Monday, July 31, 2017
Democrats' New Economic Message Even Worse Than You Think
https://www.youtube.com/watch?v=FZfW45u3cYM
James Cromwell: "We are supporting an industry that will kill us."
https://www.youtube.com/watch?v=FdVI8Lgw-vU
The Democratic National Committee (DNC) really Doesn’t Like Nina Turner
https://www.youtube.com/watch?v=e7Didus9eJA
Sunday, July 30, 2017
Koch Brothers Orchestrate Grassroots Effort to Lower Corporate Taxes, Documents Show
The billionaire Koch brothers are well-prepared
for the upcoming debate over tax reform, with allies arranging to plant
questions at town hall meetings and efforts to orchestrate a grassroots army to
demand lower corporate taxes.
A detailed timeline for the
Koch strategy was laid out in a recent document prepared by a public relations
firm that services the broad network of conservative advocacy groups controlled
by the billionaire brothers’ political network. The plan calls
for action to take advantage of President Donald Trump’s pledges to
reform the tax code. Trump has called
for cutting the corporate tax rate by as much as 50 percent, and eliminating
the estate tax on inherited wealth, creating a unique opportunity to
propose legislation that would benefit business owners such as the Koch
brothers.
“Comprehensive tax reform has
been a long-standing priority for our network, and the election of Donald
Trump, coupled with pro-freedom majorities in the House and Senate, offers us a
once-in-a-generation opportunity to restore prosperity by enacting reforms,”
the document, obtained by The Intercept, declares.
The strategy
memo lays out a five-phase plan for passing a version of tax reform that is
favorable to the Koch donor network. The Koch brothers make clear that their
ideal tax reform legislation would exclude the idea of an import or carbon tax,
while focusing on broad reductions in the corporate tax rate.
Although a portion of the
strategy entails traditional lobbying and meetings with influential
policymakers, along with paid advertising to pressure lawmakers, the memo also
calls for substantial resources to be invested in grassroots advocacy.
During Phase 3 of the
strategy, starting next month, the Koch network will use its grassroots
advocacy arms, including Americans for Prosperity, to put pressure on members
of Congress when they return home for town hall meetings during the
August recess period. The Koch network will use constituent meetings to “drive
the narrative” around the need for their tax reform ideas, the memo said.
Advancing Comprehensive Tax
Reform document
The metadata of the document
shows that it was created by Avery Boggs, a former vice president at
Freedom Partners, the umbrella group that oversees the Koch political network.
Boggs now works as a vice president at In Pursuit Of, a public relations firm
spun off from the Koch network designed to provide marketing services to the
various groups that receive funding from Freedom Partners.
The Koch network includes a
range of political advocacy organizations, each designed to play a particular
role in advancing causes and candidates backed by the billionaire energy
tycoons and their allies. Americans for Prosperity, for instance, has
about 500 paid staffers, and plays a leading role in organizing broad
grassroots campaigns. Another group, Concerned Veterans for Americans, focuses
on mobilizing veterans. The network includes i360, a campaign data company that
developed intricate profiles of voters.
Last week, Politico reported
that Americans for Prosperity plans to kick off tax reform efforts on August 2
at an event at the Newseum in Washington, D.C. Rep. Mark Meadows, R-N.C., a
conservative leader in Congress, will speak at the event.
The Koch network, a major
importer of Canadian tar sands oil, has lobbied aggressively
to ensure that any tax reform package does not include the import tax once
favored by Trump. Recent disclosures show they have attempted to influence
the “House Republican Tax Reform Blueprint Draft.”
The tax reform memo was
distributed around the time of a Koch network retreat, held to collaborate
with like-minded conservative business leaders and investors, last month in
Colorado Springs, Colorado. At the event, the brothers pledged to raise $300
million for their network over the next year.
Contact the author:
US economic "resilience" is highly exaggerated
Credit card debt is edging
into record territory but not because of consumer confidence
By Danielle DiMartino Booth
Are US Federal Reserve stress
tests leading economic indicators? That certainly seems to be the case.
Just ask Capital One Financial
Corp.
As of the first quarter,
credit card loss provisions at Capital One were above 5 per cent, a six-year
high. The company recorded some improvement for the second quarter, yet Fed
stress tests of the bank’s overall loan portfolio in a deep downturn show
losses topping 12 per cent.
That explains Capital One’s
“conditional” passing score, a black eye that prompted a reduced share buy-back
plan and no increase in its dividend.
Most economists today applaud
the resilience of the current recovery, which has stretched into its eighth
year, the third-longest in postwar history. Resilience and rising household
defaults, though, don’t tend to go hand in hand.
