This month, we look at government... a debt "jubilee"... what happens after the feds break down your door... "return-free risk"... whether character matters in politics... the potential savior of the Democrat party (or just a "smooth operator")... the scariest three words in America... waste in NFL stadiums... on the ground with the "antifa"... fixing history with a wrecking ball... and a conversation with a former Fed analyst.
A Lottery NobodyWants to Win AMERICAN CONSEQUENCES Antifa: The American Left's Militant Faction The Kamala Contradiction
I D E A S T H A T M A T T E R
E D I T E D B Y P . J . O ’ R O U R K E
What is this slimy monster of power and expense, this rampaging giant octopus with tentacles strangling us all?...
OCTOBER 2 0 1 7
50% OF SILICON VALLEY BILLIONAIRES NOW PREPARING FOR A CRISIS? While middle class Americans are pouring money into the stock market… Some of the richest people in Silicon Valley are doing something that is pretty much the exact opposite.
I’m talking about folks like: Peter Thiel (founder of Paypal) Steve Huffman (founder of Reddit) Mark Zuckerberg (founder of Facebook) Tim Chang (of Mayfield venture capital) Larry Ellison (founder of Oracle) Reid Hoffman (founder of LinkedIn)
If you care about your family… your money… and your future, I strongly encourage you to find out what these folks are doing… And why it might be important for you to do something similar… right away. Everything is explained on my research firm’s website, right here… P.S. Most Americans don’t know there’s one simple and very inexpensive thing you can do to protect yourself. Learn more here…
CONTENTS
OCTOBER 2017 : ISSUE 5
LOST? CLICK HERE
52
76
90
24
32
38
4 Inside This Issue
62 Three of the Scariest Words in America: 'Take Care Of' BY DR. DAVID EIFRIG 68 Stadiums: Sell Out or Shell Out BY RODRIC HURDLE-BRADFORD 76 Antifa: The American Left's Militant Faction BY BUCK SEXTON 79 Antifa: The Left Moves From Vacuous to Vicious BY MATT LABASH 82 Antifa: Sympathy For the Devil BY P.J. O'ROURKE 84 Where Does It End? BY KERRY MOYNIHAN 90 A Conversation With... DANIELLE DIMARTINO BOOTH 96 Reform Or Deform? BY P.J. O'ROURKE 102 Read This 104 Featured Contributors
Editor in Chief: P.J. O’Rourke Editorial Director: Carli Flippen Managing Editor: Steven Longenecker Contributing Editors: Peter Byrne, Turney Duff, Dr. David Eifrig, Andrew Ferguson, Rodric Hurdle-Bradford, Matt Labash, Kerry Moynihan, Buck Sexton, Dr. Steve Sjuggerud, Porter Stansberry Newswire Editors: Scott Garliss, John Gillin, Greg Diamond AMERICAN CONSEQUENCES
BY STEVEN LONGENECKER
6 Letter From the Editor BY P.J. O'ROURKE 16 What Moved the Market 18 What Could Possibly Go Wrong? 20 From Our Inbox 24 A Lottery NobodyWants to Win BY PORTER STANSBERRY 30 'Return-Free Risk' BY DR. STEVE SJUGGERUD 32 Confession of a Wall Street Insider BY TURNEY DUFF 38 Does Character Matter in Politics? BY ANDREW FERGUSON 46 The Two Worst Political Ideas Ever BY P.J. O'ROURKE 52 The Kamala Contradiction BY PETER BYRNE
Assistant Editor: Chris Gaarde Creative Director: Erica Wood
Cartoon Director: Frank Stansberry General Manager: Jamison Miller Advertising: Sam DeCroes, Jared Kelly, Jill Peterson Editorial feedback: feedback@ americanconsequences.com
American Consequences | 3
INSIDE THIS ISSUE
I n our October issue, Editor in Chief P.J. O’Rourke updates the introduction to his 1991 book, Parliament of Whores ... As he says, it “has stood the test of time unfortunately well.” Porter Stansberry, a financial analyst who has been labeled “remarkably prescient” by Barron’s magazine, has a new thesis... a “national lottery” that millions will cheer, but will result in a national nightmare. If you’ve never heard the term “jubilee” before, you must read this essay . Dr. Steve Sjuggerud suggests that government bonds, far from being a risk-free return... are now likely to produce return- free risk. Bestselling author Turney Duff profiles Michael Kimelman , co-founder of Incremental Capital. The feds knocked down his door and arrested him for insider trading and conspiracy. Prosecutors offered him a deal to avoid prison time. He rejected the offer and took his case to trial... Veteran journalist and former presidential speechwriter Andrew Ferguson questions whether character matters in politics... whether a politician’s good (or bad) character provide the nation with much benefit (or harm)? Or is politics just politics, no matter who’s playing? Speaking of politics... award-winning investigative reporter Peter Byrne highlights Senator Kamala Harris , widely thought of as a potential savior of the Democrat party (and current front-runner in the political
betting markets for the 2020 Democrat presidential candidate). She has seemingly abandoned a major theme of her political career... could it be because her campaign-funding machine is anchored in Silicon Valley? Dr. David Eifrig shares one of the scariest phrases in America ... while Rodric Hurdle- Bradford investigates the epidemic of taxpayer-paid funding for sports stadiums – true billionaire welfare. Then we’re on the ground with the "antifa"... • Radio star and former CIA analyst Buck Sexton looks at what this radical faction wants, and why none of it is new. • The fantastic writer Matt Labash returns from Berkeley with a look at the state of free speech in an age of antifa. • And P.J. adds his memories of trying (with scant success) to be a radical extremist in the ‘60s to, in his words, “ give some idea of what motivates these jerks by recalling my own jerkiness .” Kerry Moynihan explores how we might be able to fix history with a wrecking ball... P.J. takes a final look at some government reforms and deforms that might help (or hurt)... and Buck and Porter sit down with former Fed analyst and author of Fed Up , Danielle DiMartino Booth. Enjoy the issue. And tell us what you think at feedback@americanconsequences.com . Regards, Steven Longenecker Managing Editor, American Consequences
4 | October 2017
ONEBLADESHAVE .COM/ STANSBERRY
From Editor in Chief P.J. O’Rourke
LETTER FROM THE EDITOR
A LONE HUMORIST TRIES TO EXPLAIN THE ENTIRE U.S. GOVERNMENT
CLICK HERE TO READ THEWEB VERSION
6 | October 2017
The following is a sort of "message in a bottle" from the time when George H. W. Bush was president and all was (comparatively) well with the world. It is the first chapter of my 1991 book, Parliament of Whores: A Lone Humorist Attempts to Explain the Entire U.S. Government. Twenty-six years ago, I was exasperated, perplexed, and infuriated by the federal government and trying to laugh instead of cry. I didn't know how good I had it. Almost everything has gotten worse since. Aside from a slight condensation and a few updates in brackets, I've left what I wrote intact. Let it stand as a memorial to how intractable the problems of government are.
W hat is this oozing behemoth, this fibrous tumor, this monster of power and expense hatched from the simple human desire for civic order? How did an allegedly free people spawn a vast, rampant cuttlefish of dominion with its tentacles in every orifice of the body politic? The federal government of the United States of America takes away between a fifth and a quarter of all our money every year. That is eight times the Islamic zakat , the almsgiving required of believers by the Quran. It is double the tithe of the medieval church and twice the royal tribute that the prophet Samuel warned the Israelites against when they wanted him to anoint a king. He will take the tenth of your seed, and of your vineyards... He will
[In 2017, combined federal, state, and local government spending exceeds 36% of GDP.] Our government gets more than thugs in a protection racket demand, more even than discarded first wives of famous rich men receive in divorce court. Then this government, swollen and arrogant with pelf, goes butting into our business. It checks the amount of tropical oils in our snack foods, tells us what kind of gasoline we can buy for our cars and how fast we can drive them, bosses us around about retirement, education, and what’s on TV;
“
We could cure or mitigate the other ills Washington visits upon us if we could only bring ourselves to pay attention to Washington itself. But we cannot.
take the tenth of your sheep... And ye shall cry out in that day because of your king.
American Consequences | 7
LETTER FROM THE EDITOR
counts our noses and asks fresh questions about who’s still living at home and how many bathrooms we have; decides whether the door to our office or shop should have steps or a wheelchair ramp; decrees the gender and complexion of the people to be hired there; lectures us on safe sex, and dictates what we can sniff, smoke, and swallow. The government is huge, stupid, greedy, and makes nosy, officious, and dangerous intrusions into the smallest corners of life – this much we can stand. But the real problem is that government is boring. We could cure or mitigate the other ills Washington visits upon us if we could only bring ourselves to pay attention to Washington itself. But we cannot. Government is boring because political careers are based on the most tepid kind of lie: “I’ll balance the budget, sort of,” or, “I won’t raise taxes, if I can help it.”
Of course, politicians don’t tell the truth: “I am running for the U.S. Senate in order to even the score with those grade-school classmates of mine who, 35 years ago, gave me the nickname Fish Face,” or, “Please elect me to Congress so that I can get out of the Midwest and meet bigwigs and cute babes.” But neither do politicians tell huge, entertaining whoppers: “Why, send yours truly to Capitol Hill and I’ll ship home the swag in boxcar lots. You’ll be paving the roads with bacon around here when I get done shoveling out the pork barrel. There’ll be government jobs for your dog. Leave your garden hose running for 15 minutes and I’ll have the Department of Transportation build an eight-lane suspension bridge across the puddle. Show me a wet basement and I’ll get
“
Government is boring because political careers are based on the most tepid kind of lie: “I’ll balance the budget, sort of,” or, “I won’t raise taxes, if I can help it.”
8 | October 2017
you a naval base and make your Roto-Rooter man an admiral of the fleet. There’ll be farm subsidies for every geranium you’ve got in a pot, defense contracts for Junior’s spitballs, and free daycare for Sister’s dolls. You’ll get unemployment for the 16 hours a day when you’re not at your job, full disability benefits if you have to get up in the night to take a leak, and Social Security checks will come in the mail not just when you retire at 65 but when you retire each night to bed. Taxes? Hell, I’ll have the government go around every week putting money back in your paycheck, and I’ll make the IRS hire chimpanzees from the zoo to audit your tax returns. Vote for me, folks, and you’ll be farting through silk.” Government is also boring because in a democracy government is a matter of majority rule. Now, majority rule is a precious, sacred thing worth dying for. But – like other precious, sacred things, such as the home and family – it’s not only worth dying for, it can make you wish you were dead. Imagine if all of life were determined by majority rule. Every meal would be a pizza. Every pair of pants, even those in a Brooks Brothers suit, would be stone-washed denim. Celebrity diet and exercise books would be the only things on the shelves at the library. And – since women are a majority of the population – we’d all be married to Mel Gibson. [Not anymore! What a bum he turned out to be! Currently, we’d all be remarried to Channing Tatum.] Furthermore, government is boring because what’s in it for us? Sure, if we own an aerospace
contracting company or a 5,000-acre sugar- beet farm we can soak Uncle Sucker for millions. But most of us failed to plan ahead and buy McDonnell Douglas. And now the only thing we can get out of government is government benefits – measly VA checks and Medicare. We won’t get far on the French Riviera on this kind of chump change. Besides the French look at us funny when we try to buy pate de foie gras and Chateau Margaux ‘61 with American food stamps. Government is so tedious that sometimes you wonder if the government is being boring on purpose. Maybe it’s trying to put us to sleep so we won’t notice what it’s doing. [One thing that can be said for President Trump, he doesn’t put us to sleep. He keeps us up at night...] Every aspect of our existence is affected by government, so naturally we want to keep an eye on the thing. Yet whenever we regular citizens try to read a book on government or watch one of those TV public-affairs programs about government, we feel like high school students who’ve fallen a semester behind in our algebra class. Then we grow drowsy and torpid. This could be intentional. Our government could be attempting to establish a Dictatorship of Boredom. The last person left awake gets to spend all the tax money. Boredom isn’t the only problem. American
lack of interest in government is well developed, but American ignorance of government is perfect.
