UNBELIEVABLE!!!… I believe that I am among the majority of Americans who were both shocked and in some cases dismayed by the results of the November 8th Presidential elections. As I pointed out in my October 2016 Bond Newsletter, Hillary Clinton was the most unacceptable candidate that has been on a Presidential ballot or any other ballot in my lifetime. I also pointed out that I had no idea what Donald Trump represented, nor was I convinced that he had the temperament to be President of the United States. I, like many, was laboring under the assumption that the election was between “dumb and dumber” and that no matter what happened we were screwed. I was shocked by the results of the election and frankly felt that there was no way that Donald J. Trump would beat Hillary Clinton in the Presidential election. As the night wore on and the Las Vegas odds for Trump increased to 75% at around 11:00 p.m., I realized that an extraordinary event was taking place. I will have to admit that I do like President Trump much better than Presidential candidate Trump. I am extremely impressed with the cabinet and the people that President Trump has surrounded himself with. Although I think there has been some unnecessary “overreach”, I am both impressed and excited by his energy and the pace in which he is moving towards keeping his campaign promises. There is no way to know what his Presidency will look like in two years, but the one thing I am positive of is the fact that we are better off, warts and all, with Donald Trump than we would have been with Hillary Clinton.
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NOW THAT WE HAVE GOTTEN THE ELECTION BEHIND US… let’s look at some the realities of what we are facing. Trump began his campaign as a deeply unpopular and divisive candidate, but since winning the election, his approval ratings have gone up week after week (even among Independents and Democrats). Optimism about the economy is increasing also. With a recent CNBC survey finding that 42% of Americans now believe “the economy will get better in the next year” which represents an unprecedented jump of 17% compared with a survey conducted before the election. Meanwhile, the stock market, which had been languishing for months and was predicted to plummet if he won, has also taken off and reached record heights. -1- Perhaps the best precedent we have for Donald Trump’s unexpected victory is the 1980 election of Ronald Reagan. There are many similarities between the two: Both were outside the Republican mainstream, both campaigned on reversing a bloated government and both brought their party to heel. Reagan’s plan for economic revival consisted to three parts: Tax cuts, decrease regulation and a large increase in government spending. Trump is following in his footsteps. In fact, Trump’s economic team includes many of the same people who were instrumental in Reagan’s “supply side” revolution: David Malpass, Larry Kudlow, Stephen Moor and others. But when you look at the economic conditions that prevailed when Reagan came to power, you quickly realize that Trump has inherited a very different economy: (1) Interest rates were 20% and inflation was 11.83% in January 1981 when Reagan was sworn in. In effect, interest rates and inflation had nowhere to go but down. (2) Contrast that with our current situation. Interest rates are at record lows, between 0.25 – 0.5% and inflation is also very low at around 1.5%. (3) Debt-to-GDP – That is how much government debt is relative to economic output, it was 31% in 1981. Despite his image of being in favor of small government, Reagan ran up the tab and by the time he left office, the figure had increased to 49%. Today, however, debt-to-GDP stands at a whopping 105%. But even that statistic is misleading because it doesn’t include all the unfunded liabilities of Medicare, Medicaid and so on. Add those obligations in and you quickly realize that the U.S. Government is effectively bankrupt.
WHAT THIS ALL MEANS FOR TRUMP IS THAT, UNLIKE REAGAN, IT’S HIGHLY IMPROBABLE HE WILL BE ABLE TO INACT KEY PARTS OF HIS ECONOMIC VISION.
Reagan financed his debt expansion the old fashion way. He sold long-term government debt to private investors. It is not possible to do that now? It’s hard to believe, but back in 1982, you could lock in a 14% annual return by buying a 30-year government bond. Admittedly, inflation was higher back then, but inflation fell over time and so did interest rates. The result was that the bond investors ended making a killing. Today, purchasing a 30-year government bond will earn you less than a 3% return. Add an annual inflation of 2% and your effective yield brought you to about 1%. Inflation, then, has to tick upward only a smidgen for you to earn a negative yield. Rising interest rates will also see you lose money on most bonds. The question is, as a voter, you may love Trump’s spending proposal, but how keen are you as an investor on the idea of lending your life’s savings, with no real expectation of a return to help you pay for them? You don’t need to read The Art of The Deal to know that you are getting screwed. If you are not going to cough up the cash, who will? Enough negative analysis, it will be interesting to see what and how Trump tries to spend money that is not available.
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THE PROGRESSIVE MOVEMENT… for the most part is a California political ideology. The Democratic Party is floundering and trying to redefine itself. What the Progressives are to a Democratic Party is what the Tea Party was to the Republican Party five years ago and unless the idiots at the DNC move away from the Progressive agenda, they will destroy the Democratic Party. I do understand that a significant number of the “unemployed millennials” have embraced the progressive movement, but as they get jobs and responsibilities, they, like the rest of us who pay taxes and have financial obligations, will move away from that philosophy very quickly. -2- I am a great fan of Thomas Sowell. Thomas Sowell is an African American Economist, Social Theorist, Political Philosopher and Author. He is currently Senior Fellow at the Hoover Institution, Stanford University. If you are not familiar with Mr. Sowell, let me introduce you to him through a number of his quotes. All of which run in direct contradiction to the progressive movement. In that regard, please note:
(1) Socialism in general has a record of failure so blatant that only an intellectual could ignore or evade it.
