Is Trump About To Fire “Moderate Dog” Mattis?

At long last, amateur political strategists can finally add Defense Secretary James Mattis’ name to the growing list of Trump administration officials who are expected to leave – or rather, be pushed out – after the midterms.

At last count, that list already included John Kelly, Jeff Sessions and Wilbur Ross. But according to the New York Times and Politico, Trump’s relationship with his purported one-time favorite has been strained, perhaps beyond repair, thanks to Mattis’ continued defiance of administration policies like the ban on transgender service members, torture for terrorist detainees and the continued importance of NATO.

Mattis

Politico started the conversation earlier this week when they off-handedly mentioned in a story about – of all things – Sessions’ long-rumored dismissal that Mattis was also on his way out.

The problem for the White House extends beyond filling the top job at the Justice Department. Trump has for months been mulling the prospect of replacing Defense Secretary Jim Mattis, who is now expected to be dismissed or to resign after the midterm elections, too. Once enamored of the retired Marine general and his nickname, “Mad Dog,” the president bragged to donors, “The guy never loses a battle, never loses.” But Trump has slowly come to realize that Mattis’ political views are more moderate than his sobriquet suggests, and the president has taken to referring to him behind closed doors as “Moderate Dog.”

The White House’s short-list of prospective replacements for Mattis includes two Republican senators who have signaled they aren’t interested in the job, Tom Cotton of Arkansas and Graham, both of whom are up for re-election in 2020, according to people familiar with the matter. And Cotton has already announced his campaign for reelection.

And the New York Times kept the rumor mill churning with a story by Pentagon correspondent Helen Cooper, who recounted how the relationship between Mattis and Trump has reportedly soured over the past year. Where once Mattis and Trump would huddle in the residence and talk national security policy over a couple of hamburgers, the two men barely speak, as Trump has reportedly largely tuned out his national security staff since the beginning of his second year in office as he’s gained confidence in his own judgment.

But the burger dinners have stopped. Interviews with more than a dozen White House, congressional and current and former Defense Department officials over the past six weeks paint a portrait of a president who has soured on his defense secretary, weary of unfavorable comparisons to Mr. Mattis as the adult in the room, and increasingly concerned that he is a Democrat at heart.

Nearly all of the officials, as well as confidants of Mr. Mattis, spoke on condition of anonymity to discuss the internal tensions — in some cases, out of fear of losing their jobs.

In the second year of his presidency, Mr. Trump has largely tuned out his national security aides as he feels more confident as commander in chief, the officials said. Facing what is likely to be a heated re-election fight once the 2018 midterms are over, aides said Mr. Trump was pondering whether he wanted someone running the Pentagon who would be more vocally supportive than Mr. Mattis, who is vehemently protective of the American military against perceptions it could be used for political purposes.

White House officials said Mr. Mattis had balked at a number of Mr. Trump’s requests. That included initially slow-walking the president’s order to ban transgender troops  from the military and refusing a White House demand to stop family members from accompanying troops deploying to South Korea. The Pentagon worried that doing so could have been seen by North Korea as a precursor to war.

Of course, quotes from Bob Woodward’s book “Fear” that were attributed to Mattis – particularly allegations that Mattis once complained that Trump had the aptitude of a fifth grader while lamenting Trump’s purported inability to grasp the gravity of national security policy – haven’t helped matters, according to the Times. Meanwhile, suspicions that the author of the anonymous NYT op-ed came from within the administration’s national security camp have only aggravated the situation.

But then again, this wouldn’t be the first time the mainstream media has published a story claiming the imminent departure of a senior administration figure only for said official to obstinately remain in their position past their expected expiration date. According to the NYT, the appointment of Deputy National Security Advisor Mira Ricardel is one sign that the administration is moving to oust Mattis, given his reportedly long-standing bad blood with Ricardel. But then again, how many members of Trump’s inner circle can honestly say they like each other on a personal – or even a professional – level?

The arrival at the White House earlier this year of Mira Ricardel, a deputy national security adviser with a history of bad blood with Mr. Mattis, has coincided with new assertions from the West Wing that the defense secretary may be asked to leave after the midterms.

Furthermore, even if he isn’t pushed out, Mattis might opt to leave anyway, since he’s reportedly growing tired of constantly pushing back against his boss’s impulses.

Mr. Mattis himself is becoming weary, some aides said, of the amount of time spent pushing back against what Defense Department officials think are capricious whims of an erratic president.

The defense secretary has been careful to not criticize Mr. Trump outright. Pentagon officials said Mr. Mattis had bent over backward to appear loyal, only to be contradicted by positions the president later staked out. How much longer Mr. Mattis can continue to play the loyal Marine has become an open question in the Pentagon’s E Ring, home to the Defense Department’s top officials.

Then, of course, there’s the issue of how the market might react to Mattis’ departure. Would investors mourn the loss of one of the fabled “adults in the room” by dumping stocks?

The fate of Mr. Mattis is important because he is widely viewed — by foreign allies and adversaries but also by the traditional national security establishment in the United States — as the cabinet official standing between a mercurial president and global tumult.

“Secretary Mattis is probably one of the most qualified individuals to hold that job,” Senator Jack Reed of Rhode Island, the top Democrat on the Senate Armed Services Committee, said in an interview. His departure from the Pentagon, Mr. Reed said, “would, first of all, create a disruption in an area where there has been competence and continuity.”

At this point, it’s certainly possible that we may never find out. Because if Democrats gain even the slightest margin in the Senate, they would have enough votes to sink future Trump nominees – effectively leaving Trump stuck with his cabinet. However, if Republicans successfully fend off the much-hyped blue wave, Trump would have some more leeway to do another round of house cleaning.

