Coyote Blog

It is hard for me to parse the news on Trump.  I made it clear I thought he was an egregious and unsuitable candidate in advance of the election, but I would like to evaluate what is going on in the Administration based on actual facts rather than my preconceived notions.

What makes this hard is that the whole Russia thing the media is obsessed over is almost certainly total BS.  It is, to my eyes, the Obama birth certificate of this election (sort of Karmic given Trump was about the last man standing after Joe Arpaio in publicly supporting the whole birth certificate thing).  It is not just me who thinks the Russia thing is absurd, Glenn Greenwald, certainly no friend of Republicans, agrees.

So given that the #1 story about Trump is probably completely bogus, is all the rest?  Is Russia representative of a general trend in poorly sourced attack stories on the Administration, or is it a distraction from substantial and real problems that are getting less play.  I have been suspicious that the answer is the latter and Megan McArdle has reinforced this opinion with this devastating wake-up call to Conservatives:

But for connected conservatives in DC, the media isn’t the only source of information about this administration. I’d venture to say that most of them have by now heard at least one or two amazing stories attesting to the emerging conventional wisdom: that the president either can’t, or refuses to, follow any kind of policy discussion for more than a few minutes; that the president will not be told no, or corrected about anything, forcing his staff to take their concerns to the media if they want to get his attention; that the infighting within the West Wing is unprecedentedly vicious, and that those sort of failures always stem from the top; and that his own hand-picked staffers “have no respect for him, indeed they seem to palpitate with contempt for him.” They hear these things from conservatives, including people who were Trump supporters or at least, Trump-neutral. They know these folks. They know, to their sorrow, that these people are telling the truth.

They can also compare what they’re hearing to what they heard, both on and off the record, during the last Republican administration. Even in Bush’s final days, when the financial crisis was in full swing and his approval ratings hovered around 25 percent, there was nothing like this level of dysfunction inside the White House, this frenzy of backbiting leakage.

So even though they agree with conservative outsiders that the media skews very liberal, and take all its pronouncements about Republicans with a heavy sprinkling of salt, they know that the reports of this administration’s dysfunction aren’t all media hype. They have seen the media report on their own work, and that of their friends; they know what sort of things that bias distorts, and what it doesn’t. Washington conservatives know that reporters are not making up these incredible quotes, or relying only on Democratic holdovers, or getting bits of gossip from the janitor. They know that the Trump administration is in fact leaking like a rusty sieve -- from the top on down -- and that this is a sign of a president who has, in just four short months, completely lost control over his own hand-picked staff. Which is why the entire city, left to right, is watching the unfolding drama with mouth agape and heads shaking....

So what conservatives here know is that the freakout in Washington, which looks from afar like a battle between Trump and “the establishment,” is actually one side screaming in amazement as the other side turn their weapons on each other.

Read the whole thing, as they say.  During the campaign, I took an analogy from WWI in which the Germans were being dragged down by an Austro-Hungarian Empire that could never seem to win a battle even against small or dysfunctional armies like Serbia, Russia, and Italy.  The Germans joked in black humor that they were shackled to a dead man.  Similarly, I wrote last year that in nominating Trump, the Republicans had shackled themselves to a suicide bomber.  I actually underestimated the problem -- I thought he would just lose the election big, but now he is blowing up the Republican agenda in a much more thorough way.

As always, take this with a grain of salt given my past history of investment advice.  I am frequently correct on my calls to short something, but tend to be really early, such that a person (ie me) can likely be short-squeezed into oblivion before the fall takes place.

That being said, I think autos would be a good short.  Why?

1. They are riding positive sentiment, based on a strong October.  But October was strong because it had 5 weekends rather than 4 and recent results reflect a lot of channel stuffing.   Shorting means finding the top, and this feels like the top
2. I would be stunned if the Volkswagen emissions cheating is limited to Volkswagen.  Volkswagen is not unique -- Cat and I think Cummins were busted a while back for the same thing.  US automakers don't have a lot of exposure to diesels (except for pickup trucks) but my guess is that something similar was ubiquitous.  **
3. Apparently, the recent rebound in auto sales has been driven by a huge spurt of sub-prime lending that looks remarkably similar to the housing market 7 years ago:

This comes against a backdrop of rising US auto sales (see the numbers for October, out earlier today) and it's not difficult to explain the gains. Just take a look at the following data from Experian on the lunatic loan terms being extended to borrowers (from Q1):

• Average loan term for new cars is now 67 months — a record.
• Average loan term for used cars is now 62 months — a record.
• Loans with terms from 74 to 84 months made up 30%  of all new vehicle financing — a record.
• Loans with terms from 74 to 84 months made up 16% of all used vehicle financing — a record.
• The average amount financed for a new vehicle was $28,711 — a record.
• The average payment for new vehicles was $488 — a record.
• The percentage of all new vehicles financed accounted for by leases was 31.46% — a record.

