INVESTORS ARE CHANGING FROM STOCKS TO BONDS, WHY?

Investors are abandoning stocks in favor of short-term bonds.
Investors have been testing the waters over the past month, yanking $868 million out of U.S. equity ETFs while pouring $5.2 billion into funds that invest in fixed income with duration of less than three years, Colas said, citing XTF data. The iShares Short Treasury Bond fund, which focuses on fixed income with duration between one and 12 months, alone has pulled in $3.4 billion over the past month, according to FactSet.*

This change is usually done because of fear of a recession; however, Obama turned over an economy on fire to Trump.  The Republican tax cuts were like pouring gasoline on the fire.  There is so much money sloshing around that I don't see how a recession can be possible this year.  Certainly, corporate earning the first quarter have been great.

The result of this is what is called a "flattening yield curve" for bonds, i.e. the interest rate paid on short-term bonds approaches the interest rate on long-term bonds.  The "yield curve" can even become negative, i.e. short-term bonds pay a higher interest rate than long-term bonds.  This is considered very bad and usually means you are entering a recession or are in one.

* https://www.cnbc.com/2018/04/25/market-is-obsessed-with-10-year-yield-should-be-watching-the-2-year.html
https://www.cnbc.com/2018/05/01/investors-continue-buying-bonds-amid-the-most-hated-bull-market.html

SHOUlD TRUMP BE IMPEACHED?

Well, there are plenty of reasons for President Trump to be impeached, but I don't like this coming so soon after the impeachment of Bill Clinton.  So I conclude we should put up with him, controlling his worst impulses as best we can.  After all, WE (not me, not you) elected this guy and there are few surprises.  I am more worried about Trump on foreign policy than domestic issues.

Frankly, nearly all Trump's domestic choices have been orthodox Republican views.  Anyone of the 16 Republican presidential candidates would probably have chosen the same Supreme Court Justice as Trump did (Gorsuch).  Anyone of the 16 candidates would have signed the tax bill.  Anyone of the 16 would be for broad deregulation (I presume but am less sure of this.).

Perhaps the big difference Trump and many other Republican politicians come on trade.  I think the orthodox Republican stance is for the Trans-Pacific Partnership (TPP) and for NAFTA, for examples.  I am sure that many Republican politicians would not pursue the destruction of the legal system, State Department, FBI, and other government institutions as Trump has done.

There are issues that I don't know if all the Republican candidates for president would have undertaken so vigorously, for example pursuing the Muslim ban.  I hope not, but don't know about this as it certainly is popular with the Republican base.  I do suppose that most elected Republican politicians would be anti-Hispanic.

Republicans like to keep illegal immigration as an issue and actually want to keep it that way and really don't want a solution (e.g. the 2013 bipartisan immigration bill that passed the Senate with 67 votes but wasn't taken up by the House).  The Wall on our southern border with Mexico is very popular with the Republican base.

All elected Republicans are Pro-Life.  There are very good Republican politicians who are for Choice (e.g. Condoleezza Rice, Michael Bloomberg), but they can't run for President because of the Pro-Life litmus test.*

A problem with pro-life is that it brings many babies into households that don't want them. This leads to more dysfunctional families with great psychological harm to the child, that is likely to be perpetuated through generations.  I'm sure that a few parents who didn't want the child become nurturing parents after the birth, but the vast numbers don't.

* I find it interesting that people say that Democrats must widen their "tent" and permit Pro-Life candidates into their elective politics.  While I agree with this, I find it strange because there seems to be no problem with Republicans having a litmus test on the abortion issue.

HAPPIEST COUNTRIES AND AMERICAN STATES

This year, Finland ranked #1 as the happiest country.  For comparison, the U.S. fell four slots to #18 — falling four spots from last year and five from two years ago — "in part because of the ongoing epidemics of obesity, substance abuse and untreated depression," according to World Happiness Report co-editor and Columbia University professor Jeffrey Sachs.*
Finland is followed by: #2 Norway (#1 the previous year), #3 Denmark, #4 Iceland, #5 Switzerland, #6 Netherlands, #7 Canada, #8 New Zealand, #9 Sweden, #10 Australia.  Note all these countries are the closest to the North Pole or south Pole.


