With more talk about impeaching Trump, the biggest beneficiary is perhaps Elizabeth Warren. It’s not so much that Trump has been weakened, because the people who hate him will continue to hate him, and the people who like him will continue to like him.

The whole basis for going after Trump now is that he asked the president of Ukraine to look into Joe and Hunter Biden and the firing of the prosecutor who was investigating the company that Hunter Biden worked for.  No matter which side of the aisle you are on (or no side at all), it is hard not to ask about what happened with Biden.

Hunter Biden was being paid up to $50,000 per month working for an energy company in Ukraine by serving on the board.  This was a man who had drug troubles, and his only real qualification was that his father was vice president of the United States.  Joe Biden actually bragged at a CFR meeting that he threatened to withhold money to Ukraine if the prosecutor in question wasn’t fired. In other words, Joe Biden is unquestionably guilty of the exact thing that Trump is being accused of.

Even if Biden fans (are there any?) try to justify these actions, it is easy to understand that the American public at large won’t be so forgiving.  The main reason Biden had been the frontrunner for the Democratic nomination is because he was seen as the most likely person to be able to beat Trump in a general election.

With this latest story, that is no longer the case.

The Rise of Senator Pocahontas

Elizabeth Warren was already gaining momentum before this story about Trump and Biden and Ukraine gained traction.  She has now become the clear frontrunner for the Democratic Party’s nomination.

Trump likes to give nicknames to his rivals.  It is his form of branding.  Whatever you may think of Trump, his branding is effective.  This is how he was able to fend off “Low Energy Jeb”, “Lyin’ Ted Cruz”, and “Lil’ Marco”.  He was also able to beat “Crooked Hillary”.

The funniest nickname of them all is for Elizabeth Warren.  She has long claimed to be a Native American.  Trump calls her Pocahontas or Senator Pocahontas. It is actually quite hilarious.

Trump challenged her on this, and Warren was stupid enough to take a DNA test and publicly display it.  She thought this was a wise political move, but it essentially backfired.  Her Native American blood may be as little as 1 out 1,024.  She may actually have less Native American DNA than the average European-American.

She has evidently survived her blunder, as the polls show.  The problem is (for the Democrats) that she hasn’t really been tested in the Democratic debates.

If Warren wins the nomination and faces Trump in 2020 (assuming Trump is not removed from office), it is going to be a whole different ballgame.  Is Trump going to call her Pocahontas on the debate stage?  I sure hope so. And the more the establishment media complains about the disrespect he’s showing, the more he should do it.

When it comes to actual policy, is Warren going to keep responding that, “it’s just another Republican talking point”?  That may work in a Democratic primary debate, but it isn’t a very effective answer when you’re talking about nationalizing healthcare or imposing a massive wealth tax.

Imagine if Trump were removed from office and Pence became president.  Imagine if Pence is running for president next year against Warren.  This would be so incredibly boring and predictable, and not in a good way.

Warren will have her challenges if she faces Trump.  Trump will have his challenges too.  If the inverted yield curve continues its historical accuracy in predicting recessions, then the economy may already be in the toilet by November 2020, which would be bad news for Trump.

President Pocahontas

Let’s say that the economy does turn south in the next year and Warren is able to win the presidency. What should we expect for 2021 and beyond?

One of the main reasons she is doing well right now is because she is something of a hybrid candidate.  She is acceptable enough to the mainline establishment portions of the Democrats, and she is acceptable enough to some of the far left.  There will be a few on the very far left who end up voting for the Green Party, but this is an acceptable loss in favor of having some appeal to the independents and other swing voters.

Biden is seen as too establishment, and now he has all of these problems with his past in Ukraine. Kamala Harris is also too establishment and has sunk in the polls.  Meanwhile, Bernie Sanders is seen as too far to the left.  He is more openly socialist than Warren.  The establishment doesn’t care for him because he could be too disruptive to the status quo.  I don’t think he would rock the foreign policy establishment vote, but he does say some things against the war state that are probably concerning to the establishment.  The establishment will just say that Bernie is too far to the left and unelectable, or else they’ll at least hint that.

Warren is the compromise candidate of the far left and the establishment.  This means she will be an establishment politician once she is in office.

She has big plans to nationalize healthcare and implement a wealth tax on the rich.  While I have no doubt she favors these things, I think it is mostly for rhetorical purposes to satisfy the left.

The full nationalization of medical care in the United States will depend on the makeup of Congress.  Even if the Democrats have a majority in both houses of Congress, it is no guarantee.  Bill Clinton failed on this in 1993 and 1994.

As far as a wealth tax, I doubt that it will pass.  Some of the senators will be doing harm to themselves.  There are too many lobbyists and donors who would oppose it. I’m not saying it’s impossible, but it isn’t likely.

In terms of overall spending and welfare, Warren does not scare me.  How much worse can it get?  The government is already running an annual deficit near one trillion dollars.  This is during a supposedly prosperous time.

Consider that most of the federal budget is spoken for.  Most of it goes to Medicare, Social Security, Medicaid, the military, and interest on the debt.  Maybe Warren would cut a little out of the military.  That would be fine by me.

There is little room to expand the budget.  It will be a fight over peanuts.  A few million – or even billion – here and there between agencies isn’t going to have any kind of significant impact.  In other words, while Warren will continue the status quo and promote things that are against liberty, I don’t think she will do any more damage than what we have already seen.

On an even more positive side, Warren is not really that likeable.  She doesn’t come across as cold and calculating as Hillary Clinton, but she doesn’t come across as warm either.  She comes across as a total phony to me, and I suspect that many others will see her the same way.  She isn’t going to have a commanding presence as president. When you lack charisma, you aren’t going to be that effective in implementing your agenda.

In addition, Republicans will band together against her.  They will fight again.  They will care about out-of-control spending again.  They seem to ignore these things when a Republican is president.  We may actually hear some opposition to the budgets coming out of Washington DC.

Conclusion

When I make a libertarian case for a President Pocahontas, it doesn’t mean I, in any way, endorse her or support her or would vote for her.  I think she is a liar, and I think her policy proposals are horrible.

