Blain: "Trump Might Think The Crash Is A Fed Plot To Discredit Him"

Submitted by Bill Blain of Mint Partners

Pity Powell. Market Crash is a volatility driven VALUE AT RISK Event.

You have to feel sorry for new Fed Head Jerome Powell starting his new job yesterday: Powell is going to find he has three jobs: Inflation, Jobs, and managing Trump who might well think a falling stock market is a Fed Plot to discredit him. Does that increase the risk of a policy mistake?

Lots of interesting stuff going round this morning as market tries to assess what’s actually going on. Despite the spectacular success of the this morning’s UK Inflation Linked bond issue – (there’s a clue of what people are scared of), the risks across all asset classes are going to stay high for a least a few more days. Shake out continues. One scribbler source says he’s worried portfolio managers will use the volatility to simply dump any position causing them MiFID concerns – on the basis no one is going to spot bad news on a bad news day.  We’ve being ultra-cautious, but we’re seeing good bond flow.

It’s becoming clear this crash isn’t based on any one particular piece of news. Its as likely it was tipped into a sellathon by inflation expectations, the return of the Philips curve and wage inflation, rising and normalising interest rates, rising bond yields as much as hubris on Trump’s comments about his successes making stock markets rise.

This event is not about a correction or the amount of money that’s been lost on levered inverse VIX plays. It’s about the sudden, dramatic return of Volatility catching the market unaware and triggering a massive VAR event. That’s a lesson in complacency. The market is awash with stories – but we don’t repeat rumours in the Porridge. As four months of gains are reversed in four days, the current VAR shock sees Risk Managers shoving traders aside – that seldom ends well.

The attached graph from Martin Malone highlights the last 5 volatility spikes.

 

 

The other side of the coin is cash has to go somewhere. We still reckon the improving Global Macro Theme remains on track, thus risk assets like Stocks and Alternatives over bonds. That’s our view – for now.

You can’t help but wonder if this deepens into a full blown financial crisis in stocks and bonds, might it cause Central Banks to press the “Do Anything It Takes” button.. Lower rates? Reopen the QE gunnels? Right back into the distortions of the last 10-years and another nail in the forehead of market driven economies.

It’s a possibility. After all the market loves the Central Banking Put!

Comments

DownWithYogaPants Tue, 02/06/2018 - 07:36 Permalink

Trump might know.  There fixed it for you.

Again I repeat my comment from a previous article: 

All really convenient how when Trump starts phase II of Operation Deep State Sun Tan that the markets start taking a shit. 

But then I've been predicting it since the minute the Federal Reserve magically spun their outlook from "oh we have to go slow" when they thought Hillary was going to win to "oh god we need 3 rate hikes this year" after Trump won.  If you have watched "The Money Masters" on Youtube by Bill Still then you know that the Private Central Bankers love to fleece the sheep after the market has risen for a long time.  

Until we have monetary diversity we'll be stuck in the same economic 1st gear.  True economic liberty is the cure for this.  We have so many marginalized people that are under utilized in the USA because the powers that bee don't want to share any of their power with anyone.  They'd rather rule a shithole than allow liberty where they serve.

Added Note: Don't forget the Janet's hideous purple coat at the end of Jan 2017.......

Now do you want to bet that the FedRes does not want to risk too much upheaval yet?  Then wait a bit and BTFD.  Or are they ready to "Pull it" in the words of Larry Silverstein.

Headlining on Drudge right now: Fed Wants Blood

Déjà view Bowser18 Tue, 02/06/2018 - 07:49 Permalink

1987 Greenspan initiation...

House Of ♣♠♥♦

Trump claimed that he dumped all of his stocks right before the Black Monday crash in 1987

"They told you so!" crowed the lede of a Wall Street Journal article the day after the crash, October 20.

"I sold all my stock over the last month," Trump told the Journal.

Trump also predicted terrible things ahead for the market.

"I think the market is going to go down further, there are just too many things wrong with the country," Trump said.

http://www.businessinsider.com/trump-sold-stocks-before-black-monday-cr

Do As I Say! Not As I Do!

In reply to by Bowser18

Ms No Beam Me Up Scotty Tue, 02/06/2018 - 08:53 Permalink

Agreed, they are protecting their secret spook police.  They need them.  This is probably just to terrify everybody into submission.  It's their nuclear card.  I think Trump should call their bluff.  They aren't going to shoot their load right now.  They hang after that.  If they let it go too long maybe they will start something they can't stop.

