The Lemmings of Wall Street And Cockroaches of the Imperial City

We are damn perplexed this AM. During much of last year's campaign we offered Donald Trump loads of advice including a policy menu called "Ten Great Deals For The Donald". We even got a call from Jared Kushner for advice on economic policy matters, and sent him the full menu.

When he replied "thanks" by email we took that as a sign that more help was wanted. So we turned our musings and recommendations into a book called, "Trumped!" and worked night and day to get it out by early September. We wanted to do our part to help stop Hillary and the Deep State regime she had served for a lifetime.

To that end, we also roundly denounced Hillary's support for the Obama's asinine "sanctions" on Russia and ridiculed her for her fatuous comparison of Putin to Hitler.

So, too, we wrote numerous essays on why the civil war in Ukraine is none of Washington's damn business and that the return of Crimea to Russia was no big deal for many reasons.

Those included the fact that it had been part of Russia since Catherine the Great bought it for good gold money in 1783 in order to have a warm water naval port at Sevastopol; and that it had ended up as part of the Ukraine by sheer accident during a drunken celebration in 1956 when the new Soviet dictator, Nikita Khrushchev, deeded it to his Ukrainian compatriots on the Central Committee.

That is to say, Crimea was part of Russia 63 years before Washington "annexed" California and got its own naval port in San Diego!

At the same time, we further described in chapter and verse how the current bloody civil war in Ukraine was instigated by Washington's massive support for the putsch in Kiev in February 2014. The latter was absolutely an illegal intervention that overthrew a constitutionally elected President who chose to make an economic deal with Moscow rather than the West, as is absolutely the prerogative of any sovereign state.

No, we did not go so far as to praise Russia's thuggish, kleptomaniac ruler, Vlad Putin. But we didn't mind saying that he is clearly the most disciplined, shrewd and rational statesman on the world stage today, and self-evidently is no threat whatsoever to the safety and security of American citizens.

Accordingly, we urged the Donald to make:

.........A Peace Deal with Putin for dismantlement of NATO, cooperation in the middle east, strangulation of ISIS by the Shiite Crescent and a comprehensive worldwide agreement to end the arms trade and pave the way for general disarmament.

So where is our wiretap?!

How come the FBI didn't get a FISA warrant to monitor and investigate us for consorting with the enemy or even worse?

We are miffed about that because we are quite sure we were just as friendly to the Kremlin, and far closer to the Trump inner circle, than was Carter Page. And the latter point is not saying much at all.

For instance, we did once meet the Donald in the lobby of the Plaza Hotel in NYC. And we even spent several hours on a private plane ride with the Under-Donald, his son-in-law Jared Kushner, on the way to a destination wedding a few years back.

By contrast, Carter Page was a "volunteer" foreign policy advisor to the Trump campaign, but apparently never even personally met the Donald.

Still, according to the latest breathless revelation from the Washington Post (WaP0), his showing up on the fifth floor of the Trump campaign headquarters several times was enough to make poor Carter the subject of an FBI probe and a FISA warrant.

Well, his campaign volunteering and the fact that he was an investment banker in Moscow for Merrill Lynch 10 years ago. Apparently, the suspicious thing about the latter was that while working the deal beat there he became acquainted with the Rex Tillerson of Russia----Rosneft CEO, Igor Sechin.

Thus, last night's WAPO intoned in its best Joe McCarthy imitation:

Page’s role as an adviser to the Trump campaign drew alarm last year from more-established foreign policy experts in part because of Page’s effusive praise for Russian President Vladimir Putin and his criticism of U.S. sanctions over Moscow’s military intervention in Ukraine.

In July, Page traveled to Moscow, where he delivered a speech harshly critical of the United States’ policy toward Russia.

While there, Page allegedly met with Igor Sechin, a Putin confidant and chief executive of the energy company Rosneft, according to a dossier compiled by a former British intelligence officer and cited at a congressional hearing by Rep. Adam B. Schiff (Calif.), the ranking Democrat on the House Intelligence Committee. Officials said some of the information in the dossier has been verified by U.S. intelligence agencies, and some of it hasn’t, while other parts are unlikely to ever be proved or disproved.

Well, Dorothy, this ain't Kansas anymore---or even Nixon's third rate burglary at the Watergate. What you have here is a bald-faced abuse of FBI power that more deeply offends the constitution and threatens America's historic democratic processes than anything Richard Nixon ever did or might have even contemplated.

For crying out loud, Carter Page was a volunteer cipher in the Trump campaign and had every right as an American citizen to travel to Russia and talk to anyone there he pleased-----including the head of one of the world's largest oil companies.

That the FBI was able to obtain a FISA warrant from a purportedly sentient US judge is proof positive not only that the Surveillance State is utterly out of control, but that the Imperial City has come off the rails. The judge should have laughed the FBI out of his court-room, and slapped it hard for such an hideous abuse of the wiretapping authorities that it shouldn't even have in the first place.

By Carter Page's own reckoning, he was just another faceless citizen who had gotten no closer to the Donald than the standard gawking grounds of Trump Tower:

“I have frequently dined in Trump Grill, had lunch in Trump Café, had coffee meetings in the Starbucks at Trump Tower, attended events and spent many hours in campaign headquarters on the fifth floor last year,” Page wrote in a letter to the Senate Intelligence Committee, which is investigating Russia’s hacking of Democratic groups and possible campaign contacts with Moscow.

