Crumbs

Nancy Pelosi is at it again.  I originally planned to pen (or type) this post a couple of weeks ago, but I got pre-occupied.  Now, Pelosi has resumed her attacks on tax reform, calling the tax bill "unpatriotic," hearkening back to when President Obama said that paying more taxes was "patriotic." Like it's not our flipping money to begin with.

Pelosi also said that the tax bill is "undermining" our democracy.  To which I can only ask, how the heck do you support that assertion?  I'd like to think our democracy is about more than just paying taxes.  Maybe it's not, to her, someone who's spent most of her adult life on the public dole.

Last month, Pelosi referred to the bonuses companies are paying their employees as a result of the cut in the corporate tax rate - proof that supply-side, or "trickle-down," economics works as intended - as "crumbs."

So Pelosi is saying that a $1,000 to $2,500 bonus to an hourly-wage worker is a "crumb."

Okay, I get that it's a one-time stimulus, and as such it won't provide direct long-term stimulus to the economy.  However, let's examine this in light of how the economics of money flows actually work.

When it comes to money, velocity matters.  And the velocity of money tells us that as money is placed in the hands of those who spend it, they do just that.  And that spending picks up speed, coursing through the economy to produce additional transactions that provide economic benefit.

Some plain English is in order.  Let's say you pay a bunch of people a one-time bonus of $1,000 to $2,500.  Most of the people who receive those bonuses view them as "found money," and found money tends to get spent, not saved or invested (which isn't necessarily a good thing, but Pelosi and her ilk aren't interested in that nuance, so I'll save it for another post).

So I get a $1,000 bonus.  I spend it at Best Buy, purchasing an Xbox and an iPhone 8.  Now, multiply that by the three million or so workers who got such bonuses as a result of the tax bill.

Suddenly, Best Buy is hiring more workers, maybe giving raises themselves, because their sales are increasing significantly.  Microsoft, which makes the Xbox, also has to hire more workers, and maybe gives raises.  So does Apple, as iPhone 8 sales increase.

Those workers go out and spend their "found money" - in the form of those raises (or increased spending from the new workers hired) on meals at Olive Garden (owned by Darden Restaurants), stuff at Target, and clothes at J.C. Penney.  Those companies see an increase in sales, so they hire more people and give more raises.  And on and on it goes.

Plus, those companies' stock prices increase.  "But that only benefits the rich!" the Pelosians cry.

Really?  I'm not rich, and my family owns stock in Apple, Darden and Target.  Yes, only about half of the population participates in the stock market through 401(k) plans.  But still, that's half the population.  And other Americans participate in the stock market through IRAs and defined-benefit pension plans, which also invest in the stock market.  And some retirees invest in the market through taxable accounts.

So as companies' stock prices appreciate, and they increase their dividends, all of these Americans benefit.  As the retirees' income increases, they're willing to spend more.  And as our retirement funds grow, we're more confident, and thus more willing to spend and borrow (that's called "the wealth effect").

As we borrow, the banks become more profitable.  And as we spend, the companies that sell us stuff become more profitable.

So they hire more people.  They give more raises.  And so the velocity of money accelerates.  See how this works?  The more people earn, the more they spend.  The more they spend, the more the companies they patronize earn.  The more those companies earn, the more 1) they hire and increase wages, leading to more spending by their employees, and 2) the more their stock prices rise, leading to increased spending and borrowing from the wealth effect, which leads to 3) more spending, etc.

Back to Nancy Pelosi.  It's little wonder that she views a $1,000 bonus as a "crumb."  Her family's net worth (most of it resulting from her husband, because Ms. Pelosi is a leech who lets him make the money while she cultivates the perks) is about $100 million.  And her constituency is solidly in the 1%.  A whopping 53% of the households in her affluent district have incomes in excess of $100,000, and nearly a quarter of them have incomes of $250,000 or more.  The median household income in her district is nearly twice that of the U.S. overall.  And since the U.S. median includes districts like hers, that means incomes in her district are dramatically higher than those for most Americans.

