We, and the rest of the world, are patiently hanging around, waiting to see if the Federal Reserve wakes up to what’s happening to dollar liquidity, and the threat it poses to the global economy and to its own (glacially slow) tightening cycle.
Oh how the Fed must long for the days of yore, when it was feasible to make policy in a domestic vacuum. But the reality of it is, if the rest of the world’s economic vulnerabilities and systemic fault lines are laid bare by this December’s hike, Fed officials’ words won’t amount to much more than trash talk.
For the first time in 2016, the total return of the Dow Jones Industrial Average is above that of gold year-to-date (up 11.80%). The convergence since the election of Donald Trump is almost unprecedented as gold dumps 16% (from Trump night highs) and Dow futures up 8.5% from Trump night lows.
US Municipal Bond yields have now risen for 10 straight days, spiking from 1.72% to 2.34% today - the highest since July 2015. This crash has now moved munis to the most-oversold-ever as the group suffers the biggest fund outflows since 2013's taper tantrum.
Mr. Trump rather unfortunately may find that his chief task will not be the management of this Great Re-orientation, but more prosaically, fending off the headwinds which he will face as he hauls on the tiller of the economy. In short, there is a real prospect that his ambitious economic “remake” may well be prematurely punctured by financial crisis. These headwinds will not be of his making, and for the main part, represent the accumulation of an earlier monetary doctrine which will fetter the President-elect into a small corner from which any chosen exit will carry adverse implications.
"...who knows, maybe magic will happen. After all if the 2016 political season has proven anything it is this: Anything is possible... But buyers here with the S&P 500 near 2,200 seem to think that's a 100% guarantee. Best of luck..."
For the 16th month in a row (longer than the 14 month stretch during the financial crisis), Swiss Watch exports have collapsed year-over-year. As Bloomberg reports, the 16.4% plunge in October is the biggest monthly drop in seven years, as demand weakened in almost every major market for Rolex and Omega timepieces.
Overnight China got a present when Trump announced that the TPP is dead. That's all Beijing needed to hear and this morning China said it hoped to conclude an Asia-wide trade pact as soon as possible, in "a sign of Beijing’s intent to broaden its regional influence amid the apparent collapse of the U.S.-backed Trans-Pacific Partnership." What is surprising is how fast most Asian nations are willing to embrace their new "free-trade" overlord.
"Even if Trump is a legitimate anti-establishment conservative, his entry into the Oval Office will seal the deal on the economic collapse, and will serve the globalists well. The international banks need only pull the plug on any remaining life support to the existing market system and allow it to fully implode, all while blaming Trump and his conservative supporters."
What Yellen and Trump don’t understand is that our nation is both debt-disabled and asset-bubble addicted, which requires interest rates to be near zero or the whole ersatz economy will implode. The bond bubble’s collapse will bring Trump to that reality very soon.