A Wonderful Vehicle to Hedge Against Credit Defaults
Too much debt + too little profit = a wonderful vehicle to hedge against credit defaults... How to track industries and companies that have added hundreds of billions in debt this cycle... Mailbag: liquidity concerns, asset allocation, asset-backed securities, and is Social Security a real annuity?... P.J. O'Rourke: Look at the bright side...
Today, we continue on our credit-default cycle theme with an eye toward actual, real-time, business examples...
So if you've grown weary of our macroeconomic explanations about Austrian economic theory or "negative multipliers," don't worry. What you'll find below is the "nuts and bolts" of how you can put these theories into practice.
Before we begin, one word of warning. The examples I (Porter) give below may or may not be included in our initial version of "The Dirty Thirty" that we will publish in the first issue of Stansberry's Big Trade next week.
I'm not trying to be coy. The Dirty Thirty is a market-based set of corporate targets. It's a list of the 30 worst corporate credits that have the most equity value and the cheapest long-dated put options.
Naturally, that is going to change a little from month to month. The fundamentals of these companies probably won't change much, if at all. But the market prices and equity values will. Thus, our list will change, too.
Our core premise is the marginal utility of debt...
As companies take on excessive amounts of debt, sooner or later, their margins collapse and they begin spiraling toward bankruptcy. Why? Because few businesses actually have any real advantage in regard to access to capital. It's never just one business that "levers up." Instead, bankers visit every company in the sector. And, as production increases, profit margins always erode substantially.
Think about what happened to the onshore oil drillers over the past five years. As an industry, these companies borrowed $500 billion in the corporate-bond market. And guess what? Production soared, which sent oil prices crashing. Now, the sector has tons of debt... but much less ability to service it.
A little borrowed money, given to a few companies, would have greatly increased their profits. A lot of borrowed money, given to virtually every company in the sector, has seen profits almost completely wiped out. And that has happened in a lot of businesses, not just the oil patch.
A few easy examples...
Over the past 30 years, the car industry has seen tremendous competition and an explosion in debt, as carmakers had to finance big contributions to employee pension funds to support hundreds of thousands of retired workers. Those trends already bankrupted General Motors (GM) and Chrysler (FCAU). They will soon bankrupt Ford (F).
Since 1987, Ford has borrowed an additional $77 billion, taking total debt to a peak of around $145 billion. To put that in perspective, Ford had its best year ever in 2015, delivering a little more than 2.5 million cars and trucks. Thus, the company has been carrying almost $60,000 in debt per vehicle sold!
All of this capital and record volume hasn't improved Ford's profitability. Operating margins are half of what they were 30 years ago (5% versus 10%). And don't forget, from 2006 to 2009, Ford was losing money on every car it sold. What has changed lately is a huge increase in demand via subprime auto finance. My bet is, as subprime auto financing shuts down because of rising default rates, Ford's volume will collapse by 15%-20%, and it will begin losing money again. Sales fall, but debt burdens don't change.
Here's an example that will probably surprise you: Avon Products (AVP). Explain how ladies selling makeup door to door requires more than $2 billion in debt. Since 1998, Avon's debt has increased almost 10 times, from $250 million to $2.2 billion. Meanwhile, operating margins have collapsed from 12% to less than 3%. You see, there's this new thing called the Internet. And it's available 24/7 to buy anything you want from the comfort of your home.
Finally... it's not only the oil firms that have gotten into too much debt. Debt largely financed the massive expansion of pipelines and other energy infrastructure over the past decade.
Want to buy a wind farm in France? Call Enbridge (ENB). It's a big pipeline operator that is also building solar-energy projects and wind farms... with lots of borrowed capital. Debt has grown by more than 12 times over the last 20 years and now totals $31 billion. Over the same period, operating margins have shrunk from world-class (20%) to pitiful (3%). Maybe someone should tell the board that wind farms aren't as good a business as oil pipelines.
