When the Facts Change, Just Pretend They Haven’t…? QT.

One of my New Year’s resolutions is re-starting the blog. Little Bear is at 16 months, still a bundle of fun, and a bit less work. I’ll probably focus more on Economics/Markets, but range around as before.

I am more than little perplexed by current commentary around the Fed’s QT (Quantitative Tightening) program. This keeps coming up as a cited cause of market’s recent sell off.

That would be fine if QT had followed expectations by driving Treasury Interest Rates UP. But the 10 year bond yield has gone DOWN since the Fed started QT’s planned shrinkage of their balance sheet in October.

QT starts in October, right where the line goes… down!?!

Before-the-fact commentary expected exactly the opposite. All the QT commentary I can find predicted lower Fed buying would drive up interest rates (and challenge the market).  As we go into October, rates went down. Low rates are usually seen as helping not hurting risk-asset markets. Although commentators have stuck to QE as a cause of the market’s troubles.

Something here doesn’t add up. I don’t have a definitive answer myself. I do have some ideas.

  • A crowd surge over-powered any (relatively weak) real world QT impact? The market created a self-fulfilling prophecy keyed to the start of QE. “Everyone” expected higher rates and planned to pull back accordingly – shifting into safe assets. That buying surge would explain the drop in yields (driven by an increase in demand for safe 10 year Treasury assets). Any real impact of QT got swamped by that wall of money. In that scenario, we could have a pretty big market rebound once everyone goes home and changes into clean underwear.
  • QT is (and always was) a red herring just like QE? Arguably QE didn’t do much and the unwinding of it (QT) isn’t doing much either. As Ben Bernanke said in 2014 “The problem with QE is it works in practice but it doesn’t work in theory.” In practice, QE did boost animal spirits. But the theory pat matters. It isn’t clear QE had much real impact on market interest rates (especially long-term rates). QT might not be doing much either. That debate is above my pay grade, but a relatively weak QE/QT effect would square with the “market over-reaction” scenario above.

The real culprit may lie (conveniently forgotten) in the recent past. The failure of the US tax cuts to deliver meaningful long-term stimulus.  Lower corporate rates gave us a one year earnings boost, but no real economic boost.  The market drop may reflect that US just fired most of its fiscal stimulus bullets funding a huge tax cut into an already-booming economy. Leaving it that much more vulnerable when the next downturn comes.

Why blame QT instead of a failed stimulus?

  • Blaming QT helps us pretend someone is in charge.  I always find it odd that Wall Street clings so hard to faith in the Fed. Markets are scary, uncontrolled places. Its easier to sleep at night believing the Fed has the helm. This ignores that the Fed has been pushing up short rates with dismally little impact on long rates so far. Which may suggest the Fed’s wheel is turning the wheel, but the rudder’s broken off. That is a scary thought, but it seems to fit the facts.
  • Blaming QT avoids a lot of politically awkward questions. If you acknowledge the tax cuts failed, you risk the general conclusion that taxes are a lousy stimulus mechanism. You end up bolstering the argument that deficit spending on affluent people (who save it) isn’t nearly as useful as spending on poorer folks (who spend it).  And that is political anathema to most (affluent) investors.  Much better to blame QT instead.     

Out in reality, however, the situation looks both encouraging and dire.

  • The market tantrum might be no more than that. There are certainly headwinds and risks, but the economy seems to be generally chugging along. By mid-year, all may be forgotten. Rates remain low. It is risk-on again.
  • But, when the downturn does come, the US has very few bullets in the gun.  The Fed can’t raise rates any further. So it won’t have much room to cut. Negative rates are a political impossibility until things get really bad. On the fiscal front, we just blew out the deficit on an ineffective stimulus.  And too many people cling to a belief in tax cuts evidence be damned.

In the short term, the Fed seems likely to pause and unlikely to do much if any rate raising thereafter. Especially as they can’t raise rates much without intentionally inverting the yield curve. Unless the market (and long-term rates) shoot up. Besides, the Fed’s behavioral model seems to be “raise rates until something breaks.”  Something just broke.  So mission accomplished. 

In the meantime, those market-driven long term rates remain stubbornly low. This is the most scary thing out there IMHO – implying low growth, deflation, or both.  It is also worrying that (market-driven) long-term rates are showing no inclination to follow the Fed. A broken rudder is a scary thing in any scenario.