FBI secret police for the elite and your occupiers:

Sept 11, Vegas, JFK, Finicum, Ruby Ridge, Waco... and COVERING FOR ORGANIZED CHILD TRAFFICKING, DRUG RUNNING AND POLITICAL PEDOPHILIA EVER SINCE EVER SINCE.

 

In reply to by Beam Me Up Scotty

Jeffersonian Liberal Ms No Tue, 02/06/2018 - 09:38 Permalink

Many of us have been predicting that 2018 would be the year TPTB crash the economy. The reasons are fairly simple:

1. 2017 would be too soon, as the ghost of Obama would still be shadowing over the economy and it would be too easy to blame Obama.

2. 2018 gives Trump a year to voice national and international changes and to implement those changes.

3. Trump is the perfect fall guy for TPTB. Trump is essentially a third-party candidate. As I've said since the 1980s, if we ever elected a third-party candidate, the GOP and the Dems would do everything they could to destroy that presidency and would do so to send the message to the citizenry: "Don't ever put someone in the presidency that is not of one of our two parties (what we now call the Establishment Party).

4. TPTB can easily paint Trump as the typical capitalist. When they crash the economy, they'll say, "See? We had 8 years of a socialist and everything was grand, just grand. Then you stupid voters put a capitalist (a Capitalist! of all things) in the WH. Those free-market, capitalist principles destroyed the perfect economy that we socialists created."

5. This is all by design. Their goal is to allow the global socialists to wag a finger at us and exclaim, "Now you've really made a mess. In order to fix this, the US will have to give up a great deal of its sovereignty, the American people will have to give up a great deal of their savings and freedoms, and we will need a much stronger, globally centralized government to 'protect' everyone and ensure justice."

In reply to by Ms No

Future Jim strannick Tue, 02/06/2018 - 08:59 Permalink

Excerpt from November 19th 2016:

The crash will have to come in January 2018 at the earliest to ensure that it is blamed on anti-establishment types and not on Obama. It is possible (30%) that this could be the big one … where the globalists perpetrate a 3 – 12 month collapse, declare martial law, trade bread for guns at FEMA camps, implant RFID chips, force vaccinations, bring in foreign troops, ban cash, collapse the US dollar, and execute a “night of the long knives” to take out likely resistance leaders. Such an extreme move would be pretty risky for them, so I think a lesser crisis is more likely, and if we wake up enough people before then, I suspect their plan B will be a crash more like 2008 with a modest move towards global currency. --The Globalists Chose Trump

Of course, it is also possible that the crash is not here yet and that this is just extortion to get Trump, congress, CEOs, etc. to go along with something equivalent to the evil of the 2008 bank bailouts. Wasn't Congress threatened with martial law if they didn't vote for the bailout?

I don't think it is a coincidence that a new Fed Chairman started yesterday. Maybe the extortion is to pick a different Fed chairman because this one is not like the others.

In reply to by strannick

pissonmefico Bowser18 Tue, 02/06/2018 - 09:07 Permalink

When the stock market crashes, the reason will be that it was allowed to crash. It will crash because "they" have been forced to begin WW3 due to de-dollarization and the end of it's reserve currency status. They know that the gold backed Petro Yuan, Shanghai gold exchange etc. means game over. 

Trump is one of "them". Look at his previous history, 24/7 media exposure during the campaign, best friend Israel ever had, etc..

The scripted kabuki theater being played out is to deceive us into accepting their next currency IF "they" win.

If you noticed, that was a big if.

In reply to by Bowser18

pndr4495 DownWithYogaPants Tue, 02/06/2018 - 08:06 Permalink

Yep maybe we are at the point where people will let the pain of continuing on the same course to overcome their fear of big & needed changes. Progress in any nation usually involves conflict between & among the population. Since Russia is the hot topic, if it can happen in Russia in 1917 then it can happen in The United States in 2018 - minus the advertisement, of course :  https://www.youtube.com/watch?v=7QkJjWIHFSA

In reply to by DownWithYogaPants

swmnguy shovelhead Tue, 02/06/2018 - 09:25 Permalink

Too many people still think they have a stake in this thing for anything like that to happen.  And America still has no ideology.  Market Fundamentalism is not the same as actual political ideology, raw faith never is.

