Viking

I haven't been able to envisage the end state here. So imagine you are super-successful like Oz, NZ, Singapore and your cases go to zero. The rest of the world (ROW) screws up and muddles its way to group immunity, perhaps at horrific cost. So ROW have 70-80% people with immunity, and the virus is still circulating. Now you have three ways out. 1. Vaccine is developed and you get immunity without the horrific costs. 2. The virus is totally eradicated. 3. You live in your bubble, separate from the rest of the world until either 1 or 2 happen. This doesn't seem like a viable option if its a long time. So whats the end state these guys are thinking of or hoping for? I wouldn’t necessarily discount the possibility that bilateral travel bubbles form between countries with a low enough prevalence of COVID-19. In fact both New Zealand and Australia are thinking about this and this would help out the New Zealand tours industry as most tourist come from Australia. I can see other bubbles forming in other regions like Northern Europe and later southern there Europe if the number go down far enough. You only need to do this for 18 month hopefully until a vaccine is there and / or you can reduce the risk of adverse outcomes with better medication. So they would be the end state since you ask for it. Since I am basically located in a COVID-19 leper colony here in MA, I am not counting of going anywhere far this year, certainly not Europe as I planned. It’s probably going to be a camping trip north, if those folks from VT, NH or ME will have us. https://www.theguardian.com/world/2020/may/05/trans-tasman-travel-bubble-to-allow-flights-as-soon-as-lockdowns-ease-morrison-and-ardern-agree Who is going to want to allow travellers in from the US given the large number of continuing cases? I think Canada and US will need to decide soon what to do about the border for June... my guess is Trudeau is going to want to continue with current restrictions while the ‘stable genius‘ is going to want to get back to normal... International travel is going to be severely restricted. Imagine being that person from China who travels to the US and is involved with a positive test? Or an American going to China and same? Just think about the political points to be scored by Trump or the Chinese state. Crazy times.

When looking at Fairfax today: 1.) insurance businesses in aggregate are in solid shape writing at 96 CR. 2.) bond portfolio is positioned reasonably well 3.) dividend and interest income, with run rate of $900 million is solid. What is the above worth? 4.) the remainder is the equity portfolio: stocks, associates, wholly owned companies which i think is around $9 billion. The real question When trying to value Fairfax is what is this group of assets worth? I wonder what would happen to Fairfax’s stock price if they publicly stated that moving forward they will be moving up the quality spectrum with future equity purchases. And disposing of some legacy equity positions (the stinkers). Shift a couple of billion in equities from low quality to higher quality. This would hit BV in the short term (losses on sales); but would likely also result in a higher price/BV from Mr Market. Perhaps this is kind of what we are seeing play out the last 18-24 months. The biggest new purchase, by far, is Seaspan/Atlas and this looks like a decent company (how good we will only know in a few years as it is still very young in its current incarnation). Last year there were lots of moves to get some of the operating companies into a better spot (Eurobank, AGT etc). We will see the size of Alphabet and Exxon positions. Wishful thinking?

Today the overall market is down 2%, insurance stocks are down about 3% and Fairfax is down 5%. Sounds about right for a risk off day. I was wondering what would happen to Fairfax if the market started to once again sell off. Looks like there is still risk to the downside. How low could it go? Look at the WFC thread... some stocks just seem to be one way trains. Crazy times. We seem to have a bifurcated market - big winners and big losers. The stock market looks like it might be rolling over. What happens to the dogs if we get another brutal sell off?

The US is like a big petri dish for the virus. There will be lots of learnings... Colorado restaurant illegally reopens with no social distancing and hundreds of customers - https://www.washingtonpost.com/nation/2020/05/11/colorado-restaurant-illegal-reopening/ “I expected it to be busy. I never expected this,” she told Colorado Community Media. “I’m so happy so many people came out to support the Constitution and stand up for what is right. We did our time. We did our two weeks. We did more than two weeks … and we were failing. We had to do something. ...A sign on the door reportedly read: “ATTENTION: Our freedom doesn’t end where your fear begins. … If you are afraid to be within 6 feet of another person, do not enter this business!” The Yelp review page for C & C Coffee and Kitchen... Arellano’s supporters tried to defend her with compliments, including one woman who said “the coffee is to die for.”

