February 6, 2017

Cancel our cable TV subscriptions because reality is really more entertaining these days and there hasn’t been a day without entertainment just reading the news since Trump took office with fake news taken to a new high in this week’s Bowling Green Massacre, cited by Presidential advisor, Kellyanne Conway.

Into the first week of the Chinese lunar new year, the year of the Fire Rooster, and pandemonium has struck.

We need not have to stretch our imaginations too far to see the mass chaos and panic in the US government right now as officials, airports and airlines struggle to cope with President Trump’s immigration executive order that does not just affect poor refugees but other “aliens” living and working in the US, with Google ordering their US based non-citizen staff not to leave or face the risk of not being able to return. Lives in limbo as the US prepares to build the “promised wall” on the border of Mexico, threatening livelihoods and us in Asia preparing for a glut of cheap avocados if the border tax does come about even as Mexican restaurants in the States prepare to raise prices or shutter.

Panic for compliance officers on Wall Street because of the executive order to review Dodd Frank? To tear down the protection that keeps financial experts from ripping clients off, and tempering risk-taking behaviour in banks. Panic for foreign exchange markets with accusations of currency manipulation directed at the 3 largest economies —Japan, China and most recently, Germany.

Did we not sing along to Barbara Streisand’s Send In The Clowns for 2017? Because “we can always count on Trump for the next laugh as we bury ourselves deep under the duvet hoping everything would be alright”.

Let’s Not Be Too Cocksure

Hasn’t the year of the Monkey taught us anything?

We are monkeys in a marketplace that is a collective of monkeys that, while we cannot stop, we can tame ourselves enough to know when they will go wrong. Monkeys have proven to be better stock pickers for that frenzied rally but Chicken Little has come to town.

Source: Disney World 24

The animated film version of Chicken Little has Chicken Little as the hero whose fears were justified and in a sense, it does look like rich people are cocksure something bad is about to happen which is justified after reading that Trump’s impeachment odds have growing, along with talk that he would not complete his term, which was also incredibly predicted by a blind Bulgaria clairvoyant 20 years back.


Political upheaval in the US is making us cocksure that Trump will stumble as national defiance rises up to his executive orders that are coming daily, with 2 old ones deleted for every new one decreed. Yet, in the face of frothy valuations in stocks, bonds and currencies, many are choosing to trade from the safe side, counting down the 1,400 odd days left in Trump’s tenure.

Thus it is highly amusing and not at all surprising that Chicken Little is having a field week in the markets as the USD weakened, Gold rallied, stocks rose along with commodity and bond prices as the economy continues to surprise, closing the week with amazing job numbers out of the US even before Trump starts his work on the US economy, giving the rest of the world the jitters.

In our last post, we noted that the bank strategists and fortune tellers are concurring on 2017 with Bank of America calling for an Icarus trade where stocks will surge 10% in a parabolic “melt up” before a “mirror melt down” later in the year, as the geomancer called for “optimism to continue to bring confidence to buy in spring and summer, to be extinguished by autumn and winter”.

Let’s Not Ignore The Chicken Little Story

Let us not forget the original Chicken Little folktale was one that warned about the dangers of mass hysteria and paranoia, the moral of the story being not to believe in everything we are told or read about.

Let us not panic at the executive orders that are jamming up the US government or follow the Trump slip-ups or downs too closely, just to deny ourselves the opportunity to make money in the weeks ahead.

Taking stock of reality, everything about Trump so far is inflationary. Clamping down on immigration and America First jobs creation will only drive local wages higher, border taxes and a weaker USD will import inflation, and this does not even take the Federal Reserve into the picture because last Wednesday’s FOMC has been interpreted as dovish.

Japan is doing her part too, reportedly preparing a package to help create 700,000 US jobs, possibly to atone for currency manipulation, to justify and vindicate herself? Tweet results expected—10 Feb on Prime Minister Abe’s official state visit.

Everything about Trump’s plans will be inflationary, even when we haven’t got a single tweet about the infrastructure fiscal stimulus yet, mainly because the President cannot “executive order” those?

The global Citi Inflation Surprise Index is at a 5 year high into lunar new year and shows no signs of backing off with Bank of England Governor Mark Carney predicting that U.K.’s inflation target of 2% will be hit this month with more to come when Brexit officially begins?

Source: Bloomberg

We cannot expect global retaliation in trade wars just yet, because trade wars have not officially began and we are not sure how Trump intends to carry through all those threats because executive orders are usually not enough to start trade wars.

There is not even enough reason to start a real war anytime soon for want of provocation.

No. It is all part of political dramatics and I confess I have not watched a single episode of House of Cards to say this. Because we cannot lose our heads over the idea that politicians are out to start wars or to make enemies.

The Fowl Play—Let’s Play For Facts

  • Play for reality—economic surprises indicators are all UP. Europe and Japan are swinging back to growth.

Bloomberg Citigroup Economic Surprise Indices

  • Inflation surprise index is UP (see above), led by Europe and Japan and we are looking at even higher prices with the Trump “border tax”.
  • US wages will be going UP, on migrant labour shortage and other America First policies.
  • Offshore profits are going UP (with USD weakness and tax holiday).
  • Financial conditions will continue to improve if the Dodd Frank Act gets watered down.
  • Trump will start tweeting about the fiscal policies in time and Chicken Little will panic again.

Until then, Chicken Little euphoria will hit with the MAGICAL HISTORICAL** SUPERBOWL win by the Trump-backed Patriots even if the 80% accurate Superbowl Indicator says that a Patriots win is bad for the S&P 500.

** first overtime in Superbowl’s 50 year history


Aren’t we glad that central bankers do not look at this indicator for their decisions to taper QE and rate hikes?

Yes, let’s ignore the Chicken Little Pandemonium in the markets. Just play for the facts and the fact is that it is all looking good and inflationary for the developed world—America First is good news for them, for now.