"One minute I held the key
Next the walls were closed on me
And I discovered that my castles stand
Upon pillars of salt and pillars of sand"
History 101:
Q: Why was the last emperor a pathological liar?
A: Because he was the only one who could make America great again.
Stoned gamblers holding out for a tax cut will be paying for the wall. But don't take my word for it...
"Believe me, if we have to close down our government, we're building that wall"
- Trump, Aug. 22nd, 2017
Herein lies the problem: for the next several weeks through the end of September, no one with an IQ greater than 5 can own risk going into the debt ceiling resolution. Congress needs the Democrats and Democrats don't want a wall.
"Democrats are almost uniformly opposed to paying for the border wall and their leaders are putting the onus for raising the government’s borrowing authority on Republicans
"But conservatives in the House are demanding that steep spending cuts accompany any debt bill"
Trump fulminated against Republican congressional leaders over the debt-limit “mess” in a Twitter posting Thursday morning...The tweet spurred a spike in investor concern that Congress and the White House may not act in time.
In other words, in his infinite wisdom, Donny has just created a no bid market. But as always, don't take my word for it:
And we don't have to wait to find out what happens when the Fed rolls off their balance sheet at the EXACT same time as the debt ceiling is reached. Because that's what happened in 2011. Prior to that, balance sheet rolloff also occurred in 2010 as well.
Any questions?
This time of course there is EXTREME Twitter risk added to the equation:
ZH: T-Bill Default Spreads Record Wide
"the resolution of these problems, either the debt ceiling or the government shutdown, is not a simple linear decision tree, but is one where any momentary whim, or tweet, by Donald Trump can abort any compromise at a moment's notice"
During 2011 as the Fed was busy letting the balance sheet shrink organically, Japan and Europe had to step in to steady markets. The U.S. sneezed and the world caught a cold:
"while the T-Bill market is clearly paying attention, equities and VIX have yet to respond: as DB's Dominic Konstam writes, "despite this tail risk and the apparent turbulence surrounding DC, markets remain comparatively unperturbed. Recent spikes in the VIX have proved short-lived"
Recall this was the year of harvesting volatility and the VXX ETF reverse split this past week. The last time this ETF split was last August which was the cycle low for volatility:
And also contrary to ubiquitous belief, the 2011 debt downgrade did NOT hammer long-term Treasuries. Instead, yields collapsed...
Bueller?
The last time Emerging Markets were reaching new highs was 2011, before that 2008.
Which is why I maintain my assertion that gamblers in U.S. risk assets will pay for the wall. Because instead of a tax cut, someone is going to get a haircut:
But don't take my word for it:
"A sharp drop in asset prices would not necessarily be troubling to the economic outlook, said Dallas Fed President Rob Kaplan on Thursday"
I leave you with this prediction for the future from Forrest Chump:
