Hard to believe Thanksgiving is already staring us in the face already. Below please find my latest commentary. The markets continue their trendless but volatile path. Now positive for the year, they rebounded from deep declines in August and September. The first part of this month’s commentary focuses on conflicting views of where we might be headed from here. Major economic clues are then offered to help us make some common sense assumptions about likely drivers of market direction. Remember, no one knows with any certainty where markets will go. Investing is an exercise in putting probabilities on your side and sizing appropriately where your first priority is protecting your capital.

I also spent a lot of time recapping both the Democrat and Republican debates that occurred since my last commentary. The contrasts between the two were telling and goes back to a long term issue of bias in the media that I regularly write about in this forum. A discussion of some issues found their way through the chaos, but probably more noticeable were the issues that were not or could not be addressed. I believe that the entire debate process and framework is severely flawed and needs to be reengineered to allow the candidates on both sides to clearly articulate their platforms and allow their challengers the opportunity to argue against the their opponents positions and let the viewer decide who they support. Instead, the candidates are pushed into making personal attacks and defending irresponsible premises. Those major issues that are addressed receive only simple talking points. We are not provided with substantive detail on their views. Everyone loses in the current form, and dreadfully uninformed Americans are kept even more in the dark. Media agendas control the process as they distort and mislead instead of research and inform.

This month’s piece is a little long, but hopefully entertaining and informative.


Commentary: October 31, 2015

A collection of today’s economic, market, political, geo-political, and human interest news, thoughts, and analysis.

In This Month’s edition

  • Who Do You Believe?
  • Economic Clues
  • The Debates
  • The Brotherhood

Who Do You Believe?

The Wall Street Journal sported the following front page, above the fold headline on October 26th: U.S. Firms Warn of a Slowing Economy. This appeared on the heels of Barron’s recent cover story where respondents in the semi-annual Big Money Poll were predicting market gains into mid-2016 “propelled by a growing economy and gains in corporate profit”. These opposing opinions are obviously another confirmation that no one has a clue, so I suggest that you follow the money. In other words, how does the group issuing the opinion stand to benefit if investors react favorably to what they say. Not surprisingly, money managers are hoping investors buy their product which they will do if they believe markets are going up. Corporations are hoping to mute unfavorable reactions to negative earnings surprises by warning of looming problems. If they can lower the expectation bar, their stocks won’t be hurt as badly on an earnings or revenue miss and will likely benefit if they are able to beat lowered expectations.

Bull vs Bear

The Barron’s Big Money poll of leading money managers found 55% to be either very bullish or bullish up from 45% in the spring. Only 16% believe the market is overvalued. In the spring, fully 50% of the respondents were neutral on the markets. Now only 29% feel the same. Two thirds believe that equities are the most attractive asset class right now while more than 50% believe that bonds harbor the greatest risk. The herd is apparently reassembling. Interestingly enough, the clients of these money managers do not share the optimism. The respondents report that 76% of their clients are neutral and only 12% are bullish.

The consensus seems to believe that the 11% correction we saw in August and support found was all the market had to do in order to convince them that the near term bottom was in. The mean market forecast of the bulls now has the DOW ending the year at 17,140 or below the close on October 23rd. These pros believe that U.S. equities will outperform other major markets for the next 12 to 60 months. Over 80% of the Big Money guys forecast that earnings will be up 1% – 10% in 2016. In contrast, the research we rely most upon for our traditional allocation planning projects that U.S. earnings will be flat to negative for the next three years. Hmmm. We believe that equities are showing historical tendencies that suggest there could be a period of flat returns for as many as 10 years.

On average, those few professing to be bearish see the DOW ending the year at 15,856 or about 8% below current levels. The biggest threats seen to the domestic market are a weakening economy, recession, earnings disappointments, and continued economic problems in China. In the face of that, most respondents see economic growth remaining relatively anemic, and that the Fed won’t raise rates anytime soon making the markets the only viable choice for potential growth. In other words, investors are being forced into riskier asset classes in order to get potential return…not a good plan in the face of uninspiring views.

So now to the Wall Street Journal’s front page article on 10/26:

U.S. Firms Warn of Slowing Economy : Companies to post first decline in both earnings and sales since the recession

According to this article, businesses are protecting their bottom lines by cutting costs in reaction to declining sales. Most S&P 500 companies are multinationals being stressed by the global slow down. Profits and sales are dropping together for the first time in 7 years. Retailers are warning, laying off, and planning fewer holiday hires. Truckload carriers are seeing reduced demand and railroads are scaling back operations. This all sort of flies in the face of the Big Money guys. The above contradictions makes me want to search for more clues. It so happens there are many…

Economic Clues

The science of economics is inexact at best. In fact, scientific purists may flinch at associating the term science with the guessing game of economics. Armchair economists, such as myself, can be as predictively accurate as the world’s leading economists by looking for clues and applying some common sense. Let’s start by recognizing that the U.S. equity markets remain near all-time highs.

S&P 500 Graph

The above S&P500 chart begs the question, how much further can the market go up without a significant correction given what we know about global economic conditions and future earnings expectations? Of course it could go a lot higher and almost certainly will depending on your timeline. If your timeline is 20 years, it would be a reasonable, high probability bet that the stock market will be higher. However, if you, like most people, don’t live your life in 20 year increments, then you should probably look at the future in smaller bites. If your timeline is 3 years or less, predicting market direction is a little less certain. In fact, only armed with the information in the above chart, you might be very concerned about the next three years.

Let’s look for some other clues. We can start by considering some known knowns. We know that the consumer drives 70% of our economy. Corporate and government spending make up the rest. We know that corporate earnings have the biggest impact on market valuation. How much investors are willing to pay for those future earnings drives the price/earnings multiple. That can range from high single digits to 20 times earnings or more in an aggressively expanding economy. Lastly, we know that our economy is linked to the global economic picture more than ever before. Now for some important clues…17 of them to be exact:

1) Employment:

  • Forget the unemployment rate. It is a meaningless, manipulated number that tells us very little.
  • The more important number is the labor participation rate which measures the number of working age adults who are actually working relative to the total universe of working age adults.
  • The labor participation rate at 62.4% is near all-time lows and at the worst levels since the mid-1970s. 93 million people – over one third of the U.S. adult population – are not working.
  • New job growth is not keeping up with the number of new entrants into the job market.
  • Businesses are not hiring and when they are, most are temporary or part-time, lower paying jobs.
  • One of the biggest sources of new jobs, new business formation, has all but ceased given tax and regulatory hurdles facing startups.

2) Wages and the Work Week:

  • Average wages earned and the average number of hours worked per week are still below where they were before the Great Recession hit in 2008.

3) Debt:

  • While much lower on average than it was before the Great Recession, too much debt still encumbers a large percentage of our population especially the millennials.
  • Young adults are the backbone of future economic growth for every generation. Far too many currently can’t find jobs or are under-employed. They’re saddled with horrendous student loan debt.
  • The result is that Millennials are not buying homes like previous generations and waiting much longer to get married and start families. The negative impact on GDP growth is significant.

4) Corporate Earnings:

  • With more people not working than almost ever before and those who are working making less and working fewer hours, they will probably not be spending as much.
  • As a result, corporate earnings are likely to be further stressed. In addition, increasing costs for healthcare, regulatory compliance and minimum wages pressures will weigh heavily on earnings.
  • In fact, one of our primary research sources predicts that domestic corporate earnings will be flat to negative over the next three years.

5) Retail Sales:

  • One of the largest component parts of consumer spending is retail sales.
  • Recent projections suggest that holiday sales growth will be less than expected and well below normal.
  • Wal-Mart came out the other day and warned that their sales for the current fiscal year will be flat. Wal-Mart’s share price fell 10% that day and is now down 30% for the year.

6) Inflation: remains too low…not a sign of a healthy economy…some areas experiencing deflation.

7) The Federal Reserve – Monetary Policy:

  • The overnight lending rate has been effectively 0% for over six years hoping to stimulate growth and investment which it has failed dismally to achieve.
  • It was widely believed that the Fed would raise rates 0.25% in September or October. The fact that it didn’t should cause one to at least wonder whether or not the economy is more fragile than everyone is letting on…probably on the weight of weak retail sales and no inflation on top of already stagnant growth numbers.
  • Accommodative monetary policy by itself won’t work to stimulate the economy. It has to be accompanied by less intrusive fiscal and regulatory policy…a business friendly environment if you will.

8) GDP:

  • 3rd quarter disappointed coming in at an annualized rate of 1.4% continuing 7 years of subpar growth.

9) Exports:

  • Echoing the weak overseas economies, U.S. exports are set to decline for the first time since the Great Recession ended six years ago.

10) Automobile and Home Sales:

  • Home sales and automobile sales represent positive numbers, but they may be a bit misleading.
  • Automobile sales can be the result of pent up demand finally being relieved.
  • New and existing home sales are out of balance. While improved, the first time home buyer is still MIA.
  • In order for the economy to experience a sustainable housing growth trend, we need the first time home buyer to create the foundation of the trade up market. People who are ready to trade up to larger, more expensive homes, must be able to sell their current home. It all starts with the first time home buyer who is still missing for the most part. They can’t find work, or settle for lower paying jobs, and are buried with student loan obligations.

11) Savings: the savings rate is up which suggests less spending.

12) Consumer Spending (70% of the economy):

  • For reasons stated above, spending is not demonstrating any leadership in stimulating economic growth.
  • It’s hard to see this changing anytime soon.

13) Corporate Spending:

  • Corporations are hording cash both at home and overseas.
  • They are not spending and investing in growth given the uncertainties that plague the global economy, and more importantly, the weight of suffocating tax and regulatory burdens.