(2) Much of the social history of the western world, over the past three decades, has been a history of replacing what works with what sounded good.
(3) I think this man (Obama) really does believe he can change the world, and people like that are infinitely more dangerous than the mere crooked politicians.
(4) It is amazing that people who think we cannot afford to pay for doctors, hospitals and medications somehow think we can afford to pay for doctors, hospitals and medications and government bureaucracy to administer it.
(5) If you have always believed everyone should play by the same rules and be judged by the same standards, that would have gotten you labeled a radical 60 years ago, a liberal 30 years ago and a racist today.
(6) I have never understood why it is “greed” to want to keep the money you have earned, but not greed to want to take somebody else’s money.
(7) One of the consequences of such notions as “entitlement” is that people who have contributed nothing to society feel that society owes them something, apparently just for being nice enough to grace us with their presence. Warts and all, I do think that Donald J. Trump will move this country in a direction away from the progressive ideologies of entitlement.
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A USELESS BOND NEWSLETTER… should at least provide some useless facts:
(1) A hundred thousand years ago, human gestation was 15 months.
(2) 54% of Americans prefer to fold their toilet paper rather than wad it.
(3) A barnacle has the largest penis of any other animal in the world in relation to its size.
(4) Honey is the only known food on earth that never spoils.
(5) Percentage of Africa that is wilderness – 28%. Percentage of North America that is wilderness – 38%
(6) Percentage of American men who say they would marry the same woman if they had to do it over again: 80%. Percentage of American women who say they would marry the same man: 50%.
(7) Percentage of Americans who have visited Disneyland or Disneyworld: 70%
(8) People living in mountain states eats 30% more cookies than other people.
(9) Over 20 million Africans were transported to America and the Caribbean during the 300 years of slave trade. -3-
(10) Think we are tough today? Prior to the 20th century, boxers fought bare knuckled in matches which often lasted up to more than 100 rounds.
(11) Planet Jupiter is the only planet to spin clockwise.
(12) Russia has the most movie theaters in the world.
(13) Sir Isaac Newton, who invented Calculus, may have been a math genius, but he had terrible trouble with names and actually frequently forgot his brother’s name.
(14) n 1987, American Airlines saved $40,000 by eliminating one olive from each salad in first class.
(15) The Aztec and Maya Indians played a complicate game not unlike lacrosse. When the game was finished, the captain of the losing team was slaughtered before the onlookers and his body was torn limb to limb.
(16) The blueprints of the Eiffel Tower covered more than 14,000 square feet of drafting paper, has 1,792 steps and it took 2,500,000 rivets to construct it.
(17) The first couple to be shown sleeping together on primetime television was Fred and Wilma Flintstone.
(18) The first victim of the electric chair (which by the way was invented by a dentist) took 8 minutes to die.
(19) Iceland consumes more Coca Cola per capita than any other nation and Icelanders read more books per capita than any other people in the world.
(20) The only domestic animal not mentioned in the bible is the cat.
(21) 55% of men wash their hands after using the restroom, 80% of women wash their hands after using a restroom.
(22) The hardest bone in the human body is the jawbone. The strongest muscle in the human body is the tongue.
(23) February 1865 is the only month in recorded history not to have a full moon.
(24) The microwave was invented after a researcher walked by a radar tube and a chocolate bar melted in his pocket.
(25) The windiest place on earth is Mt. Washington in New Hampshire.
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IT IS TIME FOR OUR ANNUAL TEST… For the last few years, the first Bond Newsletter of that year had contained a short and simple test of key events that took place in the prior year. Just to make sure that you are paying attention, please check out your memory with the following questions:
(1) Seventeen candidates entered the Republican primary last year. Who were the last three standing—besides Donald Trump?
(2) Which GOP presidential primary candidate’s father did Donald Trump link to the JFK assassination, based on a story and photo in the National Enquirer?
(3) In a hacked email published by WikiLeaks, a longtime Clinton aide fretted that the then-secretary of state had promised to attend a meeting in Morocco if King Mohammed VI pledged $12 million to the Clinton Foundation. Clinton “created this mess and she knows it,” the aide said. Name the aide. -4-
(4) After the Access Hollywood tape in which Trump boasted of sexually assaulting women became public in October, this high-ranking Republican official announced he would no longer defend or promote Trump’s candidacy, and said, “I am sickened by what I heard today.”
(5) In the election, Clinton lost three delegate-rich Rust Belt states to Trump by less than 1 percent. Name them.
