LISBON, PORTUGAL – Lisbon is a beautiful city.

It was so poor and so remote, it missed out on the modernization that ruined many other cities in Europe.

Wisely neutral during World War I and World War II, it wasn’t bombed either.

Even now, after the spread of cheap euro finance has made it richer, there is still a whiff of decay about it… like a great oak with a few dead limbs… or a beautiful woman with a few gray hairs.

We will be in Portugal all this week. We’ll let you know what we find.

Bluff and Bluster

Meanwhile back in the U.S., the government, as we showed last week, doesn’t work the way it’s s’posed to.

We connected the dots… from the increase in “complexity” to the inability of the people or their representatives to know what is going on.

The insiders run the show now, we saw.

But we left out one dot…

The U.S. is the world’s oldest government, apart from quirky city-states, the Vatican, and other places time forgot.

As it has matured, from young to old – from small to big, from a nation of few laws to a nation of thousands of rules and regulations – the executive branch gained power.

Only it and its technocratic flunkies can deal with the sordid details of a Big Brother government.

So, you’d expect to see Team Trump taking charge. But instead, it shirks. Rather than take the lead, it asks Congress to sweat the Iranian nuclear deal, to trim up O’care, and prune the tax code… and so forth.

But all Congress could possibly do would be to bluff and bluster, letting the lobbyists, experts, and cronies fashion a program.

Then, when all the plums have been put in the pudding, Congress will make it the law of the land.

Swamp Battle

But the Deep State is not monolithic. Nor is Congress.

One faction of insiders controls a group of swinish congressmen from the corn states… another controls a group of scalawags from the Latte Belt… still another group of scoundrels claims to represent the poor, the downtrodden, and those on $1,163 a month in disability handouts.

Swamp critters battle for money and power. The war industry against the pharmaceutical industry… the social welfare queens against the kings of Wall Street. The slimy hustlers of Northern Virginia against the greasy grifters of Montgomery County, Maryland.

It takes strong leadership – usually from the White House – to coordinate, reconcile, and amalgamate these parasites into a unified program of systematic and sustained plunder.

Without it, it’s a free-for-all, with every chiseler and scamster stealing whatever he can.

The problem is that all the ticks are on the same dog. And if they suck too much blood, the poor pooch dies. That is why we have debt limits… budgets… interest rates… and so forth – to keep them from draining too much wealth out of the economy.

But instead of reinforcing these limits, as widely anticipated, Team Trump has removed them altogether.

The generals get more weapons, more medals, and more money. The welfare state gets more drugs, more counselors, more administrators, more hangers-on, and more sinecure seekers.

The Deep State strengthens… while the economy weakens.

Gaudy and Absurd

That is the real meaning of the $4 trillion budget Congress passed last week.

Neither the White House nor Congress will “hold the line” against deficits. Neither party says “no.” Spending flares out in all directions, more gaudy and absurd than ever.

This, then, is what to expect: more.

More spending. More debt. More swamp battles. More volatility. More crises. More nonsense. And more controls and contradictions, as the various tentacles of the Deep State reach further into every aspect of the economy and wrap themselves around our necks.

That’s the good news. The bad news is that this “complexity” pinches the economy from both sides.

It costs more to support all these money-wasters. But it also reduces the amount of real money available. GDP growth slows… tax receipts fall… and the poor dog staggers.

But wait… there’s more…

Next Crisis

Come the next financial crisis (any minute now, but don’t hold your breath), the Fed is bound to panic.

It and it alone must bridge the gap between tax receipts and spending… inflow and outflow… fantasy and reality.

The real economy – as measured by GDP and corporate profits – has been growing at a rate of about 2% a year for the last 10 years. Meanwhile, U.S. government debt is up about 100%. And U.S. stock prices are up about 200%.

The Fed’s monetary footprint (the bonds on its balance sheet and the corresponding cash it has created to pay for them) is five times what it was in 2008.

We understand why and how – more or less – such an astonishing thing has happened.

We wait, too astonished by how long it continues… and what happens when it ends.





By Jeff Clark, Editor, Jeff Clark’s Market Minute

Skechers USA (SKX) may have just saved the retail sector.

SKX – a shoe company that sells its products through specialty, department, and sporting goods stores as well as in its own company stores and online – has been having a tough year.

That’s no surprise. Just about every company related to retail, and subject to the competitive pressures of Amazon (AMZN), has been having a tough year.

