Category: Politics

Jeffrey Gundlach: Neel Kashkari will be next Fed chief because he’s an ‘easy money guy’

CNBC, via USAToday/John Melloy/10-04-17

Bond King” Jeffrey Gundlach has an unusual pick for who President Donald Trump will choose to be the next Federal Reserve chief.

“I actually have a very non-consensus point of view. I think it’s going to be Neel Kashkari,” the the CEO of DoubleLine Capital told the Vanity Fair New Establishment Summit on Tuesday in Los Angeles. “He happens to be the most easy money guy that’s in the Federal Reserve system today and that’s why he may win.”

PG View: Kashkari has been a dissenter on the recent rate hikes and seems to favor more dovish policy until inflation really does pick up.

Posted in Central Banks, Fed, Politics |

The GOP Tax Plan Is Already Hitting Speed Bumps

Bloomberg/Sahil Kapur/10-03-17

The White House is showing “softness” on ending a $1.3 trillion federal tax deduction filers get for their state and local taxes, Senator Bob Corker said Monday, warning that it raises questions about the GOP’s “intestinal fortitude” and could imperil a tax overhaul.

The framework that President Donald Trump and Republican leaders released Wednesday calls for deep rate cuts and would abolish existing tax breaks to help pay for them. Without such “pay-fors,” Congress might have to settle for only temporary tax cuts.

Posted in Politics |

Trump says GOP tax reform plan will create ‘revolutionary change’

CNBC/Christina Wilkie/09-27-17

President Donald Trump on Wednesday promised that his newly released tax reform plan would deliver American businesses some of the lowest tax rates in nearly a century, and do so with bipartisan support in Congress.

…A proposed 20 percent corporate tax rate, Trump said, would put U.S. business tax rates below the average of other industrialized nations, which the president called “a revolutionary change.”

…Most Democrats said they won’t support tax cuts for the wealthiest Americans and won’t vote for an overhaul that adds to the deficit.

PG View: Unveiling the plan is the easy part, getting something through Congress is another story entirely.

Posted in Politics |

German bond yields slip as surprise election highlights threat to eurozone

MarketWatch/Sunny Oh/09-25-17

German government bonds rallied on Monday after the German election showcased a surprising rise in support for an anti-immigrant party, highlighting waning support for the regions most established parties and reigniting fresh worries that the ascendance of anti-establishment factions would threaten the solidarity of Europe’s trading bloc.

The anti-immigration Alternative für Deutschland, or AfD, also known as Alternative for Germany, won 13% of the vote on Sunday, making them the third-largest political faction in parliament.

…Market participants believe that the German election may only be the first domino in a lineup of more substantial threats to the integrity of the eurozone. Catalonia, a province of Spain, plans to declare a referendum for its independence on Oct. 1 . . .

Posted in Politics |

Merkel’s conservatives suffer worst election result since 1949 as German far right sees surge in support

CNBC/Matt Clinch/09-25-17

Angela Merkel’s conservative bloc will be the largest party in the next German parliament, but provisional election results point to a worse-than-expected majority for the German chancellor.

Merkel’s center-right Christian Democratic Union (CDU) and its Bavarian sister-party the Christian Social Union (CSU) won 33 percent of the vote. It would make them the largest parliamentary group, but that is down from 41.5 percent in the last election in 2013 and lower than recent polling. It is also their worst result since 1949, according to Reuters.

Posted in Politics |

Japanese Prime Minister Shinzo Abe calls snap election

CNN/Yoko Wakatsuki & James Griffiths/09-25-17

Japanese leader Shinzo Abe has called an early election to take advantage of higher opinion polls to secure a stronger mandate as the country prepares to respond to increasing threats from North Korea.

Pyongyang has fired two ballistic missiles over northern Japan in recent weeks, as it steps up missile tests amid a deepening regional crisis.

In a national address Monday, Abe said he’ll dissolve parliament’s lower house on Thursday to “seek the mandate of the people immediately.”

Posted in Geopolitical Risks, Politics |

US federal debt passes $20 trillion for first time

TheHill/Niv Elis/09-11-17

The U.S. federal government’s gross debt surpassed $20 trillion on Friday, according to a daily Treasury Department statement.

The debt jumped from $19.8 trillion to $20.1 trillion after Congress suspended the debt ceiling for three months, allowing the Treasury to borrow again on the open markets.