However, I want other libertarians (and conservatives, too) to understand that it won’t be the end of the world if Warren wins the presidency.  She may be one of the least bad options at this point. No matter who gets elected, we generally get more war, more sanctions, more welfare, and more debt.

If Warren is president, I don’t think she will be all that effective.  This is the best that libertarians can hope for at this point, at least until we have more people on our side.  We want an ineffective president because it means that less liberty will be taken away from us.

Andrew Yang is a businessman and a presidential candidate in the Democratic Party.  It is hard to believe that he may actually have the biggest spending plans – or in his case, plan (singular) – of all the Democratic candidates.

They all have their ideas for making government bigger, but some are definitely bigger than others. Bernie Sanders has identified himself as a socialist in the past, yet he is one of the top tier candidates.

While Yang may have the single biggest proposal, there is something unique about him.  It is even a little refreshing in a sense.

He is a strong advocate for a Universal Basic Income (UBI).  Under his plan, every adult American citizen would get $1,000 per month from the government.  I don’t know if this would be bigger than Medicare-for-all (nationalized healthcare), but it’s got to be close.

Yang says that robots are going to take our jobs.  Therefore, we need a guaranteed income from the government.  He has tried to appeal to people from all different political angles.  He has even mentioned libertarians.

He is wrong that robots/ technology will cause us to lose our jobs.  The only exception would be if we could get to a point where robots and machines could produce everything that we want.  But then we wouldn’t need jobs, since we would have everything we want.

It is illogical to think that only a select few will get all of the wealth from owning the robots. People get wealthier by trading with others.  How will someone get wealthy if everyone else around him is poor?  Bill Gates could not have become rich if it hadn’t been for many millions of people and businesses buying his products.

Maybe it is possible that someone owns a bunch of robots that produces great wealth just for himself.  But this doesn’t automatically make everyone else poorer.  Everyone else can still have their own society where they trade with each other.  Nobody has to do business with the robot owner, assuming there is no threat of violence involved.

To be sure, robots, and technology in general, will make some jobs obsolete.  Some people will lose their jobs to technology. This is nothing new.  But there is virtually endless work to be done because there are virtually endless wants and needs.  Until robots can provide everything we want, there is work to be done.

Therefore, there should always be jobs for people.  The nature of the work may change with the times.  If there is high unemployment, then it is either because some people want to be unemployed or because there is government interference. Taxes and regulations (such as licensing laws and the minimum wage) can make unemployment rates higher, but this is not the fault of robots.  If a fast food restaurant sets up robots to take the place of some workers because it is cheaper to set up the robots than to pay the workers, this isn’t the fault of technology.  If it is due to the minimum wage exceeding the costs of the robots, then that is the fault of the government law.

Welfare for All to See

Yang comes across as being more genuine than most of the other candidates.  The reason is that he is putting his welfare plan right in front of you.  You see what you get.  It isn’t some abstract concept.

The Democrats like to make fun of trickle-down economics.  In other words, if something (say, a tax cut) benefits a rich person, the Democrats will generally make fun of the concept that this could somehow benefit the lower and middle classes.

Yet, the Democrats believe in trickle-down economics in the worst kind of way.  They believe that you should be forced to hand over a bunch of money to the government and all of its alphabet agencies, and this money will trickle-down to the poor and middle class.  When you collect trillions of dollars per year, it isn’t hard to throw some goodies back to the people.  But what percentage is eaten up through the bureaucracies? This doesn’t even account for the massive distortions that are caused.

With Yang’s proposal, the money would just go directly to people, if it works as he claims.  You aren’t getting a subsidized loan to go to college.  You aren’t getting subsidized healthcare.  You aren’t getting a special government housing loan with a low down payment.  You aren’t getting a job training program.  You are getting direct money into your bank account.

The only thing is, I haven’t heard Yang say that he will be doing away with everything else. If you got rid of all welfare programs in the United States and substituted the UBI, I could see this being attractive even to some libertarians.  I, personally, wouldn’t trust it (and it would still be immoral), but I can at least see where some people might find it appealing.

Yang isn’t talking about eliminating Social Security and Medicare and Medicaid and housing subsidies and food subsidies.  As far as I know, he just wants to mostly add to the existing structure. Even worse, while he has a laser focus on the UBI, he does propose Medicare for all.

Yang says that “people already receiving benefits would have a choice between keeping their current benefits and the $1,000, and would not receive both.”  But these “benefits” are for limited things such as food stamps and disability.  It doesn’t include Medicare, Social Security, and education for the kids. And we can be certain that his plan won’t go through Congress just the way it is.  Would someone with a major disability end up getting the same exact amount as everyone without a disability?  Oh, and what about the non-citizen residents who pay taxes?

If his proposal did become a reality, what about fraud?  How many dead people would there be trying to claim their $1,000 per month?

According to Yang’s website, he proposes to pay for this by enacting a value-added tax (VAT) of 10%. In other words, the businesses would pay (ha, ha).  He also has some other proposals, such as removing the Social Security cap, which would be a significant tax on high-income earners.

Let’s Do the Math

There will soon be 250 million adult Americans.  Multiply this by $12,000 per year ($1,000 per month times 12 months). This comes out to $3 trillion per year.

The federal budget is already nearly $4.5 trillion.  The annual deficit is currently running close to $1 trillion, and there is no sign of this slowing down.  This is during a supposedly booming economic period.

I don’t believe it is even possible for Yang’s proposal to raise this much money from taxes. If it is possible, the other consequences would be disastrous.

Businesses would have to raise prices significantly or else face bankruptcy.  And if there are a lot of bankruptcies, then there will be fewer businesses paying taxes and fewer products being offered.

There is also the option to print more digital money by having the Federal Reserve buy up even more U.S. government debt.  But this will ultimately raise prices as well.

It sure does sound nice to get $1,000 in “free” money every month.  If you have a spouse, you could be “making” $2,000 per month. The problem is, you will be paying something like $50,000 for a basic car.  You will be paying $10 for a loaf of bread.  You will be paying $12 for a gallon of gasoline.

Yang’s proposal is ridiculous.  All of the other candidate’s proposals are ridiculous too, but they are more concealed and vague. That is what I like about Yang. He is putting the ridiculousness out there on the table.  Maybe that is why he is not an establishment favorite at this point.

