Trump Panic Hits Wall Street

Donald Trump continues to bloviate about all the miraculous things he would do for the American economy - giving almost no specifics, of course - and those brainwashed by Fox News, Breitbart and other "news outlets" that create a fantasy world detached from objective reality, buy the lies hook, line and sinker.   Meanwhile, with Trump seemingly doing better in the polls, Wall Street and the international financial markets are going back into panic mode.   Equally frightening is the significant market drop anticipated should Trump win on Tuesday.  A piece in Salon looks at what those who really know about the economy and economic trends think of Trump.  Here are highlights: 

Investors are bracing for what could be the most volatile post-election trading day ever.

According to a Credit Suisse analysis of index options (financial derivatives that allow investors to bet on the future value of a market index), the benchmark S&P 500 index of America’s biggest companies could rise or fall by 3.3 percent on Wednesday in reaction to the election results. Such an election-related swing in the market would be unprecedented, well above the average 1.1 percent move that follows a normal presidential race. Other estimates are less sanguine: Citi analysts warn of an immediate 5 percent drop should Trump win the election. Others suggest the decline could be even greater.

As Election Day approaches, anxieties are running high, leading to one of the longest selloffs of stocks in the S&P 500 index since the financial crisis eight years ago. Friday’s upbeat monthly U.S. jobs report, which showed robust gains in both hiring and wage growth, helped to lift U.S. markets during intra-day trading, but the S&P 500 ended Friday down a slight 0.17 percent, its ninth consecutive decline and the longest losing streak since 1980.

The U.S. election jitters aren’t limited to the U.S.: Asian and European stock markets fell Friday, too, while the benchmark Euro Stoxx 600 shed 3.5 percent this week, touching its lowest level since July.

Safe-haven bets — low-yield, highly stable investments — have risen, too. U.S. Treasury funds gained $2.3 billion in five days, the largest influx of cash since the first week of July following the Brexit vote, as investors fled volatile markets to the safety of low-yield U.S. government debt. On Friday, the price of a troy ounce of gold was up about $30 from Monday (gold prices tend to rise when investors are on edge).

By some measures, Trump’s bold propositions — such as starting trade wars with China and Mexico and crippling the U.S. budget with massive tax breaks for the rich — would be a disaster for the U.S. and global economies. 

Let's be honest.  Those supporting Trump are really doing so because they want race relations and many social issues to revert back to the 1950's status, a time when white privilege was unchallenged and women, gays and many others were second class citizens or worse.

Economists: A Trump Win Would Tank the Financial Markets

As some - who in my opinion are delusional - continue to claim that Donald Trump is a good businessman, there's one test that they utterly ignore: Trump's numerous bankruptcies and the fact that no American bank will make a loan to him and/or his entities. Trump has gamed the system, screwed over lenders and bond holders and other investors with abandon, always making sure that he flees the sinking ship, saving himself as others perish financially.  It's as if he were Sir Cosmo Duff-Gordon leaving the Titanic in a lifeboat with only 12 people in it, he and his wife's luggage included, leaving dozens to die who might have lived had the lifeboat been even remotely filled to capacity. The financial markets and bankers know Trump well, and economists predict that should he somehow win, the world's financial markets will tank, wiping out Americans' savings, IRA's and retirement funds.  A piece in Politico looks at the likely wreckage.   Here are highlights:  

NEW YORK — Wall Street is set up for a major crash if Donald Trump shocks the world on Election Day and wins the White House.

New research out on Friday suggests that financial markets strongly prefer a Hillary Clinton presidency and could react with panicked selling should Trump defy the polls and deliver a shocking upset on Nov. 8.

“Wall Street clearly prefers a Clinton win certainly from the prospective of equity prices,” said Dartmouth College’s Eric Zitzewitz, one of the authors of the new study along with the University of Michigan’s Justin Wolfers. “You saw Clinton win the first debate and her odds jumped and stocks moved right along with it. Should Trump somehow manage to win you could see major Brexit-style selling.”

Stock prices around the world tanked over the summer when British voters surprised pundits and voted in favor of pulling the country out of the European Union. Trump himself now talks about his own upset prospects as “another Brexit.”

The report also shows where investors around the world are making big money on the 2016 campaign. Traders betting on the Mexican peso to take a beating under a President Trump, who has promised a trade crackdown, have lost big following debates in which Clinton did well.

The Trump effect also shows up for traders betting on market volatility. Futures contracts for the VIX index, which tracks market volatility, fell sharply during the first debate, suggesting investors expect much less volatility under a Clinton White House than a Trump White House.

Oil prices rose during the first debate and gold fell. Gold tends to be a safe haven when investors are worried about possible economic and financial instability. And oil tends to go up when investors expect stronger economic growth and more demand for energy.

Michael Obuchowski of Merlin Asset Management has watched every move in the campaign closely— including all the WikiLeaks email dumps on Clinton — and made two calls based on it: that Clinton will win and that she won’t go as far left as some investors initially feared.

