Our Children

Eighteen months ago, Barack Obama asserted that “ISIS is contained.”

Today, my rage is not contained.  It is white hot.

I first learned of the Manchester bombing  when I checked my Twitter feed  while I was playing a few holes of golf.   Soon thereafter, the wrenching images of youngsters began to appear on social media, forwarded by parents frantically trying to contact their kids.  “This is Amanda.  She is not answering my calls.  Please help me,” was the typical posting.   My stomach churned as I read through them—dozens of them—anguished, fearful messages attached to images of beautiful, smiling boys and girls.

This vicious, barbaric attack clearly targeted children. The victims, the method and the venue were deliberately selected by the dark enemies of civilization.  The attack came a day after Donald Trump landed in the heart of the Islamic Middle East to assert America’s new posture toward Islamic extremism.   Paris, Brussels,  San Bernardino.   Each time, ISIS or ISIS inspired terrorists have raised their game and demonstrated a new level of depravity.  ISIS took aim at gays in San Bernardino; now its operatives perpetrated a mass attack on young girls. 

Earlier in the day, the news broke about allegations that San Francisco mayor Ed Murray paid teens for sex.  The New York Times began their story with the inexplicable headline, “Sadness reigns in the LGBT community…”  Sadness?   How about outrage?  Where is the concern for the exploited children-the children damaged in so many ways by this beast?  Instead, the emphasis of the NYT was on the amorphous “LGBT Community.”

And in the first of its kind prosecution, two Muslim doctors are being charged in Livonia, Michigan for performing female genital mutilation on seven year old girls.  Predictably, the defendants are raising religious freedom as their principal defense.   That taxpayers have to pay prosecutors to deal with that claim is abhorrent.    Even worse, given the track record of some of the Obama appointed judges, is the fear that that defense may get traction.

CNN’s  Chris Cillizza begged people to “stop talking about Anthony Weiner.”  The New York Times showed more concern for the “LGBT community” than the child victims of Ed Murray.  The lawyers for the Attar’s are using religious freedom as cover for their barbaric practice.  The mayor of London, Justin Trudeau, and Emmanuel Macron have all made statements suggesting that terror is something that we must get used to in our daily lives.

This is utter nonsense.  Our children are being murdered, mutilated and exploited and the MSM and P.C. culture are enabling it.  Our defense of our young must be loud, determined and unequivocal.  It is past the time when we can sacrifice our children on the altar of P.C.   The predators that prey on the children of Western Civilization must not be given sanctuary,  pity or be excused in any way.  

A civilization that will not do what it takes to defend its children is in deep, deep trouble.  This week, we are seeing dark forces that will kill, disfigure and exploit our children while the mainstream media and the politically correct crowd excuses, rationalizes, downplays and enables it.  If a culture and society permits the fear of being labelled a “bigot” from fiercely protecting its young, it doesn’t have much time left.

Donald Trump was absolutely correct when he implored Middle Eastern leaders to drive out the extremists.   The West must be absolutely unyielding in its defense of its children from those that would kill, mutilate and exploit them, and that includes erecting an absolute barrier to the people that practice parts of Islam that cannot be tolerated in the West–terror, female genital mutilation, and child marriage, and we cannot be bashful about saying so—in the loudest voices we can find.   Likewise, creeps like Ed Murray and Anthony Weiner should not be shielded or normalized by the LGBT community or the MSM for their despicable behavior.

The predators that would harm our children must be driven out and obliterated, and those that would exploit them, jailed, and their enablers in the mainstream media must be shamed for covering for them.

If we cannot bring ourselves do what it takes to do this, the West is finished.

Riyadh Reality

It wasn’t perfect, but it was pretty good.   Donald Trump’s Saudi speech yesterday rang a few bells and I couldn’t help but think about the contrasts that his speech evoked.

First off, amidst the turmoil in Washington, I couldn’t help but consider the irony of Donald Trump travelling to the Middle East for a few days of relative tranquility.

The second contrast was that the Trump Administration was accorded more respect from Muslims in Riyadh than it did on a U.S. college campus with a Catholic affiliation, as students walked out of Mike Pence’s commencement address.

