Banana Republic

Banana Republic

The United States officially became a banana republic (and I don't mean the cargo-pant slinging clothier) on Monday August 8th, 2022. Couple the Trump Raid with the looming passage of the "Inflation Reduction Act" adding 87,000 armed "tax police" and we are there dear readers. As my good friend Jackie Chiles would say "Outrageous, Egregious, Preposterous!"

Under the auspices of non-compliance with an Archives Act violation (what is that anyway?) the FBI raided former President Donald Trump's Mar-a-lago home Monday August 8th, 2022 in the most brazen political hit job this country has ever witnessed. On the heels of this raid, Democrats have voted 51-50 to send arguably the most freedom destroying legislation to the House. The impact of creating an armed partisan tax police with 87,000 new recruits boggles the mind. This country is in trouble.

When justice is no longer blind to political affiliation or religious beliefs or the Bill of Rights truly storm clouds brew. Such is the case now as the country will undoubtedly become more polarized along political lines as the Constitution becomes a notion rather than an ideal.

What is a financial farmer to do? Oddly, the market continues to rally into the better-than-expected horrible inflation number (8.5% vs. 9.1% previously) so a crest in inflation may sling-shot us out of a Bear Market. But to a larger extent, the market is always forward-looking. How far forward is a matter of debate, but something along the lines of 6-9 months is a reasonable assumption. And based on inbound data from recent macro events it *appears* that with inflation peaking the Fed may only have to raise another couple points. 

"Only have to raise another couple points" is a tricky proposition nonetheless, as mortgage rate increases tied to the 10-year Treasury Note dictate the housing market. Expect purchasing to slow, inventory to rise, mortgage payments to be missed, and a general malaise to hit the housing market. It is hard to believe housing will continue to rally into a near-doubling of rates. The one savior (economically speaking) of this economy is the unemployment rate.

With historically low unemployment and steady to higher wages, the consumer has some semblance of protection from inflation, protection in the sense that they can now get less for more; "grin and bear it" has become the signature economic policy of the Biden Administration.

That's where we're at now as a country, trying to shoulder the burdens of inflation without breaking our backs all the while watching the rule of law disintegrate. But keep faith dear readers, as so plainly spoken in "Unbroken": "If you can take it, you can make it."

 

SPACtacular!

 SPACtacular!

A Special Purpose Acquisition Company (SPAC) model is turning the traditional Wall Street monopoly on Initial Public Offering (IPO) deals on its head...and heads are rolling in angst. Consider the recent hit piece by Bloomberg "Investors in SPACs Need to Know the Real Deal." Or any of the various rants by Jim Cramer on CNBC about why he doesn't like SPACs. But wait, a host of recent traditional IPOs (those birthed by traditional Wall Street investment bankers) like DoorDash, Airbnb, and most recently Bumble all soared on their first day of trading. Great for retail investors, right? Not so much. 

(Intentional?) Mispricing by investment bankers has led to massive single day pops on issue, leaving the IPO company in a lurch (yeah, those are dollars they left on the table, rather than going into corporate coffers) while the investment bankers make a killing (all the money is made between the lines) for a service that could have been accomplished via a direct listing like Palantir accomplished or...gasp...via a SPAC. Oh yeah, one more thing...how about all those retail buyers (read as the general public) who had to pony up to pay the premium price for a new issue? Hosed. Their only hope now is to bet on a high price going higher.

In a raging bull market, proximity to the deal flow is vital. Everyone knows this, that's why there is so much demand for IPO deals. That's why the margins are so fat. That's why traditional investment bankers crush it. It's an easy algorithm, get as close (early) to a deal of a good issue as possible. Retail investors know this well. And about a year and a half ago a SPAC launch occurred that first kinda appeared under the radar...Diamond Eagle Acquisition Corporation was to acquire SBTech and DraftKings. This seminal event ushered in a new wave of investing for the retail investor and the small company. It was a renaissance moment. Since the DraftKings deal went public, literally another hundred SPACs were launched. More are on the way.

Are SPACs risky? No doubt. Like any new issue without a track record, investors need to be cautious. When owners, founders, venture capitalists, private equity managers, hedge funds, AND retail investors, however, all are on the same page, it definitely seems like the investing world is thinking different (like Steve Jobs advised.) The one player traditionally clear and present, however, is noticeably absent...the investment banker.

SPACs are a great democratizer. And the Bloomberg article is quite right on one point; if investors still want to buy, so be it. One of the great legacies of the previous administration was the creation of an investing environment that put an emphasis on less regulation, less red tape, and more freedom. The result of this philosophy has begun to take root and bloom. The big potential losers are the static, entrenched monopolies which have maintained their status via ever-increasing market size fueled by bolt-on deals...who just said Microsoft...and bales of cash to lobby DC preventing competition. The big winner? You.

