US stock market slump, Trump blames someone else

The US stock market is having a bad week, slumping to lows for the year and said to be ‘on the cusp of a bear market’. President Donald Trump praised himself when the market rose to record highs, but as has become typical of him, he blames someone else when it dives.

Trading has a few hours to go before closing for Christmas but it is not looking good for the last five days:

The US markets closed at 1 pm on Christmas Eve. Dow Jones  closed on 21,792 , down 653.17 (2.91%) for the day.

Nor for the year:

New York Times: Stock Market Rout Has Trump Fixated on Fed Chair Powell

President Trump has unabashedly hitched his political fortunes to a rising stock market. Now, with stock prices in retreat, he has become increasingly fixated on the idea that one man is to blame for the recent rout: Jerome H. Powell, chairman of the Federal Reserve.

After the Fed raised its benchmark interest rate on Wednesday, the fifth consecutive quarterly increase, Mr. Trump fretted to aides that Mr. Powell would “turn me into Hoover,” a reference to the man who was president in the early years of the Great Depression.

Mr. Trump has said choosing Mr. Powell for the Fed job last year was the worst mistake of his presidency, and he has asked aides whether he has the power to fire him.

But the volatile stock market, which just posted its worst week since 2008, is falling in part because of Mr. Trump’s own policies, including an escalating trade war with China, a shutdown of the federal government and the fading effects of the $1.5 trillion tax cut Mr. Trump ushered in at the end of 2017. While the Fed’s rate increases have upset investors — who seem to have a darker view of economic growth than the central bank does — some analysts said Mr. Trump’s musings about the Fed would only exacerbate anxieties.

Mr. Trump’s economic advisers scrambled over the weekend to reassure markets that Mr. Trump was not, in fact, planning to fire Mr. Powell. Treasury Secretary Steven Mnuchin tweeted what he said was a quote from Mr. Trump accepting that he did not even have the power to do so.

While Mr. Trump has turned on his chairman, the Fed’s trajectory should not have been a surprise.

When Mr. Trump chose Mr. Powell as Fed chairman in the fall of 2017, he said, “Based on his record, I am confident that Jay has the wisdom and leadership to guide our economy through any challenges that our great economy may face.”

Mr. Trump also chose three of the other four members of the Fed’s board, all of whom joined Mr. Powell in voting for all four 2018 rate increases.

In conversations with friends and advisers, Mr. Trump has acknowledged responsibility for the selection of Mr. Powell. He told Stephen Moore, an economist at the Heritage Foundation, that it was “one of the worst choices I’ve ever made,” according to Mr. Moore.

Sarah Binder, a professor of political science at George Washington University, said presidents had often tried to shape Fed policy, but the current episode stood apart because Mr. Trump appeared to be acting against his own interest in a stable economy.

“I think what is the unusual part here is that it seems the president has created the crisis,” she said. “His intervention certainly seems to be making things worse for him and worse for the Fed and worse for the economy. It’s just very shortsighted, and we’re not used to that.”

@HoarseWhisperer

The punchline of Trump’s meltdown over the markets and Fed:

– Every sane human knew we were in for a bumpy landing after the long recovery under Obama

– Trump did everything possible to make that worse

– That was a recipe for disaster

Trump is now blaming everyone else for his ignorant, moronic decision to steer the Trumptanic economy right into the iceberg A competent president would have focused on things that fuel growth like:

1) Expansion of trade – rather than the opposite: trade wars

2) Pro-working class tax relief to fuel consumer spending

3) Expansion of “green” incentives to grow renewables and further reduce reliance on oil, gas and coal

4) Small business incentives to spur the true engine of the labor force

5) Reductions of loopholes and credits which shield large corporations from taxation and incent moving business abroad

6) Efforts at controlling health care costs since every consumer dollar spent toward HC isn’t spent elsewhere in the economy

7) Managing down runaway enthusiasm about the economy and growth since it leads to consumers spending their way into deeper debt which then produces a nasty backlash when the bills come due.

Every step of the way, Trump has done the diametric opposite of what he should have.

He steered the economy out of smooth waters toward calamity – and along the way, he robbed the ship of fuel to enrich the already rich.

Now, the battleship can’t be turned fast enough to help and he has no effing clue what he did wrong let alone how to fix it.

