Mr. Market Starts to Question Trump Trade Delusion

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Financial markets went into what in the hoary old days of 2014 would have been called “risk off” mode, with the degree of upheaval in Washington leading investors to doubt the so-called Trump trade. The Dow was off 370 points and the NASDAQ declined 2.6%. Treasuries and gold rose. The dollar fell. European indexes were off, typically over 1%, and Asian markets opened down.

A correction is overdue. What is curious is why it took so long. Trump was never going to be terribly successful, even if he had managed at age 70 to undergo a Prince Hal turns into Henry V sort of metamorphosis, or that a Cabinet with enough presumed grownups in it provided some badly needed ballast. Even during the campaign, at a 50,000 foot level, we’d repeatedly said that Trump was likely to be a Jimmy Carter cubed (in terms of getting little accomplished) in Silvio Berlusconi clothing. Carter, despite having been a governor and therefore possessing experience in the mechanics of governing (running a government bureaucracy, working with a legislature to get bills passed), famously came to DC with a team of outsiders, thinking that his post-Watergate mandate and Democratic control of both houses would give him license to do things differently. It didn’t.

We’d also pointed out that the record of celebrities as government executives was also poor. Jessie Ventura floundered. Arnold Schwarznegger, who has vastly better interpersonal skills than Trump plus the added advantage of marrying into a political family, found his star power lasted for about six months. Ronald Reagan was never a precedent for Trump because Reagan had been interested and involved in politics before his gubernatorial run. He’d had a politically oriented radio show for many years where he’d written his own scripts, and more important, had headed a union before running for state office.

And that’s before you get to the not-trivial fact that almost immediately after the election, the CIA and other members of the military-surveillance complex went into open warfare against Trump. Hard to get much done when you are fighting for survival.

However, in the post-crisis era, market valuations have had even less to do with fundamentals than ever and have instead been heavily influenced by central bank machinations and momentum trading. The incentives for professional investors strongly favor exiting profitable positions too late (ie, being wrong like most of their colleagues) rather than taking profits too early and risk appearing to have left too much money on the table.

Here are some of the major elements of the Trump trade thesis and why they never made much sense:

Trump would build infrastructure. This was one of Trump’s most consistent campaign promises, and was one of the few Democrats would back. And if it were even halfway decently targeted, it would be highly stimulative too. So why has nothing gotten done?

Even if Trump had moved with speed on this front, the spending would have started at the very earliest in late 2017 and more likely mid 2018 or later, simply due to all the moving parts: developing plans, putting them out to bid, qualifying bids, negotiating detailed contracts.

However Trump is nowhere, and this is consistent with what we had predicted. Trump has yet to launch a real plan. And what he has proposed is all smoke and mirrors. His plan relies on using the equity tax credits market. Not only is that market small, but those deals are bespoke and take a long time to put together. So there was never going to be much spending regardless, and the timetable was going to be even slower than for direct spending due to the reliance on a particularly complex financing structure.

Trump would cut taxes. Admittedly, investors and companies can benefit from tax breaks without the economy getting all that much out of them. Mr. Market was and is hoping for corporate tax cuts (even though Trump has also promised personal tax cuts, my tax mavens say that what will happen there, even though it will be offensive by favoring top brackets, won’t amount to much in terms of actual relief).

Hoever, Trump is not likely to provide for net spending, which is what it would take to boost the economy. There are more than enough Republicans and Democrats budget hawks to bar anything beyond a trivial increase in the deficit. So any “tax spending” would need to be funded by spending cuts. Obamacare “reform” was one bucket the Republicans hoped to tap, but that would include touching the third rail of allowing insurers to discriminate based on pre-existing conditions. There are not enough Senators who are willing to fall on that sword.

As for corporate tax “reform,” meaning elimination of a lot of breaks in return for lowering of the rate structure, again don’t hold your breath. The Republicans may well implement a tax holiday to repatriate profits booked offshore, even though that benefits industries that for the most part back Democrats (tech and Big Pharma). Note that the idea that this would bring back actual cash is a complete canard; most of these companies keep that money in US banks. Apple, for instance, runs its money hoard as an internal hedge fund in Nevada. This is a tax reporting matter that does affect the ability to pay dividends in the US. And accordingly, the last time the US gave a foreign tax holiday the result was not more spending or investment. The money instead went out in dividends and executive bonuses.

As for rate reduction and corporate tax simplification, this will not be easy to achieve. Every deduction has a constituency that benefits from it and will fight to keep it.

And that’s before we get to the fact that investors chose to ignore that Trump never had anything approaching anything other than a napkin doodle version of a tax plan and has made no progress since he’s been in office.