We are not necessarily trying to short these companies (via put options). They're just simple examples of how often companies try to overcome competition (Ford), or disruptions to their business model (Avon), or get away from their core business with huge expansions to their debt loads (Enbridge). But as everyone probably knows, it's a heck of a lot easier to make projections and take loans than it is to earn profits and pay back debt.
Spotting companies that are heading for credit downgrades and defaults is a lot like painting by numbers. You just look for who has borrowed a lot of money and then see if that's working out for them. Usually, it isn't.
One more example, for good measure. Precision Drilling (PDS) is an onshore-oilfield-services firm. If you need a hole drilled in the ground, you call these guys. To capture more business, Precision borrowed a ton of money. Debts have grown from $200 million to $1.6 billion over the last 15 years. But lots of other businesses saw the same opportunity... and borrowed money, too. Profit margins have fallen from 10% a decade ago into negative territory today. Precision is losing money with every hole it drills... and trying to make it up on volume. We wish them luck.
These are a few of the "microeconomic" examples of the macroeconomic themes I've been discussing...
They are real-world examples of how borrowing a lot of money rarely leads to prosperity.
Capitalizing on these problems is a lot different than investing in good businesses. With a good business, time is your friend. A capital-efficient company like Hershey (HSY) will simply compound your wealth by increasing its dividends every year as its business slowly grows and the economies of scale continue to deliver big benefits to owners.
Highly indebted companies, on the other hand, tend to tread water for a long time before drowning. At first, profits collapse. But companies can make adjustments and promises. Additional credit will continue to flow. Debts can be refinanced. But... as more time passes... and as margins continue to decline... sooner or later, real cash-flow problems will emerge.
In an instant, the entire sustainability of the business will come into question. Suddenly, the stock will collapse. Even if the company doesn't outright default, it can begin a death spiral as it sells assets to repay its debts, eventually leaving nothing for shareholders.
It's that moment where confidence is lost – like what happened to Hertz (HTZ) this week – that we're aiming for in Stansberry's Big Trade...
Yes, we can profit by trading around these positions as volatility ebbs and flows. That should earn us enough profits to begin investing with "house money" long before the crisis with corporate credits begins in earnest. But next year, we'll see dozens of situations like Hertz. And in 2018, we'll see hundreds. Even if we only "hit" on five or 10 of them, we'll make huge profits overall thanks to the massive leverage available to us via put options and the extremely low price of those options right now. The defaults are coming. It's only a matter of time.
In tomorrow's Digest, we'll walk you through an entire Stansberry's Big Trade sequence, from start to finish. We'll show you how to find debt maturity schedules... evaluate the risk of any given balance sheet... figure out which put option to trade... and how to trade around a position to make sure you don't lose money.
One small correction...
Yesterday, I was in a hurry and didn't do a great job of explaining what's admittedly a complicated idea – about the effect that large government debts have on stimulating the economy.
I wrote that various studies had found that government spending causes a negative-multiplier effect and reduces economic growth. What I meant was government deficit spending causes a negative-multiplier effect on economic growth in countries where debt-to-GDP is already more than 70%.
I explained the negative-multiplier idea in far more detail and gave a complete list of original sources (if you like reading academic economic research) in the October 7 Digest.
I regret making an already complicated idea more confusing, but the bottom line is the same: Borrowing too much doesn't make individuals or entire economies rich. Research shows that cutting taxes (as Trump promises to do) is unlikely to deliver any lasting economic benefits if it leads to a corresponding increase in government debt.
So can Trump cut taxes without adding to the deficit? No way, not when we're already running huge annual deficits and so much of the government's spending (around 70%) is for transfer payments and entitlements that are "mandatory" and not part of the discretionary budget.
Nevertheless, I'm sure that for the next few months... or even a year or two... folks will hope that Trump will pull a rabbit out of his hat and bring back significant amounts of economic growth. Trust me, it won't happen. The Republicans can't make our $20 trillion in federal debt disappear. You can think of that gigantic problem as the Obama legacy. We'll be paying for it for decades.