In the short term, however, low rates make riskier assets attractive. Earnings multiple relative to those low long term rates look fine. Especially if you have a return target of 5%-7% in a world where risk-free returns are around 3%.

So maybe we go back to “risk-on.” Wary of when we finally do meet a bear. With very few bullets in the gun. But in the meantime, the music’s still playing. So we keep on dancing.


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GOP To the Merely Affluent – “Go F**k Yourselves.”

The House Republican Tax Plan’s most perplexing (and schadenfreude inducing) element is how badly it would screw a core Republican voter group.  The merely affluent.  That suburban/urban “I really just don’t want to pay taxes.” voter.

The calculus is clear.  “We’re gladly throwing all you measly 2-to-15 percenters out to the wolves in order to lighten up the sled for the 1% to .01%.

Its pretty amazing how targeted the plan is against at the merely comfortable.  Why?  That’s where the money is.  If you’re cutting taxes on the super-rich, you have to balance the equation on the backs of someone.

  • Eliminate the mortgage deduction over $500k.  POW! to the lawyers and doctors who bought that high-dollar home in that “good” school district.
  • No property tax deduction over $10k.  OOF! Another body blow to home values in those nice suburbs with the good schools.  Especially those prosperous pink-tinged “I’ll whore my vote to anyone who promises a tax cut” “socially liberal, economically conservative” suburbs of the more prosperous cities.
  • No state income tax deduction.  BLAM! to anyone living in any of the prosperous states.  Those Orange County, CA Republicans certainly weren’t expecting that when they voted to cap property taxes with Prop 13 (shifting the CA state funding base to income taxes).
  • Advantaging pass-through income over wage income.  WHAMMO! to anyone who merely works for a hedge fund vs owning one…
  • Etc. etc.

In summary – “We’ll gladly repeal the estate tax for a few hundred families and pay for it with your paychecks and home values.”

The schadenfreude comes from the burst bubbles of so many people who’d fooled themselves into thinking they were part of the protected classes.  Sure the Republicans are slanted toward the rich, but I’m with them right!  They’ll carry me along too!  Won’t they…?  Its like the suckers in a club who’ve paid extra to stand behind a red velvet rope with a dedicated (but cash) bar fooling themselves they’re actual VIP’s.  Meanwhile the real (comped) VIP room with the (comped) bar is someplace totally different.  With this note on the door.

You aren’t VIP’s.  You aren’t part of the protected classes.  Your’re just another bunch of suckers.  Like those anti-abortionists and evangelicals we’ve been stringing along for years.  Or those desperate deluded coal miners and factory workers whose votes we hijacked this cycle.  And if you really think we give a shit, then you deserve to get suckered because coffee is for closers (below).

With Warm Regards – The Koch Brothers et al.

The interesting question is whether those voters will ever listen.  Because even in 2016, the merely affluent “should” have voted for Hillary based on stated policy.  Bernie was right.  She was (and is) a triangulating creature of Wall Street and the merely affluent.  But not (as much) of the plutocratic classes.

Yet so many affluent suburbs dutifully voted for a Jabberwocky Plutocrat/Rural/ Southern coalition party that is (now) dutifully serving its core voters.  And they ain’t them.

“Coffee is for closers.” (click link for Video)

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Declining Corporate Profits a Worry!?! Great News (Rising Wages). OK – Good For America if not Plutocrats…

A quick note between feedings (baby Curtis Bear is 3 weeks old and doing great and, actually, giving us little cause to complain).

The markets continue to climb the proverbial “wall of worry (markets’ periodic tendency to surmount a host of negative factors and keep ascending)”  The latest worry is that “corporate profits are rolling overAIEEEE!”  Alongside signs the tight labor market might finally be ticking up wages a wee bit.

Lets ignore the underlying blindered political/social perspective and just look at the mechanics.

  •  Corporate profits have been at an all time high as a % of the economy for ages.  And especially since the 2008 crisis.
  • The other side of that coin is that wages have claimed a declining share of the economy.  Gallons of ink has been spilled over the lack of wage inflation as employment has recovered.
  • Consumer (ie worker) spending is roughly 70% of the economy.

