Basically forwarding a right-leaning commentary that was forwarded to me:
This is long, but packed at the latter part with lots of good data, and should provide a good basis for your decisions going forward. I tried to provide actual hard data from various credible sources, and not any numbers produced by political parties or the press.
The big black swan has landed. What the assassination of Soleimani did was change the geopolitics of the world forever. Here is the perfect analogy. In 1938 Chamberlain made his famous peace in our time deal with Hitler. Appeasement and genocide. We know what happened. Obama made his deal with the mullahs in 2025, and what happened was similar, on a smaller scale. Appeasement and death. Obama financed their massive terror campaign which took off as soon as the money was delivered. Iran was treated by Obama Biden as a potentially cooperative nation who deserved to get paid 100% up front, (stupid beyond comprehension) that would suddenly act right, when they were really using the money for murdering hundreds or thousands with terror attacks throughout the Mideast. Were Obama Biden naïve, or just idiots. Both I think. Obama Biden claimed the nuke deal was going to bring a peaceful and cooperative Iran. (peace in our time). What Trump did was the equivalent to assassinating Hitler in 1938. Soleimani was the modern day Hitler. Instead of the Wehrmacht, he was running proxy armies across the world killing thousands. He was far more dangerous than Bin Laden. What is hard to understand is the Dems and the press not understanding what he represented as a clear and present danger to the US. Pompeo and Trump said he had plans for a series of deadly attacks on US personnel and facilities across the Mideast which were imminent. They had already attacked 11 bases and then the embassy. That alone is an act of war in some cases. Iran initiated all of that, and Trump did nothing but warn Iran there would be dire consequences, and Congress said nothing. What do the Dems and press think Soleimani was doing in Baghdad -buying a birthday gift for his wife??? They seem to think it better not to have done anything and let the attacks happen. The chairman of the House Armed Services Committee when asked what he would have done if he had the intelligence that Trump had about imminent attacks. He responded that he would have done nothing. Ignorance of that level is incomprehensible, and the Dems complain Trump should have gotten permission from Congress!!! That he should have asked Adam Schiff???? If he had not acted, and then when there were the attacks and Americans died, they would have condemned Trump for having the intel and doing nothing. A lot of Americans possibly would have died. Are they just stupid, or so partisan and hateful of Trump they cannot understand what is happening. I think it is both. If it is partisan, then it is it also immensely stupid, as it undermines the US threat to Iran, and just emboldens them. The idiots say this will mean retaliation and possibly some dead Americans. Yes, but they forget a whole series of attacks was imminent, and there would have possibly been many more dead Americans had Trump not acted.
Now Iran needs to think -if I do this, Trump is going to destroy my refineries, and much of my military. Maybe he is even going to blow me up. He is willing to act decisively and violently . A total change from Obama Biden appeasement and fear. The US is now in position to take out their navy bases, cyberattack headquarters, and revolutionary guard bases in a very short amount of time. If we do that, then the Iranian people will possibly be empowered to rise up again if the RCG bases are wiped out inside Iran. The Iranians now know, Trump offered to talk, but he is fully prepared to kill any of them if needed, and destroy their ability to pose a threat. The Iranian economy is in free fall, and riots have been in all the cities. The Iranians are out of money to support and pay the proxies. The Dems and press ignore all of that. The Dems and press think we should cower in fear of an attack and reassert the nuke deal. That is exactly what has brought us to Iran being in the position they are in-Obama gave them license and money to kill. Trump said, I have warned you, and if you do anything I will wipe you out, and has proven he can and will do it. It is Iran that is in fear of what might happen. The Dems are a real danger to American security.
