Listen, Donald Trump (and also a tearful Dennis Rodman), just wish everyone would give peace a chance on the Korean Peninsula, ok?
I mean, stop looking for ways to malign Trump for doing what no other President has been willing to do when it comes to the threat of dangerous regimes with nuclear weapons.
It would be one thing if there was some recent historical precedent for a comprehensive plan of action when it comes to how to deal with ensuring that rogue nations (like, I don’t know, just pulling one out of a hat, Iran) don’t have nukes, but there’s not. No one has ever come up with a multilateral agreement for how to handle those type of situations, let alone implemented one, and even if they had, it’s not like Trump has tried to dismantle it. To hear critics tell it, you’d almost think Trump pulled the U.S. out of a carefully negotiated, multilateral nuclear disarmament treaty last month or something.
Also, everyone knows regime change is a terrible idea, so what are our options in North Korea, really? There are no good ones and Trump understands that which is why he would never – ever – put some batshit, wingnut warmonger who advocates for regime change in his inner circle.
Finally, what’s with all of this talk about Trump having given Kim exactly what he wanted and gotten exactly nothing in return? I mean did you people not read the highly technical, very specific language in the document? If you did, you’d know this is far more ironclad than any hypothetical multilateral agreement with Iran which definitely doesn’t exist and which Trump, who is concerned about nuclear proliferation, would have under no circumstances tried to rip up.
Oh, and Jesus Christ, people are acting like this thing in Singapore was some kind of publicity stunt and/or photo op for Kim and Trump with no real pretensions to significance. Why anyone would get that idea is beyond me, but to hear the libs tell it, you’d almost think Dennis Rodman showed up and started crying on live television or something.
So yeah, give peace a chance, why don’t cha.
And give quiet a chance when it comes to Fed communications, because Jerome Powell seems like he’s going to be a bit more caustic than Janet Yellen. That means that paradoxically, less is more when it comes to transparency. I’m still in the camp that thinks the more Powell talks, the less clear the message will be, unless that message is “data dependent come hell, high water or low EM” and that, in turn, means the more inclined traders will be to key on every econ print. Given that, I’m not sure this is a great idea (via WSJ):
Federal Reserve Chairman Jerome Powell is considering holding a press conference after every policy meeting rather than every other meeting, and his appearance Wednesday could help him decide whether it’s worth the trouble.
At issue for the Fed: Since beginning press conferences in 2011, the central bank has fallen into the pattern of making major policy changes only at meetings followed by a news conference.
The tactic has helped the Fed leader communicate its policy changes in more detail than its heavily scrutinized, jargon-filled postmeeting statement. But the practice has lulled markets into thinking the central bank won’t act between press conferences.
“We’ve evolved to a place where the market only thinks we’ll move if there’s a press conference,” Atlanta Fed President Raphael Bostic said in an interview earlier this year. This is “a sign that what we’re doing right now isn’t working,” he said.
To fix the problem, the Fed could raise interest rates at a meeting without a press conference, said Mr. Bostic. Or it could send Mr. Powell out to face reporters after every meeting. “It’s important that the market believes that we could potentially move at any meeting that we have,” he said.
Hmmm. Ok. I’ll leave an esoteric debate about the maintenance of the Fed-market two-way communication loop for another post, but suffice to say that article was enough to move the dollar when it hit:
Here’s Jan19/Feb19 Fed funds futures spread (huge volume in the bottom pane):
Inflation hit a six-year high last month:
Small businesses are fired up about expanding:
But one business that thinks maybe downsizing is a better idea is Tesla, which is cutting a bunch of jobs while Elon Musk sells flamethrowers and plans Mars colonies.
TESLA TO CUT ABOUT 9% OF JOBS ACROSS COMPANY
while he sells flamethrowers
— Heisenberg Report (@heisenbergrpt) June 12, 2018
He’s sorry:
Difficult, but necessary Tesla reorg underway. My email to the company has already leaked to media. Here it is unfiltered: pic.twitter.com/4LToWoxScx
— Elon Musk (@elonmusk) June 12, 2018
U.S. stocks drifted around ahead of the Fed and Treasurys were steady as this week’s supply was digested with relative alacrity. There was flattening seen following the WSJ article excerpted above.
Generally speaking, DM equities are waiting on the Fed and the ECB, but there’s still plenty to talk about in EM FX.
Argentina stepped back into the market on Tuesday after watching the peso weaken to fresh lows after the IMF deal effectively signaled that intervention around 25 would cease or at least cease to be an everyday thing. Here’s Bloomberg’s Sebastian Boyd:
Central bank President Federico Sturzenegger said the bank would return to a normal FX regime, abandoning its $5 billion wall, though reserving the right to intervene in the case of market disruption. Guess how long that lasted. *ARGENTINA CENBANK SAID TO SELL USD IN FX MARKET TO SUPPORT PESO
That’s right, the bank is said to be back in the market and apparently defended 26, the level the peso slumped to yesterday. So it looks like we’re back to a dirty float.
For their part, Credit Agricole says the peso should move lower to 28, before ultimately stabilizing. “The [IMF] package is sizable and should help to contain any external shocks, even though the global market situation should be monitored closely,” Italo Lombardi wrote.
And so, ARS rallied on the day with the central bank defending 26 now, apparently. Here’s some hopefully useful perspective:
Note this from Robin Brooks:
Even if the Peso is near fair value, EM currencies overshoot during BoP crises. Chart shows our REER for the Peso (black line) through today with the average REER path for EMs during BoP crises. EM currencies fall around 30% in real effective terms. ARS is down 20% through today. pic.twitter.com/zX941hstAg
— Robin Brooks (@robin_j_brooks) June 11, 2018
Staying in EM FX land, the BCB tried again to relieve pressure on the real on Tuesday with an additional auction of 30,000 FX swaps after some morning confusion. You’re reminded that this has failed multiple times recently, including just prior to last Thursday’s harrowing plunge towards 4.00. They finally got shit under control on Friday, promising to flood the market with dollars this week, but today’s intervention was faded:
Apparently, there are questions about whether BCB is going to live up to their promise from last week although it’s possible they’re holding onto their ammo to combat any post-Fed/post-ECB BRL weakness.
Oh, and the lira is still fucked by the way, which is something that everyone should have known last week when analysts were all enamored with a rate hike that only seemed impressive in the context of Erdogan letting it happen (and that’s a low bar, right? I mean what kind of rationale is that? “We think the prospects for the currency are good because it turns out the central bank is allowed to hike occasionally“) Well, here you go fuckers:
“Unless there is a prolonged commitment to a tighter policy mix after the elections, we are concerned that the adjustment that the Turkish economy needs will be imposed by the financial markets via pressure on the currency and market interest rates,” Nomura says, to which I would channel Neal Page (Steve Martin):
Hilariously, the CBOE Emerging Markets ETF Volatility Index is sitting at a 20- week low:
Finally, for your moment of zen, here is that moron Peter Navarro apologizing for condemning Justin Trudeau to hell over the weekend:
White House trade official Peter Navarro apologizes for insulting Canada’s Trudeau https://t.co/2jhDcBTadq pic.twitter.com/a8MxQza6rd
— The Wall Street Journal (@WSJ) June 12, 2018
