Taking on the dirty old men

How young Brazilians hope to clean up politics

First, they must get elected, and the old guard make this hard

WITH his reversed baseball cap and facial fuzz, the style of 29-year-old Daniel José Oliveira (pictured) is hardly typical for a Brazilian politician. Nor is his background: he was one of 11 siblings brought up in a small town by a domestic servant and an office porter. After winning a scholarship to a Catholic school, he studied economics at a fine São Paulo campus. That led to a job at J.P. Morgan, a scholarship to study at Yale University and a job offer from another American investment firm.

But in 2015, with Brazil’s economy crashing and its politics mired in scandals, he instead came home. Inspired by En Marche!, the French liberal party which propelled Emmanuel Macron to the presidency, he hopes to be elected next October as a federal deputy for São Paulo state.

Until recently, politics was a turn-off for his generation. The average age of lower-house deputies elected in 2014 was 50, 19 years above the national mean. Brazil’s old-timers are discredited: after more than three years of the Lava Jato (car wash) corruption probe, 40% of congressmen are under investigation. Politicians are unloved. Just one voter in 20 admires them; only 3% approve of President Michel Temer.

Confidence in congress has been sagging for ages. In 2010 Tiririca (Grumpy), a professional clown, was elected to Brazil’s lower house under the slogan “It can’t get any worse.” It did. On December 6th he told his congressional colleagues he would not seek re-election in 2018. “Only eight of the 513 actually show up here,” he moaned. “I am one of those eight and I am a clown.”

Young Brazilians are fed up. “Four years ago someone like me running for congress would have made no sense,” says Mr Oliveira. But renewing Brazil’s congress will not be easy. Independent candidates are banned and parties are unwelcoming to newcomers. In some states seats stay in the hands of well-known families.

Dislodging them may get harder. In 2015, after a series of scandals, Brazil’s supreme court outlawed corporate campaign contributions. In October congress created a “special campaign-finance fund” for next year’s election. But the fund, and airtime, will be allocated in proportion to parties’ current representation. That frustrates newcomers. “Congress is like a cancer,” says Mr Oliveira. “It’s not working in the best interests of the body and it’s defending itself to survive.”

People are trying to find a cure. Mr Oliveira has applied to RenovaBR, a programme to support young Brazilians who want to run for congress. Financed by entrepreneurs, it offers 150 “scholars” courses on Brazil’s institutions plus advice on campaigning and policy. It has thousands of bidders for a half-year programme starting in January. Scholars will get a monthly stipend of 12,000 reais ($3,645).

They will be selected by written tests and interviews. They can belong to any party, but cannot hold extremist views. In return the scholars vow to complete their mandate, justify their voting decisions to their constituents and avoid hiring family as staff members. Eduardo Mufarej, who started the project, hopes to see at least 45 scholars elected.

Other groups are working to make congress more representative. Bancada Ativista (Activist Group) is a left-leaning outfit, formed to fight São Paulo’s city-council election in 2016. Rather than creating a party, it chose eight candidates from two established ones. Only one was a heterosexual white male. “By definition, a black woman is more representative than a white graduate from Harvard,” says Caio Tendolini, a 33-year-old member of the group. It arranged “speed-dating” events for candidates to meet voters and offered social-media training and public-policy contacts. It started working: the candidates drew a total of 75,000 votes and one got in. It will scale up its operation next October.

Agora! (Now!) was founded in 2016 to coax into politics young Brazilians who had shown leadership skills in other fields. Until now it has largely focused on developing policy ideas. “Politicians here think about getting elected first and then worry about their agenda...it should be the other way around,” says Marco Aurélio Marrafon, one of the group’s 150 members. Agora! has working groups on everything from health to homicide. It initially had no plans to run for congress, but “things are getting out of control”, says Ilona Szabó, a co-founder. Next year it plans to field 30 candidates for congress by persuading two parties, Partido Popular Socialista and Rede, to be vehicles. “We want to be a new political force,” says Ms Szabó.

October’s elections are perhaps the most important since democracy was restored in 1985 after 20 years of dictatorship. They are also unpredictable. Fewer Brazilians than ever identify with the old left-right model. Most want to try something new. That can favour extremists: Jair Bolsonaro, a congressman who says harsh things about gays and women, is second in the polls for the presidency. But it could also help moderate newcomers. Four out of five Brazilians say they want “ordinary citizens” to run for congress next year.