It's no wonder that Pelosi views a $1,000 bonus as "crumbs."  She's so out of touch with the reality most Americans face that she can't possible fathom what it's like trying to provide for a family on the U.S. median household income.  For that reason, if for no other (and there are plenty of others), she has no business serving in the House of Representatives, much less as its minority leader.

The Genesis of a Problem

As I watched the news this morning, I saw something that made me tie the Curmudgeon's last two posts together.

Now what, you may ask, could connect the dots between a tragic school shooting and Russian interference in our political process, intended to sow discord?

The primary point of the school shooting post addressed gun control as a means to end mass shootings.  The primary point of the Russian meddling post addressed how Russia has taken our probably irreparable partisan divide and used it as a wedge to drive us further apart.

Here's how they're related.

What I saw on the news was a student from the high school in Parkland talking about the grass-roots effort being undertaken by students there (and elsewhere) to address the topics of school shootings and gun control (and kudos to them for doing so - would that they didn't have to shoulder that burden).

This was a very articulate young man.  I recognize that this was also a young man who's recently undergone a traumatic event that no one his age should ever have to experience.  The shock, the horror, the this-could-have-been-me fright and maybe guilt, the loss of innocence ... these psychological impacts can be scarring, and certainly evoke strong emotional reactions.

In any event, the young man said, "This isn't about the kids.  It's about the adults.  And at this point, you're either with us or against us."  (Italics added)

This young man - clearly intelligent, passionate about a cause that hit way too close to home, and motivated to make the world a better place - unfortunately opened the door to the kind of irreparable divide that separates us today.  It's the first step toward creating a chasm that cannot be bridged, like seismic fault in our collective common interest.  The kind of fault that can be exploited by those with ill intent, be they a sovereign enemy or an evil element in our community.

"You're either with us or against us."  "It's my way or the highway."  "I'm either all right, or all wrong."  These are extreme positions.

A better approach might be, "I just went through this horrific experience, and I'm scarred by it.  I'm hurt, and I'm sad, and I'm damned angry.  And I'm just a kid, so I want the adults who are in power to wake the hell up and pay attention to this stuff, so I and my friends and other kids like us NEVER have to feel what I feel right now, NEVER have to be afraid to go to school, NEVER have to go through anything like this.  EVER.  AGAIN.

"While I'm just a kid, this has grown me up faster than I wanted to, faster than I needed to, faster than I should have had to.  So I have some ideas regarding a starting point to a solution.  But I don't have all the answers.  So I'm willing to listen to other people's ideas, and have an open, honest dialogue about how we stop this from happening, if we can.  I can accept that you might not be fully 'with me.'  What I can't accept is that we don't talk about it, and we don't listen to each other, and we don't work together to find a solution, despite any differences we may have."

Young man, I am on your side.  I want desperately to listen to you.  I value what you have to say.  I can't begin to imagine what you're feeling right now, and I won't pretend to be able to.  I'm willing to help you in whatever way I can.

But if the only way you're willing to accept my help is under the condition that I completely agree with your ideas regarding a solution, I'm afraid you won't be able to avail yourself of what I might be able to offer.

We need to reach a point as a republic, a people, where, in reaction to tragedies and challenges, issues and inequalities, we all recognize the following:

We may have different views.  Most of those views have some merit.  No one answer or ideology is the only right answer or ideology; there are shades of gray.  So we have to be willing to talk to one another without partisan emotion or extreme us-vs.-them positions, and we have to be able to listen.  And cooperate.  And compromise.

If we'd never had that willingness to begin with, as a people, we wouldn't be here today, as a nation - a civilization or a human race.  Let's not perpetuate the divide by instilling in our youth the same sense of absolutes that has brought us where we are today.  Let's not allow our politicians, our political parties, our media, or any outside influence do that to us.

It is my sincere hope that the youth of today are truly the promise of a better tomorrow, that they lift us above the current rancorous divide that threatens us.  That promise will never be fulfilled by "you're either with us or you're against us."  The simple truth is that we're all in this together.

Syurpriz, Syurpriz, Syurpriz!

