How far could stocks fall?
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Insider honors Juneteenth as a holiday, so we'll be off tomorrow. Have an excellent weekend.
QUOTES OF THE DAY
"I don't think he's fit for office. I don't think he has the competence to carry out the job." — Former national security adviser John Bolton on President Trump.
"What a dope!" — Trump on Bolton.
WHAT'S HAPPENING
Supreme Court blocks Trump from ending DACA immediately. This stops the administration from deporting 700,000 "Dreamers," but it doesn't protect them forever. The ruling from Chief Justice Roberts and the four liberal justices says that Trump's hasty, ill-reasoned arguments for stopping the program didn't pass procedural muster. If he wants to kill the program, he needs to come up with better reasons for doing it.
Blue Flu in Atlanta. Many Atlanta police officers called in sick Wednesday night, apparently to protest former officer Garrett Rolfe being charged with the felony murder of Rayshard Brooks. Atlanta's mayor says police morale is down "tenfold" in the wake of the murder and protests.
1.5 million Americans filed for unemployment last week. That's 200,000 more than economists expected. 46 million people have filed for unemployment during the pandemic. It was the 13th straight week with more than 1 million claims. Until coronavirus, there had never been a week with more than 700,000.
BLODGET & PLOTZ
The Trump impeachment fantasy continues.
As the usual and expected details of Trump's behavior as president in John Bolton's book leak out, some pundits are blasting Bolton for not testifying in the impeachment hearings. If Bolton had just shared all this back in January, the pundits say, Trump would no longer be president.
Please.
Bolton could have said all this and more back in January. And the impeachment result would have been exactly the same. Republicans control the Senate. No new revelation about Trump's sucking up to dictators, obsessive self-interest, corruption, disregard for law, ignorance, or incompetence would have changed a single vote.
If Bolton had testified, the impeachment hearings would still be ancient history. Trump would still be president. About four in ten Americans would still support him. And Trump would still be dismissing everyone he hired who later shared their stories about him as a "dope." — HB
But that doesn't excuse Bolton from not testifying.
Blodget's right that Bolton's damning testimony wouldn't have persuaded Republican senators to convict President Trump. The president could have peeled off his face, revealed a lizard below, and announced his plan to process all of us into alien snack food, and Republican senators still would be saying, "Well, but conservative judges."
Still, their dereliction of duty doesn't excuse Bolton, who came to conclude that Trump was a criminal, dangerous to national security, and unfit for office. As a patriot — one whose salary was paid by us — he owed Americans the obligation of telling the truth about the president under oath, the way public servants like Fiona Hill and Alexander Vindman did, at great personal cost.
Bolton blames his silence on House Democrats, who didn't pursue impeachment according to his strategy and timetable. But House Democrats couldn't have compelled his testimony. (For example, their legal efforts to subpoena former White House Counsel Don McGahn are still months from resolution because of Trump obstruction and slow judges.)
Bolton could have volunteered to testify. He would have taken a tiny legal risk — in the same way he is taking a tiny legal risk in publishing his book. The difference is that he'll get royalties from his book, and he would only have gotten grief for his testimony.
Had Bolton testified Republican senators wouldn't have expelled Trump. But they would be less able to pretend that he's fit for office. — DP
Speaking of "dopes"...
One of the things Candidate Trump said he was going to do as president was hire "all the best people." Given that promise, and the importance for any competent manager of hiring excellent people, it's always startling how unapologetically and frequently Trump describes people he personally hired as "dopes." — HB
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OTHER NEWS
Arizona and Texas governors will allow cities to require masks. Caseloads are surging in the South and West. States are not imposing masking requirements, but they're now permitting local governments and private businesses to require masks.
BUSINESS & ECONOMY
How far could stocks fall?
After a sudden plunge last week, the stock market has recouped some of its losses and is still close to its post-pandemic-crash highs.
As ever, opinions about the market's future direction are mixed. Some experts think we've started a new bull market that will soon power us to new all-time highs. Others point to the disconnect between buoyant stocks and a crippled economy and argue that we're in a typical "bear-market rally" that will soon end and send the market tumbling to new lows.
Because casual investors often seem surprised by bear markets and frustrated that they weren't warned ahead of time, here are more warnings.