“I think human society will accept a reduced human life expectancy.“ Sam, the problem is we still do not understand the virus very well. If you let the genie out of the bottle the death toll may spike much higher than expected. And at that point you have made the wrong decision but you are screwed. My guess is the health authorities in Wuhan, in Northern Italy and in Iran all made what they thought at the time were rational decisions based on their projections of what the virus would do (based on the actions they were taking). My guess is that today ‘human society’ in those regions are not happy with the decisions made. It is not as simple as virus or economy. The two are actually highly linked. When you have this much incomplete information there is no right answer; just a bunch of options with probability distributions (that likely are not very accurate). We are flying blind. PS: i am not proposing a specific course of action. I really have no idea. It will be very interesting to see how it plays out :-)

Dexterra aquisition by Horizon North Logisitcs; Fairfax to get 49% of new company (close expected in Q2) I missed this announcement back in early March. Fairfax looks to be trimming down the number of small private investments that it holds. It recently sold APR Energy to Atlas/Seaspan in return for shares in Atlas. As more private investments migrate to publicly traded companies it does make it easier to follow and value the various businesses/equities that Fairfax holds. More importantly, it hopefully gets the holdings into a better situation to grow their business. That looks to be the case with APR and hopefully happens with this and future transactions. From Fairfax's Q1 Report (page 51): "On March 9, 2020 Horizon North Logistics Inc. ("Horizon North") entered into an agreement with Dexterra whereby Horizon North will legally acquire Dexterra by issuing common shares to the company representing an approximate 49% fully-diluted equity interest in Horizon North. Upon closing the company expects to obtain de facto control as the largest shareholder and will consolidate Horizon North. The transaction is anticipated to close in the second quarter of 2020, subject to approval by Horizon North shareholders and the satisfaction of customary closing conditions. Horizon North, based in the province of Alberta, is a publicly listed corporation providing a range of industrial services and modular construction solutions." By way of background, Fairfax purchased Carillion Canada out of bankruptcy in March 2018 (at 5x free cash flow) and renamed Dexterra (not sure what the total purchase price was). Market cap of Horizon North is $98 million, with shares trading at $0.59 (May 8). While Covid 19 is impacting the business of both companies greatly, the deal will happen under the terms announced March 9. 2019 Revenue EBITDA HN $458 $31 (has debt) Dexterra $261 $17 (no debt) - http://www.horizonnorth.ca/wp-content/uploads/2020/03/InvestorPresentation-2020-03-26.pdf - http://www.horizonnorth.ca/investors/ - https://dexterra.com/about/

Stubble, thanks for your thoughts. I did read your lengthy post after FFH posted results and found it very helpful :-) Fairfax was very fortunate with the timing of the Riverstone deal. It brought them $600 million of much needed cash at (a now premium) valuation. With the economy in such terrible shape Fairfax will not be growing written premiums in the next 2 quarters (I am pretty sure this is what Prem said on the conference call) so the subs will likely not be needing $ from the hold co for business growth. In the past Prem has proved to be very creative in surfacing value. Perhaps he has a rabbit or two yet to be pulled out of his hat.

Recemize, i would be quite happy with a 5-7% gain. I have had a good year and am sitting mostly in cash. The past month or so i have been very tactical taking a couple of small positions and selling for small gains. I need to do a little investing/trading to keep my brain from going Covid19 crazy :-) I am happy to sit in cash With the majority of my portfolio until i have a better understanding of the impact of the virus on the actual economy.