The third contrast was the contrast between the deals that Trump is doing versus the deals of the Obama Administration in the Middle East.  Obama cut a deal with Russia to get chemical weapons out of Syria—and that deal resulted in Russia’s deep involvement in the Middle East and Syrian children dying horrible deaths (and Obama incredibly still asserting that it took political courage NOT to bomb Syria).   Obama also cut a deal with the Iranians and we ended up with no U.S. jobs and $400 million in new weapons for Hezbollah, and no real change in Iranian behavior.  Trump cut an arms deal with the Saudis that will end up creating jobs in the U.S. and providing a counterweight to the Iranians in the region.

The contrasts aside, Trump’s speech did two very, very important things that have been largely overlooked by the press.  First is his announcement that Islamic terror is simply not tolerable. This policy statement is huge for the West.   We have grown accustomed to Western leaders like Justin Trudeau, Emmanuel Macron and the mayor of London asserting that “terrorism is just part of living in a big city.”  Trump’s speech flatly rejected the surrender to terror, and said that, “terror must be driven out,” and that, “there can be no coexistence with this violence.  There can be no tolerating it, no accepting it, no excusing it and no ignoring it.”  While the West has more or less grown to accept it, Trump rejected the barbarity of terror in his speech.

Second, without being overly explicit, Trump laid out a vision for an Islamic reformation and renaissance.  He talked about the relative youth of Middle Eastern society (65% under the age of 30), and recalled its rich natural resources and vibrant culture.  His most potent line, “This region should not be a place from which refugees flee, but to which newcomers flock.”  This part of his speech was, I thought , the most important and starkly contrasted with Obama’s Cairo speech in which Obama blamed the U.S. for much of the dysfunction in the Middle East—colonialism and Western exploitation had created victim nations.  Trump put responsibility right back where it belonged—with those peoples and governments, and told them we would be eager to partner with them to rid them of the scourge of Islamist terror and improve their societies.  For all the rhetoric in the campaign, he did a good job of drawing a distinction between Islam and Islamism.  He correctly called out Iran as a principal sponsor of terror and properly categorized Hezbollah and Hamas along with ISIS and Al Qaeda.

Sure, he didn’t talk much about human rights or women’s rights—hopefully, that will come on another day. But on the whole, it was a very good speech and laid out not only the U.S. policy shift away from Iran, but some concrete measures to go forward. 

It could very well be that Trump turns out to be a much better foreign policy president than a domestic one.

                

Coup Attempt

A number of years ago, I attended a function at which Democrat Dick Gephardt was the keynote speaker.  While I was not a big fan of Gephardt’s, and he undoubtedly toned down his usual rhetoric for a business crowd, Gephardt had a number of worthwhile things to say.   What stuck with me was his assertion that what made American democracy so special is that the losers in elections always accept the outcome.  They may not like it.  They may grumble.  But they accept it, learn to live with it, and move on. 

That’s not what is happening.  And this time, it’s different.   

What’s really happening is a coup.  I am not the first to use that word—commentators Jake Novak and Kurt Schlichter were among the first to use the term.  I mean to amplify what they have said and offer additional support for that position.

The shock of the defeat of the pre-ordained Clinton presidency had not even worn off when the Democratic Left began to challenge the legitimacy of Donald Trump’s election.  It was the consequence of the anachronistic Electoral College, they said.  It is a vestige of the white slave owners, and the Electoral College needs to go the way of the displays of Confederate flags and statues of Confederate generals.  We just haven’t gotten around to it, yet.  This fallacious argument was a twofer for the Left—tying Donald Trump to black oppression and their first attempt to de-legitimize him.

When that failed, various other excuses were tried—Comey, Fox News in bars, general misogyny, racism, voter suppression, and finally, the Russians, Putin’s animous toward Hillary and the ever-elusive “Russian hack,” or “Russian collusion.  Leaks from the security apparatus derailed Michael Flynn’s confirmation.  While all the other excuses evaporated and were shrugged off, the success that the Left had with Flynn coupled with the difficulty of disproving innuendo have them something to hang on to.  Meanwhile, leaks from the security agencies kept coming (themselves, a federal crime).  Despite not having a shred of concrete evidence, the “Russian collusion” narrative will continue to be advanced.

