YOUGHAL, IRELAND – The muffled bells began tolling at precisely 11 o’clock on the 11th day of the 11th month of the year. And then, the poppies began to fall.

St. Canice’s Cathedral in Kilkenny was marking the end of the Great War by dropping red, paper poppy flowers, inscribed with the names of local soldiers, from the bell tower down into the nave.

For the next two hours, the poppies fell, one for every one of Ireland’s young men who died in the war… 35,000 in all.

They were shot, gassed, or blown to bits. Brothers, husbands, and sons – and fathers, too. About 25,000 Irish children never saw their fathers again.

We were in Kilkenny to discuss economics, which led to politics… and to war.

Kilkenomics Festival

Irish economist David McWilliams had invited us to participate in the “Kilkenomics Festival.” We have written so much about “Trump’s Trade War,” David must have thought we knew something about it. So he asked us to join a panel discussion.

“We’re talking about two different things here,” we clarified, for the sake of the audience.

“There’s a trade war, which is largely fake. And there’s the threat of a real war, which a trade war might cause.”

We explained our point of view. Mr. Trump has the most to lose from a trade war with China. His reputation for creating a strong economy… his reputation for forceful and successful deal-making… the fortunes of his major backers, as well as his own personal fortune – all depend on cutting a deal with the Chinese.

He could bring China to its knees, we explained, by blocking Chinese imports to the U.S. But he would enjoy his triumph for only about 10 seconds – the time it would take to notice that the U.S. stock market was crashing.

The U.S. president may be a blowhard and a dumbbell about a lot of things, but not about which side his bread is buttered on. He will want to come back from his meeting with China’s Mr. Xi at the G20 summit in Argentina at the end of this month with a victory announcement… not with a double obituary – one for “his” economy and the other for his career.

Thucydides Trap

But wait… It’s not that simple.

“Trump is, above all, a showman,” we told the crowd. “But shows sometimes veer off in unexpected and unwelcome directions.

“And while POTUS may only be posturing for his admirers, China may see its future and its livelihood being threatened. It may not have gotten the memo: that this is just showbiz. It may be unwilling to read from the script or play its role for the Trump fanbase. Something could go very wrong.”

The other panelists were ahead of us. They thought things had already gone wrong.

“This trade war has already gone way beyond trade,” said Neil Howe, who developed the theory of a generational cycle in American politics. “It’s now about intellectual property theft and technology transfers. It’s now about geopolitics and China’s rise as a great power. America feels threatened. It feels like it is losing its place in the world.”

Howe cited Graham Allison’s “Thucydides Trap.” The idea is that as great powers are challenged by rising powers, it leads to war.

According to Greek historian Thucydides, it was the Spartans’ desire to keep Athens from getting too big for its britches that caused the Peloponnesian war.

And many think it was Germany’s rise as a great power in the early 20th century that caused France and England to rush into World War I… and to punish Germany so harshly after the war.

Yesterday marked the hundredth anniversary of the end of World War I. For 100 years, historians have been trying to find a plausible explanation for the deaths of 37 million people. Thucydides was probably not far off.

Two Impulses

Germany never surrendered. She only signed onto an Armistice.

But then, with her ports blockaded, her people starving, and her resources exhausted, she was forced to accept the “war guilt,” though Germany was arguably no more guilty than any of the other participants of the war.

Germany was also saddled with “reparations,” which crippled her economy. And in 1921, when she was unable to make a reparations payment – in gold, of course – the French and Belgian troops invaded and occupied the Ruhr Valley.

As we have been exploring, there are two main impulses in human transactions: win-win and win-lose. You either do voluntary deals, in the hope of both parties coming out ahead. Or you force someone else to lose so that you can “win.”

Most of private life is win-win (though there are always some people trying to get ahead by making others lose).

Public life, on the other hand, is dominated by government, which is an us-versus-them, win-lose enterprise.

And in war, win-lose finds its most dramatic expression. You can’t win a war without making someone else lose. And in the case of World War I, the above-referenced 37 million corpses were the big losers.

