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Make Russia Great Again - The Bigger Picture

by John Jazwiec

With the exception of Trump being defensive about the Mueller probe; the biggest tell in Helsinki, was Trump's cringeworthy non sequitur argument against Russian meddling. "No Collusion. No collusion".  That's the equivalent of testifying against a bank robber, being asked if you believe that person robbed the bank and starting your argument by saying you had nothing to do with the bank job. So if Trump (a) doesn't have anything to hide and (b) is telling the truth; he is 100% guilty of sounding guilty, 100% of the time.

But I want to pivot to the larger picture here. Give the reader another prism to watch what Trump and the GOP are doing. 

Trump might not have read about history, but the early 20th century GOP - the one TR tried in vain to reform - was an isolationist party. it was anti-immigration, anti-trade/pro-tariff, wary of foreign "allies", and saw no need to be the leader of the free world.

World War II and FDR set up the world order we enjoy today. Truman set up our stance against Russia/Soviet Union. Eisenhower hewed to those policies. Nixon did too. Reagan solidified this doctrine in the 1980s, seemingly eradicating the early 20th century GOP. Both Bushes followed his script. 

Today, Trump has remade the GOP into its original early 20th century form. He has built a coalition that is a sizable minority that has bought into this new party.

Today, GOP Never-Trumpers and Republicans who sparingly speak out against his policies and behavior completely miss the point. They are outsiders in the new GOP. 

Again going back to history, dissatisfaction of Democrats in the 1850s, led to a more broader tent Republican Party and their political ascendency. Reverse the names. Why hasn't the Democratic Party pitched a broader tent for dissatisfied Republicans to switch parties?

If Never-Trumpers and Republicans fail to recognize they don't belong in today's early 20th Century GOP; Democrats fail to provide them a new home.


Is Trump Putin's Agent And/Or The Guy At The End Of The Bar

by John Jazwiec

If Trump isn't doing Putin's bidding, he certainly looks like he is. Why?

The American century, has been built through the defense of NATO and free trade with Canada and the EU. Trump is as of this writing tearing down these underpinnings. Why?

NATO EU spends more money on defense than Russia. Trump doesn't seem to grasp that concept. Why?

He is scheduled to meet with Putin in Helsinki next Monday without notetakers and anyone else in the room? Why?

It is either because Putin has coopted him and/or his base likes the fact that he seems like the drunk guy at the end of the bar being a know-nothing, know-everything simpleton.

As to the latter, his base pats themselves on the back for living in a country with two great oceans of separation. They pat themselves on the back for being true Americans, just because they were born in an American hospital, seemingly forgetting that their forefathers and foremothers were the true heroes. Caring about the complexities of the fruits of democratic alliances and Economics 101? They are confined to the bars of their own cities. If they have any broader visibility, it is restricted to their own states. Europe and Canada? They don't even know anything about another state for god sake. 

Trump belittling a foreign sounding - but pro-American - NATO leader? They eat that up.

If Putin - who is surrounded by NATO - could find, in his wildest of dreams - a better play/captive than Trump to tear NATO down and rid himself of the sanctions - he seams to have found one.

Jefferson said that American democracy depends not just on elections, but on every American having the courage to speak up as a patriot every day. I take those words to heart. What has been going on for the last 18 months and what is going on now and next week should make citizens, who know and care more than the local bar, speak up as well.


Beware Of The Shiller PE Ratio II

by John Jazwiec

http://www.johnjazwiecblog.com/2017/01/beware-of-the-shiller-pe-ratio-1.html

I wrote this post almost exactly 18 months ago. The ratio at that time was 28

The historical mean and and median is between 16 and 17.

During the dot.com boom it rose to an irrational exuberance of 44. The market eventually dropped like a rock.

During the run up to the 2008 Financial Crisis it rose to the Black Friday level of 30.

What is it today? 

32.2

What is driving this irrational exuberance today? Less than 3% interest rates. There is no place to park the money other than the stock market in order to seek yields that are inspiring.