Trump’s team does have a tiny bit more meat on the bones of their individual tax reform plans. No one believe the current version will get passed.

Trump would reform Obamacare. First, we are seeing how hard that is proving to be. Second, pray tell how would that help the sacrosanct markets? Obamacare was written by a health insurance lobbyist. Health insurance and Big Pharma stocks rose when it passed. Health insurers have spent a lot of money on institutionalizing gaming the new system implementation. They are not happy about the idea of having to spend more money to another set of changes.

Trump would engage in a lot of deregulation. While that is a Trump aspiration, regulation is the more detailed articulation of legislation. Trump can’t undo laws by fiat.

And even with a Republican majority, the details of how to deregulate are often contested, since some business interests often benefit from regulation. Look at how his efforts to roll back regulation curbing methane emissions stalled. Similarly, Obamacare “reform” may not get done due to the Senate not being on board with what the House Freedom Caucus wants.

More important, regulation isn’t necessarily anti-innovation or anti-growth. Air pollution emission controls on automobiles led to a great deal of innovation. And the Big Three resisting tougher fuel efficiency standards contributed to their loss of global market share, since most of the rest of the world implemented more stringent standards. And deregulation won’t create opportunity where none is to be had. Many commmentators have pointed out that Trump ending the Federal moratorium on coal leases will not produce more coal industry jobs. Natural gas is displacing coal.

Trump is good for confidence. Bizarrely, that that has been true despite months of chaos compounded by Trump not even being close to having taken control over the bureaucracy. Mr. Market normally likes certainty when Trump’s modus operandi is being wildly unpredictable.

However, supposedly upbeat consumers haven’t opened their wallets much. Are confident “consumers” prioritizing saving because they see a low return environment as the new normal? If you punch in a modest return assumption into your retirement calculator, you need to sock away a ton more than with a higher assumption.

And here are some issues that Trump trade fans chose to ignore:

Trump had the most freedom to act on campaign promises that were not pro-business. Trump has considerable power to enforce immigration rules, which means deporting lots of undocumented immigrants. Mind you, Obama did that too but it was never very well covered. Businesses like undocumented workers not simply because they are cheap but also because they are far more tractable and will put up with more workplace abuses than Americans. And let us not forget that many card carrying liberals see no hypocrisy in using housekeepers, yardmen and nannies that aren’t legal (I suspect the posture is “don’t ask, don’t tell).

Trump also has considerable authority on trade, where he promised on the campaign trail to redo Nafta, and get tough on China, including declaring it to be a currency manipulator. On the one hand, traditional Republicans may have seen Trump’s fast retreat on these issues as proof that his populist talk was all hot air. On the other hand, it appears not to have occurred to them that that could also signify that pretty much everything else he said might also be an empty promise.

Trump’s peculiar preference for hiring people who are guaranteed to fight with each other is a terrible managerial model and particularly unsuited for overseeing a massive bureaucracy. He’s not just subject to gridlock with Congress due to infighting with and among Republicans; he’s setting out to create gridlock on his own team.

The Fed is determined to keep raising rates this year. The central bank has been eager since the 2014 “taper tantrum” to get out of its super low interest rate corner. Even though the Fed would never officially admit error, there are plenty of soft sightings that indicate many Fed officials recognize that the over-reliance on monetary policy to try to stimulate the economy has done more harm than good once the worst of the crisis was past. And having rates this low leave the central bank with nowhere to go if another crisis hits (say out of China). So there’s been a sense of urgency about raising rates at any sign that the economy can take it.

And it’s not hard to fathom that the current Fed would be more willing to take “dent the economy” risk on Trump’s watch than on that of a Democrat or a more traditional Republican.

Mind you, this isn’t a comprehensive list of problems with the Trump trade thesis. I’m sure readers can add more. But our market is so far from historical norms on so many levels, such as the afore-mentioned heavy intervention by central banks to the scale of algo-driven trading, that it’s even more perilous than usual to suggest when fundamental factors will check profitable churn.

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  1. fresno dan

    The question I have is: What if there is a recession (soon)?
    And what if something like 2007 happens?
    (both of the above before the 2018 elections) – Could Trump have handled the 2007 Great Recession?

    1. PKMKII

      The response to another recession would be the same response conservatives have to any economic problem: throw more tax cuts for the wealthy at it. It’d be the Obama response but with heavier tax cuts, more austerity (economic eugenics), with a level of stimulus that would make Obama’s look positively Rooseveltian.

      The big difference I could see is that Trump would attach more strings to a bailout of the financial industry, but not in a good way. They wouldn’t be for reform purposes, but rather to make life easier for large real estate holders like Trump. Late-stage capitalism, not DemSoc or SocDem policies.