** Postscript:  The biggest problem with the emission cheating is that it caused the world to under-estimate the cost of emissions mandates.  When performance of cars starts to drop noticeably when emissions cheating is fixed, it will be an eye-opener

This is just amazing -- Bloomberg has become too nutty even to caricature.  From CBS NY via Overlawyered

Mayor Michael Bloomberg’s food police have struck again!

Outlawed are food donations to homeless shelters because the city can’t assess their salt, fat and fiber content, reports CBS 2’s Marcia Kramer.

Glenn Richter arrived at a West Side synagogue on Monday to collect surplus bagels — fresh nutritious bagels — to donate to the poor. However, under a new edict fromBloomberg’s food police he can no longer donate the food to city homeless shelters.

It’s the “no bagels for you” edict.

“I can’t give you something that’s a supplement to the food you already have? Sorry that’s wrong,” Richter said.

Richter has been collecting food from places like the Ohav Zedek synagogue and bringing it to homeless shelters for more than 20 years, but recently his donation, including a “cholent” or carrot stew, was turned away because the Bloomberg administration wants to monitor the salt, fat and fiber eaten by the homeless.

I am really sorry I read George Will's column this morning.  It is to depressing for words.   He discusses how Congress has, to my eye, un-Constitutionally delegated legislative power to the IPAB, an unaccountable organization that can basically write any law it wants regarding health care as long as it nominally can be justified as affecting costs (the only power Congress has is to vote such laws down, and it can only do so if it substitutes laws with equivalent cost savings).

Just to give one a flavor of just how undemocratic the folks were who crafted Obamacare, check this provision out:

Any resolution to abolish the IPAB must pass both houses of Congress. And no such resolution can be introduced before 2017 or after Feb. 1, 2017, and must be enacted by Aug. 15 of that year. And if passed, it cannot take effect until 2020. Defenders of all this audaciously call it a “fast track” process for considering termination of IPAB. It is, however, transparently designed to permanently entrench IPAB — never mind the principle that one Congress cannot by statute bind another Congress from altering that statute.

So, for the rest of eternity, there is theoretically only a single 31-day window six years hence when this board can be abolished.  Of course, I am not sure future Congresses can be bound in this way, but it shows you the heart of a dictator possessed by the folks who wrote this law.

By the way, not always a big fan of Justice Scalia, but there is little doubt he is smart and this dissent written 12 years ago certainly was prescient

“I anticipate that Congress will find delegation of its lawmaking powers much more attractive in the future. . . . I foresee all manner of ‘expert’ bodies, insulated from the political process, to which Congress will delegate various portions of its lawmaking responsibility. How tempting to create an expert Medical Commission . . . to dispose of such thorny, ‘no-win’ political issues as the withholding of life-support systems in federally funded hospitals.”

Postscript: Could the IPAB pass nanny-type rules under the justification they could reduce health care expenditures?  For example, what if the IPAB said that mandatory motorcycle helmets would reduce doctor spending, would that automatically become law?  How about limits on salt or fatty foods?  Many current dystopic novels begin with growth in government power, sometimes of one agency, due to security fears over terrorism (e.g, the movie V).  I bet I could write a good one with the core being the IPAB.

My column this week in Forbes is about the declining rate of entrepreneurship and startups in the US.

A recent study by the Beauru of Labor Statistics confirmed a potentially disturbing trend — that the number of new startup businesses in the United States has declined since 2006, and the number of jobs created by those startups has been in decline for over a decade.

This is not just a result of the recent recession.  These declines pre-date the current recession, and besides, startup activity has always held up well in past recessions as unemployed workers try entrepreneurship as a path back to prosperity.

There are likely a myriad of economic and demographic reasons for this decline, but certainly the growth of government power in the economy must be seen as a major contributor.  Government intervention in commerce nearly always favors large companies over small, even if that was not its specific intent, for a couple of reasons:

1. Increasingly complex and pervasive regulations on everything from labor practices to salt content tend to add a compliance cost burden that is more easily born by larger companies
2. Large, entrenched competitors are becoming more facile at manipulating government to create barriers to competition from upstart companies with different business models.

The role of government in throttling entrepreneurship has been evident for years, in the enormous differentials between US and European business startup rates.  Historically, the US has had entrepeneurship rates 3-4 times higher than in the large European industrial countries, due in large part to the barriers these latter countries place in the way of business creation.  But the US, with its current bi-partisan drive towards a corporate state, may soon be engaged in a race to the bottom with these other countries.

I go on to discuss each of these two points in more depth.