Dems rage about Chinese human rights issues, and Saudis killing one journalist, but Iran is free to kill 1,000 citizens, and arrest thousands and torture more, but did we hear any resolution in Congress about human rights in Iran. Crickets. They could not even pass a resolution condemning anti-Semitism, and now we have numerous anti-Semitic attacks in NYC. Do we hear anything from the Dems in Congress. Crickets. The Dems clearly do not understand the uses of raw power in geopolitics. Instead we had years under Obama Biden of a deteriorating military, and restraints on fracking, making us weak, and no real threat, plus $150 billion of cash funding to the Iranians. That just encouraged Iran to spread its terror. Now we have a powerful military, energy independence, and the will to use power in audacious ways. Kim are you paying attention!. Putin are you listening. Trump totally changed the calculus for the whole world, and the mullahs do not know what to do next. Now they have a lot more to worry about. The rest of the world has to be saying -Oh Sh-- he could really do anything. If pushed too far he will unleash fire and fury. He is not the isolationist we thought when American lives and facilities are at risk. Few people understand that Trump grew up in the NY construction industry with the mob in control. He had to deal with them all the time on his projects. I had several direct dealings with the mob, and once they threatened to kill me because they felt I had screwed them in a deal I sold to them. I did in fact. For some reason they never did try to kill me. They are nice guys so long as you do not screw with them. Once on another occasion, I was meeting with some mob guys who were very pleasant to deal with. At one point, as we were inspecting an abandoned factory, they told me how they had just been planning to kill some guy by dumping him the river with cement boots, but they decided to let him live because his wife and kid needed him. They told me this like they were discussing the weather. It was just business. This was the real world Trump lived in much of his early life. I get it, having experienced it firsthand several times. My view of him is he is like the mob. A nice guy face to face, and willing to let you live if you behave, but once he warns you, then you better not screw with him, or you die. The world has misread Trump completely. They thought he would never take action even though he had warned them clearly not to kill an American. Now they know. Heed the warning. This is not Obama trying to appease everyone, and afraid to do anything.
With the price of oil up, fracking production will rise, and there is always the strategic reserve to keep oil and gas prices down inside the US. None of this could have happened if fracking had been shut off by the Dems. Geopolitics changed entirely with fracking, but neither the Dems, the press, nor the campus left wingers have any understanding of any of this.
The Dem comments are beyond stupid and disgraceful. Here we have killed the world’s top terrorist, and they are claiming it was a bad idea because there will be retaliation. They are like a bunch of scared kids- oh he might hit me. When Obama ordered the killing of Bin Laden he was a hero for the exact same action, and he never told Congress, but they never objected. They claim Trump has no strategy. What do they think is happening, that Trump just is sitting around, and says let’s kill this guy on a whim. Rand Paul says now diplomacy is dead. It was never alive. And what is next from the Dems. Impeachment in the midst of all of this. Demands by Dems to stop Trump from acting against Iran. Iran is our sworn enemy, and the Dems want to prevent Trump from acting to defend US troops and facilities. That is insane and just encourages the Iranians. The Iranians and others likely now will do anything to help defeat Trump. Their lives depend on it. The Dems are disgraceful. Attacking Trump, and impeachment, just when we need to be united and strong. It is a replay of the thirties when Congress thought we could stay out of the war. Do they ever read a history book. Do they never learn anything. It is the Dems and press who are posing a true risk to our security. Can you imagine if one of the Dem candidates was president and nothing had been done to stop the pending attacks Trump acted to stop. It used to be that the partisan fights stopped in times of peril. Not now.
Here are some current economic stats that tell you where we really are: It is likely the ten year remains around 2% all year, and into the next year. Inflation is likely to remain under or around 2%. Unemployment around 3.5% is likely to continue and with the four trade deals and Boeing going back into production by spring, that will possibly decline further. 2018 economic forecasts were almost universally wrong, by a lot. Thus my caution about paying a lot of attention to the talking heads and fancy forecast models. Models have loads of assumptions, and one or two bad assumptions throws off the whole thing. Tariffs have created uncertainty which caused CEO’s to be too cautious, and they still think a recession is a risk, so they are not investing in capex the way they need to. Capex and hiring essentially has flat lined. Farmers, manufacturing, and thus transport all suffered downturns. This is likely to all change with the 4 trade deals. (China, USMCA, Japan and S Korea). The good news due to Iran, is oil prices are now at a place where fracking again makes economic sense, so cap ex in the oil patch might rise, but so will gas prices. Some models suggest tariffs took .5% off GDP. And added .3% to unemployment. I do not have a model, so I do not know. But if that is true, then GDP should grow nicely in 2020, especially when Boeing returns.