      1. RMO

        Well, if we get a recession soon it will probably increase the chances of eight more years of a Republican president. If things tank now they will probably be improving through 2020 no matter what the government does (well, short of full on Armageddon…) and there’s plenty of evidence to show that voters are influenced most by the direction the economy has been going in the year or so previous to an election.

        1. OpenThePodBayDoorsHAL

          LOL “Mr. Market” LOL, this article is nothing but generals fighting the last war.

          A “market” requires two-way participants to commit “money” because they have analysed “risk” and believe they can outperform the “risk-free” rate by evaluating the economic prospects of an investment.

          What we have instead now is hedge funds central banks who are one-way (buy only) participants with no economic incentive to take profits. They do not commit “money” which they earned through productivity and work, they materialise “money” which cost no time or work to produce. That means that as an investor, who had to work and earn a profit and save before you could invest, you are now alongside an “investor” who had to do no work at all. And since this “investor” has decided money is free, with the “risk-free” rate at zero or below, this means *every* investment is somehow “economic”, which of course makes it impossible to differentiate between a “good” investment and a bad one.

          CB’s exchanged *$1 trillion* in assets in Q1 for this so-called “money”. Of course (since there is no free lunch) the place the effect shows up is in the value of this so-called “money” which is dropping +/- 10% per year. They’ve changed the way they measure this to bamboozle the locals, but to anyone who needs to eat, drive, sleep somewhere, pay a utility bill, or go to the doctor it’s plain as day.

          Now if they would just fess up and replace the “Federal Reserve Note” an “Equity Participation Note” and distribute them to everyone we might have something interesting and fair and sustainable. But currently 85% of stock gains go to just 5% of people, so no soup for you.

  2. Larry

    And while all of this is true, what I most worry about is an event that gives Trump a mandate for war. Whether that event is external or caused by bellicose US posturing with Russia/North Korea/whoever matters little. Bush Jr. to me was an incredibly ineffective president with no mandate to do anything, but 9/11 handed him the imperial keys and his neocon administration ran with it. Trump is even more feckless and has less of a mandate given his extreme unpopularity, but war has a way of rallying people to your side. And with all the clamoring about how Russia is all powerful and attacking American institutions from afar, well, I wouldn’t put it past Trump to quickly jump into a bloody and costly conflict to save his own thin skin.

    1. Occasional Delurker

      I’m on board with the idea that in so many ways, Pence would be worse than Trump. I don’t, however, have a good sense for the risk of Pence starting disastrous wars like you mention above.

      I tend to agree that given Trump’s impulsiveness and instinct to go on the attack, him starting such a war is a major risk. I wonder if Mr. Market is starting to think this is a downside risk, as well.

      I’m aware of the whole possible Dominianist side to Pence and how that might lead to war, but Trump still feels like the much bigger risk on the war front to me. Which really makes me wonder if impeaching Trump (however unlikely that may be) would actually be a net positive, despite all the bad stuff that Pence would bring.

  3. McDermott

    Why not write this on a day BEFORE The market tanks, instead of after? I don’t disagree with many of your points, but it’s as iyou had this already written, and you were just waiting for a down market day.

    1. Yves Smith Post author

      What, you somehow think I deprived you of an opportunity to make a buck? This site does not give investment advice or make market calls. We don’t watch the market twitch every day. There are plenty of news and investment sites that cater to that.

      I’ve said all of this before, had you been paying attention, most of these points repeatedly. I’m merely codifying previous work. So your beef is really out of line.

      We don’t spoon feed readers. And you also appear never to have noticed that everyone who writes regularly on this site routinely cranks out complex news-driven posts.

    2. From Cold Mountain

      Jeez dood, ya needed someone to tell you the Trump Trade would flop? We’re you hoping to make 100% on yer mulah from the rantings of demagogue? You? The little guy? Doncha kno the house always wins?

      Ferget the polyticians, they are the smoke on the smoke filled rooms. Instead, look at the people around you, they are frenetic, distressed, in debt, and $100 in surprises will make them loose their house. The human VIX (!VIX) is the harbinger of the $VIX.

      Trump is the first bubble to pop; peak stupidity! Make plans to be free of all your capital encumbrances!

    3. Robert Hahl

      For almost all stocks, foreign and domestic, the lowest price so far in May was higher than the highest price in April.

  4. Si

    The Trump trade “thesis” doesn’t seem to be more than a Wall Street sales line to keep the market at nosebleed valuations. Give people a reason, any reason, even if it is not rational (better if it isn’t rational actually!) to keep buying.

