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Weekly: The Existential Threat To US Treasurys
I'm pretty sanguine about the outlook for risk assets but... BUT.
At the end of a fraught week on t
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When the realization hits the rest of the world that a claim on the US government is ‘just a claim on Trump’ then the real trouble begins. It sure feels like Trump’s nightmare strategy is the US against the rest of the world. It’s a frightening idea for the globe and it says bucket loads about Trump that he decided to attack our allies first. This is proof alone that he’s mad. I don’t even need to see the rest of the manure show like his faltering speech, inability to hold a thought beyond 5 seconds and constant narcolepsy to know he’s gone way round the bend and won’t be coming back. Who wants to claim that if there’s any other choice.
When Trump suggested–in his first term–not paying interest on US bonds held by China, it was casually dismissed. “He just doesn’t understand how the bond market works. He’s out of his depth, but don’t worry, one of the adults in the room will patiently explain to him why you can’t do that.”
When he suggests some form of that idea in his second term (and you know he’ll do it. This is a when, not an if.), people will have to take him seriously, and then? Then things get spicy
Will no one rid us of this turbulent priest?
H-Man, right on that equities still have some leg while the day of reckoning with the long end of the TBonds is the hole card. If the bonds smell a rat, the interest pain on 10’s could start sniffing 5% and that would be the end of equities for awhile. The Fed does a pass until June and that is when rhetoric will heat up about “To Late” Powell. Meanwhile this summer is when the vigilantes may surface but no later than the fall.
A “claim on Drumpf” is as good as no claim at all.
Can t’s domestic crackdown survive a bond massacre?
I’m just now getting around to reading this, awake at 1 in the morning while awaiting snowmageddon, and boy did the administration ever make some headline news since you clicked the ‘Publish’ button.
I can name several growing weaknesses in assuming rules based risk free rates. The constant drumbeat ofthe Toddler in Chief pardoning serial conmen and fraudsters for example, should really make you uncomfortable with growing systemic corruption. I see Liz Holmes is making donations to the Ballroom now. Which banks will the Great Toddler bless and which will he seek to crush due to some imagined slight or jealousy? This morning all I am reading is the USDJPY unwinding between the sheets on this cold winter morning.
I think people should lose the ability to be shocked at how stupid this all is, that this diet of tremendous hubris, childishness, will cost the world and think to hedge ahead of time.
Options flows for the week showed quite a bit of nervousness heading into this week. FOMC, Yen carry stress and the Great Toddler announcing Powell’s replacement after the Powell’s presser will be very interesting.
It’s as simple as organized crime extortion via the protection racket. Trump isn’t playing 3d chess, he’s playing Al Capone. Gold is now perfectly correlated with Trump’s Truth Social posts.
Deck Chairs Anyone!
I think everyone underestimates RoW’s ability to make US financial markets ‘uncomfortable’. Debate about falling $ seems to have no end, but is quite simple. Global trade is in $, if trade declines, theres less demand for $. Slightly more exports and dramatically less imports, IS less global trade, esp for the US. Foreign purchases of US stocks were down 33% from 2024. Given US does not save remotely as much as RoW, the less flow to the US, as we have seen results inmassive US underperformance. I’d guess that a significant amount of flows by US investors is created out of debt, margin etc. Djt’s policies and rhetoric has not changed. why would these financial trends change?
Also my bet is he changes from bad cop to maybe not so bad cop this summer, in an effort to change approval ratings going into midterms.