In the last debate, Yang told people to sign up on his website and that 10 families would win $1,000 per month for a year.  I’m pretty sure that is illegal, but again, there is something refreshing about him coming right out and saying that.  His bribery is out in the open.  You can promise free college and free healthcare for all, and this is supposedly perfectly legal.  It is bribery, but the candidates and most of those who ask them questions dare not call it that.

Yang is wrong in his prediction of mass unemployment due to technology.  Even if he were not wrong on this, his solution of a UBI is wrong.  However, he is clear on what he is proposing.  For this, I am glad he is in the presidential race.

Imagine what you are your family could do with an extra $1,000 per month without any hike in the general price level.  This could be reality if government were significantly scaled back. Unfortunately, that is not on the table from any of the current candidates.

I recently heard a meditation/ reflection session by J.L. Collins.  The whole idea is to calm people down during a bear market in stocks, or an expected bear market.  The idea is to prevent you from freaking out and selling your stocks when they are down or heading down.

Of course, it isn’t a good idea to sell your stocks when they are down, unless they are going to go further down.  The best idea would have been to sell them before they went down and then buy them back when they are at the bottom.  Since we can’t predict the future and don’t know when stocks will hit highs and lows, it is best to have a strategy to deal with the volatility.

I follow the FIRE (Financial Independence, Retire Early) movement in the sense that I listen to podcasts, read articles, and connect with others.  I am more about the “FI” part of the FIRE movement.  I don’t really want to retire early so much as just having more choices in life.

One of the common held beliefs in the FIRE movement is that stocks always go up in the long run. When most people say this, I think they are talking about U.S. stocks.

There is no clear definition of “the long run”, but I don’t think a hundred year time span would be appropriate.  If we are talking about FIRE, then the long run has to be within a somewhat reasonable period of time.  Is 30 years the long run?  Even that seems too long.  If you get a 10% total return on your investments after 30 years, good luck with that formula. And that isn’t even factoring inflation.

In the context of FIRE or FI, I think 20 years is an appropriate measure to be considered “the long run”.  Anything longer than this, and you are only going to hit FI by saving your money without any return on your investment.

In other words, let’s say you start your march towards FI when you are 30 years old.  You invest everything in stocks.  After 20 years, your investments are worth the same amount as what you have contributed over the years.  Is this considered the long run?  You are now 50 years old, and you probably haven’t achieved FI, unless your savings rate has been incredible.

FIRE Credibility

J.L. Collins is part of the FIRE movement.  I listen to the ChooseFI podcast.  I also listen to Paula Pant on the Afford Anything Podcast.  All of these people are advocates of buying low-cost index funds.  I believe they all generally advocate investing 100% of your portfolio in stocks after you have an emergency fund, at least for younger people.  This does not include real estate investments.  And to be fair, I believe they would advocate moving a portion to more conservative investments as you approach retirement, or if you are going to need some of the money in the near future.

These are all very smart people.  I listen to them for a reason.  There is a lot of financial wisdom to be learned.

I disagree with them on investing.  I do not advocate anything close to a 100% stock portfolio.  I recommend the permanent portfolio for diversification. It is for wealth preservation and growth.  It is designed to hold up in virtually any economic environment.

I am not saying that the permanent portfolio is the ultimate solution for everyone.  But I think a 100% stock portfolio is highly risky, even for “the long run”.  I can understand if someone young without a lot of money takes this path, but it really isn’t appropriate for most people.

As warned by the SEC, past performance does not necessarily indicate future results.

My fear is that we are going to have a severe and prolonged bear market in stocks.  People who followed the advice of pouring everything into stock mutual funds are going to get hammered.  It is going to alter their life plans.  They are going to then ignore the people who gave them this advice.  Worse, they will be resentful.

To be sure, there are many who follow the FIRE movement who do not advocate the stock investing advice.  Some people prefer more diversification.  Some people prefer paying down their mortgage and keeping a big cash fund. Some people prefer most of their money going into cash-flowing real estate.  (Paula Pant is a big advocate of real estate investing, aside from stock investing.)

Again, J.L. Collins and the other leaders of the FIRE movement are intelligent people. They offer mostly good advice. I think the advice on heavily investing in stocks is wrong.  It is a major component, but it is just one component.  I have learned a lot from these people, and I don’t want to see their reputations suffer because of this one component.

The Long Run in Japan

In 1989, the Nikkei (the Japanese stock market) hit almost 39,000.  It topped out at an intra-day high of 38,957 in December 1989.  As I write this, the index is just over 22,000.

If someone had invested $500,000 (or the equivalent in yen) at the top of the market, they would now have about $275,000 almost 30 years later.  If this isn’t the long run, then I don’t know what is.  The market would still have to nearly double from here just to get back to even.  I hope nobody dumped a bunch of money in 3 decades ago thinking they would be living off the dividends and capital gains today.

And Japan is a first-world country.  It has had its economic struggles to be sure.  But in comparison to the rest of the world, it is a relatively wealthy country.

To be fair, most people aren’t going to invest all of their money at one time.  And most aren’t going to do it right at the peak of the market.  Still, I think the point stands.  Even if someone had just started investing at the peak and contributed to an index fund on a monthly basis, it would still be a disaster.  At best, they might be even after 30 years in Japan.

Imagine it is the year 2049 (30 years from now).  The Dow is at 15,000.  This already happened in Japan.

It doesn’t mean it will happen here.  I don’t think it will happen here, but I also think we will have higher price inflation here than what Japan has seen over the last 3 decades.  In real (inflation-adjusted) terms, I can’t discount the possibility that the overall stock market in the U.S. will be flat or down in 30 years from now.

This is not a prediction.  Stating that something is a real possibility is not the same as a prediction.  We don’t expect bad things to happen to us, but we still get insurance.

I think we are going to see a severe bear market in stocks in the U.S.  I have no idea how long it will last.  Maybe it won’t last long at all if the Fed resorts to massive inflation.  But then we will have other problems to deal with, as our dollars won’t go very far.