Then again, Trump’s often-tempestuous relationships with members of his inner circle have been so widely documented, it’s virtually impossible to say whether the relationship between the two men might soon recover. Which is why it’s somewhat surprising that the NYT is still running stories like this one, given that nowhere in the text does it say that Mattis’s departure is imminent.

But of course, the “Crazytown” narrative isn’t going to fuel itself…

Bill Bonner: “America’s Economy Is On A Suicide Mission”

Submitted by Bill Bonner of Bonner & Partners

Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity.

             – “The Second Coming,” William Butler Yeats

Rain is coming down this morning. Buckets of it. The Carolinas are getting walloped by Hurricane Florence. Here in Ireland, another tropical storm, Helene, is said to be on its way. It is raining hard already.

Yesterday, we went up to the coast to see a village that has been preserved more or less as it was 100 years ago. The cottages were just as you might have imagined, whitewashed stone with thatched roofs.

On the coast, the winds blow so violently that the thatch must be lashed down with ropes to keep it from blowing off. Inside, each cottage had a little peat fire and just a few pieces of simple furniture.

These were tiny homes – barely as large as the typical American living room. But they were cute, cozy, and – as long as the fire was burning – fairly comfortable.

Meanwhile…

Bull Market Revival

In an unusually stark separation, the smart money and the dumb money seem to be taking leave of one another.

This week, the news seemed especially felicitous. Stocks moved higher on a wave of positive jobs data and opinion surveys.

The Dow now stands within 500 points of a new all-time high – which would signal a revival of the bull market that began in March 2009… or August 1982, depending on how far back you want to trace it.

Remember, few investors – unless they are lucky or very well-advised – make money trading in and out of small market moves… or by choosing stocks that turn out to be Apple or Amazon.

Instead, they get in at the right time… and stay in… allowing the “primary trend” to take them where they want to go. The primary trend has taken stocks on the Dow from under 1,000 in 1982 to 26,000 today.

And today, many investors expect that trend to continue. They think the economy is strong and that it should get better. After all, that’s what the president of the United States says; who would know better than he?

But Bloomberg’s Smart Money Flow Index tells us that the pros have been getting out for the last six months.

And this week, Roubini, Tepper, Dalio, and Gundlach – a whole gaggle of gurus – announced that they were turning bearish; the end of this credit boom is coming, they say. Perhaps soon.

Of course, you never really know which is the smart money and which is the dumb money until after the future reveals itself.

But our guess is that the smart money will turn out to be the money on the sidelines. A further guess is that the dividing line – between smart and dumb – will run through politics, where passionate intensity is running unchecked.

Suicide Mission

“I have never seen people get so emotional about politics,” says a long-time friend who’s come to Ireland to visit. “In some places, if you dare to say something nice about Trump, they hate you immediately. In other places, if you dare to criticize him, they hate you.”

Many investors are sure things are getting better all the time – “beyond full employment”… 4% GDP growth… China is going to buckle – all under the watchful eye of the commander in chief.

Others are sure it is all little more than reality TV: contrived, manipulated, and ultimately, phony.

Here at the Diary, we take no interest in politics… except to despise it. Money is our beat here.

But today, politics exerts a rare and pernicious pull on the money world, like a dark star tugging a planet to its death.

The U.S. government is the largest player in the financial markets. It is the biggest spender.

Its budget policies stimulate or stifle the economy. Its bank – the Fed – fiddles the money supply and the cost of credit. And all of a sudden, under the leadership of reality TV star Donald J. Trump, the government is doing remarkable things.

It is increasing budget deficits, when traditional economists claim it should be cutting them. And it is launching a war on trade, when only a quack economist – trade advisor Peter Navarro – believes it can pay off.

It is emptying its vaults and granaries, when the old-timers insist it should be saving for the hard times ahead.

“It’s bad enough that deficits are increasing this late in the cycle, but we are increasing taxes and raising interest rates,” says Jeffrey Gundlach, founder of investment firm DoubleLine Capital.

It is a “suicide mission,” he adds. “This will put further pressure on the deficit and create a self-reinforcing cycle of higher debt and higher rates.”

We are also in the early stages of a trade war. Mr. Trump believes global trade is a win-lose contest. You win, he thinks, by tough, “art of the deal” negotiating, making your opponent lose.

Yesterday, POTUS sent out a tweet:

“Our markets are surging, theirs are collapsing…” he crowed.

But trade is not a win-lose deal. It’s win-win. And it’s these win-win deals that are at the heart of capitalism, progress, and civilization. Turning trade into a win-lose deal guarantees that both sides will slide backwards.

Financial Anarchy

Trade barriers raise prices. Higher prices mean higher inflation rates and higher interest rates. Higher interest rates mean the feds will have to pay more to finance their higher deficits, which the very same POTUS has given us.

Last month, the feds borrowed $214 billion. They spent $433 billion, of which $32 billion was on interest on the national debt.

In other words, half of what they spent was borrowed. And as interest rates rise to the Fed’s target, that $32 billion will turn into $50 billion a month. Annualized, that’s $600 billion a year – or approximately two months’ worth of tax receipts.

And when the next recession comes… watch out.

Deficits will widen from $1 trillion to $2 trillion. The government debt will soar to $30 trillion. And the interest – at 4% – will take up tax receipts from January through April.

It’s as if a kind of financial anarchy had been loosed upon the land. No one knows exactly what to make of it… or what to expect.

But as their uncertainty increases, their convictions harden…

One side believes we are headed to Heaven and buys. The other sees Hell plainly written on the ticket and sells. We will see where we end up.