Connected to that is the existence of Deep State.  Obama clearly politicized each of the departments that are supposed to be politically independent—NSA, FBI and the IRS.   Barack Obama has learned how to use the State surveillance and enforcement apparatus to spy on and punish political enemies.   While other presidents have had great inhibitions about weaponizing these agencies, Obama has had none.  Moreover, he has learned from his sometimes adversaries, the Clintons, that if you evade, layer and deny long enough, you can usually get away with it.   In the normal course, a change in administration means that all these people in the government apparatus would be reporting to the new boss.  This is not the case.  It’s as if Obama had explicitly said to his appointees, “I know Trump is the president, but you’re still really reporting to me.”  The first clue that this was the case was Sally Yates, the interim attorney general, who openly defied Donald Trump and was summarily fired.  The problem is that there are 100’s of Sally Yate’s sprinkled throughout the administration.   Meet the new boss, same as the old boss no longer applies.  They still think they’re working for the old boss.  Dennis Kucinich articled this position the other night and I recommend that you watch his interview with Hannity given this week. (https://www.youtube.com/watch?v=D9wWIhwKy4c)

Resist.  Language matters.  When politicians and their followers use that word, it connotes that they will not respect the expression of the electorate through our process.   They do not intend to regroup, refocus, reformulate, re-energize.    Those aren’t the words they have chosen.  And Hillary has appointed herself leader of the Resistance.   They do not plan to recognize Donald Trump as the legitimate president of the United States.

The other clue that this is not a normal transition of political power is that Obama and Clinton have not gone away.  At no other time in my lifetime, do I remember a losing candidate and a sunsetting president  sticking around the Beltway and keeping themselves in the headlines in the manner in which Obama and Clinton are.   (The press criticizes Trump for his vulgarity, but Obama last week labelled Trump a “bullshitter”).  Lyndon Johnson retreated to Texas as did George W. Bush.  Nixon disappeared from public view almost completely.  Bill Clinton and Jimmy Carter faded.  The most popular of recent presidents, Ronald Reagan stayed out of the limelight.  Romney mostly disappeared after his loss and McCain went back to his role in the Senate.  Obama and Clinton have announced that they are not going away anytime soon, and Hillary is started a PAC and appointed herself leader of the “Resistance.”   This is very unusual and very, very troubling.   Most telling is that Valerie Jarrett has moved in with the Obamas in D.C.  Why?  The statements and actions of Obama and Clinton give us a clue.  They intend to do whatever they can to unseat this duly elected president and subvert the will of the people.  The reality is that they do not intend to allow political power to be transitioned.

Obama learned much by the experience in Ferguson.   Darren Wilson was justified in defending himself against Michael Brown.  But it didn’t matter.   What he learned was that the “Hands Up. Don’t Shoot”  narrative survived what actually occurred.   It worked.  It worked despite Roland Fryer’s study at Harvard that showed no racial bias in cops shooting unarmed black men.  Obama learned from Vladimir Lenin, ”A lie told often enough becomes the truth.”  “Russian Collusion” is the new “Hands Up. Don’t Shoot.”  It doesn’t matter whether it actually happened or not. 

This is an attempted coup.  Make no mistake.  It is not being done with AK-47s and hand grenades, but electronically and by innuendo.   And it is happening.  The coup may not be fully consummated, but Obama and Clinton fully intend to operate as much of the mechanisms of the State as possible by remote.   Obama/Clinton, the MSM and Deep State will not permit the Deplorables to choose and keep their own leader.  They will not stop until Trump is gone.

Just ask yourself who is bitterly clinging now?

Obama's Third Term?

I have to admit that I am taking a great deal of satisfaction watching Democrats work themselves up into a frenzy every time Donald Trump says or does anything, tweets, or takes executive action that he is entitled to take.  The Comey dismissal has them in a veritable frenzy as they have convinced themselves of the truth of a narrative for which even James Clapper has said there is no evidence.  I think of it in the same light as “Hands up. Don’t shoot.”  It’s a narrative that didn’t actually happen, but that they which they WISH had happened.  The “Hands up. Don’t Shoot.”  narrative conveniently  obfuscated the hard fact that officer Darren Wilson was attacked by Michael Brown and justifiably defended himself.  The “Russian collusion” narrative likewise is a diversion from the reality that Hillary Clinton once again failed to close the deal even though the MSM and the electoral map weighed heavily in her favor.  She managed to lose to someone with no political experience just as she lost to a neophyte in ’08, and she did it by insulting half of America by calling them “Deplorable,” a political blunder that Charles Murray asserts likely will change the course of history.   The Democratic Party has turned itself into the 4-H Club—Hyperbole, Hypocrisy, Hysteria, and Hyperventilation.   No, it is not a Constitutional crisis if a branch of government takes action that it is permitted to take under the Constitution.  