For months, it had been using off-book extraordinary measures to keep from defaulting. Since President Trump signed a bill including the debt-limit lift Friday, it was able to start unwinding those measures with regular borrowing and increase the debt.

Posted in Debt, Politics |

Paul Ryan calls Democrats’ debt ceiling proposal ‘ridiculous’ and ‘unworkable’

CNBC/Jacob Pramuk/09-06-17

The top Senate and House Democrat on Wednesday said their party will support an aid package for Hurricane Harvey combined with an increase in the debt limit for three months — a proposal that House Speaker Paul Ryan called “ridiculous” and “unworkable.”

The offer from Senate Minority Leader Chuck Schumer and House Democratic Leader Nancy Pelosi comes as lawmakers face end-of-September deadlines to avoiding risking default on the national debt and funding the government.

Pairing disaster aid with the often politically contentious debt ceiling vote is seen as making it easier for Congress to raise the debt limit. The House plans to take up the Harvey aid package on Wednesday, though some conservatives have said they will resist combining it with a debt ceiling increase.

PG View: Negotiations seem to be off to a great start . . .

Posted in Politics |

Looming debt ceiling deadline pushing some U.S. fund managers to cash

Reuters/David Randall/09-01-17

A potential standoff over the U.S. federal debt ceiling is raising alarm bells among fund managers who fear a repeat of 2011 when a protracted showdown over increasing the government’s borrowing limit and subsequent downgrade of U.S. credit quality led to a more than 15 percent slump in the S&P 500 stock index.

U.S. investors are raising cash and buying protection, bracing for a messy fight ahead of the Treasury Department’s Sept. 29 deadline to raise the debt limit, a legal cap on how much the U.S. government is allowed to borrow.

Failure to increase the debt ceiling could lead to a recession and prompt the first significant sell-off of the Trump administration. The benchmark S&P 500 has not fallen by 5 percent or more in over a year, the longest streak without such a decline in more than 20 years.

PG View: Given the current trends in the dollar and gold, I’d opt for the latter as my preferred safe-haven . . .

Posted in Debt, Politics |

Mnuchin says Harvey aid package could impact debt ceiling

MarketWatch/Robert Schroeder/08-31-17

Treasury Secretary Steven Mnuchin said Thursday that aid for Hurricane Harvey relief could impact the timing of the need to raise the debt ceiling. Mnuchin said Sept. 29 remains the date by which Congress should raise the borrowing limit, but added that Treasury’s spending will be affected in September by an aid package. “There could be some impact of a couple of days,” he said.

Posted in Debt, Politics |

Risk-off trades are climbing after North Korea’s missile launch

BusinessInsider/Elena Holodny/08-29-17

Investors are pulling into safe haven assets after North Korea’s missile launch.

Gold climbed to its highest level this year earlier in the day, touching $1,326.08 per ounce.

The Japanese yen, Swiss franc, and US Treasurys are rallying Tuesday morning, as well.

…”North Korea’s provocations have added to fuel to the fire that was already burning,” Marc Chandler, the global head of currency strategy at Brown Brothers Harriman, said of the dollar.

Posted in Geopolitical Risks, Gold News, Gold Price, Gold Views, Politics |

Four reasons why a shutdown is more likely than not to happen

Washington Post, via Denver Post/Amber Phillips/08-25-17

President Donald Trump addresses supporters during a rally in Phoenix on Tuesday. Speaking of his plan to build a wall along the Mexican border, Trump said, “If we have to close down our government, we’re building that wall.”

At this point, it’s not really a surprise that a government shutdown is in the realm of possibility. Congress has faced the threat of one every fall for at least the past four years, since the government shut down in 2013 over Obamacare.

But this year, the threat is more serious, say budget experts, for one reason: President Donald Trump. He badly needs a legislative victory, and he flat-out said this week he would risk a shutdown to get funding for his hallmark campaign promise, a border wall.

Overlay Trump’s potential intransigence on a Republican Party that has long brought itself to the brink of a shutdown, and you have more factors leading to a shutdown than at any time since, well, the last one.

“It’s completely unpredictable,” said Maya MacGuineas, the president of the bipartisan Committee for a Responsible Budget. “A negotiation that one could have seen the outlines for the resolution just got a mini bomb tossed into it.”

PG View: The unpredictability bodes well for gold . . .

