Random Thoughts #75

More random #75

Letitia James indicted

The president’s new interim DA for eastern Virginia took all of a week to bring an indictment against another one of the president’s adversaries, New York DA Letitia James. She is accused of mortgage fraud (naturally). The indictment says that James on a mortgage application for a home in Norfolk, VA said that she was going to use the home as a vacation home but instead rented it. Wow! I am certain that such a serious charge is punishable by death. Seriously, who doubts that the reason Trump’s hatchet man Bill Pulte head of the Federal Housing Finance Agency dredged up the charge is because Trump has declared retribution on his most prominent enemies? The indictment charges that by putting down “vacation home” the terms were such that James would save a whopping $19,000 over the length of the term. One former prosecutor said that it would be exceedingly rare for such a circumstance to even merit an indictment and “The amount of loss in this case is small peanuts, period.” Another former prosecutor said “The idea that someone would expose themselves to federal fraud charges for so little money doesn’t really make any sense.” This was another instance in which the prosecutor that Trump fired had said that the merits of the case did not rise to an indictment. Another former prosecutor said “I would be shocked if this thing makes it to a jury trial. I fully expect the judge to grant a motion to dismiss based on vindictive prosecutions.” James, herself, says that she made an error that was quickly corrected. 

John Bolton is probably next on the pay-back list. What about Adam Schiff(less)? Didn’t Joe Biden pardon him?

Environmentalists now like nukes?

In the “Surprise, Surprise” category, some environmental groups are now lobbying to keep nuclear plants open. There are actually protests in Belgium to keep a plant slated for closure open. However, the operator says it wants to exit the nuclear business and is intent on shutting it down. The Greenies have finally figured it out that nuclear is emission free clean energy. Yet their zealotry has closed plants all over Europe and now they are reaping what they have sown in expensive “green” energy, sans nuclear.

Speaking of nuclear, another one of the reasons for its resurgence is AI which is notoriously energy thirsty. The demands of AI threaten the energy grid and would significantly raise the cost of energy to everyone if it tries to glom onto the existing grid. AI companies will in many cases will have to build their own energy plants.

A little sport talk

I am not a pro football fan but I read about it. So I am wondering what has happened to the Kansas City Chiefs who lost to the Jacksonville Jaguars, the Philadelphia Eagles who lost to the New York Giants and the Baltimore Ravens who got wiped out by the Houston Texans. All the winners are bad teams. It is hard to imagine the embarrassment of losing to them. It would be like Alabama losing to Vanderbilt.

The New York Yankees just lost in the playoffs to Toronto. Some have written that Aaron Judge who will win another MVP (sorry Cal Raleigh) is being wasted for playing 10 years and not winning a championship. Well at least his team has made it to the playoffs. Think about poor Mike Trout who for a period was the best player in baseball and has never been to the playoffs. Trout is a rare being. Everyone else, including his once teammate Shoei Ohtani, would have long ago requested a trade.

The Yankees typically have one of the highest payrolls in the league (I guess the cost of living in New York is high) but are a model of frustration. Their last championship was 16 years ago. The highest payroll teams generally make the playoffs but rarely win a championship – last year’s Dodgers are an exception. But 90 percent of those who win a championship are in the upper half of all payrolls. So it is great to see bottom half teams – Milwaukee, Detroit and Seattle – go deep in the playoffs.

So what about those future rate cuts?

At least two members of the Fed’s Open Market Committee have started to express reservations about lowering the Fed funds rate lower expressing concerns over rising inflation. I know we are no longer getting data – albeit poor data – from the BLS with this government shutdown, but private sources show inflation at over 3 percent and climbing. Remember that the Fed’s target is 2 percent which is long in the rear view mirror. It will be interesting to see what transpires at the next Open Market Committee meeting on October 28-29. I would bet that the president’s man Stephen Miran will again push for a 50 basis point reduction and should be laughed out of the meeting. Some will vote for 25 basis points, likely the two Trump appointees Waller and Bowan while the rest will probably vote for no change.

A lot of people are pointing to the rise in the stock markets as evidence that the economy is strong. Yet statistics indicate that at least 22 states are in recession with either zero or negative growth. Moreover, the increase in the stock market is being fueled by tech stocks and AI and not by consumer based stocks. The president is adding new tariffs on consumer goods such as furniture and drugs and will further dampen consumer optimism and spending. 

If tariffs are making us rich as hell, then why are we getting poorer? The president keeps saying that his tariffs will bring manufacturing back to the US. Well manufacturing as a share of GDP is now falling because of the tariffs. The president seems not to know that close to 50 percent of what we import are used as inputs to American production of goods. For example, steel in the US is almost $1,000 a ton compared to $440 in the rest of the world. Gee thanks Mr President.

The rise in the markets came to a screeching halt when the president unilaterally increased China’s tariffs by 100% in retaliation to their restricting the export of rare earth minerals. The president also threatened to cancel his upcoming meeting with Chairman Xi. The president criticized the Chinese restrictions as “a rather sinister and hostile move” and countered with one of his own. The president said that the tariffs would be 100 percent “over and above any Tariff that they are currently paying,” as well as American export controls on “any and all critical software” — both of which would begin on November 1, “or sooner, depending on any further actions or changes taken by China.”

The S&P 500 dropped 2.71 percent, the Dow fell 878 points and the tech heavy NASDAQ fell 3.58 percent. The president said “Some very strange things are happening in China! They are becoming very hostile, and sending letters to Countries throughout the World, that they want to impose Export Controls on each and every element of production having to do with Rare Earths, and virtually anything else they can think of, even if it’s not manufactured in China.” Hum, doesn’t that sound a bit like what Trump, himself, is doing?

Only China and Canada have retaliated Trump’s tariffs. Stay tuned to see who blinks first. But curtailing the rare earths will severely hamper the production of the magnets which are so crucial in virtually all high tech products. I wonder what impact will this have on the Open Market Committee meeting?