The Trump Rally or the Chump Rally?
Why I haven’t written since November 22?
I haven’t written on this blog since the Trump victory. I was shocked, as were many and needed some time to put this unexpected change into perspective. Not only was I shocked by the victory, but I am also surprised with the stock market rally (up 13%) that has become known as the Trump Rally. It is obvious that Wall Street expects huge tax cuts for individuals and corporations, a diminishing of regulations and infrastructure projects that will stimulate the economy. I don’t believe Trump and the Republicans are capable of governing and these promises (and others like health care for everybody, a wall, getting coal jobs back etc.) will be difficult to fulfill. In my last written market letter November 22, I listed eight points that I believe are negative for both the economy and the country. Now, that we are into sixty-seven days into the Trump presidency, I can see that these items continue to be monumental roadblocks to the success of the Trump presidency.
The main reason I had written the Lone Bear Letter with the Dow at 17,672, was that I believe that income inequality and a resulting oligarchy, would eventually lead to an economic shakeup that would be worse than that which occurred in 2008. In my post “In a time of universal deceit, telling the truth is a revolutionary act” George Orwell. I said, “I believe political stagecraft, through skilled manipulation of facts, has given the public the perception and the illusion of power, rather than participation in real power. Public opinion has been manipulated and nullified. We have only ourselves to blame. Like Pogo said “We have seen the enemy and it is us”. My fear is that, this process has Big Corporations and the top 1%, dominating the financial industry” (and now the government) “has left small businesses and the investing public very vulnerable. The general public, in my opinion, has become so weakened, that it is powerless to stop a crisis from progressing.”
Although President Trump won the election with only 26% of those able to vote and has a unbelievably low 36% approval rating and a 57% disapproval rating, this narrow segment of citizen support claims the exclusive right to speak on behalf of ‘We the people’. I believe that there is a danger to the norms and institutions necessary for our Republic to function. Like all authoritarian populous leaders, President Trump is defiant to all that challenge this rule, such as judges, journalists, democrats and Congressional oversight. He declares them as enemies of the people. The president’s dark rhetoric and outright lies sound quite familiar to anybody who has an understanding of history and knows how quickly democracies die.
Can Republicans govern?
The recent defeat to abolish ObamCare and replace it with TrumpCare was a disaster for the Republicans and the big supposed closer, President Trump. With his limited knowledge of politics, he assumed that the Republican Party was unified. However, he forgot about the 40 members of the Freedom Caucus, (the former tea party members), who basically don’t believe in government. They will vote against anything (except defense) that has government involvement, which is what government does. The healthcare bill had only a 17% public approval rating, because it took away many of the advantages of healthcare privileges, with savings for the government of an estimated $1 trillion. This one trillion dollars was going to be used to offset some of the reduction of government income, that are expected to be lost by tax cutting measures, when a new tax bill is proposed. Here is why I believe a tax bill will not pass this year. 1) The administrations ineptitude in proposing a new health care plan, will probably also surface in any new tax bill. There will continue to be a leadership vacuum as many Republicans will concentrate on the deficit and debt. The tea party and many republicans has deeply held convictions that any tax overhaul should not add to the national debt. While the president is known as the King of Debt, his party is deeply concerned about debt. It is expected that he proposed tax cut and infrastructure plan, could add $7.2 trillion to the $20 trillion national debt over a decade. 2) In addition, Republicans want to include a large import tax known as a ‘border adjustment tax’ in the package. This would include a 20% tax on imports that the Republicans believe will raise as much as $1 trillion to offset cuts in individual and business tax rates. However, retail giants like Walmart, are bitterly opposed and willing to wage a costly advertising war against this plan they believe will increase the price of products and end up raising prices for American consumers. In effect, it is a $1 trillion tax on working poor consumers, while giving a huge tax cut to the wealthy. 3) It is also possible that popular tax breaks for individuals, such as deductions for mortgage interest, charitable giving and state and local taxes will no longer be allowed. Individuals, the real estate industry, charitable groups and state and local governments are just a few of the constituencies that will revolt against such changes. 4) Now, there is also an indication that President Trump is backing away from the 15% corporate tax rate and is more likely to propose a 25% tax rate. This will be very disappointing to Wall Street, although most of the 500 S&P largest corporations do not pay any tax. 5) Lastly, the Republicans must decide whether to use a process known as ‘budget reconciliation’ to speed changes through Congress by a simple majority vote. However, because of the structures of the ‘budget reconciliation’ process, any tax plan would not be allowed to add to the deficit for the next ten years. There is a lot that can go wrong and probably will. Therefore, be warned Wall Street, we see no tax plan this year and maybe never, because as follows:
The Russian factor?
Because I had knee surgery on March 17, and therefore not being ambulatory, I was able to constantly watch CNN, Fox News and MSNBC during the most unbelievable March 20th week, since Watergate. The week began, with testimony to the House Intelligence Committee by James B Colby, the director of the FBI, which disclosed for the first time, that the agency is running an investigation into Russian interference in the US election and possible ties between Trump associates and Russia. This immediately brought up the question of why the FBI director made a disclosure about Hillary Clinton’s emails a week before the election, but no discussion about the Trump Russian inquiries which had been going on since July? Tuesday had testimony by Supreme Court nominee Neil Gorsuch and was followed with the circus atmosphere that ended up with speaker of the house, withdrawing the TrumpCare vote. It was truly, the week that was! I could go on with details, but more importantly, there is the feeling that there is not only smoke, but fire under the accusations that Trump associates met with Russians and may have discussed deals to eliminate sanctions. In addition there is a possible Watergate type cover-up that may lead to the top. If you want to get a better feel of Putin, I suggest you take a look at the CNN documentary called, ‘The most powerful man in the world / Putin In his book New Seeds of Contemplation which was published in 1962, Trappist priest Thomas Merton wrote: ‘The world is full of great criminals with enormous power, and they are in a death struggle with each other. It is a huge gang battle, using corporations, lawyers and policemen and clergymen as their front, controlling papers, means of communication, and enrolling everybody in their armies.”
The house intelligent committee chairman Devin Nunes, who served on the Trump transition team, has not acted in an independent manner. Adam Schiff (along with Senator McCain), the committees Democratic leader has suggested that Nunus step down as chairman as Nunes, last week showed President Trump information (without showing it to other committee members),that Trumps closest associates may have been ‘incidentally’ swept up in foreign surveillance by American spy agencies. New meetings for the committee have been canceled.Sally Yates was previously scheduled to speak today.
Today, Trump tweets “Trump Russia story is a hoax.’ Methinks he protests too much. A cover-up? If there is nothing to hide, let’s do a wide-open independent investigation. The hoax was the claim that President Obama wiretapped his phones. Let’s take a look at Trumps tax records and see if any of his income has come from Russia? I think he is involved with the Russians in business. Does Trumps business associations with foreign powers create a conflict of inters that violate the emolument clause of the constitution? The latest event is that Trumps son-in-law has had conversations with the Putin’s Russian bank, which is under sanctions in the US not to deal with the Bank. The Russians say it was about business! At the minimum, a conflict of interest? Will all those Trump Associates be allowed to testify? The truth about the Trump administrations associates being involved with the Russians will eventually come out. In the meantime, this issue will continue to be a cloud over the authenticity of the Trump administration would be eventually be devastating to Wall Street and the stock market.
Government shutdown April 28th?
Carl M Birkelbach