AIKEN, South Carolina – The poor Republicans!

A Washington Post story wonders if the party could “break in two.”

Party stalwarts are threatening to desert to Hillary. And a Texas newspaper worries that the GOP could be “on the verge of extinction.” 

Feeding Like Leeches

Not much to report from Wall Street yesterday.

The Dow is still teetering on the 17,000 level… like a school bus on the edge of a bridge.

Several readers wrote in to complain about our fact-ish item: that $176,000 was the cost of “salaries” for the typical third-grade classroom.

The figure came from Conspiracies of the Ruling Class, a new book by Lawrence Lindsey, the director the National Economic Council during the G.W. Bush administration.

The title was so provocative, we picked it up.

The idea of a “conspiracy” at the top of U.S. politics… and a “ruling class” in what is supposed to be a republic… suggested that the author, a Republican insider, had lost his party membership… or his mind.

We opened it eagerly… hoping it was the former, not the latter.

Perhaps Lindsey – anticipating the neocons who are abandoning the GOP banner for the Deep State favorite, Hillary Clinton – had stolen a march on them… and gone over to the Democrats.

Lindsey’s point, insofar as the education numbers are concerned, was that the typical third-grade teacher doesn’t get a salary of $176,000. Nowhere close.

Instead, the money goes into salaries for administrators, “educators,” and all the assorted zombies now feeding like leeches on the public school system.

Rigged and Rotten

You could look at the entire system in the same way.

You’d find zombies hiding in every corner and crevice – from the National Labor Relations Board… to the Federal Bureau of Prisons… to Pentagon procurement… to the Food and Drug Administration… to the Securities and Exchange Commission.

The whole shebang is rigged and rotten – including the financial system.

The typical voter doesn’t understand why or how. Who does? But he feels it. Something is wrong; he knows it. And more and more, he wants to say so.

So far, the most effective voices for this discontent are Donald Trump and Bernie Sanders – neither of whom has much truck with the GOP’s traditional principles.  

Consider a report yesterday in Investor’s Business Daily.

“Small Businesses Are Hitting the Brakes on Wages and Benefits,” reads the headline.

The article that follows gives the results of a poll of small business owners. Generally, they are not feeling their oats. Instead, they are putting a “chill” on hiring and capital expansion projects.

This attitude is now being blamed for the surprisingly weak wage data that came out earlier this week. More people are working – according to the official reports – but doing less overtime and earning less money.  

The survey also revealed the following detail:

Another factor for weaker wages: In addition to weaker sales, a net 4% reported lower selling prices, the worst in more than five years.

Lower prices leave businesses with lower margins. And less desire to hire. This is part of the dreary picture that faces young people today… and it’s why they, too, may be turning against the GOP and its “establishment” candidates.  

Generation Stagnation

From Red Alert Politics, an online publication for conservatives, comes the following report:

A 30-year-old millennial earns roughly the same as what a 30-year-old earned 30 years ago, according to a new study from the Center for American Progress.

The wage stagnation is demoralizing when the differences are vast. Millennials today “are 50% more likely to have finished college and that they work in an economy that is 70% more productive,” but a weak recovery and a shift in the labor market has kept starting salaries low, the report notes.

The median compensation for 30-year-old workers in 1984 was $18.99 per hour. By 2004, it had moved up to $20.63 hourly, but declined to $19.32 hourly by 2014.

The Atlantic added further detail:

In retail, wholesale, leisure, and hospitality – which together employ more than one quarter of this age group [between 25 and 34] – real wages have fallen more than 10% since 2007.

To be clear, this doesn’t mean that most of this cohort are seeing their pay slashed, year after year. Instead it suggests that wage growth is failing to keep up with inflation, and that, as twentysomethings pass into their thirties, they are earning less than their older peers did before the recession.

Count on a progressive think tank like the Center for American Progress to provide claptrap “solutions” – including increasing “private sector unionism.” Bernie’s got answers, too – raising taxes on the rich and providing free education and free health care.

But the poor GOP – and its leading man, Trump – has no answers at all, not even crackpot ones.

Mr. Trump is a dealmaker. A negotiator par excellence. But who are you going to negotiate with to get the economy moving in the right direction?

We saw him on TV last night. The more we see him, the more we like him… and the surer we are that Americans are doomed.

“The world is ripping us off,” he said; who “the world” is and how it rips us off is unclear.

Part of the Problem

Old-school Republicans would have had answers. But you’d have to go back a long time to find them.

“Try some real money for a change,” they would have said.

“And, oh yes, balance the budget, too.”  

But today’s Republicans are usually part of the problem, not the solution. They have been bought by the Deep State. Now, they offer much the same nonsense as the Democrats: tax, spend, borrow, regulate, bomb, imprison. In that regard, the last Bush administration was probably the worst in modern U.S. history.  

The GOP is in disarray. It doesn’t believe its own core ideas. Neither does its standard bearer, Trump, or the voters.  

When we picked up Lindsey’s book, we hoped he might put some light on the subject. Or at least a kick in the derriere to the Republican leadership.