    This market is the MOAB (mother of all bubbles), to say that it is going down because of Trump does an injustice to clear over valuation which has been kept afloat only through peoples willingness to believe that they can find a greater fool.

    Tesla at a market cap of $50b when it bleeds $ ever year and has done for 10 years? Really? Amazon PE ratio of 177….. bargain!

    Here is my theses. The market is going down because insane valuations cannot go on forever.

    If it tanks, it will be all ‘Trumps fault’. If it recovers? Goes up? …. that is thanks to Trump? Or….?

    1. PKMKII

      This market is the MOAB (mother of all bubbles), to say that it is going down because of Trump does an injustice to clear over valuation which has been kept afloat only through peoples willingness to believe that they can find a greater fool.

      There’s a Monty Python sketch in which a magician puts up apartment buildings instantly, with no construction costs. The buildings function perfectly fine, as long as everyone living in them believes they’re real buildings and not just a magician’s illusion. Otherwise, they collapse.

      Pythonesque times, indeed.

    2. Jim Haygood

      “Trump trade” is a diversion. Mr Market has been ebullient not because Trump is doing anything, but because he’s NOT doing anything.

      In comparison to dirigisme, benign neglect is nirnava.

      A prolonged period of partisan turmoil, lurching and searching for reds under the beds, is even better. Nothing whatsoever will get done, as government’s wheels spin uselessly in the mud.

      The Nasdaq 100 is up 0.75% as I type. Morning in America! :-)

      1. Art Eclectic

        The best thing that could possibly happen to this country under Trump is 4 years of wheel spinning and them only able to do a minimum amount of damage to anything except the future of the Republican Party.

        If nothing else, we will dispel forever the idea that what the country really needs a business CEO who knows how to crack the whip, clean house of the dead weight, and get things done.

  5. Dirk77

    About Trump’s dustup with the military surveillance complex: Since he does run the executive branch, couldn’t he redirect them all to infrastructure projects? They could keep their money to finish their kitchen remodel in McLean, and we’d actually get some useful work done. Or are these people really as worthless as their record shows? Just curious.

    1. Damson

      You’re idea is too sane and socially useful.

      Yes, that’s exactly what National Service could and should mean.

      But the complex is not run by you or me – it’s run by sociopaths.

    2. Vatch

      The Congress appropriates money for specific projects, so the President can’t redirect money from one agency to another. So far, Trump has shown little interest in limiting the military. The Defense Department is one of the few departments for which he proposed budgetary increases.

      1. Art Eclectic

        The grifting is easiest and best in Defense, why do you think it’s so popular with both parties?

  6. RenoDino

    Good summary, and let’s not forget that markets love nothing more than blue sky promises and a sitting President whose actual theme song is “Money, Money, Money.” Soft data confidence numbers have ramped higher even as actual hard data numbers started to tank. Thus, reality means virtually nothing to the market because central banks around the globe have acted in unison to insure that price discovery will never be allowed on their watch. This is the real hole they cannot climb out of without crashing the world’s economy.

    We will never know again what real interest rates are, what stock prices are based upon fundamentals or the real value of commercial real estate. The debt burden that overhangs all these mispriced assets is simply too great to allow price discovery without a complete collapse of the world’s economy resulting in social chaos and political upheaval.

    I have been saying for the last several years that assets markets can never be allowed to go down again because central banks will not accept policy failure. Central banks and sovereign wealth funds are now the number one buyers of equities around the globe. The Swiss Central Bank is the largest owner of Apple stock. The Japanese central bank owns over 40% of the Japanese stock market. God only knows how much of the market China’s central bank owns. All these entities have one thing in common. They print their own money and they will NEVER sell their stocks or bonds.

    Of course, this doesn’t mean that prices of certain individual investment names can’t fluctuate radically, but what is does mean is that markets, as whole, can never again sell off dramatically without central banks stepping in and flooding the system with free money to backstop any significant attempts at price discovery. That’s why negative news is seen as a buying opportunity. It means more free money is on the way.

    In light of this coordinated, global policy commitment, Trump’s machinations are chump change. It’s also why Jamie Dimon is always so happy.

    1. cnchal

      > It’s also why Jamie Dimon is always so happy.

      He’s happy because he escaped going to prison for fraud.

      Bernie Sanders: The business of Wall Street is fraud and greed. That can be expanded to include central banks.

      Enough of the not funny stuff, what I fail to understand is the logic of valuing the stawk market at the last quoted price times the number of shares in circulation.