In case you're not fluent, that's Russian for "Surprise, surprise, surprise!"

Special Prosecutor Robert Mueller has handed down a list of indictments - a list that no one expected - and ... guess what?

Before we get to that, go read the indictment, if you haven't already.  Yes, it's 37 pages long.  But to play in the Curmudgeon's sandbox, you've got to go to the source document, read it, and discern the truth for yourself.  Don't let Rachel Maddow or Sean Hannity tell you what it says, or what to think about it.  Go on, read it - I'll wait.

Okay, you're back, and you've read it?  Good.  And what did it say?

It said that 13 Russians and several shell companies they formed engaged in a campaign of cyber-misinformation with the intent of interfering in our electoral process.  To what end?

To sow discord among the American people over the political process.  (As if we needed the help.)

Not to get Donald Trump elected.  While some of their activities and propaganda were in support of Trump and anti-Hillary, some were in support of Bernie Sanders and Jill Stein.  In other words, support the candidates who will stir the pot, not the mainstream, same-ol', same-ol' politics-as-usual candidate.

Further, if they merely wanted to get Trump elected, they'd have left well enough alone once that happened.  But they didn't.  They staged rallies both for and against Trump after he was elected, but before he was inaugurated.  Why?

To sow discord.

Did Trump or his senior campaign officials participate in this?  Did they collude with the Russians named in the indictment?

No, they did not, as the indictment explicitly states.  The Russians, assuming false identities or outright stealing them, posed as American grass-roots activists and contacted unwitting, low-level, state campaign workers in key swing states to organize rallies.  And they started all this activity related to various candidates for the 2016 election in 2014, well before Trump announced his candidacy.  Again, why?

To sow discord.

Did the Russians' meddling affect the outcome of the election?  The independent Special Prosecutor made clear that it did not.  So why did the Russians do this?

Do I have to say it again?

Make no mistake, this is bad.  We can't have an enemy state - and Russia is without question an enemy state; we need no more proof than this - trying to disrupt our political processes, and trying to pit us against one another.  But even CNN's Michael Smerconish acknowledged that that is the extent of what we should be concerned about here.  Not collusion on the part of the Trump campaign.  Not a change in the outcome of an election.

We do, however, have evidence of high-level officials of a U.S. candidate's campaign, and of a U.S. political party's national committee, colluding with operatives connected to Russia in an effort to influence the outcome of the election.  It's just not the candidate or party that everyone's been pointing the finger at for the last 15 months or so.

The two saddest things about this are that 1) the Russians used our own political divide against us.  They played us for the unwitting, partisan dupes that we are.  We have met the enemy, and he is us, although there was some aiding and abetting going on.

And 2) we're continuing to let them win.  They left a trail that a blind, deaf dog who's lost his sense of smell could follow.  They wanted to get caught, and they're laughing about it.  They just wanted to show us what they could do.  And yet we continue with the very partisan bickering that they were trying to bring about, or make worse.

In short, the seeds of discord have been sown, watered, and fertilized, and they have taken root.  The Russians won, and we let them.

How could this happen?  Simple: our elected officials took their collective eye off the ball (like they did with ISIS, the "JV team"), and it smacked them square in that eye, leaving a pretty ugly shiner behind.

Remember the debate between Mitt Romney and Barack Obama prior to the 2012 election, when Romney was asked what he thought was the greatest threat against us?  His answer?

Russia.

In response, President Obama mocked him.  He stated that the Cold War ended 20 years prior, then issued the now-famous line: "The '80s just called, and they want their foreign policy back."

Well, we all want it back, too.  Romney was right.  And the Cold War isn't over, it's just being fought in the cybersphere with weapons like identity theft and Facebook posts, instead of in missile silos with nuclear warheads.

Thanks, Obama.

Some Facts, A Curmudgeonly Solution ... and a Healthy Dose of the Truth

Every time there is a mass shooting in America (well, almost every time; more on that later), the following cycle ensues:  thoughts and prayers offered; debates on Facebook and cable media; proposed legislation; people forget; Congress doesn't act.