Meanwhile, over on Main Street, USA, average Americans who bought his bullshit deficit-spent thinking they’d get a present on Tax Day.

A cooling economy. Consumer wages going sideways. Bills going up. No money in the treasury to help.

This is going to be a sh**-show.

Trump inherited an eight-year expansion. A healthy economy with some navigable challenges.

He burned the whole damn thing down by being an incompetent, narcissistic moron… …and steered the entire economy straight toward full-blown recession.

This is going to be ugly.

Stock markets can be fickle things, but after a good run for years it was on the cards that there would be a correction, or worse, It looks like heading for worse right now, regardless of who is to blame – but the big buck stops at the President’s desk.

The US stock market may drag the world down with it. We can hope that heading into the holiday period it may not be so bad here in New Zealand,

 

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24 Comments

  1. Gezza

     /  December 25, 2018

    Aljazeera tv was reporting on this last night and mentioned that Mnuchin had interrupted his holiday & announced that he had personally spoken to the CEOs of 6 of the major banks and they had assured him everything was fine, they had no liquidity problems, there was nothing for folk to worry about.

    This appeared to have had precisely the opposite effect, the reporter said. Now folk were worrying about whether there’s really also a problem in the Finance Markets. :/

    Reply
  2. Reply
  3. david in aus

     /  December 25, 2018

    There appears to a serious issue in the high-yield debt market, like in the 2008 crisis, these loans to high-risk companies are packaged into (collateralized loan obligations) CLO and were sold to pension funds. The quality of these loans are dubious and they are also known as covenant-lite.
    Because interest-rates were so-low for so-long even Argentina managed to sell 100-year bonds at a relatively low interest rate for them. This is a country with a repeated history of defaulting on debt (six times).
    The scuttlebutt is companies are being shut out of these rolling over these loans or are being asked to pay higher interest rates. The amount of debt among corporates have exploded in the last ten years and a significant proportion are just above investment grade. In an economic downturn, these bonds will be downgraded and pension funds will be forced to sell, setting off a downward spiral.
    Remember bond/debt holders get their money back first before shareholders, hence the sell-off in the market.

    I think Europe is in big trouble with the amount of debt the governments have, many of their countries and companies are only treading water because of ultra low interest rates.

    https://www.fnlondon.com/articles/the-biggest-emerging-market-debt-problem-is-in-america-20181224

    Reply
    • Gezza

       /  December 25, 2018

      The world needs to somehow move away from letting the US dominate the markets. The bastards just can’t be trusted.

      Reply
    • david in aus

       /  December 25, 2018

      The next shoe to drop will be a Pensions Crisis in America and Europe.
      Defined benefit pension schemes, where states/councils/companies promise to pay a percentage of the final salary, have been underfunded for the last decade. Even with the stockmarket boom of the last few years, they have not been contributing enough.
      States such as Illinois, California, local councils; companies Intel, General Electric, American Airlines etc are in big trouble in the next stockmarket downturn.

      I wouldn’t be surprised if many of them go bankrupt. The era of pretend-and-extend is coming to an end.

      https://www.bloomberg.com/graphics/2017-corporate-pensions/

      Reply
      • Duker

         /  December 25, 2018

        for US companies their Chapter 11 quasi bankruptcy process allows them to shed pension liabilities ( to the tax payer) and maybe even bonds ( not sure on this , but know airlines can shed plane leases and such very easily).
        To be honest Trump may have extended to bull run even longer, but it couldnt continue no matter who was president. Smart people may have even got out of stocks not long after the business tax cuts.

        Reply
  4. PartisanZ

     /  December 25, 2018

    Where’s Blazer? I wanna hear from Blazer …

    Reply
  5. Blazer

     /  December 25, 2018

    its as plain as the nose on your face ,that the ramping debt levels and the effects of years of Q.E are unsustainable.
    Raising interest rates even moderately and Quantitative Tightening(opposite of Q.E)will impact on the market and all financial instruments.

    The world has been awash with this ‘money’ for a decade now,as it sought safe havens in stocks and land in stable countries.

    Easy money has increased private debt levels to historic highs.

    Another ,more severe credit crunch looms.

    Japan has managed deflation for 20 years ,and lowering interest rates ,rather than raising them has been the usual practice.