But if you cut through the rancorous partisanship, the bluster, puffery and tweeting of Donald Trump, the ridiculous childishness of the MSM (“Trump got 2 scoops of ice cream while everyone else got 1”), the antics of Perez, Ellison, and Schumer, and focus on the Republic , the Constitution, and our free market system, we see more continuity with the Obama administration than discontinuity, even though certain policies have changed.

First, is the penchant for misleading statements.  Beginning with the assertion of attendance at his inauguration, Donald Trump has made multiple statements that were either untrue or gross exaggerations.  But that is a continuation of the Obama administration’s proclivities for the same—blaming Benghazi on a video, claiming cash shipped to Iran was not a ransom, denying that the IRS had targeted conservative groups, and, of course, the whoppers that “if you like your doctor you can keep your doctor,” and “Obamacare will save your family $2,500 a year in premiums.”   Of course, there was the infamous, “We have to pass it to find out what’s in it,” statement by Nancy Pelosi.  Candor and transparency have not been hallmarks of either Obama or Trump.

Second, both Obama and Trump have governed largely through executive action.   Our system has been designed to reach a stable accord through negotiation and accommodation.  The same folks that yawned when Obama said, “I have a pen and I have a phone,” and “If Congress won’t act, I will,” are now horrified that Trump has exercised the same prerogative.   Trump has cracked down on illegal immigration, curtailed administrative rulemaking and federal hiring, and launched a raid on Syria without Congressional action.  His first stab at repealing and replacing Obamacare failed and the second run at it will either fail or be substantially rewritten.  In short, other than Obamacare, which was passed through sheer force with a temporary supermajority, neither Obama or Trump has marshalled any major piece of legislation and that is bad for the country.   Trump is merely enforcing immigration law that Obama refused to, but neither has been able to address the issue through legislation.

In foreign policy, Trump has tilted back toward Israel, but then has backtracked on recognizing Jerusalem as its capital.  Trump has said positive things about Putin, and invited Philippine president Duterte and Turkish president Erdogan to the White House.   Yes, Trump has swung the pendulum hard the other way with his America First doctrine, which contrasts sharply with Obama’s Blame America First instincts, but he has been too cozy with some of the world’s thugs, calling Putin a “strong leader,” Xi Jinping “a good guy,” and characterizing his phone call with Duterte as “warm.”  But is this really any different than Obama’s coziness with the Muslim Brotherhood, his tete a tete with the totalitarian regime that almost ignited WWIII, and his cold silence as freedom lovers in Iran fought back against the mullahs?  Neither Obama or Trump talk about liberty and human rights much at all in their foreign policy pronouncements.

On the domestic front, neither president is an advocate for free exchange and free markets.  Obama restrained trade through the Administrative State via excessive regulation and taxes. Trump elects trade barriers, tariffs and jawboning.  Pick your poison.  It’s true that Trump wishes to restrain regulations but then offsets that benefit by  needlessly antagonizing our trading partners. 

On the budget, Obama shifted resources away from the military to fund the welfare state and ran up $10 trillion in debt.  Trump vows to spend $1 trillion for infrastructure, cut taxes, and increase military spending, while slashing departments like the State Department.   Obama suffocated the bi-partisan Bowles Simpson Commission plan, did nothing about entitlements and Trump won’t even talk about entitlement reform.

It will horrify both Republicans and Democrats to admit to this, but in certain key respects-- namely respecting our Constitutional system, advancing the cause of individual liberty and our nation’s fiscal management-- Obama and Trump are more alike than at first appears.

Yoda and Jedi Knight

The words “analysis and rigorous debate” boomed out of interim dean Dean Douglas Skinner at the luncheon at the Chicago Booth annual Management Conference on Friday.  After reading about the riots at Berkeley, the assaults on Charles Murray at Middlebury and the disruption of Heather MacDonald at Claremont, the renaming of buildings, the demand for “safe spaces” and “trigger warnings, it was a breath of fresh air.  The University of Chicago may be one of the last redoubts of intellectual integrity, and its business school and economics department is at its epicenter.  This weekend, I had an opportunity to hear two of its finest finance minds—Eugene Fama and Amir Sufi.  Fama won a Nobel Prize in economics in 2013 for his work in portfolio theory and asset prices.  Sufi won the 2017 Fischer Black Prize, awarded to the top finance scholar under 40 for his work on household debt.