Via the AZ Republic:

Rep. Jose Serrano is firing a brushback pitch at the state of Arizona for passing a strict new immigration law

Seeking Major League retribution, the Bronx Democrat will ask big-league baseball Commissioner Bud Selig to move the 2011 All-Star Game from Phoenix. Serrano will make his request to the commissioner in a letter to be sent later today.

I have made it pretty plain I don't like AZ's new immigration law, but this is silly.  While overly authoritarian, it is no more so than any number of cash confiscation or stop and search laws on the books in other states.  I am pretty sure Arizona could remain standing in a head-to-head fight between AZ and NY on whose laws are the most authoritarian.  A Representative of a city that bans trans fats, zones to exclude certain fast food restaurants, has proposed a salt ban and initiated a campaign against soft drinks needs to get his own authoritarian house in order.

I have written any number of times about government health care as the excuse to regulate nearly everything, since nearly every individual decision and activity can be argued to affect one's health.  If government is paying the health care bills, it now has an interest in regulating behaviors that might raise those bills.  Given the US government has been on a 80-year mission to end the concept of individual responsibility, Obamacare is a huge milestone.

Witness, yet again:

You see, Ms. Kaplan obviously thinks it is the role of government to "help Americans eat healthier" even if it means banning things.  My guess is she'd not be quite as ready for government bans it they had to do with, oh I don't know, books or something similar.The excuse?

In Santa Clara County, one out of every four kids is either overweight or obese. Among 2- to 5-year-olds from low-income families, the rate is one in three. The county health system spends millions of dollars a year treating kids for health problems related to obesity, and the tab is growing.

If you haven't yet figured out that the passage of ObamaCare has emboldened the nannies at all levels, this ought to make the case.  Trust me, this reporter didn't dig this nugget out.  It was handed to her by those trying to justify this power grab.

Yeah, I know this is just a local action, but this is just a market test for future similar federal actions.  I can just picture John Jay and James Madison arguing in a tavern.  "Jimmy, I am just not sure what kind of Constitution we need.  Well, John, whatever we do, we absolutely must make sure the Federal government has the power to ban toys from kids meals.  Oh, and to regulate salt content too.  After all, that's what we fought a war for."

Postscript: My question is, how long are health cost advocates going to nibble at the margins?  Childhood obesity costs are probably close to zero, in the grand scheme of things, despite the BS numbers from "advocates."  Two individual decisions drive a ton of health care costs - driving (the most dangerous activity we pursue, typically) and sex (not just in disease but in pre and post natal care).  And I wonder how long it will be before government health care costs treating gunshot victims will be used to trump 2nd amendment arguments?

I have warned for quite a while that government health care is a Trojan horse for all kinds of intrusive micro-regulations of our decisions and behaviors.  Here's an update: (via Maggies Farm)

"As the government assumes a larger share of health care costs, it is increasingly able to use that as a justification to intrude into personal decisions or private enterprises, whether it's a matter of smoking policy, trans-fats, or salt," we wrote last month. Now the Wall Street Journal is out with an editorial praising Michelle Obama's campaign against childhood obesity, reasoning, "the reality is that U.S. obesity imposes huge costs on taxpayers. In 2006, the per capita increase in spending attributable to obesity was 36% for Medicare and 47% for Medicaid, according to a paper last year in Health Affairs. Many fat kids grow up to be fat adults, and you've got to start somewhere."

Almost any behavior or decisions, from eating to driving to sports participation, has implications on one's potential future health care costs.  So by this logic, almost anything can be regulated.  For example, I would argue that sex has a much higher health care cost impact than eating, not just in STD's but in the cost of pregnancies and pediatrics.   Or as another example, our family spent far more in health care costs on treating our kids' accidents while playing sports than in dealing with any obesity costs.  Should we be requiring kids to stay indoors playing on the computer where they will be safe from potentially expensive accidents?

I thought this was really funny -- from an email I got today:

With water supplies drying up in the next 10 years, the Salton Sea poses an economic and ecological threat to the Coachella Valley and large portions of Riverside and Imperial counties. And while plans to restore the Salton Sea exist, government funding and determination to tackle this potential multi-billion disaster have not materialized.

Why is this funny?  Because the Salton Sea is the result of a man-made environmental disaster about a century ago.  The lake formed when floodwaters from the Colorado River roared down a man-made canal, breached a dike, and formed the lake.  Since then, this record "spill" which dwarfs the sum total volume of every oil spill of all time has been slowly drying up like a puddle on the garage floor.  I suppose I am OK retaining it if people have gotten used to it, but I find it funny that the natural reversal of a man-made ecological disaster is itself an ecological threat.