New 52-week highs (as of 11/9/16): American Financial (AFG), Axis Capital (AXS), Berkshire Hathaway (BRK-B), CME Group (CME), PowerShares S&P 500 BuyWrite Portfolio Fund (PBP), iShares MSCI Global Metals & Mining Producers Fund (PICK), PNC Financial Warrants (PNC-WT), Gibraltar Industries (ROCK), and TTM Technologies (TTMI).
In the mailbag... a lot of great questions. As you'll see, I took my promise to answer all of your questions seriously. There's far more in here than usual, so please read it carefully. And... send me more questions! I'll answer all of 'em: feedback@stansberryresearch.com. And of course, if you haven't reserved your spot for Wednesday's free live training event, please click here.
And make sure to read past the mailbag for the latest "instant classic" essay from contributing editor P.J. O'Rourke.
"Porter, you are asking for questions, I'm very close to paying up now for the Big Trade but one thing that bothers me a bit. If you get lots of subscribers, we are all going to be diving into these long dated well out of the money options, is there enough liquidity to let us all get them without a big change to the price?" – Paid-up subscriber Tim B.
Porter comment: We've built our research out in a way that overcomes any liquidity problems.
But let's imagine a typical newsletter scenario. If we were to recommend one specific put option on a single stock to a few thousand investors, the price of that option would skyrocket. Many subscribers don't understand trading or limit orders. Plus, after seeing our recommendation, lots of market makers know that a bunch of a novice investors are going to be coming into the market, so they jack up the price and wait for someone to make a bad trade.
It makes me crazy that subscribers won't use limit orders. They won't be patient. But that's what happens. Meanwhile, a few days later, the price would return to normal and everyone who wanted to trade the position could, at a reasonable price.
We know that's what usually happens. We know it frustrates lots of you who don't have the ability to watch the market every day and wait for the price you want.
So we've worked hard to build a better "mousetrap" that we believe can defeat the market makers trying to jack prices up... which can serve a lot of subscribers in real time.
We're going to avoid the single-stock, single-options-contract problem by not covering just one stock at a time. In Stansberry's Big Trade, we're covering 30 different positions every month. Market makers can't manipulate all of these stocks at the same time.
Furthermore, dozens and dozens of different put options exist on each of these stocks, which expands the potential universe to thousands of possible positions.
Yes, we will still build a model portfolio using specific contracts, but we will simply be picking the puts that have the most attractive price (the lowest implied volatility) at the time we publish. Those prices will surely be a little bit different by the time you get our work or at the time you're ready to trade. We'll show you how to find the puts that are the most attractive whenever you're ready to buy.
What you have to understand is that this strategy isn't merely predicated on these individual companies having credit problems. They all have serious credit problems. As a result, as the credit-default cycle moves forward, these stocks will tumble. The volatility on these stocks will soar. The prices of their put options will soar across the board.
That's what you really have to understand. This is really a bet on rising volatility.
Even if these stock prices don't move much, we can still do very well simply trading around these positions as volatility rises and falls. We want to buy puts when the "VIX" is below 15. We want to sell puts when the VIX approaches 25. Doing that now, we should be able to generate gains that we can commit to even longer-dated options to carry us deeper into the default cycle.
Subscribers who decided to sign up early and received "beta" access to The Dirty Thirty have already seen how this works. They earned big profits last week when volatility spiked before the election. The underlying stocks didn't even move on the week, yet some subscribers saw gains of 40% or more.
That's why, to be successful, you'll want to buy puts from across The Dirty Thirty based on whichever options give you the lowest implied volatility. That's how you can capture these volatility-based gains.
We've identified the most liquid "benchmark" long-dated puts in each stock and will give you the implied volatility for each one. All you'll have to do is find the puts that are most attractive (lowest-priced) at the time you're ready to trade. We'll point you in the right direction, of course. But these prices are changing all of the time, so you'll want to look around and see what the market is offering you at the time.
