President Trump: The NEW one and only politics thread

Trading resumes. Dow down 12 percent.

 

If you were trading, not investing, you'd probably be focused on chart levels right now. May not happen in a day, and things are now so oversold in the short term, that you'd expect bounces. ... but we are not too far from the December 2018 lows when the Federal Reserve thought it could start raising the overnight rate slowly and stop reinvesting expiring bonds they had purchased and the stock market freaked out and the Fed reversed course in a panic to blow the bubble even bigger for 2 years more. The levels aren't so much technical as psychological, but you can almost bet that is going to get tested. Then, it's not too far down to where it wipes out all the gains since Trump's first day in office. Today is a tough gauge, though. Everyone is frantically trying to raise cash, so everything -- good and bad -- is getting sold hard. The stock market is going a lot lower, UNLESS somehow fiscal and monetary authorities worldwide can figure out something artificial to prop it up some more. The same, "rates, quantitative easing" formula is not going to be enough on the monetary side, but that doesn't mean they can't find even more radical interventions that allow them to buy up EVERY bond being issued with freshly printed money. On the fiscal side, a lot remains to be seen. You will have different governments announcing eye-popping dollar amounts of debt-financed spending. Will that be enough this time around or are the sovereign debt levels already so out of control that those fiscal interventions now get perceived as negative instead of positive? I don't know the answer. ... this is all going to be unchartered territory, and that includes the batshit things they started doing after 2008.

 

Yeah, when that squawk came through a few minutes ago, the consensus in my headset was, "Mmm hmm. During market hours, heading into the close. Will they learn from last week and lead with Mnuchin instead of Orange Julius?"

Honestly, I don't think they can just jawbone this. Then the question becomes any active interventions they actually do -- and I don't know what they can do fiscally unilaterally -- will it actually have any effect? They are going to target the commercial paper market, I bet. It's actually kind of necessary right now, given the mess they have on their hands. There are going to be airlines and oil drillers and hospitality industry companies that have already tapped out their revolvers and are seeing any attempts at further funding being hit with huge costs IF they can even get their hands on money right now. I don't know the mechanism by which the Fed can just step in and hijack that kind of short term lending to get the pesky market out of the way, but I'd guess it requires the Treasury. So I am guessing that will be a big part of what you hear. ... "Hey look, we are saving the day by making oodles of quick money available to businesses, so we've got it all under control. Nothing to see here."

 

BTW, I wasn't suggesting that they should lead with Mnuchin or Trump prattling about the stock market at all. It's a public health crisis. They should be out there all day giving good information focused on THAT right now.

But they are clueless. They saw the stock market trade limit down in a furious sell off, when they thought that the Fed coming in with moaaaaaar QE would reflate the bubble, and their reaction was, "Let's throw out a 3:30 presser to plant the idea that something big and market-changing is going to be announced and that will stop the selling." They have been doing this since the beginning of this BS administration. Throughout the trade war they waged, they did these nebulous, but meaningless, announcements over and over again to jawbone markets higher. What they didn't realize was that their BS wasn't magically lifting markets -- all the leverage central banks were injecting were the necessary ingredient for their BS to work. The ONLY question left is can they once again stem a debt crisis by growing the level of debt exponentially higher.