Win-win deals often lead participants to want to win again… that is, to do more deals (business, consumption, sex… whatever).

But win-lose deals leave participants looking for revenge. So the 37 million losers from World War I ended up as simply the downpayment on the total win-lose tally for the 20th century.

Adolf Hitler was on the case. By 1921, he was the chief of the National Socialist German Workers’ Party – or Nazi Party – and he was already peddling his us-versus-them, win-lose claptrap. “We were stabbed in the back,” he claimed. By 1945, another 60 million people had been added to the losers’ list.

The church service in Kilkenny ended with a bugler performing “The Last Post”… which was played at the end of the killing…

Then, the last poppy drifted down and came to rest on the floor… like the last soldier falling into the mud of the trenches.

The church grew quiet.

And after a minute or two of silence, a baby began to cry.





By Joe Withrow, Head of Research, Bonner & Partners

As Bill reported last week, stocks rallied after the midterm elections. And this isn’t a new phenomenon.

Historically, stocks have performed well in the twelve months following midterm elections…

That’s the story of today’s chart, which tracks the S&P 500’s 12-month performance immediately following midterm elections, going back to the Reagan administration.


As you can see, the S&P 500 has generated positive 12-month returns after every midterm election going back to the Reagan years.

On average, the S&P 500 returned 13.8% during the 12 months following the last nine midterm elections. For comparison, the average 12-month return for the S&P in a given calendar year is roughly 7%.

And with the S&P 500 already up 2% since election day, this trend is off to a strong start once again.

What’s more, the fact that the 2018 midterms resulted in a split Congress – with Democrats controlling the House and Republicans controlling the Senate – is seen as bullish for stocks by many investors.

“Gridlock is good,” as the old-timers say on Wall Street. That’s because the government tends to be “less bad” for business when politicians are fighting each other over legislation.

There’s no guarantee that history will repeat… But this trend suggests that stocks may hold up for a while longer.

– Joe Withrow


Why Does Momentum Work?
The “momentum trade” is simple. Find the stocks that are performing the best, and buy them. “Momentum” will carry the stocks higher. For 25 years now, the momentum trade has been relatively successful. But nobody seems to know why…

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In the mailbag, dear readers discuss America’s favorite hollow tradition:

No, it is not a hollow ritual at all. What would you suggest as a replacement? The only thing that would replace it is tyranny.

– Marg L.

Accurate take (from my elderly perspective), but voting isn’t really “hollow.” It’s what keeps a constant state of violence from existing in a society. The “deciders” in Afghani-land are a small group, an elite. But because their ideology/culture doesn’t default to a peaceful, community-based process for resolving disputes, which presumes that “All are created equal and are endowed by their Creator with certain Rights, which are inalienable,” the “survival of the most brutal” tends to prevail.

– Richard B.

I have just completed reading your Diary entry regarding voting. I believe that those who don’t vote get what they deserve, while those of us who do vote get what we don’t deserve.

– Leroy L.

Meanwhile, readers discuss why government will never make America great

No government can make the economy strong; it’s the working people. But government can help by getting out of the way, as Trump has done.

– Anonymous

Easy for you to speak from whatever country you’re in today.

– Mike K.

You are too bitterly cynical! Though you are very knowledgeable and insightful, your “lens” for seeing the world is caught in the “victim” mode. Not to worry, as most people would agree (but for various reasons, not necessarily the same). The world – and society – is not being done to you. It is your world that is being done to you… As the saying goes: “We don’t see the world as it is. We see the world as we are.”

Throw off the mantle of cynicism! Be hopeful! You obviously have a good heart and much wisdom. Offer your insight through hope and heart – you will inspire us and help society in greater ways!

– John S.


In February 2016, Jeff Brown, Bill’s top technology expert, recommended the best-performing stock in the S&P 500 for that year – chipmaker Nvidia. It’s now up 560%.

Now, Jeff’s uncovered a new opportunity, one he’s even more excited about. Get the full story here.