"... The question I have is about timing and position sizing. You frequently point out that economic trends, mispricing of assets and otherwise dysfunctional markets can continue longer than anyone might expect. The continuing bull market in U.S. equities is an example. This makes betting against the market quite perilous, it seems, compared with sticking with the trend on the way up, and exiting when our trailing stops show us to the door.
"So the short question is, how do you size a 'short' position when hedging the market? What portion of your long equity positions should be hedged? As an older investor, I want to continue to avoid a 40 to 50% wipe out at this point, and so far, your recommendations for raising cash, hedging with gold/silver positions, and otherwise cleaning up my portfolio have served me well the last year." – Paid-up subscriber Larry C.
Porter comment: Great question. The most important way to hedge your portfolio is simply by holding cash. That will give you "dry powder" when the stocks you want to own begin to trade at reasonable prices.
The best hedge-fund managers (like Seth Klarman) have around 40% of their equity portfolios in cash right now because they know that both the stock market and the bond market have been manipulated to unsustainable prices. A correction is coming... only the timing is uncertain.
If you look at my Investment Advisory's model portfolio right now, you'll see we have 10 short positions and 11 long positions. In that way, we're hedged almost 50% short. But another dozen companies are long-term holds in our portfolio. So you might say we're about 20-25% hedged with short sells.
But that's misleading. You see, four of our long-term holds are well-run property and casualty insurance firms that we're unlikely to sell, no matter what happens during the credit-default cycle. In fact, as interest rates rise, these companies should see their earnings increase substantially.
Another four recommendations are ultra-high-quality, long-term holds. These four companies are among the world's highest-quality credits. Their stocks are among the least volatile in the market. And their business models are among the most capital-efficient in the world. I'm talking about Johnson & Johnson (JNJ), Microsoft (MSFT), McDonald's (MCD), and Hershey (HSY). These eight positions, as a whole, are safer than cash because they provide increasing amounts of income and are thus hedged against inflation. On a combined basis, they have almost zero volatility.
Finally, three or four of our recommended stocks are, in fact, hedges themselves because they're negatively correlated to the stock market as a whole. I'm talking about our junior mining recommendation, our gold recommendation, and our zero-coupon bond position. These positions tend to go up in price when the market falls.
Ergo, even without our short positions, we have a portfolio that's designed to do well no matter what happens to the overall stock market. Roughly half of our long positions are either relatively uncorrelated or even negatively correlated to the stock market as a whole. Plus, about 20%-25% of our portfolio is "short" the market. This is what "feels" right to me given the current situation in the market.
But this allocation wasn't necessarily intentional. When we sit down to manage our portfolio every month, we don't target any specific allocation mix. Instead, we look in the market to find investments that look safe and cheap. It's the opportunities we focus on, not the allocation. Our allocation is created because of the mix of opportunities that we find, not the other way around.
Having said all of this, with stocks trading near all-time highs (on an enterprise value-to-earnings basis), and with so many economic signs that suggest we are late in the credit cycle, I recommend holding at least 25% in cash and at least 10% of your portfolio short the market. With 10% to 15% in gold and some gold stocks, that would get you to around half of your savings into non-correlated or negatively correlated assets.
If you want to be long stocks at all, focus only on the highest-quality names. No matter what, I wouldn't be holding more than 40% of my liquid assets in stocks. The balance of my portfolio would be high-quality credits, like the kind we've been recommending in Stansberry's Credit Opportunities.
Keep in mind, though, this is only a rough outline. Everyone's goals, income needs, and risk tolerance are different.
One last point... I'm often asked how much cash I'm personally holding. The answer is that cash is by far my largest position. A substantial portion of my liquid assets is usually in cash. Why? Because at 43 years old, I'm nearing the peak of my income-earning ability. It's natural that cash should build up in my accounts. And with a high current income, it's also natural for me to be patient and strategic about allocating capital. The higher your income, the more patient you can afford to be. That's a luxury I won't have forever, but I'd be nuts not to take advantage now. That's why when people ask me what I earn on my cash, I always tell them, "Not much... yet."
