We
begin 2019, should be an interesting year. Rink Rats takes a short term and
long term view of 2019.
-
It’s been a while since the United States has faced a year like the one that we
expect 2019 to be.
This
year appears as if it will be dominated by presidential scandals — and the
question of whether President Trump can survive those scandals. If he does,
2019 could feel a lot like 1998, when President Bill Clinton did indeed
survive. If the danger continues to mount for Trump, 2019 could instead end up
resembling 1973 or 1974. The presidency of Richard Nixon, of course, did not
survive 1974.
Tellingly,
some senior Republicans now share these expectations for 2019. The Washington
Post recently quoted Steve Bannon predicting that this year would be one of
“siege warfare” for Trump. The story ran under this headline: “Republican
anxiety spikes as Trump faces growing legal and political perils.”
To
prepare for the coming political battles, we recommend some history — of the
battles over the Clinton and Nixon presidencies. Three recent hit podcasts have
covered this history, and I enjoyed all of them.
Rachel
Maddow’s “Bag Man” focuses on Spiro Agnew’s resignation in
the midst of Watergate. As she notes, many Americans now have very little
knowledge of the Agnew story, and it’s pretty incredible. The other two podcast
come from Slate’s Leon Neyfakh. The first season of
his podcast “Slow Burn” covered Watergate, and the second season retold
the story of Clinton’s many sex scandals, culminating in his impeachment.
All
three convey a sense of history-making drama, and I suspect we are about to
enter another such period.
Today here we are
on a rainy day, in the richest country in the world, in the richest state in
the country, in a state as blue as it can be and, in a city, loaded with
millionaires, where teachers have to go on strike, declared Alex Caputo-Pearl
president of United Teachers Los Angeles.
The
33,000-strong L.A. teachers’ union went on strike Monday as the Los Angeles
Unified School District (LAUSD) slouches toward insolvency due to unaffordable
labor contracts. Despite a putative $1.8 billion reserve, the district is
spending about $500 million more each year than its annual revenues and will be
broke within two years, which could prompt a state takeover and bankruptcy.
Los
Angeles teachers earn on average about $75,000 per year—about $6,000 less than
the statewide average—though compensation including health and retirement
benefits exceeds $110,000. One problem is the region’s high housing costs make
it harder to retain teachers while more and more money is diverted to benefits
and pensions.
Health
benefits consume about 15% of the $16,000 or so the district spends per pupil.
Teachers can retire as early as age 55 and don’t have to pay a dime for health
insurance until they qualify for Medicare and then receive subsidized
supplemental coverage. Few government or private employers anywhere provide
this perk.
Nearly
all California school districts are also being squeezed by rising pension
payments that the state Legislature has mandated to shore up the California
State Teachers’ Retirement System (Calstrs). School district pension costs have
more than doubled since 2014.
Thus,
school districts across the Golden State are scrounging to keep the lights on.
Last year San Francisco voters approved a $300 parcel tax on each home to fund
schools. Sacramento City Unified warns it could go bankrupt this year barring
cuts to worker benefits. Governor Gavin Newsom’s budget proposal last week
would provide schools with modest relief by making a $3 billion payment to the
Calstrs pension fund on their behalf.
But
as LAUSD Superintendent Austin Beutner notes nearby, schools can’t spend money
they don’t have. LAUSD has offered teachers a 6% raise over two years and to
hire 1,300 teachers and support staff. The union is demanding that the district
spend more no matter the district’s finances. Once higher pay and spending are
in place, the union will then lean on the politicians to lobby for another tax
increase via referendum in 2020. The tax-spend-tax-spend union ratchet never
stops.
Another
2019 issue, Climate Change, not only a definition of global warming, a problem recognized
yeas ago but nothing really being done to deal with fact that our world is
changing – the same can be said for higher education. Climate change in the model
of providing higher education, the way of doing business in higher education is
changing and will never go back to the old models of how education is funded
and how the product is distributed, the bubble will burst (college closings,
student demands, facility requirements, curriculum's changing, tenure gone). 2019
will be the beginning of change or the beginning of the end.
