Tuesday, March 28, 2017

Trump crashes the market not so much

Nothing like failure to make you successful...not

The Freedom Caucus have got their man, and he's screwed!  The lack of effort in passing TrumpCare will make of Paul Ryan and President Trump "Freedom bitches!"  Nothing will pass congress without their support, and they know what they want:  To make government small enough so that it can be drowned in a bathtub (except for the military...).

This will be an intersting week, don't think that Ryan will last very long in his current job.  On the one side you've got the extremist that cannot be budged, they have gerrymandered their district so that they are unmovable and will continue their crazy talk, and on the other side you've got the moderates (as they are), that are squishy in their demands and needs.

Now the big one are trade reform and tax reform followed by the Wall and infrastructure projects.  We must not forget the April 29th deadline to increase the government obligation/ability to continue to pay its bills -- as America's overall debt burden continues to grow and bump against its self imposed limits.

So four big things:

  • Tax reform (e.g tax cuts for the 1%)
  • Trade reform (NAFTA etc)
  • The Wall -- make joke here
  • Trump's infrastructure "project"  (aka don't hold your breath)
  • April 29th debt ceiling 
  • Visa (H-B1 & friends)

First off the GOP is overall against any change to trade agreements, after all it is the to 20% that have gained all the value added of the past 40 years of reform.  it is also very complicated and some of its trade partners (aka Canada) are very very keen on re-opening NAFTA...to Trumps' surprise!  

Tax reform is the big nut, and the difficult one because its all about money and who's going to pay. Importers see the writing on the wall, those who benefit from massive tax savings (the ethanol lobby) and the lawyer/accountant lobby are certain to want to keep their loopholes!  This will complicated the process because all those involved have a lot of money, and Congress needs a lot of money for its elections.  Not entirely clear that Congress or Trump has the attention span...

The debt ceiling is the best way the Freedom caucus has to control Trump and his friends.  They can force certain things that otherwise would make Trumps' day.  My guess is that his infrastructure plan is DOA -- he will get a few billion for his wall (eg study the wall and how to build a wall -- insert joke here).  There is simply no way he's going to get anything else -- even if America infrastructure are crumbling -- its simply not a priority for the Freedom caucus.

the H-B1 visa is a big issue, as more and more non-Americans leave the country (they have no choice), but tech companies are nimble and will relocate elsewhere.  Rumors are that the big boys are already told all non-Americans that all jobs will be in a non-US location; the implication is that foreign campus will grow much larger -- and will suck increasing resources (yeah Canada).

As for the market, it got a little hot and bothered a few days ago when there was some glimmer that the health care act would pass, but it all quickly faded to irrelevance.  The best is that Trump will do absolutely nothing -- that's change wall street can get behind (especially if Dodd-Frank is abolished and Wall Street is allowed to do everything it wants -- unchecked -- and then get rescued.  the S&P is sitting 2343 -- just 60 off its all time record.  The market is still pricing perfection, and an administration in revolt with itself is maybe the best possible outcome.



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