      As an example, lets say publicly traded company A has 1000 shares outstanding and each share is sold at $10 in an IPO which makes the “value” of that company $10,000 and the very next time that a share is sold it sells for, as an example, $11 now valuing the company at $11,000 when by my twisted way of thinking the actual value is 999 shares at $10 and 1 share at $11 which makes the value $10,001

      This difference of $999 was not borrowed into existence and spent on share purchases, yet everybody buys into the idea that if one share is bought for a higher or lower price, all shares now are at that price, when the only thing that matters is the differential between when one buys and sells, if dividends are ignored. I call it the grand delusion.

      1. TheCatSaid

        That’s a really interesting point about share difference. It would be interesting if overall company values were tracked on these differences based on the original cost of each purchase. It’s possible to track physical inventory that way, surely someone has tried to do this with other shares? On a single-company basis this is done with each individual shareholder as long as the company is small–at what point can this no longer be done–when a company goes public, or when private equity invests and various companies are invested in and things become more opaque?

        Think of the megacompanies with mega stock prices–yet lots of those share are those bought or given to early-day investors at far lower prices than current, right? So using your suggestion would value those megacompanies as a fraction of their inflate-every-share-equally current valuation method, right?

      2. MLS

        Using your example, once the stock trades at $11, then any shares (and by extension all of the shares) can now be sold at that price, setting aside for a moment any price impact of 100% of the stock coming for sale at once.

        That’s what it would cost to buy the company in that manner. What was originally paid is irrelevant.

        1. apotropaic

          You describe the delusion well. That the stock collapses later is unrelated right? That happens because of some other factor, always, no matter what. Couldn’t be that the stock was never worth the higher price. Blasphemy!

          1. MLS

            you are confusing price and value. They are often quite different for many reasons and for long periods of time. What I described in my comment is the price of the shares. If it collapses later, it’s because the value was lower than the price.

        2. cnchal

          It is a type of imaginary leverage to look at it normally. Spending $1 more than the present price of a share, and then assuming all other shares combined add $999 to the sum total of the market.

          Isn’t that what share buybacks are about? Borrowed money at low interest rates is used to inflate share prices. If the interest payments on that borrowed money is less than the price appreciation of the inflated shares, it’s profitable for the CEO to add the debt to the company, and collect a fat bonus for doing so. How many shares did the company buy to move it’s own price? If not very many it’s like a form of leverage or price manipulation.

          1. MLS

            Yes, share buybacks are leveraging up the company balance sheet. That is different than your example which did not mention any buyback.

            in your example a transaction occurs at $11. It is the most recent “opinion” of investors of the value of a share of company stock. This may or may not be correct, but it’s an assessment that other investors are free to disagree with. But why would the shares transacted earlier at $10 be worth anything other than $11 now? The shares are fungible, indistinguishable from one another, and that $10 transaction at the IPO was an old assessment (yes, even if it happened one second earlier). Just because the price of the company has changed, it does not mean the value has changed (by the same amount)., only the perception of value.

            As I stated earlier, if one were to try and buy all the shares, they would not pay one person $11 for theirs and $10 to everyone else that bought them at the IPO.

  7. Peter Pan

    Thank you for pointing out some of the things to which we should be paying attention rather than the Russia-gate hysteria.

  8. David Carl Grimes

    If Trump is Jimmy Carter 2.0 in Berlusconi clothing, does that mean he will become a one-term President? Does this mean that the likes of Clinton or some corporate democrat will take over in 2020? Does this mean that the Democratic party will never reform because there is no real need to? Because all they have to do is wait for Trump to implode?

    1. Deadl E Cheese

      tThe Clintonites may have decided that permanent minority party status may be vocationally preferable, but it doesn’t work like that. Sanders of all people being able to credibly challenge someone with unified establishment support behind him. And the forces that are animating him only become stronger each year. Democrats have absolutely imploded in popularity and power over the past four years. No matter how much they wish for and struggle for a future in which the Clintonites are in permanent control, even at the cost of being reduced to a lower state than the Whigs in 1848, it’s just not possible. Either they’re forced to reform along more economically left lines or they die out like the Whigs did.

      More theoretically, when a regime disjoins (and I believe that the Reaganite regime currently led by Trump is about to disjoin) not only does it take down the regime but it also takes down the opposition. Jeffersonians weren’t succeeded by Federalists despite battling them for decades: they were succeeded by Jacksonians. Jackonsians weren’t dispatched by Whigs despite battling them for decades: they were dispatched by Lincolnians. Lincolnians weren’t eliminated by Wilsonians despite battling them for decades: they were eliminated by New Dealers. New Dealers weren’t destroyed by Rockefeller Republicans despite battling them for decades: they were destroyed by Reaganites.