    The only thing you can be sure of,is when recession bites, the banking oligarchy will win again!

    Banking reform and reintroducing Glass Steagal regulations on financial institutions is better late than never.

    The U.S dollar is still supreme as the currency of international trade,but things are changing slowly.

    Gold price is already on the rise.

    Boom,slump.collapse.When is the..question!

    Reply
    • Duker

       /  December 25, 2018

      Large companies have their own version of QE. Regular large scale share buybacks, often paid for with borrowed money. Once that tap gets turned off, it too will lead to a stock downturn. On top of share buybacks for established companies like Ibm and Boeing, there is the mad US tech stock boom, with valuations based on a wing and a prayer, likely too each round of investment in the next best thing is based on borrowed money based on last years investments in equally dubious schemes. Tulips for the 21st century

      Reply
  6. duperez

     /  December 25, 2018

    Donald Trump is like some guy from Reefton who’s never played in a real organised game of rugby let alone donned boots, but he’s seen others play it and seen it on TV. Not only that, he is unco-ordinated and not at all athletic

    He’s won a raffle at the local pub, (bought all the tickets) and is immediately on a plane and chucked into the Rugby World Cup Final in front of 82,000 at Twickenham. And of course he’s telling the other players what to do.

    Reply
  7. David

     /  December 25, 2018

    It was dumb for Trump to take credit for the rising market he was always going to be smacked when it turned. The media will delight in this.
    The economy is still very strong this is a Fed based adjustment as they unwind Obama,s QE by shrinking their balance sheet which is a very welcome move signalling Trumps economy can stand on its own two feet and with near 4% growth so it should. He needs to sign off a proper budget now to take the pressure off interest rates and get control of the federal deficit.
    I dont think it signals a recession or anything like that…more just a big wobble. If you want to panic have a look at Europe, Italy Spain and France are in all sorts of trouble with some frightening stats and Greece is still a mess, Sweden and Belgium dont have functioning governments and if the Poms crash out Europe will suffer more than they will.

    Reply
    • Duker

       /  December 25, 2018

      Fed didnt do QE on Obamas instruction.
      No way isTrump getting control of deficit unless those tax cuts , especially for big business are rescinded – because they never created lots of jobs , just boosted dividends and share buybacks- cant see that happening either, meanwhile circus of ‘the wall’ continues when most drugs come via sea in containers to ports while overstayers and others come via airports
      Functioning government doesnt quite mean what you are suggesting. Germany did fine ‘without a government’ until start of Feb when their election was same date as ours. In reality legislation may be on hold but officials run government as usual

      Reply
    • Joe Bloggs

       /  December 26, 2018

      That’s a bit U-turn from David, who has spent the last two years praising trump’s economic perspicacity.

      trump’s an economic ignoramus and mnuchin is little better. I’ll be astonished if the two of them don’t drag the world into another global financial crisis

      Reply
  8. kluelis

     /  December 25, 2018

    Share market rises and fall these past 60 years have not changed life in NZ one i ota. Stop getting upset about nothing. Y’all leave Donald Trump alone. He is doin just fine. Presidents and Prime ministers in modern western democracies are figure heads and can’t do zilch without Government approval. Have a kai a beer/wine and a granny nap.

    Reply
    • Blazer

       /  December 25, 2018

      ‘ have not changed life in NZ one i ‘..yeah right…are you Rip Van Winkle?

      Reply
  9. peddiebill

     /  December 25, 2018

    Although I agree with much of the above I am starting to wonder if there s a serious psychological problem for the GOP in general and his followers in particular. It takes a great deal of courage to say “I was wrong” particularly if every effort was made to construct a tether with an apparently rising star. Now the star is falling, it would take a particular form of courage to let go.

    Reply
  10. Gezza

     /  December 25, 2018

    Reply
  11. duperez

     /  December 25, 2018

    Gezza

    Only if you appreciate that I think Reefton is wonderful and the people there lovely. The closest Trump actually comes to Reefton is that his intellect matches that of a piece of coal.

    Reply
  12. I think Trump needs to stop worrying about the stock market , but start worrying on how to decrease that deficit and all that debt.
    Maybe he can also start worrying on how to get out the USA out of that trade war aswell.

    Reply

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