Clown Car Open Thread: Will No One Sit At the ‘President’s’ Right Hand?


 
Uhhh… why did this just pop up?



Tulips. Tulips I Tell You

Prediction is hard, especially about the future.  But a quick glance at the Wall St. Journal’s Market Data page made my eyes pop.

I wanted to see if my general sense of unease around the financial markets had any quantitative basis, so I was looking up the price to earnings ratio of the major market indices.  The first number I noticed was the current p/e number for the S & P 500: 24.13.  That’s only a smidge up from a year ago, but is still historically pretty high.

It is, it should be noted, nowhere near the stratsopheric numbers achieved in the 2009, when earnings crashed so far and so fast that market prices couldn’t crash fast enough to keep up, but it is not far off those in the summer of 2008, just before the Great Recession became brutally obvious.

That’s got me generally a little concerned, as it doesn’t take much to spook “smart” money, and a high p/e is always a good excuse to sell.

But what made my eyes pop was the estimate of forward p/e: 17.65.  That is, in essence, a prediction that company earnings are going to improve significantly over the next year — enough either to ease the market into a soft landing, a return to more historically normal valuation, or (if you’re an ebullient sort) to keep the market powering upward for a while yet.

That’s all well and good, and as I’m a lot closer to retirement than my first day at work, I’ve got no objection to such an outcome.

But what has me antsy is that I don’t know the assumptions that went into that estimate, and known or not, I don’t trust ’em.  I’m writing now about the South Sea Bubble of 1720, and I’m continuously struck by how easy it was for very smart people — Isaac Newton, forsooth! — to persuade themselves the party would continue, even very late in the game.

All of which is to say that three hundred years of securities market adventures tell us that it’s always when, not if for unpleasant surprises.  I don’t know if one is imminent, but I do know two things: given current events, a big crash could produce true social and political ugliness in a hurry; and there are at least a few reasons to watch out for market hubris.

Any jackals got a similar feeling? Any actually knowledgeable types out there want to weigh in?

Necessary disclaimer:  I’m not a financial expert. I do not watch the markets closely.  Most of my retirement funds are in the most boring possible index funds I can find.  I have enough time — a decade-ish — so that I can ignore near term gyrations (ask me again around 2025 how I feel). And I’m certainly not an expert on company valuation, or the connection of or utility of macro- and political economics to something as fine-grained and context-dependent as a market investment.  I’m not a financial advisor, nor do I play one on TV.  I’m just a guy getting a little queasy.

Also too — a guy who thought we could use some more thread.

Over to you.

Image: A Stock Market Cleaner, cover of Puck, v. 15, no. 376,  May 21, 1884



Another set of amazingly expected indictments

This is about as surprising as finding out that North Carolina is a bit humid in the summer.

Open Thread



Late Night Open Thread: 24-Carat Ingratitude

Much more of a symbolic protest than an actual boycott, of course; if not to the Repubs, where are a bunch of bloodthirsty economic parasites gonna go?

As national Republicans scramble their resources for a high-stakes midterm election year, some of the party’s biggest and most reliable donors have quietly withheld their support for Senate and House Republican groups out of frustration with the new tax law, CNN has learned…

…[S]ome of the Republican Party’s powerhouse donors in fact feel deeply stung by the law and have made their displeasure known to party leaders by keeping their wallets shut, according to multiple sources familiar with the situation, who spoke with CNN on condition of anonymity. Although some of the donors have not sworn off contributions to individual campaigns or even the Republican National Committee, all have so far withheld contributions to the House and Senate Republican campaign arms — which are key players in the 2018 midterm elections — as a way to send a message over the law.

The donors who have boycotted, all of whom are leaders of prominent hedge funds, include Paul Singer, of Elliott Management; Citadel’s Ken Griffin; Warren Stephens of Stephens Inc.; Cliff Asness of AQR; Bruce Kovner, formerly of Caxton; and Third Point’s Daniel Loeb. Combined, their donations accounted for more than $50 million to Republican groups during the 2016 election cycle; Singer ranked among the top 10 donors of either party, while Griffin and Stephens ranked in the top 20.

