the debt, because eventually we are going to have higher interest rates, and that’s something that this country is going to need to deal with.” Ironically, with that statement, Mnuchin quickly sent yields spiking higher, although courtesy of foreign buyers these were promptly renormalized.

Treasury Rate Spike

The mini selloff in Treasury securities on that day could have been prompted in part by anticipation: When longer bond options become available a certain portion of long bond investors while invariably sell off a portion of their current holdings to reach for the higher yield.

For example, investment strategies such as the permanent portfolio (which I follow) require you to allocate 25% to the safest & longest government bonds denominated in your local currency.

On the net such a move would simply be a gift to such long bond investors, since longer maturities offer more upwards punch precisely when needed, that is when deflationary pressures prevail and interest rates plummet. Furthermore longer maturities pay higher interest rates, essentially a risk free subsidy to those with money to invest in this manner.

If you’ve read my post about Modern Money Theory you’ll understand that most other reasons cited by Mnuchin don’t make much economic sense, since the government doesn’t really “need” to borrow money or issue long term debt at all:

Why sell longer term government bonds like the Treasury does, effectively setting a risk free rate and thus a floor for longer term loans? Again a good question! In fact, MMT ultimately suggests that beyond very short term Treasury Bills at most there’s really no reason for the government to be floating long term bonds.

Within the confines of today’s fiat money system, MMT actually offers the most libertarian alternatives regarding interest rate management and government bonds: let the overnight rate go wherever market conditions amongst private banks let it go, and don’t issue any long term government debt at all!

And in Why The National Debt Doesn’t Matter I explained:

When the Treasury pays interest on the public debt, it does so by asking the Fed (the banks’ bank) to mark up the recipient’s bank’s bank reserves via electronic keystrokes. It doesn’t need to raise taxes anywhere in order to perform this operation.

On that same token, when the Treasury retires a maturing government bond, it asks the Fed to remove said bond from the bondholder’s bank’s securities account and in turn marks up said bank’s bank reserve account accordingly. Once again, no tax money is needed to perform this operation. No future generations, to cite a popular cliche, are being asked to cough up the money to perform this operation.

And on Mnuchin’s claim that we’re “going to have higher interest rates, and that’s something that this country is going to need to deal with”, I’ve pointed out the following in that same article:

How many bonds are outstanding, at what maturity, and how much interest we wish to pay on them, are both 100% present-day political decisions that the federal government can make independently of the private sector. Theoretically, all outstanding bonds could be replaced by bank reserves that pay zero interest. All that would happen, in that case, is that one type of government obligation (government bonds, the promise to pay future bank reserves) is replaced with another government obligation (bank reserves, the promise to accept them to settle tax liabilities).

In other words: In a sovereign floating fiat money system rates on government bonds are always under the government’s control, letting them float is a choice, not an imperative.

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