Our purpose in all of this, of course, is not merely to give a sermon on civil liberties and the constitution. The larger point is that with the Imperial City self-evidently crawling with Deep State cockroaches bent on trampling upon every semblance of historical rectitude and normality, why in the world do the lemmings of Wall Street keep rushing toward the sea?

It is alleged that Walt Disney doctored his famous film of the Norwegian lemmings leaping to their death by the thousands, but there is no falsification of the madness of the crowds leaping to their demise down in the S&P 500 pits.

The latter index is still up by an unaccountable 11% from November 7. That's even as the evidence pours in by the day that the US economy is grinding to a halt, and that there will be no great Trump Stimulus whatsoever----only an unprecedented outbreak of dysfunction, paralysis and unmitigated mayhem in the Imperial City.

As to the US economy's slide toward the flat line or below, the nosedive of Q1 GDP might even count for something this time. It's been distorted by the "weather" again----but this time with the wrong sign. That is, the least wintery winter in years appears to be generating a mere 0.4% blip in economic growth:

To be sure, we generally think short-term GDP and other outpourings from the Washington statistical mills are a second cousin of random noise, but this time there is a plethora of "incoming data" from the commercial sphere that can't be gainsaid.

Exhibit number 1 is the outbreak of what amounts to near-Armageddon in the retail sector. With the recent chapter 11 filing by Payless, it now appears that upwards of 3,500 stores will close in early 2017 alone.

Even the BLS fudge factory seems to be getting the word about the scorched earth condition of the malls. During the last two months, it has reported a 60,000 decline in the seasonally maladjusted job count; and a 758,000 drop in the actual count since the December holiday peak. By the way, that compares to only a 644,000 drop over December-March during the prior year.

Retailers stores closing 2017

The fact is, other than easy credit fueled auto sales, which are now also rolling over, and purchases through Jeff Bezos' cut rate e-Commerce juggernaut, the American consumer has been quasi-comatose for nearly three years now.

Reported sales at general merchandise stores in February were no higher than they were 30 months ago in August 2014---and we do mean "nominal" sales. Since the CPI is up 2.8% during the last year alone, inflation adjusted sales are actually already well into recession.

The debt-encumbered American consumer is dropping, not shopping, because the entire so-called recovery has been wasted. That is, consumers can't spend energetically because there has been no significant deleveraging since the 2008 crisis.

That means, in turn, that the Keynesian predicate of Washington's economic policy has again been refuted, and that Say's law is back in the saddle. In fact, notwithstanding a 5X gain in the Fed's balance sheet---from $900 billion on the eve of the Lehman meltdown to $4.4 trillion today---our Keynesian central bankers simply could not cause consumers to borrow and spend their way to prosperity.


Accordingly, any "growth" we are getting must come from expanded production and enterprise. But the latter is hobbled with $13.4 trillion of business debt and the wanton strip-mining of trillions from business balance sheets and cash flows to fund a financial engineering spree on Wall Street. The latter drastically inflated financial assets, while leaving investment in productive assets 30% below their turn of the century level.


Indeed, Janet Yellen's recent boast that the Fed had steered the US economy back to virtual full-employment is downright risible. Outside of energy, industrial production is actually still down 7.3% from its pre-crisis peak. The Fed's "mission accomplished" rhetoric, in fact, is part and parcel of the fantasy world that has descended upon the Imperial City.


Based on the run-rate during Q1 it now appears that nearly 150 million square feet of retail space will be closed this year-----an all-time record that far exceeds anything which has gone before. But our point is not merely that mall REITs and any retail chains left standing are an excellent short.

The larger point is that the retail Armageddon now underway is not a one-off hit to the US economy; its symptomatic. It's the result of the massive falsification of financial asset prices and the resulting flow of cheap debt and over-valued equity capital that caused a hideous over-building of the retail sector in the first place.

Stated differently, the carnage in the retail sector is just the beginning of the traumatic financial and economic "morning after" which lies ahead.

Under these circumstances, what possible reason is there for owning the S&P 500 at 24X reported earnings----other than the completely groundless delusion that the Donald is going to kickstart the nation's languishing economy?

Needless to say, we have a different idea. As the Donald's reckless Syrian bombing caper makes clear and as the Page Carter disclosure reminds, the Deep State rules like never before in American history.

This we know. Enabling the Donald to succeed at making the American economy great again, or anything else, is not even remotely on the agenda.

Like Woodrow Wilson a century ago, in fact, the Donald has now swallowed the bait. He ran in November to "keep us out of war" with Russia just as Wilson did with respect to Germany.

Yet on the same day in the month of April that the foolish Wilson asked for a declaration of war on a nation that could not have possibly harmed America in 1917, the Donald did the same with respect to the god-forsaken pile of rubble that remains of Syria and its economic and militarily pint-sized but nuclear-armed protector in Moscow.

Call that world class folly. And also call it an opportunity to sell, sell, sell.

David Stockman's Contra Corner is the only place where mainstream delusions and cant about the Warfare State, the Bailout State, Bubble Finance and Beltway Banditry are ripped, refuted and rebuked. Subscribe now to receive David Stockman’s latest posts by email each day as well as his model portfolio, Lee Adler’s Daily Data Dive and David’s personally curated insights and analysis from leading contrarian thinkers.