Ten year rates are down 100 BP from where they were in 2018, and from where economists and the Fed forecast they would be at the end of 2019. The reduction in rates is key to housing, with mortgage rates below 4%, that is the trigger point that accelerates housing demand. We are below 4%. So the housing market should be strong in 2020, and that is very good for the economy. The housing vacancy rate is at a 35 year low including multi and single family, and going lower. There is already a shortage of 1.6 million units, and the demand is now annually running1.7 mill, but only building 1.4 mill, so the built up demand situation is getting worse. All of the shortage is in low and moderate income units, but costs to build including land is too high. 2.5 cents more of average aggregate increased household net worth is generating an added .5% of GDP due to the wealth effect. The stock market matters. Savings are now around 8%, near a new high, and boomers are higher than that. That is good for covering retirement along with the higher home values and stock values which will generate much more for retirement than most forecasters expected. When the Dems claim only the rich are benefiting, it is nonsense. The high dollar will continue to be a drag on export demand, but it keeps inflation low. The dollar is not at risk for now of being replaced by anything. China will be better off with the trade deal, but they will go back to their program of pushing to reduce the massive excess leverage in their economy, and that will be a further damper on Chines growth. That then dampens growth in emerging markets dependent on selling commodities. The EU will remain in major problems.
The risk in residential is in Fannie, Freddie and FHA. The major banks are out of this market now. It is almost all small nonbank lenders who are dependent on credit lines. If there is a financial downturn, they could lose their lines and then the agency market could crash. Or the big banks could step in and acquire the portfolios and save the day.
Household debt service to income is the lowest in two generations, and debt total to income the lowest in one generation. So when you hear talking heads say rising consumer debt is a problem, ignore that. Consumers are in financially the best shape in 50-60 years. A massive refi of mortgages to low rates has made a huge difference, so now consumers are able to spend and save more. Record stock prices and home values have made consumer balance sheets the best ever, and have a wealth effect. Households hold $30 trillion of stocks, double the prior high, and another $30 trillion of home value, 20% above the prior high, so when the Dems claim only rich guys hold stocks, it is a blatant lie. 50% of all workers own some stock in a 401K or otherwise. Those numbers are double the prior high. Good for more consumer spending. Boomers are now able to save much more for retirement than they had been able to do, so the crisis in that retirement age group may not be so bad as first thought. 25-30 year old’s neve saved money, so ignore the warnings that they are not saving now.
Commercial Real Estate has increased 8% per annum since the crash. This is likely to flatten out as rates will not likely drop from here. CRE is very vulnerable to rate rises now. The best types are warehouse, industrial and apartments, but high end residential is now getting over built so is more risky, depending on the market. In NYC it is already badly down.
The federal debt outstanding is now 80% of GDP and headed to 100% by 2030. A real risk long term. All stock measured by the Wilshire 5000 is now at a 15 PE vs long term 9. Worst was 18X in the tech bubble. Earnings need to start growing more to justify these levels, and interest rates need to remain low. Margins are getting pressed by labor costs but the lowering of tariffs will help a little. AI should help mitigate rising labor costs and raise productivity, but it is unclear when and by how much. We need to continue to have high stock prices to have the wealth effect to push consumers to spend.
The biggest risks are geopolitical and the US election. There are protests and violence around the world now as populism takes hold. It is especially bad in S America, the Mideast and France, with other parts of the EU at risk. This is escalating now in many countries that had been stable, like Chile. The US is somewhat insulated, but not totally. It is highly likely Trump is reelected, but in case he is not, the markets and the economy will tank given the candidates, other than Bloomberg. Bloomberg is the only viable candidate, but it is 11 months away. Impeachment is a non-issue for almost everyone.