Winter is
coming for stocks - Not a ton of optimism to go around, huh? After some
market-churning Fed drama and a late-year slump, many of you think 2019 will
bring the same tough love for the markets.
Slight
market correction but very volatile swing in stocks...In the longer term,
student loan debt will start to become an increasing burden.
Inflation
will spike and the market will dive deeper into recession...
The
Fed reverses its course and doesn't raise interest rates in the first quarter
of 2019. The recession everyone says won't happen comes into play putting a
damper on July 4th fireworks.
Disclaimer:
Trying to predict the whims of the stock market is about as futile as trying
not to laugh at Monty Python's stock market report.
Big
Tech troubles are here to stay.
Facebook,
Google, Amazon, and others got smacked around by both the public and lawmakers
in 2018. But everyone's most worried about Facebook in 2019...
I
think we will see the end of Facebook as we know it. The platform is far too
large for an all-out collapse, but the controversy around Zuck and Sheryl
Sandberg in the Western world will lead to some huge changes in strategy,
structure, and possibly even who stays in corporate power.
No
way Zuck gets his mojo back. I think this is a snowball that has only just
begun rolling down the hill.
And
while we're here, let's quickly recap some of the big tech M&A you're
predicting for 2019.
Yes,
Apple will buy Sony. Long shot: Apple may even buy IBM in order to be a player
in the cloud...and also buy IBM's patent portfolio, as well as make a major
play into the enterprise market.
Snapchat
will be acquired. Most likely by Amazon or Disney, as they seek to gain appeal
with the younger teen generation.
Plant-based
meats are going to take off in 2019 and beyond. Impossible Foods, JUST Foods,
and Beyond Meat FTW.
I
wouldn't be surprised to see plenty more scandals pop up over the course of
2019. That being said, I think we might start to see more funding, prominence,
and success for companies with a more humanitarian focus. Whether it be by
preserving nature and taking care of the planet, or by helping raise the
standard of living, companies focused on bettering society will get a lot of
headline space, and in turn, hopefully, start to grow and thrive.
Legalization
of sports betting brings a new sector of tech boom. Prop bets galore mixed with
advanced stats.
Disney's
new OTT platform rollout will be more competitive with Netflix than people
think. They have the content and brand to generate massive subscriber growth
off the bat. Netflix will have to buckle up for a serious battle, as Disney's
going to be a legitimate threat.
2019 VOTES - It's a
big moment for global democracy. The leadership of roughly a quarter of the
world will be decided as three of the seven largest countries by population
will hold general elections in the next four months. They follow Bangladesh,
the eighth largest, which went to the polls last Sunday.
Nigeria
(February): Four years ago, President Muhammadu Buhari swept into power on a
surge of optimism, pledging to restore security and stamp out corruption. Since
then, his record has been mixed, his popularity has dwindled and his health is
poor (he recently had to deny rumors he’d been replaced by a body double). The
old guard is clawing at the door.
Indonesia
(April): President Joko Widodo is a charismatic reformer, but he’s in a bitter
fight fueled in part by misinformation about his faith. He has picked an
influential Muslim cleric as his running mate in an attempt to undercut his
strongman rival. If he loses, observers fear a rollback of democracy.
India
(April/May): Recent setbacks in state elections were a shot across the bow for
Prime Minister Narendra Modi, whose BJP party may struggle to win enough seats
to form the next government. It's a stunning fall for a leader who, until
fairly recently, looked untouchable.
2019 MARKETS - The
issues that whipsawed stocks in 2018 — trade and the Fed — aren't going
anywhere this year. That leaves few catalysts to push stocks to new highs,
despite the jump after January 4 monster jobs report.
Trade:
Almost all analysts are optimistic about the likelihood of a U.S.-China trade
deal.
The
Fed may back off on hiking interest rates as quickly as previously planned. But
the central bank won't revert to easing — despite what traders are betting.
Depending
on your outlook, these can be opportunities for Chair Jerome Powell to spook
the markets, or for the market to adapt to his communication style.
SPACE 2019 -
Astronauts haven't launched from U.S. soil since the end of the space shuttle
era in 2011. But as Russian rocketry ages and U.S. commercial and military
interests grow, the ability to carry astronauts from the U.S. will be key.
