While Markets Burn

While the modern day Nero golfs, world market's burn, and like the original emperor, he doubles down on his tariff torture for the foreseeable future.

Throughout most of Nero's reign, he was associated with unrivalled extravagance, tyranny, debauchery and murder. For the moment, the murdering comes in different forms. Nevertheless, there appears to be a few parallels.

The doubling down is also a function of Trump's character. He is a classic narcissist as defined in the following profile:

https://www.aplaceofhope.com/what-are-the-five-types-of-narcissism-and-how-do-they-affect-different-types-of-relationships/

All of these characteristics are on display in Trump's current actions toward the rest of the world. Moreover, his overestimation of his competence, compels him to not back down from his terrible decisions (otherwise known as the "Dunning-Kruger Effect").

However, my earlier supposition still holds - and it is now part of his current mantra - that Trump's intension was essentially to force countries to "negotiate". According to recent statements, all the affected countries are "lining up" to make a deal (all of them except the penguins).

While the supposed drive to negotiation is happening, the tariff method is still a bad decision.

If we pause for a moment to consider the effect on the stock market, the other line forming is led by the big guns of the money business and companies heavily involved in stock trading. The likes of J.P. Morgan, BlackRock, Pershing Square Capital Management and others have been knocking on the Oval Office door (lightly of course, so as not to piss Trump off) to suggest that he has to change what he is doing. Like every economist in the world also warns, he is warned that he will regret driving up inflation and increasing costs on American consumers.

Trump's character will not allow him, at least for the moment, to back down. Besides, he does not take advice from anyone who does not agree with him.

Consequently the stock market is having a difficult time reading the direction that the country will ultimately take.  One thing I learned about the stock market years ago, is that the this beast called "the market" operates primarily on expectation.  Stock traders are driven by that expectation and try to "get ahead" of events, whether they are buying or selling. Plain and simple, stock traders want to be on the right side of whatever the market swing will be.

Right now, and for the past week, the market has been up and down like a yo yo because all the traders are trying to predict what will happen based upon any tidbit of information that comes from the oval office. When there is a different utterance, they reverse course. 

Most stock traders are just "big swinging d#$ks" (i.e. cocky sons-of-a-bitches) in the words of Michael Lewis, author of the Big Short. I would add that they are skilled reactionaries - and their herd-like knee jerk reactions to any perceived calamity will move the market up or down. It happens all the time, especially with commodities like oil or grain or gold. in these well known volatile market segments.

What is different about this situation is the uncertainty.  That word is used every two minutes by anyone discussing what is going on in the market at present. Of course, uncertainty drives traders nuts (and everyone else) because, even as a bunch of big swinging you-know-what, they can't get ahead of the market. 

Every person with an ounce of common sense, as well as educated individuals who study economies and the stock market agree that the tariff move is madness. However, when we consider the strategy in the context of Trump's character and background it all makes sense. After all, this is how he operated in real-estate - changing the rules of the game, mid-game, putting people on their heels and then grinding them into the dirt with his "deals".

In my view this is all Trump wants - aside from his twisted satisfaction of being the centre of attention.  All the countries he has targeted are indeed lining up to deal with him.  He can now say he drove them to the table and, in his bombastic manner, claim will get a better deal for America.  That will be part of his idea as a "win".

However, this is where it will fall apart. Countries are not like the contractors or opponents he dealt with in real estate and who he can drive into bankruptcy. Countries are much more sophisticated and have more options and resources at their disposal. What will also accelerate the unravelling is that there are not enough people loyal to Trump to spearhead the hundreds of negotiations that will pile up in front of them. As time passes, his plan will be exposed as poorly conceived and poorly executed.  Inflation will be felt by his constituency and his popularity will continue to sink.

Although the chicken littles of the world are portending total global economic doom, other events will drive Trump back from the brink of economic Armageddon.  There will be a reversal of course once a few minor wins can be trumpeted from the negotiating table and once the full effects of tariffs are felt by the public. Then he will claim that he saved the world from economic catastrophe.

Time will tell if this assessment is correct - and the time in which it will all transpire cannot be predicted with any certainty. Certainty will emerge slowly, when there is clarity and that will require the above noted events to run their course.

In the meantime, don't bail out of the market and run for the exits. Trump will have burned you, like Nero allegedly burned Rome.