2020 will be a wild ride for sure.
This is long, but packed at the latter part with lots of good data, and should provide a good basis for your decisions going forward. I tried to provide actual hard data from various credible sources, and not any numbers produced by political parties or the press.
The big black swan has landed. What the assassination of Soleimani did was change the geopolitics of the world forever. Here is the perfect analogy. In 1938 Chamberlain made his famous peace in our time deal with Hitler. Appeasement and genocide. We know what happened. Obama made his deal with the mullahs in 2025, and what happened was similar, on a smaller scale. Appeasement and death. Obama financed their massive terror campaign which took off as soon as the money was delivered. Iran was treated by Obama Biden as a potentially cooperative nation who deserved to get paid 100% up front, (stupid beyond comprehension) that would suddenly act right, when they were really using the money for murdering hundreds or thousands with terror attacks throughout the Mideast. Were Obama Biden naïve, or just idiots. Both I think. Obama Biden claimed the nuke deal was going to bring a peaceful and cooperative Iran. (peace in our time). What Trump did was the equivalent to assassinating Hitler in 1938. Soleimani was the modern day Hitler. Instead of the Wehrmacht, he was running proxy armies across the world killing thousands. He was far more dangerous than Bin Laden. What is hard to understand is the Dems and the press not understanding what he represented as a clear and present danger to the US. Pompeo and Trump said he had plans for a series of deadly attacks on US personnel and facilities across the Mideast which were imminent. They had already attacked 11 bases and then the embassy. That alone is an act of war in some cases. Iran initiated all of that, and Trump did nothing but warn Iran there would be dire consequences, and Congress said nothing. What do the Dems and press think Soleimani was doing in Baghdad -buying a birthday gift for his wife??? They seem to think it better not to have done anything and let the attacks happen. The chairman of the House Armed Services Committee when asked what he would have done if he had the intelligence that Trump had about imminent attacks. He responded that he would have done nothing. Ignorance of that level is incomprehensible, and the Dems complain Trump should have gotten permission from Congress!!! That he should have asked Adam Schiff???? If he had not acted, and then when there were the attacks and Americans died, they would have condemned Trump for having the intel and doing nothing. A lot of Americans possibly would have died. Are they just stupid, or so partisan and hateful of Trump they cannot understand what is happening. I think it is both. If it is partisan, then it is it also immensely stupid, as it undermines the US threat to Iran, and just emboldens them. The idiots say this will mean retaliation and possibly some dead Americans. Yes, but they forget a whole series of attacks was imminent, and there would have possibly been many more dead Americans had Trump not acted.
Now Iran needs to think -if I do this, Trump is going to destroy my refineries, and much of my military. Maybe he is even going to blow me up. He is willing to act decisively and violently . A total change from Obama Biden appeasement and fear. The US is now in position to take out their navy bases, cyberattack headquarters, and revolutionary guard bases in a very short amount of time. If we do that, then the Iranian people will possibly be empowered to rise up again if the RCG bases are wiped out inside Iran. The Iranians now know, Trump offered to talk, but he is fully prepared to kill any of them if needed, and destroy their ability to pose a threat. The Iranian economy is in free fall, and riots have been in all the cities. The Iranians are out of money to support and pay the proxies. The Dems and press ignore all of that. The Dems and press think we should cower in fear of an attack and reassert the nuke deal. That is exactly what has brought us to Iran being in the position they are in-Obama gave them license and money to kill. Trump said, I have warned you, and if you do anything I will wipe you out, and has proven he can and will do it. It is Iran that is in fear of what might happen. The Dems are a real danger to American security.