I wholeheartedly endorse the FI movement.  It is good to save money.  It is good to look to the future.  It is good to give yourself choices that come with having money.

I don’t think heavy stock investing is an element of FI, but it is something that many in the FI/ FIRE movement advocate.  I do not endorse this one aspect.  With that said, someone pursuing FI who is heavily invested in stocks will still be in better shape financially after a bear market than the average person who isn’t pursuing FI.

The Federal Open Market Committee (FOMC) released its latest monetary policy statement.  It had become widely thought that the FOMC would lower its target of the federal funds rate by one-quarter percent.  This is what the Fed delivered.

The markets were rather tame after the announcement, which is almost an event in itself. There is typically a parsing of words that leads to a market overreaction one way or another. With this recent announcement, stocks were down a bit at first, but ended up little changed for the day. Gold did fall a bit.

While nearly everyone focuses on the statement itself and whether the Fed is “lowering rates”, I like to look at the detail found in the Implementation Note.

There wasn’t a lot that was interesting this time around.  The Fed will now pay a rate of 1.8 percent on bank reserves. In other words, there is still free (for them) money for the banks, but a little less of it than before.

The 1.8% interest is just above the bottom of the target rate.  The target rate is now set between 1.75% and 2.00%.  The Fed is actually dropping this rate by 30 basis points (0.3%) from its previous 2.1% announced in the July meeting.

The most important takeaway is the statement on the balance sheet.  All holdings of Treasury securities will continue to be rolled over.  Meanwhile, up to $20 billion per month of mortgage-backed securities will be reinvested in Treasury securities.  On net, the balance sheet should stay about the same.  But the Fed will be shifting some of its holdings from mortgage-backed securities to U.S. Treasury securities (government debt).

The Fed’s short period of monetary deflation ended with the previous meeting in July.  So even though the Fed is lowering its target rate, its overall stance on monetary policy is neutral.  In other words, the Fed is not inflating or deflating the money supply at this time.

This doesn’t mean that prices won’t change.  It just means that the base money supply is relatively neutral.  I think it will stay this way until there is more evidence of an economic downturn.  When things get bad, we can expect monetary inflation again.

How Bad Are Things Going to Get?

Trump says that the economy is booming, yet he wants the Fed to lower rates to zero or negative. He wants the boom to keep going until November 2020.  If things get bad before then, his chances of winning reelection will be reduced significantly.

While the establishment media is mostly very unfavorable towards Trump, and in an obvious way, there is more silence in regards to the economy.

Even though the establishment media wants to see Trump lose the election in 2020, they are mostly keeping with past trends in not talking down the economy.  There have been a few warnings about the inverted yield curve, but most pundits are not screaming that a bad recession is coming right at us.

But if the economy is doing well, then why is the Fed lowering its target interest rate? Why did the Fed abandon its balance sheet reduction so quickly?

The unemployment rate is near an all-time low.  Stocks are near all-time highs.  Price inflation, as measured by the CPI, is around 2%.  It is just below 3% if you use the median CPI.

We are supposedly 10 years into the recovery, yet the Fed is lowering its target rate.  And consider that rates are still historically low.  Even short-term rates, being at 2%, are very low.

The Fed is saying that there are “implications of global developments” and “muted inflation pressures”.  Is this the best they can do for giving a reason to lower rates?

I think the Fed members are worried.  They are just not showing their hand.  They see the inverted yield curve.  They see that you can buy a 20-year bond for close to the same interest rate as a one-month Treasury bill.  They know something bad is brewing.

They aren’t going to come right out and say that a recession is likely in the near future.  They would be accused of talking down the economy, and not just by Trump.

They also want to be seen as doing something.  If the economy tanks 6 months from now, they can say that they had already started dropping rates in anticipation of trouble ahead.  Meanwhile, Trump will continue to blame the Fed for not being aggressive enough.

It doesn’t really matter what the Fed does at this point, barring some kind of massive monetary inflation as never seen before.  They can lower short-term interest rates all they want at this point, but it isn’t going to stop the massive correction that is coming.

The Fed was lowering interest rates in 2007 before the official recession began.  The financial crisis didn’t become evident until late summer of 2008.  In other words, the Fed’s tinkering had no impact in stopping the recession that was coming.  It won’t be any different this time around.

I am still expecting a recession in 2020.  We’ll see if it hits with full force prior to the election.

I think everyone should prepare for what is coming.  Unemployment is going to go up.  Nominal wages will go down.  The good news is that consumer prices will likely go down too.

While I expect housing prices to go down in most areas, I don’t think it will be as severe as what we saw a decade ago.  The biggest bubble now is in stocks.  I will not be surprised to see a major drop of 50%, or 60%, or even more.  It will eventually depend on how fast and furious the Fed reacts to the situation.

We could end up seeing a return to QE like never before.  It was astounding what the Fed did from 2008 to 2014, more than quadrupling its balance sheet.  If we hit a deep recession, we could see the Fed creating $100 billion per month.  Maybe it will be $200 billion per month.  That will be the time to buy gold and silver and other hard assets.

We could also see our first $2 trillion annual deficit.  It was amazing to see it hit $1 trillion.  It is amazing that it is close to $1 trillion now, and that is with a supposedly booming economy.

It is impossible to say how all of this plays out.  But with the Fed lowering short-term rates during a supposed economic boom, we know something is up.  It is wise to prepare for what is to come.

I watched three hours of torture so that I could bring you this libertarian analysis of the debate.

It was incredibly disappointing not having Tulsi Gabbard on the stage, but it was not surprising. Her anti interventionist positions, at least when it comes to foreign policy, could not be tolerated by the establishment.  It would have been surprising if the DNC had not found a way to keep her off the stage.

Here is an analysis of the 10 candidates who were on the stage.

Andrew Yang

Andrew Yang said something about 10 American families winning $1,000 per month (sign up on his website) and what they could do with an extra $1,000 per month for a year.  I like Andrew Yang better than most of the rest of the candidates, but this is incredibly stupid.

Of course any family getting an extra $1,000 will be better off.  If it is only ten families getting this money, then it will be a huge benefit to those families.  But what happens when 120 million families get this?  Who pays?