Their efforts may fail. New candidates fret about finances and some are already running low. Mr Oliveira used to help his parents out with the bills. Since deciding to run for office he has had to stop. With corporate donations banned, the candidates must rely on individual contributions, and no one knows how generous Brazilians will be. Lack of broadcast time will hurt.

“Next year might not be the tipping point,” warns Mr Oliveira. “But we have to open a trail. If not, there will be no hope of renewal in 2022.” Political renewal may not happen overnight. But Brazil’s Young Turks are making a start.

Reagan’s Tax Reforms Revisited


Reagan tax reform

WASHINGTON, DC – Congressional Republicans must, President Donald Trump has commanded, pass their sweeping US tax bill by Christmas. Otherwise, they will have no major accomplishment to show for an entire year during which they have controlled the legislative and executive branches of government. Having apparently failed in their seven-year campaign to deprive millions of Americans of health insurance, they dare not fail in their Scrooge-like campaign to transfer billions of dollars from the middle class to the ultra-rich.

In an effort to rally support for the tax bill, Trump recently sought to invoke Ronald Reagan’s tax initiatives of the 1980s. And he has a point, though not the one he intended. Recalling what transpired under Reagan might shed some light on the Republicans’ murky current proposals.

There were actually two huge tax bills during the Reagan years – the Economic Recovery Tax Act of 1981 and the Tax Reform Act of 1986 – and they differed in almost every respect. The 1981 legislation was not true tax reform, but a rushed and poorly coordinated frenzy of fiscally irresponsible cuts to both corporate and personal income taxes. The 1986 law was the well-thought-out result of an extended, deliberate, and bipartisan process, designed to be revenue-neutral, with low marginal income tax rates balanced by fewer deductions, particularly on the corporate side.

The 1986 reform was a model of how to carry out fiscal reform, whereas the 1981 process was a model to avoid. Yet it is the latter that the Republicans’ current tax “reform” most resembles.

As in 1981, the current process has been rushed, with scant deliberation – the usual hearings have not been held – and not even a pretense of bipartisan cooperation. Almost every day brings news of some radical change in the legislation proposed in either the House of Representatives or the Senate. The situation is so volatile that we may not know everything the bill contains – and which special interests won out – until after it is passed.

It goes without saying that thorough deliberation is essential to good legislation, not just to secure the political buy-in of others, but also to avoid drafting errors and limit unintended consequences. Moreover, fiscally responsible reforms involve hard choices, and tend to work only if they are drafted with a spirit of shared sacrifice: “I will give up my cherished benefit, if you give up yours.”

Far from pursuing careful deliberation and smart compromise, US Republicans today are pretending that the cuts for which they are striving will carry no costs. If they get their way, these self-professed fiscal conservatives will blow up the budget deficit, just as they did in 1981 under Reagan, and just as they did again in 2001 and 2003, thanks to the massive tax cuts enacted under President George W. Bush.

To be sure, the current proposals do not get everything wrong. Reducing the US corporate income tax rate would be a good move, provided that the lost revenue were recouped through the elimination of business loopholes, such as the corporate interest deduction and the favored treatment of carried interest. But the legislation cuts the corporate tax rate too much and closes too few loopholes to achieve anything close to revenue neutrality.

But Reagan’s 1986 reform prioritized working families over corporations, such as through the expansion of the Earned Income Tax Credit. The current proposed legislation does the opposite. It aims to achieve its supposedly restrained goal of limiting revenue losses to $1.5 trillion over ten years by allowing households’ tax cuts to expire before the decade is over, while corporations enjoy their cuts indefinitely. Taxes on families earning less than $75,000 would rise, on average, relative to today.

Of course, today’s Republicans do not admit that their plan isn’t revenue-neutral. Like their counterparts in 1981, not to mention during the Bush era, they claim that the cuts will stimulate the economy so much that overall tax receipts will stay the same or even rise. Yet such claims have been rejected by virtually all mainstream economists, including the economic advisers of both Reagan and Bush. Those administrations implemented their cuts anyway – and, as economists had warned, budget deficits increased sharply.

The tax cuts that the Trump Republicans are attempting to pass today would be even more damaging.

There is good reason to fear much more serious long-term consequences of the rise in the budget deficit, owing to two key issues of timing – one cyclical and the other demographic.

The 1981 tax cuts went into effect at the onset of the 1981-1982 recession, a time when some short-term fiscal stimulus came in handy. The opposite is true today. With a 4.1% unemployment rate, the US economy does not need more stimulus. In fact, the US Federal Reserve is expected to raise interest rates again in December, to prevent the economy from overheating.