So Capital might (finally) losing ground to Labor.  If you want a less political formulation – the engine driving 70% of the economy is finally getting a little more fuel in the cylinders.  And pumping fuel into that consumer/worker engine is a heck of a lot more productive than super-charging the capital/financial side of the economy.

  • Worker’s propensity to spend is high.  A dollar in their pocket is going to (mostly) turn into a dollar spent.  Going into the pockets of another worker.  lather, rinse, repeat.  Monetary velocity goes back up and the whole economy gathers speed.
  • Capital’s propensity to spend is LOW.  Rich people save.  A lot.  Plowing “extra” dollars back into financial assets.    Driving up the price of assets but doing little for the “real” economy.  Sound familiar?

The first signs of a real consumer-led recovery should be heralded as a good thing for the economy.  That’s what real booms (and eventually bubbles) are made of.  OK, corporate profits decline as a percent of total.  But the total is growing faster as a % and that growth is concentrated in “real” sectors of the economy vs finance fun-with-numbers.

This is also probably good news for the markets over the next few years.

  • Yes, corporate profits will face a headwind.  Which means earnings will be harder to come by in the short-term.  Put more bluntly, companies will have to give up a larger share of revenues to their workers and keep a smaller share for investors.
  • But the total pie will start growing again.  What happens when 70% of the economy comes out from under a decade-plus of repression.

The shorter-term vs longer-term risk trade-off in current markets is “animal spirits.”

  • Rich people will feel worse because their share of the pie will be shrinking.  Boo hoo.  But the investor class is largely made up of rich people so…
  • But merely prosperous people (doctors & lawyers & etc…) will start to feel the pulse quickening around them  The retail investor will come back.  Probably to be fleeced yet again, but I digress.
  • The average Joe will start to feel better.  And that’s what fills the streets (and stores) with upbeat animal spirits.

The question is which cycle kicks in when etc etc.  But the overall trend is pretty darn good.  unless you are a dog-in-the-manger plutocrat type.  More on that later.

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You Broke It, You Own It. Selling Out for 30 Pieces of Silver? Venal. For 30 Wooden Nickels? Just Dumb.

Disaffected Rust Belt voters aren’t the only people that gave us Trump.  He also owes his office to people that should (and did) know better.  “Socially liberal, economically conservative” suburban affluent Republicans.  Educated, otherwise thoughtful people who ignored his stench, held their noses, and voted for “Team Republican.”

The bet they made?  From recent NY Times piece “I Voted for Trump. And I Sorely Regret It.

Those of us who supported Mr. Trump were never so naïve as to expect that he would transform himself into a model of presidential decorum upon taking office. But our calculation was that a few cringe-inducing tweets were an acceptable trade-off for a successful governing agenda.

Or if I might summarize.

“We handed our country over to a madman in return for 30 pieces of silver tax cuts.  And now he’s stiffing us!?!”

This was always a cynical bet.  It was also a dumb one.  Their dumb fantasy wasn’t Trump.  It was that today’s Republican Party actually HAD a “successful governing agenda.”

The health care debacle wasn’t Trump.  The “tax reform” debacle isn’t Trump.  The infrastructure debacle isn’t Trump.  Those debacles are Ryan & McConnell rummaging in an incoherent grab bag of negativist sound bites masquerading as policy.  Policy incoherence that was obvious long before Trump came along.  Provided you wanted to see it.

So why didn’t “Team Republican” see it?  Tribal loyalty?  Yes, but to what?  Its not the man, its the graven image, holy of holies, fetish totem underpinning that particular fantasy faith.  Tax cuts!  Because that’s what “successful governing agenda” really boils down to.

You gotta say “tax cut” to yourself in your best Gollum voice like “my precious my precious” to really get to the underlying emotions.  Or read from the self-pitying Gospel according to Louise Linton (Ms Mnuchin).

“Have you given more to the economy than me and my husband? Either as an individual earner in taxes OR in self sacrifice to your country?  I’m pretty sure we paid more taxes toward our day ‘trip’ than you did. Pretty sure the amount we sacrifice per year is a lot more than you’d be willing to sacrifice if the choice was yours.”

The fantasy was/is that no real-world tax cut wasn’t/isn’t going to amount to much.  The math didn’t add up,  doesn’t add up, and never will add up.  Maybe for Sheldon Adelson, the Koch brothers, and Mr Mnuchin.  But that affluent suburban voter was looking at maybe an extra few thousand bucks.  That barely pays for the kid’s travel team fees.