“I always assumed Trump would eventually collapse so that meant staying in equities and going away from certain high-dividend stocks assuming Clinton is going to win and try and tax those dividends at a higher rate,” he said.

The new report suggests that the stock market is worth 11 percent more under a Clinton presidency than a Trump presidency. This is a highly unusual circumstance because markets historically prefer Republican policies on taxes, regulation and trade to those of Democrats. . . . . Current market action is the direct reverse of what happened in 2012 when President Barack Obama was running for reelection against former Massachusetts Gov. Mitt Romney. 

Investors now clearly back a Clinton presidency and by a large margin.

The Trump effect is also global.  Britain’s FTSE 100 traced U.S. stock prices higher following the first debate. Currencies in Canada, South Korea, Australia and New Zealand — all major U.S. trading partners — tend to rise when it appears Clinton is doing well and headed to victory.

“All told, these movements suggest that financial markets expect a generally healthier domestic and international economy under a President Clinton than under a President Trump,” Wolfers and Zitzewitz write in their new paper.

This also suggests that a shock Trump victory next month could crush stock prices, perhaps by as much as 10 percent, and send the peso and other currencies sharply lower while ushering in a period of intense market volatility as investors try and discern how Trump would govern and whether he would make good on his pledge to start trade wars with Mexico and China and deport 11 million current undocumented immigrants.

“You would see incredible pressure on stock prices if Trump wins and everyone flooding into rare metals like gold and into bonds” in the U.S., Germany and the United Kingdom, said Erik Jones, professor at the Johns Hopkins University School of Advanced International Studies.

Overall, the authors of the new paper envision a massive global market shock should Trump win. “Given the magnitude of the price movements, we estimate that market participants believe that a Trump victory would reduce the value of the S&P 500, the UK, and Asian stock markets by 10-15%,” they write and “would reduce the oil price by $4, would lead to a 25% decline in the Mexican Peso, and would significantly increase expected future stock market volatility.”

Bottom line?  By supporting Trump, many of his followers will be voting against their own financial best interest, falling once again to the GOP ploy of suckering them in by calls to their racism and xenophobia.  

Wall Street Begins to Freak Out About Donald Trump

With some polls showing a tightening in the presidential race, Wall Street, which seems to have never believed Trump could be actually elected, is beginning to freak out at the thought of a Trump presidency and the disaster that it would unleash on the financial markets, international trade and a host of other issues.  The irony is that Trump claims incessantly that he is such an amazing businessman, yet by many reports he is being propped up by Russian monies from questionable sources and Wall Street sees him as not being up to the task of the presidency.  A scripted reality TV and running a super power are vastly different, not that the narcissistic Trump seem able to grasp the difference.  A piece in New York Magazine looks at the growing angst and fear on Wall Street.  Here are highlights:

The U.S. stock market, seven years into an almost nonstop bull run, went on a wild ride last week: The Dow Jones Industrial Average swung between 100 and 200 points — up one day, down the next — on four separate days. There hasn’t been such a bout of volatility since late June, when the U.K.’s surprise vote to exit the European Union sent markets on a roller-coaster ride. Volatility is not just apparent in the stock market either. Wall Street strategists say it’s also cropping up in the bond and foreign-exchange markets.

Global markets are jittery about many things right now, but one fear seems to override all others: The polls in the presidential race have suddenly tightened, and Donald Trump might actually become president of the United States of America — with unknown, but possibly very negative, implications for everything from trade policy to foreign relations to monetary policy.

In short, a Trump presidency is the very definition of what markets hate: uncertainty. “Trump is widely considered to be reckless and Clinton is widely considered to be a friend to Wall Street,” explains Chris Irons, an analyst with the equity research firm GeoInvesting.

Société Générale analysts call it the “Trump factor.” They argue that the tightening of the polls between Trump and Clinton is a big reason for a sell-off in global bonds in September, which has led to the unease in equity markets, Bloomberg reported on Tuesday. Rates on both long-term Treasury and Japanese bonds have been rising since the polls started tightening, SocGen says.

A tightening of the race is normal, and might seem inevitable after the huge lead Clinton took following the Democratic National Convention and the Khizr Khan affair. But investors seemed to start selling when Trump took the lead in the crucial swing states of Ohio and Florida. 

In general, markets prefer a Clinton victory. In a new CNBC survey of economists, fund managers, and strategists, 53 percent think Clinton is better for the stock market than Trump — because she’s a known quantity, and a person whose ability to relate to foreign leaders is comforting. Only 26 percent of those surveyed think Trump is better for stocks, down from 32 percent the prior month. Some market prognosticators have suggested a win by Trump could send the stock market down at least 10 percent.

“I don’t know what the U.S. dollar is worth with a Trump victory. I don’t know what it does to foreign flows into the U.S.,” says Josh Brown, CEO of financial adviser Ritzholtz Wealth Management. “Are foreign corporations as desirous of owning US dollars with someone so erratic in the White House?”