Dems rage about Chinese human rights issues, and Saudis killing one journalist, but Iran is free to kill 1,000 citizens, and arrest thousands and torture more, but did we hear any resolution in Congress about human rights in Iran. Crickets. They could not even pass a resolution condemning anti-Semitism, and now we have numerous anti-Semitic attacks in NYC. Do we hear anything from the Dems in Congress. Crickets. The Dems clearly do not understand the uses of raw power in geopolitics. Instead we had years under Obama Biden of a deteriorating military, and restraints on fracking, making us weak, and no real threat, plus $150 billion of cash funding to the Iranians. That just encouraged Iran to spread its terror. Now we have a powerful military, energy independence, and the will to use power in audacious ways. Kim are you paying attention!. Putin are you listening. Trump totally changed the calculus for the whole world, and the mullahs do not know what to do next. Now they have a lot more to worry about. The rest of the world has to be saying -Oh Sh-- he could really do anything. If pushed too far he will unleash fire and fury. He is not the isolationist we thought when American lives and facilities are at risk. Few people understand that Trump grew up in the NY construction industry with the mob in control. He had to deal with them all the time on his projects. I had several direct dealings with the mob, and once they threatened to kill me because they felt I had screwed them in a deal I sold to them. I did in fact. For some reason they never did try to kill me. They are nice guys so long as you do not screw with them. Once on another occasion, I was meeting with some mob guys who were very pleasant to deal with. At one point, as we were inspecting an abandoned factory, they told me how they had just been planning to kill some guy by dumping him the river with cement boots, but they decided to let him live because his wife and kid needed him. They told me this like they were discussing the weather. It was just business. This was the real world Trump lived in much of his early life. I get it, having experienced it firsthand several times. My view of him is he is like the mob. A nice guy face to face, and willing to let you live if you behave, but once he warns you, then you better not screw with him, or you die. The world has misread Trump completely. They thought he would never take action even though he had warned them clearly not to kill an American. Now they know. Heed the warning. This is not Obama trying to appease everyone, and afraid to do anything.
With the price of oil up, fracking production will rise, and there is always the strategic reserve to keep oil and gas prices down inside the US. None of this could have happened if fracking had been shut off by the Dems. Geopolitics changed entirely with fracking, but neither the Dems, the press, nor the campus left wingers have any understanding of any of this.
The Dem comments are beyond stupid and disgraceful. Here we have killed the world’s top terrorist, and they are claiming it was a bad idea because there will be retaliation. They are like a bunch of scared kids- oh he might hit me. When Obama ordered the killing of Bin Laden he was a hero for the exact same action, and he never told Congress, but they never objected. They claim Trump has no strategy. What do they think is happening, that Trump just is sitting around, and says let’s kill this guy on a whim. Rand Paul says now diplomacy is dead. It was never alive. And what is next from the Dems. Impeachment in the midst of all of this. Demands by Dems to stop Trump from acting against Iran. Iran is our sworn enemy, and the Dems want to prevent Trump from acting to defend US troops and facilities. That is insane and just encourages the Iranians. The Iranians and others likely now will do anything to help defeat Trump. Their lives depend on it. The Dems are disgraceful. Attacking Trump, and impeachment, just when we need to be united and strong. It is a replay of the thirties when Congress thought we could stay out of the war. Do they ever read a history book. Do they never learn anything. It is the Dems and press who are posing a true risk to our security. Can you imagine if one of the Dem candidates was president and nothing had been done to stop the pending attacks Trump acted to stop. It used to be that the partisan fights stopped in times of peril. Not now.
Here are some current economic stats that tell you where we really are: It is likely the ten year remains around 2% all year, and into the next year. Inflation is likely to remain under or around 2%. Unemployment around 3.5% is likely to continue and with the four trade deals and Boeing going back into production by spring, that will possibly decline further. 2018 economic forecasts were almost universally wrong, by a lot. Thus my caution about paying a lot of attention to the talking heads and fancy forecast models. Models have loads of assumptions, and one or two bad assumptions throws off the whole thing. Tariffs have created uncertainty which caused CEO’s to be too cautious, and they still think a recession is a risk, so they are not investing in capex the way they need to. Capex and hiring essentially has flat lined. Farmers, manufacturing, and thus transport all suffered downturns. This is likely to all change with the 4 trade deals. (China, USMCA, Japan and S Korea). The good news due to Iran, is oil prices are now at a place where fracking again makes economic sense, so cap ex in the oil patch might rise, but so will gas prices. Some models suggest tariffs took .5% off GDP. And added .3% to unemployment. I do not have a model, so I do not know. But if that is true, then GDP should grow nicely in 2020, especially when Boeing returns.