“They lost the plot,” he might have said. “They set up the Deep State to take over. No wonder their candidates aren’t winning!”

Instead, he loses the plot himself. It’s all the fault of the liberals, Obama, the Clintons… and even Franklin Roosevelt, he suggests.

In such a target-rich environment, it is a shame to waste the ammunition on the dead.  




Portfolio Insight


[Bill’s Note: For over a decade, value investor Chris Mayer has been one of the top-performing analysts in our business. And we’re proud to have him as the newest member of the Bonner & Partners team. Chris is working on an exciting new project for Diary readers – code-named Bonner Private Portfolio. So, expect to hear more from him in these pages over the coming weeks.]

It won’t matter much whether Donald Trump wins the presidency or not.

As Bill has been warning, the Deep State is in charge…

But Trump can teach us a thing or two about investing…

I just finished his first memoir, The Art of the Deal. And it’s a fun read. Trump tells great stories. He’s funny. And he certainly knows how to make a deal.

“Deals are my art form,” Trump writes. “Other people paint beautifully on canvas or write wonderful poetry. I like making deals, preferably big deals.”

Many people write-off Trump’s success because his father, Fred Trump, was already a wealthy real estate developer. They say Trump Sr. gave his son a leg up. But there were five Trump children… and only Donald became a billionaire.

His first big deal was the Commodore Hotel at Grand Central Station. The owner of the hotel, Penn Central, was in financial trouble.

Trump knew that unless “the city literally died,” the location of the Commodore could make the hotel a hit. He struck a deal with Penn Central, once again using little of his own money. (His father helped with a debt guarantee, a fact Trump conveniently omits in his book.)

Today, the Commodore (Grand Hyatt) is a four-star hotel. Trump sold his interest for $140 million in 1996 – about 14 times his purchase price.

Throughout the book, Trump repeats this strategy. He gets the property cheap enough to cover his downside risk… and he buys it with leverage.

Sometimes, the strategy didn’t pan out. But using leverage allowed Trump to magnify his wins. It’s a secret of many great investors, including Warren Buffett.

Trump’s early success boils down to this: Buy cheap. And use other people’s money.

With the downside covered, the upside can be enormous.

P.S. Recommending cheap stocks helped me deliver an average return of 28.8% on my recommendations over the course of a decade… and beat the S&P 500 three to one. Right now, I am creating a new investment advisory that builds on my proven strategy.

If you’d like to get exclusive updates about this exciting new project – and hear my insights as I work to develop it – I’ve set up a special mailing list. Tomorrow, I’ll be revealing a specific type of stock everyone should avoid right now. So you don’t miss out, sign up for free here.

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CoLots of interesting feedback today… all about one man: Donald John Trump.

If Trump wins this election, we are screwed. Every president has been worse than the last, and Trump will keep the record going.

How could anybody think that blow hard has any real sense or a halo setting atop his horns. The big underlying problem, worldwide, is the welfare state. The checks will stop coming, then all hell breaks loose.

At least during the Great Depression people could go back to the family farm to get something to eat. That cushion is no longer available.

— Jerry C.

During the last presidential election, the Republican Party insiders defeated themselves by destroying each others credibility to point that the best of them did not have a chance. I was embarrassed to call myself a Republican.

Most of this bickering was done by insiders or former insiders of the establishment. It is time for a change in what has been taking place. The negative comments and derogatory remarks by influential people – Mr. Bonner included – will cause us to have four or more years of the fiasco that we have had the last eight years.

Bill, I like reading your diary and appreciate your insights concerning the markets and the economy. I find they cause me to think about situations in a different light… and that is always good. 

— Dale H.

What Trump is really trying to accomplish?  

Is he deliberately being the unelectable Republican candidate for this election so that the Democratic candidate will be assured of victory?  

Since the end of the Bush I tenure, there has been a sequence of office holders in the White House who all would appear to be furthering the agenda of the principal players of the Deep State and nothing else.  

— Wayne M.

The only people who are wrong about the coming election are the conservatives who say: "If Trump (or Cruz) wins the nomination, I’m not going to vote at all.”

Do you remember a promise that the candidate who was running for office had to agree on all of our ideas? I guess I missed that.

When I was about 30, I believed you should vote for “the man, not the party.” Then I realized the party in power chaired and controlled the bills that could become law. 

— Virginia W.

And finally this…

Editor: I continue to admire (yes, that’s the word) your selections for “MAILBAG,” for I am routinely provided (by you) with abundant LOL fodder. 

Bill endlessly describes himself as an "OBSERVER,” yet MAILBAG relentlessly publishes PO’d folks over his "observations.” The evident idiocy, ignorance and bigotry of these clueless twits is truly hilarious! 

— Robert L.

In Case You Missed It…

Our colleagues at Casey Research just produced a short film about how you can turn economic turmoil into profits.

In this short video, Casey’s experts explain how investing legends like Rothschild, Buffett, and Templeton used crises to make vast fortunes. And how you can use the same techniques to build your wealth…

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