We can approach this the same way as minimum wage laws.  If $15 per hour would be so good, then why not $50 per hour or $100 per hour? So my question to Yang is: Why not $10,000 per month?

Let’s do some math. If every single adult American – let’s say 250 million people – received a monthly check for $1,000, that would be $12,000 per year times 250 million.  That is $3 trillion per year.  The federal budget is currently just over $4.5 trillion. The annual deficit is near $1 trillion.

Is Yang going to cut $3 trillion elsewhere out of the federal budget?  No.  His proposal is to have a value added tax (VAT).  If he is going to collect $3 trillion per year with a VAT, that is going to be one high tax.  So you can get your $1,000 per month, but you will be paying $10 for a loaf of bread and $3,000 for a new iPhone.

But there is something really positive about Yang.  He brings the welfare state directly to the front and center.  The Democrats like to make fun of Republicans for believing in trickle-down economics (although this originally started with George H. W. Bush against Ronald Reagan with voodoo economics). The Democrats believe in trickle-down economics by going through government bureaucracy.  Andrew Yang is directly exposing the welfare state.  He is saying, “let’s just give the money directly to the people.”  But that might impact our system of lobbyists and bureaucracy. It would expose the administrative state.  This is why the Democratic establishment doesn’t really like Yang.

Kamala Harris

Kamala Harris is still the scariest of all the candidates.  She is an authoritarian leftist.  Maybe this is somewhat redundant, but she is really the worst of all worlds.  She is bad on virtually every issue.  She favors the police state.  She favors the war state.  And she favors more welfare and bigger government in virtually everything.

I hope that Tulsi Gabbard saved us from this dangerous woman.  It was a secondary reason for the Democrats to get Gabbard off the debate stage.

Beto O’Rourke

Beto O’Rourke is an incredibly annoying gnat, although that may be an insult to gnats.  He is just annoying in almost everything he says.  It is surprising that he almost beat Ted Cruz for a senate seat.  It shows you how much Cruz went down in public opinion after running for president.

O’Rourke started out by saying that the racism of Donald Trump was welcomed with open arms when someone went on a shooting spree in Texas.  This is over-the-top hyperbole, and I hope that even Democrats can see right through it.

Most of what he says is dangerous.  I hope most everyone else finds him as annoying as I do.  Actually, everyone else can find him half as annoying as I do, and that will be good enough for him to get little traction.

Bernie Sanders

Sanders opened up talking about Medicare for all and a green agenda.  He says almost nothing about foreign policy unless he is directly asked.  When he does talk about foreign policy, he tends to be pretty good from a libertarian standpoint, at least as compared to the other candidates.

But I don’t trust Sanders at all.  He will be quickly taken over by the war faction if he becomes president.  He puts no emphasis on his foreign policy. The fact that he campaigned for Hillary Clinton in 2016 says it all.  She is as much of a war hawk as anyone.  Sanders may say some good things about non-intervention, but he has no strong principles on this most important issue, and the one significant issue where he sometimes makes sense.

I do not fear a Sanders presidency as much as others.  I believe he would be ineffective at getting most of his welfare state initiated.  It is already big, and there is a massive annual deficit during supposedly good times.

One amusing moment was when Sanders was asked about Venezuela and how that compares to his version of democratic socialism.  He said not to equate his democratic socialism to what is going on in Venezuela.  Then he went on to say we should be more like Canada and Scandinavian countries.  He said we need universal healthcare, a living wage, etc.

The point that is often missed is that Sanders supported the socialism of Venezuela a decade ago. He only repudiates it now because of the results.  Venezuela is just an example of bringing socialism and continuing it to its ends. When the market is not allowed to function, then the state is eventually left with a choice of easing back restrictions and allowing somewhat of a market economy, or bringing death and violence to anyone who opposes it and even to those who are too weak to do anything about it.

Socialism is violence, but Sanders won’t express it this way.

I expect Sanders to be one of the final three standing for the Democratic nomination.

Joe Biden

There isn’t much to say about Biden.  He is trying to win by default.  And with this field, it just may work.

He has to say some things that he wouldn’t have said in the past to satisfy the left.  But we know he is a true establishment candidate who will not rock the boat.

He said a few decent things regarding the criminal justice system, but this is hard to take seriously.  Where was Barack Obama for 8 years?  Obama could have pardoned everyone convicted on federal drug charges, but he didn’t.

At this point, Biden is just hoping not to mess up.  He has to minimize his gaffes.  He made a few minor ones during the debate.  He should be happy that Elizabeth Warren is now leading in some polls.  It takes some pressure off of him, and I think Warren has many issues that could be exposed.

Elizabeth Warren

Elizabeth Warren has become the left’s alternative to Bernie Sanders.  She is a leftist, but a little bit more acceptable to the establishment.

I don’t fear a Warren presidency any more than the other establishment candidates.  I think she comes across as phony, but apparently some people have bought in to her rhetoric.

She has still not been asked on the debate stage about her lying to get into college by claiming she is a Native American.  Aren’t some celebrities on the verge of going to jail because they lied to get their kids into college?

If she ends up on the debate stage with Donald Trump, he may just continually call her Senator Pocahontas.  If the Democrats were smart, they would address this issue now to see if she can survive it.

Warren does not come across genuine as it is.  I think she will have a likeability problem in a general election.  She will look like a more incompetent version of Hillary Clinton, although less criminal.

Pete Buttigieg

Mayor Pete, as they call him, does come across as likeable.  It was interesting how he said he wants to have a Medicare option for all and to let each person make the choice.  He somehow tried to come across as being in favor of individual freedom (pro choice) while proposing something that would vastly increase government.

The problem with his proposal is that it does not give you a choice because you don’t have a choice to not help pay for it.  Under his healthcare plan, you can choose an expensive private health plan or a less expensive government plan.  Your taxes will be high either way.

Buttigieg is a second-tier candidate, but he has the potential to make it to first-tier status if any of the others slip.

Amy Klobuchar

She was incredibly boring and stands little chance at being the nominee, unless every other candidate implodes, which isn’t completely out of the question.  She was given favorable reviews in the post-debate polls because she came across as half sensible at times.  If Biden drops out, maybe she will get some traction from the so-called moderates.

