Monday, June 19, 2017

Difficult week ahead for Donald Trump

The logical thing for Donald Trump do to now is to hand the keys to Pence and walk away. If he does that Pence will pardon him and he can go on to start his Trump TV channel and make millions off the people that voted for him - heck NBC and Megyn Kelly can join his venture and just rename themselves as TrumpeNBC and Trump Alex Kelly and we can all get on with our lives. But we all know that's not going to happen. Firstly, he is never going to go out looking like a loser and Bannon hasn't finished Dugin's agenda of destroying the US yet.

It appears as of now that Trump's kids are in the frame for illegal activities. This is going to hurt Donald Trump - I mean what is the point of being so powerful if he can't even protect his own kids? what will people say? if he can't protect his own kids - how could he possibly protect them? So as Special Prosecutor Mueller starts interviewing Trump associates - they will (rather than going down with the Trump) point a finger to his kids. This puts his kids in a miserable place, and that pain will relay directly to Donald Trump.

When it relays up to the top like that - he will try to press Sessions and the DAG Rosenstein to fire Mueller (since Trump can't actually do it himself). As that pressure ratchets Rosenstein will resign and the warrant of precedence will take effect. This pressure release valve will ensure that Mueller speeds up his investigation and more of Trump's aides go public with their testimony to Mueller.

All this will play out in the week ahead - and remember - it is always the straw that breaks the camel's back.

Which brings me to the other incredible news of last week  - the Fed's talk of reconciling its balance sheets.

Neel Kashkari wrote up a small piece titled "Why I dissented" which makes for interesting reading. In this piece Neel speaks of how such a reconciliation could spark a tightening of the monetary situation. The effect would be akin to an interest rate hike. This is what I had brought up earlier - that it would take money out of the stock markets and put it into the bond markets where the rising number of bonds would cause bond prices to fall.  Once Neel said this other Federal Reserve officials began to speak of a time frame in which the reconciliation process could begin - words like "by the end of the year" etc... were thrown around.

Now you might wonder, "say if I knew how exactly the Fed was going to sell its bonds I could ride the wave of bond prices down". That is what Neel is hinting at when he says the Fed should publish its exact schedule for reconciliation. In practice what will happen however is that Goldman Sachs will be told what they are going to do, but you the ordinary investor won't. So only Goldman will make money and you wont - but at least Neel has the right idea in mind.

As such the comment from the Fed is a very muted one. One will have to wait to see if any such plan actually exists, and if it does how the market reacts to it.

1 Comments:

At 10:35 AM, Blogger Ralphy said...

combined with the recent rate hikes, the fed's gradual unloading of its bond portfolio will suck a lot of dollars out of the economy making the dollar more scarce and thus, more expensive. my son has already seen a slow down in his gold business.

historically, deflation is the great boogeyman of the american economy. :-(

 

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