Now I'm not arguing that Congress should act, necessarily.  I've rarely seen an instance in which Congressional action actually fixed anything or solved any problem, going back in the history books to before the Curmudgeon roamed the earth.  In fact, more often than not, they muck things up even worse (witness health care and homeownership expansion).

Having said that, I will weigh in on the topic with some thoughts on reasonable gun control measures.  First, however, it's always important to be armed - with the facts.  I posted the following on Facebook in June 2016, after the Orlando nightclub shooting.  Because the same misinformation is all over cable and social media today, it bears repeating, so let's start with it as a factual foundation.  (And apologies in advance for a lengthy post.)

"I'm not some hard-core gun aficionado, but I do believe that before this topic is discussed - especially with any posturing of moral authority - people should educate themselves so that the discussion can be informed and intelligent. In other words, we should let the facts get in the way of the rhetoric.

First, some basic definitions are in order: an automatic weapon, vs. an assault weapon, vs. a semi-automatic weapon, and just what an AR-15 is. This may help prevent the proliferation of memes quoting Ronald Reagan as saying that AK-47s should be banned (which he did say), then twisting that to imply that Reagan was in favor of banning AR-15s (which he never said).

An automatic weapon is one that can fire multiple rounds with a single trigger pull - like a machine gun. This is likely what comes to mind when people hear news stories of mass shootings, such as the ones that took place in Orlando and San Bernardino. After all, these are the weapons used by Rambo and Tony Montana ("Scarface"). We've seen those movies, so we envision the shooter blazing away with a similar weapon, firing round after round while they hold down the trigger. But that hasn't been the case. And - most importantly - automatic weapons cannot be purchased legally in the US.

"Assault weapon" has several definitions. They're generally defined as weapons that can be switched between semi-automatic (single-fire) and fully automatic (burst mode). In other words, a weapon that can potentially be automatic, and thus would be illegal anyway. Because of that, these weapons are also illegal.

The assault weapons ban signed into law in 1994, which expired in 2004, expanded the definition to include semi-automatic (single-fire) weapons that had other characteristics, like folding stocks or threaded barrels - features that made the weapons look more like automatic weapons, but didn't really make them any more lethal. It was about the optics. And, that law was established with a ten-year expiration for a reason: to see whether it would be effective. Whether it was is still inconclusive today, but the bottom line is that criminals simply use the weapon of choice, which was and remains the semi-automatic weapon in its basic form.

The focus on optics leads us to a fairly clever definition I read recently: it's any weapon that looks like something those opposed to gun ownership would want to ban.

And a friend - ex-military - recently defined "assault weapon" as … a weapon. That's a pretty intuitive observation, and it puts the lie to the argument that only "defensive weapons" should be allowed. When using a weapon to defend oneself, one would be using it in the exact same manner, with the exact same intent, as the person using a weapon - perhaps the very same weapon - to put one in a position to need defending. Any weapon can be used in a lethal assault, including a hammer.

Now, a semi-automatic weapon is one that fires a single round with each trigger pull. That includes your grandpa's deer rifle, a Colt .45, or an AR-15. Semi-automatic weapons can be legally purchased in the US. Not automatic weapons. Not assault weapons, according to the traditional definition.

The AR-15 seems to be the weapon of choice for mass shooters (a variant of it, made by Sig Sauer, was used in Orlando, not an AR-15). Many people mistakenly assume the "AR" in "AR-15" means "automatic rifle" or "assault rifle." Here's where we really need to educate ourselves, for the AR-15 is neither of those things. The "AR" stands for the name of the manufacturer: ArmaLite, which first produced it in 1959. Thus, "AR" stands for "ArmaLite Rifle," just as "VW" stands for "Volkswagen," not "vehicle of war." It's a brand. However, like Kleenex or Coke, it's become synonymous with other similar products, like the Sig Sauer used in Orlando.

