Two Warnings
Washington: Out first president and founding father expressed three warnings in his farewell address. He worried about sectionalism, which is putting local, geographical concerns over national interest. This is not a major problem, but what is is the reality of red and blue states. The second warning becomes a prophecy. He feared, "Political Fractionalism." This is the rise in power of poltical parties. They could and Evolution says, have undermined our republic. The final warning also becomes a prophecy. Washington did not want our nation to have foreign entanglements. He is not resting easy in his grave.
Eisenhower: We need to protect our nation, but the dangers of abuse between our government and the industrial/military complex needs to be watched. Another prophecy as the "Deep State" undermines our democracy.
Today
We have two great presidents that warned us and yet, we fell into the trap. Remember, it was the two political parties that pushed the lie of "free trade" which ended in outsourcing of our jobs and standard of living. Enter Trump. He is correct in his goal to bring back manufacturing. It will make us more self-sufficient and raise our standard of living. He forgets application. We got into this predicament over time. We cannot flip a switch and have it done over night. Trump needs to target areas. When he sees improvement, then, pick another segment to address. Then again, DOGE has only targeted low hanging fruit. It is sad that we end foreign aid, but reality cannot be denied. We have been living above our means. We have been abusing the privilege that our currency is the world's reserve. If we lose that, we become a third world nation overnight. We need to slash costs.
In every bureaucracy there is waste, fraud and abuse of power. By sun-setting them, we can step back and apply what is good in a new formation when we have the money. With that said, FEMA has been shut down. There were some good parts to the emergency agency. One of them is flood insurance.
What Now?!
There were 4.7 million policies under a program to offer flood insurance because private insurance was either unaffordable or not available. We can thank the Federal Reserve for destroying the purchasing power of our dollar in the cost for flood and all insurance and everything for that matter. Anyway, this translates into $1.7 trillion in liabilities. What will home owners in flood prone areas do? How much will they lose in property value? When there was not enough money to cover disasters, the National Flood Insurance Program (NFIP) would help. However, their program was short funded. They borrowed from the US Treasury. They owe $22.5 billion.
There are other related problems like mortgages under Fannie Mae and other government backed mortgages. FEMA has learned many aspects to disasters. This data was passed along to state and local government. It helped in building plans and codes. Remember, no one can get a mortgage in a flood zone without flood insurance. Real estate will take a hit.
We Suggest
That the federal government offer a national disaster insurance in partnership with any state that will buy-in to the program to help their citizens. The state will offer separate programs for renters and home owners. They will pay 50% of the premium and the federal government pays the other 50%.
Now
DOGE needs to address the alfa waste basket, the military. They have been over-charging for years with brides, fraud and poor execution. The military gets the biggest part of our budget and they squander the most. You can see the results in every undertaking like the navy's new generation destroyer DDG. It will be $3.4 billion in overrun production. How about the new generation sub, the SSN. It could run $7.2 billion over estimate. How about the Air Force? There new B-21 bomber is way over its estimate and you could mention any F-series jet. They all cost more than projected.
We Sugest
That in negotiating in military contractors that if they cannot produce what they said that they could that they eat the overrun. No ands, if or buts. Yeah, we know that the military branches want changes after the contract due to tech advancements. However, this reflects more on them with poor vision and planning. They spend money because it was appropiated and not with insight.
Meanwhile, Market
The big drop will abruptly change course. We see a rally, but volume will dictate whether it is a bounce or the market has settled and digesting the tariff outlook. Ultimately, we see a test of the COVID low around 38,000. If it falls lower, uncertainty will follow...Peace.
Alert! Alert! = The market on Tuesday tried to rally, but reversed course mid-day. This piece is written on Saturday. The last sentence, (If it falls lower, uncertainty will follow) has emerged. There could be another rally attempt, but uncertainty will cause a failure. The stronger trend is down, but there are many resistance points along the path. Patience is the correct avenue.