Does anyone have an opinion on the likelihood that FFH will need to do an equity offering in the near term to shore up their balance sheet? My guess is they are ok today. However, there are risks moving forward: 1.) possible operating losses in Q2 and Q3 2.) sizable impairments on equities/associates (Recipe and Toys R Us are flashing red and there are more) Offsetting this will be some gains in their equity portfolio since March 31. The $2.9 billion in bonds they bought likely also will see some nice price appreciation. Dividend and interest income is also now a $900 million run rate which is very good (especially given the sale of 40% of runoff). What do people think? Too many moving pieces and when combined with the virus (path unknown) simply too hard? Best case scenario for Fairfax is a vaccine is discovered that can be deployed in volume in Q4. My interest in FFH right now is as a short term trade. The company is out of favour. And the sector is out of favour. And the stock price has been very volatile of late. Stock Price = US $250 BV = US $422 P/BV = 0.59 If we adjust BV to reflect Associates at fair value Vinod estimates BV = $390 P/adj BV = 0.64 Petec also suggested discounting BV further to reflect Fairfax India and Fairfax Africa at fair value —————————————————- Some notes after listening to the conference call: - CR was decent at 96.8, with 2.6 points for Covid 19. - Covid exposure is manageable with largest exposure at Brit and Odyssey - expects to post underwriting profit for the year (even after Covid losses) - expects written premiums to fall in Q2 and Q3 and rebound in Q4 as economic activity gets back to normal; expect flat for the year - purchased $2.9 billion in US corporates; yield = 4.25% and term = 4 years ($123 million in interest income per year) - run rate for interest and div income is $900 million - continuing to focus on redeploying cash to grow this - Riverstone divestiture happened March 31. 40% sold for $600 million. Continue to hold 60% valued at $605 million. - debt offering in April $645 at 4.625% will add $30 million to interest expense per year Balance Sheet - had $700 million cash At hold co - drew $1.8 billion of credit line; cash = $2.5 billion - April debt issue = $645; total cash, net on credit line = $1,345 billion - as global economies restart expect to pay down credit line Can someone help me out with what happened to the $600 million proceeds (March 31) from the Riverstone sale? Is that included in the above figures? - said FIH, FAH, Recipe and TC all have access to financing and do not need $ from Fairfax - said covid did not affect long term value of Bangalore Airport - Atlas, largest equity holding by far, reported decent Q1 results with strong future guidance (expects manageable impact from Covid)

For those who like a historical perspective... How Pandemics End - https://www.nytimes.com/2020/05/10/health/coronavirus-plague-pandemic-history.html?action=click&module=Top%20Stories&pgtype=Homepage When will the Covid-19 pandemic end? And how? According to historians, pandemics typically have two types of endings: the medical, which occurs when the incidence and death rates plummet, and the social, when the epidemic of fear about the disease wanes. “When people ask, ‘When will this end?,’ they are asking about the social ending,” said Dr. Jeremy Greene, a historian of medicine at Johns Hopkins. In other words, an end can occur not because a disease has been vanquished but because people grow tired of panic mode and learn to live with a disease. Allan Brandt, a Harvard historian, said something similar was happening with Covid-19: “As we have seen in the debate about opening the economy, many questions about the so-called end are determined not by medical and public health data but by sociopolitical processes.” Endings “are very, very messy,” said Dora Vargha, a historian at the University of Exeter. “Looking back, we have a weak narrative. For whom does the epidemic end, and who gets to say?”

Yes, good read; having followed Francis for many years it is good to understand what he is doing thinking. Nice that he admitted a number of errors and said the poor multi year performance was primarily due to poor stock selection. I am not sure how value investing and resource stocks fit in the same sentence (predicated on predicting where natural gas and oil prices are going)? At Dec 31 he had 50% in Associates Fund in financials and another bunch in BRK; very concentrated (although he said he was selling banks in Q1). Looking at his multi year results i think he was a little late to the party. Goes to show the importance of being inquisitive, open minded and to keep learning to be a successful long term investor. Evolution is important to surviving.

