Trump cabinet is the ultimate corporate coup d’état

This is an important discussion. In a world where corporations have increasingly been running governments, Trump’s cabinet discards the charade, effectively “cuts out the middlemen” and places corporate heads inside the government itself. The groundwork for this transition has been laid by breach of trust and purchase of both parties over the past 30 years. As I have said before, another business-as-usual status quo government had Clinton won, would also have been a bad thing for democracy and ethics. But having corporate interests literally take the helm is the next phase of this crisis for we, the people. The stakes for all sides are very high now and the conflict and upheaval promises to be great before this era ends.

Journalists Naomi Klein, author of “This Changes Everything: Capitalism vs. the Climate” and Lee Fang of The Intercept talk about the role of corporations inside the Trump administration and the inauguration. Here is a direct video link.

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Danielle on This Week in Money

Danielle was the second guest with Jim Goddard on This Week in Money today, talking about recent developments in the world economy and markets.  You can listen to an audio clip of the segment here by advancing the show playbar to 23:40.

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Renewable energy: best global growth opportunity

Over the past decade, the cost of renewable electricity has fallen some 64% for utility-scale solar power and 41% for land-based wind since 2008. At current pricing, renewables are already competitive with coal and natural gas, and getting cheaper by the day.

Naysayers fixate on the fact that just 20% of global electricity demand is currently supplied from renewable sources, and just 4% once hydroelectricity is excluded.  But this misses the point utterly.  Far from undermining the argument for renewable energy, the currently low penetration rates underline the mind-boggling scale of opportunity here for investment, jobs, self-sufficiency and lower utility costs ahead.

Canada best get on board, or our economy will be left flailing in our tailings ponds.  See:  Numbers don’t lie: we’ve reached a tipping point for renewable energy:

The rush for renewables is happening – and it will continue with or without us. In the long term, failure to embrace this transition really would be economic suicide.

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Why declaring cabinet ‘highest IQ’ ever, is not smart

Last night President-elect Trump proclaimed his team “by far the highest IQ of any cabinet ever assembled” (here is the video for those who can’t believe anyone would say that).

Thinking people should be reminded of Daniel Khaneman’s illuminating work on human behavior, the prevalence of mental errors in over-confidence and the critical importance of Emotional Intelligence in effective decision making.  Michael Lewis’s latest book The Undoing Project is about Khaneman’s life work and partnership with Amos Tversky and    Kahneman’s excellent 2011 book ‘Thinking fast and slow‘ explains key findings in detail.

This 2012 appearance on Charlie Rose is also a good refresher.

Psychologist Daniel Kahneman discusses his book, “Thinking, Fast and Slow,” which examines the nature of intuition and the two systems that drive how we think.  Here is a direct video link.

The most obvious risk for the new US government out of the gate, is that Trump’s semblance of supreme confidence has engendered high expectations in his supporters for quick and dramatic change to improve their problems. On the other side, his detractors are expressing the lowest approval rating and expectation for any incoming President in decades. President Trump and co therefore have a good chance of surprising detractors while disappointing supporters.

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Shiller: ‘cathartic crash and judgment day’ likely to follow ‘Trumplosion’

America should brace for a final blow-off surge in stock markets akin to the last phase of the dotcom boom or the “Gatsby” years of the Roaring Twenties, followed by a cathartic crash and day of moral judgment, according to a Nobel prize-winning economist.  See: Donald Trump ‘could send America into the Next Great Crash’ warns Nobel laureate Robert Shiller.

Well catharsis is long overdue, but come now Robert, we can’t give Donald all the credit, he hasn’t even taken the seat yet!

The next great crash has been earned by a lot of reckless and fraudulent help from a whole bunch of people over the past 20 years.  No one person can be blamed for this mess.  One thing we can know for sure, ‘The Donald’ will definitely not be claiming credit for this one in the end.

…The Cape Shiller P/E index measures the average earnings of S&P 500 equities over 10 years in real terms, and is closely watched by investors as a gauge of underlying value. It is trading at roughly 25. This is the highest level in over 130 years, excluding the two anomalies of the late 1990s and 1920s.

Here is the chart of Shiller’s cyclical PE 10 (in red) along with other historically reliable indicators (Crestmont P/E, Q Ratio and composite from regression), showing today’s over-valuations compared with the infamous 1929, 2000 and 2008 pre-crash peaks.

Valuation cycles
Not only are large-cap stock prices crazy high, mid-cap companies (market caps of 300m to 2b) are even worse–the Russell 2000 is trading at some 237x net income.  Still given the trend of companies reporting Non-GAAP (inflated, massaged, orchestrated) earnings the past few years (70% of S&P and 80% of TSX companies, as charted below), today’s valuation calculations are likely understating the madness.
Non gap earnings on the rise

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Bankers excited: Trump to make Wall Street great again

As attendees at the economic forum in Davos this week wax curious about the “populism” and “inequality” undermining world order today, irony and hypocrisy are thick and cognitive dissonance plentiful.

What has been great for grotesquely enriching Davos-ites and the .1%–finanicalization, globalization, debt securitization, asset bubbles, government bailouts, central bank largess, corporate welfare and environmental abuse–have been extracted directly at the expense of the masses and world stability everywhere. The resulting extreme wealth for some has begat extreme fragility for many, and yet few of the ‘elites’ acknowledge the connection.

None of this seems likely to change soon, as bankers and the corporate class are quietly expressing renewed excitement that the incoming Trump administration is set to make conditions even more favorable for them. To wit: Bankers in Davos see Trump’s Team making Wall Street great again.

Bank executives, speaking on condition of anonymity at events around the Swiss ski resort, said they’re not counting on Trump to overturn Dodd-Frank. Instead, they expect the federal agencies that enforce the rules to ease up on them and support bankers’ efforts to limit how much capital and liquidity their companies need to pay bills or absorb losses in a crisis…

Several bankers in Davos said they’re optimistic that regulators under Trump could do away with the gold-plating by the U.S. of the latest Basel benchmarks and ease the process by which banks are stress-tested annually to ensure they have adequate capital to absorb losses in a hypothetical crisis.

Corporate mergers, amalgamations, deregulation and increasing political purchase since the 1980’s, led to an explosion in the size, influence and leverage of global investment banking, financial engineering, non-GAAP corporate earnings and the executive pay linked to them.  This chart of CEO pay relative to the average worker since 1965 tells the tale.

CEO pay to worker

Lest there be any doubt, this chart of the mirror rise in the US stock market capitalization (S&P 500) and CEO pay, shows the direct impact of ‘financialization’ on c-suite compensation.
CEO comp and S&PWant to truly understand the cause of extreme wealth imbalance and today’s increasing global angst? Start here.  But realize that historically those who have benefited from undue privilege, have never relented anything until forced to by insurrection or financial collapse.  We wonder which one of these will prove the mean reversion catalyst this time.

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