The following, by the way, has to be the dumbest idea of all time from an economic and energy balance perspective:

The Imperial County Board of Supervisors and Imperial Irrigation District have voted to explore the Sea to Sea Plan, which not only brings water to the sea, but generates hydroelectric energy that will be used for desalinization of water that can then be sold to water users throughout the Southwestern United States and Mexico. This new, reliable water supply will generate funds for further Salton Sea restoration.

So we pay money to pump water out of the Sea of Cortez, but then somehow have this generate electricity that pays for desalinization to then pump the water back out of the Salton Sea for irrigation.  Sorry folks, but I think the second law of thermodynamics says this won't work.

Update: OK, from here, one source says the water generates energy via hydroelectric plants, which seems odd (pumping water up and then harvesting the energy going down never balances, though this is used in certain California lakes as a method of energy storage) while one source says the power is geothermal.  Hmm, does "half-baked" come to mind reading this?

Update #2:  Shouldn't desalinization occur as close as possible to the source?  Otherwise you are paying to pump tons of salt you are going to eventually remove.

I don't think younger folks really comprehend the staggering environmental improvements we have made over the last 40 years.   Virtually every metric you can think of on air and water pollution has improved, not to mention the return to health of a number of high-profile species like the bald eagle.

So I am sure that had you told me in the early seventies that the main toxic threats that the government would be campaigning to protect us from in 2009 were carbon dioxide and salt, I would have thought you were crazy.

I am honestly curious here.  Apparently, Seattle does not use salt to melt ice on roadways because they believe " it's not a healthy addition to Puget Sound."  I could understand if the salt was all washing into a trout stream or perhaps a reservoir, but isn't Puget Sound part of the ocean, which has, um, salt water?  Is it a different kind of salt  (e.g. calcium chloride vs. sodium chloride) that causes the problem?  Or is this another typical "don't understand the math of concentration" story?  Or perhaps are they using environmental concerns as cover for lack of preparation?

I have not been able to read a Grisham lawyer novel since "the Runaway Jury,"  which was an absolutely amazing ode to the joys of jury tampering.  Seldom does one see an author treat so many abuses of due process and individual rights so lovingly, all because it is OK to take away a defendant's right to a fair trial as long as the defendant is an out-of-favor corporation.  (On the other hand, Grisham's "the Painted House," about growing up on a small cotton farm in the south, is wonderful).

Grisham's biases in the Runaway Jury become clearer to me now that I now he pals with Dickie Scruggs, notorious Mississippi tort lawyer who is soon to be sharing a cell next to Jeff Skilling, that is unless they can delay his investigation until Jon Edwards is attorney general.

Anyway, it seems Grisham may be up for the bad timing award:

With what might seem like startlingly bad timing, Scruggs chum/novelist (and campaign donation co-bundler,
if that's the right term) John Grisham is just out with a new fiction
entitled The Appeal, whose thesis, to judge by Janet Maslin's oddly favorable review in the Times,
is that the real problem with the Mississippi judicial system is that
salt-of-the-earth plaintiff's lawyers are hopelessly outgunned in the
task of trying to get friendly figures elected to judgeships to sustain
the large jury verdicts they win. One wonders whether any of Maslin's
editors warned her about recent news events -- she doesn't seem aware
of them -- that suggest that the direst immediate problems of the
Mississippi judiciary might not relate to populist plaintiff's lawyers'
being unfairly shut out of influence. Of course it's possible she's not
accurately conveying the moral of Grisham's book, and if so I'm not
likely to be the first to find out about it, since I've never succeeded
in reading more than a few pages of that popular author's work. By the
way, if you're wondering which character in the novel Grisham presents
as the "hothead with a massive ego who hated to lose," yep, it's the
out-of-state defendant.

If you would prefer a novel that make villains of tort lawyers and treats Mississippi as a trial-lawyer run legal hellhole, my novel BMOC is still on sale (and actually selling pretty steadily) at Amazon.

I thought this was pretty funny, via TJIC.  The Fed apologizes for the Great Depression:

Ben Shalom Bernanke (born December 13, 1953)"¦ is an American
macroeconomist who is the current Chairman of the Board of Governors of
the United States Federal Reserve ("the Fed")"¦

On Milton Friedman's Ninetieth Birthday, Nov. 8, 2002 he
stated: "Let me end my talk by abusing slightly my status as an
official representative of the Federal Reserve. I would like to say to
Milton and Rose: Regarding the Great Depression. You're right, we did
it. We're very sorry. But thanks to you, we won't do it again.""¦

The quote is from Wikipedia, so I take it with a huge grain of salt.  Anyone have a link to another source, because the quote is pretty funny.  Good to see the government take responsibility for the economic messes it creates, even if 75 years late.  Of course, 75 years after the Hawley-Smoot tariffs helped throw a recession into the Great Depression, Congress is about to launch us down the same protectionist path, so don't give the feds too much credit.