Nice article by Der Spiegel talking about de-globalization from a German perspective. Pretty obvious why they have one of the leading economies in Europe. Future of Our Global Economy: The Beginning of De-Globalization https://www.spiegel.de/international/world/future-of-our-global-economy-the-beginning-of-de-globalization-a-126a60d7-5d19-4d86-ae65-7042ca8ad73a The corona crisis is changing the global economy. Production security is growing more important than efficiency. Here is what that might look like. —————————————- This article marks the launch of a DER SPIEGEL series examining the vast changes we are facing. Among those shifts is the move away from globalization and the changes in the worldwide division of labor that entails. Another is the trillions in debt that will limit the flexibility of both countries and companies for years to come. Technology is likely to become an increasingly prominent feature of our daily lives. And more attention will have to be paid to the pressure heaped on the shoulders of workers and to ideas for making our economic model both fairer and more sustainable.

Mephistophelese, Sam Zell said the current government bailout while necessary only likely buys the economy 60-90 days. If the economy is still in the toilet in a couple of months the government will not be able to do a second bailout. To your point, Buffett will be ready, able and willing :-) I am wondering if we are not seeing Berkshire being re-valued as a true conglomerate. They are usually valued at a discount to BV. In the past Buffett has talked about 1.2xBV as an important level for buybacks. His recent commentary almost sounded like he wasn’t interested in doing buybacks regardless of the price. Perhaps he spooked some investors. The perception was Berkshire, largely due to its cash hoard, would provide investors some downside protection during the current downturn. That clearly has not happened with BRK down 25% and the S&P 500 only down 13% (from Jan 2 to now). Interesting...

Berkshire seems to be having a bit of an identity crisis. Why would someone buy it today? What is the catalyst (in the near term) for shares? Is Buffett too old? Post Annual Meeting it looks like we are getting quite a few shareholders deciding it is time to move on. It will be interesting to see where the share price goes from here. Since Jan 2, BRK is down 25% and S&P 500 is down 13%. As of today BRK market cap is $420 billion. Cash is $140 billion = 33.3% of market cap (incl. airline sales) Share Price = $172; BV = $152 (March 31); P/BV = 1.13 Buffett said on Saturday: - the shares are not particularly undervalued even at $160 (the low they traded at in March). The value of some of Berkshires businesses have been impaired so the company as a whole is worth much less than it was 12 weeks ago. - that investing in S&P 500 index would likely provide a better return than Berkshire moving forward. - the company is being run more like a ‘trustee’ with capital preservation being paramount; focus is to look after existing wealth of large, long term shareholders. - large cash balance will likely not be re-invested until the virus is under control (which may be 2 years away). But how low can it go? How many more people are tired of waiting for Buffett to put some of the $140 billion cash hoard to work and decide to move on (which will drive shares lower). PS: I do own shares :-)

This is the problem. We can all speculate, but we simply cannot know whether the causes of poor investment performance are ongoing or whether the company can improve. Lumpiness I can deal with. In fact I like it - the market pays a premium for predictability that (all else equal) I’d rather not pay. All I care about is whether Fairfax can adapt. “The best predictor of future performance is past performance.” 10 years is a good amount of time. Much better than using the first 10 years, which an investor probably should throw out (given the company has changed immeasurably since then). Well if you think that then for God’s sake don’t invest. But until recently you seemed quite positive on the portfolio they own; may I ask what changed? Petec, sorry for the late reply to your question. I was just re-reading the thread and saw it :-) What changed for me? The virus and its impact on the global economy. As i mentioned on the Coronovirus thread, on Feb 27 I went to 80% cash (and to 100% shortly after that). Beginning last year and to start this year my read was Fairfax was slowly digging itself out of the hole they had put themselves in (with their investment portfolio). I liked the moves from the company that i had seen during 2019 and to start 2020. (Fairfax India was also a very large holding for me). But much work still needed to be done to get the company in a good place. The virus changed everything overnight (for every company). Unfortunately for Fairfax, it put them deeper in the hole and may set them back years in terms of their recovery/transition. Their investing style is being exposed again as wanting, this time by the virus. Their low quality holdings are getting killed: Eurobank, Stelco, Blackberry, Resolute etc. (By low quality it might be country or industry or company.) At the same time, emerging markets/currencies have sold off so this has hit their substantial Indian holdings. Other large purchases like Recipe (collection of restaurant stocks) are turning into a disaster. Other recent investments like Toys R Us are likely severely stressed. The bottom line is in 2019 Fairfax was moving in the right direction but much more work still needed to be done (more asset sales, repositioning etc). The virus has set them back ( yet again). Not fair. But you reap what you sow. Fairfax has to learn their style of investing puts them at risk to these sorts of events... hence the need to slowly, incrementally over time, shift the investment strategy. The reason i am so hard on Fairfax is i do like the company and i want them to succeed :-) i just can’t understand why they make things so difficult on themselves.