American Consequences | 9
“ LETTER FROM THE EDITOR
We are the only nation in the world based on happiness.
[Last month, my high school junior daughter was assigned a textbook that makes American Civics seem like Atlas Shrugged ... This is Howard Zinn’s A People’s History of the United States . Zinn (now dead and gone to hell) detested America and, in A People’s History , describes the entire American enterprise as based upon racism, bigotry, slaughter, and exploitation of the poor by some supposed “elite.” Zinn makes me yearn for the mere liberal PC claptrap of 1991.] Our Founding Fathers lacked the special literary skills with which modern writers on the subject of government are so richly endowed. When they wrote the Declaration of Independence, the Constitution, and the Bill of Rights, they were so clumsy of thought and pen that even today, seven generations later, we can understand what they were talking about. They were talking about having a good time: We hold these Truths to be self-evident, that all Men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the Pursuit of happiness... “This is living! I gotta be me! Ain’t we got fun!” It’s all there in the Declaration of Independence. We are the only nation in the world based on happiness. Search as you will the sacred creed of other nations and peoples. Read the Magna Carta, The Communist Manifesto , the Ten Commandments, the Analects of Confucius,
Almost everything we know about the workings of Congress, the presidency, the Supreme Court, and so forth comes from one high school civics course and one spring vacation when Dad took the family to Washington, D.C. On the trip to Washington, we learned that the three branches of government are the White House, the top of the Washington Monument, and the tour of the FBI building. In high school civics class, we learned just how long an afternoon can be made to seem with the help of modern educational methods. Things have not changed much. I got a copy of a current high school civics book, American Civics . I’m told it’s one of the nation’s most widely used texts. American Civics has trimmed its sails to the prevailing ideological winds. It has a section with the infelicitous title “Upsetting America’s Ecology” and another section that says, “The Reverend Jesse Jackson ran a strong campaign for the 1984 and 1988 Democratic Presidential nominations.” There’s a photo of a man in a wheelchair above the caption, “Disabled doesn’t mean unable.” Beneath the moral frills, however, American Civics is the same font of monotony, the same bible of ennui that civics books have always been. I defy anyone to read two paragraphs of it and tell me what he just read.
10 | October 2017
—Advertisement —
How A Simple Fix – To This HUGE Investing Mistake – Could Double Your Returns How A Simple Fix – To This HUGE Investing Mistake – Could Double Your Returns How A Simple Fix – To This HUGE Investing Mistake – Could Double Your Returns
Sounds crazy, right? Sounds crazy, right? Sounds crazy, right?
Yet a few minutes from now, you could begin doubling the profits from your brokerage account. “I’ve made over 891,000 using this... mostly by doing nothing.” – John C., Utah Yet a few minutes from n w, you could be in d bling the profits from your brokerage account. “I’ve ade over 891,000 using this... mostly by doing nothing.” – John C., Utah Yet a few minutes from n w, could be in doubling the profits from your brokerage account. “I’ve made over 891,000 using this... mostly by doing nothing.” – John C., Utah It’s the same secret used by top traders ... and now everyday investors... with astonishing results. It’s the same secret used by top traders ... and now everyday investors... with astonishing results. I ’s the sam ecret us d by top raders ... nd ow eve yday investors... with astonishing results.
632% MORE Profit from a Single Stock And it can help earn up to 632% more money on stocks you own right now, starting today. 632% MORE Profit from a Single Stock And it can help earn up to 632% more money on stocks you own right now, starting today. 632% MORE Profit from a Single Stock And it can help earn up to 632% more money on stocks you own right now, starting today.
I’m Dr. Richard Smith. I’m Dr. Richard Smith. I’m Dr. Richard Smith.
Not long ago, I concluded an algorithm-based research project on the portfolios of 40 individual investors. You won’t see it published on Yahoo Finance, CNN Money or even Fox Business. Because until now, the full results have not been shared beyond a select group of private investing networks. Not long ago, I concluded an algorithm-based research project on the portfolios of 40 individual investors. You won’t see it published on Yahoo Finance, CNN Money or even Fox Business. Because until now, the full results have not been shared beyond a select group of private investing networks. N t l ng ago, I conclu ed a alg rithm-based research project on the portfolios of 40 individual investors. You won’t see it published on Yahoo Finance, CNN Money or even Fox Business. Because until now, the full results have not been shared beyond a select group of private investing networks. The study showed how a simple adjustment to your brokerage account The study showed how a simple adjustment to your brokerage account The study showed how a simple adjustment to your brokerage account
could on average double overall investing profits – on stocks already owned . could on average double overall investing profits – on stocks already owned . could on average double overall investing profits – on stocks already owned . Including gains on individual stocks like... 274.4% MORE money on PSX... 632% MORE on STZ... 121.6% MORE on OCANF, 719% MORE on TTPH... and 291.4% MORE on AMBA. Including gains on individual stocks like... 274.4 ORE oney on PSX... 632% MORE on STZ... 121.6% MORE on OCANF, 719% ORE on TTP ... and 291.4 ORE on AMBA. Including gains on individual stocks like... 274.4% MORE money on PSX... 632% MORE on STZ... 121.6% MORE on OCANF, 719% MORE on TTPH... and 291.4% MORE on AMBA.
