"Take A Deep Breath: Markets Are About To Be Dragged Into A Real-Life Version Of Fear And Loathing"

By Michael Every of Rabobank

Take a deep breath. Markets are about to be dragged into a real-life version of ‘Fear and Loathing in Las Vegas’, a cinematic achievement one does not so much feel one has watched as been forced to snort off the screen at gunpoint. In other words, the climax of the US presidential election is upon us. Of course, there is a better Hunter S. Thompson novel to capture the bad trip that is 2020: ‘Fear and Loathing on the Campaign Trail ‘72’, which McGovern’s campaign manager himself said represented “the least factual, most accurate account” of the election. Indeed, once again we live in times where we are both lacking facts and yet see total accuracy; or we have the facts and lack the accuracy.

So where do we stand this morning after just one weekend of US news? President Trump nominated Amy Coney Barret (ACB) to replace the sadly-departed Ruth Bader Ginsburg (RBG) on the Supreme Court. This appears to be achievable before the election day provided Trump does not lose more than three Republican senators along the way. Everyone hum along: “ACB; Easy as 1,2,3; Unless you lose Mitt Rom-ney; Mur-kow-ski; and then in November, McSally.” Naturally, this drama --not another fiscal stimulus package-- now preoccupies Washington DC, despite the desperate need for one according to every Fed speaker.

Trump used Twitter to challenge Joe Biden to a drug test either before or after the looming presidential debate tomorrow night, which he would also take too, in order to remove any suspicions that either candidate is taking performance-enhancers. Which underlines just how far 2020 is into Hunter S Thompson territory. Indeed, the journalist who best captures his tone to me today (albeit in a sober sense), Matt Taibbi, replied on Twitter: “Drugs should be administered to both candidates in equal doses, live and before opening statements, by someone with expertise – like the road manager of a metal band.” Who wouldn’t pay to see that show? And would the answers we get make any less sense for the scale of problems we all face?

The New York Times released what it claims are Donald Trump’s tax returns The headline is that Trump allegedly paid just *USD750* in income taxes in 2016 and 2017 and no income tax at all for 11 years. Of course, we don’t know if this is true or not as we don’t have the actual returns, which would probably mean 5 years in prison for someone. Trump has naturally dismissed it all as ‘Fake News’. However, there is much gnashing at teeth that this is entirely inappropriate for a billionaire. Actually, it would be entirely typical for a billionaire to pay so little – because that is the way the US tax system works, and all the journalists writing today’s outrage pieces know that, especially the ones working for billionaire media owners.

Is it healthy? That’s a whole different question – which will not be asked on the campaign trail by anyone. In this someone-spiked-my-drink atmosphere, Joe (and Jill) Biden’s joint tax returns --released with full transparency-- show in 2016 he earned USD400,000 as Vice-President, and in 2017 that rose to USD11m, falling back to USD4.6m in 2018. That is a lot of well-paid after-dinner speeches and book royalties that don’t await anyone reading this once they retire – but again is not in question in DC, because that’s just how the system works. The Wall Street Journal also claims they avoided paying USD500,000 in tax on it by classifying it “as S-corporation profits rather than taxable wages.” (A technique UK politicians have also used for years too, and it’s all perfectly legal and normal on both sides of the Atlantic.) Expect many more such stories, and worse, in coming weeks: that’s a campaign trail, folks.

Somehow this seems unlikely to move the polls very much; then again, which polls? Most still show a very healthy Biden lead. However, a subset of pollsters vociferously claim this is failing to pick up a massive realignment of new likely voters which is increasingly making this into not a traditional Republican vs Democrat battle, but into an ‘insider’ vs. ‘outsider’ one. Of course, that’s just a view, and people will always talk their own book: but more volatility could well lie ahead.

Finally, this morning Project Veritas has also reported allegations of organised ballot harvesting of mail-in votes having been captured in Michigan, which none of the larger newspapers are going anywhere near, just the more tabloid New York Post.

Naturally, China’s Global Times is running an editorial today that talks about the end of the Roman Empire and the failing appeal of the US despite “so called freedom and democracy.” As Thompson already noted back in ’72: “It was like a scene from the final hours of the Roman Empire: Everywhere you looked, some prominent politician was degrading himself in public.” The good news? As far back as ’72 he was also already writing: “The only thing I ever saw that came close to Objective Journalism was a closed-circuit TV setup that watched shoplifters in the General Store at Woody Creek, Colorado.”; and was asking “Where will it end? How low do you have to stoop in this country to be President?”

In short, this too shall pass.

But first we have weeks and weeks of daily crazy stories…and of no US fiscal stimulus (most likely)… and consequently of further moves back towards the USD. Which might make as much sense to some as the same way Hunter S. Thompson would reach for a case of ether when already so full of drugs that he looked like a petro-chemical plant; but in both cases one still ends up with a fist full of dollars somehow, tangled up in red, white, and blue. God bless America!

Indicatively, consider that a US judge has just stayed the shutdown of TikTok, following a similar delay on WeChat: we have the US president calling both a national security concern, and yet a judge is capable of halting the process to ensure that it is entirely legal.

The US Department of Commerce has meanwhile decided to impose restrictions on US tech exports to China's biggest chipmaker SMIC after concluding there is an "unacceptable risk" that equipment supplied to it could be used for military purposes. Again, this shows US muscle. China is talking about the need for a “long march” to break its tech dependence on the West. That, as Bloomberg reports that “China’s Rebound Lost Momentum in September, Early Data Show”.

Abroad --and getting almost no coverage because there are no nice 5-star hotels or big media bar tabs available in the vicinity-- we also have war between Armenia and Azerbaijan, which potentially risks dragging in Russia and Turkey on opposite sides. In the very worst-case scenario, it is also alleged that Armenia could even blow up the gas pipelines that cross it and which feed Turkey (which now has some involvement in Libya, Syria, Iraq, and Armenia, as well as geopolitical tensions with Greece and Cyprus).

Let’s finish with a duo of red, white, and blue of Hunter-isms:

“When the going gets weird, the weird turn professional.”

“With the truth so dull and depressing, the only working alternative is wild bursts of madness and filigree.”