Which makes the whole bet even dumber.  Judas got 30 pieces of silver.  These folks sold their country to a madman for 30 wooden nickels…  Now?  You broke it, you own it.

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Bannon Wasn’t Pushed. He Jumped. Rats and Sinking Ships…

The papers are all saying Steve Bannon was fired from the Trump White House.  But he was clearly the author of his own fate.  To borrow a phrase, he “self-deported.”  Yes he was pushed.  But Bannon rolled out the gangplank, set up the shove, and choreographed the landing.  Why get yourself fired?  Because rats aren’t stupid.  Rats leave a sinking ship.

Consider the timeline and facts:

So why did Bannon do a Scaramucci on himself?

  1. Bannon saw writing on the wall after Tuesday’s debacle.  Time to get off the Trump trainwreck.
  2. He couldn’t resign “on principle” because the Charlottesville marchers are “his people.”  OK, most Breitbart News readers aren’t Nazis.  But a lot are soft sympathizers.  The same demographic targeted by the Neo Nazi “Daily Stormer” – people who start a sentence by saying, “I’m not racist, but …
  3. Bannon also needed to go out with a bang.  To retain his brand value.  And to set up a “I fought the good fight” Lost Cause narrative.  Which Breitbart rolled out one day later on Saturday – “With Bannon gone, there is no guarantee that Trump will stick to the plan. That is why — too late, in retrospect — conservative leaders wrote to the president Friday to advise him that Bannon and campaign manager-turned-counselor Kellyanne Conway were too valuable to lose.

That “Lost Cause” narrative is doubly appealing to his readership.

Those Breitbart-reading, history-bending, Southern apologists are also a core voting base of Republican party.  Bigger and MUCH more core than a lot of “socially liberal, economically conservative” taxes-hating coastal types care to acknowledge.  Its a harder truth to ignore after Charlottesville.  But if you divert a LOT of emergency power to your personal reality denial field….

Sailing off on a ship of fools.  Captained by a madman.  But deserted by its biggest, most cunning rat.

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What if Tillerson Goes Out With a Bang?

Sec State Rex Tillelrson seems likely to leave soon.  He’s a sensible guy.  Used to being taken seriously.  And presumably cares about his reputation.  What if he leaves with a bang?

“I can no longer serve in good conscience under this President.  I have seen this man up close and he is not fit to be President.  I have come to mistrust his temperament, judgement, and honesty.  I have lost confidence in his leadership.  He is a danger to our national security, prosperity, and democracy.  It is time for Congress to exert the leadership and power entrusted in them by the Constitution.  I call on them to begin impeachment proceedings against this man before more harm is done.”

You can dream right?  Although President Pence scares me from a pure policy perspective.  But Trump just plain scares me these days.  And I am a patriot first.

And this isn’t just my own wish fulfillment.  It is also Tillerson’s best exit route.  He comes across as a principled man.  Calling a spade a spade.  And he gets credit for being the first person to say out loud what most Republicans is already thinking privately.  He might as well go out on the right side of history.  Especially as there’s no reward for loyalty.

More important is that same logic applies to all the other “adults” in this Administration.  If Tillerson doesn’t take that path, someone else will.  Eventually.  Maybe Jeff Sessions jumps ahead of Tillerson?  Maybe they do a double-header Thelma and Louise style?

I’ve gotten two big calls wrong this past year.  The election (I went with the odds so not feeling too bad about that…) and the chaos that followed (I just lacked the imagination to think it could get this bad).  Its no comfort at all to realize I’m in pretty good company on both fronts.


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Robot Markets Giving Me The Heebie Jeebies. No (Human Readable) Information in the Price… Mostly Brownian Motion

Everyone is searching for the “ghost in the machine” and just won’t admit that the “machine” is what drives price action.

A friend sent me that comment recently.  It crystallized what’s been giving me the heebie-jeebies about today’s markets.  Its not really the price level or valuation.  Its how those prices are getting set every day.  How things are trading.

Back in the good old days (say 2010) you could pull up a chart and “read the tape.” There was useful and valid insight in how the price moved.  That isn’t some old market saw.  Price information is the core of all Economics models.  That is all a price “is” – information summarized.