      If this historical pattern holds, the Reagan regime will not be dismantled by Clintonites. That would literally be an American historical first, where a long-entrenched minority opposition of a regime ascends to become a permanent majority. If Trump and the rest of the Reaganites go down, it won’t be by the hands of the New Democrats — and honestly, probably not even by Sanders and Warrens. Their successor will be to Sanders what FDR was to William Jennings Bryan.

      1. Deadl E Cheese

        I know my hypothesis has a dialectical, even millenarian bent to it but when you look at the states of political regimes, they don’t gradually fade to accommodate the new orthodoxy. They’re swiftly discredited and dismantled. The Reagan regime is unusual in that the old orthodoxy managed to survive at all (hence Sanders) but generally, when a reconstructive (i.e. Great) President ushers in a new era it’s directly after the previous era completely implodes in on itself. There’s never been a gradual transition where someone offers a better product to voters who are generally satisfied with the previous product.

        This is why the Democratic Party in its current state is doomed. If they come on the coattails of a failed Trump regime, an improved version of the old product (like what Obama and Clinton tried) isn’t going to cut it. Booker or Cuomo or Hillary or whoever will simply fail to offer an alternative to Reaganism, will then endure four years of 2012-2016 Obama-style failure and gridlock, and we’ll just be doing this dance all over again in 2024.

  9. JTMcPhee

    As to the Imperial presidency not being able to undo regulations because it’s “just a more detailed articulation of legislation,” and thus requires overcoming congressional intent and “the force of law:” neoliberal and neocon infilling of the agency staffs with their adherents has a long and telling history, and has facilitated all kinds of demolition of regulatory control over externalizations of “costs”. I lived through one major assault as an enforcement attorney with the US EPA when the Reaganauts took over. We were told in 1980 to simply stop sending in any new enforcement actions for patent violations of federal environmental laws and even general criminal laws as part of the former violations. And the “senior executive service” and “exempt” C-suite-ers at the Waterside Mall HQ and as placed in all the regional offices and agency labs did their darndest to make sure that “business’ became the “customer” for EPA as a service provider.

    And that was at a time when there were still a (very) few members of the legislature that took their nominal constitutional responsibilities to promote the general welfare semi-seriously, before the wholesale acquisition of the “legitimizing imprimatur of ‘law'” by the Bribery and Owner Class. And anyone hoping that the Department of “Justice” will set any of this right is vastly deluded.

    I hope people here are not hobbled by notions that there are public-benefit “laws” that are being “faithfully executed” to “regulate” all the depredations of the “business class.” And the Trump administration can very definitively affect the ‘regulatory environment’ by just directing a “rededication of effort” by the agencies under all the new policies and guidances and regulatory interpretive memoranda and changes in stuff like delegation manuals. Stuff like this:

    Environmental Protection Agency (EPA) Administrator Scott Pruitt last week issued a memorandum revising the existing delegations of authority related to implementation of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), or “Superfund” law. Administrator Pruitt’s action consolidates his authority to make remedy selections at the most significant of CERCLA cleanup sites. The revised delegation reserves for the Administrator, with the option to further delegate only to the Deputy Administrator the authority to select any remedy estimated to cost more than $50 million. This retention of authority applies at both privately owned sites and federal facilities.

    Rationale for Revising the Delegations

    In his memorandum announcing the changes, Administrator Pruitt writes, “[U]nder my administration, Superfund and the EPA’s land and water cleanup efforts will be restored to their rightful place at the center of the agency’s core mission.” By centralizing the authority to select remedies at major cleanup sites, EPA hopes to engender consistency that will “improve the remedy selection process” while creating efficiencies that lead to “more-rapid remediation.”

    Sounds so very bland and bureaucratically uninteresting, doesn’t it? “Improving efficiency,” “core functions,” and all that? But that’s going on throughout the EPA, just one of the many agencies that the operators in the new administration are working over…

    1. TheCatSaid

      Thanks for this insider experience.

      Regarding the Pruitt regulation interpretation memorandum you quote, I don’t have the experience to read between the lines to understand who is likely to benefit from this change, and how it might be “spun” to benefit some other party, if there is a difference.

      1. JTMcPhee

        Re Pruitt and EPA delegations: It’s one of many “centralizations,” which bring what are supposed to be informed neutral administrative decisions, reflecting real science and public input and competent review and fact-finding, straight into the hands of political appointees like Pruitt.

        Congress “delegates” to agencies (usually under color of the industry-hated “commerce clause” of the constitution — hated, until it can be invoked to destroy a competitor, e.g.) the power to implement various statutes that are supposed to be the backbone and framework for ‘regulation’ of the evil that men and women do. The agency head then delegates through a complexity of ‘delegations manuals’ to the people at lower levels who are supposed to figure out the legislation, develop the complex regulations that are supposed to implement the legislative intent. Which regulations are the stuff that we discuss here as the substance that gets “regulatory captured” by those special interests that ooze up from K Street and other sewers that feed the Empire.