Moreover, the baby boom generation is now retiring at a rate of about 10,000 people per day, meaning that Medicare and Social Security outlays – for health insurance and pensions, respectively – will increase rapidly. Despite the slowdown in the growth of per capita health-care costs in recent years, the Medicare trust fund is projected to be depleted by 2029, and the Social Security trust fund by 2034.

Meanwhile, the national debt held by the US public stands at 76% of GDP, compared to just 25% when Reagan took office and 46% when George H.W. Bush left office 12 years later. Total national debt, including bonds held by the Fed, stands at 104% of GDP today, compared to only 31% in 1980. In short, this is the wrong time to be increasing the budget deficit and borrowing more – particularly with interest rates set to rise further.

The US has much experience with irresponsible tax cuts. Yet its leaders seem not to have learned their lesson. Should Republicans secure the legislative victory they desire, the entire country – with the exception, probably, of the wealthiest few – will lose.

Jeffrey Frankel, a professor at Harvard University's Kennedy School of Government, previously served as a member of President Bill Clinton’s Council of Economic Advisers. He directs the Program in International Finance and Macroeconomics at the US National Bureau of Economic Research, where he is a member of the Business Cycle Dating Committee, the official US arbiter of recession and recovery.

Your Bank Account, Not The Government, Will Be Bailing Out The Big Banks When We Crash

Avi Gilburt


•Market history.

•What rights do you have to your bank account?

•What does Cyprus have to do with all this?

•What a ‘bail in’ means.

Some of you may not remember the announcement made by Goldman Sachs last year, so allow me to refresh your recollection. In early 2016, Goldman Sachs announced that it was entering the online banking market, offering bank accounts that don't require a minimum deposit, with no transaction fees. Clearly, Goldman wants the retail market money.

While many hailed their entry into the market as an opportunity, I viewed it quite skeptically, especially in light of the recent history in Cyprus. But, before I go into my perspective regarding this decision as being quite suspect, allow me to provide a bit of the background that is shaping my overall thinking.

Market History

Back in 2007, the S&P500 hit a high of 1576SPX. In 2017, we are now 65% higher than the high struck in 2007. That means we are significantly well above the highs struck by the overall stock market before the financial crisis hit the markets in 2008.

Now, feel free to take a look at the banking ETF XLF. You will see that it has not yet even been able to exceed the highs it struck in 2007. Even if you look at Goldman Sachs, one of the leading banks, you will see that only recently was it able to make a marginally higher high over that struck in 2007.

Now, take a look at one of largest banks in the United States - Bank Of America. Shockingly, BAC has still not even retraced 50% of its financial crisis plunge. And, amazingly, it represents approximately 11% of all deposit money in the United States. In fact, if you look at Citigroup, it has barely even retraced 10% of its financial crisis fall.

While we certainly do have some banks that have exceeded their per-crisis highs, like JPM and WFC, ask yourself what such general underperformance is telling you about some of our largest banks. Furthermore, consider that the top 10 banks still control approximately 45% of the total bank deposits in the United States, with Citigroup (4%) and BOA (11%) representing approximately 15% of that 45%.

What rights do you have to your bank account?

Let’s go through a little background so you understand the relationship that you, the depositor, has with your bank.

Most Americans use bank accounts to pay our bills, as well as a depository for our excess funds.

What most people do not understand is that when we give our money to the banks via deposits, we are actually giving that bank a loan. In other words, we become unsecured creditors of the bank, and the bank provides no security the loan will be paid back. Should the bank default, depositors will stand in line with the rest of the bank creditors to receive pennies on the dollar through the bankruptcy process.

Now, many think that this is not an issue since the FDIC guarantees bank deposits up to $250,000. So, believe their money, up to that amount, is secure. This is a reasonable belief when individual banks run into problems, but it is not a reasonable belief during times of systemic stress.

In 2009, when there was a tremendous amount of stress on the banking system as a whole, the FDIC Insurance Fund fell into a deficit of almost $21 billion. Yes, the supposed "backstop" had a massive deficit, raising questions about how much you should rely on the FDIC during a major crisis.

What does Cyprus have to do with all this?

So, what does Goldman's recent decision have to do with all of this? Well, when we consider what occurred in Cyprus several years ago, it may open some eyes.