Posted in Politics |

Spoiling for a shutdown

Axios/Mike Allen/08-24-17

Top White House and GOP leadership officials tell us the chances of a market-rattling government shutdown are rising by the day — and were even before Trump threatened at his raucous Phoenix rally on Tuesday night to use a shutdown as leverage to get funding for a border wall.

Trump is dead serious about this fight, a senior administration source tells Axios’ Jonathan Swan, and the president’s talk is starting to spook markets.

Goldman Sachs, in guidance to investors last Friday, pegged the odds at 50/50. This strikes us as high, but the dynamics are ominous:

A top Republican source put the chance as high as 75%: “The peculiar part is that almost everyone I talk to on the Hill agrees that it is more likely than not.”

This may all come down to Trump’s mood. As Swan puts it: “Trump is spoiling for a fight and the [conservative House] Freedom Caucus haven’t had a fight for a while. That’s a dangerous dynamic.”

Posted in Politics |

Trump says raising debt ceiling ‘a mess’ after Ryan, McConnell didn’t tie it to veterans’ bill

MarketWatch/Robert Schroeder/08-24-17

President Donald Trump said Thursday that raising the U.S. debt ceiling is “now a mess” since House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell did not tie an increase to a veterans’ bill, as he asked. “Now we have a big deal with [Democrats] holding them up,” Trump said on Twitter. On Monday, McConnell said there is “zero chance” the debt ceiling won’t be raised. Treasury Secretary Steven Mnuchin has said the Treasury can keep paying bills through September.

Posted in Politics |

US stock futures in retreat amid Trump shutdown, Nafta threats

FT/Pan Kwan Yuk/08-23-17

US stocks are set to break their two day winning streak on Wednesday, with futures pointing to a lower opening after President Trump injected fresh uncertainty into the markets by threatening to shut down the government and pull out of the North American Free Trade Agreement.

…The moves come after President Trump lashed out at the media and his critics at a rally in Phoenix, Arizona last night, saying he would shut down the government if Congress did not pay for his proposed border wall. He also revived threats to end Nafta just days after officials from the US, Canada and Mexico began the laborious process of renegotiating the deal.

The comments quickly dashed hopes that Washington will return to business as normal following a couple of tumultuous weeks that were marked by escalating US and North Korea tensions, outrage over Mr Trump’s response to the violence in Charlottesville, the departure of top US CEOs from the president’s advisory groups and the ousting of chief White House strategist Stephen Bannon.

Posted in Markets, Politics |

Trump Has Decided to Remove Bannon, New York Times Reports

Bloomberg/Justin Sink/08-18-17

President Donald Trump has decided to remove Stephen Bannon from his role as White House chief strategist, though the timing of his departure is unclear, the New York Times reported.

The departure of Bannon, the chief executive of Trump’s presidential campaign and an architect of his election victory, removes a champion of conservative populism from the White House. The former chairman of Breitbart News, Bannon served as a link to the so-called “alt-right” movement attuned to the attitudes and opinions of the president’s base.

Trump is still debating the time and manner of Bannon’s exit and may still change his mind, the Times reported, citing two administration officials.

PG View: Why this is a risk-on event is lost on me.

Posted in Politics |

Donald Trump puts the great ‘Cohn trade’ in doubt

FT/Gillian Tett/08-17-17

When Donald Trump won the race for the White House last year, markets rallied. The so-called “Trump trade” rested on the hope that the US president would deliver business friendly reforms that would boost growth. This was a bit of a misnomer: what executives and investors have really been betting on for most of this year is a “Cohn trade”.

…The question that investors and executives are asking is whether that “Cohn trade” still works. It certainly looks like a higher risk bet. Never mind the fact that Mr Cohn and John Kelly, the president’s chief of staff, failed to stop Mr Trump from making his inflammatory comments this week about the Charlottesville protests. What is most telling is that this disaster happened at the very moment that Mr Cohn’s star was supposed to shine.

…This does not necessarily mean that all the investor optimism around the Cohn trade has disappeared. Stock markets are still flushed with oodles of central bank liquidity and boosted by moderate economic growth. And one important detail about the Cohn-cum-Trump trade that is often forgotten is that markets did not merely rally because business hoped reforms would get done. Executives were also excited about what might not occur under Mr Trump — Barack Obama-style regulatory creep.