Why is the AR-15 the weapon of choice with mass shooters? Is it any more lethal than any other gun? Not necessarily; it's more lethal than a derringer or a pellet gun, but less so than many legal guns. It's popular with them for the same reason it's popular with hunters, law enforcement and the military: it's reliable, it's well-made, it can be customized by hunters for use hunting anything from squirrels to coyotes to wild boars, and it's been thoroughly field tested. Reliability, quality of manufacture, customizability, thorough testing - that's what I want in a car, a cell phone, a laptop … or a rifle, if I chose to own one.

The AR-15 is also widely available and reasonably priced, which adds to its popularity among all buyers, nefarious or not. True, it was originally developed for military use. So were most guns, including the Colt .45 and your grandpa's deer rifle, which was probably a Henry lever-action rifle (or some variant thereof), originally produced for use in the Civil War.

And the AR-15 is black, so it looks like those automatic rifles brandished by Rambo and Tony Montana in the movies. Again, that's strictly optics. You could produce a version with a wooden stock, like grandpa's deer rifle of yore. But it would be heavier, and more expensive. While that arguably might deter some criminals, it would also deter hunters, and in any event it wouldn't make the weapon any less lethal. (If you're anti-hunting, talk to a game warden; that's another topic entirely.) Also, requiring wooden stocks on rifles would deplete natural resources, something that most gun ownership opponents are also opposed to.

Those are merely the definitional arguments, intended to educate and inform in order to provide a foundation for informed, rational civil discourse. They do not, prima facie, support a ban on AR-15s and their copies. And I should note that, again, I'm not a big gun aficionado, nor do I own an AR-15. I merely did my research, wanting to be better informed on the topic before I weighed in. I wanted the facts to supersede the rhetoric, in other words."

Okay, so hopefully that takes some of the hysteria out of this debate.  Now, what would the Curmudgeon propose as a possible solution?

Well, I don't know that there is one.  But there are some reasonable "gun control" measures I wouldn't have a problem with.  (Note that I support the Second Amendment but am not a member of NRA, and the only reason I own a handgun is that my Dad brought it home from WWII and it has sentimental and historic value, seeing as it was taken from an SS officer.  I've never so much as purchased ammo for it.

• I'm fine with thorough background checks, and a sufficient waiting period to take possession of a firearm to allow them.  If I'm planning a hunting trip in the fall, and I need a special gun to hunt whatever I'm going to be hunting, I have plenty of time to plan the purchase in advance.  Needing a gun right now is a red flag to me.
• I'm definitely in favor of required training in the proper handling, storage, cleaning and use of a gun for anyone who wants to own one.
• While I'm normally a proponent of states' rights, this is one area where I believe national laws are needed, so that we have one set of standards.  That way, maybe someone like the Vegas shooter can't amass an arsenal of weapons and ammo purchased in different states, under different laws, without being detected.  And different states have different laws around gun show purchases.  They should all be the same: a mandatory background check and a waiting period, just like a gun purchased in a store.
• In concert with the previous point, I'd be okay with a national database of gun owners, and what they own.  Again, that would alert law enforcement if someone is amassing an arsenal.  If they're a legitimate collector, they should have no problem proving that.  If they aren't quite playing with a full deck, that's another story.  Now, the hard-core gun aficionados adamantly oppose this.  They view such a registry as the first step in the government taking everyone's guns.  I see the point, and no, I don't trust our government much either.  But I look at it rationally: for that to happen, the government has to either completely abandon the Constitution (highly unlikely), amend it (read Article V to see just how challenging that would be - getting a two-thirds majority of both the House and the Senate to vote for it, and then getting two-thirds of the state legislatures to ratify it), or the Supreme Court would have to come up with some extremely creative arguments to warrant gun confiscation under the Second Amendment (equally unlikely).  Then, they'd have to have sufficient law enforcement resources to round up all the guns.  We readily admit we don't have the resources to round up every illegal immigrant; how the heck are we going to round up everyone's guns?  But hey, if it did come to an attempted gun grab ... well, that's exactly what the Second Amendment was intended to resolve.
• Bump stocks should be illegal, along with any other modification to a semi-automatic weapon to make it function as an automatic weapon.
• Ban suppressors, for all I care.  Suppressors are referred to as "silencers" by those who apparently obtain their knowledge from the movies (like Hillary Clinton).  But in the real world, they don't reduce the sound of a gun firing to the "Pffft! Pffft!" of the James Bond movies.  Reportedly, a suppressed AR-15 is about as loud as a jackhammer.  And while they do afford some hearing protection for hunters and recreational shooters, there are other means to achieve that.
• Want to restrict magazine capacity?  Okay.  Just know that a competent, trained person can drop and replace the magazine on a semi-automatic weapon in a matter of seconds.  Ten rounds maximum vs. 30 won't matter much.
• Let's enforce the laws on the books.  That also means following up on credible tips about people who might be planning a mass shooting.  Maybe if the FBI weren't pre-occupied with spying on Americans due to their political affiliation based on dishonestly obtained FISA warrants, they'd have the resources to follow up on a tip from someone close to a potential school shooter signaling that they intend to turn that potential into reality.