And despite the partisan chatter, there isn't a well-organized, well-connected group trying to destroy the whole thing.  There are factions of Oligarchy looking to unseat each other to control the system more or less as it exists now. 

Silly people call Obama and the like "Communist," but they only persist in that because most Americans don't understand political terminology.  No "Communist" ever in history would have diverted the US Treasury through Wall Street to save the Finance Sector from itself in 2009.  No "Communist" would have enacted ObamaCare to save the Healthcare Finance sub-sector from the consequences of having priced their product out of the reach of their customers.

So you're quite correct.  We're a long, long way from a takeover by outsiders with a meaningfully different ideological approach.  We might be nearing a takeover by a rival team of insiders, and those of us who don't flatter ourselves to have a partisan interest, the difference will not be noticeable.  The arc of decline will have a few bumps but the line will appear utterly smooth from 20 paces.

In reply to by shovelhead

nuerocaster swmnguy Tue, 02/06/2018 - 10:02 Permalink

The Finance Sector has morphed into top down collectivism.

Infinite leverage? Privatized profits, socialized costs?

Typical collectivist caste system with much involuntary servitude.

Yes there was a reverse order. The revolutionary roll out came first, followed by the gobbledy gook promises, rationalizations, ideology to the masses.

Bottom line society must pay. Including those who didn't think they were in the game.

In reply to by swmnguy

swmnguy HopefulCynical Tue, 02/06/2018 - 14:06 Permalink

No, not "just like."  In fact, 180 degrees different, as shown by the direction of the flow of money.  Wall Street funded the Bolshevik Revolution to further Wall Street's aims.

We all know the US created what came to be known as Al Quaeda.  Why, because the US supports radical Islam?  No, because clever people outsmarted themselves in one regard, and because the Al Quaeda guys are dead-enders who make useful and expendable mercenaries; nobody would accept their surrender if they even tried it and they'll shrink from no atrocity.

So it's not hard to envision why Wall Street might fund Bolsheviks.

However, why would a Communist bail out Wall Street?  I'd suggest an actual Communist would have allowed Wall Street to collapse, and opened up Medicare to all Americans.

Obama was never anything remotely "Communist," nor even left-of-center.  All the way back in his days in the Illinois Legislature he sounded like Paul Ryan on Social Security and Medicare.  Obama has always been fascinated with Finance, as opposed to actual productive anything.  Obama's Administration was cautious and center-right by every standard.  Indistinguishable from GW Bush or Clinton.  Reagan's 8th and 9th terms.  And Trump has been so far Reagan's 10th term.

I've found it very interesting that Big Business has had virtually nothing whatsoever to say about any of Trump's policies, even in their internal meetings.  They had almost nothing to say about Obama's policies, either.  Even ObamaCare; they recognized that healthcare finance was a goner and supported government intervention to help them with their second-largest cost of doing business after only raw payroll.

The merger of corporate and state interests and power is NOT Communism.  And Communism is NOT just a click or two away from Fascism.  Not that I want to live under either; I enjoy living in a little backwater of the Seat of Imperium; but if we intentionally misuse our terms we can't communicate.  And that is not accidental.  Some smart people have gone to a lot of trouble to make sure we confuse concepts and are easily and docilely led.

In reply to by HopefulCynical

Dark star DownWithYogaPants Tue, 02/06/2018 - 08:40 Permalink

For the last eight years we have had a totally convincing demonstration that the "Markets" have been rigged and are / have been, 100% obedient to those who pull the strings.

Logic would dictate the assumption that the markets remain obedient to those who pull the strings, and as Yoga pants would have it, a distraction has been arranged to allow criminals to escape justice.

To find out who is pulling the strings, follow the money, and watch to see who ("inexplicably") makes a fortune out of volatility and plunging markets.

Watch to see who buys the dip and when.

Anybody who gets wiped out should buy a nail gun and arrange some accidents, rather than making an intimate acquaintance with gravity and the sidewalk. Take a perpetrator with you if criminality is clear; law and justice in the U.S. no longer exist.

What role is played by insider trading swamp dwellers?

In reply to by DownWithYogaPants

DJZZ DownWithYogaPants Tue, 02/06/2018 - 09:16 Permalink

Every negative action just reinforces the base.  At this point everything looks like an attempt to take Trump down.