If the ratio was 28, 18 months ago and it is now 32.2 - with 3% GDP growth and earnings growth (culling out stock buybacks - the earnings basket of all stock must correlate to GDP growth) - that means that investors are paying 15% more for stocks.

Does paying 15% more for stocks make sense with 3% GDP and earnings growth? No. 

Add in the risks of inflation for the tariffs and the explosion of national debt to pay for corporate tax reduction - which would/will require interest rate hikes by the FED - and you have the inevitable sharp correction on the horizon. Worst case scenario is a ratio contraction of 50% back to the historical mean.

And history tells us that isn't sustainable.

 

 

 

 

 

 

 

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No Donald, You Didn't Win Yesterday II

by John Jazwiec

Economics 101

Trump's tariff wars are not only taxing the US but are targeting Trump states by design.

Steal

Steel prices are up 20% from February due to tariffs. In addition, 900,000 people are employed in jobs that consume steel and only 80,000 people are employed in jobs that produce steel as of today. You don't have to be a mathematician to see the net/net, of the demographic chasm between the two, hurts more American workers than helps them. But any Economics 101 student can see that any consumable - like buildings - will see prices rise and is thus inflationary.

China retaliates against soybean imports

Soybean prices - the largest agricultural product made in the US - have declined 15% in the last month in a steep and steady daily decline that shows no sign of abating. 

What are the top states that produce soybeans? Swing states, including Iowa, Indiana and Missouri, that have Democrats running for reelection. 

China, the EU and Mexico retaliate against whiskey. 

The company that makes Jack Daniels - headquartered in Kentucky - has seen an 18% drop in their stock price. Why target whiskey? Call that a Mitch McConnell political tax for complicity with Trump.  

 

Justice Anthony Kennedy's retirement

Now it is clear that Justice Kennedy's words regarding American institutions was a deliberate signal to the US Senate to be considered when voting on his replacement. He shoehorned that in a day before he announced his retirement. 

Also to be considered is the precedent of William Rehnquist in US vs Nixon in 1974. Rehnquist was nominated by Nixon and recused himself in the vote. 

Expect the Senate to ask any replacement candidate for Kennedy two questions. Would he (a) recuse himself in any matter with the Court and Donald Trump and (b) would he expect Neil Gorsuch - another Trump appointed justice - to do the same?


No Donald, You Didn't Win Yesterday

by John Jazwiec

SCOTUS Warning Shot

The Supreme Court yesterday approved Trump's watered down travel ban with 7 countries. But less noticed, were the warning shots contained within the majority opinion by Chief Justice Roberts and the concurring opinion by Justice Kennedy.

Roberts went to great length, to basically say, "there are presidents that have lived up to our ideals and some who have not".

Justice Kennedy might as well have - relative to a judge - screamed into a US and Radio Free America microphone, in saying "It is an urgent necessity that officials adhere to these constitutional guarantees and mandates in all their actions, even in the sphere of foreign affairs. An anxious world must know that our Government remains committed always to the liberties the Constitution seeks to preserve and protect, so that freedom extends outward, and lasts.”

So Trump finally got his travel ban. (I am not bothering to look up how long it took, because there are dog-days, human-days and Trump-days which are galactic measured in too many tweets to count). But he opened the door for SCOTUS to warn him that counterclaims of constitutional overreach by Trump in his defense will not find safe quarter where the justice buck stops.

 

Tired of Winning Yet?

So, Harley Davidson due to tariffs, is moving jobs to Europe. While I am pretty sure that a significant amount of Harley owners, don't care and are cheering Trump on, the people who make them across the US do care.

Then there is the trade war with China and how it is impacting farmers future viability and the value of their land. https://www.cnbc.com/2018/04/06/donald-trump-wants-protect-us-farmers-from-chinas-tariff-but-trade-spat-may-widen.html How are those Trump voters going to feel in 2020?

We could get into aluminum and steel and others, but you get the point. 

Any Econ 101 student understands that free trade lifts all boats. And knows that trade wars - not only drains the water - but ends in shipwrecks. This goes back thousands of years. One country/region can make tea, and the other can make sugar and they decide to trade. They both double their market and economy. Great, right? Then some King decides he is getting ripped off, stops trading and his people have to get used to 1/2 of their economy being eliminated. Spoiler alert - the story ends badly.