Posted in Economy, Politics |

A Gary Cohn resignation would ‘crash the markets,’ management guru Jeffrey Sonnenfeld says

CNBC/Berkeley Lovelace Jr./08-17-17

The markets would crash if top White House economic adviser Gary Cohn resigns, Yale School of Management’s Jeffrey Sonnenfeld told CNBC on Thursday.

“I don’t want to be an alarmist, but there is a lot of faith that he is going to help carry through the tax reform that people are looking for,” Sonnenfeld said on “Squawk Box.”

“I think if he steps away, it would crash the markets,” he said.

PG View: Risk appetite has been diminished on yet another layer of political uncertainty, which is weighing on stocks and providing a tailwind for gold.

Posted in Markets, Politics |

Trump signs measure on Chinese trade practices, says it’s ‘just the beginning’

CNBC/Jacob Pramuk/08-14-17

President Donald Trump on Monday signed a memorandum that could lead to a trade investigation of alleged Chinese theft of intellectual property.

The measure directs U.S. Trade Representative Robert Lighthizer to look into options to protect U.S. intellectual property. It does not take any specific action against China at this point.

“We will safeguard the copyrights, patents, trademarks, trade secrets and other intellectual property that is so vital to our security and to our prosperity,” Trump said.

He added: “This is just the beginning.”

PG View: This move comes at a critical time. While protecting intellectual propoertty is really important, the U.S. is simultaneously seeking China’s help in deescalating the North Korean situation. This seems unlikely to help that cause. Amid a very real risk of a real war with North Korea, potentially starting a trade war with China seems less than prudent.

Posted in Politics |

A looming threat to the stock market’s calm is not even on investors’ radar

BusinessInside/Pedro Nicolaci da Costa/08-09-17

In normal times, a looming changing of the guard in the world’s most powerful central bank would be dominating Wall Street’s attention. But these are not normal times.

With headlines consumed by Donald Trump’s chaotic presidency — investigations into possible campaign collusion with Russia, the collapse of healthcare legislation promised for seven years, and now a diplomatic standoff with North Korea — the strong likelihood that Trump will replace Janet Yellen with Gary Cohn, the former president of Goldman Sachs who now leads the president’s National Economic Council, has barely registered.

“Any time you pick someone who’s got a deep academic track record, like a Bernanke, like a Yellen, you have a highly predictable setting for monetary policy,” Neal Soss, the vice chairman for fixed income at Credit Suisse Securities, said in an interview with Bloomberg TV.

…”Gary Cohn doesn’t have that kind of grounding, so from the point of view of Fed watchers there’s at least an initial phase where you have to view that as a less predictable figure and a less predictable policy stance.”

Posted in Central Banks, Monetary Policy, Politics |

Trump aides predicting ‘brutal’ September

POLITICO/Josh Dawsey/08-14-17

Inside President Donald Trump’s White House, no one seems to be looking forward to September.

Senior officials have described the coming month as “brutal,” “bad” or “really tough” because of the confluence of complicated issues — but they also say it’s pivotal to getting the presidency back on course.

…“The stakes are very high in September,” said Jenny Beth Martin, who leads the Tea Party Patriots, a conservative grass-roots group. “There is a lot to do in a very short period of time.”

PG View: September also marks the beginning of a cyclically strong period for gold. Now may be the time to buy.

Posted in Politics |

Shutdown risk grows as both parties balk on debt ceiling hike

Washington Examiner/Susan Ferrechio/08-08-17

Both Democrats and Republicans in Congress are poised to stand in the way of lifting the nation’s borrowing limit next month, increasing the chances of real problems for House and Senate leaders as they try to increase the debt ceiling by an end-of-September deadline.

House and Senate conservatives have long insisted that debt ceiling increases be accompanied by spending reforms, and that hasn’t changed this year, even under a Republican president who is insisting on a “clean” debt ceiling increase.

…Potentially more troubling for the prospects of a debt ceiling increase, the largest group of conservatives, the Republican Study Committee, announced Tuesday it will also oppose a straight increase without spending cuts.

That means if a “clean” debt ceiling hike is to happen, it will need support from a majority of Democrats. But this year, that may not happen.

Posted in Debt, Politics |

Republicans punt: Obamacare replacement vote delayed

MarketWatch/Jeffry Bartash/06-27-17

Republican Senate leaders on Tuesday delayed a vote on the party’s controversial replacement for Obamacare until after July 4 amid a frantic effort to round up enough votes and avert an embarrassing defeat.

