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Like This Irrational Bull Market, Trump's Braggy Market Tweets Have No Downside*


“Bipartisan agreement” isn’t something that’s common these days inside the Beltway, but I think it’s safe to say that if there’s anything lawmakers on both sides of the aisle have come to a consensus on it’s the notion that everyone would be better off if Donald Trump did not have a Twitter account.

As a wise man once mused in these very pages, “why hasn’t Gary Cohn convinced senior staff to give Trump an iPhone with no actual mobile or internet connection that only has Twitter and Fruit Ninja on it?”

Well over the past, let’s just call it 72 hours, Trump has subjected his 43 million followers and just generally the entire world to an unrelenting stream of mind-boggling 280-character ramblings and egregious retweets. Included in those retweets were a series of anti-Muslim videos originally posted by Jayda Fransen, the deputy leader of the far-right group Britain First who is facing charges of inciting religiously aggravated harassment.

His decision to retweet those videos led at least two UK MPs to call for Trump’s immediate arrest if he should decide to show up in the country and also won the President a condemnation from Theresa May, who later discovered that thanks to that condemnation, she had herself become the victim of a presidential Twitter attack (and that assumes the term “presidential Twitter attack” isn’t a complete oxymoron).

As truly ridiculous as all of that most assuredly is (I mean, just let that sink in: actual lawmakers are seriously in favor of arresting the President of the United States if he shows his face in the UK), Trump took it up another couple of notches on Thursday morning when he tweeted the following about the stock market:

Screen Shot 2017-11-30 at 3.18.11 PM

A couple of things you should note about that. First of all, Trump is on an absolute tear with these stock market tweets. In fact, he tied his own all-time, 3-day record on Wednesday:

(Sentiment Trader)

(Sentiment Trader)

The reason he’s doing this is because he doesn’t have anything else to point to in terms of “achievements” since his inauguration and so, he’s going to keep tweeting about record high stock prices in an effort to convince his base that i) record highs on the Dow are somehow meaningful to them, and ii) those record highs are somehow related to his presidency.

On that first point, it seems highly unlikely that Trump’s base is benefiting from the inexorable rally in equities. And even if they are benefiting, financial assets are disproportionately concentrated in the hands of the rich. Here’s how Salient’s Ben Hunt put it in his latest note:

The goodies of a trebled stock market aren’t evenly distributed. Who owns stocks? If we’re talking about households, leaving aside pension funds and endowments and other institutional investors, it’s the rich, mostly. And that household share of the Central Bankers’ Bubble doesn’t increase linearly with wealth, but exponentially, meaning that the really rich own a lot more stocks than the merely rich, so the really rich have gotten a lot richer than the merely rich.

Right. And if Jeff Bezos is getting “exponentially” richer than Steve Mnuchin during this rally, well then you can extrapolate what that means for the likes of Gwynne Abrams, an unemployed nanny in Henderson, Nev., who told the Washington Post how she recently scraped together $78 in nanny money to donate to Trump’s “cause.” At least Steve gets the satisfaction of knowing that even if Bezos is now 333 times richer than him thanks to the Amazon rally, the money Jeff spends is literally signed “Mnuchin”. I don’t think you’re going to see “Gwynne Abrams, Certified Nanny” scrawled on your dollar bills any time soon.

On the second point, there is almost no sense in which the stock market rally is attributable to Donald Trump. If you look at the yield curve, the dollar, and which sectors have led since January, it’s abundantly clear that the exact opposite is true. That is, it’s growth stocks and momo that have led this charge. Virtually everything associated with the Trump agenda has been faded aggressively and the yield curve is now screaming “recession imminent!”

But the ultimate irony here is that this would be the very same stock market that just 14 months ago, Trump called a “false, big, fat, ugly bubble.” He also hilariously suggested (on CNBC) that Janet Yellen was conspiring to “do political things” and “ought to be ashamed of herself” for the market she’s created.

Do note that the reason I use the term “hilariously” there is not because what he said isn’t true. But rather precisely because it is so true as to be self-evident and Trump presented it as though it were some kind of revelation. Or as if he was telling everyone something they didn’t already know. Or as if Ben Bernanke hadn’t written an Op-Ed for the “#AmazonWashingtonPost” six years earlier called “What The Fed Did And Why” in which he explained exactly what was about to happen as follows:

This approach eased financial conditions in the past and, so far, looks to be effective again. Stock prices rose and long-term interest rates fell when investors began to anticipate the most recent action. Easier financial conditions will promote economic growth. For example, higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.

So Trump surely understood that last year (even if he was about six years late when it comes to fully appreciating it). Fast forward to this year and either he’s forgotten to what this market owes its good fortune or else something has changed since September of 2016 which compels him to conveniently forget about the role Yellen, Draghi, and Kuroda are playing in this.

Hmmm. Let’s see. What’s changed since Trump called this a “big, fat, ugly, false bubble”? Oh, that’s right. Trump became President.

And just like the BLS numbers were “fake” before he was President but are, to quote Sean Spicer, “very real now,” the stock market is no longer “ugly” and “false” but rather so real that the gains are reducing the country’s national debt, according to Trump’s own calculations.

As if all of that weren’t absurd enough on its own, Trump is now going to go ahead and claim that if a Democrat had won the Presidency, the Dow would be sitting at roughly 12,000.

How he came to that figure is anyone’s guess, but what I would note here is that he is digging his own grave, because to the extent he’s convinced his base that he is in fact responsible for the latest leg higher in equities, he is going to have to explain to that same base why stocks aren’t actually important to them in the event the market sells off.

Either that, or he’ll have to find a scapegoat. And God help whoever he decides to blame when risk assets do finally correct, which they almost invariably will at some point during his term.

If there’s one person you absolutely do not want to be right now, it’s Jerome Powell, because you’ve got to believe that after Trump has blamed Democrats and after he gets done figuring out a way to tie stock market losses to a CNN conspiracy, the next person in the firing line will be the Fed Chair.

So quick Jerome: deregulate those banks so we can convert all that excess liquidity into leverage and drive this fucker up another 20% lest you should wake up one morning and discover that #JeromeTheJerkOff is trending on Twitter along with #MarketCrash.



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