• Ashok Dhillon

Markets Abandon Trump – For Viral Reality (#114)

The myth that Donald J. Trump is some kind of a business and financial savant was busted long ago, except in those circles in which he is also the ‘Chosen One’ and a ‘Messiah’, sent by God directly to save America from the ‘Infidel’ Left.

But in the last few weeks, a virus, from Wuhan, China no-less (an ‘officially’ Godless-Country), wiped out any vestiges of intelligence that may have lingered in the public’s mind regarding the Chosen One, and the unquestioned ‘Dear Leader’ to Fox News and the Republican Lawmakers.

And this is in spite of his multiple out-ed scams, his fraudulent charities (shut down by Court Order), and various schemes of old, like his fake University (had to pay settlements to scammed students), and his many bankruptcies (6 at last count), and the determined hiding of his tax returns, so that his true net-worth (probably considerably less than he states) was never ever found out.

But for all the conmen out there, he is ‘God of Cons’ (he became President of the USA after all!). Those people and the US evangelicals still believe in him, although some Republicans are also having second thoughts, considering his latest performance - but the Financial Markets no longer do.

Trump’s ‘Address to the Nation’ from the Oval Office, setup to calm the seriously rattled Stock Markets, and to reassure the Nation, in turmoil from his administrations chaotic response to the first real crisis it has faced, had totally the opposite effect.

Trump’s usual discordant message laced with self-aggrandizement, opponent-bashing, and confused and contradictory policy response, drove the Market ‘Futures’ towards ‘Limit Down’ (the worst case scenario) even as he spoke.

And the 12th of March (the morning after the Address) the Markets had one of their worst days in history.

It was so bad that the New York Fed pumped 1.5 Trillion (yes Trillion) dollars into the financial markets to try and bring some semblance of order to the Markets, and pledged to up the purchase of bonds.

In other words the Fed is going ‘Full QE’ (Quantitative Easing), as during the 2008 Crisis, and the Markets still closed at record lows (the Dow closed -2353 points down, one of the biggest one day drops ever!).

It takes some kind of a special talent to spook the Markets that badly.

And it’s not over yet, in spite of historic plunges, tomorrows futures are pointing to more selling, in all asset classes, including gold, bonds and crypto-currencies.

It seems Investors have lost all faith and just want out – into CASH!

Trump has been taking credit for the buoyant ‘Record-setting’ Markets ever since his election, even though the charts show a ‘Bull Market’ started 11 years ago.

Most market players ignored his personal credit-taking because they were happy making money from the unbroken Fed & Central Bank largesse that had them making ‘Easy Money’ with little to no risk, with their backs covered by the Fed and the other major Central Banks (of all the biggest economies) since 2009.

But now came a virus (according to Trump a ‘Foreign’ one - as if viruses had Nationalities), and totally busted that convenient, happy money-making trend, and for the first time Trump faced a real economic challenge that required real leadership devoid of politics and ‘bull shit’, and of course Trump flubbed it miserably, as he just couldn’t help himself. And this time all his glaring weaknesses showed.

For Trump, it was finally ‘The Emperor has no clothes on’, moment.

Where ever he went in the past few weeks of the Corona Virus Crisis, he rambled about irrelevant issues (irrelevant to the Corona Virus Crisis), at times incoherently; and as is his ‘style’, he lied, obfuscated, went totally off-topic, played partisan politics, and in short, rambled and made a general clown of himself.

In the time of great national need for real leadership, Trump came up real short (way shorter than his ‘Mini Mike Bloomberg’ insult) and the Stock Markets took note and punished him for it by panicking and tanking.

The reasons for the panic are real enough.

Apart from China (the World’s second largest economy) taking a massive hit from the Corona Virus, with South Korea, Australia and Japan following, and Italy being in total shut down, the viral infection has reached and is spreading rapidly on every continent except Antarctica, in estimated 113 countries.

Its impact is dramatic and unprecedented, as country after country, entire states and cities declare emergencies, and shut down substantial numbers of their normal activities to try and slow the spread of the infections.

The impact of all this is most extensively felt by the travel and related industries – airlines, tourism, cruises, hotels, rental accommodations, rental cars, credit card use etc. - but the adverse business impact is rippling outwards in ever widening circles till it’s effecting all sports events, conferences, concerts, public gatherings of every kind, from museums, to galleries, shops, restaurants, schools, universities, factories, offices, and even the late night television shows. Such a curtailment in normal economic activity is likely to tip the World in to a global economic recession.

When one thinks of all the related activities to the above list (in no way complete), the impact of the Corona Virus on all economic activity is simply mind-numbing.

The financial markets, and the punters in them, finally woke up to the reality of it all, and watching Trump do his usual clueless shtick in response to a potential global catastrophe, it broke their nerve, and their faith, and they ran.

The plunging markets in almost all equity classes brought on a potentially severe liquidity crisis akin to the 2008 Financial Crisis, forcing the Fed and the other Central Banks to respond with emergency measures, to try and stave off further panic and further damage.

How successful they will be this time to control a collapsing global economic order remains to be seen, but with the global debt at record levels, and interest rates being already close to zero, and in the negative territory in the EU and Japan, there seems to be very little room for them to maneuver in this time around. And although this too shall pass, but before it does, its most likely there will be significant bloodletting both in the World Economies, and in the Financial Markets.

During all this time, Trump did his vaudeville act, first denying there was any problem at all, then blaming it on the Democrats, and of course on ‘Fake News’, then declaring he and his administration were doing an outstanding job at dealing with it, the best ever of course, and that the Corona Virus testing fiasco in the US was ‘perfect, like the letter and the transcript’ (hearkening back to the Ukraine fiasco), and that he has a special talent in understanding such an epidemiological crisis, his uncle was at MIT, and was a Doctor …

And so on and so forth.

The financial markets weren’t buying it, at all - and so they sold instead, with a sustained vengeance.

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