Good Friday Morning! Has anyone been to Greenland? Donald Trump wants to buy the place. That’s a real story from the Wall Street Journal this week — for the record, I’m very pro-buying Greenland. We have to fence those Canadians in geographically. Another real story is one from the Daily Mail, who reported that the now deceased Jeffery Epstein owned a painting in his NYC townhouse of Bill Clinton wearing the Monica Lewinsky blue dress. The NYPost independently confirmed the story.
Quick hit: There’s a diplomatic dustup right now involving members of the “Squad,” and Israel. Israeli PM Benjamin Netanyahu has banned Representatives Omar and Tlaib from entering Israel. It was a reversal of a previous decision where Netanyahu agreed to have the two on a diplomatic trip. Here’s what happened, Trump leaned on Israel to disinvite Omar and Tlaib from entering the country and Netanyahu obliged. That would seem unwise to me. It’s better just to let them in and kill them with kindness. But, as Seth Mandel notes, Omar and Tlaib were supported and sponsored on this trip by an organization that seeks Israel’s destruction — including Palestinian terrorists. You have to work hard to be as anti-Semitic as these two are being for this proposed trip. And it’s not a “Muslim ban,” as some in the west are saying.
This week I’m focusing in on two important stories that could shape up to impact the 2020 elections. Links to follow.
Where you can find me this week
The recent mass shootings offered a look at how the media handles the same situation when differing ideologies are involved.
While Epstein’s suicide is terrible, we must force our judicial system to shine a light deep into his criminal enterprise. Trust in our institutions, which enabled Epstein for decades, is at stake.
Epstein, Recession, and the 2020 election
Two stories are shaping up to impact the 2020 election. The investigation into the now-dead Jeffery Epstein, and signs a recession are near with markets showing an inverted yield curve. Both stories are far-reaching with the potential to shake up the 2020 race if fallout occurs from them.
The Epstein investigation
For the time being, I don’t have any reason to disbelieve the main account of Epstein’s death. If it’s a suicide, I don’t need a conspiracy theory to explain it — though, as I wrote this week — I don’t blame you if you hold conspiracy theories. Epstein’s entire life was aided and abetted by a legal and cultural system. I don’t know how he did it. The accounts are barbaric. Rich Lowry drilled this point home this week, Epstein got away with a pattern “errors” from the legal system:
It was a mistake that Epstein got to leave 12 hours a day, six days a week, while briefly in jail in Palm Beach so he could pursue his “work” (including bilking one of his clients).
It was a mistake that New York City police didn’t enforce the requirement that Epstein check in with them every 90 days as required under his sex-offender status. (Don’t you know, Epstein’s primary residence was a private island in the Caribbean, not New York?)
All the while, Epstein continued to socialize with fancy people, buying his way into their company and entertaining the great and the good at his New York City mansion.
It was only when the Miami Herald unearthed the enormity of his crimes that Epstein’s world began to unravel. He got charged with sex crimes by the Southern District of New York. Although, still, Epstein’s lawyers got what they wanted on at least one key request. They reportedly asked for him to be removed from suicide watch while in custody despite a prior suicide attempt. The authorities assented, and Epstein apparently killed himself, a punctuation mark on the futility and incompetence of a government that had ample opportunity to bring him to justice and failed every single time.
It shouldn’t be possible for a hideous monster to game the American system of justice, but it’s exactly what Jeffrey Epstein did, from loathsome beginning to unforgivable end.
But while I agree that there’s a pattern, I don’t see a conspiracy. The problem with a conspiracy theory here is that I don’t know what it would accomplish. The investigation is going to continue. Epstein’s empire is going to come down (if investigation stops, then start up the conspiracy theories). Epstein’s death doesn’t stop anything, except for him answering for his sins in a court of law.
