White House Boiler Room

The Trump crew must be making a fortune trading in their anonymous offshore corporate accounts. You don't think Wilbur Ross wasn't short stocks/long puts when he said US and China are miles apart?  You don't think Kudlow wasn't short when he said yesterday that US and China are a long ways from making a deal, and that Trump wouldn't meet Xi? 

And you can bet they will load the boat with calls before they announce the trade deal.  The White House has turned into a boiler room.  Instead of pumping and dumping worthless penny stocks, they are pumping and dumping the US equity indices, with leverage. 

Back to the market.  That was a heck of a selloff, first gapping down and then running lower on doubts about a trade deal by March 1, and of course, the now routine last hour rally into the close.  As I am writing, we are trading at the levels right after the Powell pop on the dovish Fed announcement last Wednesday.  But bond yields are lower despite the SPX going nowhere since then. 

Bonds have stubbornly been strong despite a near relentless rally over the last 6 weeks.  And many traders are catching on, as I am seeing more fund managers and analysts calling for lower yields this year.  I agree, but I don't expect yields to go lower in a straight line, unless you start seeing SPX go back to a downtrend.  This is about the extent to which the risk parity trade can work, with both higher stock and bond prices.  This is because higher SPX levels than what we saw this week will ease financial conditions and slowly pressure the Fed to back off their dovish talk and regain their optimism about 2nd half economic growth. 

I do expect growth to slow more than most people expect, but this face ripper rally this year globally will probably delay the inevitable recession by a couple of months.  The real economy doesn't matter anymore.  The poor and middle class are constants, in a perpetual state of stagnation.  Its the rich that are the variable here, because their fortunes are tied to the financial markets, and those things are bloated and vulnerable.  When the rich feel the pain, the economy will suffer.  The poor and middle class are pawns in the economic game and are easily sacrificed without any meaningful damage.  More than ever, the rich are what matter in this finance-based  economy.

No strong conviction on the next move, but I am leaning towards a rally next week as based on the data I am seeing, hedge funds are still very underinvested and will support the market on dips for at least a few weeks.