Tuesday, April 25, 2017

When will the market fall?

Like  so many of you - I am wondering when the "Trump Rally" will end.

My understanding is that the "Trump Rally" is driven by two factors,

1) A number of subscribers  to the "Old White Man" (OWM) mentality on Wall Street convincing each other that Trump is going to make the economy boom and that stock prices will go up. You don't have to be an old white man to believe this, you just have to be stupid enough to match the target profile that Brad Parscale et al drew up in PA, WI, MI. If you match it - you will subscribe to Millenarist nonsense about markets that go up forever.  You will keep borrowing money to buy shares in companies that are massively overvalued, and you will keep leveraging up in the hope that somewhere you will make a big strike.

2) The Russians want to take the money they injected into the market to survive the long decade long depression that Russia under Putin is now heading for. RIS money movers had pulled money out of the failing RU economy in the 90s and injected into Wall Street via DJT and others. Now they want to pull it back out so that they can shore up their decaying system of power. To do that they have to strategically boost the prices and jump out at the high point. The resulting collapse is something they can take advantage of in a number of ways (especially in the derivatives market) but that is separate story.

You might say - "Hey the market is booming - so why aren't the OWMs coming back to the their senses? and why are the RIS guys dumping and leaving?".

The answer to the first is that OWMs have convinced themselves that Trump will perform magical acts that will take the market to an even greater height. Over the last five months, DJT's image has taken a beating with these people, as they are slowly realizing that he will not deliver most of what he has promised, but all the big players in the market (i.e. Goldman Sachs) are telling them Trump will "cut taxes" bigly. We all know this is total bullshit, but if you subscribe to the OWM mentality - you're pride standing firmly between you and the manifest reality.

The answer to the second poser about the RIS dumping and leaving depends to some extent on the persistence of the OWM mentality on Wall Street and partly on US sanctions that prevent large scale transfer of wealth between RU and the US/EU. Briefly - as long as the OWM effect persists on Wall Steet, RIS can't be sure it is getting the highest possible price (with the lowest risk) for what they are trying to sell. The RIS knows that the coming depression could be long and hard, so they want to squeeze their investment for as much as they can. And so they are seduced into waiting just a little bit longer. The other issue about sanctions on RU preventing the backflow of wealth from Wall Street to RU - that can change if Le Pen is elected in France. Once she is in power in Paris, she can simply break the  US led sanctions and wire money to Moscow. With France breaking all sorts of agreements in the EU, there will be sufficient chaos to permit these flows to go undetected. Also Donald Trump has basically hollowed out the US government machinery by not filling thousands of vacant posts and the few that have been filled are all given to lobbyists. So if France wired money to Putin in Moscow, it is unlikely that Donald Trump's Admin would do anything about it.

So those are the two legs holding the "Trump Rally" up:

1) OWM mentality people waiting for tax cuts and
2) Le Pen waiting to get her hands on the EU banking system.

With each major visible fuckup that the Trump Admin commits the OWM does a double take. The #TrumpRussia story cuts into the heart of the OWM notions of trust. And with each passing day the corrosion of belief in Donald Trump among subscribers to the OWM  mentality rises. Everything we are seeing in the context of Ukraine, North Korea, Meals on Wheels, Obamacare Repeal etc... this imho is purely distraction optics to draw attention away from the collapses of trust in Donald Trump.

Which leaves the Le Pen victory. It would be ideal for RIS to have its hands on the EU banking system, but I feel it may not be essential. I suspect there are other ways to draw money out of Wall Street and push it into Putin friendly hands in the Grand Duchy of Moscow. I suspect some of those channels are via digital cryptocurrencies which are hard to regulate and whose blockchain allows you to securely transact them.


At 9:02 AM, Blogger Ralphy said...

too much conspiracy theory.

the simple fact?

inflation in the US is still low.

brick and mortor retail stores are getting clobbered by the amazon and the internet.

massive bankruptcies loom as shoppers aren't shopping.

the middle class is shrinkin due to wage stagnation and globalization there of.

the oil lake is brim full and then some.


well, major corps cost of energy remains flat as well as wages.

investors love it.

At 9:04 AM, Blogger Ralphy said...

trump will cut business taxes. guaranteed. the democrats can't resist.

At 7:01 PM, Blogger maverick said...

Dear Ralphy,

Don't think it's conspiracy.

That's my point, there is no reason for the market to boom.

The boom is fueled by people borrowing and betting stock prices w go up.

The resulting rise in the value of the stock is boosting the apparent value of companies. This is further fueling the rally.

That's the OWM angle.

The RIS angle is the only one that matches all the available info. There is no earthly reason for RIS to back both Trump and LePen. And there's no rationale for RIS news media to celebrate Le Pen "landslide". No rational reason for post French election bump in djia.

The real problem though is that Wall St. is much better at taking money than giving back.

At 7:06 PM, Blogger maverick said...

Sure but how will he manage the resulting decline in revenue and debt servicing issues?

He won't cut out Mar a Lago and he can't cut entitlements or welfare, so where will the money come from.

He can shut down the govt, but then the resulting anarchy will destroy the market as will any attempt to default.


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