Prosecutors included in their indictment a conspiracy charge, which means they have other people targeted as part of their investigation for aiding Epstein in his debauchery. Just days before Epstein’s death, the Miami Herald named big names as part of a document dump of unsealed court records:
Besides [former Maine Sen. George] Mitchell, they include: the late scientist Marvin Minsky, modeling scout Jean-Luc Brunel, former New Mexico Gov. Bill Richardson, 71, Hyatt hotels magnate Tom Pritzker, 69, and prominent hedge fund manager Glenn Dubin, 62. Giuffre has previously identified Epstein’s lawyer, Alan Dershowitz, 80, and Prince Andrew, 59, as two of the people with whom she had sex.
Epstein was ridiculously well-connected. And while the Clinton in the Lewinski dress painting is funny and bizarre, it underscores their relationship.
The Epstein story is one of those things where it’s not what we know that’s troubling. It’s what we don’t know. No one knows how Epstein made his fortune. No one can track down a single Wall Street fund that he managed. Rumors swirl that Epstein blackmailed the rich and famous. When Epstein got arrested, what got reported of a search of his house seemed to support that theory:
Back in 2015, a woman named Virginia Roberts alleged that U.S. authorities had footage of her having underage sex with powerful friends of billionaire Epstein, who was charged by federal prosecutors on Monday with sex trafficking, including trafficking minors. Roberts said Epstein “debriefed her” after she had sex with these “associates” so that he would possess “intimate and potentially embarrassing information” that could be used for blackmail. Epstein’s allies dismissed Roberts as “a liar and a fantasist.”
But after Epstein was arrested on Saturday, a law enforcement search of his Upper East Side apartment reportedly revealed compact discs in a locked safe labeled “Young [Name] + [Name],” which, as The Intercept‘s Ryan Grim points out, could buttress Roberts’ allegations.
Rumors also swirl around what Epstein could have had stashed in his truly bizarre Carribean compound. Allahpundit linked to some stories that Epstein had a secret vault on that island.
And that’s the thing; ultimately, I don’t know what to expect from this story. It’s already a conspiracy theory simply because you have an international child rapist globe-trotting everywhere with the rich and famous, with his main base of operations on an island that the locals nicknamed “Pedophile island.” It’s insane.
Which brings me to 2020: There’s a non-zero percent chance that this Epstein investigation ropes in someone significant during the 2020 race. Epstein’s circle was too big, too wide, and the potential for fallout is on a nuclear level. I don’t know who it could impact, ultimately, but if people do get taken out by it, I’d expect them to squeal to investigators. This story could get even uglier than it currently is… which is why I don’t see Epstein’s death as a hindrance.
The economy and a recession
The other big story this week was that the yield curve on bonds inverted. It’s widely considered one of the few accurate predictors of a recession within 12-24 months. What is in an inverted yield curve? Glad you asked, Heidi Moore had a simplified explanation that is better than anything I could write:
So first the context: Why the bond market tells you more about the economy than the stock market. We all hear about the stock market every day. The S&P 500, the Dow Jones Industrial Average. What is the stock market? Think of it as a literary device. The stock market is a way that people tell short stories about companies.
So for instance: When a stock is up, people are telling positive stories about that company. When a stock is down, people are talking smack about that company. When the “stock market” is up: Well frankly that is meaningless. No one knows why it goes up or what it means. When it goes down, yes everyone is cranky. But we still don’t know why. It could be literally anything. It’s never ONE thing.
So the stock market is actually a tiny fish. The big fish is the BOND market. TRILLIONS of dollars.
What are bonds? They are how companies and governments borrow money.
Every bond is a contract that says “we’ll pay you back with this interest on this date.” Bonds ALSO tell a story about a company or a government. But it’s a BETTER story, a novel rather than a short story. That’s because selling stock is pretty casual but borrowing money requires a lot of proof and documentation. Bond investors are SKEPTICAL.
Similarly, companies and governments that sell bonds don’t want a lot of pikers who run around selling loans. They want people to stick around. So, to lure people to buy bonds — to lend money to a company or government — and HOLD ON TO THEM, companies and governments promise a higher “yield” to people who promise to lend them money over a long time.
What is a long time? Let’s call it at least 10 years. So if you buy a bond in which the company promises to pay you back over 10 years, you make MORE yield than people who only lend money for one year. It’s also good to lend money over 10 years. It shows you have faith the company or government will be in good shape in 10 years.