Julian Castro

Castro is slightly less annoying than O’Rourke, but not by that much.  His big moment was going after Biden and challenging his memory.  The establishment media is saying he was making fun of Biden’s age.  I don’t think that was his intent, but I don’t care either. Castro is horrible and annoying.

Cory Booker

Booker does not stand out much.  He could be a compromise candidate as an establishment leftist, but Warren is beating him out for that right now.  Several of the other candidates would have to implode for him to have much of a chance.

Conclusion

As of right now, I would put Warren, Sanders, and Biden in the top tier of the candidates, meaning they have the best chance of getting the nomination.  I think our country can survive any of them, even it won’t be pleasant.

Harris is still a contender unfortunately, but I think her chances are slim.

We should also watch Buttigieg, who may make a run if the stars align for him.

Unfortunately, it is probably near the end for Tulsi Gabbard.  She needed to be on that debate stage.  Maybe she can make one last run to get her poll numbers higher.  She should be reaching out to libertarians who like her mostly anti-war message.

It may not matter anyway because we know the DNC likes to rig things to keep out anti-establishment voices.

It would have been more fun to have Gabbard on that stage challenging the other candidates on foreign policy.

It has been an interesting week for Trump, and there has been shortage of idiotic comments. Unfortunately, some of those idiotic comments have come from people calling themselves libertarians, or associating themselves with the liberty movement.

Trump tried to end the war in Syria last year, saying he was going to pull all of the troops out. Then he took a beating by the left, the establishment media (which mostly overlaps the left), and the war hawks.  This included several people in the Trump administration.

While Trump can be bold on Twitter and a debate stage, he isn’t so bold when it actually comes to following through on doing the right thing.  He was unable to stand his ground on Syria, even though he is supposedly the Commander-in-Chief.

This past week, there was hope that he was going to finally end the longest hot war in American history.  The U.S. military has been in Afghanistan for nearly 18 long years, and Trump was going to negotiate a withdrawal with the Taliban.

Of course, I don’t know why he can’t just withdraw.  Maybe he wants assurances from the Taliban that they will allow U.S. troops to leave peacefully.  Beyond that, there isn’t really much to negotiate.

When there was an attack in Afghanistan that killed people, including an American, the meeting was called off.  Who knows if the Taliban actually did it, but it is a shame that one more violent act could lead to many more in the future.

After that, John Bolton was fired as National Security Advisor.  Bolton was quick to go on television and say that he resigned. Either way, it was obvious that Bolton’s agenda was different from Trump’s agenda.

While we can lightly applaud Trump for doing the right thing, let’s remember that Trump was the blundering idiot who put Bolton in that position in the first place. Bolton was already a well-known war hawk, but that didn’t stop Trump from putting him in that role. That is not what you would call draining the swamp.

Justin Amash – An Enemy of Liberty

Justin Amash is a congressman and former Republican.  He was the first Republican in Congress (at the time) to call for the impeachment of Donald Trump.  But he wasn’t calling for Trump’s impeachment because his policies are helping to starve children in Yemen.  He wasn’t calling for Trump’s impeachment because he has been overstepping his power in hiking tariffs without congressional approval.  He wasn’t calling for Trump’s impeachment because Trump bombed Syria.  If he had called for impeachment over any of those things, then he would have also had to call for impeachment of Obama when he was president.

No.  Amash wants Trump impeached for supposedly obstructing justice in the investigation of Russian collusion.  He wants Trump gone because he may have interfered with the witch hunt to overthrow the sitting president because some people didn’t like the election results.  Amash bought into the whole Russia hoax.  He is either a liar or incredibly naïve.

Anyone who is promoting the Russia hoax, regardless of motives, is helping to fuel tensions between the U.S. and Russia.  Many people, including Amash, find it acceptable to slightly increase our risk of nuclear war if it means getting the chance to dethrone Donald Trump.

Now, here’s the latest from Amash.  He sent a Tweet saying some good things about ending the war in Afghanistan, but then ended it with this: “How about we end the war without inviting the Taliban to dinner on the week of 9/11?

In other words, Amash is going to hammer away at Trump over something symbolic.  He would rather see a continuation of war than to have Trump meeting with Taliban representatives during the week of 9/11. I know he says that Trump should just end the war, but then why does Amash mention 9/11 at all?  It is completely counterproductive to his original message.

By the way, the Taliban didn’t commit the attacks on 9/11/2001.  The best you can say is that the attacks were planned on soil that was controlled by the Afghans.  But if that is your measure of being guilty, then all Americans are guilty too.  The hijackers were planning the attacks on American soil and getting flight training.  I don’t think the Taliban was giving lessons on how to fly airplanes.

When Amash entered Congress, some said he would be the next Ron Paul.  That has turned out to be a joke.  Amash certainly does take many libertarian positions, but he is either a liar or doesn’t understand the workings of the deep state. And his priorities are not set straight, as he would rather risk more war in order to score points against Trump.

Nicholas Sarwark – An Enemy of Liberty

The second “libertarian” who has shown his true colors is Nicholas Sarwark, the chairman of the Libertarian Party.  He is a good example of why I have generally not supported the Libertarian Party over the last decade.

Like Amash, Sarwark takes some libertarian positions.  But on the key issues, he is horrible.  Sometimes you have to pick out the nuances in what he says. Other times, he is more obviously against the liberty movement.

After Bolton was either fired or resigned, Sarwark said that the country is safer without Bolton in there, and he criticized Trump for his lack of judgment for putting him in there in the first place.  So far, so good.

Then, Sarwark said: “There’s also a fight over who is telling the truth about circumstances of the resignation.  All I’ll say is Bolton doesn’t have a long and documented track record of being a liar.”

He later sent another message saying: “Bolton lied about WMDs in 2001 and said on TV that he believed in lying for national security reasons.  The President has over 12,000 documented lies in the last 3 years, many of them petty things to make himself look better.  An opinion on who is lying is not an endorsement.”

First, I don’t really care much if Bolton resigned or he was fired.  Again, Sarwark will find any reason to go after Trump.

Second, where does he get his statistics from?  Who has 12,000 documented lies by Trump?  Is it the media?