"Can you address the issue of companies and corporations securitizing loans by selling them to investors? These, as in your comments about Hertz and Avis, have to be rolled over regularly; will they have access to the credit markets that they can afford? Do other asset-backed securities, (mortgage backed securities, NOT subprime) for example, face the same stresses with respect to a possible liquidity crisis?
"Will the probable slow increase in interest rates by the Fed, (increased borrowing costs), and the diminished value of used cars in the case of rental car companies be just a small blip in the marketplace? I'm concerned about the integrity of so many assets, bundled and sold off to investors. Who monitors or constrains the development of the derivatives that arise from them? How do we stop this insanity?" – Paid-up subscriber Bob E.
Porter comment: You're right, Bob, lots of huge companies routinely securitize assets to sell to investors. Capital One (COF) comes to mind as an example. It packages its credit-card receivables into securities and sells them as asset-backed securities ("ABS").
But these securities do not have to be "rolled over." What happens instead is that if default rates reach a certain level, the issuing company suffers losses. When that happens, the market generally refuses to continue to securitize their receivables at reasonable prices, shutting these companies off from the credit markets. That can cause a panic in the share price, as investors begin to fear if the company can survive the downturn.
The real problem isn't the ABS (which is important to sentiment but isn't a huge piece of the credit market). As I've pointed out many times, problems in the credit markets are "contagious." Defaults on asset-backed securities serve as a "canary in the coalmine" and warn investors about the potential for a default cycle.
Right now, the biggest problem in the credit market is rising default rates on corporate bonds issued by oil companies. That's causing the default rate on high-yield corporate bonds (roughly $3 trillion outstanding) to move above 5%, which is causing the cost of capital to rise across the spectrum. This rising cost of capital will make it harder for lots of companies to refinance their debts (not just oil firms) and that will cause even more defaults next year.
The second-biggest problem in the credit markets is the rising default rate on securitized auto loans. This is going to be a huge problem next year, as it will cause automakers to significantly curtail manufacturing. That will cost America tens of thousands of jobs and lost income. That, in turn, will put even more pressure on consumer-loan securitizations. That's how the credit cycle works. Once defaults hit a certain level, the spiral down begins.
Yesterday, GM announced it's laying off 2,000 workers and cutting production of the Chevy Cruze and the Cadillac ATS and CTS models. GM's deliveries are down 7.5% this year.
"Like many others I have enjoyed and benefitted from reading your cogent contrarian economic analysis over the years. I don't always agree with you politically, but my question, though it may seem to be politically argumentative, is not – I am genuinely confused by a recurring theme in your writing and would like to understand this: Why do you (and so many others) say that Medicare and Social Security are discretionary government spending programs, when they are simply government-mandated insurance programs that individual workers have paid into by having part of their hard-earned salaries diverted from their paychecks decade after decade. Conversely, why is military spending is called 'mandatory' when it is paid for in the exact same way but not being repaid to the people whose money is taken away by the government to fund it?" – Paid-up subscriber Art G.
Porter comment: I'm afraid you have it backwards, Art. Transfer payments (which you wrongly understand as "insurance") are known as mandatory spending. The Pentagon and other government efforts (like building roads) are known as discretionary spending. We used those terms accurately yesterday.
The fact that we're spending 70% of the government's budget on mandatory transfer payments will greatly harm the government efforts to boost the economy. As I hope is obvious, borrowing even more money to steal from Peter and pay Paul won't produce any lasting economic gains.
More importantly, your understanding of Social Security and its offshoot, Medicare, is sadly flawed. The government wants you to believe Social Security is a government-administered annuity and Medicare is an insurance program. But they most assuredly are not... and never have been. Social Security is a government-run Ponzi scheme and Medicare is an out-of-control welfare program. Both programs are funded by taxes that flow through the U.S. Treasury, like all other taxes.
