There’s another Black Swan!
Well, have you recovered yet? I guess the status is no longer quite so quo now. First Brexit – and now the biggest earthquake in US – and global – politics since the Declaration of Independence in 1776 – a mere 240 years ago (incidentally very close to a Fibonacci number!).
Indeed, political and media establishments around the world are being shaken to their core this year. The cosy sweetheart arrangements for politicians (jobs for the boys) – not to mention rewards for failure in commerce – are rapidly coming to an end. Just last week, institutional shareholders are ramping up the pressure to restrict FTSE company CEOs’ mammoth salaries where the principle of jobs for the boys and rewards for failure are so entrenched. This has lead to massive wealth inequality — a theme that will return after lying dormant for a few years.
With Trump readying to put his feet under the desk in the Oval Office in January, I expect him to kick some butt. And that puts Janet’s job on the line (unless she resigns first). Trump said he would like to abolish the Fed. There is little doubt that the Federal Reserve’s Keynesian money printing policies with ZIRP and NIRP has hit America’s blue collar workers very hard and that realisation drew many to Trump.
I have forecast for some time the gradual rejection of the authority of the Fed ( and other central banks) to a point where they will be vilified, and that day is getting closer.
The voters have seen how the bank bail-outs and asset bubbles have only benefited the top 1%. Workers further down the pyramid have only seen jobs going offshore, stagnant wages – and rising expenses of essentials (except food), such as rents and health insurance,
It would not surprise me if Janet does resign soon and The Donald appoints more Austrian economists to the Fed board. That would go some way towards seeing the end of decades of deficit spending which has lead to the debt bomb of the mammoth debt pile (and growing) we now see. Already, bond yields are zooming up this morning in anticipation of more inflation. This is a theme I have been stressing for some time.
Rising yields will kill asset markets (except gold for now).
For a great commentary on the perilous state of the US economy, I cannot recommend David Stockman highly enough. I am sure he will have some very pithy comments later today.
But what struck me during the election campaign is how the vast majority in the MSM were incredibly hostile to Trump – aggressively so in many cases. Every picture of him was shown with him in a very unflattering pose, often momentarily snarling or looking loopy/yawning. I am sure we all have photos of ourselves like that somewhere taken at just the wrong moment which we prefer not to reveal to others. The picture editors were seemingly hell bent on finding the most disturbing images to feature.
And at the same they let Hillary off the hook while printing flattering pictures of her.
Was this deliberate policy? If it was, it backfired spectacularly. I am sure Trump will get his revenge somehow.
And the BBC – one of the worst culprits in this bias – just couldn’t believe it this morning when the results started coming in. They were featuring mostly Trump detractors – that is, until he looked like winning.
The USA has a well-developed right-wing media (especially talk radio) while we in the UK do not. All MSM media is dominated by the BBC. There is no balance in the UK.
And that, in a nutshell, is what the voters for Trump were kicking against – smug ‘liberal’ media bias who are in the pockets of the money men, as well as wanting a real change.
Bearish sentiment holds sway
For traders though, the crucial point of Trump’s victory is that he has been espousing very bearish policies of exclusion (Mexican walls, Muslims turned back), and anti-Free Trade deals. But of course, that all could have been electioneering talk. Is there any realistic chance he could persuade the Mexican government to pay for that wall? Of course not – I am sure he threw that one out just to wind up the adversarial liberal media.
But even with the huge swings in stock indexes today, I am not certain of the wave labels – and the next big move.
Here is one view for the Dow that remains valid
Today’s range is almost 1,000 points! From the low around 17,500 in the early hours, the market has zoomed up to the current 18,200 – a gain of 700 points this morning. That is some recovery, and leads me to believe that the EW labels in the chart could be my best guess. Purple wave 3 has clear A-B-C form, which is typical for second waves.
If so, we could now be in a large purple wave 3 – and these are usually long and strong, implying new all-time highs lay ahead. They key for this view is the red wave 4 low at the 17,000 area. Breaking below that would cancel it out.
But for trading purposes, this is a period to sit on your hands until the dust settles.