On
the horizon:
Boeing
and SpaceX — both NASA partners — are planning uncrewed tests of their
spacecrafts in the first half 2019. SpaceX's first test is scheduled for
January 17.
These
uncrewed tests will be accompanied by "abort tests" — a key
demonstration of the ability of the crew to escape from the spacecraft in the
event of an emergency.
A
demo test flight of SpaceX's Dragon space capsule, carrying two NASA
astronauts, is scheduled for June and the first crewed flight for Boeing is on
the docket for August.
The
big picture: Successful commercial crew launches would be a prelude to missions
aimed at deep space, including a possible return to the moon and an eventual
Mars mission. Both of those are probably more than a decade away.
COLLEGE
CHRONICLES – Lawmakers inadvertently exempted public universities — though not
private ones — from a new 21 percent tax they created on nonprofits that pay
their employees more than $1 million.
There
are hundreds of million-dollar employees on college campuses, many of them
football and basketball coaches. Nick Saban, the University of Alabama football
coach who earlier this week lost his bid for a sixth national championship,
earned $8.3 million in 2018, according to USA Today, which tracks coaches' pay.
Republicans are now trying to correct the snafu, though there is no sign that
Congress will act anytime soon.
The
University of California has advised students and faculty members not to use
the social-media apps WeChat and WhatsApp while traveling in China because of
the potential that their messages could be used against them.
BIRTHDAYS
THIS WEEK – Birthday wishes and thoughts this week to Kevin Costner (64), Renee
Miller …famous Accounting Professor, James Earl Jones (88), Walter Mondale
(91), Howard Stern (65), Betty White (97)
ON THIS DATE - From the
annals of British fiscal management: Today marks 450 years since Queen
Elizabeth I held the first state-sanctioned lottery in English history at St.
Paul's Cathedral in London, as she sought to avoid new taxes or foreign loans
in her efforts to keep up England's lofty world status.
SCIENCE - Deaths
from cancer dropped 27% over a quarter century, resulting in an estimated 2.6
million fewer cancer deaths during that period, according to a new report from
researchers at the American Cancer Society.
For
most of the 20th century, overall cancer deaths rose, driven mainly by men
dying from lung cancer, researchers noted. But since the peak in 1991, the
death rate has steadily dropped 1.5% a year through 2016, primarily because of
long-running efforts to reduce smoking as well as advances in detection and
treatment of cancer at earlier stages, when prognosis for recovery is generally
better.
GOOD READ –
Christopher Goffard’s original Los Angeles Times story entitled “Dirty John”
dated October 1, 2017. https://www.latimes.com/projects/la-me-dirty-john/
BUFFETTOLOGY – Warren
Buffett has a tip for young people: Focus on learning how to write and speak
clearly. “If you can’t communicate, it’s like winking at a girl in the dark –
nothing happens.” “You can have all the brainpower in the world, but you have
to be able to transmit it.”
MARKET WEEK - Amazon
closed last week with a market capitalization of $796.8 billion, surpassing
Microsoft to become the world’s most valuable public company for the first
time. The e-commerce giant jumped from fourth to first in six trading days,
gaining $74.1 billion in value in that time span.
S&P
500 companies are expected to post earnings growth of 11.2% for the fourth
quarter of 2018, according to FactSet. Based on the average change in earnings
growth due to companies reporting positive surprises, it's likely that the
index will report growth above 15% for the quarter, but below the 25% growth
reported in the prior three quarters.
U.S.
long-term mortgage rates continued to fall this week, reaching their lowest
levels in nine months. The decline in home borrowing rates in recent weeks has
been a spur to prospective homebuyers, reflected in a spike in applications for
mortgages. Mortgage buyer Freddie Mac said Thursday the average rate on the
benchmark 30-year, fixed-rate mortgage dipped to 4.45 percent this week from
4.51 percent last week.
Gold’s
rally since late last year is already facing a challenge: renewed confidence in
the U.S. economy and a rebound in stocks.
The
S&P 500 sank 14% in the fourth quarter, driving investors into safer
assets. Gold reaped the benefits, rallying 7.3%. Prices are currently near
their highest level since June.
