So first of all, we’re just going to rub it in.
24 hours ago (almost on the dot) it was this:
- TRUMP ENDORSES BIPARTISTAN HEALTH-CARE DEAL
Then, earlier today it was this:
- TRUMP: SUPPORT ALEXANDER PROCESS, NOT BAILOUTS FOR INSURERS
And then, today at exactly 2:54, it was this:
- TRUMP DOESN’T SUPPORT ALEXANDER-MURRAY BILL IN CURRENT FORM
TRUMP DOESN'T SUPPORT ALEXANDER-MURRAY BILL IN CURRENT FORM
this fucker literally has no clue what's going on pic.twitter.com/6ybpx4jRKQ
— Walter White (@heisenbergrpt) October 18, 2017
In the short space of a week, he has thrown the entire U.S. health care system into complete disarray by cutting off Obamacare subsidies, endorsed a bipartisan proposal to restore those same subsidies, and then un-endorsed that same proposal less than 23 hours after it was floated.
Also on the docket for Trump on Wednesday was arguing with an African American lawmaker from Florida who accused him of telling the widow of a deceased soldier that her dead husband “knew what he was signing up for.” That, less than 24 hours after bringing John Kelly’s dead son back to life in order to prove that Obama didn’t actually call the families of soldiers who died during his presidency, a spurious claim Trump made on Monday while holding a 45 minute press conference on why he can’t get tax reform done. And now, he’s bringing John Kelly into it again:
— The Hill (@thehill) October 18, 2017
I mean, it’s like watching a sitcom where there’s a new episode every, single day. And you always get a preview of what today’s plot will be by tuning into his Twitter feed between 6 a.m. and 7:30, with Wednesday being no exception:
He’s like Jack Torrance knocking on your damn door every morning:
Meanwhile, Steve Mnuchin did a podcast with Politico this morning where he literally said this:
To the extent we get the tax deal done, the stock market will go up higher. But there’s no question in my mind that if we don’t get it done you’re going to see a reversal of a significant amount of these gains.
This administration is now blackmailing Congress with the stock market. But don’t worry, because the tax thing is going great. Just ask this headline that hit after Trump met with the finance committee this morning:
- TRUMP TALKED TO DEMS MORE THAN GOP IN TAX MEETING, HATCH SAYS
So that was your day in U.S. politics: Stark. Raving. Mad.
And speaking of stark raving mad, volatility has all but completely disappeared with the last bastion of hope (FX vol.) having now flatlined along with equity and rates vol:
“Whether you look at generalized measures of volatility in equities, bonds or currencies they all remain in the sewer,” Bloomberg’s Richard Breslow wrote on Wednesday, adding that “currency volatility, that last great hope of finding an asset whose prices are moved by news, has fallen back to three-month lows.”
The Dow closed above 23,000 – best day since early last month:
This was the best day for IBM since 2009:
China kicked off the Party Congress overnight with a 46-hour-long speech from Xi (Xi, like Chuck Norris, can give a 46-hour speech in a three-hour time frame). Here’s Goldman’s quick take:
- Change in the “principal contradiction facing Chinese society,” which is usually viewed as the guidance on the Party’s key area of focus. In the report, Xi said that “the principal contradiction facing Chinese society has evolved to be that between unbalanced and inadequate development, and the people’s ever-growing needs for a better life,” a change from previously, “the principal contradiction in our society is still between the ever-growing material and cultural needs of the people, and the backwardness of social production.” (This statement had been in place since 1981.) We view this change in “principal contradiction” as an acknowledgement of the need for more efficient and balanced economic development.
- Xi’s thoughts on socialism with Chinese characteristics for a new era. The report came up with thoughts on socialism with Chinese characteristics for a new era, which should be effectively a summary of Xi’s thoughts and will likely be incorporated into the Party Constitution during the Congress. There are 14 fundamental principles, which have been mentioned previously in different situations, with the first being “ensuring Party leadership over all work.” On economic areas, Xi mentioned “continuing to comprehensively deepen reform and “adopting a new vision for development,” which reiterated Xi’s five development concepts (i.e., innovation, coordination, green development, opening and sharing), and reemphasized letting the market play a decisive role in resource allocation. Environmental issues are listed as a separate principle under “ensuring harmony between human and nature,” and the report mentioned plans to “implement the most rigorous ecological and environmental protection system.”
- A new two-stage development plan. In the report, Xi emphasized importance of the period up to 2020 as “the decisive stage in building a moderately prosperous society,” and said that “all requirements on building a moderately prosperous society from the 16th, 17th, 18th Party Congress must be followed.” Presumably, this would include the goal of doubling income by 2020 established in the 18th Party Congress, though it was not explicitly mentioned here. Then Xi proposed a two-stage development plan from 2020 to the middle of the 21st century, with the first stage from 2020–2035 to see that socialist modernization is basically realized, and the second stage from 2035 to the middle of the 21st century to develop China into a great modern socialist country. However, there are no quantitative details in the plan currently.
- Characterizing the economy as turning from a high-growth phase to a high-quality development stage. The report also mentioned building a modern economic system. Major measures for this include deepening “supply side” reforms (e.g., reiterating key structural tasks such as over-capacity cuts and de-leveraging), strengthening innovation, promoting SOE reforms with mixed ownership, developing a twin policy management framework with both monetary policy and macro-prudential tools, “significantly” loosening market access to domestic service sectors and protecting foreign enterprises’ legal rights in China.
- Other highlights included a proposal to establish a central leading working group on the comprehensive rule of law, although the exact form of the group has not yet been specified. In social areas, Xi highlighted a policy intention to widen the coverage of education, reduce income gaps between low- and high-income groups, strengthen social protection (e.g., retirement, unemployment), reduce poverty and deepen ongoing medical service reforms. He also reiterated that, “houses are for living, not for speculation” and mentioned plans to “speed up the development of a housing system with supply from multi entities, protection from multi channels and combination of rental and sale.”
- The next publication will be the list of Central Committee members on Oct 24, followed by revealing of appointments to the Politburo Standing Committee on Oct 25.
During the speech, Xi demonstrated his usual penchant for expressing his excitement with wildly animated, Jim Carrey-ish facial expressions:
There is literally no way to tell if this man is alive or dead. Good luck finding his “tell” at the table.
The yuan moved lower on subdued EMFX volume before paring losses during the New York session to trade around its 50-day moving average at 6.61:
European shares were up across the board and, in another testament to the persistence of the low vol. regime, VStoxx hit an intraday record low.
Crude fell on the day, although tensions between Baghdad and Erbil are still supportive for prices. “Political risks that are out there are definitely supporting prices of crude oil and you’re seeing buying action right near that $51 level,” Phil Streible, senior market strategist at RJO Futures told Bloomberg. The EIA report showed a build in both gasoline and distillate for the first time since June.
Junk bonds are trading in a laughably tight range this year supporting the contention that everyone is asleep at the proverbial wheel:
The Nikkei is apparently never going to have a down day again – it’s now risen for a dozen consecutive sessions headed into Sunday’s election. It’s the best run since June of 2015:
And don’t worry, the BoJ has your back. “The Bank of Japan should continue to buy exchange traded funds for the time being and it will think about if any adjustments are needed once an economic recovery is sustained for a while,” board member Makoto Sakurai said at a press conference in Hokkaido today.
Oh, and finally, remember that i) this is still going on, and more importantly ii) it’s set to slow down:
Sorry Steve, but that’s the most important driver of risk assets – not your damn tax plan although to be fair, both QE and a tax cut will make your ilk richer.