Wry, blunt and at times self-deprecating, Fama is a true scientist.  In many ways he stands as an icon for what The University of Chicago represents.  He analyzes data and has a history of upending his own hypotheses when he discovers data that do not conform to his models. He began with a 3 factor model for determining asset prices and has expanded it to a 5 factor model, but says he is “suspicious about profitability” as a factor. 

In his pithy and droll delivery, Fama offered these policy nuggets:

• ·         Banks need more equity.  Shadow banks should be allowed to fail.  Too Big To Fail is the biggest blunder in capitalism and it’s getting worse.
• ·         [On proposed Trump tax cuts]  Corporate taxes are irrational.  System is all messed up.  How many times do you want to tax a dollar of value creation?
• ·         A trade war and protectionism are insane.  There is lots of evidence that the Smoot Hawley tariff worsened the Great Depression.  The world is intertwined.  An airplane gets built with parts from all over the world.
• ·         A single currency for Europe is a good idea.  But Europe is drowning in its own entitlements. It  can’t pay for them.  It will either have to renege or suffer out migration.
• ·         More government equals less growth.
• ·         I don’t know about China.  How soon can you trust any of the data you get from them?
• ·         The word “bubble” is a swear word.
• ·         Our debt is a problem.  There are only two ways to pay off the debt—taxes and inflation.

Fama remains fairly humble about his Nobel Prize.  When asked how it has changed his life, he flatly responded, “The room is full, isn’t it? People treat you with more respect."

But he recounted the day after he won the Nobel when a TV camera man followed him across campus.  When they got back to his office the camera guy said, “I noticed that none of the students looked up from their studies in the Quads when you walked by.”  Fama answered, “If they looked up every time a Nobel winner walked by here, they wouldn’t get anything done.”

If Fama is Yoda, Amir Sufi is the young Jedi Knight.  Sufi won the Fischer Black Prize in 2017.  The Fischer Black Prize is given for original research in finance by someone under 40.  Sufi’s book, House of Debt: How They (and You) Caused the Great Recession and How We Can Prevent It from Happening Again, published in 2014 was one of the top 10 business and finance books chosen by the Financial Times. 

Sufi’s thesis is that credit supply shocks are an important driver of economic fluctuation.  They work through the household sector more than the business sector.  They amplify the cycle- fueling a boom and making the bust harder.   Sufi’s says that a credit supply shock is a variation in  the risk premium which he believes is more important than expected future cash flows. 

Sufi contends that sudden increases in household debt systematically predict a decline in growth.  It happened in the Great Depression and in the Great Recession.  Increases in household debt occur in low interest rate environments. These increases in debt are associated with consumption booms and increases in imports of consumer goods. 

Sufi asserts that the most important factor in the housing meltdown was not deregulation but a boom fueled by huge inflow of cash from Asia that was looking for yield and ended up in mortgages.   When a boom happens, you should be careful to ask why.   For instance, if housing prices are rising in Englewood, you need to ask whether something is fundamentally changing in Englewood or whether it is someone just looking for yield.  If it is the latter, that is a dangerous condition.

As for macro trends, Sufi offered these observations:

• ·         The student loan default rate spike is largely limited to the for-profit colleges, not places like Michigan.
• ·         The biggest problem in the world economy is too much capital chasing too few good investments.
• ·         The biggest problem with wealth inequality is that it could create a credit supply shock—again, capital chasing yield.
• ·         Changes in the discount rate are more important than cash flow. 
• ·         There appears to be a credit problem in the subprime auto but that could be distorted because of Uber.
• ·         Sufi has great worries that our economy looks a lot like Japan’s after their housing bust.

I intentionally chose these two presenters from the menu of faculty that were presenting on Friday back to back because both of these great minds brought new knowledge and new ways of thinking about our world with a rigor that is the hallmark of Chicago finance and economics.  I found it fascinating that Fama said he did not travel much after his Nobel, although he certainly could have.  No one in that department rests on laurels and neither does the school.  There is a nearly 40 year age difference between these two fine scholars.   Chicago has a deep bench and an unwavering commitment to rigor and debate.  After hearing about recent events on campuses across the country, Chicago continues to be a beacon of light.