[T]he concern on Wall Street is whether or not Trump knows what he is talking about — or even cares. In recent weeks, for example, he has been bashing Fed Chair Janet Yellen, blaming the Fed for creating a “false economy” and an “artificial stock market” in an interview with Reuters, saying the Fed needs to raise rates. But Trump also says the economy is a disaster. “Which is it?” asks Brown, noting that if the economy is truly a disaster, rates would need to stay low. (Trump also changes his mind a lot, which Wall Street doesn’t like. This spring, he said raising rates would be “scary.”)

Wall Street economists have long warned that a Trump presidency could increase the chances for a recession. In an August 25 research note, Citigroup chief economist Willem Buiter wrote that “a Trump victory could prolong and perhaps exacerbate policy uncertainty and deliver a shock (though perhaps short-lived) to financial markets. Tightening financial conditions and further rises in uncertainty could trigger a significant slowdown in U.S., but also global growth.” 

“When you lay out the possibilities of what can happen with Clinton, it’s far more predictable. When you lay out what could happen with Trump, we could be at war with Canada.”

Despite such fears, the ignorance embracing Christofascists, white supremacist and economically challenged white males are putting their hopes in a vulgar carnival barker.   

Britain Votes to Leave EU; Markets Plunge

In a move that seems more motivated by bigotry and racism, not to mention nostalgia for a past that will never be again, a majority of voters in the United Kingdom voted for withdrawal from the European Union - despite agreement by virtually all economists that the move would significantly harm Britain's economy.  Like it or not, the days of the sun never setting on the British Empire are gone for ever, but why rely on logic and objective reality when one can satisfy one's racist bent and xenophobia.   As  piece in the Washington Post, those who voted for withdrawal in many ways mirror the know nothings and white supremacists rallying to Donald Trump.  Here are article highlights:

It may be pure coincidence that Donald Trump flew to Scotland on the day that British voters decided to leave the European Union. But in striking ways, the forces fueling Thursday’s historic referendum here were similar to those that have shaken U.S. politics to its core in the past year.

On both sides of the Atlantic, political establishments and the elites have found themselves on the defensive. Rising resentment over the fallout from globalization and the effects of the financial collapse of 2008, which has widened the gap between the rich and everyone else, has divided voters in Britain and the United States.

Added to that are emotional issues of national and cultural identity at a time of growing demographic diversity, highlighted in both countries by often-angry debates over immigration. Both Trump and those pushing for Britain to leave the European Union have found the immigration issue to be their most potent political weapon.

Trump’s slogan, “Make America Great Again,” could easily have been adapted to the messaging of those in the “leave” campaign across the pond. Here, that desire for a return to an earlier time — to make Britain great again — is expressed through the issue of control.

Those who have pushed for Britain to leave the E.U. want to reclaim a measure of sovereignty by wresting power from the bureaucrats in Brussels, the headquarters of the 28-member bloc. They feel about the E.U. bureaucracy as tea party Republicans do about the federal government.

Early Thursday, Steve Devereux, an economist and teacher, was passing by the polling place at London’s Methodist Central Hall, a short distance from Parliament. . . . . On balance, Devereux said he feared that rattling the establishment’s doors by voting to leave the E.U. would pose a great risk. But it is clear that the sense of disgust and disenfranchisement is deep and widespread.

Distrust with political establishments cannot be overstated, on either side of the Atlantic. During the debate here, Michael Gove, a Conservative Party lawmaker and a leading voice in the “leave” campaign, sought to discredit studies warning of the economic consequences of leaving. “People in this country have had enough of experts,” he said.

The choices in the two countries may be different, but what animates the sentiment behind the votes springs largely from the same set of grievances. Even the contours of the electorates are similar. Here, as in the United States, voters are polarized along recognizable lines: young vs. old; college-educated vs. non-college-educated; urban vs. small town and rural.

A SurveyMonkey online poll showed that voters younger than 45 favored the “remain” campaign, with the very youngest overwhelmingly in favor. Those 45 or older supported the “leave” campaign. Similarly, those with a college degree supported the “remain” campaign by a nearly 3-to-1 margin. Those without a degree favored the “leave” campaign, though by a narrower margin.

By better than 2 to 1, those here who cited immigration as their most important issue said they would back Britain’s exit. Those worried about the economy, poverty and inequality, or defense and foreign affairs, all backed remaining.

Beyond the issues that have shaped the campaign here and in the United States, there are other parallels. As in the United States, the campaign here has been marked by a coarsening dialogue, befitting perhaps of the age of social media and the culture of cable television.

The SurveyMonkey poll found that people here who said they would support Trump for president if they could vote in the United States backed the “leave” campaign by a significant margin. Those for Clinton said they were voting to remain in the bloc.

It is sad to see that like America, Britain has a significant uneducated white trash element that can be duped into voting against its own financial best interest by appeals to racism and the fantasy of restoring the past.