During the Cypriot financial crisis several years ago, there was no bailout being offered to banks (reasons for which seem to have been political in nature). As a result, two of the largest banks were on the verge of closing. Ultimately, Laiki Bank had to be wound down, and the depositors of that bank lost most of their uninsured savings.

However, the Bank of Cyprus, rather than wind down as well, entered into a restructuring, and utilized the cash held from depositors for the funds needed to effectuate the restructuring. The depositors were issued shares in the newly restructured bank in return for their deposits which were used for the restructuring.

Let me state that I do not believe we are on the cusp of a major banking crisis such as the kind seen in 2008 just yet. However, my long-term chart of the S&P 500 suggests that it’s within reason that we could see another such crisis, and potentially one that is worse, once we turn the corner into the 2020s. That means that Goldman and the other major banks have at least three to four years to build their common depositors’ base.

My regular readers know I am not a tin-foil-hat type. But, let's first assume I am correct in my expectations for another major banking crisis in the not-too-distant future, especially for the weaker of the larger banks. Let's further assume that, rather than a bailout being offered by the government again, the powers that be determine that a Cyprus-style "bail in" would be the preferred path, as the country likely does not have the stomach for any further bail-outs to the big banks.

Do we begin to see the light as to why Goldman wants to increase the deposits it holds within its “virtual safes”? While many consider them the “smartest in the room,” they certainly seem to be preparing for this potential scenario down the road.

What a ‘bail in’ means

There is one more point that should be understood. As far as I know, we still do not have any laws in place which authorize the Cyprus-style "bail-in" scenario. While that does not mean that one may not be passed when an emergency situation arises, we currently do not have a mechanism to legally effectuate and enforce such a "bail in" on depositors.

As a former lawyer with a significant amount of mergers-and-acquisitions experience, I also want to point out that depositors would be better served by bail-ins as compared to the bankruptcy option, and would probably prefer it. Under such extreme circumstances, a "bail-in" at least preserves the "good" assets of the bank and gives them future hope of being able to recover more of their losses than they would have otherwise had to recognize under the bankruptcy option.

The bankruptcy alternative truly leaves them nothing in their unsecured status, so providing a restructuring using a "bail-in" type of scenario places them in a better position than as a standard unsecured creditor would hold.


There could very well be many business reasons as to why Goldman has now moved down the path of opening its vaults for mass deposits. But when considering where I view the market several years down the road, along with the lagging long-term charts of the bank stocks, one has to consider the Cyprus-style potential "bail-in" scenario a little more seriously.

Ultimately, one must consider whether they even want to place money in the large banks to begin with, considering the potential risks being alluded to within the long-term charts. Being forewarned means you are forearmed, and you can seek out a safer depository for your cash reserves well before any crisis strikes.

Why is any of this important to you right now? Well, even though I believe we will still have several more years ahead of us before a major financial crisis strikes again, I think it is always a good time to understand the risks coming down the road. So, consider this your early warning.

In Israel, Danger Is on the Horizon

By Jacob L. Shapiro


The fight against the Islamic State in Syria and Iraq put a number of issues on hold in the Middle East. But the Islamic State is now all but defeated, and with the loss of a common enemy has come the loss of a common purpose for the anti-IS coalition. Concerns that dominated the region before IS are dominating the region once more. That means Israel, which mostly sat on the sidelines in Syria and Iraq, will become a more active player.

Whoever emerged as the victor in the war in Syria would have been an enemy to Israel, and all things being equal, the Israelis preferred the Assad regime to IS. But Assad is still an enemy, and the more his regime consolidates its power, the more of a threat Syria becomes.

A Nightmare Scenario

Israel’s strategic position in the Middle East changed in 2011 when the Syrian civil war broke out. At the time, there was great uncertainty on all of Israel’s borders, particularly on the Egyptian border. Egypt fell into disarray, and the Muslim Brotherhood briefly rose to power. Although Egypt’s military never seriously relinquished control, Israel had to begin considering a worst-case scenario: a hostile government in a country that was the most serious threat to Israel’s existence in the decades following 1948.

A return to hostilities with Egypt would have been a serious threat. But Israel’s biggest fear isn’t invasion by one enemy; it has the military and advantageous geography to resist any single invader in the region. The country’s nightmare scenario is a well-coordinated invasion by multiple powers. (Had the coalition of Arab states that attacked Israel in 1948 been better coordinated, it might have defeated Israel.) The civil war in Syria, therefore, was actually the silver lining in the uprising in Egypt for the Israelis. At the same time that Israel was dreading the return of past demons in Egypt, its enemies to the north were suddenly incapacitated.