Pressures have been building
in the background for some time. When adjusted for inflation, credit card usage
has grown faster than incomes for 18 months. According to Fed data, that time
frame coincides with the upturn in revolving credit, a proxy for credit card
debt.
In November 2015, outstanding
revolving credit crossed above the $900-billion threshold for the first time
since December 2009. By May of this year, annual growth was clocking 8.7 per
cent.
Meanwhile, credit card
balances hit $1.02 trillion, the highest level in almost eight years.
Whether by choice or force,
the aftermath of the financial crisis prompted households to ratchet back their
usage of credit cards. As the recovery got underway, frugality prevailed,
punctuated by an increase in debit card purchases.
It is thus notable that Bank
of America data find debit card usage has weakened in recent years as
households grew more comfortable rebuilding their credit card balances.
“Confidence” is the term most
associated with the rising credit card debt. But it’s fair to ask why confident
households would choose to pay so dearly for the privilege. At 15.83 per cent,
the average rate on credit card balances is at a record high.
It is more likely that
households are increasingly tapping their credit cards to cover the cost of
necessities, that they are less confident and more anxious about their future
finances.
The latest University of
Michigan consumer confidence data suggest anxiety is indeed setting in. At
80.2, the expectations component is at the lowest since October and running
below the 2016 average of 81.8.
According to the University of
Michigan: “The data indicate that hopes for a prolonged period of 3 per cent
GDP growth sparked by Trump’s victory have largely vanished, aside from a
temporary snap back expected in Q2. The declines recorded are now consistent
with just above 2 per cent GDP growth in 2017.”
The US retail sales report for
June corroborates the forecast for continued muted economic growth. In
constructing gross domestic product, statisticians net out auto, gasoline and
building materials purchases from retail sales to arrive at a “control group”.
At 2.4 per cent, the annual
growth rate of the control group has fallen to the lowest since January 2014.
The renewed weakness in
consumption prompted the economists at Bank of America Merrill Lynch to reduce
their forecast for second-quarter GDP to 1.9 per cent. The Atlanta Fed’s GDPNow
forecast is a bit higher, at 2.4 per cent, but that’s a far cry from the robust
4.3 per cent rate anticipated on May 1.
In her recent congressional
testimony, Fed Chair Janet Yellen expressed continued optimism for a strong
second-quarter rebound in GDP growth. If the Atlanta Fed’s forecast pans out,
first-half growth will stumble in at a 1.9 per cent rate, hardly reflective of
accelerating economic activity.
Even the ebullient home
builders have begun to concede that there could be more than just a supply
shortage at the root of the slowing housing market. Pending home sales have
fallen for three straight months and are now 1.7 per cent below their year-ago
level.
The National Association of
Realtors acknowledged that “weaker financial and economic confidence could also
be playing a role in the slowdown in contract activity.” The NAR added that
they had “found that fewer renters think it’s a good time to buy a home, and
respondents overall are less confident about the economy and their financial
situation than earlier this year.”
With rental inflation running
3.9 per cent above its year ago rate and homes priced out of their budgets,
renters are effectively trapped in a budgetary vice. Housing costs consume
about a third of households’ average budgets and largely dictate consumers’
wherewithal to finance the discretionary purchases that make the
consumption-driven US economy hum.
Suffice it to say, when the
costs of other necessities such as health care, the food you put on the table,
your car payment and mobile-phone bills are also running high, it’s difficult
to make ends meet. In a survey conducted by Survata and released in late June,
49 per cent of households said they were living paycheck-to-paycheck; six in 10
reported that their rainy-day funds could not cover six months of living
expenses.
What’s a household to do under
such circumstances? It would appear they’ve had to rely on credit cards. The
eventual price tag for the economy remains to be seen and won’t be known until
the next recession has come and gone.
As for how high the bill will
be in the end, its likely Capital One already has that answer.
— Bloomberg
Wall Street unprepared for even a 2.5% drop
Wall Street isn’t ready for a 1,100-point tumble in the Dow industrials
By Mark DeCambre
The U.S. stock market has been
on such a parabolic march higher that Wall Street investors may have forgotten
what a typical, sharp downturn feels like.
Indeed, much has been made
about the lack of volatility. The CBOE Volatility Index VIX+1.78% otherwise
known as the “fear gauge,” had been flirting with its lowest close on record,
implying that market expectations for a sharp, sudden fall are near rock
bottom, as the Dow Jones Industrial Average DJIA+0.15% S&P
500 index SPX-0.13%
and the Nasdaq Composite Index COMP-0.12% scale
new heights. (The Dow notched
a fresh record on Friday to end the week 1.2% higher.)