With that said, here is the larger point.  Bolton’s lies have led to devastation and death to millions of people. He lies in order to start wars and overthrow foreign governments.

Even if Trump has lied 12,000 times, all of those lies combined can’t equal one lie by Bolton that kills hundreds of thousands of people.

This is the “libertarian” version of Trump Derangement Syndrome.  Let’s criticize Trump for every little thing, but overlook the lies that lead to devastating wars.

There are still many good libertarians in the Libertarian Party, but Sarwark represents what is bad about the party.  That is why he is a defender of Johnson and Weld.  Gary Johnson is a questionable libertarian who did not do a good job (in both presidential campaigns) of communicating a message of liberty.  Bill Weld is not a libertarian at all.   He is just a war hawk Republican who happens to tolerate gay marriage and marijuana.

I know that some libertarians will say that there is too much infighting within the libertarian movement.  Maybe that is so. But I don’t consider Amash or Sarwark to be friends of liberty.  In many ways, they are working against us.

That is why they should be called out and ridiculed.  They would rather score points criticizing Trump than actually helping to get us peace in the world.  They would rather see Trump fail than to end a war.  These people are not friends of liberty.

U.S. stocks ended this past week on a positive note, or at least that’s how it seemed.  The problem is that every time we have a few big up days in stocks, I get this feeling that it will directly correlate to the number of people who will be devastated in the end.

I believe this is a suckers rally.  It will only serve to quell some fear that has been recently lingering.  There may be more rallies before this whole thing is over. After all, it took two years after the inversion of the yield curve in 2006 before things really fell apart.

When you look back, we were already in a recession at the beginning of 2008, but people didn’t know it yet.  It was really September 2008 when the wheels fell off, but the official recession is recorded as beginning in December 2007.

The yield curve is mostly inverted. The most relevant portions of it are inverted.  I don’t care all that much about the 10-year yield versus the 2-year yield.  I think it is more significant that the 10-year yield is below the 3-month yield.  The 30-year yield was below the short-term yields for a short time, and it is now close to flat.

The interesting thing to me is that some people are actually talking about it.  Some people are actually daring to mention the “R” word – recession.  It isn’t being touted in any official Federal Reserve statements, but you will get some mention of a recession possibility on well-known websites and on CNBC.

Now throw this into the mix.  Former New York Fed president, William Dudley, actually said that the Fed should not bail out Trump for his tariffs.  He said that if the goal of monetary policy is to achieve the best long-term economic outcome, then Fed officials should consider how their decision will affect the political outcome in 2020.

If Dudley is thinking this, I can’t imagine that current Fed officials are not.  They did lower the target federal funds rate at the last meeting.  I don’t think they want to get at Trump so much as they do not want the brunt of the blame when things go bad.  Neither does Trump, which is why he is preemptively blaming Powell and the Fed for being too tight.

Jerome Powell is a bureaucrat and an establishment shill.  Trump should have known this when he appointed him as Fed chair.  Maybe Trump did know.  It makes it all the easier for Trump to pick a fight with him now.

I am sure Powell despises Trump at this point.  Trump beats up on Powell on Twitter, and Powell is forced to sit there and take it.  I suppose that Powell could respond, but he is a scared bureaucrat, and he doesn’t want to disrupt things more.  He is probably hoping that Trump loses in 2020.  He’s not likely to get reappointed either way.  But Powell is not going to try to sink the economy, or at least not make it obvious that he is trying to sink the economy. This is why he’ll go along with a one-quarter point rate cut to the federal funds rate.  It won’t stop a recession, but it makes it look like he’s doing something.

The Great Crash

There are similarities to 2007/ 2008 right now, but there are also differences.  I expect housing prices to go down significantly in many areas at some point, but I doubt it will be as severe as the previous housing bust.  That is the good news.

The bad news is that we are worse off in many ways.  The monetary inflation from 2008 to 2014 was bigger than anything we have seen in the U.S. since the creation of the Fed.  Some of this was kept in check by the massive excess reserves piled up by the commercial banks.  But the loose money and low interest rates have massively distorted the allocation of resources.

The national debt is ridiculously higher than it was.  We may see a one trillion dollar deficit in fiscal year 2020 even without a recession.  It is getting to the point of absurdity, and it makes you wonder how this whole thing will unravel. I don’t know how it will unravel, but I expect it to unravel quickly once it gets going.

The banks have already seen massive bailouts.  They were bailed out directly in 2008 and 2009.  This infuriated much of the American public, although not enough for any kind of serious consequences.  So the Fed started bailing out banks by buying up mortgage-backed securities and by paying interest on bank reserves.  I guess this could be seen as good news in the sense that many banks should not be quite as brittle in the next recession.

And then there are stocks.  I believe this is the massive bubble.  I am not counting bonds because I don’t think bonds are going to unravel in the immediate recession.  If anything, rates will go down.

Stocks have exploded since March 2009.  It is an unprecedented bull market that has lasted for over a decade now. It is going to crush some people who have based their future plans on a retirement portfolio that is heavily in stocks.

These people could get out now, or at least some of them could.  But most of them won’t.  They are sold a line that they should buy and hold and stay in it for the long run.

What if we see U.S. stocks crash by 80%?  Will we still hear people advising to buy and hold?  Actually, the advice might be more appropriate at that time, but it will have already devastated anyone already following that advice.

Buyers and Sellers

When stocks go down, we hear that there is a “sell-off”.  Or we hear that the people are selling today.

I am not faulting anyone for saying this, but it is important to note that this is not precise language.  That is because whenever a stock is traded, there is a buyer and seller.  There may be more than one buyer and/ or seller, but there is a buyer to match each seller for each share.  In order to sell stock, you have to have a willing buyer.

The key is the price. You could own a stock that is “worth” $100 per share.  But this is really just the price that it was last traded.  It doesn’t mean you can get this price if you want to sell.

You could have many willing buyers, but maybe they are only willing to buy for $80 per share. So it isn’t really a question of how many buyers and sellers there are.  It is a question of what price they are willing to buy and sell.