These days?  There is no freaking information in the price!  To be more specific, there’s less and less human readable information.  Why?  On most days, most trading is by algorithms (“robots”) not humans.

So the thing setting the price is, well, a thing.

So a lot of the information/logic reflected in that price is non-human.  A lot of people shrug at this.  They assume the programmers are still programming to mimic humans.  Their mental model has robots as speedy but still human-style investors.  Like a Mr. Spock in Star Trek – wider-ranging, faster, breadth of inquiry unclouded by emotions.  But still comfortingly human-like.  Which is also how a lot of humanity-ambivalent investor types see themselves at work and too often at home too, but I digress…

A lot of people assume that is still how robots trade. They don’t.  And haven’t for a long time.

Now?  Its robots programmed to prey on last-generation robots that were built to prey on even older robots that have long since become lunch.  Imagine a spiral of snakes eating each other’s tails down down down into the obscuring mists of long-past time.  (“Turtles all the way down” but with cannibal snakes! How was that for a mixed metaphor!).

More fundamentally, the robots aren’t understandable by humans.  Most people really really don’t understand this.

“Unlike some other sciences, you can’t verify if an ML [robot] is correct using a logical theory. To judge if an ML it is correct or not, you can only test its results (errors) on unseen new data. The ML is not a black box: you can see the “if this then that” list it produces and runs, but it’s often too big and complex for any human to follow…  It gives the too big to understand linear algebra producing the results. It’s like when you have an idea which works, but you can’t explain exactly how you came up with the idea: for the brain that’s called inspiration, intuition, subconscious, while in computers it’s called ML. If you could get the complete list of neuron signals that caused a decision in a human brain, could you understand why and how really the brain took that decision? Maybe, but it’s complex.”

I’m NOT actually too worried about sharing the pool with a bunch of hyper-predatory neural networks.  Maybe I should be.  But I stick to things humans do better – anything but fancy math.  Especially avoiding math on well-bounded, machine-readable data sets.  An army of robots have already chewed that data six ways to Sunday from cross-correlation angles you or I would never even dream of.  Oh and we’re magnitudes slower at it to boot.

What’s giving me the Heebie Jeebies is that “too big and complex for any human to follow” traders inject nonsensical (to humans) information into the price.  Making an already faint narrative thread even harder to tease out and follow.  As the quarters age, the narrative thread fades behind a rising tide of Brownian Motion.  The ghosts in the machine bumping into other ghosts for reasons beyond our ken.

Brownian motion or pedesis (from Ancient Greek: πήδησις /pέːdεːsis/ “leaping”) is the random motion of particles suspended in a fluid (a liquid or a gas) resulting from their collision with the fast-moving atoms or molecules in the gas or liquid.[1]

More in a following post.

FYI the best “how to read the tape” guide I’ve seen is a book published back when prices were literally tick-tick-printed out on ticker tapes….  Get past the first @50 pages to adjust to the language and its a great read as well =>  Edwin Lefèvre’s  Reminiscences of a Stock Market Operator.

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Why Plutocrats Hate Obamacare – It’s Not Just the Taxes…..

Its worth considering why Republican donors powers-that-be have such a deep, implacable opposition to Obamacare.  Sure it meant higher wealth taxes and the risk the government might actual do something right with a broken (ahem “free”) market.  But those alone don’t account for the visceral, violent, vituperative, vigor of their vexation.

They hate Obamacare for loosening of the bonds of wage slavery…

Obamacare’s foundation is a (reasonably) functional & fair individual healthcare market.  It un-picked the (totally arbitrary and stupid) link between healthcare and employment.  Did it ever make sense to tie a universal, social need to the vagaries of education, business cycles, and luck?  It didn’t and still doesn’t.

What’s wrong with breaking that link?  People became a little less afraid.  Losing or quitting that job at BigCo becomes a little easier.  To become self-employed ( like your truly).  To start up a company.  Or whatever.  Obamacare took away a fear that helped keep many chained to their desks.

Consider the hidden coercion in the viral tweets of this Google Ventures partner who relied on Google’s healthcare plan to care for his desperately sick son until he dies at age 11.