14) Government Spending:

  • It appears that government spending will continue to grow unabated.
  • All you had to do was listen to the recent Democrat debate. Everything is going to be free…except that it is not free. Someone has to pay for it.
  • Now, Congress voted to lift the debt limit for the next two years.
  • The problem with government spending is that it does nothing to stimulate economic growth even though they all tell you that it does. The inherent inefficiencies associated with wasteful government spending overwhelms any simulative effect and introduces many unintended negative consequences.
  • The expanding debt sucks up more and more of the lending ability in the private sector.

15) Fiscal Policy:

  • It’s been seven years since we last saw the semblances of a business friendly environment from the standpoint of governmental tax and fiscal policy. We really haven’t seen a true business friendly environment since the Reagan era.
  • Taxes keep increasing in many forms. The regulatory environment continues to constrict the free markets.
  • I would like to believe that a certain change in leadership might reverse this trend, but history has not suggested that this would be the case.

16) Price/Earnings Multiple:

  • With market multiples at or near historic averages, what will be the catalysts for the investor to want to push those multiples higher?
  • The primary catalyst is the prospect of higher future earnings. Hmmm…the clues don’t seem to provide a huge comfort zone for that to be happening any time soon.

17) Strong Dollar / Durable Goods Orders:

  • The current strong dollar makes U.S. prices higher relative to foreign currencies…lowers export demand.
  • Durable goods orders declined 1.2% in September reflects a weak global economy stressing U.S manufacturing demand.

So, given the admittedly less-then-optimistic view laid out above, where will the next wave of buyers come from? Let’s look at another chart of the S&P 500. Carter Worth argues we’re in a bear market and offered this inflation adjusted 18 year view of the S&P500. The premise is that without the aid of inflation, the markets face major resistance near current levels. Go to the following link for a more in depth view: http://www.cnbc.com/2015/09/29/we-are-in-a-bear-market-carter-worth.html

S&P 500 Inflation Adjusted

More importantly, we seem to have reached a ceiling of sorts that will probably take a significant catalyst or group of catalysts to break through. In the meantime, we must look at all the clues and plan accordingly

Okay, we’ve looked at the clues and some known knowns. As always, there are also a plethora of known unknowns…good and bad. We are aware of these unknowns and can do some planning to deal with whatever happens. What keeps me up at night, however, are the unknown unknowns. What little unpleasant surprises might be in store for us that are not on anyone’s radar screen? By definition, that is impossible to predict or hedge your bets against unknown unknowns. We don’t know what we don’t know. But oh how smart everyone will become after the next unknown unknown makes itself known.

Like Worth, we believe that we could very well be in the later stages of a secular (long term) bear market. During most secular bear markets, we can experience several bull market rallies and have indeed had two as depicted in the charts above. Historically, secular bears have three major draw downs. These drawdowns inevitably include that moment of capitulation where all hope is gone and everyone gives up. Could that be what we’re being set up for at this time? Are we seeing signs of complacency that often precede these significant corrections? Of course, we have no way of knowing with any certainty. Look at the clues, use some common sense, and try to place the probabilities on your side as best you can. That’s what we do every day.

This year has turned out to be one of the most unpredictable and difficult trading markets we have seen in a long, long time. Look at the last 90 days. In August and September the S&P 500 was down almost 9% only to bounce back 8.3% in October while registering almost no change for the last 10 months. With no trend, we’ve traded small

The Debates

We’ve had two more debates since I last wrote. The third Republican debate and the first Democrat love fest.

This is probably the right time to remind everyone that I am a fiscal conservative. I look at issues based on likely economic cause and effect as well as how they may or may not impact the economic well-being of the majority. This should provide the appropriate context to my comments below. As the Republicans continue the slow process of narrowing a large and distinguished field of candidates, the Democrats presented an example of unity that must be admired. With the help of the mainstream media, instead of being focused on destroying each other, the Democrat candidates are pursuing a path that risk ultimately destroying the economic foundation of society as we know it…the society that has been the underpinning of the greatest free nation in the history of mankind. Oh my, there I go again.

Okay…following the Democrat debate and coupled with Joe Biden’s decision not to run, I am ready to concede that, barring Hillary being indicted on her email scandal (anyone else would be), she will now easily win the Democrat nomination for President of the United States. However, Biden’s speech announcing he is not running sounded far more like he was running. Hmmm. If I was a conspiracy theorist, I would have come away believing that the other four candidates are running to provide her cover and grease the way to her rightful spot. Sanders essentially folded his hand by dismissing Clinton’s email scandal.

To Hillary’s credit, she gave a good performance. She was relaxed, in control, and had a command of all the issues…at least those that she wanted discussed. Clinton and the others refused to answer questions on the tougher issues even though many of the most important problems facing this nation weren’t even addressed.

So, there is no need to waste a bunch of ink on who has a chance of winning based on their first debate. It’s pretty much pre-ordained as everyone thought. There wasn’t much of a debate as all the challengers ignored the opportunity to hammer the front runner which any serious candidate would have done. Punches were pulled essentially granting Hillary a pardon on her biggest vulnerabilities and ushering her into the nomination.