But SKX single-handedly raised the retail sector from the dead on Friday. SKX announced earnings that were far better than expectations. The company reported a terrific back-to-school season. And management said it was looking forward to a strong holiday season.

SKX rallied 42% on Friday. That is an absolutely insane reaction to an earnings report. And it’s a good illustration of just how beaten-down, oversold, and left for dead the entire retail sector had become.


Skechers had a great day on Friday. But it’s also worth noting that just about every other retailer had a great day as well.

For example, Dick’s Sporting Goods (DKS) rallied 2.6%. That’s more than five times the 0.5% gain in the S&P 500. Macy’s (M) – that tired, old department store that is almost universally despised on Wall Street – popped almost 5% higher on Friday.

Of course, we don’t want to get too excited over just one good day. Retail stocks have been horrible performers this year. It’s going to take quite a few good days to catch up to the run in the S&P 500.

Friday was a good start. Now the sector has to add to that action over the next week or two.

There are several more retail stocks set to report earnings in the coming days – including Deckers Outdoor (DECK), Columbia Sportswear (COLM), and Under Armour (UAA). If we get more positive talk about the back-to-school season, and more positive expectations from these companies for the coming holiday season, then we’ll likely see an even stronger rally in the retail sector.

It’s also worth noting that on Friday – a day when every major stock market index hit new highs, and when the retail sector was leading the way higher – the largest and best-performing retail stock this year, AMZN, was actually down on the day.

Could it be possible that the retail pendulum is starting to swing in the other direction?

Have we finally seen the bottom in stocks like Dick’s Sporting Goods and Macy’s? And have we seen the top in Amazon?

We’ll know within a few weeks.

Jeff Clark

P.S. Every morning the market is open, my Market Minute newsletter tells readers where the action is headed for the day… including which sectors to watch and which to avoid.

If you’re an active trader, it’s a valuable tool for preparing your day. If you’re not an active trader, you’ll learn tips that’ll make you a vastly better investor. To automatically receive the Market Minute for free right in your inbox, click here.


Will It Be Congress’ Fault If the Stock Market Tanks?
The Dow has risen nearly 25% since Trump’s election. Treasury Secretary Steven Mnuchin says the run-up is because the market expects a healthy tax cut. And if Congress doesn’t pass one, U.S. stocks would plummet.

Chris Mayer: How to Spot a “100-Bagger”
A “100-bagger” is a stock that returns $100 for every $1 invested. One of Bill’s top analysts, Chris Mayer, shows how to separate these big winners from the rest of the market.

Five Industries Millennials Are “Killing”
Millennials are people in their twenties and early thirties. They are now the largest generation in America. And as consumers, they have quietly been putting these five industries out of business.


In the mailbag, readers offer advice for Bill’s ranch

As a rancher, I can tell you that making money in cattle is a myth at the moment; it is hard to barely break even, as you are finding out. Always check for water first, all else second in buying land.

– Fran S.

Your letters on ranch events record the art you are painting to provide experiences in real-world decision making. Churchill painted canvas in retirement; I enjoy making land use management decisions on my farm. I think it’s a wonderful form of recreation and art that occasionally even makes money. Enjoy your art without apology. It serves an important purpose.

– Vernon H.

You mentioned “… the new reserva that we had kept in a barrel for a year before bottling.” Is that not a crianza?

– Andy C.

Meanwhile, conversation turns back to President Trump

Love him or hate him, you have to admit that he gets more airtime than any previous president and maybe that might encourage more people to think about their votes in the future.

– Bob B.

Maybe folks who are too busy updating their Facebook pages are better off for it. If you are frustrated with politics, Bill, how can us peons make a difference? Granted, your perspective is much more highly evolved than your average bear, and is probably more disturbing as well because of it; but people are too busy to try to cast any logic on all the moving parts everybody is grinding their own axe over.

It’s bad. Life is too short. Take your happiness where it can be found. A ranch in Argentina sounds pretty nice, actually, while the world burns.

– Michael C.

Editor’s Note: Last week, many readers wrote in asking about the new Diary format. The new format allows the Diary to be easily read on a tablet, smartphone, and other mobile devices. It’s part of our commitment to ensure that Bill’s “dear readers” can read the Diary any time, from any device.


If you were born before 1969, our colleagues at the Palm Beach Research Group just released a book you’ll want to read.

Buried in President Reagan’s Tax Reform Act of 1986 is a little-known government program. And if you qualify, you could retire with an extra $2,194 per month, tax-free. This book explains what this program is and how you can qualify today. Read on right here.