The recent level of
complacency permeating the market has pundits talking about the lack of 5%
falls in the market—an occurrence that isn’t unusual in a normal market
environment. However, a 5% tumble, while normal, isn’t that common either. It
has occurred at least 75 times over the course of the blue-chip index’s,
according to WSJ Market Data Group, using data going back to 1901. The Dow,
however, hasn’t experienced a 5% decline since 2011, and before that a 5% drop
hadn’t happened since 2008, when there were 9 such drops (see chart below):
At this point, with the Dow
just 200 points shy of 22,000, a 5% selloff would equate to a 1,100-point,
one-day slide in the gauge. Is the market ready for that sort of sudden jolt
lower, given the optics of a quadruple-digit downturn and how it might rattle
investment psyche?
Art Hogan, chief market
strategist at Wunderlich Securities, doesn’t think so.
“I would say no because we’re
out of practice. Your usual standard garden-variety volatility just hasn’t been
around, and we haven’t seen it for 12 months,” Hogan told MarketWatch.
“Quiet markets have been the
norm and not the exception and I think a major pullback is going to feel a
whole lot larger for lack of experience and the numbers are larger,” he said.
Even a 2.5% drop in the Dow,
adding up a 550-point decline, could be unsettling, market participants said.
Those sorts of tumbles are far more frequent, with 564 such moves of that
magnitude occurring in the Dow since 1901. The most recent slump of at least
2.5% was on June 24, 2016, when the Dow
tumbled about 610 points, or 3.4%, a day after U.K. citizens voted to end
the country’s membership in the European Union. There were 3 falls for the Dow
of at least 2.5% in 2015.
Hogan said it is even hard to
imagine what the landscape of the market would like in the face of a plunge of
the same magnitude of the 1987 crash, when the Dow lost 22.6% of its value, or
508 points, in a single session.
“That’s why it is hard for
investors to think about it intuitively. We have no muscle memory for it. It’s
hard to harken back to 30 years ago. We have been lulled to sleep,” he said.
As for the S&P 500, going
back to 1950, 61 of the past 67 years have had a 5% downdraft at least once, or
91% of all years, according to Ryan Detrick, senior market strategist, at LPL
Financial.
“The inevitable 5% drop will
be a shock to nearly everyone,” Detrick said. “We’ve been historically spoiled
so far this year, but as the economic cycle ages, we fully expect more
volatility the remainder of this year and the likely 5% correction to take
place as well,” he said.
Market bears have offered no
dearth of warnings that a slide is imminent, including citing rich valuations
of the biggest names in technology, including Facebook Inc. FB+1.18% Apple Inc. AAPL-0.7% Google-parent
Alphabet Inc. GOOG+0.8%
, GOOGL+0.61%
Netflix Inc. NFLX+0.74%
and Amazon.com Inc. AMZN-2.48%
which considers itself online retailer rather than a tech behemoth.
Billionaire investor Howard
Marks, co-chairman of Oaktree Capital Management, said “this is time for
caution,” pointing to a
number of bad-market omens. Those include trailing 12-month
price-to-earnings ratios, a measure of valuation, for S&P 500 stocks
running at 25 times. He said another valuation metric, the Shiller Cyclically
Adjusted PE Ratio, known as the Shiller CAPE, is at its highest level since
only two other times in the market’s history: 1929 and 2000
On
CNBC on Thursday, Robert Shiller himself described the low level of
volatility in the market as concerning, saying he “lies awake worrying” about
how this period of quietude will last before things unravel. Though he admits
that it could run longer than academics, market pundits and bears might expect.
So far, investors have
demonstrated a preternatural resilience, shaking off political worries
associated with an expanding investigation into Russia’s ties to members of
President Donald Trump’s administration, infighting within that same
administration, and the unwind of easy-money policies around the world as the
Federal Reserve attempts to navigate its own efforts to normalize interest-rate
policy amid sluggish signs of wage growth, prices and inflation—key measures of
economic health.
When, not if, things go
pear-shaped, Detrick recommends that investors put the move into perspective:
“The important thing to
remember is the Fed is still accommodative, earnings continue to improve
globally, and inflation is contained—meaning any pullback could be a nice
opportunity to add equity exposure. Although a 5% correction might feel like
1987 to some of us about now, pullbacks and volatility are perfectly normal
parts of bull markets and are needed to flush out the weak hands.”
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