Markets were quiet at the end of last week, economic reports scarce, the bond market stable for the first week since the election. We will get a ton of data the week after the New Year.
Now 24 days to I-Day, the oath of office, “Mr. President” and all of that. Despite apparent market calm, and quiet among politicians, Mr. Trump every day adds tension to the springs and cables of markets and government.
His intended appointments and words have made paramount three areas: his choice of leadership team, their economic intent and Trump’s personal warbling.
The new leadership team
The new leadership team falls into the same three categories of all new administrations: nuts and cronies, obligatory postings to please the constituent base, and the adults.
I may be alone, and possibly should be, but I don’t much care about potential conflicts of interest. These people will be responsible for so much money (federal spending in 2016: $4 trillion) that any personal nest-feathering does not matter.
Nor do I worry about industry veterans who will supervise their industries: Better experienced than not, and if we cannot separate the honest from not, then we are in too much trouble anyway. Tillerson, Mattis and Cohn may do very well. Flynn scares me. Mnuchin and Pompeo are black boxes.
Economic focus
Second, the economic focus is now very clear, although it’s the kind of thing found in the bottom of a Christmas stocking forgotten in the attic for thirty-five years.
This new government will be of business, by business and for business. OBBBFB. Ob-foob.
This approach was last tried (very briefly) early in the Reagan administration, “supply-side” Voo-doo, Laffer Curve belief that all tax cuts raise more revenue than cut, and that business growth will raise all boats.
Theorists of this faith have been safely on CNBC and op-ed pages ever since, excluded from all governments — even Republican ones. The more you hear from Moore, Malpass and Taylor…duck.
OBBFB is the target, and the means is clear now also — and infectious not just among Trumpistas and the stock market but some of our best businesspeople.
Economic policy will be executed by “deal guys.” Not corporate administrators, but deal guys like The One.
Ray Dalio is the brilliant founder-leader of Bridgewater, managing $150 billion. In his post this week: “By and large, deal-maker businessmen will be running the government. Their boldness will almost certainly make the next four years incredibly interesting and will keep us all on our toes.”
Blind to irony, Dalio recommends that we all read Ayn Rand, “as her books pretty well capture the moment.”
The last big fan of hers was personally responsible for the greatest regulatory failure in the history of credit (Alan Greenspan). Also blind to history.
There is always a crowd at every level of government saying it should be run “like a business.”
But it isn’t a business. Business benefits from singleness of purpose, profit for stockholders. Government has millions of constituents who express their will though the impossible tangle of democracy. Deals can be made with Congress, but not without.
The warbling
Third, Mr. Trump himself.
A blue-and-yellow macaw named Bob allowed my brother to live with him. At sunrise, Bob often felt the need to check in with macaws living on the other side of Miami, a tweet which shattered sleep and threatened windows.
Trump appears enamored with Nixon’s crazy-president concept: If other leaders are scared of you, they’ll behave.
This week began with chirping at China about a snatched drone (he missed his intel briefing and news that an embarrassed China had already returned the thing) and ended with: the U.S. must “greatly strengthen and expand its nuclear capability.”
A spokesperson tried to soften the blast, but then came the re-peep: “Let it be an arms race; we will outmatch them at every pass and outlast them all.”
Fans of Trump bristle when he’s called “crazy,” but that’s insane.
Markets will care about all of this. And as OBBFB founders in Congress, markets will care more and more about disorder.
Happy holidays to all, anyway! I have great faith in our nation and government to adapt and to make the best of what’s ahead — or to contain it.
The U.S. 10-year T-note in the last year.
The U.S. 10-year T-note in the last year. In any experience with markets, we ought to see some at least temporary rally. However, the business exuberance at Trump’s election can take quite a while to fade, and the Fed is coming no matter what.
The U.S. 2-year T-note in the last year.
The U.S. 2-year T-note in the last year. Watch this thing! The best indicator of how fast and far the Fed is coming:
Onnada Srilawong / Shutterstock.com
Three of Bob’s cousins, not quite three feet tall, beak-to-tail. Smart, big vocabularies (and expect you to answer) and show-offs — effortlessly cracking and peeling Brazil nuts. Do not get in a tweeting contest.
Lou Barnes is a mortgage broker based in Boulder, Colorado. He can be reached at lbarnes@pmglending.com.