Ottawa seems to want the oil/resource sector to shrink. i am just not sure where the growth is going to come from (to replace all we are losing). Especially when you look at all the $ the oil industry has been sending to Ottawa for decades (via equalization payments) which has gone to the less well off regions. Given how equalization payments are calculated there is a multiyear lag (I think) so the money will be drying up right when federal deficits are exploding. There is an obvious answer to who is going to pay for everything in the coming years: consumers and businesses via much, much higher taxes. One big difference with Canada and US is Canada has historically high consumer debt and not terrible federal debt; US is the opposite. So I see a scenario where Canada spends at the Federal level a massive amount in the coming years because they can. It will help in the short term and likely bite in the medium term.

Thank you, Viking. What are your thoughts on the contraction of NA economies, especially US and Canada. Arcube, i think Canada faces some pretty significant head winds: 1.) oil price decline 2.) virus 3.) housing bubble The big risk for Canada is if the coming severe recession morphs into a housing crash. Imagine the US in 2008 with its housing crisis and then on top of that add the current oil price crash and virus causing worst recession since Great Depression. I call it the three headed horseman. Not to say we get a housing crash (Canada manages mortgages very differently than the US)... but the probability is rising. This is one of the reasons i am being exceptionally careful with my investment portfolio (mostly cash and mostly in US$). Capital preservation is my focus :-) All the forecasts i see for the US are calling for it to experience its worst recession since the Great Depression. With each passing month we will get more economic news and will better understand exactly what is going on under the hood. The big challenge in the near term is the virus is a global event and we are experiencing a global severe recession. When the Recession hit in 2008/09 China ramped up spending and as a result many countries only experienced a mild recession (Canada, Australia and much of EM). Today global leadership/institutions may be at their weakest point since WW2. This just increases the odds of policy mistakes (protectionism, wars etc). The US consumer is in decent shape and the US fixed their banking system. Bottom line, we know the near term is going to be ugly. What happens after that will depend on the path of the virus which is unknowable. I completely understand why Buffett is doing what he is doing (raising cash and waiting to see what the virus does). Graham defines investing as “An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return.” He said everything else is speculation.

We are starting to get economic data on what is going on. Looks like 2020 is going to be ugly in Europe. And falling inflation... ‘Recession of historic proportions’: EU predicts 7.5-per-cent contraction in 2020 - https://www.theglobeandmail.com/business/international-business/european-business/article-recession-of-historic-proportions-eu-predicts-75-per-cent/ The European Union predicted Wednesday “a recession of historic proportions this year” due to the impact of the coronavirus as it released its first official estimates of the damage the pandemic is inflicting on the bloc’s economy. The 27-nation EU economy is predicted to contract by 7.5 per cent this year, before growing by about 6 per cent in 2021. The group of 19 nations using the euro as their currency will see a record decline of 7.75 per cent this year, and grow by 6.25 per cent in 2021, the European Commission said in its Spring economic forecast. “It is now quite clear that the EU has entered the deepest economic recession in its history,” EU Economy Commissioner Paolo Gentiloni told reporters in Brussels. As the virus hit, “economic activity in the EU dropped by around one third practically overnight,” he said. ... The pandemic has hurt consumer spending, industrial output, investment, trade, capital flows and supply chains. It has also hit jobs. The unemployment rate across the 27-nation EU is forecast to rise from 6.7 per cent in 2019 to 9 per cent in 2020 but then fall to around 8 per cent in 2021, the commission said. Beyond that, Gentiloni said, “we will have a massive drop in hours worked.” Inflation is also set to be significantly weaker as consumer prices fall amid a sharp weakening of demand and drop in oil prices. Investment too is likely to contract, with firms expected to postpone or cancel their investment plans amid the uncertainty. Exporters will not be spared, with continued disruption to movements of people, goods and services likely.