Hillary Sanders Alliance

The evening was more of a conversation amongst likeminded individuals instead of a debate. The only difference between the candidates was who could give away more, faster and how badly to demonize success. It was a contest to see who could grow government more as well as increase taxes and regulation the most. The theme of victimization and divisiveness by pitting different groups against each other was again front and center: rich against poor, young against old, men against women, black against white, etc., etc. They have essentially detached themselves from discussing the private economy…probably since they had little of any substance to offer on how to improve it. Helping the private economy is contrary to their primary platforms.

This debate offered two great lessons for the Republicans. It was a clinic in:

  • How not to answer questions, and
  • How not to attack the other members of your own party.

Like our president, several believe the biggest risk facing the United States is climate change. Really? I’m not saying that climate change isn’t a concern. In fact, the world, not only the United States, must take the subject very seriously. Outside of the fact that the climates have been changing for 4 billion years, we must take reasonable measures to protect our environment and be good stewards of our planet…key word ‘reasonable’. But the biggest risk? Sorry, not buyin’ it. There hasn’t been a single dire prediction that has ever been made since climates became a politicized issue that has ever come true. The models that are used are terrific, but they are so jammed full of faulty data, assumptions and premises that the predictive output is utterly useless and forces nonsensical conclusions. The improbable predictions are then used as the hammer to stop the very progress that will do the greatest good for the most people.

Greatest Risks III

What about terrorism, jobs, the economy, or a $20 trillion debt that will face the next president? Aren’t they a little more important on a risk scale than model driven climate change? For this fiscally minded individual, they most certainly are. I think the Democrats, as well intended as they claim to be, have their collective eyes on the wrong ball.

Greatest Risks IV

All five candidates agreed with the Republicans on one issue: after seven years of the Obama presidency, the economy is a disaster. O’Malley was rather to the point when he said, “…70% of us are earning the same or less than we were 12 years ago.” However, their solution is to do more of the same. Actually they want to double down on already failed policies of raising taxes even further and introducing more layers of regulation. Wasn’t it Einstein who defined insanity as doing the same thing over and over again and expecting a different result?

Sanders wants to economically wipe out the top 1%. Unfortunately, you can tax the top 1% at a rate of 100% and you’ll only be able to run the government for a couple of weeks. However, no matter what you do, there will always be a top 1%…it’s just math. Once the existing top 1% is eliminated, then the new 1% becomes the target. Then what? Well, at some point we arrive at Margaret Thatcher’s vision where, “…you eventually run out of other people’s money.”

Let’s take a look at this concept of FREE. Is there anyone out there that really thinks that education or healthcare for that matter will be FREE for anyone? In the world of economic cause and effect, FREE is the most expensive path towards providing any type of goods or service. Can we at least stipulate that someone pays for it? You may be surprised at how many people believe that it comes from “Obama’s stash” or some other magical source. It’s plain and simple, when government hands something out, the taxpayer pays for it.

Since most of the evil 1% are business owners, when their taxes are increased to pay for the new freebies to be handed out, they must increase the prices of their product or service to account for this increase in expense. So some in the lower and middle class may get something for nothing, but the cost of everything goes up for everyone. Since most who have to pay the higher costs don’t get the freebie, they are worse off than before. Additionally, stop and think about how much care and respect people tend to give to something they don’t have to work for or earn. The value of that freebie is inevitably diminished, taken for granted, and ultimately mistreated. Remember, you get what you pay for

Clinton seems to think that being a woman is one of her most important qualifications and reasons why she should be president. Unbelievably, she feels that her gender makes her a political outsider and defines how she is different from the current president. Even more unbelievably, people buy into this narrative. Am I so out of touch that I believe that gender, age or race has almost no importance in determining whether someone is qualified to hold the highest office in the land? I don’t care if you’re a blue, 80 year old, parthenogenesis. I just want to know how you will lead this nation

Bernie Sanders is a self-proclaimed socialist who spent his honeymoon in the former Soviet Union and everyone seems to want to out socialize ol’ Bernie. By comparison, the policies and platform of everyone’s presidential idol, John F. Kennedy, would be considered extreme right wing by those on today’s left. Both parties are facing transformations and moving to the extremes offering little chance that they will be able to find common ground. Those few of us who are paying attention are very frustrated and very discouraged

Okay, here is a summary of what we learned from the Democrat debate. It was long on ideology, pretty thin on substance and heavy on emotion as well as victimization. The issues receiving the most attention were:

  • In the modern Democrat platform, capitalism takes a backseat to socialism. Their stated goal is to reign in capitalism, whatever that means. This is a head scratcher since it seems to me that unfettered capitalism has always created the greatest outcome for the most people. Reigning in capitalism flies in the face of almost everything they wish to accomplish.
  • Climate change is the biggest issue/risk facing our nation.
  • Inequality is pervasive. A naturally occurring event continues to be politicized. Legislating equality has never worked and never will.
  • In their eyes, healthcare is still broken and not accessible enough. What was accomplished? Well access to healthcare has been reduced and costs on all fronts are increasing at an increasing rate. Well done. Since it was a government action, that outcome shouldn’t surprise anyone. But apparently it must now even be provided to illegal immigrants for FREE. Fully socialized medicine is the next goal. In other words FREE for everyone. However, be advised. If you think it is expensive now, wait ‘til it’s FREE.
  • There will be FREE College education for every American citizen, legal immigrant, AND illegal immigrant. Better hold on to your wallet.
  • Almost all workers will be subject to higher taxes/costs disguised as ‘higher taxes on the rich’. Unfortunately, as always it will be the poor who feel the greatest negative impact.
  • We will have open borders complete with taxpayer funded benefits for all entrants.
  • Government will be bigger and more in control of what used to be personal freedoms and responsibilities. We will continue to abdicate our rights.
  • No guns for legal, law abiding citizens. Unfortunately criminals will still have theirs.
  • Banks as we know them will disappear. The primary source of capital for economic growth will be regulated and restricted out of existence.
  • Like they are in the process of doing to coal, there will eventually be no oil to sell or consume.
  • We apparently have an unfair justice system. They see it as unfairly applied to the poor and minority law breakers. Unfortunately, from a justice perspective the real problem is that justice is not blind for all. Those in charge receive preferential treatment. Politicians live by a different set of rules and the wealthy can afford better legal representation. However the real problem is that law enforcement apparently focuses too much on those who break the law. What sense does that make.
  • In their mind, the upwardly spiral of minimum wage will apparently cure inequality despite history showing the opposite to be true. The result is always fewer jobs overall. Basic economic cause and effect is ignored in favor of political expediency.
  • Apparently, only certain lives matter in their politicized view of our country.

Of course, I had little fun embellishing the above summary, but it is essentially an accurate depiction of the major issues that were discussed and where we would be headed as a result of their policy goals

Almost nothing was said about:

  • The illegal immigration problem except to open the doors to everybody and give illegals FREE healthcare and education including college.
  • The threat of domestic and global terrorism…apparently foreign policy will be defined by isolationism where the US no longer leads and takes on an advisory role if any.
  • The risks and side-effects of the Iranian nuclear deal.
  • Government spending and the national debt…there is no presumed concern about continuing to spend our way into oblivion.
  • Jobs…the labor participation rate is at historic lows. 93 million American adults do not work.
  • Economic growth…the Great Recession was followed by a seven year period of economic recovery that has been as mediocre as the educational output of our public schools

Now on to the third Republican debate…what a disaster! Train wreck would be too kind. If you tuned in expecting to see a substantive debate on consequential issues, you were very disappointed. The moderators quickly lost control of the process as they unabashedly set out to embarrass and marginalize each candidate. I thought the candidates did a fairly good job in articulating their concerns and positions when given the chance to do so…which wasn’t often. From the start, they were under attack from what seemed to be a panel of CNBC commentators that outnumbered the candidates. Each new debate seems to be more about the sponsor and their minions as they try to trot out everyone for a photo op. Wouldn’t it be better if there was just one moderator with the focus on the candidates? The agenda of the moderators was clear.

The only thing we learned from the third Republican debate was how biased and inept the mainstream media is, and they made no attempt to hide their true colors. The format essentially prohibited the candidates from fully answering questions that were designed to cast a negative light on each. They were being interrupted by a moderator either disagreeing with the answer or cutting them off for the unrealistic time limits…30/60 seconds. How do you provide a detailed, succinct response in a few seconds while being interrupted or challenged by an antagonistic panel? They were judgmental, argumentative, sarcastic, and mocking…insane

Shame on the RNC for continuing to agree to a suicidal format administered by individuals that make no effort to hide their animus. Shame on the media sponsors who claim to be neutral journalists only to prove their bias in how questions are designed and the arrogant and condemning tone in which they are asked. Unbelievable. The good news is that the candidates apparently are revolting and the RNC is finally getting a backbone and canceled the scheduled February debate that was to be sponsored by CNBC’s parent, NBC. It’s about time

I stopped watching CNBC as well as the other business news channels a half a dozen years ago. They provide little in the way of value to the average viewer. In fact, I would venture that most people listen and come away confused. The way CNBC managed the debate served only to confirm this view

Almost all agree that the loser that night was CNBC. The winners were the candidates that had enough and finally took the moderators to task as an insulted live audience cheered in support. Let’s look at examples of the stupidity and how the candidates responded.


The first question by John Harwood set the tone for the evening: “Mr. Trump, you’ve done very well in this campaign so far by promising to build a wall and make another country pay for it, send 11 million people out of the country, cut taxes $10 trillion without increasing the deficit, and make Americans better off because your greatness would replace the stupidity and incompetence of others. Let’s be honest, is this a comic-book version of a presidential campaign?” The question was not framed to talk about the underlying issues, how Trump would accomplish his goals, or attempting to get at his qualifications. The question was insulting, framed to embarrass Trump, and created a negative false premise.