We focused on giving him a happy life instead of bankruptcy, GoFundMes, or taking second or third jobs that would take us away from him.  Even then, our lives were upended. I wanted to start a company, or join a very early stage startup. I could not risk losing coverage.  Nor could I purchase it myself due to his preexisting condition. Even the 18 months of COBRA scared the hell out of me.  When a family member is this severely sick, even the tiniest chance of going without health coverage is terrifying and means bankruptcy

This situation is particularly awful and heartbreaking, but we have all been stalked by that “tiniest chance of going without health coverage.”  That gnawing fear kept a lot of people at their desks.  Rowing away below-decks and not causing a fuss.

In this case, Google Ventures hung onto his services and the American economy never got to see whatever company he might have started.  He was a well-paid wage slave and Google is hardly an ogre, but that still leaves the score at “BigCo – 1, Free market Individual – Zero.”

BigCo likes their workers afraid.  Beholden to a BigCo benefits department that’s negotiated a better deal (from another BigCO).  A deal some puny SmallCo or individual can’t get.  Because BigCo doesn’t have to try so hard if it stacks the deck in its own favor….

No wonder the plutocrats are trying so hard to roll back Obamacare.  It empowered the individual, the entrepreneur, the little guy.  Those people have their place – in front a flag & amber waves of grain in the the Koch’s Republican’s TV ads.  But they don’t actually have a place in the Koch’s Republican party.  BigCo plutocracy is a cozier, safer place without them.   And thus without a functioning individual market for a universal need on fair and socially beneficial terms.

And yes, I’m a little annoyed they are working so hard to take away my healthcare.  I wish more of my (mostly employed) friends would figure out Obamacare isn’t just for poor people…  Its for them too.

Its worth thinking about what happens if you decide to step out on your own.  Or if that next jobless stint goes past 18 months…  Sort’ve like this former Republican congressman figured out…  Call your congresscritter.

This could be you too. Unless you really are a 1%-er and not a mere 2%-er.

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Midterms Will Be Hijacked By A Shadow Power. And it ain’t Putin.

I ran into this bit from the Washington Post’s Daily 202 piece on the Koch Brothers recent confab.

Emily Seidel, who directs political strategy for Freedom Partners… about how tough the midterms might be for Republicans.  Seidel stressed the need for the [Koch Brothers] network to spend early. “Early engagement with paid media is how we set the narrative,”  

She is wrong.

Hillary’s team said the same thing in 2016.  Didn’t work out so well, did it?  Millions in paid ads buried by billions of re-Tweets.

More generally, it got me to thinking how the Republicans traditional advantage – a wall of money – will struggle vs social media in 2018.

Social media will hijack this election (see prior post).  A shadowy power beyond party control (otherwise knows as “Democracy”).   I expect a “nationalized” election centering around Trump, healthcare, immigration, and the general disaster that is Washington.  That nationalization will happen via social media.  Consider the hows and whys…

Social media works best with an engaged population.  Democrats are pissed off and Republicans are demoralized-to-just-plain-embarrassed.

  • Vote! Impeach Trump!  Stop the Madness!  Revenge!” are nice, simple, and (in context) reasonable messages.
  • Corporate Tax reform!  Higher barriers to healthcare!”  Not really barn burners.
  • The other obvious Republican social media tack (and policy plank no matter how hard socially liberal suburban whites pretend otherwise) – “Keep those brown people in their place!” But too-explicit racial attacks risk backfiring.  If just one tweet’s dog-whistle racism crosses over a little too audibly, its re-tweeting will just drive up Democratic turn out.  Remember that rash of ill-advised Republican “rape” comments a few years ago?   On the other hand,  too-quiet dog-whistling won’t get out the vote.

Social media also works well with a simple message that appeals across the broadest possible population.  That takes away the usual defensive playbook for mid-terms – to localize/personalize the election.  “Washington may be a mess, but you can trust our guy.”  That’s not going to work in 2018.  Especially with full Republican control of what’s been chaos so far.

  • Angry, energized voters will turn this into a national referendum centered around “Turn over enough seats to impeach Trump.”  The parties will have to deal with this.  They certainly won’t be driving it.
  • The GOP’s counter-message?  Not so catchy.  “To the barricades to defend our ineffective chaos!  We promise we’ll get to abortion, protectionism, and all that other stuff in 2018-2020.  Really!  Right after we wrap up these last few give-aways to billionaires!
  • The one powerful GOP counter-message could be on immigration – expect headline-grabbing legislative moves going into 2018.   The risk is this does more to wake the sleeping Hispanic voter giant than turn out the GOP’s racist nativist wing…  And a “real” immigration bill risks more incoherent Congressional chaos.  A huge wing of the GOP desperately wants to keep illegals right where they are.  Frightened workers with uncertain legal rights are great for profits.  (As are legal workers without access to a functioning individual healthcare market.  But I digress…)
  • More nuanced, local messaging?  Buried in ads people don’t watch and the howl of a (national) social media struggle.