Here is a very good summary of Buffett’s comments from a long time BRK follower Jim Sloan. The comment section is also a worthwhile read Buffett Gives A Seminar On Risk, Cash, Debt, Discipline And The Future Of Berkshire - https://seekingalpha.com/article/4342835-buffett-gives-seminar-on-risk-cash-debt-discipline-and-future-of-berkshire Buffett's Q&A at Berkshire's virtual annual meeting addressed risk, cash, debt, discipline and Berkshire's future. Buffett explained that Berkshire's calculable risks were very manageable but that a large incalculable risk hung over the economy; he suggested that this required a larger cash set aside than previously. Berkshire's cash set aside for emergencies has a message for ordinary investors: start with a bucket for cash you need to sustain your lifestyle for the foreseeable future. Buffett explained his reasons for dumping the airlines in a way that should focus investors on the true risks for many industries. In February, the world changed to a degree which may not have been fully recognized; Buffett showed that he is in the process of learning and changing with it. "In times of change learners inherit the earth while the learned find themselves beautifully equipped to deal with a world that no longer exists." - Eric Hoffer

The problem is as follows: if mall/whatever reopened, I would go there if I knew I'd be the only person in the mall. But then store(s) don't get enough business. OTOH, if everyone rushes in, then I wouldn't go there. So likely you can't get many people there. It's also possible that there will be a bad feedback loop: people don't go to malls, cases don't rise, people think that it's safe and go to malls, then cases rise again, rinse, repeat? Restaurants are more complicated than stores. Even if I'm the only customer there, there is a risk of getting infected from the staff. More risk than if I ordered for delivery. So screw going to restaurant. What this speaks to is the importance of the response from the government, at all three levels: if people have confidence in Federal, State and Local governments and trusts what they are saying and doing regarding the virus then phase 2 (post lockdown) will go better (keep case count low and maximize economic activity). Lots of learnings to come.

I wonder if part of what is broken is their investment decision "process" at Hamblin Watsa. Francis Chou and Mohnish Pabrai's harvard interview elucidates that at FFH they use a devil's advocate who is usually a senior member of the investment committee who is not going to have psychological imperatives towards deference to the portfolio managers. However, this seems to lack the ability to incorporate a diversity of opinion. Some of which may actually come from junior members or the introverted individuals on the committee who may have a different perspective or special insight that would help the decision process or at least improve their accuracy. Gary Klein and Paul Sonkin had a podcast on Capital Allocator's that was quite interesting about how to structure team discussions to make them more effective towards truth finding. Perhaps Sanjeev, you could pass this idea to them as it may have asymmetric outcomes (hopefully to the upside) and it costs them nothing. On a secondary note, who makes the ultimate decision to increase FFH's financial leverage? Is it just Prem or do the executives play a role in the decision-making process? If Paul Rivett was to remain CEO, would he make the call? If i had to pick one thing that Fairfax has gotten wrong with investing is it might be hubris. They appeared to get stuck in their old orthodoxy. It is/was almost like a religion cloaked in value investing clothes. They had success in the beginning and for many years. They then tried to replicate this same formula over and over and over. Even when it did not work and the world was changing. They were not able to make beneficial small incremental changes to their philosophy over time. Results suffered. Value investing works. Bad investing (even if wearing the cloak of value investing) does not. Buffett was, for many years, able to keep learning (inquisitive and open minded) and updating his model of ‘value investing’. The shift to buying quality was one shift of many. He got progressively better his first 30 years as Berkshire got larger. The evolution of Fairfax’s investment philosophy the past 8 years has been pretty messed up and results reflect the challenges. The good news is with some new blood the investment part of Fairfax may be in transition. They are decent underwriters; if they can get average results on their investment portfolio the stock is dirt cheap. We will see what they do.