Quintanilla asked Rubio if he hated his job referring to his missed Senate votes. He asked why Rubio won’t finish the job he started. No attempt was made to discuss his qualifications or to differentiate the nature of the votes that were missed, that he was running for president, or that Senators Kerry and Obama missed a similar number of votes during their presidential campaigns. The question was framed to do harm, not clarify.

By the time Quintanilla asked Cruz a question on the debt limit, the senator from Texas had had enough and unloaded with the following statement that garnered a roaring applause: “You know, let me say something at the outset. The questions that have been asked so far in this debate illustrate why the American people don’t trust the media. This is not a cage match. And, you look at the questions — “Donald Trump, are you a comic-book villain?” “Ben Carson, can you do math?” “John Kasich, will you insult two people over here?” “Marco Rubio, why don’t you resign?” “Jeb Bush, why have your numbers fallen?” How about talking about the substantive issues the people care about? The contrast with the Democratic debate, where every fawning question from the media was, “Which of you is more handsome and why?” Let me be clear. The men and women on this stage have more ideas, more experience, more common sense than every participant in the Democratic debate. That debate reflected a debate between the Bolsheviks and the Mensheviks. And nobody watching at home believed that any of the moderators had any intention of voting in a Republican primary. The questions that are being asked shouldn’t be trying to get people to tear into each other. It should be what are your substantive positions.”

The subjects of super PACs came up. In another appropriate slam of the mainstream media, Rubio offered the following commentary, “OK. You know, the Democrats who have the ultimate super PAC, it’s called the mainstream media. (CHEERING AND APPLAUSE) And I’ll tell you why, last week, Hillary Clinton went before a committee, she admitted she had sent emails to her family saying, hey, this attack in Benghazi was caused by al Qaeda-like elements. She spent over a week telling the families of those victims and the American people that it was because of a video. And yet the mainstream media is going around saying it was the greatest week in Hillary Clinton’s campaign. It was the week that she got exposed as a liar… (CHEERING AND APPLAUSE). But she has her super PAC helping her out, the American mainstream media.”

Becky Quick framed a question that was condescending and designed to cast a negative light on Fiorina’s tenure as HP’s CEO. Fiorina’s response was perfect.

  • QUICK: “Ms. Fiorina, I’d like to ask you a question. You are running for president of the United States because of your record running Hewlett-Packard. But the stock market is usually a fair indicator of the performance of a CEO, and the market was not kind to you. Someone who invested a dollar in your company the day you took office had lost half of the dollar by the day you left. Obviously, you’ve talked in the past about what a difficult time it was for technology companies, but anybody who was following the market knows that your stock was a much worse performer, if you looked at your competitors, if you looked at the overall market. I just wonder, in terms of all of that — you know, we look back, your board fired you. I just wondered why you think we should hire you now.”
  • FIORINA: “You know, the NASDAQ dropped 80 percent — 80 percent — and it took 15 years for the NASDAQ to recover. I was recruited to H.P. to save a company. It was a company that had grown into a bloated, inept bureaucracy that cost too much and delivered too little to customers and shareholders. It had missed, before I had arrived, expectations for nine quarters in a row. As an outsider, I tackled H.P.’s entrenched problems head-on. I cut the bureaucracy down to size, re-introduced accountability, focused on service, on innovation, on leading in every market, in every product segment. And yes, it was a very difficult time. However, we saved 80,000 jobs and we went on to grow to 160,000 jobs, and scores of technology companies literally went out of business — like Gateway — taking all their jobs with them. The truth is I had to make some tough calls in some tough times. I think, actually, people are looking for that in Washington now. And yes, I was fired over a disagreement in the boardroom. There are politics in the boardroom as well. And yet the man who led my firing, Tom Perkins, an icon of Silicon Valley, has come out publicly and said, “you know what? We were wrong. She was right. She was a great CEO. She’d be a great president of the United States because the leadership she brought to H.P. is exactly the leadership we need in Washington, D.C.” Nevertheless, one of the things that I think people don’t always understand is how accountable a CEO actually is. So you know, I had to report results every 90 days in excruciating detail. I had to answer every single question about every single result and every single projection in public until there were no more questions. And if I misrepresented those results or those projections in any way, I was held criminally liable. Imagine if a politician were held to that standard of account. I will run on my record all day long.

Undeterred, Quick then attempted to embarrass Rubio on personal finance decisions, “You have a lack of book keeping skills…it raises the question whether you have the maturity and wisdom to lead this $17 trillion economy. What do you say?” So what was the intent and purpose of that question? Rubio offered a great response: “…you just listed a litany of discredited attacks from Democrats and my political opponents, and I’m not gonna waste 60 seconds detailing them all. But I’m going to tell you the truth. Here’s the truth. I didn’t inherit any money. My dad was a bartender, my mother was a maid. They worked hard to provide us the chance at a better life. They didn’t save enough money for us to go to school. I had to work my way through school. I had to borrow money to go to school. I tried, early in my marriage, explaining to my wife why someone named Sallie Mae was taking $1,000 out of our bank account every month. I know what it’s like to owe that money, and we’ve worked hard. We’ve worked hard our whole life to provide a better life for our family. We own a home four blocks away from the place that I grew up in. My four children have been able to receive a good Christian education, and I’ve been able to save for them to go to college so they never have to have the loans that I did. But I’m not worried about my finances, I’m worried about the finances of everyday Americans who today are struggling in an economy that is not producing good paying jobs while everything else costs more. And that’s what this economy needs to — that’s what this debate needs to be about. This debate needs to be about the men and women across this country that are struggling on a daily basis to provide for their families the better future that we’ve always said this country is all about.”

