The Bible tells us to love our neighbors, and also to love our enemies; probably because generally they are the same people.
– G.K. Chesterton, Illustrated London News, July 16, 1910
Main Street’s economic malaise is the key story of the 21st century. It is, in short, what got the Donald elected.
But what’s happening to Flyover America is not about an onslaught of imports. Foreign trade negotiators have not outwitted us. Nor is it a function of immigrants pouring over our borders with bad intentions.
And it’s not, as you might have heard from a “democratic socialist” or two, a failure of capitalism.
It’s about a ruling class that serves itself.
Our duopoly – an elite consensus of Republicans and Democrats – favors forever war, unchained welfare, fiscal incontinence, monetary repression, financial engineering, and borrowed prosperity.
What ails the 99% is the handiwork of Imperial Washington. At the same time, that handiwork has been good for Wall Street.
Because “wealth effects”-focused central planning does indeed concentrate the wealth.
So, halfway through his historic presidency, it’s fair to ask whether the Donald has begun to fix anything at all – the broader economy, the “Swamp,” the stuck toilet in the West Wing hallway…
The answer is, “No.”
Markets are retreating, rapidly, from this last gasp of Bubble Finance.
The back-up was already well underway before Steve Mnuchin issued what one observer called the stupidest statement by a Treasury Secretary in about half a century last Sunday.
Trump’s man from Goldman Sachs reassured the market of a danger it wasn’t contemplating.
So, the Dow Jones Industrial Average shed 653 points on Monday.
It bounced on Wednesday, the day after Christmas, adding more than 1,000 points. It was the biggest single-day point-gain in the Dow’s history.
Today, it was down as many as 528 points.
This is the confused reaction of a market grown totally dependent on “easy money.” It also reflects a lot of instability at the top.
The Donald is indeed making great progress as the “Great Disruptor.” He doesn’t know it, as it’s all quite by accident.
He’s making matters inestimably worse with his Trade War, his Border War, his Fiscal Debauch, and his Federal Reserve-bashing.
He’s accelerating the Mother of All Yield Shocks and the consequences it will unleash.
Whether the Fed changes its rate-hiking schedule or not, it will continue to shrink its balance sheet. That’s an impact of about $600 billion.
There’s another $1.2 trillion of new federal borrowing to account for, too. And that’s not going to happen at a sub-3% rates on the 10-year U.S. Treasury… not in a million years.
This is how the Donald threatens the existence of the very duopoly that would have him on the Dick Nixon Memorial Express on the way to exile at Mar-a-Lago.
But here’s the thing about this impending crisis: Neither the Donald nor the Deep State will win.
It’s Never Too Late
Desperate times call for… “common sense” measures.
Markets are corrupted by monetary central planning. They’re confused. And the road back to “normal” is going to be treacherous.
We’re looking at a major re-pricing for all financial assets. And thousand-point intraday or day-to-day swings are part of that equation. Those can be frightening… for “buy and hold” investors
I have a different approach, one that combines strategy and tactics into a plan flexible enough for you to survive and thrive amid the coming chaos. It’s called “The Stockman Model.”
All we’re after is a little stability, perhaps a chance to pocket a windfall when opportunity presents…