The post-World War II economy and the WTO expansion in the post-Cold War - after the disaster of the 1920's restrictions on trade and immigration (driven in large part by post-WWI racial/ethnic xenophobia) - takes the tea/sugar example and multiplies that by numbers too high to count.

It is just too bad, too few people, went to such a basic class in HS or College as Econ 101. Trust me. If Trump keeps eroding all that was built by the US for the US - handed to him by each president from Truman to Reagan to Obama - the masses will notice when they are economically cut to shreds. You think the 2008 Financial Crisis was bad? Wait for the 1929 sequel. Same spoiler alert.


Keeping Today's US In Perspective

by John Jazwiec

My favorite comedian is Chris Rock. Why? His comedy - like George Carlin - is funny, uses a discipled wordsmith technique, and provides a snap shot of society and history like Carlin. One of his most poignant jokes, is the following, and I paraphrase - 

"Dead African-Americans in the 1960s - looked down from heaven on living African-Americans in the 1960's - said 'they had it good'. Turning water hoses on African-American children is just white people trying to be nice ..."

I have watched a plethora of historical documentaries over the last year. There was PBS's American Experience: The Great War (World War I), a re-watch of Ken Burns "World War II" and his latest, "The Vietnam War". 

Although we are not out of the woods by far, and I am embarrassed by the state of our country against its ideals, it's hard to argue that progress trends-upward, but not in a straight line.

The Great War shows Woodrow Wilson's retrograde treatment of African-American civil servants, barring them from relatively gainful employment. His tyrannical use of state-sponsored propaganda and thug squads to ensure no resistance to the entry of the US into World War I. His contempt for women. And his hypocrisy on pro-immigration; using the same people as cannon fodder. The Great War - again - shows immigrants, people of color, and indigenous Indians as heroes, willing to serve, with the hope of being accepted, and sadly, largely disappointed but making some progress. 

World War II shares most of the many cons and few pros of progress as World War II. Japanese internment camps with the backdrop of Japanese heralded soldiers is both disgusting and inspiring. Again, the African-American internal belief that service in the military would lead to progress when they got home is tragic and breaks one's heart. Basic civil rights being suspended - by another old-school Democrat - make the current GOP, look progressive if non-duplicitous.

The "daddy" of perspective is "The Vietnam War. A country on the brink of a real revolution. More people of color as protagonists. A Japanese-American - of internment roots - a hero. The first prison of war - a Mexican-American - enduring the longest captivity (eight and one-half years!). Professional military personnel dissing policy, while attaining future professional status. The con/pro of duality, between people of color leading, while being degraded, is relatively depressing. But it nonetheless moved a 1 out of 10 to a 2 out of 10.

But 1968 - 1972, with the riots, the arrests, the violence, the lying presidents ... well it makes calling today "the biggest threat to our democracy" seem out of context. Even, Charlottesville - as ugly and repulsive of a scene as I have watched - looks tame compared to Kent State.

Yet within 36 years of all of this horror, America elected, twice an African-American, as president. It was always going to be a two-step forward, reactionary-one-step backwards event. Trump is as much of a product of Obama, as the GOP was a product of Wilson. 

Trump and his supporters? That just the 21st century version of "white people trying to be nice ...". Better than World War I. Better than World War II. Better than the Vietnam War. Worse than Grant Park? Yes. 

But today, bears little resemblance to history. Just more 1.1 steps forward followed by 1 step backwards. But over time, the 0.1s add up. Current news doesn't put it into context. But history does.


Trump Isn't The Problem, We Are

by John Jazwiec

I don't know if Trump is a racist. But I do know that about 33% of this country is and has been racist for a long time. I don't necessarily mean KKK-like racism. I am talking about a third of our people who want the country to maintain a healthy lily white Christian majority forever kind of racism.

That's why this 33% wants zero-tolerance immigration. That's why this 33% supports family separation at the border. That's why this 33% feels like Trump had to unfairly cave on family separation. 

