The Federal Reserve has pursued the unprecedented monetary policy of lowering rates to zero and increasing their portfolio from 500 billion to over 4 trillion. But as the Fed reminds us, there is a cost.
Since President Trump’s surprise victory over Hillary Clinton in November, investors and management teams have been acutely focused on the new administration’s policy proposals. As expected, all 4 key themes discussed on Q4 conference calls are closely linked to Trump's policies and include tax reform, regulation, fiscal spending and trade policy.
Yesterday it was widely reported in the business press that Mary Jo White is returning to her former law firm as a partner representing clients who face government investigations. This news is highly significant because it would appear that the U.S. Senate was seriously misled by White’s ethics letter in its deliberations to confirm her as the top cop of Wall Street.
According to BofA, the best ways to hedge increased risks of a potential Eurosceptic win in the upcoming French election is favouring 10y peripheral spread wideners in Spain vs France, longs in 5y5y Germany and 5y Dutch sovereign CDS. In the options space, the banks recommends going long vol with a hybrid 6m10y strangle. In inflation, it likes 5y5y French CPI v HICP widener and a long 30y OATei breakeven vs inflation swap.
Donald Trump, the man who positioned himself as the common man's shield against Wall Street, signed a series of orders today calling for reviews or rollbacks of financial regulations. He did so after meeting with some friendly helpers...
Beware of what may be coming next. We already know the establishment has a plan to blame President Trump for the next financial crisis, and now there are moves being made that will support that narrative.
In his Inaugural Address, having nominated the wealthiest cabinet in American history, he proclaimed, “For too long, a small group in our nation's capital has reaped the rewards of government.” Under Trump, an even smaller group will flourish -- in particular, a cadre of former Goldman Sachs executives. To put the matter bluntly, two of them (along with the Federal Reserve) are likely to control our economy and financial system in the years to come.
We have an economic crisis - centered on the persistent elusiveness of real growth, rather than just monetized debt masquerading as 'growth'; and a political crisis - in which even ‘Davos man’, it seems, according to their own World Economic Forum polls, is anxiously losing his faith in 'the system' itself.
While President Trump chose not to attend the elite extravaganza in Davos last week, choosing instead to lambast the great-est and good-est of the world's executives in their crony capitalist safe space, the cognitively dissonant CEOs reassured each other by saying 'ignore the tweets', confident that "if [Trump] knows the facts, he’ll respond according to the facts." It depends whose 'facts' those are, of course.