Quintanilla clearly attempted to create a controversy by linking Carson’s traditional view on marriage to being inconsistent with his being on the board of a company that was known as the number one gay-friendly brand in America suggesting that their policies were counter to his views on homosexuality. Are you kidding me? The intent of this question could have only been to manufacture a controversy where none existed. Carson demonstrated his brilliance in his response, “Well, obviously, you don’t understand my views on homosexuality. I believe that our Constitution protects everybody, regardless of their sexual orientation or any other aspect. I also believe that marriage is between one man and one woman. And there is no reason that you can’t be perfectly fair to the gay community. They shouldn’t automatically assume that because you believe that marriage is between one man and one woman that you are a homophobe. And this is one of the myths that the left perpetrates on our society, and this is how they frighten people and get people to shut up. You know, that’s what the PC culture is all about, and it’s destroying this nation. The fact of the matter is we the American people are not each other’s enemies, it’s those people who are trying to divide us who are the enemies. And we need to make that very clear to everybody.”

Harwood asked Huckabee to opine on Trump’s moral authority…whatever that is. What a stupid, waste of time question whose only intent was to coax candidates into a catfight. Huckabee and Trump responded well:

  • HUCKABEE: “You know, of the few questions I’ve got, the last one I need is to give him some more time. I love Donald Trump. He is a good man. I’m wearing a Trump tie tonight. Get over that one, OK?
  • TRUMP: Such a nasty question, but thank you, Governor.
  • HUCKABEE: Let me tell you, Donald Trump would be a better president every day of the week and twice on Sunday, rather than Hillary.”

When Quintanilla attempted to create a controversy on, of all things, fantasy football, Christie couldn’t contain himself any longer and said, “Carl, are we really talking about getting government involved in fantasy football? We have $19 trillion in debt. We have people out of work. We have ISIS and al Qaeda attacking us. And we’re talking about fantasy football? Can we stop? How about this? How about we get the government to do what they’re supposed to be doing, secure our borders, protect our people, and support American values and American families. Enough on fantasy football. Let people play, who cares?” (HUGE APPLAUSE)

Clearly frustrated by the constant challenges and interruptions by the moderators, the following exchange occurred between Harwood and Christie on the topic of climate change:

  • HARWOOD: “So what do we do?” CHRISTIE: “Well, first off, what we don’t do is do what Hillary Clinton and John Kerry and Barack Obama want us to do, which is their solution for everything, put more taxes on it, give more money to Washington, D.C., and then they will fix it. Well, there is no evidence that they can fix anything in Washington, D.C.”
  • HARWOOD: “What should we do?” CHRISTIE: “What we should do is to be investing in all types of energy, John, all types of energy. I’ve laid out…”
  • HARWOOD: “You mean government?” CHRISTIE: “No, John. John, do you want me to answer or do you want to answer?” (LAUGHTER)
  • HARWOOD: “How are we going to do this?” CHRISTIE: “Because, I’ve got to tell you the truth, even in New Jersey what you’re doing is called rude.”


In the few minutes that the candidates were able to direct the focus on the real issues facing America, we gained a little insight into their views on tax reform, reducing government and regulatory economic roadblocks, creating more jobs, dealing with terrorism, focusing on out of control spending and reducing the federal debt. Unfortunately the moderators kept trying to turn it into a junior high bully session.

The candidates went into closing statements. I liked Fiorina’s the best: “You know, every election we hear a lot of talk. We hear a lot of good plans. We hear actually a lot of good intentions. But somehow for decades, nothing really has changed. What we need now is a proven leader who has produced results. That’s how you go from secretary to CEO. You lead and you produce results. I will cut this government down to size and hold it accountable, simplify the tax code, roll back the regulations that have been spewing out of Washington, D.C. for 50 years. I may not be your dream candidate just yet, but I can assure you I am Hillary Clinton’s worst nightmare. And in your heart of hearts, you cannot wait to see a debate between Hillary Clinton and Carly Fiorina. I will tell you this, I will beat Hillary Clinton. And with your vote and your support and your prayers, I will lead with the citizens of this great nation the resurgence of this great nation.”