(6) Which tech billionaire financed pro wrestler Hulk Hogan’s ruinous defamation lawsuit against Gawker.com?
(7) Beyoncé’s sexually charged mention of this national food chain during her performance in the Super Bowl halftime show was credited with a 33 percent spike in its sales.
(8) This British leader called for the referendum that led to the country’s “Brexit” from the European Union, and then campaigned for his nation to stay.
(9) Which recently elected world leader called both President Obama and Pope Francis a “son of a whore”?
(10) What country has taken the largest amount of Syrian refuges, at more than 2.7 million? (11) Microsoft agreed to acquire this social media company this year for $26.2 billion. (12) What innovation did McDonald’s consistently credit with boosting the company’s earnings this year?
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WERE IN 2016:
(1) In 2016, 64% of Americans are happy with their financial situation, 77% with their career and 84% with their family and friends.
(2) 51% also think the economy is improving, up from 39% a year ago, yet (and ironically) we are still very worried. 74% say that the country is headed in the wrong direction and 50% think that the nation’s best days have passed.
(3) 77% say Americans are greatly divided when it comes to the most important values and 70% thought that the elections brought out the worst in people and 7% lost or terminated a friendship because of the political arguments. Still 60% say the campaign was more “interesting” than past elections.
Whom do we blame for the country’s problems?
(1) 82% say that people running the country don’t care about the ordinary Americans.
(2) 76% have an unfavorable opinion of Congress and 47% have an unfavorable opinion of the Supreme Court.
(3) President Obama gets better reviews with 55% saying that he has been a “good” or “great” President. But only 21% think Obama’s policies helped their personal financial situation, where 33% think they actively hurt their finances.
How has society changed?
(1) A record 62% now support same-sex marriage, 72% favor passing laws to protect lesbians, gay and transgender people from discrimination.
(2) 60% think marijuana should be legalized.
(3) 63% believe racial relations in the U.S. are in a bad shape, the highest number since the 1992 Los Angeles riots.
(4) 55% think things are only going to get worse.
(5) The growing role of technology in our lives is also a cause for concern as 49% believe our Smartphones and other gadgets are making us dumb and 54% say they make us less connected to our friends and family.
What are we scared of?
(1) 80% fear the terrorists will soon launch a major attach on U.S. soil.
(2) 39% fear the government will try to take away the guns and ammunition.
(3) For what it is worth, 8% are phobic of clowns.
(4) 46% think Donald Trump will drop a nuclear bomb, including 20% of his own supporters and 54% say he could cause the U.S. to default on debt.
(5) Faced with all these troubles some of us just want out. 21% would be inclined to volunteer for a wmission to Mars even if it were a high risk of dying enroute (pretty sad).
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HOW MUCH IS A BILLION?
(1) A billion seconds ago, it was 1959.
(2) A billion minutes ago, Jesus was alive.
(3) A billion hours ago, our ancestors were living in the Stone Age.
(4) A billion days ago, no one walked on two feet.
(5) A billion dollars ago, was only 8 hours and 20 minutes, at the current rate of government spending.
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TO THE PROGRESSIVES… extreme wealth is seen as “obscene”. I would adamantly disagree and in defense of that thought Jeff Jacoby, in the Boston Globe, suggested that the world’s eight richest men own as much wealth as the world’s poorest 3.7 billion – half the planet’s population. That’s what the international charity, Oxfam, tells us, calling the vast income gap “a moral and social calamity”. It’s a striking statistic, but it’s also irrelevant. To begin with, “the Oxfam 8” – Microsoft Bill Gates, investor Warren Buffett, telecom mogul Carlos Slim, Facebook’s Mark Zuckerberg, clothing magnate Amancio Ortega, Amazon creator Jeff Bezos, Oracle co-founder Larry Ellison, and New York City’s entrepreneur ex-mayor Michael Bloomberg are not parasites exploiting the masses. Through hard work and ingenuity, they have created enterprises that improve the lives of billions; moreover, each gives massive amounts to charity. Meanwhile, thanks to capitalism, “the world’s poor have been climbing out of poverty at the fastest rate in human history”. Over the past 30 years, the number of people in extreme poverty has dropped by 75% or 1.2 billion people. Liberals keep insisting the extreme wealth is “obscene” as if the economy were a zero-sum game in which people get rich only if the poor get poorer. That’s not true “wealth is good, and the more people who can create and earn it, the better”.
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IT IS NO ACCIDENT… that Nielson, Hoover & Company is the largest provider of surety credit in the Southeast United States. With all the potential work, particularly in Florida in 2017, there will be plenty of opportunity to stretch work programs and consequently stretch the need for surety credit. No one does capacity better than we do…not convinced, give us a call and we will prove otherwise.
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PARTING SHOT: “I come in peace. I didn’t bring artillery. But I am pleading with you, with tears in my eyes: If you f–k with me, I’ll kill you all.” – James ‘Mad Dog’ Mattis (from a speech to the Iraqi Army)
Charles J. Nielson CJN/cb