Click here to see how they did it. Click here to see ho they di it. Click here to see how they did it.
LETTER FROM THE EDITOR
Plato’s Republic , or the U.N. Charter and find me any happiness at all. And this is one good reason why we who live here can’t bring ourselves to read American Civics or even the daily paper. As it is with us, so it was with the Original Dads. Their beef with King George? He was no fun . As the Declaration of Independence goes on to say, George III is attempting to: ...complete the works of Death, Desolation, and Tyranny, already begun with circumstances of Cruelty and Perfidy scarcely paralleled in the most barbarous Ages, and totally unworthy the Head of a civilized Nation. Totally. There are 27 specific complaints against the British Crown in the Declaration of Independence. To modern ears they still sound reasonable. They still sound reasonable because so many of the complaints can be leveled against the present U.S. federal government. Maybe not the “Death, Desolation, and Tyranny” [unless you’re a DACA “Dreamer”], but how about: ...has erected a Multitude of new Offices, and sent hither Swarms of Officers to harass our People, and eat out their Substance. George III was a piker compared to FDR and LBJ. ...has refused his Assent to Laws, the most
wholesome and necessary for the public Good. Our Congress wouldn’t pass a balanced budget or any legislation banning people over 30 from wearing spandex bicycle shorts. ...has kept among us, in Times of Peace, Standing Armies... ...has combined with others to subject us to a Jurisdiction foreign to our Constitution and unacknowledged by our Laws... Federal regulator agencies, for instance. ...Depriving us, in many Cases, of the Benefits of Trial by Jury. If we cross one of those regulatory agencies. ...Cutting off our Trade with all Parts of the World. As U.S. trade quotas and tariffs do. ...Imposing Taxes on us without our Consent. Nobody asked me if I wanted a 1040 Form. ...has excited domestic Insurrections amongst us... For sure.The Constitution is an equally forthright piece of work and quite succinct – (21 pages in the American Civics E-Z- reader large-type version) giving the complete operating instructions for a nation of 250 million people. The manual for a Toyota Camry, which only seats five, is four times as long.
12 | October 2017
“
If the gun laws that Massachusetts has now had been in force in 1776, we'd all be Canadians.
An hour’s perusal of our national charter makes it hard to understand what all the argle-bargle is about. The First Amendment forbids any law “abridging the freedom of speech.” It doesn’t say, “except for commercials on children’s television” or “unless somebody says ‘f***’ in a rap song or ‘chick’ on a college campus.” The Second Amendment states that “the right of the people to keep and bear arms shall not be infringed,” period. There is no mention of magazine size, rate of fire, or to what extent these arms may resemble assault rifles. All rifles were assault rifles in those days. Furthermore, if the gun laws that Massachusetts has now had been in force in 1776, we’d all be Canadians. And you know what kind of weather Canada has. There is no reference to abortion whatsoever in the Constitution, not even so much as an “I’ll pull out in time, Honey, honest.” The Tenth Amendment tells us “the powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” This means the power to stop the endless, vitriolic “Pro-Life” versus “Pro-Choice” argument is – just as the Amendment says – “reserved to the States respectively, or to the people.” The Constitution is not hard to understand. Although the quality of reasoning degenerates in the later amendments. The Sixteenth Amendment is particularly awful:
The Congress shall have the power to lay and collect taxes on incomes, from whatever source derived... And Section 4 of the Fourteenth is very silly: The validity of the public debt of the United States, authorized by law... shall not be questioned. The Twenty-Sixth Amendment, giving the vote to 18-year-olds, must have been drafted by people who’d never met any 18-year-olds Constitution is easily glossed. The single exception being the Twelfth Amendment: ...The person having the greatest number of votes for President, shall be the President, if such number be a majority of the whole number of Electors appointed; and if no person have such a majority, then from the persons having the highest numbers not exceeding three on the list of those voted for as President, the House of Representatives shall choose immediately, by ballot, one of them... The idea seems to be to make the election of a president so complicated and annoying that no one with an important job or a serious avocation or who is presently making any substantial contribution to society or, worse, by people who were 18. But, on the whole, the text of the
American Consequences | 13
LETTER FROM THE EDITOR
“
When can we say of our political system, "Stick a fork in it, it's done"?
would be tempted to run for the office. So far, it’s worked. Otherwise, only one important question is raised by the Constitution, a question implicit in its preamble: We the people of the United States, in order to form a more perfect Union, establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity... The question being, “Are we done yet?”
The first objective was achieved by the Civil War. Brother fought brother, neighbor fought neighbor, even perfect strangers fought each other. I assume a more perfect Union was formed, since the “Union” side won. We’ve established about as much justice as the country can stand (Perfect justice being a thing none of us would care to confront). Domestic Tranquility we don’t have, but how we’d get it without violating the whole Constitution and Bill of Rights is beyond me. The common defense is so well provided for that even such uncommon things as Saudi Arabians are defended by it. In the matter of promoting the general welfare we have – to judge by the welfare rolls – done it too well. The blessings of liberty are so manifestly secured to ourselves that we seem weighed down by the things, and lately are attending AA meetings and formulating personal diet and exercise regimens to ease the burden. And as for posterity, that’s why birth control was invented. So when can we quit passing laws and raising taxes? When can we say of our political system, “Stick a fork in it, it’s done”? The Mystery of Government is not how Washington works but how to make it stop.