First, a sobering sentence from fund manager John Hussman of the Hussman Funds. Reiterating his longstanding belief that today's extremely overvalued stock market will plunge 60% or more from its peak, Hussman points as precedent to the extreme valuations, economy-market disconnect, and bear-market rally that followed the crash of 1929:
"Severe economic recessions often feature what might be called an "incubation phase," where an exuberant rebound from initial stock market losses becomes detached from the quiet underlying deterioration of economic fundamentals and corporate balance sheets. From the post-crash low of November 13, 1929, the Dow Jones Industrial Average enjoyed a 48% rebound, peaking on April 17, 1930, followed by an 86% collapse by July 8, 1932 (an overall loss of 89% from the September 3, 1929 bull market peak)."
Yes, an 89% loss from peak to trough. If the Dow Jones Industrial Average fell that far from the recent peak of just over 29,000, it would bottom at just over 3,000.
Hussman doesn't think this bear market will be that bad. But stock-market investors in 1929 and 1930 didn't think that, either.
Nor is Hussman the only mega-bear out there. Jeremy Grantham of GMO, a financial-bubble expert who called the top for Japan in the late 1980s, the NASDAQ in 2000, and the housing market in 2008, thinks the current US market is the fourth great bubble of his career — and, possibly, the craziest.
Grantham is so bearish that he thinks a healthy amount of US stocks to own right now is zero.
So if all hell breaks loose, don't say you weren't warned.
But! These are only two educated and experienced guesses at an unknowable future. Other experienced investors, not idiots, think the market will do okay or even well from here.
So, what's a smart investment strategy in the face of this uncertainty?
Diversify your portfolio and be ready for anything.
If your portfolio, retirement plans, and mental health would be destroyed if stocks fell, say, 50% — if you might even panic and sell at the bottom — then you have too much of your portfolio in stocks and you should have more in cash. Similarly, if you're keeping so much of your portfolio in cash that, if stocks rose 50%, you would feel so moronic that you might rush to buy at the top, you should have more of your portfolio in stocks.
In short: No one knows the future, so don't try to predict it. Just build your portfolio to survive anything. — HB
LIFE
He tried 18 flavors of Goldfish crackers. Insider's Lucien Formichella ranks them all, and a few are better than the classic cheddar. Also his keyboard is now "covered in a fine orange mist."
Colin Kaepernick joined Medium's board of directors. The activist and former NFL quarterback will also write articles about racism for the site.
THE BIG 3*
Matt Gaetz and Cedric Richmond got into a shouting match at House hearing on police reform. "Who the hell do you think you are?" Republican Gaetz shouted at Democrat Richmond in an exchange about the safety of Black children.
"Kroger Karen" goes viral for using a stroller to block a black woman leaving the parking lot. They'd had a minor confrontation inside the grocery store.
What would happen if the Queen retired and handed power to Prince Charles. She could officially abdicate, making him king. Or she could retire, and he'd become the Prince Regent, which is King in all but name.
*The most popular stories on Insider today.
YOUR LETTERS
I am a bar owner in [San Francisco] I have multiple locations. I worked, scraped and sacrificed for 20 years to have what I have and I am now likely facing financial ruin. I can honestly say I have made my peace with whatever is in store for the future of my businesses — sometimes bad things happen and I think dwelling on them although understandable, will only proliferate my misfortune.
I noticed your comments about bars in [Wednesday's] newsletter. I think the media continues to cover bars the same way, they are a dangerous place for people to congregate now, along with sporting events and live entertainment venues. I get it, I'm a bartender, I'm not a scientist, and I am willing to yield to their advice. I'm not going to open my places anytime soon unless something changes.
I have read comments from SF Chronicle articles where readers are in favor of industry-wide failure for the hospitality sector. Some might be prohibitionists, some think if we are unable to adapt to the current situation we should die as a business and some think we are insignificant or "non-essential."
But over the past few days as I contemplate closing my doors for good, I can't help considering the ramifications associated with the entire collapse of the restaurant and bar industry and perhaps hotels as well. Aside from the obvious, staff, commercial landlords, tax revenue and small business owners like me failing there is so much more who will be hurt. I understand companies like Southern Wine and Spirits, the largest distribution company in the US has furloughed 100,000 employees. And they are just one of many food and beverage distribution companies.
There are service companies such as dishwashers, kitchen rental equipment, gas services, refrigeration, linen, farmers, waste management, point-of-sale companies, lighting companies, contractors, plumbers, architects, lawyers, accountants, license brokers, permit expediters. I think I could make a list for the rest of the day and I'll stop there. I think anyone who feels letting the hospitality sector die is really ignorant and hasn't thought through the ripple effects.
— Eric Passetti