And like all other government benefits, you have no legal right to Social Security or Medicare benefits. When I have explained this before, subscribers have always become furious with me, as if I was making this up or if it was my idea.
Don't shoot the messenger. I'm merely telling you what every American taxpayer should already know. These issues have long since been decided by the Supreme Court, which ruled in 1937 that Social Security "contributions" were in fact taxes (Helvering v. Davis).
It then ruled in 1967 (Fleming v. Nestor) that Social Security isn't an annuity and that you don't have legal right to any benefits. Quoting from that decision...
To engraft upon the Social Security system a concept of "accrued property rights" would deprive it of the flexibility and boldness in adjustment to ever changing conditions which it demands... It is apparent that the non-contractual interest of an employee covered by the Act cannot be soundly analogized to that of the holder of an annuity, whose right to benefits is bottomed on his contractual premium payments.
By the way, when the Supreme Court says deprive it of "flexibility," what it really means is that in a Ponzi scheme, somebody always gets screwed. And yes, the government can screw over whoever it wants. Folks who believe they will continue to receive meaningful Social Security payments for the next 20 years are the folks who are going to get screwed.
If you doubt what I'm saying, just consider these numbers, which were published by the Social Security Administration: On average, a couple that retired in 1960 contributed $18,000 to Social Security and Medicare (in 2011 dollars). Total benefits received were $248,000 – a return of 1,277%. For a couple that retired in 1980, these same figures were $104,000 contributed and $512,000 in benefits, a return of 378%. By 2010, the returns had fallen considerably – now $352,000 in contributions that were worth only $798,000 in benefits, a 226% return.
Just like any other Ponzi scheme, the "returns" are amazing at first and then decline before collapsing. And in fact, the "returns" would have long since turned negative, except for the fact that Social Security taxes have been increased 40 times since the program began. That was necessary, because today, only three workers must support each retiree (down from 16-to-1 in 1950).
By 2030, the numbers will fall to two workers supporting each retiree. Yes, the two retirees could still outvote the worker and vote themselves his wallet... but the worker will probably quit, as the nature of the scheme will become clear. (Remember game theory?)
Thus, the entire system will soon collapse. And folks who believe that these taxes are akin to an annuity are going to be grievously disappointed. Having been invited to a lovely dinner, they will be shocked to learn that they're the main course.
The simple truth is, these programs redistribute wealth in a politically expedient way: "We're going to tax folks who haven't been born yet and give the money to you!"
Like any other Ponzi scheme, it worked great at first...
Finally, if you want a sure way to find out if your Social Security "contribution" is a tax or not, just try not paying it. You'll quickly find out what these programs are really all about: power.
Regards,
Porter Stansberry
Baltimore, Maryland
November 10, 2016
Always Look on the Bright Side of Life
I have to admit, this is fun!
I'm not a big Trump fan, but nonetheless, I woke up Wednesday morning in an oddly good mood.
(Although, with a slight headache from staying up too late watching election results and medicating myself with too many antidotes for political commentary – on the rocks with a splash of soda.)
Speaking of good moods, I hope you readers made some money and picked up some bargain stocks Tuesday night when gold soared and shares tanked. But you had to move fast. By midday Wednesday, markets had already decided that they're OK with a Trump presidency.
And I'm OK with seeing the smirk wiped off the face of people who consider themselves to be America's elite… starting with the Clintons.
The election may have been won by Trump, but it was lost by the smug look worn by everyone in the Clinton camp.
And "everyone" was in the Clinton camp – every sanctimonious celebrity, preachy egghead, public goody-two-shoes, plaster saint pundit, simon-pure editorial writer, and mealy-mouthed business bigwig. The Clinton campaign was a who's who of the self-righteous and a what's-what for the holier-than-thou.
About time somebody let the air out of them.
I'm also enjoying watching the Clintons and their clique try to blame the election loss on something – anything – other than the Clintons and their clique.
