“I’m not going to quit, and neither should you.” Kate McKinnon (SNL – 2016) – singing Leonard
Cohen’s ‘Hallelujah’ https://www.youtube.com/watch?v=mgydzfHqVZA
Thoughts:
Factually, most of us are
still recovering from the election.
Donald Trump was elected because of a hacker named ‘Qucifer’, who
discovered Hillary’s private e-mail server, and Julian Assange of WikiLeaks
exposing the information for all to see.
Without that chain of events, the FBI would never have been involved,
and the rage and the rural vote would have never come out like they did. Combine that with:
-
The media that
faked the truth, spun the lies, told us to ignore all the criminal behavior (on
both sides).
-
The rural,
non-college degreed white voters that showed up in numbers never seen before,
-
The ‘little
guys’ tired of 30-years of stagnant wages, a two-tiered justice system, and job
losses - all saying STOP at the same time,
-
FBI Director
Comey bringing Hillary’s e-mail issues to the forefront – TWICE. By not going forward to the DOJ or the
Attorney General, he allowed the evidence to be tried in the court of public
opinion,
-
WikiLeaks’ last
release showing: (a) Hillary accepting Qatar money while she was Sec. of State,
(b) the DNC and CNN colluding on the debate questions and leaking them to
Hillary, and (c) the Clinton Foundation paying Chelsey $30m for her annual
salary.
-
The Clinton campaign
itself that: (a) never had her to visit Wisconsin as a Democratic nominee, and
(b) only going to Michigan after polling showed that the race was a dead-heat.
-
Trump promised
that he would LISTEN.
You can't say we weren't
warned. Brexit showed that the
powers-that-be were out of touch with the rank-and-file. The disconnect is not only about economics,
but about attitudes, education and identity.
Trump preached two lessons: (a) be willing to change, and (b) be willing
to stand up for what you believe in. He
refused to play by the rules. He
committed faux pas after political faux pas, but everything that the mainstream
media said would matter – did not. Trump
had little infrastructure, and almost no ‘get-out-the-vote’ effort. The joke may end up being on us given he goes
in armed with a Republican Congress ready to:
-
Supply Middle
Class Tax Relief – which would provide middle class families with two children
a 35% tax cut,
-
Lower
the business tax rate from 35% to 15%,
-
Provide
Affordable Childcare and Eldercare – that would allow individuals to deduct
childcare and elder care from their taxes, incentivize employers to provide
on-site childcare, and create tax-free savings accounts for children and
elderly dependents,
-
Repeal and
Replace Obamacare, and
-
Re-Do the
American Energy & Infrastructure Act – spurring $1 trillion in
infrastructure investment over 10 years.
But what keeps nagging me is
an old saying: "If elections really mattered, why would they let us
vote?” Donald Trump beat the best,
well-oiled, political machine of all time, and I think it was for a
reason. I have said for years that there
is going to be a global monetary reset.
The world is over $500 Trillion in debt, with over $3 Quadrillion in derivatives. This is debt that cannot be repaid, and must
be expunged. I think Trump was tapped
for three reasons: (a) In him they have a man that J. Q. Public could believe
in. (b) He’s navigated many bankruptcies
in his past, and guiding us through a global currency reset would be a natural
fit. And (c) he’s disposable. I have a feeling that Mr. Trump has been
tapped to be the ‘excuse’ that the elitists have been looking for. I
think they're going to let him try and institute some of the things he wants to
do, pull the plug on the global economy, and then blame him for his failed
policies.
If Trump was picked to truly
be the guy that reverses our slide – he's got the fight of his life in front of
him. But if he was picked to be the fall
guy – the next few years are going to be incredibly brutal. Make no mistake, I want to make America
strong again and heal the divides, and as Kate McKinnon said on SNL – “I’m not
going to quit, and neither should you.”
The Market:
“It ain’t what you know
that gets you in trouble … it’s what you know for sure that just ain't
so." Mark Twain
This week Mr. Stanley
Drukenmiller (a well-respected fund manager) stated: "I sold all my
gold on the night of the election because inflation is now set to spike,
forcing money out of safe assets - like gold and Treasuries - and into the US
Dollar. I expect higher deficits,
stronger growth, and another surge in debt.”
That
was followed by Mr David Stockman
(Director of the Office of Management and Budget (1981-1985) under President
Ronald Reagan) saying: “Donald Trump has no coherent program, and I believe the nation's long financial nightmare has just begun. For months and years to come, our nation
will be racked with fiscal, financial, political, and even constitutional
crisis. The stock market will now
crash. The stock-price obsessed C-suites
of corporate America will begin to panic, and pitch inventory and workers
overboard. We will be in an official
recession within 6 months. The Federal
budget will plunge back into trillion dollar annual deficits, and any notion
of a Trump economic revival program will be stillborn in the financial and
fiscal chaos ahead.”
So there are two really smart
guys at polar economic opposites. They
both know about the debt picture, and are thoroughly aware of the derivatives
and large counterparty risk associated with them. They also both realize:
-
If Trump removes
the regulations from coal, oil, and small business – jobs will improve.
-
If Trump cuts
taxes – people and corporations will spend more quickly.
-
If Trump creates
better trade deals – we will enjoy better trade ratio's.
But the fly in the ointment
is still balancing the immense amount of necessary borrowing required to pull
that off – with any future revenue creation.
The banks are insolvent, and can't be ‘fixed’ by Trump. The system tried to purge itself in 2008, and
instead of letting the crash happen our FED rushed in with the biggest monetary
bazooka of all time – and kicked the can down the road. Trump cannot fix that.
