Yes - and if short term treasuries were near 3% I'd say a "pop" is long overdue, but with treasuries at basically 0%, the numbers are still in the nosebleed territory, but not ludicrous. I've moved to a far more traditional 60/40 balance for my portfolio over the last couple of years, with at least half of the 60% in stock overseas.

However I am almost always wrong about the markets, so please do not regard this as smart or anything like that.

Thanks.

I like your positive outlook.

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No worries... just had to set the record straight.

P/E- isn't 35 traditionally considered bubble territory?

Germany- yeah, inequality and the plight of the working poor get whitewashed here too.

The issues you are not picking is where my interest mostly lies... maybe next time.

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The two most popular government programs in history, Medicare and SS, are not center right, and the government is already paying 7 out of every 10 healthcare dollars through Medicare, Medicaid, the VA, Obamacare subsidies, research, tax breaks, state programs, etc.

So, Single Payer just requires dealing with the 3 out of 10 dollars remaining.

That's closer to "incremental" territory than most recognize.

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Well, anti-Single payer propaganda and bribery of politicians to reinforce it has been about as intense as the war on drugs... and both are failing.

The times they are a changing.

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I also believe that to make dramatic changes in the American system you need either a supermajority (White House, House, plus 60+ seats in the Senate) or you need to compromise. Since supermajorities are rare, finding compromise is the way to go. The Republicans denounced compromise in the last 10 years, and it is so ingrained that they can't even compromise with themselves (proof point: repeated failures to repeal the ACA).

Thus I'm of the opinion that large steps away from the center-right norms of this country, even with supposed public support* are unlikely and that an incremental approach is simply more likely to deliver results.

In the British system a simple party can exercise almost unfettered power and lurch the country in larger steps, and frankly I think that is a better system of government that the loudly praised "checks and balances" system in the Constitution.

* The problem with saying "65% of people want X" is that when the opponents of "X" suspect that policies promoting "X" are likely they engage their propaganda and the public support for "X" drops. I regard polls showing the popularity of unlikely outcomes as accurate reflections of general public opinion, but not manipulated public opinion during the heated debate of a topic in this country when political decisions are made. Plus, Don is right, money dictates outcomes in American politics at the moment.

Firstly, if "Bernie-Bros" is an insult, my apologies - I thought it was the movement's own, proud, term for their supporters. My bad.

Re: P/E ratio

Correct, it currently is 35, my very simple model was showing the effect of QE lowering interest rates and thus raising the price (P) of stocks, not explaining the current market in detail. The P/E of 35 reflects about a 3% "return", but it is expected that the "E" (earnings) will grow in the future and that is priced in. Also, dividends add another e.g. 2% or so, bringing the long term implied returns up to about 5% + priced-in future growth.

re: Germany

For the most part, the Germans are very pleased with their lot, and most of their neighbors agree (https://www.economist.com/news/europe/21695581-europeans-have-warped-views-their-neighboursand-themselves-green-eyed-continent).

The AfD took a lot of Merkel's support in Bavaria, and it is perceived that this is not because a lot of old, rich Germans are pining for Adolf, but that they feel Merkel is diluting German culture, to which the separate party in Bavaria (the CSU part of the CDU/CSU alliance) has always been sensitive to - they definitely put the "Christian" part more prominently and Merkel was importing a lot of non-Christians. I still believe that in a few years the mass immigration event will be forgotten, unless the Germans create ghettos similar to the ones the French have with their minority populations.

FYI: I know I'm just cherry picking a few replies to all the points you raised. Sorry.

P/E

A

What a nice explanation.

But isn't the average PE about 35 right now?

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This time I agree with everything in this comment.

"I think they oligarchs will just let the EU and Asian governments create the next "American" middle class instead."

But that is a mind-numbingly depressing prediction.

And, something worthy of fighting against to ensure it is not allowed to happen.
I think our middle class is worth fighting for too.

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First off, thanks for all your responses.

Fully agree with almost everything in this comment.
My pitchfork is ready and eager, but lonely.

I truly do think anger and understanding about the causes are growing, and the combination of pissed off left and "damn, we were duped" right will have an effect.

If a free trader like you (just to acknowledge how you do indeed differ from Bernie) is pining for some "Bolshie", there is hope.

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BTW, Hillary (in her new book) and right wing corporatist Dems are still attacking Bernie.

Those internecine squabbles cut both ways.

I personally agree with Don here that neoliberal Dems are part of the problem, and that the fight is necessary not problematic, but I doubt that shocks anyone.

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Good answer.

I think several teams are in dire need of Kaep's skills... as he is very skilled... but that's just my opinion, not even a quibble with your wisdom.

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OK.
Once again, I'm going to set the record straight even though this isn't what your comments were actually about.

Bernie supporters do not call themselves "Bernie-Bro's"... so I wouldn't expect anyone to embrace that moniker.
The name was created as a smear by the Hillary campaign in an effort to tarnish all Bernie supporters.
Glenn Greenwald and company investigated the claim, and the "examples" of offensive misogyny in online comments offered by Hillary Inc. turned out to be... bum bum bah... Republican Trump supporters.
That is a simple fact.

Now, I'm sure that a tiny percentage of Bernie supporters actually are misogynistic asshats, but the stereotype smear campaign tactic was never representative of Bernie supporters, and if you want to be factually accurate, the term deserves to be relegated to the dustbin, not repeated.

As CW and Don have both pointed out recently and above, what is actually politically possible CAN change, and HAS changed.
Single Payer is now politically possible because it has the support of the majority of Americans... and yes, I know it will require a change in both Congress and the WH and may still take several positive election seasons to accomplish.
(again, for the record, 8 out of 10 of Bernie's top policy proposals had majority support among all Americans... not just Democrats... so the "purity/pragmatism" arguments were always just an excuse to maintain the status quo... but whatever).

In any case, neil and kick, both of you have expressed strong support for Single Payer (unlike "it's never going to happen" Hillary), and neil, in your comments above you embraced the more socialistic "right balance" from Germany, condemned the trickle down neoliberal response to the Great Recession, and have previously expressed support for other policy changes which are all far more like Bernie than the current and recent Democratic establishment...

... so, whatever you want to call yourselves, I would hope you recognize you're part of the actually viable solution.

Kick-
Whatever the ability of Bernie to deliver, purity was never Bernie's thing... it was another campaign tactic from Hillary Inc... and I still think he would have beaten Trump and been positive for the country.

Don, yup... just to acknowledge why I included you in this comment.

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... but, unless I missed something, isn't Kaep still looking for a job because of hypocritical NFL owners "offended by Trump"?

Hey, Punk!

The beauty of America is that Kaep is free to exercise his right to free speech, and the owners are free to exercise theirs. The sword of democracy cuts both ways.

Doesn't the "we're with him, but won't hire him" shtick jump out as a glaring omission in the media frenzy?

I've heard some talk of it... not nearly enough, though. It sucks. Same thing seemed to have happened with Michael Sam.

I suspect there are three things at issue:
*Some of the owners aren't hiring him because of his activism.
*Some of the owners are not hiring him because they have no need of his skills.
*Some of the owners quite simply lack the courage of their convictions... which these athletes certainly do not.

Glad to see the support for the protesters against racism...

... but, unless I missed something, isn't Kaep still looking for a job because of hypocritical NFL owners "offended by Trump"?

Doesn't the "we're with him, but won't hire him" shtick jump out as a glaring omission in the media frenzy?

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I'll never be a Bernie-Bro, but I admire and understand his vision - I just don't think it is feasible because I'm an "art of the possible" type. Thus I'm wide open to purity tests that I'll fail reliably for your entertainment, but I'm still on your side.

Very well said, sir. All things being equal and if Saint Bernard were actually the POTUS, how much of his "purity agenda" do you think Bernie could actually deliver? Exactly right.

As anyone who knows history can tell you, it was quite simply drawn up that way purposely. The founders had already been through a revolution and wished to avoid it again at all costs. The words of our Constitution were carefully chosen, hotly debated, and finally ratified. It's actually a feature of our country and not a bug that a revolution is not likely possible.

"...for good legislation two houses are necessary..."
~ Thomas Jefferson in a letter to the Marquis de Lafayette, 1789

I'm half German and still have family there, and I follow events there with only some occasional lapses.
I'm glad you have a good employer, and that you benefit and recognize the positives, but you didn't address most of the issues I raised.
From comment 7-
"increased military budgets (as Trump demanded btw), austerity social budgets, anti-immigrant policies, mass surveillance and a resurgent Realpolitik internationally"
Of course, their political spin is that they want to chart their own course due to disagreement/disgust with Trump, but even the blind can see they are essentially following the same course as the right wingers in both parties in the US.
Quite a coincidence.