Happiness has also been rated for the U.S. states:
The well-being scores comprised the following five elements:
Purpose: Liking what you do each day and being motivated to achieve your goals
Social: Having supportive relationships and love in your life
Financial: Managing your economic life to reduce stress and increase security
Community: Liking where you live, feeling safe, and having pride in your community
Physical: Having good health and enough energy to get things done daily**
Here are the top 10 states for well being in a Gallup Poll:**

1. South Dakota (64.10)
2. Vermont (64.09)
3. Hawaii (63.39)
4. Minnesota (63.12)
5. North Dakota (63.06)
6. Colorado (62.87)
7. New Hampshire (62.80)
8. Idaho (62.79)
9. Utah (62.75)
10. Montana (62.56)

Except for Hawaii and perhaps Utah, you will note all are northern states and all are red or purple states.  Notably missing are California and New York, much to my surprise, but there are other polls.  In other polls, states move around in the ranking; however, Minnesota, for example, remains in the top 10.  Another Poll is by Wallet Hub on happiest states.**  The third column shows the rating in the Gallup Poll.

1	Minnesota	4
2	Utah	9
3	Hawaii	3
4	California
5	Nebraska
6	New Jersey
7	South Dakota	1
8	Iowa
9	Wisconsin
10	New Hampshire	7

And here are the bottom 10 with scores (The first column is the average score, and the following three are different categories.:

40	New Mexico	45.53	34	45	39
41	Alaska	45.43	23	49	50
42	Tennessee	44.29	45	17	38
43	Missouri	43.86	41	26	44
44	Kentucky	41.69	46	35	37
45	Mississippi	38.89	42	46	47
46	Arkansas	37.33	50	28	35
47	Alabama	36.60	47	43	42
48	Louisiana	35.35	43	50	48
49	Oklahoma	34.97	48	44	43
50	West Virginia	34.89	49	48	31

Kansas is rated #27.  Remember they had a big tax reduction that they had to back off of.
GOODWYN: Brownback had promised the tax cuts could spur up to 25,000 new jobs a year but that proved wildly optimistic. Kansas actually lost jobs the first year. Roads went from a 10 to a 50-year maintenance schedule. Nevertheless, the legislature was still forced to raid the State Employees' Retirement Fund, then it raised the sales tax twice. With the state lagging behind its neighbors economically, public school financing a mess and budget chaos in the Capitol, Governor Brownback's popularity fell off a cliff. Last year, a wave of moderate Republicans swept into office at the right wing's expense. They partnered with Democrats, rescinded Brownback's tax cuts and overrode his veto. After four years, the great Kansas tax experiment was over.***
West Virginia (ranked #50) recently had a teacher's strike over school funding.  Arizona (ranked #21) too had teachers demanding a 20% pay hike. Oklahoma (#49) and Kentucky (#44)  tax cuts spurred a teacher's strike.  You will note that the bottom 10 states are heavily populated by southern states and red states, generally with low wages.  The two states getting the most Federal government aid are Alaska (#41) and Mississippi ((#45).

And lastly, what is the American community with the greatest well being? It is Naples-Immokalee-Marco Island, FL (ranked #1 or #2 in every category), though Florida as a state has a declining well being.****


* https://www.cnbc.com/2018/03/16/these-are-the-top-10-happiest-countries-in-the-world.html
http://worldhappiness.report/ed/2018/
** https://www.cnbc.com/2018/02/23/the-top-10-happiest-and-healthiest-states-in-the-us.html
https://wallethub.com/edu/happiest-states/6959/
*** https://www.npr.org/2017/12/13/570387479/kansas-2012-tax-cut-experiment-could-serve-as-a-cautionary-tale
**** https://wellbeingindex.sharecare.com/wp-content/uploads/2018/03/Gallup-Sharecare-State-of-American-Well-Being_2017-Community-Rankings_vFINAL.pdf

TWO SOCIOPATHS TO MEET

What happens when two sociopaths meet?  We may find out.  Apparently, President Trump and North Korean Supreme Leader Kim Jong-un are to meet in about a month to discuss matters such a denuclearisation and getting a peace treaty to end the Korean War.

