President Trump: The NEW one and only politics thread

A lot of it is the travel, imo. The stay-at-home orders are accompanied with do not travel for non-essential purposes. A massive loophole in non-essential businesses, for example, are golf courses because they promote health. In my metro county all the golf courses are closed for the rest of month while the surrounding counties' courses remain open. So yesterday, an unseasonably warm day in the Midwest, it might not be a stretch to say that 1,000 people or more in my county drove to go play golf. One friend said he had never seen the course near his house so crowded. I agree that golf on its own is OK with social distancing and other protections (no touching flagsticks, walk don't ride with a friend, etc.), but the problem is the mass of people getting there and many from areas that are trying to get people to stay the heck home.

 

Clicked on this just now while jumping around. ...

Fed Foray Into High Yield Sparks Biggest Junk Bond Spike In Over A Decade

As we noted earlier, with this intervention in the equity-like junk bonds, there are no more free markets as what today's action means is that the Fed's nationalization of stocks ust now just a matter of time.

 

They took their balance sheet from less than a trillion to 4.5 trillion over a decade.

No other solution!

With all of the leverage they created. ... and the debt crisis we are now suffering as a result due to the pandemic popping their margin and leverage bubble. ...

No other solution than to do more.

Except now. ... the relatively quaint government debt monetization they were in effect doing isn't enough. They need to buy up EVERY bit of bad debt that was created due to their "no other solution" in the first place. ... just to keep it all propped up.

But no other solution than to answer a self-created leverage problem by creating exponentially more leverage to keep it propped up.

For anyone who says, "no other solution." Stop trying to provide solutions. You're the fucking problem that you are going to have the next solution for. At what point do you wake up to the fact that each "solution" makes the problem exponentially worse?

 

Why would earnings matter in pricing equities? There is no honest price discovery in those markets. The stock market isn't a discounting mechanism when endless liquidity is being injected into asset markets.

The thing is, that isn't a phenomenon he should have just woken up to. Earnings went nowhere in real terms for years and the stock market grinded higher on the back of their debt monetization. Last year, earnings DROPPED precipitously, and the stock market went on a tear (as multiples expanded) into the new year because of the repo operations they started in September (which was the precursor to all of this. ... You saw the cracks then as things were really starting to fall apart). Equity valuations have correlated entirely with the size of their balance sheet and how successfully they suppressed short-term interest rates (done at the expense of any saver and our overall economy).

When things buckled in 2018 / 2019, it was because they thought they could stop and gingerly let expiring bonds roll off that massive balance sheet and raise the overnight rate a few times -- 25 basis points at time.

But when the stock market started to crash, they reversed course. From late last year, they did a series of 25 basis point rate cuts and more importantly, because their debt bubble was popping, they started those repo operations where they were buying up billions of dollars of short term paper every day -- trying to do it in stealth. And they created one last panic buying jag into mid February.

Now? The debt bubble didn't just crack. It imploded.

There is one honest choice: Admit that you created a massively overleveraged mess and let the deleveraging happen. Really serious medicine. Unavoidable. It either happens now, or it happens later and takes an even bigger toll because of the additional bad debt you are going to lop on top of it.

Or try to prop it up some more. ... Which of course was what they would do. Unfortunately, the amount of debt the world is now saddled with due to their stupidity is too great for the old playbook to work. So. ... they need to buy muni debt, short-term paper to make sure people's money markets don't break the buck. ... and junk bonds. And they can't just do it in the billions of dollars every month anymore. . ... Now they need to debase the dollar by trillions of dollars with each new desperation announcement.

Unfortunately for all of us, there is a limit to being able to do that, and the closer they get to that limit, the more all of us are going to suffer.