Reagan 2.0

On the surface it might not seem likely given the significant divergence in their public personas, but Donald Trump might just be Ronald Reagan 2.0

Behind the media's candelabra, there is a distinct similarity for the love of America and laser-focus on defense, infrastructure, and big deals between Donald Trump and Ronald Reagan. Obviously both are Republicans, but both weren't scions of the GOP establishment. Rather, both Presidents started off in that other party...the Democratic one, which left them and millions of other moderate Americans behind.

If history is any indicator, Reagan 2.0 should continue to be a boon for stock market investors as the government will ramp up spending on defense and infrastructure, while reducing regulation, lowering taxes, and putting America First (read as smart trade negotiation.) On the proverbial back of the envelop is the calculation of Dow 25,000 by the end of President Trump's 1st Term; there are estimates of Dow 30,000 too, but those make some really difficult assumptions.

It is going to be nearly impossible for President Trump to accomplish everything he sets out to do in his first term. Nevertheless, if President Trump can navigate the tricky deal of providing health care coverage for millions of Americans while simultaneously lowering taxes, reducing regulation, and securing our borders he'll have succeed in the bulk of his goals. Even on the belief that he will accomplish just some of these monumental tasks, the stock market has risen some 3,000 points in the past 4 months.

Investing in America has never seemed brighter; companies are regularly beating their earnings expectations and a pipeline of new incentives are on the horizon. Corporate tax reduction coupled with the ability to repatriate trillions from overseas is likely to bolster the corporate bottom line immediately, while the effects of ongoing, material reduction in regulations will provide intrinsic value which will materialize over time.

Financial farmers are in essence buying into the American Dream at a ripe time. Further prosperity via innovation and growth in the underlying fields of business should provide a bumper crop for years to come. How do I like them apples? I love 'em!

Donald J. Trump Inauguration Speech

January 20th, 2017

Washington, D.C.

Chief Justice Roberts, President Carter, President Clinton, President Bush, President Obama, fellow Americans and people of the world, thank you.

We, the citizens of America, are now joined in a great national effort to rebuild our country and restore its promise for all of our people. Together we will determine the course of America and the world for many, many years to come.

We will face challenges. We will confront hardships. But we will get the job done. Every four years, we gather on these steps to carry out the orderly and peaceful transfer of power. And we are grateful to President Obama and first lady Michelle Obama for their gracious aid throughout this transition. They have been magnificent. Thank you.

Today's ceremony, however, has very special meaning. Because today, we are not merely transferring power from one administration to another or from one party to another. But we are transferring power from Washington, D.C., and giving it back to you, the people.

For too long, a small group in our nation's capital has reaped the rewards of government while the people have borne the cost. Washington flourished, but the people did not share in its wealth. Politicians prospered, but the jobs left. And the factories closed. The establishment protected itself but not the citizens of our country. Their victories have not been your victories. Their triumphs have not been your triumphs. And while they celebrated in our nation’s capital,  there was little to celebrate for struggling families all across our land.

That all changes starting right here and right now. Because this moment is your moment. It belongs to you. It belongs to everyone gathered here today and everyone watching all across America. This is your day. This is your celebration. And this, the United States of America, is your country.

What truly matters is not which party controls our government but whether our government is controlled by the people. January 20th, 2017 will be remembered as the day the people became the rulers of this nation again.

The forgotten men and women of our country will be forgotten no longer.

Everyone is listening to you now. You came by the tens of millions to become part of a historic movement, the likes of which the world has never seen before. At the center of this movement is a crucial conviction -- that a nation exists to serve its citizens. Americans want great schools for their children, safe neighborhoods for their families and good jobs for themselves.

These are just and reasonable demands of righteous people and a righteous public. But for too many of our citizens, a different reality exists. Mothers and children trapped in poverty in our inner cities, rusted out factories scattered like tombstones across the landscape of our nation, an education system flush with cash but which leaves our young and beautiful students deprived of all knowledge. And the crime, and the gangs, and the drugs that have stolen too many lives and robbed our country of so much unrealized potential. This American carnage stops right here and stops right now.

We are one nation, and their pain is our pain. Their dreams are our dreams, and their success will be our success. We share one heart, one home and one glorious destiny.

The oath of office I take today is an oath of allegiance to all Americans. For many decades, we've enriched foreign industry at the expense of American industry, subsidized the armies of other countries while allowing for the very sad depletion of our military. We defended other nation’s borders while refusing to defend our own. And spent trillions and trillions of dollars overseas while America's infrastructure has fallen into disrepair and decay.

We've made other countries rich while the wealth, strength, and confidence of our country has dissipated over the horizon. One by one, the factories shuttered and left our shores with not even a thought about the millions and millions of American workers that were left behind.  The wealth of our middle class has been ripped from their homes and then redistributed all across the world. But that is the past and now we are looking only to the future.