Social media reaches younger people best.  Also low-information voters (love that euphemism) whose media diet is otherwise TMZ and cat videos.  Everyone currently living a life lesson in not-showing-up-to-vote-sort’ve-sucks-dude.

Social media doesn’t do much for the GOP’s elderly voter stalwarts.  And it blunts the usual GOP strategy of suppressing turnout.

Social media rewards the fresh and new.  Old warhorses? Not so much.  Incumbent Republicans aren’t generally social media geniuses.  There are a lot of JEB! look-a-likes out there.

The one wild card is a major terror attack.  Impossible to handicap, but worryingly likely.  More certain is that Republicans best “national” issue will be national security and fear of terror.  Watch for a ramping up on those issues (plus immigration) as we get into 2018.  On the other hand, Trump’s overseas bumbling might just as easily serve up a military disaster in the next 12-18 months.  Just a (very) wild card.

My final thought reading this quote?  She’s just trying to get paid.  Consultants take a percentage.  No wonder she wants “early engagement with paid media.”  A percentage of free media is… zero.

The Clinton team followed the same, self-dealing advice from the campaign industrial complex down the drain in 2016.  Expect a lot of less-imaginative GOP’ers to do the same in 2018.

Politics is still in early stages of technology disruption and the incumbents still don’t get it.  Go ask JEB!

From Daily 202

Seidel stressed the need for the [Koch Brothers] network to spend early. “Early engagement with paid media is how we set the narrative,”

Emily Seidel, who directs political strategy for Freedom Partners, which is part of the network, delivered a presentation Sunday afternoon about how tough the midterms might be for Republicans. “We’re facing a reinvigorated progressive left,” she warned.

While there are 10 Democratic senators up for reelection next year in states Trump carried, Seidel said: “None of these will be an easy lift.” She noted that Democrats need to flip 24 House seats, and Republicans must defend 23 seats in districts Hillary Clinton won. The GOP also needs to defend 27 of the 38 governorships that are up in this cycle. “In midterms since 1982, the president’s party has lost an average of four seats in the Senate and 20 in the House,” she said. “If that happened next year, Chuck Schumer would be the majority leader and Nancy Pelosi would be four votes away from being Speaker. … These governors’ races could very well determine control of the U.S. House for the decade following the Census in 2020.”

Seidel stressed the need for the network to spend early. “Early engagement with paid media is how we set the narrative,” she explained. She cited the successful effort in Ohio last year to negatively define Republican Sen. Rob Portman’s challenger, Ted Strickland, before he could raise enough money to go up with his own television commercials. Once the airwaves become saturated, she explained, the network’s grassroots programs will then drive voter engagement.

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Blockchains! Wow! Totally Missing the Point of a Currency! But No-One Cares! Blockchains!! Wow!!

Finally crystallized what bothers me about all the Blockchains/Bitcoin/Ethereum hoo-hah.  Its not the really the pump-and-dump dynamic (everyone will all of course dump right before the last second so that precisely no-one will be left holding the bag).  But under that is a dream  And idea.  A hope.  A belief.  Totally wrong.  But cherished nonetheless….

The dream?  That currency is a store of value….

It isn’t.  It never will be.  Get used to it.  Hammer that into your head.  Never let that go.

Currency is a “means of exchange.”  A socially convenient common denominator for enabling transactions.  You work.  Receive dollars/gold/silver/cowrie shells/huge round stone discs for it.  Turn around and spend it one someone else’s work.  Etc etc.

We really really really could substitute cowrie shells or huge round stone thingies for dollars.  They sound ridiculous, but no less ridiculous than magical green pieces of special paper.**   I can walk into a store with a green piece of paper and walk out with milk.  In an alternate universe, I’d walk in with string of cowrie shells.  Nothing else need change.