Collectively, they have bristled at what they view as favored treatment for corporations under the law. While the corporate tax rate was slashed from 35% to 21%, hedge funds are largely taxed at the top individual rate, which ticked down from 39.6% to 37%…

Although Singer has donated six figures to the Republican National Committee this year and has given directly to the campaigns of Reps. Martha Roby and Claudia Tenney, he has uncharacteristically not donated to groups supporting House and Senate Republicans. Stephens’ only engagement has been maxing out to a few congressional campaigns in Arkansas, his home state. Griffin has not donated to any federal campaigns or committees this year, according to FEC data, although a source familiar with his thinking said donations to congressional candidates and national Republicans are forthcoming.

Asness donated $250,000 to the Congressional Leadership Fund last year, in addition to more than six figures to the NRCC — but has not given since Trump signed the tax law. Loeb has supported Mitt Romney’s Senate campaign in Utah and Roby’s reelection bid but has not opened his wallet for any national Republican groups. And Kovner has not donated this year to federal candidates or committees — after last year giving six-figure sums to the NRSC and Speaker Paul Ryan’s PAC…



Tuesday Morning Open Thread: The Sorrow of the Repubs


 
Paul Ryan’s tears, they are delicious! From the Washington Post, “GOP increasingly fears loss of House, focuses on saving Senate majority”:

Republicans are increasingly worried they will lose control of the House in the midterm elections, spurring an urgent campaign to hold the Senate with a simple message: Only the majority will ensure confirmation of conservative judges and President Trump’s nominees.

To many, the Senate is emerging as a critical barrier against Democrats demolishing Trump’s agenda beginning in 2019. Worse yet, some in the GOP fear, Democrats could use complete control of Congress to co-opt the ideologically malleable president and advance their own priorities.

Democratic enthusiasm is surging in suburban districts that House Republicans are struggling to fortify, causing GOP officials, donors and strategists to fret. They have greater confidence in more-rural red states that Trump won convincingly and that make up the bulk of the Senate battlefield.

Senate Majority Leader Mitch McConnell (R-Ky.) and his allies are seeking to capitalize on ­concerns about the House. He is leading an effort to motivate ­conservative voters by reminding them that his side of the Capitol has the unilateral power to confirm federal judges to lifetime appointments and Trump administration nominees.

Trump is showing a keen interest in the Senate landscape, raising money for a highly touted challenger, helping clear the primary field for an endangered senator and playfully engaging in an intraparty contest…

Oh yeah, Donny Dolllhands is gonna be such a big help right now — in the time he can spare from avoiding Robert Mueller. And Stormy Daniels. And all the other Trump-scam-victim plantiffs…

While some Republicans believe they can expand their 51-to-49 Senate advantage, simply holding the slim majority has grown increasingly more complicated. Hard-right Republicans running in Arizona and Mississippi and a competitive open race in Tennessee could lead to Democratic gains. An even better pickup opportunity exists for Democrats in Nevada.

But on the whole, the Democratic path to the Senate majority is more daunting: They are defending 26 seats to just nine for the Republicans. Trump won in 10 of the states where Democrats are playing defense. They include North Dakota, West Virginia, Indiana and Missouri — all states he won by 19 points or more.

In the House, Republicans have built their ranks on locking down seats in suburban and exurban districts. But in these areas, Democratic turnout has been high in elections over the past year, ­fueled by anger with Trump. If Democrats can gain 23 House seats, they will clinch the majority.

Rep. Tom Cole (R-Okla.) put the chances of holding the House majority at “50-50.” The veteran party strategist warned that “the environment could easily continue to deteriorate,” and said he didn’t begrudge McConnell for pitching his case for the Senate….

But how does Pauly Blue Eyes feel about getting thrown under the Trump bus caravan?

Michael Steele, a former Republican National Committee chairman, said the House “may be further gone than people like to admit publicly.” While many in the party worry about a Democratic House and Senate launching an endless string of hearings and investigations into Trump, Steele said he has a different concern — that Democrats will work with the president to pass legislation that Republicans won’t like.

“Trump will cut whatever deal he can get a vote on,” he said. The president, he argued, “is an opportunist.”…

After the way the GOP dumped Michael Steele a hot second after promoting him as their ‘Black Best Friend’ was no longer so important, the man has to be enjoying his former employers’ plight, just a little. What’s the old Chinese proverb — Sit by the river long enough, and the bodies of your enemies will float past