The reason I bring this up is because stocks can fall in price very quickly.  If the sentiment turns, then things can get ugly.  Stocks can go up for 10% per year for several years and then get wiped out in the matter of weeks or days if the news is bad enough.

The inverted yield curve is telling us that a recession is ahead.  I believe the bond investors.  The bond market is smarter than the stock market.  Of course, markets don’t have brains, but the people buying and selling in them do.

There are many stock investors who have their accounts on autopilot.  Think about someone with a 401k.  They have a certain amount from each paycheck going into their account.  Some people have all, or a good portion, of their money going into mutual funds made up of stocks.  This is not as much the case with bonds.

There are millions of Americans who are relying on a healthy stock market in order to retire. If you are 25 or 30 years old, it is probably not a big deal, unless you were planning to retire really early. But for people who are in their 40s and 50s, and even older, they are going to be devastated if they have staked their future plans on the wealth derived from stocks.

When I see these big up days for stocks, I know that it will mean even more pain on the way down. I think it is wise to plan for a drop in stocks of at least 50%.  If this makes you nervous, then do something about it.  With the massive bubble and the time that has gone by, I don’t think it would be impossible to see a fall of 80%.

When that happens, I may just buy and hold for a while.  That’s when everyone will have stopped recommending that strategy.

I previously wrote a post titled “Is It Wise to Take Out a Loan Against Your 401k”.  While I think that explored some of the pros and cons of a using a 401k loan, I would like to add some more material and go a little deeper here.

The conventional wisdom from the “experts” is that you generally shouldn’t take out a loan against your 401k.  This is probably good advice to someone who does not live an intentional life and is not a careful consumer.  However, for someone who is financially savvy, there are many nuances to consider.

There are some people who say you should “never” take out a 401k loan.  I think it is safe to completely disregard someone who says this.  I mean, if you don’t have any money to put food on the table for your child, should you really choose starvation over a 401k loan?  I understand this would be an extremely rare situation, but it is still a situation, which is why the word “never” shouldn’t be used here.

It is important to note that you typically can’t make a withdrawal from a 401k account if you are still employed with the employer that sponsors the plan.  You may be able to take a hardship withdrawal under certain circumstances.  Therefore, if you have not reached the age of 59 ½, sometimes a loan is the only option you have to access “your” money.

If you can take a withdrawal, this may be the best option to take.  There are pros and cons with that too.  But you should know that you will likely owe income taxes, plus a 10% penalty.

Disadvantages

One of the main reasons that you shouldn’t take out a 401k loan is that you will be stuck paying it back, with interest and fees.  Depending on the interest and fees, this could really hurt your cash flow. Sure, you are paying back the interest into “your” account, but you can’t access this any more than you can access the rest of it.

Therefore, the loan is like any other loan in the sense that you have to make payments on it. In most cases, it will come right out of your paycheck, which is really probably a direct deposit.

On this, I am more on the side of the conventional wisdom.  If you are buying a luxury item as a consumer, then you probably shouldn’t take the loan.  If you can’t pay with money already saved outside of a retirement account that you can actually access, then you probably shouldn’t be buying the item. A car or house can qualify as a luxury item because people more often than not get a more expensive car or house than what is really necessary.

The most important thing here is that you shouldn’t take out a loan from your 401k if you wouldn’t take out the same loan from a bank.  You don’t want to put yourself in too much debt.  And a 401k loan is a debt because you have to make payments on it.

In addition, you should consider the fees that your plan may charge.  If you have to pay a large fee or a quarterly maintenance fee (or something similar), then consider if a loan is worth it.  If you are taking a $40,000 loan with a one-time fee of $50, then it is not a big deal.  If you are paying a one-time fee of $50 for a $1,000 loan, that is 5% of the loan right there.  Even if the interest rate is low, that is probably a bad deal (unless it is to put food on the table).

Advantages

So why not just take out a loan from a bank?

The most obvious reason, and perhaps the best reason, is that you pay back the interest into your own account.  Even if you can’t access that money now, you will likely be able to access it when you hit the age of 59 ½, or you can take an early withdrawal (with payment penalty) when you are no longer working for the employer that sponsors the plan.

If you are going to take out a loan with a 5% interest rate, you might as well pay the interest into your own account instead of handing it over to the bank or lending institution. Even if your 401k plan charges a 5% interest rate, and you could get a bank loan with 4%, you may still want to get the 401k loan.

One of the main criticisms of taking out a 401k loan is that you miss out on compounding interest. But this is only correct if your returns are that much greater than the interest rate itself.  And of course, there are no guaranteed returns when it comes to investing in the stock market.

If the interest rate is low, then you are getting a cheap loan.  If the interest rate is high, then you are paying that “return” to your own retirement account for that portion of the money.

I think this is really where the difference of opinion comes in on whether to use your 401k account as a loan source.  People who think you should buy and hold stocks because they historically return an average of 8 to 10 percent per year are not going to favor taking money out.  If I thought I was going to average 8 to10 percent per year in stocks, then I probably wouldn’t want to touch that money either.

But not everyone holds this long-term view, including me.  There is no guarantee that stocks will keep returning 8 to 10 percent every year.  And even if they do, it is a wild roller coaster ride to get that. If I can get a guaranteed return of 5% on a portion of my money, I’ll take it in this low-interest rate environment.  Therefore, if I am going to take out a similar loan anyway, I may as well pay the interest back to myself with the guaranteed rate.

One strategy I have suggested before is that you can actually take out a loan against your 401k to finish off an existing loan.  If you have $10,000 left on a car loan, you could take out a $10,000 401k loan and pay off the balance.  You can make payments back to your account similar to what your remaining monthly car payments would have been.

This could even work for a mortgage if your balance is low enough.  If you have a large balance in your 401k account, you may be able to take a loan up to $50,000.  If you have, let’s say, $40,000 left on your mortgage, then you could pay it off with a 401k loan.  Your cash flow would still be similar, but the interest would be going into your retirement account instead of to the mortgage lender.

I would only implement this strategy if you can pay off the car loan or mortgage in its entirety.

These are some of the considerations when deciding whether to take out a loan from your 401k account.  If you are risk averse and looking for a guaranteed return on some of your money, then a loan may be appropriate in some situations.