"Increased spending on mental health" has also been mentioned as a possible solution.  I don't disagree, but let's not assume the government doesn't already spend money addressing mental health through various programs and block grants.  But I do believe that not enough attention is paid to mental health issues.

Now, for that healthy dose of the truth I promised you: none of the above would put a stop to mass shootings, whether they be in nightclubs or schools.  The first, second, fourth, fifth and sixth points above would not have stopped the Vegas shooter, although the fourth and sixth might have slowed him down.  So maybe he'd have only killed 30 people instead of nearly 60.

What would stop mass shootings?  Probably nothing.  Other factors bear some responsibility: a breakdown of family values.  Increased bullying, supported in part by the anonymity of the internet.  The 24/7 cable news cycle that gives notoriety to these horrific events.  Increased violence in TV shows, movies, video games and music.  The opioid crisis.  The ability to find just about any information on the internet.  (To that point, when I was in high school, we had several bomb threats a year, usually from some kid wanting to get the school closed for the day.  One kid did detonate a pipe bomb in his locker, but it only blew off the door and the walls of the two adjacent lockers.  Today, that kid could do a google search and learn how to use nails and ball bearings to turn that pipe bomb into an IED.  Not a mass shooting, but a potential mass killing.)

People also need to speak out about social media posts that raise alarms.  Let's follow up "see something, say something" with "do something."  Don't take the law into your own hands, but report, and follow up.

And we might want to try securing our schools.  This is going to keep happening even if we ban all future gun sales, because there are too many of them already out there, and it's too easy to obtain one illegally, or steal one.  After 9/11, we secured our airports, and we've done a pretty decent job of it, all things considered.  Maybe it's time we create the Education Security Administration.

I'm saddened, horrified, and dismayed by events such as the one that took place in Florida last week.  I want desperately for those events to stop.  But gun control isn't going to stop it, nor is increased spending on mental health.  As for the factors noted in the preceding paragraph, those genies are out of the bottle.  It's tragic, but this is the world we live in, the current state of the human condition.  That doesn't mean we shouldn't take steps to change it for the better.  But don't expect miracles, and don't think gun control is a panacea.

Gun control isn't going to end mass shootings.  But neither are some reasonable measures a precursor to a bunch of jack-booted government thugs coming in the night to grab everyone's guns.  The truth, as always, lies somewhere in the middle.  But sadly, the middle ground on this issue is about as vacant as a sand-state subdivision of spec houses in 2007.

A final note, one that occurred to me just this morning.  In the first sentence of this post, I noted that the calls for gun control don't occur after every mass shooting.  Sure, they did after Columbine, Sandy Hook and Parkland.  They did after San Bernardino, Orlando and Vegas.

But what about when a gunman opened fire on a group of Republican Congressmen practicing for a baseball game?  That was intended to be a mass shooting with multiple casualties; but for the bravery of Capitol Police, it would have been.  Where was the outcry then?

In the wake of the Florida school shooting, Nancy Pelosi said, "I would rather pass gun safety legislation than win the election," and, "the victims are paying the price for our inaction."  (If you believe that first quote, I'll lease you the beachfront in my backyard.)

In the wake of the Congressional shooting, she blamed not guns, but Republican rhetoric.