        The original Superfund program was legislated to try to deal with a century of industrial externalizations of waste products of industry (ever heard of the Love Canal?) The statute made anyone (corp or individual) who generated and released hazardous substances into the environment, both strictly, jointly and severally liable for the remediation of those releases. Strict liability — intent or negligence was no defense to liability. Joint and several liability — each entity that released schmutz was liable, collectively and individually, for the entire cost of cleanup. This was a Big Deal, and the white shoe lawyers took it all the way through the courts and fought it tooth and nail. And then worked diligently to undercut all the science that demonstrated the risks to health and the environment and resulted (through heavily lobbied and fought administrative proceedings) in “cleanup standards” that were supposed to be attained by response actions. A diffference of a few parts per million or in acceptable statistical methods of sampling could result in ‘savings’ of billions in costs of response.

        And don’t let me leave the impression that some of the Agency staff, not just the Reagan infill, did not engage in the corruption stuff, or that there was no grotesque waste in the whole process — lots of examples of both, to be expected any time billions of dollars are sloshing around, with not a lot of honest and competent and diligent oversight managed by incorruptible people motivated to “do the right thing.” Never a feature of large human-rulership structures at any time I am aware of.

        Maybe you have heard of Rita Lavelle (not a congressman’s stripper, but the Reagan appointee to head the Superfund program), who also “centralized” decisions on which corporations would be hit with the costs of cleanup, the determination of “how clean is clean.” She was delegated that power by another Gorsuch, Anne Gorsuch Buford. Lavelle went to jail for lying to Congress, and after a whole lot of actual reporting by the media on Gorsuch’s corruption and meddling with the processes of the Agency for corporate benefit, she was ousted. Somebody has to sign off on government decisions, of course, that’s how power is exercised (and responsibility diffused.) But what Pruitt the current team are doing is to to take away and “centralize” whole swathes of the ‘normal” functioning of an agency, in writing and enforcing regulations. It’s part and parcel of the continued looting of everything of any value to ordinary people in their “lives, liberty, and pursuit of happiness…”

        The corruption is much better insinuated into what too many of us still believe is “our government.” Pruitt, along with a triumphant mob of neos, is busily hamstringing and killing by the death of a thousand cuts the regulatory programs that are supposed to be “protecting human health and the environment.” These people are insulated from all consequences — more of the immunity-impunity shield that wealth, and thus the wherewithal to corrupt and fill with cronies all the nooks and crannies of “government” — all three of those ‘coequal branches’ that are supposed to serve the general welfare via that “system of checks and balances” that us older f@rts were taught to believe was the foundation of our “government of laws, not of men.”

        Too many words, not well edited, but I hope that helps a bit. I am sure that I am forgetting and failing to emphasize stuff here — that was 30 years ago, and this is one massive complex blob with so many “unregulated” (in even the engineering sense) moving parts.

  10. Mikerw0

    Really well written summary of past points and a reminder that everyone should focus on content, not the shiny objects that MSM loves to dwell on (at least Buddha focused on his navel I guess).

    I do have one quibble. Calling tax plans relief plays into the meme that we are systematically over taxed. We aren’t. We never seem to approach government as grown-ups and say these are what we want it to do and here is what it will cost and then pay it. Instead we are like the immature child who wants everything but won’t pay for it. Again, a quibble.

  11. Wellstone's Ghost

    Times of trouble are also times of opportunity. All the more reason to be screaming Single Payer/Medicare for all and raise the federal minimum wage on every street corner.

  12. Jeff N

    I wasn’t as smart during January-August 2001 as I am now ;) , but I do remember GWB being sort of a lame-duck during that time? Or was that just Dem petty wheezing about his many vacations?

    1. TheCatSaid

      Does this mean we should expect something big to happen in September, say, that will change everything for Trump’s presidency?

  13. Chauncey Gardiner

    IMO this morning’s market action was instructive in the power of the central bank, Treasury and Wall Street to arrest a market decline and reverse it. At the Open of today’s session, the market declined sharply. Although neither I nor any other ordinary citizen was invited into the room, looked to me like the “Plunge Protection Team” entered with Cash guns blazing, and for a brief period the market pulse looked like the heart rhythm defibrillation chart of a cardiac arrest patient, fluttering wildly in both directions. As with defibrillation, the chances of restoring a pulse decrease rapidly with time, so time was of the essence. And as is evident from today’s market chart, “The Team” performed admirably (again), with the Dow rising over 118 points in 38 minutes.