A picture taken on Nov. 20, 2017, shows Israeli Merkava Mark IV tanks taking part in a military exercise near the border with Syria in the Israeli-occupied Golan Heights. JALAA MAREY/AFP/Getty Images
This turned out to be a boon for Israel, especially once Egypt’s military replaced Muslim Brotherhood leader Mohammed Morsi with the current president, Abdel-Fattah el-Sissi. Syria was being torn apart, and the Assad regime was too busy fighting for survival to challenge Israel. Hezbollah, which viewed the Assad regime as an ally and which fought a war with Israel in 2006, was preoccupied in Syria. And, most important for Israel, Iran’s strategy to create a crescent of influence extending to the Mediterranean was temporarily thwarted.

Israel was more secure at that moment than it had ever been. As long as the fighting continued in Syria, Israel faced no immediate threats on its borders. This is not to say that Israel was uninterested in who won out in Damascus, but the best-case scenario for Israel was a long, drawn-out civil war that weakened all sides. And for a few years, this was exactly what happened. Israel intervened occasionally to prevent certain types of weapons, like anti-air or anti-ship missiles, from finding their way into Hezbollah’s hands. But for the most part, Israel, which in the past has had to act pre-emptively to ensure its survival, was largely a bystander.

This passivity made sense while the war raged on. But now the conflict is scaling down and Israel must examine its options. It is in this context that the media’s recent obsession with a budding friendship between Israel and Saudi Arabia must be understood. That Israel and Saudi Arabia should find common cause right now makes perfect sense: It’s a classic case of “the enemy of my enemy is my friend.” Iran is a threat to both countries, and the Iran nuclear deal signaled to the United States’ two oldest and most reliable allies in the region that U.S. interests – not Israeli or Saudi interests – were going to dictate future U.S. policy in the Middle East. Intelligence sharing and behind-the-scenes cooperation between the Saudis and Israelis is not so much a revelation as a fait accompli.

There are limits, however, to what Saudi Arabia can offer Israel. Much has been made of the possibility that Saudi Arabia may be willing to recognize Israel – and coax other Arab states to do the same – in exchange for an Israeli strike on Hezbollah in Lebanon. That is the kind of simplistic geopolitical thinking that gives analysis a bad name. Saudi Arabia can offer Israel very little at this point: Egypt and Jordan already recognize Israel, Syria is beyond Riyadh’s reach, Lebanon is now also out of its grasp, and the Gulf states are no longer all under Saudi control now that Riyadh has severed ties with Qatar and is reportedly having trouble with Kuwait too. Israel will not risk its security for recognition from a few Gulf states.
Concerns Closer to Home
The only area in which Saudi Arabia could help Israel is much closer to home, in the interminable Israeli-Palestinian conflict. Since the collapse of the Camp David negotiations in 2000, Israel has charted its own course in the West Bank and the Gaza Strip. Israel has pulled out of Palestinian areas that were either unimportant or indefensible. It has continued building settlements in the West Bank, creating numerous new “facts on the ground,” in the past decade and a half. Israel has waged mini-wars against Hamas in the Gaza Strip, as if the Gaza Strip were an overgrown garden that required occasional upkeep. Israel could afford this approach because its strategic environment was relatively steady.

But this isn’t the case any longer. The Palestinian issue by itself is not a serious threat to Israel, but it can become one if the Palestinian territories erupt at the same time that Israel faces a foreign invader. Israel has not had to think in these terms for decades, but it no longer has that luxury. Assad’s victory, Iran’s ascendance in the region, Washington’s distractions, Egypt’s instability and even Turkey’s increased assertiveness in its old Ottoman stomping grounds are all potential threats for which Israel must prepare. Israel does not want a Palestinian intifada to break out at a time when the country is facing critical threats, nor does it want a foreign power to be able to use the Palestinians to distract Israel from its regional priorities.

The question, then, is whether Saudi Arabia has enough influence with the Palestinians to strong-arm them into signing a peace deal that would allow the Israelis to put the issue to bed, at least temporarily. The timing makes sense: Israel is in a position of power, and perhaps will never be as strong as it is now.
The issue will be getting the Palestinians to accept a deal that grants them a small fraction of the country they have envisioned for generations. The recent machinations in Egypt to secure a reconciliation deal between the Fatah and Hamas factions in the Palestinian territories are the first step in this process, but there is a long way to go, and it’s not clear that Saudi Arabia and Egypt have enough pull to make it happen. Iran, which in the past has financially supported Hamas and currently backs the Palestinian Islamic Jihad group, would love to spoil the plan.