Both of these people have sociopathic/ psychopathic personalities.
Definitions of sociopath and psychopath:*

Someone whose social behavior is extremely
abnormal. Sociopaths are interested only in
their personal needs and desires, without
concern for the effects of their behavior on others.*

a person with a psychopathic personality whose
behavior is antisocial, often criminal, and who
lacks a sense of moral responsibility or social con-
science.*

Psychopath manifests as amoral and antisocial
behavior, lack of ability to love or establish meaningful personal relationships, extreme egocentricity, failure
to learn from experience, etc.

Surprisingly to me, the topic of two sociopaths meeting has some literature.**  One thing we know about Donald Trump is that he admires dictators.  And Kim enjoyed playing the game of "can you top this" about the horrors they would do with the others.

So one expects that such a meeting would be explosive.  For just that reason, I think the meeting may be a surprise because each knows the dangers in the other so they could well keep themselves under control.  But this does not mean that the meeting will be a success.

I'm not sure what game Kim Jong-un is playing: a peace treaty, all right for America to keep troops in South Korea, a willingness to discuss denuclearization, etc.  I wonder if we will know the answers to these questions after the meeting?

* http://www.dictionary.com/browse/sociopath
http://www.dictionary.com/browse/psychopath
Also see: https://www.mcafee.cc/Bin/sb.html
** http://signsofapsychopath.com/when-psychopaths-meet/
https://www.quora.com/What-happens-when-two-sociopaths-meet

POISON GAS AND THE FUTURE OF BASHAR AL-ASSAD

There seems to be a lot of confusion about the U.S. intention in Syria and Bashar al-Assad, dictator of Syria.  Today I heard complaints on TV that the bombing raids of Syrians poison gas facilities did nothing to take out Assad.  For a long time, I too was confused.  I thought that first we would get rid of ISIS and then get rid of Assad.

But I have finally figured it out, and I believe our intention is not to eliminate Assad.  We only want him to stop using poison gas.  Further, we have decided that Syria is in the Russian sphere of influence, perhaps Iranian too by default.  Others have commented on the strangeness of it being all right to do "industrial scale"* murders of the Syrian people using "conventional" explosives, but poison gas is unacceptable.  Society has concluded, however, that poison gas is an unacceptable way of killing people in war (executions are something else).

To go back to the beginning. a multi-nation airforce organized by President Obama began an air strike against Libyan forces in support of an uprising by a mob on March 19, 2011, to stop threatened crimes against humanity by Qaddafi**  To do this without any plan as to what should happen after Qaddafi was overthrown was a bad mistake.  An even bigger mist mistake was we had promised Qadaffi that, if he got rid of his nuclear weapons program, we would not try to overthrow him.  Doing so has haunted international relations since.

Indeed, Obama himself admitted earlier this year [2016] that "failing to plan for the day after" the overthrow of Gaddafi was the "worst mistake" of his presidency. Critics of U.S. military strategy have long-warned that the 2011 intervention would create a power vacuum and inevitably pave the way for an entity, such as ISIS, to gain control.*** 

Then, I think on August 18, 2015, or close to it, President Obama announced that Assad must go in Syria.  His idea was to enlist forces in Syria to overthrow Assad, but again there was no plan as to who should take over if Assad is overthrown.  While it proved difficult to find any Syrian forces to eliminate ISIS, many could be found to fight Assad, but ISIS was the first priority.

At some point, President Obama abandoned plans to overthrow Assad because of the inability to plan for the day after.  It was hard to stand by as Russia pummeled Aleppo, killing and injuring a huge number of civilian people.  I wondered if President Obama could hold out against calls for the U.S. to interfere, but he didn't.

At any rate, President Obama's term as President was over before he could return to the Assad problem, and, by this time, the Russians were firmly ensconced in Syria.