Ten year rates are down 100 BP from where they were in 2018, and from where economists and the Fed forecast they would be at the end of 2019. The reduction in rates is key to housing, with mortgage rates below 4%, that is the trigger point that accelerates housing demand. We are below 4%. So the housing market should be strong in 2020, and that is very good for the economy. The housing vacancy rate is at a 35 year low including multi and single family, and going lower. There is already a shortage of 1.6 million units, and the demand is now annually running1.7 mill, but only building 1.4 mill, so the built up demand situation is getting worse. All of the shortage is in low and moderate income units, but costs to build including land is too high. 2.5 cents more of average aggregate increased household net worth is generating an added .5% of GDP due to the wealth effect. The stock market matters. Savings are now around 8%, near a new high, and boomers are higher than that. That is good for covering retirement along with the higher home values and stock values which will generate much more for retirement than most forecasters expected. When the Dems claim only the rich are benefiting, it is nonsense. The high dollar will continue to be a drag on export demand, but it keeps inflation low. The dollar is not at risk for now of being replaced by anything. China will be better off with the trade deal, but they will go back to their program of pushing to reduce the massive excess leverage in their economy, and that will be a further damper on Chines growth. That then dampens growth in emerging markets dependent on selling commodities. The EU will remain in major problems.
The risk in residential is in Fannie, Freddie and FHA. The major banks are out of this market now. It is almost all small nonbank lenders who are dependent on credit lines. If there is a financial downturn, they could lose their lines and then the agency market could crash. Or the big banks could step in and acquire the portfolios and save the day.
Household debt service to income is the lowest in two generations, and debt total to income the lowest in one generation. So when you hear talking heads say rising consumer debt is a problem, ignore that. Consumers are in financially the best shape in 50-60 years. A massive refi of mortgages to low rates has made a huge difference, so now consumers are able to spend and save more. Record stock prices and home values have made consumer balance sheets the best ever, and have a wealth effect. Households hold $30 trillion of stocks, double the prior high, and another $30 trillion of home value, 20% above the prior high, so when the Dems claim only rich guys hold stocks, it is a blatant lie. 50% of all workers own some stock in a 401K or otherwise. Those numbers are double the prior high. Good for more consumer spending. Boomers are now able to save much more for retirement than they had been able to do, so the crisis in that retirement age group may not be so bad as first thought. 25-30 year old’s neve saved money, so ignore the warnings that they are not saving now.
Commercial Real Estate has increased 8% per annum since the crash. This is likely to flatten out as rates will not likely drop from here. CRE is very vulnerable to rate rises now. The best types are warehouse, industrial and apartments, but high end residential is now getting over built so is more risky, depending on the market. In NYC it is already badly down.
The federal debt outstanding is now 80% of GDP and headed to 100% by 2030. A real risk long term. All stock measured by the Wilshire 5000 is now at a 15 PE vs long term 9. Worst was 18X in the tech bubble. Earnings need to start growing more to justify these levels, and interest rates need to remain low. Margins are getting pressed by labor costs but the lowering of tariffs will help a little. AI should help mitigate rising labor costs and raise productivity, but it is unclear when and by how much. We need to continue to have high stock prices to have the wealth effect to push consumers to spend.
The biggest risks are geopolitical and the US election. There are protests and violence around the world now as populism takes hold. It is especially bad in S America, the Mideast and France, with other parts of the EU at risk. This is escalating now in many countries that had been stable, like Chile. The US is somewhat insulated, but not totally. It is highly likely Trump is reelected, but in case he is not, the markets and the economy will tank given the candidates, other than Bloomberg. Bloomberg is the only viable candidate, but it is 11 months away. Impeachment is a non-issue for almost everyone.
2020 will be a wild ride for sure.