We assembled here today are issuing a new decree to be heard in every city, in every foreign capital and in every hall of power. From this day forward, a new vision will govern our land. From this day forward, it's going to be only America first -- America first.

Every decision on trade, on taxes, on immigration, on foreign affairs will be made to benefit American workers and American families. We must protect our borders from the ravages of other countries making our products, stealing our companies and destroying our jobs. Protection will lead to great prosperity and strength. I will fight for you with every breath in my body. And I will never, ever let you down. America will start winning again, winning like never before.

We will bring back our jobs. We will bring back our borders. We will bring back our wealth, and we will bring back our dreams. We will build new roads and highways and bridges and airports and tunnels and railways all across our wonderful nation. We will get our people off of welfare and back to work rebuilding our country with American hands and American labor. We will follow two simple rules -- buy American and hire American.

We will seek friendship and goodwill with the nations of the world. But we do so with the understanding that it is the right of all nations to put their own interests first. We do not seek to impose our way of life on anyone but rather to let it shine as an example. We will shine for everyone to follow.We will reinforce old alliances and form new ones. And unite the civilized world against radical Islamic terrorism, which we will eradicate completely from the face of the earth.

At the bedrock of our politics will be a total allegiance to the United States of America and through our loyalty to our country, we will rediscover our loyalty to each other. When you open your heart to patriotism, there is no room for prejudice.

The Bible tells us how good and pleasant it is when God's people live together in unity. We must speak our minds openly, debate our disagreements honestly but always pursue solidarity. When America is united, America is totally unstoppable.

There should be no fear. We are protected, and we will always be protected. We will be protected by the great men and women of our military and law enforcement. And most importantly, we will be protected by God.

Finally, we must think big and dream even bigger. In America, we understand that a nation is only living as long as it is striving. We will no longer accept politicians who are all talk and no action, constantly complaining but never doing anything about it.

The time for empty talk is over. Now arrives the hour of action. Do not allow anyone to tell you that it cannot be done. No challenge can match the heart and fight and spirit of America. We will not fail. Our country will thrive and prosper again. We stand at the birth of a new millennium, ready to unlock the mysteries of space, to free the earth from the miseries of disease and to harness the energies, industries and technologies of tomorrow.

A new national pride will stir ourselves, lift our sights and heal our divisions. It’s time to remember that old wisdom our soldiers will never forget -- that whether we are black or brown or white, we all bleed the same red blood of patriots.

We all enjoy the same glorious freedoms, and we all salute the same great American flag. And whether a child is born in the urban sprawl of Detroit or the windswept plains of Nebraska, they look up at the same night sky, they fill their heart with the same dreams and they are infused with the breath of life by the same Almighty Creator.

So to all Americans in every city near and far, small and large, from mountain to mountain, from ocean to ocean, hear these words -- you will never be ignored again. Your voice, your hopes and your dreams will define our American destiny. And your courage and goodness and love will forever guide us along the way.

Together, we will make America strong again. We will make America wealthy again. We will make America proud again. We will make America safe again. And yes, together, we will make America great again. Thank you, God bless you, and God bless America. Thank you. God bless America.

In Gold We Trust

     With the election of Donald Trump as President, the United States has voted to put in power a pro-growth, pro-infrastructure leader who has vowed to make significant structural improvements in America's roads, bridges, highways, byways, airports, tunnels, schools, hospitals, and walls...all of that takes money. Almost by definition, big spending booms in infrastructure correlate with inflation. From a gold buying perspective we are almost in a perfect storm; the U.S. Dollar has rocketed in value versus a global currency basket while gold has fallen in value nearly 10% since the election due to the "fear" trade dollars flowing into the stock market. Buyers of Gold in U.S. Dollars betting on big government spending on defense, healthcare, and most poignantly infrastructure now looks like an ideal time to add to your hard physical Gold holdings.

Complete & Utter Repudiation

     The American voters have spoken, and they have completely and utterly repudiated the Obama and Clinton big government ideology of a nanny state infringing on personal rights, choices, and decisions. This is a victory for the Republic as a whole as history will soon begin to illustrate. In the coming weeks and months changes to the tax code, Supreme Court, and health care industry will have far-reaching and liberating effects for Americans of all walks and stages of life.

     From an investment standpoint, a Trump presidency offers the opportunity for large corporations to repatriate several trillion dollars back into the United States at a proposed flat tax rate, lowering of the corporate tax rate to 15%, lower of personal income tax rates for Middle Class Americans, restructuring trade deals, rebuilding the infrastructure of roads, bridges, and transportation hubs. In addition, both biotech and the defense industries stand to benefit as the free flow of capital returns to innovation. These are several of the many proposed economic improvements that the Trump ticket has focused on during his campagin. 

     The net effect to average Middle Class American should be an increase in real wages, job security, national security, opening of educational opportunities, and rebuilding of the core physical infrastructure and health care systems. Long live the Republic.