Senate Majority Leader Mitch McConnell had hoped to hold a vote before the holiday, but Republicans lack enough support for a bill that’s been criticized by both the moderate and conservative wings of the party.

PG View: That means that the balance of the President’s agenda is delayed as well. The stock market doesn’t like it . . .

Posted in Politics |

May’s Tories Head for New Civil War Over Europe

Bloomberg/Tim Ross & Alex Morales/06-12-17

The U.K.’s governing Conservative Party headed for a fresh civil war over Europe as Theresa May prepared for a showdown with her lawmakers that could hasten the end of her premiership.

The botched election campaign opened a new front in the Tories’ decades-long internal conflict over Britain’s membership of the European Union. Some of May’s most senior ministers are plotting to soften her approach to leaving the bloc, potentially keeping the country in the single market and customs union. By contrast, hard-line Brexit supporters are determined to force through the prime minister’s plans for a clean break.

Posted in Politics |

Brexit at risk as Jean-Claude Juncker warns negotiations can only begin when Britain is ready

Telegraph/Patrick Sawer & Christopher Hope/06-09-17

European Commission President Jean-Claude Juncker says he hopes there will be no “further delay” to the start of Brexit negotiations.

Mr Juncker said: “As far as the Commission is concerned we can open negotiations tomorrow morning at half past nine.”

He spoke after the EU’s chief Brexit negotiator said talks on Britain leaving can only begin when the UK is ready.

PG View: An already complex situation has become even more complicated and uncertain.

Posted in Politics |

Election results 2017: What does it mean for Brexit?

BBC/James Landale/06-09-17

Britain’s exit from the European Union has been plunged into uncertainty.

Theresa May has not secured the clear mandate that she sought for her version of a hard Brexit.

When she called the election, she declared: “Every vote for the Conservatives will make me stronger when I negotiate for Britain with the prime ministers, presidents and chancellors of the European Union.”

Well, she is not stronger.

She has fewer seats than she started with.

As a result, it will now be hard for the government – formed with the help of Northern Ireland’s DUP – to start talking to the EU in nine days time as planned without rethinking its strategy.

Posted in Politics |

May to forge ‘government of certainty’ with DUP backing


Theresa May has said she will form a government with the support of the Democratic Unionists that can provide “certainty” for the future.

Speaking after visiting Buckingham Palace, she said only her party could form a “legitimate” administration after winning the most seats and votes.

She said she would work with “friends and allies” in the DUP to take forward Brexit, saying “let’s get to work”.

The Tories are eight seats short of the 326 needed to command a majority.

Posted in Politics |

Pound slides and FTSE 100 rises as UK faces a hung parliament

FT/Roger Blitz, Michael Hunter & Michael Mackenzie/06-09-17

The pound fell more than 2 per cent and prompted a sharp divergence in UK equity prices after the general election result deprived Conservative prime minister Theresa May of a parliamentary majority, plunging the country into political uncertainty less than two weeks before Brexit negotiations start.

…The uncertainty created by the election result ahead of the country starting negotiations with the EU over leaving the trading bloc was primarily being expressed in currency weakness.

“We must consider that a political risk premium will hang over the pound for the foreseeable future,” said Stephen Gallo, a foreign exchange strategist at Bank of Montreal. This will “put a ceiling on the pound”.

Posted in Politics |

UK exit polls deal a blow to sterling

FT/Katie Martin & Robin Wigglesworth/06-08-17

The exit polls are in. They suggest the Conservatives are on track to win 314 seats, with 266 to Labour and 14 to the Liberal Democrats. That means the Tories are shy of a majority, and we are heading for a hung parliament.

Sterling has taken a heavy blow, falling 1.4 per cent on the day to $1.2719 at just past 5pm in New York, which would be its biggest one-day drop since early October.

PG View: Gold is nonplussed, trading little changed from where it spent much of the day.

Posted in Politics |

U.K. voters hit the polls, buzzed by uncertainty of the outcome

MarketWatch/Victor Reklaitis/06-08-17

Brits headed out Thursday to vote in a general election that’s still managing to get some people keyed up, even though it’s the third time in just over two years they’ve been called to the ballot box.

“It could be very surprising, the result. So we’re living more on excitement today, than actual results,” said an elderly woman voting in central London who declined to give her name.

“We’re all feeling very odd in England at the moment, because we’re not sure what’s going to happen,” she said.

Posted in Politics |