Timing & trends
For the establishment that enjoys its own privileges, the Double Standard doesn’t exist. For those outside privilege the Double Standard is “in – your – face” and “in – your – wallet ” government. As in suffering endless rules and regulations that Washington’s version of Moscow’s “Nomenklatura” generally ignore. Perhaps it should be described by a term Progressives can understand – “Standards 2.0”.
As history shows, those who impose rules don’t like to follow them.
On the civics side, the value of common law is that it usually prevents predatory governing classes. Lately it has been daunting to insist that various government agencies stop acting in their own interests. This is the political struggle of this century.
At the beginning of the previous century the feature of liberalism was the sanctity of the individual and limited government. Socrates’ “The unexamined life is not worth living” was widely regarded.
Today’s corruption of liberalism insists that good comes from government without limits. This has forced the greatest intrusion into ordinary life in American history. To the point where a recent headline sums up the persuasions of the younger generation: “Millennials think socialism would create a great safe space”. Ancient theorists about democracy could not imagine the new world of “The uncoerced life is not worth living”.
It is not just terms that have been corrupted. Agencies voluntarily formed to ensure law and order have been corrupted. The FBI and DoJ, formerly “of the people”, have become swamp critters.
The integrity of free markets and economic engineering in electricity production has been displaced by the passions of CO2 zealots. Costs of basic electricity in many regions are sky – rocketing. In a bizarre form of Gresham’s Law, bad electrical power has driven out good electrical power. Then the promoters discover that the wind does not blow all the time. So, they are forced to duplicate politically correct power generation with, for example, economical natural gas.
The brilliance of sound money has been corrupted by reckless financial adventurers in central banking. The transfer of wealth to the Deep State through depreciation has been the biggest scam in financial history.
The term “Deep State” is an appropriate description of relentless ambition, now very defensive.
And it won’t quit voluntarily. Thankfully, history provides examples of the senior economy going authoritarian and then being reformed. Through popular uprisings. When the money runs out.
In the Third Century, Rome was corrupted by ambitious bureaucracy into a police state. When confiscatory taxation became inadequate, the state imposed chronic depreciation. The combination of central planning and bureaucratic greed destroyed the Empire’s economy.
Christianity 1 along with the independence of the Northern Provinces 2 helped collapse the Roman Deep State. Ironically, by the 1500s the church had the only organization that could be corrupted by ambitious bureaucracy. The combination of church and state imposed regulatory intrusion, confiscatory taxation and chronic inflation. It ran until the economy was impaired. Serious reform in England began in the early 1600s.
Historians called it the Protestant Reforma tion. Every authoritarian agency and belief was examined and eliminated or reduced. Under the advance of real science, astrology became astronomy; alchemy became chemistry. The corruption of the Church was exposed and reduced. Overall, it should be called a Great Reformation.
Sixteenth Century indulgences provided absolution from sin. Today’s indulgences provide absolution from the “sin” of emitting CO2, which while a trace gas is essential to all, repeat all, life.
Both indulgences were available for only those who could afford them and were integral to bureaucratic corruption.
The other form of absolution from destructive behavior has been the inside loop. Such as the one that enabled and protected Hollywood’s predatory habits. Another offense is the Main Stream Media that never criticizes either the methods or results of the Deep State.
That there is a “thermostat” that will perfectly set the Earth’s temperature is the greatest delusion since the solar system rotated around the Vatican.
Carbon dioxide emissions are, of course, the latest in the concept of “original sin”. In these days, ambition about Biblical morality will not advance an activist’s career. However, the concept that just living is an original sin has been a winner for anyone beguiled by authoritarianism.
Recently, the power of today’s authoritarians seems to be faltering.
Even with out the edition of yet another Star Wars , Hollywood’s force field is collapsing rather quickly.
The very strong El Nino warming of 2016 was a weather event , and is now over. Even before the next Al Nina there is solid evidence for a cooler winter. An Ipsos – MORI survey notes that those who are “Concerned” about “Climate Change” reached 82 percent in 2005 and has declined to 60 percent now.
The popular uprising has not been “put down” in the US and reform is spreading with Brexit to Austria and Czech elections. Saudi Arabia could be starting a reform. In all cases, the struggle is between a corrupt culture and reformers.
In his Death of Liberalism , published in 2012 Emmett Tyrrell reviewed “Liberal – Progressivism”. He wryly observed “A double standard is better than no standard at a ll.”
Criticism of Standards 2.0 has only just started.
Bob Hoye
Institutional Advisors
1 Two important Christian concepts were “Render unto Caesar…….” And free will.
2 Rome had a “top down” legal system. Northerner’s code did not grant exceptional powers to central authority.

Those looking for an optimistic forecast for U.S. equities can turn to Northern Trust. Bob Browne, its chief investment officer, identified six themes that will drive the capital markets over the next five years. Taken together, they translate to 5.9% annual returns for U.S. stocks over that period, which includes 2017.
Browne spoke at the Schwab IMPACT conference in Chicago on November 15. He oversees much of the $1.1 trillion under management at Northern Trust.
Browne predicted that developed markets, exclusive of the U.S., will earn 6.8% and emerging markets will return 8.4%. Because U.S. markets have returned so well this year, with equities returning approximately 17% year-to-date, he said we are “stealing future returns” in 2017.
How does he get 5.9% returns with PE ratios starting at approximately 20?
Browne said that revenue growth would contribute 4.3% annually (consisting of 2% from inflation and 2.3% from nominal GDP growth), 1.9% from dividends and 0.9% from enhanced margins and stock buybacks. Those numbers add up to 7.1%, but he applied a 1.2% “haircut” to account for valuations (PE ratios) “normalizing” to get to 5.9%.
Browne is not predicting a recession in the U.S. over the next five years.
He said the emerging market returns will be higher mostly because of stronger revenue growth at 6.7%.
Here are the six themes that Browne said should matter to investors:

The look on his face let you know it wasn’t going well.
He was clearly frustrated, almost in tears running up and down the court, and it wasn’t even halftime.
I was at my 8-year-old son’s basketball playoff game, and they were down by 10 in the second quarter.
For this age group, scoring 20 points in a game is a lot. So, to be down by 10 seemed impossible to come back from.
But basketball is a game of runs — where teams can rally back into a game.
That’s exactly what his team did, and they made it a great game before it was all over.
The nature of going on runs sums up how the markets work.
Certain asset classes are going to be in favor for some time, where it seems like they can’t do anything wrong in analysts’ eyes.
Eventually, that favor will switch, and the stocks that no one liked will eventually be in favor.
We are at such a point in the market right now, and one segment of the market will outperform over the next year as it goes on its comeback rally.
Let me explain …
A Select Group of Stocks
So far this year, a select group of dividend stocks, known as the “Dogs of the Dow,” have underperformed the market.
The Dogs of the Dow are simply the 10 highest-yielding stocks in the Dow Jones Industrial Average (DJIA) at the end of each year.
So the stocks we are talking about were the highest-yielding stocks in the DJIA at the end of 2016.
And to find a year where this group of dividend stocks underperformed the DJIA this bad, you have to go back to 2009 — a much different time in the market.
The End of a Bear Market
If you think back to what was going on in the market in 2009, the underperformance makes sense.
The economy was going through a recession, and the stock market was nearing the end of a bear market.
In March 2009, the stock market bottomed.
The ensuing rally for the rest of the year was tilted toward stocks with more reward and more risks, not the generally stable dividend stocks.
The DJIA finished 2009 up 18.8%.
Meanwhile, the Dogs of the Dow were up 12.9%.
So far in 2017, the DJIA is up about 18.5%, and the Dogs of the Dow for this year are up almost 10%.
That’s a slightly worse underperformance than in 2009 … but the year isn’t over just yet.
And if the margin of underperformance holds, it likely means the Dogs of the Dow will outperform next year.
Looking Forward to 2018
In 2010, following the worst recent year of underperformance for the Dogs of the Dow, the DJIA still climbed double-digits, ending up 11%.
But, as investors took gains from other Dow stocks, the money was moved into dividend stocks. This helped propel the Dogs of the Dow to beat the DJIA by posting a 15.5% increase for the year.
Assuming investors follow a similar trend, and revert back to solid dividend-paying companies, we can expect the Dogs of the Dow to outperform in 2018 as well.
I’ll be back after the New Year with a further breakdown of the current Dogs of the Dow, which ones meet the list and what kind of expectations we have for them.
Until then, this is a strategy you want on your radar for next year.
Regards,
Chad Shoop, CMT
Editor, Automatic Profits Alert

Cryptocurrency may be one of the biggest threats to governments, security and the entire financial system that we’ve ever seen.
It can help fund terrorism and its anonymity makes it almost impossible to track. Most importantly, it is poised to revolutionize global finance and banking.
But our new Enemy No. 1 can’t be fought; it can perhaps be controlled. Banks have figured that out and are bringing crypto currency into the fold.
The superpowers—U.S., China and Russia–will have to face the new reality. They love to hate it and hate to love it. Regardless, if they don’t embrace it, they won’t be able to control it. An enemy you don’t control is a much bigger threat.

It is always refreshing to step away from the keyboard for a few days and hit the “reset button,” which is exactly what I did last week. My wife and I took a quick trip to Mexico to get a little sun on our face while we wiggled our toes in the sand.
I came back astonished.
Over my 30-odd years of working with money in various capacities, I learned to “shut-up and listen.” This is particularly the case when you are in an airport lounge or packed like sardines in a missile-shaped tube hurling through the air at 35,000 feet.
People love to talk…if you let them.
I had a dozen “listening sessions” with a wide variety of people who each told me roughly the same thing summarized as follows:
- The market is a “can’t lose” proposition.
- So is “Bitcoin” (even though they had no idea what it really is when I asked them.)
- The market is only going higher from here because the Fed won’t let it go down.
You get the idea.
And just when I thought I was sure I had the most bullish views wrapped up – Kevin Matras fro Zack’s Research hit my inbox with the following:
“The S&P will double. And not just eventually. But over the next 5 years (or sooner).
Sounds like a Herculean task on the surface, but it’s really not. In fact, the market only needs to gain on average of 14.9% per year in order to do so. That’s not such a stretch given the market has been averaging 14.9% per year since this bull market began in early 2009, even though GDP (prior to this year) has only been increasing at an anemic 1.48% annual rate.
My 5-year doubling thesis also means that we won’t see another recession until stocks double again, nor will we see another bear market until stocks double again.“
So, there you have it.
No bear market until the market racks up another 2600 points and dwarfs every other economic growth cycle in history.
Meanwhile….Back On Earth
Before I go further, let me clarify one thing.
As a portfolio manager, I am neither bullish nor bearish. I don’t really care which way the market is headed personally. If it is rising, as it is now, I am long equities. When it reverses that trend, I will either be short equities and long bonds and cash.
That’s my job.
My job is also to pay attention to the risks that could quickly remove large chunks of investment capital from my client’s portfolios
The Perfect Storm Cometh