Many of my Facebook friends have posted memes, articles, and their own opinions in support of gun control in the last week, often in anger

Not one of them - not. one. - posted such things after Rep. Steve Scalise was wounded in the Congressional shooting.

That tells me that this is a partisan issue, which saddens me even more.  Every life lost to or attempted to be taken by gun violence is tragic to me, be it a suicide, a gang shooting, a family killing, an accident, a school student, a teacher, a concert goer, an employee at an office Christmas party, someone enjoying themselves at a nightclub ... or a politician, regardless of party, practicing for a baseball game that's intended to put aside our differences and, for a few hours, bring us together.

Does Nancy Pelosi feel the same way?  More importantly, do you?

Stay Calm and Invest On

Okay, so the market averages all posted their largest single-day point drops in history today. Worried that the sky is falling?

Don't be. The Curmudgeon is here to allay your fears and put your mind at ease, armed with the medicine he always prescribes: the facts.

First, while a 1,175-point drop in the Dow is indeed the largest single-day point decline in the average's history, remember that we started from a very high number, historically speaking. On a percentage decline basis, the Dow was down 4.60% today, which ranks 14th in history.  Hardly the Armageddon the doomsayers would have us believe it is.

Over the last two trading days, the Dow is down 1,840 points. That's a combined 7.1% decline. And since the market peak on January 26 of this year, the Dow is down a total of 8.5%.

Time for some definitions. A bear market is traditionally defined as a 20% decline in market averages from a peak. A correction is defined as a 10% decline, and a pull-back is defined as a 5% drop.

So we're not yet even in correction territory, and certainly nowhere near a bear market. (Note that the other major averages, the S&P 500 and the NASDAQ, are down by less than 8% from their recent highs.)

One fearmonger was noting the fact that the VIX, a gauge of market volatility, was the highest since the Brexit.  Well, the Brexit vote occurred in June 2016. One month after the vote, the VIX had fallen by more than half. The VIX is always high when prices are moving fast. The Dow was up a respectable 13.4% in 2016, by the way.

Now, let's think about the word "correction." Normally, we correct something when it's wrong, and the intent of the correction is to get it back on the right track. The market had made a huge, rapid upward move since the 2016 election, with an even sharper upward trajectory since the passage of the tax bill became a foregone conclusion last December.

In short, the market was overheated, and it had gotten ahead of itself. So a correction isn't necessarily a bad thing - in fact, most market participants were expecting it, even hoping for it, as corrections present opportunities to buy stocks at lower prices.

Having said that, market valuations today aren't unreasonable. Declines through certain percentage-point levels - 5%, 10%, 20% - tend to be driven by computer-generated trades based on technical analysis. Technical analysis focuses on charts of the price movement of a stock or index. When the price falls below a given threshold - a percent decline, an x-day moving average, a previous low, or some other level - the computer programs trigger sell orders.

But see, those technical factors aren't what drives a stock's price. Stock prices (which, in aggregate, create index values) are based on the underlying fundamentals - earnings, sales, cash, debt, etc. - of the underlying companies, as well as broader economic fundamentals.

Don't get me wrong, there are technical analysts, or chartists, who make a lot of money trading on that basis. But the Curmudgeon suspects that their success results from a self-fulfilling prophecy: if enough technical traders sell when those levels are breached, the selling pressure will drive stock prices lower. And a lot of unsuspecting investors will follow, selling exactly when they shouldn't, out of panic.

So what of the fundamentals?

The economy is strong by any measure. GDP growth is trending above 3%. Unemployment is at very low levels. Incomes are growing. Manufacturing indicators are all positive. Housing is strong. There really isn't one sector or indicator I can point to (and I look at more than 80 indicators on at least a quarterly basis) that suggests weakness on the horizon.

And companies are doing well. Corporate earnings are growing. Companies are hiring and investing, buying back their own stock and increasing dividends. They're flush with cash, and now they have a significantly lower tax burden. An Apple or an Amazon or a Boeing is no different today than it was two weeks ago, when all those companies' stocks were peaking.

So why the pull-back?

Well, other than the fact that a correction was probably due, and thus investors were looking for an excuse to generate one, there are a couple of factors at play since the market opened last Friday, sparking the two-day sell-off.

Friday morning, the jobs report for January was released. And it showed that A) average hourly earnings were up 2.9% year-over-year, the most since 2009. That led to B) an increase in the yield on the 10-year Treasury note to 2.84%, the highest since 2014. And that caused some market participants to become concerned about C) higher inflation going forward. Which raised fears of D) more aggressive tightening (increasing short-term interest rates) by the Fed, which would rein in inflation but would also threaten continued economic growth. The overriding concern was that the Fed would get ahead of the market.

Okay, let's unpack all that.

A. Average hourly earnings being up is a good thing. Wage growth has been stagnant since the recession, and that served to dampen economic performance and market returns. So if low wage growth is bad for the economy and the market, how is healthy wage growth suddenly also bad? It doesn't make sense. People make more money, they buy more stuff, the companies who make or sell that stuff do better, their stock prices go up, GDP growth increases.

Yeah, too much of a good thing is ... well, too much of a good thing. But we shouldn't get too concerned about wage growth leading to runaway inflation until average hourly earnings are up more than 3.5% year-over-year on a consistent basis.

B. The fearmongers have been raising concerns over low 10-year yields signaling an imminent recession. This is a false narrative. While it is true that a flat or inverted yield curve (where long rates are lower than short rates) has often occurred prior to a recession, that is a coincidental, not a causal, correlation. And an inverted curve typically precedes the onset of recession by about two years. (The Curmudgeon can explain this in more detail, but let's not get too far off-topic here; if any reader wants to request it, I'll explain it in another post).

So low 10-year yields had the doomsayers worried, but now that long yields are rising, they're worried about that? Again, it makes no sense. And it's not like long yields are skyrocketing. A 10-year yield of 2.84% is still very low, historically speaking. In fact, from the beginning of 1962 to the end of 2008, the 10-year yield had never been that low.

And the 10-year yield today is just a half-point higher than when the Fed began raising short-term rates in December 2015, during which time the Fed has raised rates by more than twice that. Really, the 10-year has been very well-behaved for a tightening cycle.

C and D. A higher 10-year yield could indeed signal higher future inflation. But inflation is also quite low, below the Fed's target of 2%, at which they had said they would begin raising rates. They're raising them anyway, but very modestly. Two weeks ago - even two months ago - both the consensus of market observers and the Fed's own guidance called for three rate hikes in 2018, of a quarter-point each. That's one less rate increase than last year.

That hasn't changed since Friday morning.

In fact, an even better barometer of the Fed's future course of action than the 10-year yield or the stock market is the Fed funds futures market. In December, that market had priced in about a 33% likelihood of two hikes in 2018 and a 33% chance of three, with only a 15% likelihood of four increases.

Today? Guess what - virtually no change.

As for the Fed getting ahead of the market, folks, that hasn't happened since Paul Volcker was Fed chairman in the 1970s. And Volcker's drastic action of sharply raising rates was necessitated by double-digit inflation brought on by OPEC-driven oil shocks. We're nowhere near that today.

Since then, the Fed has erred on the other side, only moving aggressively when they're cutting rates. They famously got behind the market in 1994, and that caused long yields to move sharply higher.

And the new Fed chair, whose first day on the job was today (which I'm sure he loved), is exactly who we want steering monetary policy. The last two Fed chairs, Ben Bernanke and Janet Yellen, were pure academics. Like the Curmudgeon (and unlike most Fed chairs), new Fed chairman Jerome Powell doesn't have a PhD in Economics. He has, however, worked in banking, the capital markets and the U.S. Treasury. He understands the markets and the financial system like Bernanke and Yellen never could.

So don't panic. This correction - if it becomes one, and it probably will - was overdue and necessary. That's okay. The markets have experienced corrections in the past, only to pick up steam and finish the year strong. There is nothing in the economic or corporate fundamentals to suggest that this year will be any different from those prior years.