14 | October 2017
From the preface to Parliament of Whores
WHY GOD IS A REPUBLICAN AND SANTA CLAUS IS A DEMOCRAT
G od is an elderly or, at any rate, middle-aged male, a stern fellow, patriarchal rather than paternal, and a great believer in rules and regulations. He holds people strictly accountable for their actions. He has little apparent concern for the material well-being of the disadvantaged. He is politically connected, socially powerful, and holds the mortgage on literally everything in the world. God is difficult. God is unsentimental. It is very hard to get into God’s heavenly country club. Santa Claus is another matter. He’s cute. He’s nonthreatening. He’s always cheerful. And he loves animals. He may know who’s been naughty and who’s been nice, but he never does anything about it. He gives everyone everything they want without thought of a quid pro quo. He works hard for charities, and he’s famously generous to the poor.
Santa Claus is preferable to God in every way but one: There is no such thing as Santa Claus.
American Consequences | 15
WHAT MOVED THE MARKET THE BIGGEST STORIES THAT MATTERED FOR THE MARKET LAST MONTH...
September 24 German elections reshape parliament. German Chancellor Angela Merkel saw her party's support erode, winning only 33% of the overall vote. This was down from the 41% won in the 2013 election. Alternative for Germany, considered a far-right group, won almost 13% of the vote and will enter parliament for the first time. This was the worst result for Chancellor Merkel's party since 1949, and they must form a new government coalition to maintain majority control of parliament. October 1-15 Catalonian independence referendum and Austrian elections create tension in Europe. On October 1, the Spanish region of Catalonia held an independence referendum where voters decided in favor of separation from Spain. The Spanish national government declared this vote illegal, and the ensuing back-and-forth between the regional parliament and national prime minister created concerns around harmony in the eurozone. Compounding the problem was the election of far-right candidate Sebastian Kurz in Austria, highlighting more potential discord.
October 12-15 The IMF andWorld Bank held their annual meetings inWashington, D.C. The event featured speeches by many key global central bankers, including Federal Reserve chair Janet Yellen and European Central Bank (ECB) president Mario Draghi. The meetings were kick-started by the International Monetary Fund (IMF) raising its global growth expectations for this year and next. Central bankers from both Europe and the U.S. followed the IMF's lead by also talking up the global growth picture. Fed Chair speculation heats up. Throughout the month, the market and media tried to decipher who will be the next head of the Federal Reserve when Janet Yellen's term ends on February 3. Press reports had whittled the list of potential candidates to Stanford economist John Taylor, Fed governor Jerome Powell, former Fed governor Kevin Warsh, Yellen, and White House economic adviser Gary Cohn. Three of the candidates are viewed as more hawkish than Yellen, implying rates may head higher. In Summary... The market roared to new highs. The reflation "trade" enticed investors to buy financials, industrials, and technology stocks, and there were encouraging economic developments throughout the month.
EDITORS
Scott Garliss
John Gillin Greg Diamond
TUNE IN Stansberry NewsWire , everymorning at 8:30 am.
16 | October 2017
WATCH THESE DATES
The global inflation data were better, and manufacturing expanded at the fastest clip in over a decade. Auto sales rebounded and U.S. sales are now projected to be above 17 million units. Retail sales jumped "post-hurricane" and buyers returned to old-line retail stocks that had been cast aside on news that Amazon was taking over the world. Earnings have been better than the forecasts. Apple made more money last quarter than any company in the history of the world. And the tech sector, awash in cash, moved to all-time highs. Bitcoin blew through the $5000 level on a string of positive developments out of Asia. Tax reformwas center stage and the betting line has turned in favor of getting real reform passed this year. The market has largely ignored health care reform fights, the Iranian nuclear agreement, and the rumblings from North Korea. Passive inflows totaled $500 billion year to date and the spigot is wide open. Recent results from the big banks showed promising loan growth, and the move up in short-term rates buoyed net interest margins. Basic resources joined the advance on 7% GDP growth estimates from China. Central banks continue to be in lockstep, focusing on their mission of full employment, 2% inflation, and modest GDP growth targets. The Fed announced its plan to begin balance- sheet reduction and the market gave the move a thumbs-up. The lyrics of the late, great Tom Petty nail this market environment: "And I'll keep this world from draggin' me down, gonna stand my ground... and I won't back down."
October 24 Markit releases U.S. and European Flash Purchasing Managers' Index (PMI) data.
For real- time market updates from some of Wall Street’s most plugged-in analysts, CLICK
October 31 Eurozone release of third quarter GDP data.
October 26-November 2 The ECB, the Federal Reserve, and the Bank of England (BoE) decide on interest rates. In the case of the ECB, the market will be looking for guidance on how it plans towind down quantitative easing. The market anticipates the Fedwill commence winding down their balance sheet, and the BoE is expected to raise rates. Thesewill be key cues for the health of the global economy.
HERE to get instant
October 30-November 2 China releases PMI data.
access to NewsWire.
November 5 ECB to release monetary policymeeting minutes.
American Consequences | 17
WHAT COULD POSSIBLY GO WRONG?