My market prediction was
that if Trump won – the immediate reaction would be a severe plunge, and then a
bounce. That is exactly what happened,
but I made a mistake on WHEN it would happen.
On Tuesday (as a Trump victory was becoming clear), the overnight
futures kept falling with the DOW down -800 points, and -100 on the S&P. But then the futures ‘magically’ started to
climb, and by Wednesday at 4pm we closed up by 300 DOW points. What happened? Well, just because Trump was elected, it
didn't stop Wall Street from doing funny things. They let the enormous drop and recovery take
place in the futures market in the middle of the night – when and where J. Q.
Public doesn’t really participate.
And just because the DOW was
up last week, other areas of the economy were still unhappy. Oil prices dropped considerably. It seems that data showed OPEC’s oil
production rose by 230,000 barrels a day to a record high of 33.83 million
barrels a day in October (exceeding the OPEC ceiling range of 32.5 million to
33 million barrels a day). And in the
U.S. we still have: (a) 96m people not in the workforce, (b) 44m people on food
stamps, (c) over ½ of the population that can’t get $400 together for an
emergency, and (d) over 1/3 of our working population – working 2 jobs.
The reason for the early
powerful moves in the DOW are that the Republicans now control the Presidency,
the Senate, and the House. This
directive means that in the first 100 days, many of the executive orders that
President Obama has implemented can be easily reversed. For example: (a) on Immigration, Trump could
reverse the Deferred Action for Childhood Arrivals program, (b) on Climate
Change, Trump will most likely cancel the Paris Agreement, and repeal many of
the EPA regulations, and (c) on Trade, Trump will stop the Trans-Pacific
Partnership, renegotiate NAFTA, and may even have his Treasury Secretary label
China as a currency manipulator.
This week we saw massive
moves higher in: financials (10.5%), healthcare (8.25%), industrials (7.8%),
materials (5.3%) and the U.S. Dollar index (2%). And we saw huge down moves in: utilities
(4%), consumer staples (3%), precious metals (4%), long-term Treasuries (7%)
and the Mexican Peso (13%).
Trump’s plans include large
borrowing for infrastructure and a tax cut, which will result in a ballooning
deficit and inflation. This will either
translate into economic growth or stagflation.
In the near-term, markets have discounted a significant amount of what
they think will happen, and will probably need some time to digest these
moves. The sharp move higher in interest rates certainly gave the FED the
green light to raise rates in December.
The strengthening dollar won't be good for our multinational
corporations, and will also slow the FED's willingness to raise rates in
2017. On Friday (a day when the bond
market was closed), someone (nation) dumped $10B worth of paper gold onto the
market @ 8:40 am ET – sending gold to a 4-month low. This is NOT normal behavior.
If I sound cautious and
concerned here, it’s because I am. The
transaction volumes on Thursday and Friday were higher than normal, but in the
end the S&P closed right around the flat line. That means an awful lot of selling - accompanied substantial buying. We are in the seasonally strongest time of
the year, and we may rally on from here; however, I'm frightened when I can't
follow the plot. Just because Trump says
he's going to do all of these marvelous things, the market normally knows
better than to follow in ‘lock-step’.
This is unusual behavior. It's also unusual to see how many market
‘experts’ instantly flipped from saying Trump is a disaster, to ‘all is grand!’
While the stock market move
was impressive (and there's probably more to come), all we can do is hope that
earnings and economic activity will improve enough to match these lofty
levels. Currently the market is short-term
extended. I have to think that we're
looking at a bit of a pull-back this week, but the pull-back will probably be a
short term buying opportunity. Don't
forget, we are in the seasonally strongest time of the year. With Obama wanting to go out on a high note,
I could see them attaining more all-time highs before Trump gets sworn in on
January 20th.
Tips:
It was Veteran's Day on
Friday, and to all of those that have served, I say: Thank You. The elements that soldiers bring back with
them from war, impact their lives forever.
I tip my hat and say thank you to any and all that served, no matter
what your role.
Touching
on Gold and Silver specifically:
In the past 3 days,
investors have decided gold is not the place they want to be during the opening
days of a Trump pre-administration. In
the heat of the election, gold initially jumped 2% higher, but soon gave up that
rally to be down 4% at the end of the week.
Gold (if nothing else) is a long-term currency risk against the dollar’s
current $600B deficit and $20 Trillion debt.
Prior to the election, gold was in a sweet spot. The uncertainty cycle was peaking, inflation
was picking up, the Fed was doing nothing, stocks were expensive, and bond
yields were low.
The Trump spending plan
(Reaganomics) increases the likelihood of a dollar collapse. Yellen will be forced to raise rates at a
faster clip than she was previously thinking.
This flies directly in the face of other global central banks that have
been easing. The FED raising while
others are cutting will cause the dollar to increase too much, and hurt
multinational corporate profits and America’s exports. Combined with our current debt levels, Trump
won’t be allowed to increase deficits as much as Ronald Reagan. Reagan spending did increase debt as a
percentage of GDP, but it was beginning at a much lower level than where we are
at today. Trump’s debt projections
(without entitlement cuts) would be the highest in our nation’s history. Unaccompanied by drastic cuts to government
health care, defense, and social security – gold and other ‘flight to quality’
products are simply down temporarily.
To follow me on Twitter.com
and on StockTwits.com to get my
daily thoughts and trades – my handle is: taylorpamm.
Please be safe out there!
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