There's a Bull Market in Tinfoil

Let's begin by talking about the Washington Post story that purportedly revealed that President Trump disclosed "highly classified information" to the Russian Foreign Minister and Ambassador.  Then, we'll address the leaked memo penned by fired FBI Director James Comey that indicated that Trump asked him to back off investigating former National Security Advisor Michael Flynn, whom you will recall resigned from his post after it was revealed that he had lied to Vice President Pence regarding communications with Russian leaders.  Finally, we'll turn our attention to the appointment of a special counsel to lead the investigation into ties between the Trump campaign and the Russians.

First up, the WaPo story.  It asserted that, in a meeting with the two Russian diplomats, Trump disclosed "highly classified information" regarding potential terror threats.  That intel was purportedly provided by a U.S. ally with significant knowledge of terror threats, particularly related to ISIS, Syria and Iran.

The WaPo story went on to name the threat disclosed: that terrorists may use laptop computers and tablets carried on board flights to hide bombs that could be detonated in mid-air.

Here's the problem: if WaPo knows the specific threat, how is it "highly classified information?"  Moreover, by publishing the story, didn't WaPo itself disclose that information to the world, including the terrorists, any of whom could google the WaPo story and find the threat that we've learned of?

Critical thinking is clearly dead.  Because the people who lap this story up like mother's milk don't think about things like that.

Further, what's wrong with a President sharing that information with any other country that might aid in the fight against the spread of terror?  (Recall that a Russian jetliner was downed by terrorists in 2015; they might have a vested interest in this.)  For that matter, what's wrong with sharing it with all of us?  I fly a lot; I'd like to know what threats are in the air, literally.

In fact, the WaPo story rightly noted that no laws were likely broken, as the POTUS has broad powers to disclose information, determining on the fly whether it's classified or not.  It would be a different matter entirely if he had told the Russians what our nuclear response times were, as Hillary Clinton did when she announced them to the world during a debate last fall.  Of course, that was a non-event in the mainstream media.

Moreover, in March - well before the meeting between Trump and the Russian diplomats - both the US and UK implemented bans on laptops and tablets in carry-on luggage on flights originating from a handful of Middle Eastern and North African airports.  So the threat was known to all at that point, or at least to all who pay attention to such things.

The story went on to note that the ally that provided the intel is one that has expressed frustration in the past over the U.S.' handling of intel that country provided.

Again, let's apply that endangered species, critical thinking.  One, "in the past" implies that the Obama administration may have played fast and loose with intel that this ally provided.  And two, if WaPo knows who the ally is, as its story implies, that casts further doubts on the notion that this information was "highly classified."

But in journalism and partisan politics, if you say it enough times, it starts to feel like the truth.

On to the Comey memo.  It was leaked, interestingly enough, after Comey was fired, and was allegedly produced by Comey following a meeting with Trump just after the inauguration.  In that meeting, Trump supposedly appealed to Comey to back off the investigation of Flynn (who was fired for lying to the VP about his Russian contacts, not for the content of those communications).

Okay.  Have you ever been an employer?  If so, you're familiar with the term "disgruntled former employee."  As a CEO, I once fired a guy for egregious cause: stealing from the company.  He went on to file an arbitration claim against the firm, and to smear the firm's name among its clients.

However, we had him dead to rights, courtesy of incontrovertible evidence that he stupidly left on his computer and in his desk.  So he lost his arbitration case.  But he did manage to sway a few clients he was close to, that didn't understand the term "disgruntled former employee."

When someone's been fired, it's always prudent to take their allegations against their former employer with a healthy dose of salt, especially if they had every opportunity to disclose those allegations prior to being terminated.

As did Comey.  In fact, if he knew, as FBI Director, that Trump had attempted to obstruct justice, and failed to report it, he himself is guilty of a felony.  Comey is in a dangerous Catch-22 situation here.  He either implicates Trump in an obstruction charge and goes to jail for not disclosing it as soon as he knew of it, or he backs off and admits that he exaggerated the content of the conversation recorded in the memo (which was likely penned after he was fired; after all, he now has time on his hands).

Ah, but those who view Facebook as the font of all truth and knowledge tend to eschew grains of salt.  If a fired employee lambastes his former employer, said employer must be guilty as charged.

In defending his decision to fire Comey, Trump called the former FBI Director a "grandstander."  The left howled its rage.

So what did Comey do after the memo was leaked?  He stated his desire to testify before Congress, not in a closed hearing, as would befit matters of national security, but in a public one.  If that's not grandstanding, what is?  Sounds to me like an attention-starved disgruntled former employee looking to air his grievances in the court of public opinion.  But I have no aversion to salt.

So now Deputy AG Rosenstein, who recommended Comey's termination, has appointed a special counsel, Robert Mueller, to head the Russian investigation.  Mueller preceded Comey as FBI Director, appointed by George W. Bush in 2001 and serving through that President's two terms, and two years into President Obama's tenure.

The left smells blood in the water.  But it just may be that Rosenstein realizes that this matter has to be put to bed once and for all, and the only way to do it satisfactorily is to appoint a special counsel.  (Not prosecutor.  Counsel.  There's a significant distinction, lost on those who lack the capacity for critical thinking.)  No matter; if the special counsel determines that there's no smoking gun, the left will manufacture a conspiracy theory.  As an investor, I'd recommend being long tinfoil.

We'll see how it all plays out.  In the meantime, since this is the Economic Curmudgeon, after all, let's look at the potential market impact, especially since the Dow sold off by some 370 points today.

Everyone has been drawing parallels to Nixon since Comey was fired, probably because they can't conjure up a defensible Hitler reference.

During the Watergate scandal, the market sold off some 10%.  That meets the definition of a correction, nothing more.

If Trump were to be impeached - and I'd place the odds of that at less than 10% at this juncture, notwithstanding the partisan rantings of Chuck Schumer and Maxine Waters - we'd see a similar correction.

But it would be short-lived.  We'd then have President Pence, who is more even-keeled than Trump (the understatement of my lifetime), but shares the same pro-business and pro-market positions regarding taxes, regulation, etc.  Thus a rebound would ensue, and in the long run, the markets would be fine.

In fact, for the investor, that may be a better scenario.  I said a long time ago that a vote for Trump was a vote for Pence, because Trump was likely to do something during his first term to get himself impeached.

Not because he's corrupt - he can't carry Hillary's jockstrap in that regard - but because he's used to functioning as a businessman, where "my way or the highway" rules the day.  That doesn't play so well in the political arena, where there are checks and balances.

Now, I don't believe that what's transpired to date will get Trump impeached.  But here's the thing: the constant distractions surrounding his presidency impede the policy initiatives that have buoyed the economy and the markets since November 8.  (My own portfolio is up well more than the S&P since then.  Granted, I'm a better stock-picker than many fund managers, but you still have to give some credit to the anticipation of a return to pro-business policies, after eight years of the opposite.)

There is some debate - most of it partisan - surrounding whether those distractions are self-inflicted or manufactured.  For economic purposes, it matters not: regardless their genesis, they impede policy progress, and that is enough to disrupt the markets.