Financial follies and disaster in the making
crisis. More concerning, if the central-bank “unwind” fails... what ammunition is left? Read more about one extreme possibility – a “Debt Jubilee” – in this issue . And stay tuned for our November issue, where we’ll explore this idea in more detail. The world will never trade oil in only U.S. dollars again... At least, that’s the goal of the Chinese government. They want to trade oil in their own currency, the yuan. And these yuan- priced futures contracts would be convertible into gold. If it works, this will be the start of a huge shift of economic power... Today, commodities trade in U.S. dollars all over the world. And that gives the U.S. enormous power. U.S. sanctions can make it nearly impossible for countries like Russia, Iran, or North Korea to trade freely. China’s yuan-priced oil futures would allow these countries to freely trade in oil without the worry of U.S. oversight. That’s a huge incentive and it creates a built-in customer base for China.
The ‘great unwind’ is here...
After months of speculation, the Federal Reserve formally made the announcement late last month... It will begin to “taper” its $4.5 trillion balance sheet in October. The central bank also said it expects to raise rates at least one more time this year. And Fed chair Janet Yellen used the occasion to confirm that the era of “easy money” is ending. We aren’t convinced... The Fed and other central banks have thrown the monetary “kitchen sink” at the global economy... yet growth remains tepid at best. The inflation they’ve been desperate to create has yet to show up. And even the Fed doesn’t know what will happen as it begins to remove this unprecedented stimulus. Maybe they’re right... Maybe the economy will continue to grind higher even without support. Or perhaps their confidence is misplaced... Strategists at Deutsche Bank believe Fed tightening – the beginning of what they’ve called “the great central bank unwind” – could ultimately trigger the next financial
18 | October 2017
Not only does this plan allow countries to skirt U.S. trade regulations... But they don’t have to take any yuan risk, either. They will have the ability to settle all trades in gold. It’s a simple solution to the risk of a yuan-priced futures market. More important, it could be the first step toward China’s yuan competing with the U.S. dollar as the world’s reserve currency. Toys “R” Us files for bankruptcy, burning bondholders... For years, the well-known toy store made struggling position in retail, crushing debt burden, or mounting losses. That information was readily available for all to see... And yet, investors in the company’s bonds were somehow caught off guard. As recently as June, Toys “R” Us bonds due in October 2018 were trading above par. That means that bond investors were willing to pay more than the face value of the bonds to “lock in” the bonds’ 7.3% yield. In fact, the bonds traded for 98% of their $100 face value as recently as August. Weeks later, the first group of investors started to realize the risk, and Toys “R” Us bonds began to sell off... The bonds fell from $98 to $70. A week later, they traded for around $40. When the company announced its bankruptcy in September, the bonds collapsed to $20. What happened with Toys “R” Us represents the current state of financial markets... Investors are ignoring risk and chasing yield . This has been a successful strategy efforts to improve its operations, but management never hid the company’s
in recent years with all the “cheap” money sloshing around... But it can’t last forever. More than $1.3 trillion in speculative debt like this is coming due between now and 2020. We can’t know when the carnage will begin. But we just got an important confirmation that it’s looming... And the wave of credit defaults could come sooner than most expect. The IRS hires Equifax to prevent tax fraud... This month, Equifax leaked data on more than 140 million U.S. consumers... A breach that occurred after a software update was released to address the vulnerability in Equifax’s website. Shortly after the leak, the IRS hired the company for several million dollars to provide taxpayer identification and fraud prevention services to help it recover from two separate attacks that exposed 700,000 Social Security numbers and allowed hackers to steal tax refunds worth millions of dollars. What could go wrong? The contract was awarded to Equifax as a “no bid” contract, meaning that no other company could compete due to the IRS’ claim that only Equifax is able to provide the security and services requested. As we go to press, the IRS temporarily suspended the contract after it was revealed Equifax’s site may have been compromised a second time. At this point it is unlikely that the IRS will replace Equifax before the 2017 tax season, and suspension or not, the real damage is already done. Your government at work...
American Consequences | 19
FROM OUR INBOX
Re: How Robber Barons Became Robin Hoods
to read the whole damn magazine. I really don’t have time for this. Great list of topics. I’ll have to install a tablet in the john to have any hope at all of getting through them all. – Carl Graham P.J. O’Rourke comment: That’s the kind of complaint we love to hear! (I’ve always found the john, as a place to read, the only spot in the house that’s completely safe from children, dogs, spouse, cleaning lady, etc. As a result, I lock the door and prop a towel rack against the doorknob even when I’m all alone in a hotel room.) Over 20 years ago, I cut out the quote: “If you think healthcare is expensive now; wait until it’s free.” I became an O’Rourke fan. – Bill Chapman P.J. O’Rourke comment: Thanks, Bill. And, not that I’m counting, but that was twenty- four years ago. It was in a 1993 op-ed I wrote for the Wall Street Journal while the nation was in the throes of Hillarycare. Alack and alas, 24 years later, it’s still true. National Lampoon. I was probably the only paratrooper in the 82nd Airborne Division who had a subscription to it. When he left it, so did I. I took it with me to the field and let my comrades literally read it to shreds. In a time before the internet, cell phones or even video games it provided me with hours of The last magazine I subscribed to that was edited by Mr. O’Rourke was the
Where is the article on why the fake- news media hates job-creating American businesses? – Several subscribers, including Bob Smith, Dan Haselton, Mike Mcaffee, and Cindy Long P.J. O’Rourke comment: That article is right here , by my friend Andy Ferguson, senior editor at The Weekly Standard . He wrote why business journalists hate business... with one big exception. (Hint: “There’s silicon in that there valley!”) And if you liked that article, read Andy’s new feature this month, Does Character Matter in Politics . As one born a leading-edge baby boomer (1944), I am profoundly grateful for your gift of American Consequences. You’ve provided me the opportunity to die of laughter. Thank you. – Leilani Hino in Honokaa, Hawaii P.J. O’Rourke comment: Well, at least you’ve got a warm, beautiful place to do it! (Although we leading-edge Baby Boomers shouldn’t joke about such matters.) Thank you for your kind words. And we mean to make American Consequences a gift that keeps giving. Re: Our Newest Readers Weigh In