In my assessment, Rubio, Christie, Cruz, and to a lesser extent Fiorina had the best performances of the night. Huckabee, Carson, and Trump probably didn’t gain but also didn’t lose any ground either. Kasich, Bush, and Paul couldn’t seem to get much traction. We probably know enough about the candidates at this point to begin to thin the herd. If it were up to me to set the next debate, I would invite Rubio, Christie, Cruz, Fiorina, Carson and Trump. Sorry if your guy isn’t on my short list. The only way to have a more substantive debate is to get down to fewer candidates and have questions designed to focus on each candidate’s platform and differentiate them from each other as well as from the Democrat message.

Wouldn’t it be nice if they could create a true debate structure where candidates have, let’s say, ten minutes to outline their platform, opponents have five minutes to argue against, and the candidate then has two minutes to rebut. Maybe then we would learn something of consequence. As it stands, it’s nothing more than a beauty contest. Of course, we need to also hope for a more unbiased approach by the mainstream media…probably not much hope in that happening anytime soon.

The Brotherhood

I recently had the opportunity to get a small peek into the true definition of brotherhood. Along with that came the realization that I will never truly understand the real meaning of the word as defined by an elite group of human beings I had the honor of spending some time with a few weeks ago. Only those who have earned the right to be part of this amazing group of warriors will ever understand.

Last month I wrote about those brave and inspiring souls who had the courage and vision to risk life and limb for a concept of freedom the world had never before seen. Walking amongst us today is a band of brothers who exemplify the same character of our founders and a willingness to defend the rights and freedoms they gave us with their very lives…no questions asked

Our son, Tom, supports the Chicago chapter of the Navy Seal Foundation (NSF) whose mission is to provide support on multiple levels for families of those Seals who have willingly placed themselves in harm’s way. Many return home with permanent physical and/or mental/emotional injuries sustained while defending the freedoms we enjoy each and every day. In too many cases, some make the ultimate sacrifice. Tom recently had the opportunity to attend an amazing event sponsored by the New England NFS chapter and invited me to join him.

Twenty guests joined over 20 former and one active duty Navy Seal Team Members for a range day at Sig Sauer’s Professional Training Academy. We were treated to one on one instruction on a variety of weaponry typically deployed by Seals in the prosecution of their missions. As we arrived at the Academy, we were greeted by the staccato of automatic weapons fire all around us. Our Seal driver turned to us and said, “Ahhh, the sounds of freedom.”

Instruction included hand guns, sniper long guns, AR15 automatic rifles, shot guns, and M249 ‘saws’ machine guns. We learned simple tactics and maneuvers like clearing a house, contending with a hot zone ambush and escaping while laying down cover fire as your team member moved to escape or find protective cover. All exercises used live ammunition. Tom put together short video that memorialized the day. You can watch it at the following YouTube link: https://www.youtube.com/watch?v=WjUKFKPcCXU&feature=youtu.b

What struck me the most was how genuine each of the Seal Team members were…they went out of their way to learn about us, where we were from and what we did. Even more than their unspoken physical presence was the high level of intelligence supported by dedication, discipline and determination. Among the SEAL RSOs (Range Safety Officers) were young men now attending Harvard, Dartmouth, and Wharton pursuing professional degrees: several MBAs and a MD. Several were graduates of the U.S. Naval Academy. A number had founded successful businesses or are working in the private equity and hedge fund world

At dinner, we heard from Rear Admiral Howe…president of the Naval War College. We also heard from the father of an active duty SEAL who had lost his life in March and the role the Foundation played in helping them get through an unimaginable time of grief. Tom and I were at a table with 6 former Seal Team Members. Very memorable.

This elite cadre of some of the finest men this country could ever produce made me proud to be an American. In an odd sort of way, they made me feel at ease in a crazy world where much doesn’t make sense and where our freedoms are being assailed at home and abroad each and every day.

There are about 2500 active duty Navy Seals deployed in 35 countries trying to make the world a safer place for freedom loving people everywhere. The Navy Seal Foundation pledges to care for any member of this elite brotherhood as well as their loved ones should injury or death intervene. Knowing that The Foundation has their back allows these brave men to enter into unimaginably perilous situations without the distraction of worrying about what might happen to their wives and children if the worst scenario were to play out.

The Foundation can now count on support from Sue and me, and I would encourage anyone who might be interested to look into supporting an NSF chapter near you.

Next month I plan to dig into the economic impact of Obamacare. I’ve been researching the facts and hope to report the good and the bad. I’ve also been collecting a lot of data on the growing momentum for tax reform. I’ll try to compare and contrast some of the more interesting plans being proposed. Of course, there will be more presidential primary drama which should prove to be entertaining. Thanksgiving will have come and gone. We’ll get a pretty good idea of how the holiday shopping season may turn out

Everyone here hopes you and your family has a wonderful Thanksgiving holiday. Our daughter is again hosting (pfew) and is expecting a smallish group of about 20. Hope she can find a large enough turkey. I’m sure Sue will provide an assist.

Thanks for tuning in.



Bruce Anderson

Managing Partner

South Georgia Capital, LLC

2135 City Gate Lane, SUITE 460

Naperville, IL 60563




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