This 33% are not economists. In 1940, there were about 100 million people in the US. Today there are about 350 million. GDP per Capita has risen from under $1,000 to $55,000 per year. Some of that is inflation. But most of it, is because immigration drives new businesses, fills jobs at the high end and fills jobs at the low end. Because the US economy and GDP, is 70% based on consumerism, the more people the country has - regardless of color - the more spending occurs and the more GDP and GDP per Capita rises. People forget that little immigration was allowed in the 1920s. That in part led to the stock market crash (rising stock price expectations without increased demand from population increases). It also hurt the 1930s recovery. But in 1940 until Trump, immigration rates have been remarkably constant.

But what about the other 67%?

Too many don't read and keep up with current events. And even if they do, their own problems and/or cognitive dissonance, dismisses events.

Too many weigh atrocities against what is going right instead of making a stand against atrocities. 

Too many make a similar rationale when faced with a binary protest vote. They don't like the other candidate more or don't vote at all.

Too many march reactionary-wise to send a "message". Instead of biding their time and voting and organizing voter drives.

Too many anxiously follow the news and want Robert Mueller to solve the problem. That is not only a fantasy, but an abdication of responsibility.  

Too many people don't realize that only about 1/2 of people eligible to vote, do in fact vote. And the percentage falls every year. Especially in mid-term elections.

The question is really this in November - who are we? We know 33% are today's form of racists. But we don't know who the other 67% are.

We will know in November.

Trump's 2016 election showed Trump wasn't the problem; he was the symptom. And it just wasn't the 33%.

Will this change in November? IMO the odds are no better than 50-50.


Reagan's GOP

by John Jazwiec

A timely excerpt from Reagan's farewell address in the "end-section warnings tradition" best remembered by Eisenhower "The Military-Industrial Complex"

I've spoken of the shining city all my political life, but I don't know if I ever quite communicated what I saw when I said it. But in my mind it was a tall, proud city built on rocks stronger than oceans, windswept, God-blessed, and teeming with people of all kinds living in harmony and peace; a city with free ports that hummed with commerce and creativity. And if there had to be city walls, the walls had doors and the doors were open to anyone with the will and the heart to get here. That's how I saw it, and see it still.

And how stands the city on this winter night? More prosperous, more secure, and happier than it was 8 years ago. But more than that: After 200 years, two centuries, she still stands strong and true on the granite ridge, and her glow has held steady no matter what storm. And she's still a beacon, still a magnet for all who must have freedom, for all the pilgrims from all the lost places who are hurtling through the darkness, toward home.


Making American Great Again?

by John Jazwiec

MAGA can't be about the US economy vs. the rest of the world AND GDP per Capita.

Screen Shot 2018-06-11 at 11.25.44 PM Screen Shot 2018-06-11 at 11.27.28 PM

Some perspective here. We tend to think too much about recessions and discount relatively uninspiring growth rates. But the US economy is so large, that low single digit annual economic growth adds up quicker than you think. US GDP in 2018 will be over $20 trillion. That's double what GDP was in 1994

But perhaps the more relevant measurement is GDP per Capita, which give us an idea of how productive an economy is. Some socialist/capitalist countries and finance-havens may be a little larger, but the US produces a lot of non-financial arbitrage activity per individual. Russia and China? $10,500 and $8,500 respectively. Less than 1/6 as productive as the US.

But discounting MAGA by macro-economics alone is a mistake.

MAGA IMO is being driven by one large factor, with more than one force driving it, and not-so-simple and not-so-populist political prescriptions.

The largest factor that is fueling MAGA and will continue to fuel MAGA is wealth inequality. Wealth equality began around 1980. The Reagan tax cuts are the simple blame. But that isn't where wealth inequality is coming from. And it's not going to be fixed by taxing the rich and giving it to the poor. No Colonel "Bernie" Sanders. He is as unrealistic and dangerous as the recent tax "breaks". Two dangerous poles.

Rather it has come and continues to come from technology replacing any job that can be computerized, unfettered global supply chains allowing the lowest cost component to be shipped JIT and the biggie: a lack of interest in too many families on education priority AND education reform.