Thanks for screwing up my month. I just read the ‘Inside this issue’ and now I have
20 | October 2017
Send us a message, question, or criticism at feedback@americanconsequences.com
difference between wrong and fun. Although I find, at my age, the question becomes less pressing if I go to bed at 9:30. I will read American Consequences with a hope that your self-confessed penchant for “ridicule” is rigorous, and as such will be able to also “reveal” and “re-energize.” Knowledge without consequential action is vanity. I have my own penchant – the Federal Reserve, which I believe is the root of all our problems... No problem can last for long if it is not “funded” by somebody. – Bob Love in Wichita, Kansas Steven Longenecker comment: We agree Bob. Take a look at our inaugural issue on the Federal Reserve ... read our conversation in this issue with Danielle DiMartino Booth, former Federal Reserve analyst and author of Fed Up: An Insider’s Take on Why the Federal Reserve is Bad for America ... and stay tuned for more. It’s an issue we follow closely. Re: Transitioning America to a ‘Cashless Society’ I get it. Cashless is wonderful. Except following a hurricane when there is no Internet service. In order to make cashless work, first the Internet has to be fixed. Shipping Comcast to Timbuktu would be a good start. – Linda Jessen Steve Sjuggerud comment: Don’t get me wrong. I’m NOT saying cashless is wonderful
entertainment. And I finally figured out who the Mad Crapper was. I’ve been reading him ever since (I’ve given away I don’t know how many copies of “Give War a Chance”) and I can’t thank him enough for how much he’s made me laugh, think and fulminate. I look forward to this newest endeavor with much anticipation. Cheers, Pete Salerno P.J. O’Rourke comment: Pete, you have no idea how glad it makes the grouchy, old- conservative me that the young, hippie-dippy me who edited the National Lampoon aided in our nation’s war efforts! You know the dedication in Give War a Chance , and I won’t repeat it here. But that dedication was for you. And, for those who’ve read the National Lampoon 1964 High School Yearbook Parody , Pete’s right, the Mad Crapper was none other than... Ha! Like Pete and I would tell! I’m excited to read this new e-zine. P.J. is a genius, so if he’s the Editor, I am all in! I roughly live my life according to P.J.’s quote: “I’m not worried about the difference between right and wrong. I’m worried about the difference between wrong and fun.” Thank you for all the decades of your excellent writing! Best Fishes, Bill Shepherd in Carmel, Indiana P.J. O’Rourke comment: Bill, my wife, children, and dogs think “genius” is going too far. But I’m with you! And I’m still worrying about the
American Consequences | 21
FROM OUR INBOX
(as you said). I’m saying cashless is coming – for sure. I don’t have the answer. But maybe Europe has already solved it... Most European cards are “chip + pin” instead of the “chip + signature” that we use in the U.S. Instead of signing, you input a four-digit pin to authorize the transaction. In addition, they use an offline pin. It authenticates without an internet connection. I don’t know the answer. I can just tell you that cashless is coming. As a person who has been innovative- tech-oriented since the 1960s, familiar with cryptocurrencies and pay-by-wire, who also has some background in economics, I can tell you something without qualification: The moment cash disappears, so does your freedom. – Lonny Eachus Steve Sjuggerud comment: I agree with you 100%. I prefer to pay in cash myself. Each time you swipe your card, you are at risk of being hacked or tracked. My point is, cashless is coming. Young people think it’s way easier (and they don’t care about their privacy). And the government loves it. It will know what the bad guys ( and the good guys) do with their money. When the citizens and the government both want something, it’s going to happen. The smartest thing for investors to do is find a way to profit, since we know it’s happening. If you’d like to learn how invest in this trend by owning what I call the “One-Tap App,” click here.
The coming cashless society in the U.S. and elsewhere rings true to me. However, there are a couple of issues to consider when going this route. 1. Going cashless may be easy in an egalitarian society like Sweden but perhaps not so easy in countries where a segment of the population may be hard-pressed to afford the technology to allow them entrance to a cashless world. 2. Visa and MasterCard may well be the big winners in this situation, at least early on, but there are developments in the blockchain world which, in time, may ‘threaten’ the dominance of the existing payments systems... One thing is certain: technological change often has large, unpredictable consequences which makes life tough but interesting for investors! – Brian Kelly Steve Sjuggerud comment: I agree with your second point. We’re early in this process. The card networks have been the big winners of credit and debit card adoption. And they’re in the pole position right now. The technology will change that at some point. That’s part of the reason I recommend investing in the entire area, not just the big players of the moment. To your first point, I disagree. Just look at what’s happened in Kenya in recent years... The country is one of the poorest in the world. Yet, it’s led the world in mobile payment adoption in recent years. The reason
22 | October 2017
is because the technology isn’t expensive, and it made life easier. Nearly everyone in Kenya has a mobile phone, and that’s all they needed. Not the latest iPhone or best smartphone, just a simple cellphone did the job. Re: Blue Apron’s Two-Sided Tale of Wall Street In order to short a stock, you have to be able to borrow it. How did ‘Luke’ manage to short Blue Apron on the initial day of trading? Who did he borrow the shares from? – Bob D’Angelo Turney Duff comment: Shorting an initial public offering (IPO) can be difficult because of the limited number of shares available to borrow. But it’s not impossible. What a hedge fund would do is call up their prime broker to request a “borrow” of that stock. Typically, a good-sized hedge fund could have two or three different prime brokers they use. And like most things on Wall Street – the relationship matters. They’d beg their prime broker to get a borrow on as many shares as they could. Then, they’d call their other prime brokers and do the same. Also, sometimes hedge funds can short stocks without the borrow. If they cover on the same day, typically nothing happens. But if they carry the position overnight, they get a call the next day and the process of a buy-in starts to occur. This usually results in a slap on the wrist and takes many days to become official so the stock might be lower before they are forced to buy the shares back.