That collective delusion is a feature of the system, not a bug.  Your visceral response to “primitive” cowrie shells and un-questioning acceptance of dollars is evidence of how powerful and important that delusion is.  We have to believe to make the whole thing work.  And that belief must be un-examined to stay valid.

But that belief bleeds over to the illusion that money is a “store of value.”   A person with a million cowrie shells isn’t rich.  A person with a million green papers is?  Both are equally silly.  Except one is invested with the holy magic of a powerful collective delusion.  A necessary delusion to sustain currency as a unit of exchange.

But no currency functions as a “real” store of value.  Never has.  Never will.  Piling up dollars will lead to homelessness and starvation just as fast as piling up cowrie shells.  Until/unless you “means of exchange” them into food and housing.  Dollars don’t digest.

But real-world blockchain activity is almost entirely around this magical “store of value” idea.  No-one really uses Bitcoin to transact (except for drugs and PC ransomware I guess?).  The belief behind this mining and storing up a “coin” as a thing with value in itself.

Piling up Bitcoin is no different than piling up cowrie shells and declaring yourself a millionare.  That works as long as other delusional people will convert your cowrie shells to dollars and thus to food/shelter/cocaine.***  But its still founded on that collective delusion.  The cowrie shells, or dollars, or bitcoins stubbornly remain means of exchange for things that actually have value – like food and housing.

That’s where gold investors fall down the rabbit hole.  They want to believe that a shiny metal is somehow more “real” than a piece of paper.  Although that shiny metal depends on the same “someone else will accept this as a means of exchange” mechanism as a cowrie shell.

And if things break down to the point currency’s “means of exchange” function fails?  You won’t need gold.  You’ll need a shotgun and a Mad Max tribe of buddies.  Because society will have atomized backwards to a more primitive, less functional collective delusion (tribalism).  Its just delusions all the way down (or really turtles all the way down).

Gold bugs and Bitcoiners desperately don’t want to accept that they are just part of a really useful but artificial collective delusion.  Because that leads back to a whole lot of uncomfortable introspection about their own human-ness and impermanence and perception and all the rest of that stuff.

That nesting box of socially useful delusions is a scary thing to contemplate.  Its not easy to think about how we are all just watery bags of chemicals participating in a self-sustaining-and-functional-but-still-totally-artificial collective delusion.  Unless you drop a lot of acid I guess.

But some people are more scared by this than others.  It’s too much of a threat to their sense of self, order in the universe, and the value of a really well organized sock drawer.  Or it reveals a collective dependency and mutual obligation they really don’t want to acknowledge (see “Libertarian Techno-Geeks”).  People who had Mr. Spock as a teen bedroom poster.

They desperately want/need to believe in some deeper grounding and truth in the universe.  There is some Ur-Turtle at the bottom that is “real” and not standing on the back of another turtle!  REALLY!  YES! [voice rising to an angry shriek]!!!!!

Of course, this is just another self-delusional belief in the whole stack of turtles holding up our self-delusionally-defined universe.  But try telling that to an libertarian-leaning Bitcoin enthusiast….  Probably that hit of acid is the only real way to shift them.  We could add it to the water at a Bitcoin conference?!?  🙂

Absent psychedlic intervention, Blockchain has enticed that gold-bug crowd.  Plus a whole lot of techno-futurist types who are always trying to somehow escape our/their human frailties.  Engineers of a certain stripe.  Self-regarding meritocrats.  The professional investor class (looking for stock prices in “the numbers” vs the stories behind those numbers).  Etc….

Piling up the cowrie shells.

It won’t end well.  Better to ground your hopes and dreams on something a few turtles further down the stack.  Follow Bugs Bunny, not Daffy Duck.

A great cartoon in its entirety BTW.  Especially in the Age of Trump.

**  At least blockchain “mining” just burns server cycles and electric power.  Massive scale cowrie-farming and/or rock quarrying to “print money”would be an environmental disaster.  Although we could have the Fed laser engrave serial numbers on specific shells/rocks.  Heck, we could use Bitcoin or some other blockchain to generate those serial numbers!  Get some benefits of fractional reserve banking and avoid the (proven) toxic side effects of the old fixed money supply approach to currency.  So blockchains could be useful after all I guess?

*** Even when Bitcoin is used for a transaction, its pretty rapidly converted to dollars or Euros somewhere.  At least by the smarter folks out there.

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