Why is immigration and racism part of MAGA? Sorry, I don't buy into America regressing its long-arc of progressive history. What I do understand, is people and families, who feel economically and socially disenfranchised, looking for a reason why????

The not-so-simple and not-so-populist political prescriptions.

First, you can't stop technology. That's akin to JFK blaming one of America's greatest presidents - Dwight D Eisenhower - for the interstate highway system displacing the old US highway system leaving small towns into dustbowls. 

Second, and perhaps you can try to make some political points, but 99% of US businesses will continue to demand unfettered global supply chains allowing the lowest cost component to be shipped JIT. 

No, the only prescription for MAGA, is getting parents to first focus on education. Not just for their kids but by them doing double-duty going back to school to be retrained. The government - at least at this writing - is willing to loan the money. 

But the biggest problem with our education system - if you want to read more about it google "Serial Job Killer" - is that we are teaching kids in K12 and college - a 150 year-old industrial revolution inspired-and-required curriculum. Back then, towns begin to pay for schools, so that farm kids could work in factories with NO AUTOMATION.

Jeez, what would be emphasized? Math. You have to not only perform arithmetic in a NON AUTOMATED INDUSTRIAL REVOLUTION FACTORY, but you need to understand some higher concepts like geometry. What would have been the least emphasized? English and creative arts. Read and write, sure. But being able to articulate large thoughts with condensed words that nonetheless convey important things? Malcontent. Being creative and thinking for yourself? Anarchy.

Today - and I know it goes against everything we hold on so dear to - we should start kids out with computers to understand what a number means. Make it fun. Show them four toys with the number 4 above it. Then let them enter large digits. By ten, they will get what numbers do. Them let them add/subtract/divide/multiply with a computer or calculator. It's not the rote learning I object to. Rather its the time and opportunity cost.

You give me a first grader, with a computerized primary number understanding and an automated way to manipulate the numbers, AND I can then start them out with a simple pixel on a computer. Each pixel can have a color and let say it has to have a limited number of states (lines or curve). If the first grader wants to draw a picture, they will soon be able to understand, how to do it with pixels. 

Then, as they master perfection, might as well introduce them to calculus.

All of this leads to a new education system that is applicable to the digital economy. Half computerized. But even more importantly, half creative problem solving, debate, speech, and even standup comedy.

Finally education reform must give the time for kids to play with each other - and yes this is controversial too - but be allowed to argue, fight and to make-up. 

We didn't have mass shootings when I was growing up. That's because the loner had to go out a play to get out of his mom's hair. That's because all of us learned conflict resolution. But my point isn't mass shootings. Playing, with little to no supervision, and learning how to not only engage in conflict resolution, but to sway others to your point of view, is so critical to the jobs all of us are hiring for. 

To conclude, MAGA's prescription inevitably must go through education reform. 21st century employers are looking for "unique value creators". It's hard, but we find them. Usually they are B students with street skills. The straight-A 36 ACT? They either get scooped up and spit out by Wall Street or they are of no use to us, because they only knew what the game was - and like that 19th century student - got through QC (quality control) as an end on to itself.

So this is a generational fix. Call it Project 2030 or something more catchy. The point is it is going to take time. It's going to mean fighting school unions (private schools don't count because they skew toward the enfranchised). Roll back the eliminations on deductions on state and local taxes to fund the schools. 

Take MAGA - with its divisive connotations - and turn it into an Apollo project. There is nothing divisive of MAGA being a single national goal. That's how to really make America Great Again. When the tide lifts all boats ... immigration and racism will return toward the unbending arc of progressive history this country has tried to perfect for 250 years!

The party and candidate that can link MAGA and Apollo - not over-embrace MAGA but not dismiss it and call it deplorable - will win.