Present Trump took over the U.S. government.  President Trump also has had to stand by during a merciless attack on a city, this time Ghouta, a suburb of Damascus.  Cries for humanitarian interference were more muted than for Aleppo.  He also announced that our troops would soon leave Syria because ISIS was all but beaten, a comment that alarmed our military.

So the surgical air attack by multination forces to degrade Syrian poison gas facilities was intended to be just that and I have no problem with it.  Many buildings were destroyed along with a lot of equipment, and no one was killed.  In spite of the disappointments of many, it was never intended that this attack would overthrow Assad.

[Note added 04-16-2018: Rather than an air raid, the military apparently really wanted greater sanctions on Russia which, after all, had promised to take care of the poison gas problem but hasn't done so.  President Trump, however, decided he didn't want more sanctions on Russia.  Because Trump lately had said a few nasty things about Putin, I thought he had given up on building a Trump tower in Moscow, but it seems he hasn't.  At any rate, the air raid is the only punishment the Syrians are to get.  I would have liked to see both.]

My conclusion is that there is no plan by the U.S. to get rid of Assad no matter how bad the humanitarian crisis.  We have ceded Syria to the Russians and Iranians, as it has no strategic value to us.

I feel that, if a force in Syria of 2,000 troops, will keep the lid on groups like Isis, we should do it forever if called for.  We have 10s of thousands of troops spread all over the world - Japan and Germany in particular.

* A term I actually heard yesterday.
** https://en.wikipedia.org/wiki/2011_military_intervention_in_Libya
** https://www.commondreams.org/news/2016/08/02/us-attacks-libya-again-peace-group-tells-obama-stop-bombing

NELLIJA VALIDA OLEKS STORY - I (THE SILVER BRACELET)

(This is the first of some stories about a woman who was talented but could not get herself to write up her own stories.  She is now deceased, and I have decided to write up some of her stories in her memory.)

Nellija Valida Oleks (b 1926) grew up in Latvia* and was there during WW-II.  She was a promising ballerina student.  Latvia had been occupied by the Soviet Union for a year, but the Nazi's came in and pushed out the Soviets.  Later, the Soviets came back and were pushing out the Nazis.  A decision had to be made - go with the Nazis or stay with the Soviets.  Which do you prefer - the frying pan or the fire?  Nellija and her mother and sister went with the Nazis where she spent two years in a camp.

The family was brought to America by a religious group that was very demanding and the family succeeded to separate themselves from the group with difficulty.

Nelllija had a townhouse with four bedrooms three of which she rented.  At one time there was a woman renter who left without paying her rent and took with her a Latvian silver bracelet.    This bracelet was heavy and weighed four ounces, but, of course, the sentimental values was more important than the loss of so much silver.

A few years later, another woman was renting a room from Nellija who, coincidentally, turned out to be the sister of the woman who stole the bracelet.  Nellija told the woman about it, and the woman said she would get the bracelet back.  I was sure the woman had sold the bracelet, but, as it turned out, she hadn't and the sister did get it back for Nellija.

* http://www.baltic21.org/history/latvia.html

RETAIL STORE OPENINGS

Normally I like the Treasury Secretaries whether they are Democrat or Republican, but I'm not sure about Steve Mnuchin who also lies.  Incidentally, Amazon has less than 4% (yes, less than four percent) of the retail business.  Contrary to the claims, brick and mortar retail stores are increasing rather than decreasing (quotes are in italics and larger print with the reference at the end):

As the “retail apocalypse” canard continues to grab the odd headline in the media, the data and the facts are consistently telling us quite a different story: a story of an industry in transition, but still growing. The most recent retail sales figures released by the Census Bureau were up a robust 4.2 percent year-on-year in July. Every month this year has seen a steady increase in sales over the same period last year. 

........................................................................

Their data shows a net increase in store openings of over 4,000 in 2017. In fact, for each company closing a store, 2.7 companies are opening stores.  (bolding and underlining are added)

(https://nrf.com/blog/retail-store-openings-increase-2017 )

I suspect that Walmart has been responsible for far more stores closing than Amazon.