Yes, the data the next 6 months will be very interesting. Regarding wages, if unemployment hits +15% and we do not get a V shaped recovery then my guess is wage growth will slow over time as expectations fall. Currently, grocers are having to pay a premium to attract and keep workers during the pandemic. This will likely be true for all occupations where employees are put at a health risk. I also see a scenario where business that re-open have to charge higher prices because their revenue is lower (due to social distancing requirements) and their expenses are higher (due to PPE they need to source for staff). Crazy stew of unknowable factors right now. Business owners must be going crazy trying to figure out what to do and how it all might play out...

Here is the perspective of a non-American. At some point Americans have to start thinking about what is right for the country and not simply what is best for them. And think about what kind of country they want to hand over to their children. I believe the US will be at a crossroads in November. If Trump is re-elected for 4 more years i think the US and the world will sustain permanent damage. I am not exaggerating when i say this :-) Trump is tearing the very fabric of American democracy and society. He already governs like a king; if he gets in for 4 more years he will act quickly, aggressively and even more ruthlessly than his first term. Perceived enemies will be wiped out (removed, attacked and beaten). Think of all the things he has learned the past 3.5 years and think about all the injustices and wrongs he needs to ‘pay back’. But he HAS to play nice right now due to the fall election. But i guarantee you he is making plans. US Democracy is toast. US rule of law is toast. Non-supporters are toast (if you do not kiss his ass you are the enemy). He is a very smart, evil and ruthless man. Senate republicans are his servants. If re-elected Trump will have 4 more years to remake America in his own image. American standing (influence) in the world is at all time lows. Under Trump the US can no longer be trusted. Trump will divide the West and China and Russia will benefit from the anarchy Trump brings. (Russia is the good guy?????). China, and to a lesser degree Russia, are happy to fill the void left by the US. In some respects, i do believe Trump has been the change agent that many people wanted. Immigration needed to be reformed. Regulation needed to be streamlined. Trade deals needed to be updated. The tax system needed to be updated. Law enforcement (CIA and FBI) had its biases and flaws. Obamacare had its flaws. The news media has its biases when reporting. China, and its political system, and the risk it presents to Western Democracies, is now understood in the US and globally. Allies were not paying their fair share on defense. i am not saying that Trump dealt with all of these topics perfectly or even well; he caused everyone to debate and think about these topics in unimaginable ways (compared to pre 2016). and he has moved the supreme court hard right with the appointment of two justices. On all of these issues Trump has changed the dialogue in the US permanently. There is no going back for the Democrats to pre-2016 on these issues. If Trump is not reelected you still get many of the benefits of having Trump for the past 4 years. His reform agenda will continue. But by electing a Democrat you will get your country back and the much needed healing of the tearing can start. Trump did his job. He changed the narrative (sometimes 180 degrees) on many, many issues. But he is also destroying the US. If you elect a Democrat you get to keep Trump’s work and you do not destroy the country. If you elect Trump your Democracy and society is screwed. And the world will be a much, much worse please (the globe needs a functioning US).

I can also envision mild deflation followed by inflation. As deflation starts to set in the government will start to panic. These is a risk the Treasury will want to do whatever is necessary to get the economy going including dropping money directly to consumers. Hoisington/Hunt says watch the Treasury (not the Fed). The Fed is somewhat restricted by laws what it can do. It will be interesting to see what Trump/Treasury decide to do if we do not get a V shaped recovery in the coming months. Helicopter money right before the election? I would be surprised if Trump did not do it. ————————— In my post above i also forgot to mention how technology is also driving deflation. Look at falling expense ratios in banking, the disruption in retail etc... the move to online is only accelerating. Yes, technology is a growth industry. However, my guess is the disruption and the job losses is many industries is much larger. Net effect is it is deflationary to the economy as a whole. And you can also look at it from a country perspective. The US is the big winner with most of the technology jobs happening there (Amazon, Alphabet, Faccebook, Apple etc). Other countries lose jobs as those platforms expand internationally.

Wow, what a contribution. Thank you! +1