    But the days of “Foaming the runway” to enable the banks (and some others) to recapitalize themselves through officially sponsored speculation should be over. A legitimate question arises about whether injecting public money into supporting financial markets is the highest and best use of the nation’s monetary resources? Also, the economic theory upon which capitalism rests; i.e., “free markets”, has through these repeated market interventions been casually tossed aside. Along with passive investments in the form of Exchange Traded Funds that are designed to mirror the overall performance of the market indexes or ever narrower sectors of the market, sometimes with triple and even quadruple debt leverage as was the case with the trusts of the late 1920s, the performance of individual companies and their management has been eclipsed by central banks’ monetary policy, high-frequency computer trading algorithms, and coordinated market interventions. Begs the question of why we have financial markets at all.

    Perhaps as Bill Murray chanted in the greatest summer camp film ever made, Meatballs, “It just doesn’t matter!”… Too, maybe there are some geopolitical or other implications I am unaware of. But maybe these changes in market structure are also in part behind the decline in the nation’s productivity, rising inequality, and some other issues? IMO public policy matters, and it’s time for a very public discussion of the various pros and cons of market intervention.

    1. TheCatSaid

      Lots of food for thought in your comment. With the points you make about intervention in markets, and combine that with what we already know about rigging for decades (maybe since The Beginning?) of LIBOR, Fx rates, commodities, and the role of CB–not to mention the scams of new & established company IP valuations & sky-high IPO valuations based on no revenues–I struggle to see any sign of “reality” in “the market”.

  14. MLS

    I think it’s important to define what the “Trump trade” has really meant since the election. Basically we had a huge rally in the things Trump promised to touch upon. More economic growth implied higher interest rates and, combined with a promise of lighter regulation, drove a massive rally in the banks. Similarly for infrastructure-related stocks like machinery companies on the basis of fiscal spending there. Yes the rest of the market did well also (helped by the expectation of tax cuts but also due to the improvement in corporate earnings), but these areas in particular led the charge as value-oriented stocks that are more sensitive to the business cycle took off. Growth stocks (primarily the technology sector) lagged in the period immediately after election.

    As it’s become clear that growth may only marginally pick up (if at all) and the Fed will continue to raise rates into a flatter yield curve, the value-oriented stocks have backed way off and more growth-like companies in technology have been leaders. This is the true unwinding of the Trump trade (from value stocks back to growth stocks) and it’s been going on since about mid-December.

    The reality of all this is that while the Trump trade can (and probably will) continue to unwind, the market overall can still do reasonably well as a reflection of the mediocre GDP growth/modest inflation* backdrop we’ve largely seen the last several years. In other words, not much has really changed.

    * Yes I’m skeptical of government tallies of these measures, but inflation in a broad sense is far from the painful 6-8% experienced in certain categories like rent, and that’s what matters to markets.

  15. Jeremy Grimm

    I take heart from this post. When Trump was elected I expected he would be stopped from doing anything to benefit anyone except the Power Elite. Trump seemed to originate from a different component of the Power Elite more closely tied to pillaging the Homeland and concerned to avoid being disturbed from that effort by activities of the component focused on pillaging abroad. I hoped Trump might be able to put the brakes on the many new initiatives in International pillaging Obama worked so hard to get underway before he left the Whitehouse. While I didn’t look forward to the damage Trump could do the U.S. I felt the dangers and costs of further foreign wars including possible armed conflicts with Russia or China might be avoided or minimized. I also hoped our national sovereignty would not be handed to the International Cartels.

    Recent events — Trump’s seeming acquiescence to the large neocon element in the government — the cabinet appointments he made — the backpedaling/”re-shaping” of some of his stances on trade and International affairs — the truly horrible direction of Obamacare “fixes” and I started to worry that the Trump presidency meant full-scale pillaging of the U.S. economy combined with enlarged pillaging of the rest of world and increased warfare with the added risk of larger more dangerous wars. Though viewed through the lens of impacts on the Market — minimizing Trump’s dealings with the MIC and Intelligence Complex — Yves enumeration of the many ways a Trump Presidency promises four years of gridlock and in-fighting accomplishing nothing has given me some comfort. Although it might be nice to see some positive developments — four years of nothing accomplished is a much more pleasant prospect for the future than I could have hoped for.

    1. OpenThePodBayDoorsHAL

      Raul’s term is naked kleptocracy and I think that describes it best, we can obsess over which gang of kleptocrats is currently gaining the upper hand and siphoning the most milk and honey from the public weal into their private (offshore) accounts, but why bother.

  16. Frederick Swartz

    I believe this article is the verification of something I read here prior to the election which said Trump was the lessor of two evils since he would be ineffective vis-a-vis Clinton.

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