POST OFFICE PACKAGE CHARGES

It turns out that there is a dispute going on among the Post Office, Amazon, and UPS for some time about the pricing structure of the Post Office (quotes are in italics):

The dispute primarily centers around how the post office splits its fixed "institutional" costs — such as the driver salaries, trucking fees, and other overhead expenses — between its two businesses: The "Market Dominant" letter business (a government-protected monopoly) and the "Competitive" parcel business (which competes with many private businesses, including UPS and FedEx).
.............................................................

The 5.5 percent minimum share was set in 2006 when the Postal Accountability and Enhancement Act (PAEA) became law. But because the law was written more than a decade ago, it fails to capture the growing mix of package shipments, especially as a result of e-commerce growth, UPS wrote in a filing last year.

The post office has seen a steady increase in revenue from the Competitive packaging business. In 2008, the Competitive business generated just $8.4 billion, or just 11 percent of the total revenue. By 2017, that part of the business had grown to over $19 billion in sales, approximately 30 percent of the post office's total sales.

To better account for this change, UPS thinks the Postal Service's Competitive business should pay a larger share of the fixed costs — approximately 29 percent.*

And here is another take on the Amazon-Post Office-UPS dispute

One of his main contentions is that Amazon is ripping off the U.S. Postal Service, but it's not clear whether it is getting the short end of the stick from the Jeff Bezos-led retailing juggernaut.**

In fact, Amazon may be saving the post office from financial ruin. (Underlining and bolding added)

On April 3, Trump said, "the post office is losing billions of dollars," at U.S. taxpayers' expense.

It's true that the post office is losing money. It reported a $2.7 billion net loss in 2017.

But the post office is not funded by U.S. tax dollars.

And when you look at the revenue breakdown, you can see that shipping and packages is actually one of the few categories that brought in more money than the previous year. While overall revenue fell $1.8 billion, shipping and packages saw a $2.1 billion increase in revenue. Meanwhile, first-class mail revenue was down around $1.8 billion.**

...................................................................

That idea that the post office is losing big likely stems from a Citigroup report. The report alleges the USPS' pricing model is unsustainable, and that parcel rates would need to rise significantly for the agency to break even.

The report was mentioned in a widely circulated Wall Street Journal commentary by shipping analyst Josh Sandbulte. The analyst argues that the post office is essentially giving Amazon a $1.46 subsidy for every box it ships.**

But if true, that figure would hold for all companies across the board, not just Amazon. Which is probably where Trump is coming up with the claim that the post office "will lose $1.50 on average for each package it delivers for Amazon."

* https://www.cnbc.com/2018/04/05/amazon-and-ups-disagree-postal-regulatory-commission-public-filings-post-office-cost-structure.html
** https://www.cnbc.com/2018/04/06/trump-claims-amazon-is-ripping-off-post-office-but-its-complicated.html

MARCH IS OVER - WHEW!

If you don't invest in stocks and bonds, go on to something else.

March is over, but will April be any better?  An Article in Barron's gives us some hope. (quotes from the reference are in italics)
During that stretch, there were 46 positive Aprils and 22 negative ones.
................................................

Say what you will, the Stock Traders’ Almanac found that the Dow had returned an average 7.6% between Nov. 1 and April 30, going back to 1950, compared with just 0.4% between May 1 and Oct. 31. The tendency for weakness in the middle of midterm election years is even more pronounced. The second and third quarters have been the weakest of the four-year cycle, with an average decline of 1.8% in the Dow industrials.

That historically sets up for the “sweet spot” of the four-year election cycle. From the fourth quarter of the midterms to the second quarter of the “pre-election” year, the Dow has averaged 20.4%.
...................................................