But
looking ahead, many investors remain largely confident that the U.S. economy
will continue expanding. That means they will likely opt to ride out the
volatility in stocks, rather than piling into havens like gold, analysts say.
Days until
the 2019 election: 294
Days until
the 2020 election: 658
DRIVING THE
WEEK - The
North American International Auto Show in Detroit kicked off on Monday, and,
well...your town's upcoming 5K charity run is probably getting more press.
There
aren't going to be too many flashy announcements, while brands including BMW,
Audi, Ferrari, and Lamborghini couldn't be bothered to show up. Next year,
organizers are moving the show to June in an attempt to boost its profile, so
this will be the last Detroit auto show held in the depths of a Midwest winter.
Of
course, there is plenty to talk about in the industry...
Starting
with the collapse of sedans in the U.S.
The
fall of the sedan has been remarkable, amounting to a "mass exodus out of
classic family cars and into sport utility vehicles," writes Bloomberg.
So
how bad is it?
Sedan
models including the Honda Accord and Ford Fusion accounted for 30% of U.S.
auto sales in 2018, a record low.
Sales
of passenger cars will sink to 21.5% of the U.S. market by 2025, per LMC
Automotive.
What
this means for carmakers: They've got too many factories making the wrong
product. Remember, GM said in November it would be idling five North American
plants and cutting around 14,000 jobs.
So
what's the future?
Electric
and autonomous vehicles will eventually take center stage. The only problem?
Some automakers are finding that developing these new technologies is too big a
task to go it alone.
Ford
and Volkswagen, for example, have been trying to build a "global
automotive alliance" to keep costs down, and they're expected to reveal a
deeper partnership this week.
Tesla's
still the one with the target on its back, which is why GM is tapping its luxury
Cadillac brand to lead its EV push.
THE EMPIRE
STRIKES OUT – When did you feel that you had broken their will? ... When did you
feel that you guys had complete and total control of the game? These are the
types of questions you would like to ask a boa constrictor about the small
mammal it just strangled and ate. For a decade, Alabama has been the boa
constrictor; Last week in the BCA Championship game, the most dominant college
football program of the century was relegated to the role of the deceased
mouse. A few freshmen rebels who were in high school this time last year led
Clemson to a crushing win over Darth 'Bama.
SWAMI’S WEEK
TOP PICKS
–
NFL Football Picks of the Week – Sunday 1/20 Noon (PT) Fox; Los Angeles
Rams (14-3) vs. New Orleans Saints (14-3), the home field advantage is too much
for the Rams (still a good season) Saints win 28 – 24.
Sunday
1/20 3:30 PM (PT), CBS; New England Patriots (12-5) vs. Kansas City Chiefs
(14-3), game time weather is predicted be in the single digits, again home
field is the advantage here, Chiefs win 24
– 20. (Season
to date 15 - 8)
NHL Game of the Week – Saturday 1/19 7:00 PM PT ESPN+; Pittsburgh
Penguins (25-14-6) vs. Vegas Golden Knights (28-16-4), end of a long road trip
for the Penguins, Vegas wins the bets 5 –
2. (Season to date 7-2)
College Hockey Game of the Week – Saturday 1/19 7:00 PM ET NESN; #1
University of Massachusetts Minutemen (17-3-0) vs. #8 Northeastern University
Huskies (14-4-1) huge Hockey East
test for the Greg Carvel (St. Lawrence ’93) Minuteman, Mass wins 4 – 3. Season to Date (3-2).
Season to
Date (0 - 0)
Next Blog: January 28 - Jack Ass of the Month, Word
of the Month, the usual.
Until
next time, Adios
Claremont,
California
January
15, 2019
#IX-17-385
CARTOON OF
THE WEEK – New Yorker,
Christopher Wehant
RINK RATS
POLL –
2019,
the year of _____
_____ Weather
_____ Impeachment
_____ Bubble burst
_____ The Wall
_____ Me Too
QUOTE OF THE
MONTH
– “Good instincts tell you what to do
long before your head has figured it out." - Michael Burke
