The Scylla And Charybdis Of Dumb And Dumber

Bulls are trapped by exceptional bullshit. Sadly, an abject lack of humility prevents our mentally and morally challenged "leaders" from ever admitting they are wrong. So they will just pile drive this shit show straight into the ground. So far, so good...

Trump's trade war and tax cut are both backfiring. Which is a problem, because they got bought with both hands. Fools following even bigger fools. What we are witnessing is the rearranging of deck chairs on the Titanic to suit intellectually-stunted bimbos...

"All forward decks are now open for swimming"

First the casino:

As I write (Thursday open), the S&P is back-testing the Year-to-date break-even line. The MAGA trendline decisively broken. In other words bulls are trapped. 

"The breakdown of this trendline signifies a very important change of trend."

Here is where it gets interesting: as momentum stocks get annihilated, interest rates and bond yields are backing off, giving yield sectors a temporary reprieve. Of course when "safe havens" roll over, that's when the wheels come off the bus. Again.

Getting back to the economy, first off, Trump's trade war has served to widen the trade deficit to the widest since July 2008. Why? Because it has weakened the second largest economy and their currency. Which means that now the terms of trade are in China's favor. But the even bigger factor is Trump's mega fiscal deficit which has vaulted U.S. "GDP" above the rest of the world, meaning that imports are growing faster than exports. These factors have more than offset the tariffs. 

On a related note, a new study came out just yesterday, indicating that over three million jobs were lost when China joined the WTO in 2000. Meaning that it took 18 years for "experts" to figure out what protesters in Seattle already knew in 2000.

Meanwhile, I published my own study many years ago, it took all of five minutes to prepare. Two rounds of Shock Doctrine cost 5.5 million manufacturing jobs. Which were replaced by CapuccinoConomy. Note that manufacturing employment had been relatively stable in the three decades prior. And then fell off a cliff to fund stock buybacks:

  

The problem of course wasn't China's ascension to the WTO, it was American Multinational corporate policy of industrial arbitrage aka. "Free trade". Which only became a bad word in the past few months or so.

Meanwhile, the tax cut is meeting a similar "unexpected" fate. Because it is driving up borrowing costs worldwide. Here is what the Fed said in their most recent minutes:

"Participants noted a number of favorable economic factors that were supporting above-trend GDP growth; these included strong labor market conditions, stimulative federal tax and spending policies, accommodative financial conditions, solid household balance sheets, and continued high levels of household and business confidence"

In other words, the Fed is using Trump's tax cut as the excuse to normalize policy:

"At a time when the Fed is undergoing criticism from President Donald Trump and some notable market voices, Kaplan said policymakers are on the right track with their gradual approach to raising interest rates."

All of which is how we got to "This again?", because we have bimbos running all sides of the 'Conomy. The same way they've  been running it for decades.

Into the ground.