Now let’s go to Treasury bonds. There are three important durations of US Treasury bonds: 3 months, 2 years and 10 years. To be clear, that means investors are lending the US government money over 3 months, or over 2 years, or over 10 years. The yields should *always* be higher on 10-year Treasury bonds. I mean, you’re not seeing your money get paid back for 10 years! You should be compensated accordingly.
So that is the yield curve: It shows short-duration bonds with lower yields than the long ones. HOWEVER. (dark music) Over the past few months, yields have been higher on the LOWER END. So buying US Treasuries for only 3 months paid more than keeping them for 10 YEARS. And today, briefly, you could make more money buying two-year Treasury bonds than 10-year ones.
This phenomenon of getting paid more for a short-term loan than a long-term loan to the US government: It is all upside down! It’s inverted! Ergo the INVERTED YIELD CURVE.
So why is this specifically bad news? Well because when the yield curve is INVERTED, usually a recession follows within around two years. That’s been the case for the last 5 recessions. Inverted yield curve predicts recessions. And that is why it bad news when there is an inverted yield curve.
The question to ask from that is: 1) Is this a real inverted yield curve, or is it somewhat artificial due to Federal Reserve interference?
I don’t know the question to that question. I tend to agree with Ben Hunt, over at Epsilon Theory, that markets have left reality behind and are driven more by narratives than fundamental factors. If that’s the case, the federal reserve could “fix” this problem through monetary policy — and it wouldn’t shock me if they did just that in the next six months. This situation could also be a distorted signal, as Mohamed El-Erian has suggested.
On the other hand, what if it is real? Then that means sometime in the next 12-24 months, the US economy is signaling it is headed for recession. We’re approximately 15 months away from the 2020 election, meaning it’s well within reason the markets could tank just before the election. Elizabeth Warren already set her campaign stakes on the issue, predicting there would be a recession last month.
Conventional wisdom is that Trump’s candidacy is over if he enters the 2020 election with a failing or weakened economy. I don’t know that this is 100% true — but is conventional wisdom, and I don’t have any objections to it right now.
So, if this is a valid recession signal — and I have doubts that it is — the economy will take over as the number issue next year. Like the Epstein case, keep this filed away in the back of your brain while watching events unfold.
Links of the week
What Is To Be Done About Facebook? – An account of its rise, its practices, its manipulations, its apologies, its determination to dominate— with some tough suggestions about its future – Christine Rosen, Commentary Magazine
The Long History of Politically Motivated Travel Bans: Israel’s decision to bar Tlaib and Omar from visiting may not be wise, but all talk of violation of democratic norms is moronic – Liel Leibovitz, Tablet Magazine
Ebola Is Now Curable. Here’s How the New Treatments Work – Megan Molteni, Wired Magazine
“How do you propose to end mass shootings then?” – thewriterinblack
Skillet’s John Cooper on Apostasy Among Young Christian Leaders – George Brahm, Cogent Christianity
Max Boot’s Dishonesty: He intentionally misconstrues what others write and then lies about it, knowing that no one will bother to uncover his distortion. – Charles C. W. Cooke, National Review
Facebook Paid Contractors to Transcribe Users’ Audio Chats – Sarah Frier, Bloomberg
Epstein’s Death Was On 4Chan Before Officials Announced It — And Authorities Had To Look Into It: About 38 minutes before news outlets first reported Jeffrey Epstein’s death in prison, a 4chan user published a detailed post about it. – Jane Lytvynenko, Buzzfeed News
Laurence Tribe’s Fact-Free Defense of Abortion Rights – Alexandra DeSanctis, National Review
Are AR-15 Rifles a Public Safety Threat? Here’s What the Data Say: Is it true that the AR-15, a popular firearm owned by millions of Americans, is a unique threat to public safety? – Being Classically Liberal, FEE.org
Universal Background Checks Are Constitutionally Suspect – David French, National Review
Guns and the ‘New Class’ Why the debate over gun control is so polarized – Matthew Continetti, The Washington Free Beacon
Twitter Thread(s) of the week
Satire piece of the week
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