Right now, Israel is relatively strong and secure, but it may not stay that way. The U.S.-Israeli relationship, though still strong, is not what it once was. Russia is a bit player that can’t really help Israel. Turkey is strengthening and increasingly independent-minded. Iran, Syria and Lebanon are all enemies of Israel, and Israel can’t assume that Egypt and Jordan will be docile forever. Israel must now play a delicate game – but playing that game isn’t going to be easy if it’s facing constant strife at home. If Saudi Arabia can help, then Israel may be willing to return the favor. But there is no silver bullet. No single relationship is going to fix all of Israel’s problems. Israel is strong now, but danger is on the horizon.

 The Dumbest Dumb Money Finally Gets Suckered In  

Corporate share repurchases have turned out to be a great mechanism for converting Federal Reserve easing into higher consumer spending. Just allow public companies to borrow really cheaply and one of the things they do with the resulting found money is repurchase their stock. This pushes up equity prices, making investors feel richer and more willing to splurge on the kinds of frivolous stuff (new cars, big houses, extravagant vacations) that produce rising GDP numbers.

For politicians and their bureaucrats this is a win-win. But for the rest of us it’s not, since the debts corporations take on to buy their own stock at market peaks tend to hobble them going forward, leading eventually to bigger share price declines than would otherwise be the case.

The ultimate loser? The only people traditionally willing to buy in after corporations are finished overpaying for their stock: Retail investors, of course.

Let’s see how it’s playing out this time.

First, corporations spent several years elevating stock prices with share repurchases. Note the near perfect correlation between the two lines:

Now they’re scaling back their purchases:

Saying Bye to Buybacks 
(Wall Street Journal) – Companies in the S&P 500 are on pace to spend the least on buybacks since 2012. 
Large companies are repurchasing their shares at the slowest pace in five years, as record U.S. stock indexes and an expanding economy propel more money out of flush corporate coffers into capital spending and mergers.

Companies in the S&P 500 are on pace to spend $500 billion this year on share buybacks, or about $125 billion a quarter, according to data from INTL FCStone. That is the least since 2012 and down from a quarterly average of $142 billion between 2014 and 2016. 

Buyback activity among top-rated nonfinancial debt issuers, many of which have regularly borrowed money to finance share repurchases, declined for the third straight quarter in the July-to-September period, according to Bank of America Merrill Lynch. Meanwhile, mergers and acquisitions among that group of companies had their biggest quarter of the year, analysts at the bank said. 
Factors including high stock price, historically high share valuations and uncertainty over the future shape of the tax code mean that “companies may be less likely to favor buybacks over other uses of cash in 2018,” analysts at Goldman Sachs Group Inc. said in a report this week.

And – here’s the really sad part – individual investors are taking up the slack:

The emboldened retail investor may be a new catalyst to help take stocks higher — for now. 
(CNBC) – “The level of enthusiasm about the market … has been building. We’re seeing more individuals come in,” said Liz Ann Sonders, chief investment strategist at Charles Schwab.
Sonders said she’s anecdotally seeing signs of more individuals putting money to work in the stock market in the last several months, after years of skepticism and concerns about “every variety of doom and gloom.” 
She says she is getting fewer investors asking about bubbles or about what’s the next shoe to drop. 
“I think it’s finally starting to suck people in … emotionally, and actually it’s hard to judge why now all of a sudden, but maybe it’s because of how persistent the move has been with so little volatility on the upside and on the downside,” Sonders said. “This year has been different. This kind of year pulls people in.” 
Retail brokers have been reporting an influx of accounts. Charles Schwab, in its earnings release, said clients opened more than 100,000 new brokerage accounts a month in the third quarter, making for a record-breaking 10-month streak of new accounts topping 100,000. Its rival, TD Ameritrade, said on its earnings call last month that new accounts, asset inflows and other indicators are at the highest since the financial crisis.

What’s frustrating about this is the repeating pattern of government creating conditions in which smart money (that is, the guys who donate big to political campaigns) is allowed to get in early, make huge profits, and then hand the bag to regular people who aren’t connected or sophisticated enough to see what’s happening. The rich, who are or will soon be shorting the hell out of this market, get richer and the rest see their hopes for a decent (or any) retirement dashed one more time.

And the political class wonders why voters don’t like them anymore.