Have Genius, Will Travel.

Well needless to say, this was not a particularly inspiring week.

Or actually, that’s not entirely true. It was a “tremendous” week if you enjoy watching raging dumpster fires and/or marveling at slow motion political train wrecks. It’s impossible to communicate just how poorly the last five days have gone for the Trump administration – we seem to be back to the situation we were in late last summer when every week could be summed up as follows: “this was the worst week for the Trump administration since last week.”

The tariff boondoggle was the most important event for markets, but playing out in the background here is an increasingly aggressive Robert Mueller who seems to be zeroing in on Kushner, which of course is the logical next step. We’ve always said the special counsel will start from the outside of Trump’s orbit and move in with Kushner being the last domino to fall before “Bobby Three Sticks” finally turns the screws on the President. Meanwhile, Jeff Sessions seems to be taking something of a stand against Trump and one certainly imagines that the Alabama stalwart wasn’t amused when America learned that his nickname in the White House is “Mr. Magoo.” Also, Hope Hicks is out, and McMaster appears to be on the way out. Gary Cohn is reportedly fed up (again), this time by the tariff decision which we suppose is at least better than the circumstances surrounding his last spat with his boss (in late August, after Trump sided with Nazis following Charlottesville on the way to regaling reporters with tales of Thomas Jefferson’s slaves at a press conference that was ostensibly called to discuss infrastructure).


Of course to let Sarah Huckabee Sanders tell it, America is thrilled with the chaos.

What can you say?

In addition to the tariff news, markets were also rattled by Jerome Powell’s testimony on Capitol Hill which went ok on Thursday but not so well on Tuesday. Have a look at this:


So that’s 1,600 Dow points. Here’s S&P futs since Trump surprised everyone on Thursday:


By the time it was all said and done, the damage wasn’t horrendous, but this isn’t exactly inspiring either:


Retail investors looking at that SPY they bought last week:


For 10Y yields there was Powell and then there was the safe-haven bid that accompanied the tariff news:


Here’s USDJPY on the week. At one point on Friday, it fell to 105.25, a fresh low since since November 2016. The moment Kuroda’s “exit” comments hit the tape and the moment Trump’s first predawn trade tweet was posted are clearly evident:


Here’s Deutsche Bank on Kuroda’s “exit” comments:

The exact nuance of what the Governor said is not particularly relevant. What matters is that for the first time Kuroda is explicitly downplaying the open-ended nature of the BoJ’s QE program and crucially displaying a willingness to discuss exit in the face of an already materially appreciating yen. The implicit signaling is at best tolerance for yen appreciation. Note this is the broader message from Japan — finance minister Aso’s comments overnight offering no pushback either.

The dollar managed to eke out a second consecutive weekly gain:


Here’s Deutsche again with a little color:

Our view is that this is a “soft dollar” policy by proxy.

Trump’s decision finally adds flesh to the bones of what has so far been protectionist rhetoric in name only. Crucially, there are far more important decisions coming up on China abuse of intellectual property under section 301 of the US trade act, so there is plenty of potential for escalation. Tariffs are a negative supply shock that increase inflation but lower growth, a bad mix for a currency.

This was the worst week for the loonie in a year:


Tough stretch for crude as WTI fell some 3.6% on the week:


European shares plunged on Friday. And it’s a fucking shitshow at this point with the Dax and the Stoxx 600 near 13-month lows:


As Bloomberg recounts, “the Stoxx 600 [has] wiped out all of its rebound from the February rout [with] all 19 industry groups falling Friday; miners lead losses with a 3% retreat.” It looks to me like Friday was the worst day for French stocks since Brexit:


Of course Europe is now threatening to retaliate if Trump goes ahead with the tariffs and that’s not helping sentiment.

We’d go on, but frankly no one is listening at this point. It’s Friday afternoon so we’ll just send you off to the weekend with the following picture of Wilbur Ross (which is not Photoshopped) who wants you to enjoy some chicken noodle soup and American-brewed horse piss on Saturday…


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5 thoughts on “Have Genius, Will Travel.

  1. If we don’t have adequate domestic steel production we might run a little short of tanks, trucks and cannons (among other items) in a protracted war.

  2. Let’s talk Steel and Trump!

    October 11, 2016: https://www.pri.org/stories/2016-10-11/trump-vows-take-chinese-steel-then-buys-it
    During a Debate: “We have to bring back our workers,” said Trump. “You take a look at what’s happening to steel and the cost of steel, and China dumping vast amounts of steel all over the United States, which essentially is killing our steel workers and our steel companies.”
    Clinton picked up the thread, saying, “China is illegally dumping steel in the United States, and Donald Trump is buying it to build his buildings, putting steelworkers and American steel plants out of business.”

    October 4, 2016: http://thehill.com/policy/finance/299293-steelworkers-livid-over-report-trump-bought-chinese-steel-aluminum
    On Monday, Newsweek released an investigative report concluding that in at least two of Trump’s last three construction projects he purchased steel and aluminum from Chinese manufacturers, including for his Las Vegas hotel, which opened in 2008.
    Trump has campaigned heavily in states like Ohio, Michigan and Pennsylvania where he has placed blame on Hillary Clinton and her support of trade deals like the North American Free Trade Agreement (NAFTA) and China’s entry into the World Trade Organization as the reason why workers have lost their jobs.
    Gerard called the Republican candidate’s statements about foreign trade and the need for better job creation in manufacturing “hypocritical” and “fundamentally dishonest.”

    October 12, 2016: https://aflcio.org/2016/10/12/six-facts-donald-trumps-use-chinese-steel
    The report, published last week, showed us yet again that all Trump does is run his mouth and pad his pockets. The Newsweek report found Trump used cheap Chinese steel and aluminum in two of his recent construction projects and went to great lengths to cover his tracks.

    Rather than take up more column space here, just type these words – trump purchased his steel from china – in the Google search engine – pages and pages and pages on this subject. This man is a total CROOK. Quoting an AFL/CIO comment – “all Trump does is run his mouth and pad his pockets”.

  3. Speaking of Photoshop, thanks for the great picture of our stable genius. That one had me laughing. The Powell-Yellen picture from yesterday had me disturbed.

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