"My point is that socialist ideals are strong in Germany, and the likes of Merkel are not looking to undercut the system."

The massive growth in the numbers of working poor and the increasing inequality are the result of the weakening of socialist ideals generally, and government policies specifically.
Just going by memory (I'm in no mood for refresher research), I believe it was either Schroder or the SPD, CSU/CDU coalition that began/implemented Hartz4, and other neoliberal economic policies like austerity budgets and social cuts, and other trickle downesque emulation... which is why that part of my comment was about Merkel but included the supposedly more liberal parties as well.

In other words, the "balance" has changed fairly recently with negative results, and they continue to move in the direction of more business friendly/worker unfriendly policies... and I think the previous balance was the right balance.
But, my original point wasn't just about economics.
Long held ideals about privacy inspired by the horrors of the Stasi are now being violated using the terrorism boogeyman excuse (just like unconstitutional US surveillance policies), and SPD, the Left, and Green party politicians are embracing a more militaristic policy and even scapegoating immigrants like the AfD and Trump.

I hope you're right about the AfD.
But if you happened to catch the post-election BBC article, Merkel is vowing to "win back" the right wingers who abandoned her party for the AfD.
Time will tell, but that sounds like a plan to move even further right to me, and that is essentially rewarding the right wing extremists, rather than addressing the root causes that resulted in their growth in popularity and power.

And, just for context, the regime change wars in Libya and Syria which were embraced by the supposedly liberal ruling coalitions for "humanitarian" reasons are the cause of more than two thirds of the flood of immigrants into Germany which the AfD used to great effect in the election when their anti-EU approach fizzled.
So, the increasing militarism and the consequences is a relevant subject to this discussion.

Sorry for going on and on.

A

Also: if we wanted to show disrespect we could fly a confederate flag.

Exactly! Truth be told, they're not even flying the flag of the Confederate States of America; that's the battle flag of Robert E. Lee's Army of Northern Virginia that was used in battle against the Army of the United States of America. The original official flag of the Confederacy was the "Stars and Bars," designed by a German... go figure... the same German who designed the confederate uniform.

I never quite understood why the same people who claim to be "patriots" and insist that America is a "Christian nation" (have they even read the United States Constitution?) are the same ones who fly the battle flag of Lee's Army of Northern Virginia and worship graven images of General Lee. Isn't NOT doing that one of their "Big Ten" commandments?

And just to be clear here, that paragraph above is spoken with a Southern accent with tongue in cheek... mostly. ;)

You may just be trying to be funny again, but I have no idea what you're referring to... as you didn't specify which comment or which portion of a comment.

In any case, if I repeated myself, it was typed anew... and heartfelt.
So, I don't appreciate the falsehood even if it was somehow meant in jest.

A

Perfect!

Also: if we wanted to show disrespect we could fly a confederate flag.

Also, agree with WAPO columnist in Chris' article who compared Trump's attitude during UN speech to that of a Mob boss. Not 'Gansta', actual gangster. Like Joe Pesci after being rudely awakened, but without the charm.

And Paula, watched with fascination as team after team protested yesterday. Particularly pleased to see two singers of the Anthem take a knee.

I think there is a simple ladder between risk and return. I'm going to describe the capital markets using a ridiculously simple model to make a point - you have been warned. Note: this model ignores inflation assuming that everything is done in constant dollars.

Let's assume there is a country with only three capital markets instruments:

1. Government bonds - utterly safe - you will get your principal and interest back guaranteed because the government can print money - your only risk is hyper inflation and for our purposes we will value that at below 0.01%

2. Corporate/other bonds - pretty safe, but a 2% chance of default where you might lost 50% of your money (i.e. a net risk of 50% of 2% = 1%)

3. Stocks - historically, as an index, volatile with a risk curve that decreases based on holding time - i.e. if you only want to invest your money for one year the risks are high, but if you want to invest for 10 years the risks are about 10% that you might lost 50% of your money, thus net risk for 10 year holding is 50% of 10% = 5%)

So we have a ladder:

Gov't Bonds: Completely safe - 0% risk
Corp Bonds: Somewhat safe - 2% risk
Stocks: Least safe - 5% risk

To invest in the "somewhat safe" vehicle you need to get more than 2% return. To invest in stocks you want more than 5% return over 10 years

So, if Gov't Bonds pay 5%, you'd expect Corp Bonds to pay over 7% and the stock market to pay at least 10%.