Has the deep state given any thought to the anger in flyover land?

600+ million firearms and 25 trillion rounds of ammo in the hands of legal citizens.  Over 100 million Veterans.

Trump has the military and his administration is filled with former military officers.  Most are loyal to Trump.  I see a real possibility of military tribunals, especially with activist judges.  "enemies foreign and domestic".

Remember the deep state tried to rig the election!  We need a Special Prosecutor to investigate the weaponized DOJ and FBI.

Whether you like Trump or not we need to support the U.S. Constitution.

In reply to by DownWithYogaPants

brianshell DownWithYogaPants Tue, 02/06/2018 - 10:20 Permalink

Interesting times we live in.

Is Trump a genius?

Will he issue US notes?

Can Trump play the Fed fiddle like he is playing the DC piano?

Speaking of the DC piano, check out George Webb's 110.2 and 110.3 this morning.

HRC is Moriarty. She should have stayed in the shadows. Just ask Bill.

 

In reply to by DownWithYogaPants

PT Tue, 02/06/2018 - 07:37 Permalink

Plenty of stuff the Deep State don't want us to notice at the moment.  The Memo.  PizzaGate.  Everything else.  I'm sure yous can add more.

Cloud9.5 gatorengineer Tue, 02/06/2018 - 08:02 Permalink

Correlation and causation are irrelevant in this political atmosphere.  The meme that the left is taking down the market to destroy Trump is as marketable to the Deplorables as was the mime that the Russians stole the election to the Resistance.   We live in parallel universes.

The back story to this instability is the fact that we have reached the end of growth.  Exponential growth of debt is the only mechanism left to cover net energy declines.  No one even imagines that the debt will be repaid.  Debt is irrelevant to this system. 

If a liquidity shortage collapses the system it will be for political reasons or because the Fed has locked onto some arcane notion about sound money.  The money is not sound.  It is conjured.  If this is not political the threat of blood in the streets when J.P. Morgan rolls over and shuts down the EBT system will open the money spigots again.

In reply to by gatorengineer

swmnguy Cloud9.5 Tue, 02/06/2018 - 09:05 Permalink

Correct.  If this continues for a couple more days we'll be able to re-print ZH articles and comment sections from early 2009.  Because it's the same issues, just painted over with funny money for 9 more years.  What "DeepPurpleHaze" and "Mr.LennonHendrix" had to say about it then is just as applicable today.  Though the evolution of the Trump character adds a surreal touch, nothing substantive has changed, and that's the problem.

There's no real growth and hasn't been for decades.  It's just that there's so much wealth things can be manipulated for a lot longer than most of us would think.  In 2003 when I refinanced my tiny starter home after 7 years of ownership and my staid, cautious credit union appraised it at 2.5x what I'd paid for it, it occurred to me that nobody who would want to buy it had experienced a 2.5x rise in income, so how the hell did that work?  Obviously it only worked by suspending the rules of prudent Capitalism.  Right then I knew the whole thing had to collapse, but it really didn't in 2007-2009 because of changing the rules mid-game, and that hasn't stopped.

Capitalism has to collapse about once a generation, to flush out unpayable debt and redistribute accumulated wealth.  The only way the Elites can preserve their accumulated advantages forever would be to openly revert to Feudalism or to make money abstract.  They chose the latter. 

So now we use debt at interest as money.  To do that, we have to have actual, real growth at or slightly above the going rate of interest; not the Fed level, but the consumer level, or the debt can't be repaid. 

To have unlimited growth, we have to have unlimited inputs of money, resources, energy, and markets.  Our planet being finite, we can only have infinite money, and that only by making it abstract. 

We can keep the game going by changing the rules, just as in "Monopoly" when one kid gets all the hotels, houses, money and properties he can loan to the other players, but sooner or later the kids are going to get sick of playing and go outside to shoot baskets or something.

In other words, it's the same conundrum that's been bedeviling us for about 20 years.  It's gotten worse and harder to cover over, the longer the vast majority of Americans haven't seen an increase in purchasing power (which they haven't in about 45 years).

It takes a pretty dumb man to take credit for short-term superficial success in that environment.  Or a man incurious and unobservant enough not to have noticed or understood what's really been going on.  A man dumb enough to have "scalp reduction surgery" instead of just shaving his damn head, perhaps.

In reply to by Cloud9.5