"If they raise rates even just a little bit, it's all going to come crashing down"
- Forrest Trump, Sept. 26, 2016
This week, the Fed, Wall Street, and Trump were at odds explaining how the "best recovery ever" is imploding due to a 2% Fed rate. All three boxed in by their own lies.
But not nearly as trapped as those who trusted proven con men.
- Forrest Trump, Sept. 26, 2016
This week, the Fed, Wall Street, and Trump were at odds explaining how the "best recovery ever" is imploding due to a 2% Fed rate. All three boxed in by their own lies.
But not nearly as trapped as those who trusted proven con men.
For the archaeologists out there, the narrative of the day is that "the greatest economy ever" was just derailed by interest rates at 2%. Because who wouldn't believe that story? Jeff Gundlach would, we know that much. I suggest it will be cold comfort to Trump supporters when he blames the Fed for popping his mega bubble given that he alone convinced them it was the greatest economy ever.
Worse yet for Donny and his apologists, what actually happened, is that Trump's borrowed tax cut inflated the stock market bubble via $1 trillion in stock buybacks and then subsequently popped the bubble due to the higher interest rates driven by the tax cut. It was all a self-inflicted circle jerk.
Even Jeff Gundlach should know there's no such thing as "free money":
Here we see homebuilders and ten year rates going in opposite directions since the tax cut came into effect:
Worse yet for Donny and his apologists, what actually happened, is that Trump's borrowed tax cut inflated the stock market bubble via $1 trillion in stock buybacks and then subsequently popped the bubble due to the higher interest rates driven by the tax cut. It was all a self-inflicted circle jerk.
Even Jeff Gundlach should know there's no such thing as "free money":
Here we see homebuilders and ten year rates going in opposite directions since the tax cut came into effect:
The rest of the world was warning this "Black Swan" event was coming. Day in and day out for eight months straight. But the U.S. was decoupled from reality right up until October 1st. It turns out that trade wars and global liquidity implosion are not "accretive" to earnings after all.
The U.S. housing market was warning for eight months as well. Both imploded by Donny's "free money":
And of course autos were warning:
"The stock has suffered as auto sales in 2018 have declined and that is leading analysts to cut their earnings estimates for the company"
And of course autos were warning:
"The stock has suffered as auto sales in 2018 have declined and that is leading analysts to cut their earnings estimates for the company"
What changed in October for the rest of the casino?
Rewind to a few weeks ago in September, the early warning sign came via 3rd quarter profit revisions. Because nothing against the Fed's backwards looking data, and Wall Street's forward looking magic 8 Ball, the best "tell" on the economy comes from CEOs themselves. Perhaps the fact that they were selling with both hands, should have been a warning that the tax cut sugar high was wearing off:
But here is where it gets real. Because back in September, the outperforming Transports sector mysteriously left the party. In other words, the very sector that was deemed to be "confirming" U.S. expansion, had a change of mind:
transport equities took a nosedive today, following a downward trend that began mid-September. Stocks across modes of transportation took hits, impacting companies involved in rail, air, and maritime freight markets
freight markets continue to show signs of weakening as the outbound tender volume index (OTVI) for the U.S. has fallen 3.3% over the past seven days"
This week, Transports gave up all of their year-to-date gains. Nine month of gains evaporated in three weeks:
Now, Wall Street, Trump, and the Fed are all trapped by their own false narratives. Each one blaming the other for an "awesome" recovery that fell apart due to a 2% Fed Funds rate. Anyone who attempts that argument proves they were a lying dunce in the first place.
Meanwhile, global liquidity continues to shrink at a rapid pace.
"Swept along by super-easy money, investors have debated for years how world markets will react when this central bank largesse inevitably ends. Now the liquidity tide is about to turn, and they have only a few months to adjust."
While markets reached dizzying heights during the easy money era, that flood will dry up by the year-end"
After a near decade of money-printing and zero interest rates, the shift for markets will be momentous."
Here we see the combined Fed, ECB, BOJ balance sheet is nearing the level at which they expanded policy. Instead they are all rapidly shrinking accommodation.
Add in the fact that we just entered the stock buyback earnings blackout period, and one wonders who is the marginal fool now?
We just learned this week that it's not Skynet.
"The iShares Edge MSCI USA Momentum Factor ETF seeks to track the performance of an index that measures the performance of U.S. large- and mid-capitalization stocks exhibiting relatively higher momentum"
"The iShares Edge MSCI USA Momentum Factor ETF seeks to track the performance of an index that measures the performance of U.S. large- and mid-capitalization stocks exhibiting relatively higher momentum"
What we didn't learn ten years ago this month, is that con men can't change their narratives quickly enough to get every one out. Sadly, that's inherently impossible.
In summary, delusion has been derailed.
Any questions?