There's the FBI excuse.
But it's not like Hillary's e-mail scandals hadn't been front and center throughout the campaign. And FBI Director James Comey let Hillary off the hook – again – four days before the election. Comey put the spotlight on Hillary's aide, spooky-ooky lost-member-of-the-Addams-family Huma Abedin and her obviously insane estranged husband Anthony Weiner.
Voters were thereby given a timely reminder of just how icky things can get in the Clinton inner circle. This, however, does not account for Hillary's loss. After all, the ickiest reminder of all – Bill Clinton – had also been front and center throughout the campaign. Ever since Monica Lewinsky, it has been impossible to look at Bill and not see an entire presidential administration in its tighty-whities.
There's the "glass ceiling" excuse.
"Americans are just too backwards to elect a woman boss."
But people all over the world – some at least as backwards as Americans – have elected women.
Aung San Suu Kyi runs Burma. Angela Merkel runs Germany. Theresa May runs Britain, and Margaret Thatcher used to. Then there was Golda Meir in Israel and Indira Gandhi in India. Gandhi was first elected in 1966, at a time and in a place that was far more sexist than the U.S. here and now.
It wasn't "a woman" American didn't want to elect. It was Hillary.
And there's the "whitelash" excuse.
"Trump was elected by grumpy old white guys, and nobody but grumpy old white guys."
This doesn't add up. I've done the math. In the three generations of my immediate family, we have nine people and only a third of us qualify as grumpy old white guys. And one of us has been dead for years.
Trump was elected for the simple reason that the federal government is broken and everything we've tried to do to fix it hasn't worked. When everything you've tried doesn't work, try something different. In this case, very different.
The big top has collapsed on the political circus, so let's go to the real circus instead.
We don't know whether Trump can remove the red nose, get out of the giant shoes, doff the fright wig, scrub the greasepaint off his face, and become an effective ringmaster. But it will be fun to watch him try.
Meanwhile, in other ways, I'm disappointed with the election results.
For one thing, I'm disappointed with the Libertarian Party. Here was a chance for Gary Johnson and Bill Weld to go to Washington and paint the town red. But their campaign was like watching paint dry, except they forgot to bring any paint.
More to the point, I'm disappointed because I'm a conservative/libertarian/sort-of Republican who is convinced that this country is headed for disaster. And I wanted a left-wing/liberal/for-sure Democrat to be in charge when things went to hell.
And things will go to hell. This is because of the Big Bang speed of expansion in the size of our government... and the Deepwater Horizon oil slick spread of that government's scope... and our fat deficit, morbidly obese debt, and free-lunch monetary policy.
I don't think Trump can or will reverse these trends, not even with the help of a solidly Republican House and Senate and the opportunity to appoint a Supreme Court full of Scalia clones who live to the age of Methuselah.
The reason I don't think so is because the Republicans have been here before. From 2003 to 2007, the GOP dominated all three branches of government and showed no sign of getting that government to slow down, clean up, or get fit. From 2003 to 2007, the national debt grew by $2.2 trillion.
And that was back when Republicans were made of sterner stuff. Not like the Trump Brand™ "Big Promise Populists" who will control Congress for the next two years. They'll be too busy vowing to build a wall here, raise a tariff there, and find a "better" replacement for Obamacare someplace else. (In the language of politicians, the word better always means "more expensive.")
My personal strategy for the 2016 election was to see Hillary and the Democrats get elected, thereby hastening the crisis and getting the going-to-hell over with sooner. Let Hillary and her party take the blame. My hope was that the Democrats would join the Federalists and the Whigs in the American political party recycling bin, and that "Hillary Clinton" would replace "Millard Fillmore" as America's punchline president.
But the electorate has decided otherwise. It's all over for the former First Lady and Secretary of State. The electorate has decided to leave Hillary only wishing that she could go down in history for being as illustrious and well-remembered as Fillmore.
And I, for one, honor the electorate's decision.
Regards,
P.J. O'Rourke