Get Ready for an Oil Squeeze (Bad News for Oil Bears) The firm that
accurately predicted 2014’s oil crash from $100 to $40… And warned
that “Peak Oil” was a myth… Now says America is on the precipice of what could be the biggest oil boom in history. Click here to learn more .
Good news for Your Retirement Account
A new bill is moving through Congress. If you saved for retirement, you could
collect thousands in cash over the next few weeks. Get the details .
American Consequences | 23
MILLIONS OF AMERICANSWILL SOON BE CALLING FOR “REDISTRIBUTION”... WITH THE YOUNG VIOLENTLY TAKING FROM THE OLD. A LOTTERY NOBODY WANTS TOWIN
A major jubilee is coming to America soon... Lots of people will be excited about this once-in-50-years event. The crowds will cheer. And politicians will promise new and better prosperity. But what will happen is really a national nightmare. If you’ve never heard of the concept of a national jubilee, read this carefully... and skeptically. I need your feedback about these ideas. (Please send us a note to the e-mail address at the end of this article). You see, I fear we may be among the only people in America who know what’s about to happen... and why it can’t be stopped. Did you ever read Shirley Jackson’s acclaimed short story, The Lottery ? The story starts out by painting a picture of a beautiful, small farming community.
The morning of June 27th was clear and sunny, with the fresh warmth of a full- summer day; the flowers were blossoming profusely and the grass was richly green. The people of the village began to gather in the square, between the post office and the bank, around ten o’clock... The children assembled first, of course. School was recently over for the summer, and the feeling of liberty sat uneasily on most of them; they tended to gather together quietly for a while before they broke into boisterous play. The author, however, soon hints at the depravity that will follow: Bobby Martin had already stuffed his pockets full of stones, and the other boys soon followed his example, selecting the smoothest and roundest stones; Bobby and Harry Jones and Dickie Delacroix – the villagers pronounced this name “Dellacroy” – eventually made a great pile of stones in one corner of the square and guarded it against the raids of the other boys.
By Porter Stansberry
24 | October 2017
CLICK HERE TO READ THEWEB VERSION
These debt revolutions are characterized by the inability of the debt burden to be reduced in “normal” ways. In a normal cycle, deleveraging reduces debt burdens. And this happens through some combination of reduced spending (to pay off debt), defaults (where assets are redistributed among creditors), and increases to the money supply (to prevent a deflationary spiral and stoke economic growth). But in a debt revolution... those normal measures don’t work. Austerity causes a big reduction in economic growth. Spending slows and the economy declines faster than debt can be reduced. Likewise, the debt burdens can be so big that defaults don’t work because the collateral won’t come close to covering the debt. (Think about General Motors’ bankruptcy.
This is a lottery that no one wants to win... As you know if you’ve ever read the story, every adult has to draw a card from the black box. Whoever pulls out the card with the mark of death (a black spot) is stoned to death. It’s a ritual killing. Every member of the community must take part. They even hand a stone to the victim’s young son, so he can take part in the ritual. The jubilee we’re about to experience will have many of the same characteristics... Millions of Americans will soon be calling for it. Some violently. The young, the poor, and the ignorant will all rally for jubilee. They will, in effect, start piling up stones. And the person who is going to be ritually killed? That will be us. Economies collapse when debt-service costs grow faster than income for a long time – usually 50 years or more. These aren’t normal default cycles. These are far different... These are debt-fueled revolutions. What happens is that debt builds and builds. Once debt-service costs start growing faster than the economy, then the total debt is never reduced. Sooner or later, debt begins to grow geometrically, far faster than income. And
The young, the poor, and the ignorant will all rally for jubilee. They will, in effect, start piling up stones. And the person who is going to be ritually killed? That will be us.
The government put an additional $50 billion into the company, and it still couldn’t pay its creditors.) And sometimes even extreme amounts of money printing doesn’t work because interest costs increase more than inflation,
then... it simply can’t be managed. That’s when the crisis hits.
American Consequences | 25
Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13 Page 14 Page 15 Page 16 Page 17 Page 18 Page 19 Page 20 Page 21 Page 22 Page 23 Page 24 Page 25 Page 26 Page 27 Page 28 Page 29 Page 30 Page 31 Page 32 Page 33 Page 34 Page 35 Page 36 Page 37 Page 38 Page 39 Page 40 Page 41 Page 42 Page 43 Page 44 Page 45 Page 46 Page 47 Page 48 Page 49 Page 50 Page 51 Page 52 Page 53 Page 54 Page 55 Page 56 Page 57 Page 58 Page 59 Page 60 Page 61 Page 62 Page 63 Page 64 Page 65 Page 66 Page 67 Page 68 Page 69 Page 70 Page 71 Page 72 Page 73 Page 74 Page 75 Page 76 Page 77 Page 78 Page 79 Page 80 Page 81 Page 82 Page 83 Page 84 Page 85 Page 86 Page 87 Page 88 Page 89 Page 90 Page 91 Page 92 Page 93 Page 94 Page 95 Page 96 Page 97 Page 98 Page 99 Page 100 Page 101 Page 102 Page 103 Page 104 Page 105 Page 106Made with FlippingBook Online document