Let's look at the stock market. We measure returns based on two parts: dividends (EPS) and stock price rises. Some companies pay no dividends so you expect all your returns in higher share prices, some provide dividends and higher prices. To simplify this this model I'm going to assume no dividends are paid, you get all your returns through higher share prices, thus the key number is the P/E ration - price to earnings ratio - i.e. how much do you have to pay for a share (Y) to get earnings of X. In our simple model, the P/E ratio would need to be at least 10 (to give the 10% returns).

So what happens when Gov't Rates drop to 0%?

1. Gov't return: 0%
2. Corp Bonds: 2%+
3. Stocks: 5% = P/E of 20. Thus as Gov't rates decrease and if earnings remain constant, P doubles and everybody who has a 401k is happy.

This is what is happening at the moment, and in the earlier post I showed that complacency in the voting public is allowing the owners of our politicians to keep the lid on pay and this inflation.

I think that the last recession was the first economic crisis of modern times where the fiscal policy players decided to opt out, and so only monetary solutions were on the table. For that fact, I hold the White House, the House and the Senate in utter contempt - but at least the WH tried with the auto bailout and the propping up the financial system. However the seeds for a repeat are not in place because Frank-Dodd was a band-aid that the current regime is trying to remove anyway, and the Justice Department didn't put 50-100 Wall Street "names" in long term jail sentences to send a message that we won't put up with a repeat. So lots of blame to go around there.

This put the Fed in the position of trying to address the economic situation using only monetary means, and the primary tool, lowering interest rates, quickly ran out of ammunition (difficult to go below 0% although Germany has succeeded to a limited degree). Thus the Fed invented a new tool (not that new - really it is just called "printing money" but they couldn't call it that), Quantitative Easing, that effectively lowered rates below zero. This had the effect of pumping money into the economy, but the problem was, without any fiscal policy, the money went anywhere it wanted, and it wanted to go to the stock market, which has boomed since 2009.

(I'm going to put in a separate post some thoughts about effective interest rates, and relative risk, because that would bog this down, but it explains why this happened.)

So now the Fed are trying to reload their "Interest Rate" weapon by raising rates (so they have the ammunition to lower them in a future crisis) but due to fiscal policy failures they are fighting the economy (inflation is stubbornly low, and despite high employment, there is little wage pressure).

Thus the Fed have lost one weapon, and now only have their new one, that is far from perfect, can't be aimed (fiscal policy provides that targeting - directing the money to e.g. middle class programs, more money into the hands of people who will spend it instead of putting it in their 401K, etc.).

I hold out little hope for any significant growth until the wealthy realize it is in their interest to get their paid politicians to put money into the 95%'s pockets so they can spend more, and thus grow the economy from the bottom up (trickle down has failed beyond count). However with globalization, I think they oligarchs will just let the EU and Asian governments create the next "American" middle class instead.

I'm amazed, but then shouldn't be based on experience, at the level of economic innumeracy in the general public. There are two simple facts that just about every American living in a household with an income below $250K should know and want changed:

1. Just about all the wealth and income gains since for the last three decades have gone to the top 5-10% of Americans - everybody else has flatlined.

2. Currently the GDP per person is about $54.6K but the income per person is only $17.5K - a 3x difference is ridiculous*

Why is this not a pitchfork and torches issue in this country?

So in answer to your question, I don't think this time will be different because American voters seem to be acting like battered spouses who just keep coming back for more. I grew up in Scotland and there was always grumbling discontent about the rich getting more than their "fair share" - "Bolshie" was the word that described that attitude, and it was felt that sometimes the regular people had to be a bit "bolshie" otherwise they'd be getting ripped off by the rich. We could do with more of that here.

* Paper that covers median household income and per capita gdp for the U.S. and compares it to other countries:

https://stefanthewissen.files.wordpress.com/2015/08/nolan-et-al-2016-gdp-per-capita-versus-median-household-income-inet-wp.pdf

I'll never be a Bernie-Bro, but I admire and understand his vision - I just don't think it is feasible because I'm an "art of the possible" type. Thus I'm wide open to purity tests that I'll fail reliably for your entertainment, but I'm still on your side.

I work for a German company. I'm very proud to and regard them as an excellent employer - they basically offer us European-style benefits in the U.S.