Then there’s the Fed, which is on track for another two, and maybe three, quarter-point interest-rate increases this year. The Treasury market is reacting anomalously, with longer yields coming down again. The yield curve, expressed in the spread between the two- and 10-year notes, has fallen to less than a half-percentage point. That’s made it the flattest since the financial crisis. The history of the yield curve suggests caution.

https://www.barrons.com/articles/the-fang-stocks-bite-back-1522454400

FICTION AND FACT WITH DONALD TRUMP

Trump's accusation against Amazon are fabrications:

Trump Tweet:
"I have stated my concerns with Amazon long before the Election. Unlike others, they pay little or no taxes to state and local governments, use our Postal System as their Delivery Boy (causing tremendous loss to the U.S.), and are putting many thousands of retailers out of business!"

The Facts:
Actually, Amazon exceeds the Federal law on the matter of collecting state sales taxes.  It collects the sales tax on its own products in all 45 states that have sales tax whereas it is only required by law to collect the sales tax in states where it has a physical presence (e.g warehouses, office buildings, and other structures. *
SCORE: Amazon A+, Trump F

As to 3rd party merchant sales taxes, Amazon started collecting these in Washington state as of January 1, 2018, and Pennsylvania as of April 1, 2018.  These are the two states that mandate collection of such taxes by law.
But another chapter has opened, because while Amazon handles sales taxes on purchases from its own inventory, it's up to third-party merchants selling on its marketplace to tally and send in their own sales-tax payments. Many aren't doing it.**
SCORE: Amazon B, Trump F

Trump Tweet:
“I am right about Amazon costing the United States Post Office massive amounts of money for being their Delivery Boy. Amazon should pay these costs (plus) and not have them bourne [sic] by the American Taxpayer. Many billions of dollars. P.O. leaders don’t have a clue (or do they?)!” he tweeted early Tuesday.***

The Facts:
"The postal service has lost money for 11 straight years, mostly because of pension and health care costs. In 2017, the service lost $800 million on $69.7 billion operating revenue. Under a 2006 law, it must pre-fund 75 years' worth of retiree health benefits. Neither the government nor private companies are required to do that. (It has defaulted on those payments periodically, with the last one made in 2015).
....................................................
The 2006 law also mandated that each line of business within the postal service cover its attributable costs. In other words, for the postal service to lose money on package delivery would be against the law.
....................................................
Amazon ships enough with the post office to qualify for bulk rates, giving it a significant volume discount that varies depending on package weight and number. "***
...................................................
The Post Office brought in $19.5 billion from shipping packages like Amazon’s last year, one of the few bright spots in a balance sheet marked by a $1.9 billion decline in revenue from first-class mail. Mail delivery that shrank by 5 billion pieces (4%), but package shipments rose by 589 million (11.4%). Package revenues were also up by about $2.1 billion year over year.
The Post has become essentially a package delivery company that also deliver mail.
SCORE: Amazon A, Trump D (Yes, Donald, the Post Office IS losing money)

For a list of rates for mailing packages see: https://pe.usps.com/cpim/ftp/manuals/dmm300/Notice123.pdf


* https://en.wikipedia.org/wiki/Amazon_tax
** https://phys.org/news/2017-11-states-third-party-sellers-amazon-marketplace.html
***  http://fortune.com/2018/03/29/donald-trump-post-office-amazon-losing-money/
https://www.cbsnews.com/news/amazon-contract-usps-fact-checking-trump-tweets-amazon-post-office-03-31-2018/

TRUMP'S FICTIONAL TAX WAR ON AMAZON

Just to clear some fiction up, see:

Amazon currently collects and remits sales taxes for sales made directly by Amazon, as opposed to its third-party sellers, to all forty-five states with a statewide sales tax. Amazon supports the Marketplace Fairness Act that requires remote sellers to collect sales taxes.
................................................................
Amazon offers its third-party sellers an optional sales tax collection service for a 2.9 percent fee (based on the collected sales taxes). To the extent existing third-part sellers purchase the sales tax service, Amazon benefits.

The imposition of sales tax on remote sellers, including Amazon's third-party sellers, might help in-state retailers by leveling the playing field with online competitors. However, the expansion of sales taxes to remote sellers will benefit Amazon.

https://www.cnbc.com/2018/04/02/how-amazon-will-win-the-tax-war-with-trump.html