Casino cash and the Wall Street billionaires running America

There is no question that Wall Street has been running fiscal and monetary policy for decades, regardless of which party or President has been in power. Some of the more recent big picture connections are discussed in this clip. One thing for sure, no one has been looking out for the ‘little guy’, least of all Donald J. Trump.

Steve Bannon was fired from the White House on Friday, August 18th, 2017, but most of the media is missing the story of Robert Mercer, the billionaire that brought Bannon to the White House. Here is a direct video link.

TRNN Documentary: The Real Story of How Bannon and Trump Got to The White House from The Real News Network on Vimeo.

In an interesting footnote to this thesis, a Vanity Fair piece yesterday (see Steve Bannon readies his revenge) looks at the fallout of Bannon’s ouster and notes:

“Bannon has media ambitions to compete with Fox News from the right. Last week in New York, he huddled with his billionaire benefactor, Robert Mercer, and discussed ways to expand Breitbart into TV…

At Breitbart, Bannon has a brigade of similarly happy warriors. “We’re in a loud bar celebrating the return of our captain!” Breitbart’s Washington editor Matt Boyle told me on Friday night. Breitbart’s defense of Trump has so far helped keep the Russia scandal from gaining traction on the right. But that could swiftly change if Trump, under the influence of Kushner and Cohn, deviates too far from the positions he ran on. If that happens, said one high-level Breitbart staffer, “We’re prepared to help Paul Ryan rally votes for impeachment.”

Apparently Brietbart, Bannon and Mercer feel confident they can make or break the President depending on his adherence to their agenda.  This could get very interesting.

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Introducing Tesla to Grandpa

May we all keep open minds as we age.

A commercial real estate broker in Toronto, Canada introduces his 97 Year-Old Grandfather to “the future”. Here is a direct video link.

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Weekend reading: The S&P 500: Just Say No

GMO’s James Mortimer and Matt Kadnar have written a great piece breaking down and comparing ‘relative’ value opportunities in risk assets today. Well worth the time for anyone with savings to shepherd through the world’s presently precarious financial markets. See: The S&P 500: Just Say NO.

If you’re a manager that must be long risk assets, or an individual with some financially suicidal obsession, their table below shows today’s relative return choice set for different risk assets from current levels over the next 7 years.  Math must be faced.  No strong picks yet, to say the least.

However for those that have the flexibility and self-discipline to not choose from poison fruit, future returns offer much promise (precisely because this price cycle is so over-extended today) once the next bear market arrives to ‘Make Value Great Again’.  Here’s their suggestion:

In absolute terms, the opportunity set is extremely challenging. However, when assets are priced for perfection as they currently are, it takes very little disappointment to lead to significant shifts in the pricing of assets. Hence our advice (and positioning) is to hold significant amounts of dry powder, recalling the immortal advice of Winnie-the-Pooh, “Never underestimate the value of doing nothing”or, if you prefer, remember – when there is nothing to do, do nothing.

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Fact-checking the Trump business conflicts saga

The trouble with pathologically dishonest behavior and actors is that they have a way of making rational people feel like the rational people are crazy or the problem. As a lawyer and analyst I have always found that a focus on organizing facts and objective evidence is the best decipher of crazy, but it can take a lot of work and many people lack the focus or discipline to do it.  Donald Trump famously said in his campaign that “he loves the uneducated” voters.  This would make sense if one’s life long modus operandi is to delude and confuse.

Putting his highly honed fact-organizing skills to work, last February retired trial lawyer Stephen Harper began building a timeline of verifiable events in the Trump/Russia/conflicts saga.  In the months since, it has now grown to more than 400 data points.  You can view it here and develop your own conclusions.

Harper explained his process in the clip below.

Attorney Steven Harper has prepared a timeline with more than 400 data points of all the events surrounding the Trump team and Russia. He prepared it as if it had to be presented to a jury. Lawrence O’Donnell also discusses the findings with Bill Moyers.  Here is a direct video link.

Also, the man who spent 18 months shadowing Donald Trump in the 1980’s as prep for ghost-writing Trump’s 1987 promotional memoir The Art of the Deal, here on CNN last night, said he believes Trump will resign before year end as a way of avoiding the fallout from political failure and the ongoing FBI investigation into his business conflicts:

“The reason he’s going to do that, as opposed to go through what could be an impeachment process or a continuing humiliation, is that he wants to figure out a way, as he has done all his career, to turn a loss into a victory. So he will declare victory when he leaves.”

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Cautionary tale in Venezuela’s demise: after the debt-fueled oil rush

Political and economic crisis have erupted in what was once Latin America’s richest country. Daily protests and an increasingly authoritarian leader threaten to transform Venezuela into a failed state. Here is a direct video link.

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The math of paying too much

This past spring Canadian realty prices leapt to a fevered peak that was far beyond historical norms of affordability or investment valuations in many areas.  Since then prices have weakened pretty much all over and many are in shock.  See:  Toronto home buyers and sellers try to stay afloat in a rocky market:

“…buyers who purchased in the spring have become spooked by the decline in prices in the past few months. Tales of buyer’s remorse are common. Some buyers are trying to back out of deals or renegotiate. Mr. Rocca understands the predicament; he has clients who purchased a bungalow on a very good street with the intention of selling it again for a profit.

“They paid a big buck,” he says. “They paid $1.9-million. Now, that bungalow’s worth $1.6-million. It’s scary.”

Scary? Let’s do some math.  If a buyer were funded enough to possess a conventional 20% down payment on 1.9 million, they needed 380K down and a mortgage of $1.520m to close.  Five months later, a price decline of just over 15% has evaporated 79% of their notional equity, reducing it to 80K while still owing a mortgage of 1.520 million.  And that’s if they did not borrow some of the down payment from relatives or other revolving credit.

And we have hardly even started into this mean reversion process.  After leaping 40 or so percent between December 2016 and April 2017 to an average price of $1.455 million in the GTA, and giving back most of that since, average sale prices in the greater Toronto area in July were still $1.177m and some 12k higher than at the start of 2017.  Year over year, many prices are not even negative yet.

But for the majority of households who were already paying more than 50% of their disposable income just to keep the roof over their heads, a 15 to 20% price decline is not manageable and has already wiped out their equity or put them in a position of owing more than the house is now worth.  This makes refinancing or locking in to fixed rate mortgages very challenging already even without further price corrections or higher interest rates.

This is the math of paying too much.  Whether it’s for investment securities, real estate or anything else that is supposed to hold value or appreciate over time.  The price we pay locks in our return experience for years thereafter.  A great many people are going to learn this lesson the hard way yet again in the months and years ahead.

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