I also work with a lot of Germans in a German business culture. There are strengths and weaknesses to the German business culture. On the plus side for employees, it is almost impossible to fire anybody, seniority is strong, and there is a "Worker's Committee" that have to approve certain decisions that involve German workers. On the minus side, there is a lot of very talented people who are have been working for the company for decades and are in positions and are being paid way below their potential from a Silicon Valley perspective. Plus the general salaries are about 1/2 to 2/3 what an equivalent U.S. employee would be paid.

My point is that socialist ideals are strong in Germany, and the likes of Merkel are not looking to undercut the system. The political philosophy is more citizen centered than our business centered philosophy. Frankly I think they have the right balance.

The AfD are a knee jerk reaction to the large wave of immigration and their support is most strong in the old East Germany which is still significantly poorer. I see this as a one-off unless there is another humanitarian crisis and Merkel decides to repeat the open door policy of 2014/5 - which I doubt because I think she is pragmatic enough to realize that this will only help the AfD.

Please stop cutting and pasting old comments into new ones.

I mean, seriously!?

I have a question for you (or anyone else for that matter): How is a silent protest any worse than that thing on BLOTUS' head? [not the pathetic orange "hair" situation, the ignorant cap]

Explain me this: Where do the right-wing whiners wearing their "MAGA" attire get off saying that athletes who take a knee to silently protest are showing disrespect to America? I mean, really! It's not like the athletes are wearing hats with a logo that insinuates our country isn't great and encouraging others to wear it also. If small hands/small mind honestly believes that people who disrespect our country should be fired, then he can make an example of himself for wearing, selling for a profit, and encouraging other Americans to wear a stupid ______ <--- [insert expletive here] hat that disrespects America IN ALL CAPITAL LETTERS.

If I said it once, I said it a hundred times over the weekend. If I was one of those athletes standing at a podium being asked about kneeling, I would have simply stated in response: "Our silent protest has nothing whatsoever to do with disrespect for our country. If we had wanted to show disrespect for America, we could have simply worn those stupid Trump campaign hats."

I'm not sure why you're cheering Merkel's win.
The German equivalent of the Democrats lost badly... though Merkel is to the left of Hillary.
If the bar is being set at "better than neo-Nazis", it portends a race to the bottom.

There's actually quite a bit of grumbling from the left in Germany... and not just about the gains by the AfD.
The Left party, the Greens and the SPD are all supporting the increased military budgets, austerity social budgets, anti-immigrant policies, mass surveillance and a resurgent Realpolitik internationally... all moves to the right politically.
The abandonment of long held liberal principals (which has worked out so well for Dems in the US) has increased inequality greatly and created an ever growing class of working poor in Germany... a relatively new phenomena in post-war Germany and one of the factors at the core of Trump's ability to win.
Dangerous games they are playing.
A German version of Trump could be on the horizon.

I saw your comment about the economy in a previous post... your mortgage broker slowdown comment.
Quite a few people are noticing the signs.
As you pointed out months ago, we are due for another recession going by the historical record.
I think the declining car sales and just announced layoffs at GM and Ford are indeed indicators.

Considering that a huge slice of the US population never saw any recovery from the Great Recession (aka Wall Street fraud bubble implosion) I believe there will be more vocal discontent than is usual.
And with economic Darwinians still in charge of our government, I believe their response will make that discontent grow.

What are your feelings on the economics given that the Fed is basically still using the tools available to them after the last recession... not much in the way of an ability to cut interest rates for example?

A

Back from nowhere, I decided to go back and check out your comments on the massive Pentagon budget supported by Democrats.

I failed to find any columns where it was mentioned.
Can you direct me to where you addressed the topic please?
Thanks.

As for today's column, I have a little trouble taking any debate about GOP health care bills seriously at this point.
Sorry Kimmel.

Big Money Dems didn't accomplish anything of substance for labor in Obama's 8 years, unless making unions even smaller and no increase in the minimum wage counts, but Raygun being honored amounts to a farce for sure.
Maybe that explains why Obama considered him a transformative president worthy of praise?

I'm not sure what part of "the left" you were referring to about Plame.
She's basically been a non-entity in the circles I keep tabs on... and since you mentioned her support for Hillary, I think I know why.

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Show some respect JFC, that is Ambassador Palin for Nambia to you!

https://www.newyorker.com/humor/borowitz-report/trump-names-sarah-palin-ambassador-to-nambia

Yes, THAT Manafort.