July 8th 2018 Musings

by John Jazwiec

The hyperbolic anti-Trump fears are statistically over-blown and under-analyzed. The current meme is that Trump's 80% approval rating within the GOP means, he is either going to win two terms or delay the 2020 elections and become a dictator. Besides showing too little faith in the American system - one I whole-heartedly reject - the meme is statistically over-blown and under-analyzed. As we sit here in June of 2018, 42% of Americans who vote, are independent; while 29% are Democratic and 27% are Republican voters. Trump's 80% approval with Republicans, means 0.80 times 27% or 22% of voters are solidly Trump voters. He is -12% with independent voters, which means he only has 38% of the other 42% adding another 16%. Add the two numbers up and you get 38% Also, he has a gender problem with every class of female voters. How big? Minus 34%. Women outvote men in elections. Women outvote men especially in mid-term elections. King Trump? He first has to worry about the 2018 mid-term elections.

Speaking of statistics, Trump and the GOP are setting up another 1970's-like hyperinflation/high interest rate problem. The FED rarely has figured out how to softly land an economy with too high of inflation. But inflationary fiscal policy abounds. First, you have a massive tax cut, which besides driving up economic demand, adds a massive amount of new debt to the massive one we already have. Second, a protectionist tariff policy means, high prices on stuff to make stuff. Third, the change in the Iran deal, has led to higher pump prices. Finally, and there is more, just the threat of eliminating the individual mandate of ACA - while popular - would mean that hospital costs and health insurance premiums would have to go up. Health care cost, accounts for 1/5 of core inflation. Hospital costs had a 4% inflation rate pre-ACA. That fell to 2% post-ACA. But in the past six months — as Republicans attempted to roll back the ACA — hospital inflation has soared to an annual rate of 6 percent. If all of this reignites inflation, the FED has only one weapon to fight it. And that is to raise interest rates. 

Speaking of tariffs .... I was out talking to some of my clients around the country this week. Because they depend on access to cheaper steel and aluminum from Canada, their clients - the one's that build buildings - are hedging their bets. A tariff means the cost of these commodities either goes up, because of the tariff, or because the local producer charges the same. Combine that with interest rate uncertainty and there is concern amongst them.  

G7+1-->G7-->G6 +1  My god. 74 years almost to the date of the Normandy landings - where American boys fought, not for the conquest of land, but for the ideal of saving western democratic values - we have lost our moral authority. Trump calls Canada a security threat to validate his prized tariffs (somehow Trump voters see this as important as Mexican immigration - who's primary threat is they are leaving/not coming, at the risk of losing their children who are detained in cages - shouldn't that lack of humanity suffice?). When has Canada ever been a security threat to the US? They have and continue to shed blood in all American wars. EMBARRASSING. France's Macron: "Because these 6 countries represent values, they represent an economic market which has the weight of history behind it and which is now a true international force". EMBARRASSING. Angela Merkel Chancellor of Germany - now the West's value leader - has made clear her disquiet with Trump's policies, arguing that Germany may no longer be able to rely on its US ally. Trump's contribution to the Summit? He wants to bring back Russia. A Russia under US sanctions for the invasion of Crimean. A Russia under more US sanctions from meddling in the 2016 elections. A Russia who is backing up every alt-right party in Europe?

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This one picture captures the whole absurdity. Trump - who was late and is leaving early - is being confronted by Merkel and Macron, while Japan's Abe looks on in resignation. While Trump conserves his 71 year old "best shape ever" body by sitting in a chair or crown ... EMBARRASSING.

Speaking of tradition: Justify! Justify winning the Triple Crown, at the 150 year running of the Belmont Stakes - twice the amount of time since Normandy, was as exciting of an American sporting event as there is in the world of sports. Mike Smith - a Mexican-American born in New Mexico, openly displaying his Christianity and showing his advanced age - can make every American proud. No one watching the race was thinking about what separates us. Everyone was together today. And perhaps shed a bit of a tear, seeing history happening in realtime with ethnic and age diversity. Today was a true example of what MAKES AMERICA GREAT!


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From athletic scholar and satirist to computer programmer to CEO success, John Jazwiec brings a unique and often eccentric perspective to business and supply chain challenges. Exploring how they can be solved through the leadership and communication insights found in untraditional sources. This CEO blog demonstrates how business insights from books on history to the music of Linkin Park can help challenge and redefine “successful leadership.” Read Jazwiec’s Profile >>

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