“La sabiduría de la vida consiste en la eliminación de lo no esencial. En reducir los problemas de la filosofía a unos pocos solamente: el goce del hogar, de la vida, de la naturaleza, de la cultura”.
Lin Yutang
Cervantes
Hoy es el día más hermoso de nuestra vida, querido Sancho; los obstáculos más grandes, nuestras propias indecisiones; nuestro enemigo más fuerte, el miedo al poderoso y a nosotros mismos; la cosa más fácil, equivocarnos; la más destructiva, la mentira y el egoísmo; la peor derrota, el desaliento; los defectos más peligrosos, la soberbia y el rencor; las sensaciones más gratas, la buena conciencia, el esfuerzo para ser mejores sin ser perfectos, y sobretodo, la disposición para hacer el bien y combatir la injusticia dondequiera que esté.
MIGUEL DE CERVANTES Don Quijote de la Mancha.
21 de agosto de 2017
Markets Are Losing Their Patience With Trump
Last week brought “good” news, at least as far as
markets are concerned, and poor performance. This is telling.
by David Ader
Markets are starting to crack. Photographer: Drew Angerer/Getty Images
I have been recommending a defensive stance in equities
since at least February, and truth be told, that hasn’t worked out so
well. The S&P 500 Index has returned 4.3 percent since then,
including reinvested dividends. I’m not ready to throw in the towel.
What
compels me to keep at it is the behavior of stocks at the close of last
week -- after the big gain in University of Michigan’s consumer
sentiment index, after the European Central Bank sounded a more dovish
tone, after U.S. retail sales rebounded with strong upward revisions to
past months, and after the ouster/resignation of chief strategist Steve
Bannon from the White House.
After all that, you would think
stocks would have done something other than close down for the
week. Interestingly, the big technical damage came on Thursday despite
the White House saying rumors that National Economic Council
Director Gary Cohn would soon resign were false. Perhaps that last bit
gave stocks a small boost, but they certainly were goosed with the news
that Bannon was out. None of that lasted, of course. So here we have two
bits of ostensibly “good” news about the Trump administration, at least as far as markets are concerned, and poor price action. This is telling.
Let me explain. Gary Cohn is one of the leaders on Trump’s
tax reform, hopes of which are already coming into doubt based on the
friction between the White House and, well, everyone else. He’s a
business-friendly guy who is also a leading candidate to replace Janet Yellen as Chair of Federal Reserve when her term expires in February.
What
I think last week taught, especially in the wake of Bannon’s departure,
is that the markets are losing their already diminished optimism for
the Trump administration, and that raises bearish risks for risk assets
in general. Up to now, people like Cohn and White House Chief of Staff
John Kelly have kept hope alive that there were enough adults in the
room at the Oval Office. People like Bannon and former communications
director Anthony Scaramucci, who was hired and fired within the space of
11 days, were deemed something else.
I’m not saying there haven’t
been a lot of antics to concern markets, but I do think that the market
have given Trump a pass in the hopes that his fiscal stimulus and tax
reform agenda would ultimately win out over the negatives. The exit of
Bannon should have offered something about Trump’s inner circle
apparently getting it together. It didn’t.
Granted, after a week that saw him forced to shut down his
two business councils before all the CEOs involved resigned plays into
it. And to equate neo-Nazis, KKK paraders and white supremacists with
pretty much anyone is an affront to even those whose overriding agenda
is lower taxes. My point is that I think last week marked a turn in the
market’s tolerance of the Trump administration. The exit of one of its
biggest extremists and the lack of a sigh of relief reveals that.
A sideshow to this big show -- the circus reference is deliberate –- comes in the form of relatively poor seasonals for stocks, which is a technical matter having nothing to do with Trump. A second sideshow is the behavior of Bitcoin.
I’ll admit that as much as I try to understand Bitcoin, I
still don’t get it. It still seems to be to be a vehicle for drug
dealers to transfer money and others to avoid taxes and scrutiny and I
don’t get the mathematical creation. What I can understand, however, are
charts, and if anything looks like a late cycle bubble, it’s this one.
It seems hard to believe, but Bitcoin now has a $69.7 billion market
value. I’ve overlaid Bitcoin with the Nasdaq Telecom Index going back to
2000 for a curious comparison.
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