Trump’s dinner last night could tip a new tax cut plan coming tonight

Tuesday’s post will have some high-octane speculation dealing with tonight’s State Of The Union speech by President Trump.

First all the major stock indices jumped in the last 5 minutes of trading Monday. For instance the Dow Jones rose almost 100 points as traders banged the close.

This could mean that a rumor went through the market that professionals wanted  in before the news broke.

Second bit of news: President Trump and Treasury Secretary Steven Mnuchin had dinner at the White House with Federal Reserve chief Jerome Powell and Fed Vice Chairman Richard Clarida.

While the president has taken the Fed chief to task in the past on Twitter for his overzealous rate rising plan, this was the first time since Trump appointed Powell that the two met in person at the White House, according to the Federal Reserve spokesperson.

So I understand that the president would probably not have a State Dinner scheduled for the night before the SOTU, but its curious these four would get together for a White House dinner prior to the speech.

That is unless the conversation was to brief the Fed leaders on a change in fiscal policy, which would impact the Fed’s monetary policy.

So my speculation is that we will see another tax cut proposed by the president in the speech. It may be on both the corporate and the personal sides. This makes sense since his first tax cut has worked its way through the economic cycle, and he could use the bump going into 2020 with a mid- to late-year stimulus plan.

How any legislation from the White House would get through the House in this election cycle is problematic at best. However, if the Democrats in the House deny a tax cut leading up to 2020, that could be the death knell for the party in 2020.

We will see in a matter of hours whether I am right.

Stay tuned

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Looks like the Fed overshot again with rate hikes

As I wrote Wednesday morning prior to Fed chief Jay Powell’s announcement of standing pat on Fed funds rate.

Stocks and the gold price took off on the news that the Fed statement took all the language out of their plan to look at raising rates, due to recessionary fears. The Fed is currently at 2.5% on the rate.

What does this mean? Well appears that Powell & Co. may have overshot — once again — restraining lending too much and may put the US economy into negative reading on growth.

As I wrote at the time, the December rate hike was not needed since the Fed had already taken much of the air out of the economy through pricking the asset bubble in stocks.

Now due to the government shutdown we will not get our first reading of fourth quarter growth, which would normally be out Thursday, until later on in the month. However the Fed probably had a good read on that GDP number, which is probably below 2% growth.

 

The gold standard and the Fed

Fed chair Jay Powell is scheduled to give a press conference Wednesday after announcing that the central bank will hold rates steady as expected.

Powell’s comments and the language in the statement on future hikes will be what markets are looking at for direction.

We all have seen that the Fed has looked under every rock in the economy to find inflation and has come up empty. It is still trending below the 2% threshold that the Fed uses to assess its policies.

Yes Powell & Co. prick the asset bubble know as the stock market to curtail that inflationary aspect by jawboning future rate hikes much to President Trump’s ire.

When talking about the Fed it was very interesting that President Trump retweeted Tuesday a Laura Ingraham post (below).

The post links the US economy to the “Gold Standard”. The president replies, “So true and not even close.”

Trump hinted during the presidential campaign he would like to go back to a gold standard for the dollar, which would send gold prices soaring in order to sustain that move.

However, gold prices over the last 10 days have risen close to $30 an ounce and broken through the long-held sub-$1,300 mark.

We also have this drop from Dec.12, 2018 No. 2619 answering a query if we have the gold:

Yes.
Gold shall destroy FED.
Q

So we have multiple mentions of the Fed and gold from various sources. Might it be wise to pick up some of the “ancient relic” as so many modern pundits call gold?

Not advising either way, but gold appears to be having a moment. On Nov. 13, 2018 gold was trading at $1,213 an ounce. Today it is $1,318 an ounce.

Hmm.

Jobs number shows America First trumps China tariff fears

====================SPECIAL SATURDAY POST========================

The 312,000 new jobs reported for December is a huge green flag for the Trump administration.

To reach that level — almost double the Wall Street estimates — this late in the economic cycle is off the charts. Firms added 2.64 million employees in 2018 with wages climbing 3.2% for the year.

Fed chair Jay Powell blinked yesterday in a speech in Atlanta by making a more dovish statement on 2019 rate rise. As well he should. Powell should take a look at the carnage his December rate rise caused in the stock market.

His talking about the hike in the fall and his press conference comments after the rise took markets took the Dow Jones index the woodshed during the last quarter of 2018.

I have often said that Powell is tilting to windmills searching for inflation in this economy, which at 1.8% is below the Fed’s 2% target. He has pricked the asset bubble of stocks to take away the middle class wealth effect and also hurt them with cheapening home values as mortgage rates rise.

The Fed needs to understand that most of the wage increases in 2018 — while healthy — are more a mechanism of raising minimum wage in many states than overall salary increases for the US workers.

So the inflationary value of the 3.2% is muted at best due to the expendable income these households have.

While the naysayers on Wall Street are still predicting an economic slowdown here in 2019 due to tariff tiffs, Trump’s nationalistic agenda of bringing jobs back to the US is resonating with US companies.

Certainly the employment gains are testament that US companies don’t see China and a trade war as a detriment, in fact it may be creating a boost as more manufacturing jobs are being created here.

I’m sure Powell took notice of the stock market’s explosion higher on his more dovish stance. The 747-point rise erased all of the bad Apple news on Thursday and perhaps set up a new takeoff for shares to soar.

Listen we need to go back to the days when three percent of the US population knew who the Fed chairman was and take ego and hubris out of the monetary equation.

Markets losses were a Democratic election tactic

Despite a national tax cut and record low unemployment with marginal wage gains, stocks had their worst year since 2008.

The Dow Jones industrial average lost 5.6 percent from the beginning of October to year’s end.The index hit 26,951.81, on Oct. 3 before crashing 3,624.35 to close out 2018 at 23327.46.

I’ll get to the other numbers down below, since you can read them in any stock story today. What I want to tell you is that there was no economic or monetary policies that precipitated such a fall one month prior to the midterm elections.

You see how I tied those two together. I believe part of the Democratic Party’s plan was to take away from President Trump his ability to ballyhoo the market gains under his administration. Remember in 2016 and 2017 the S&P 500 soared 9.5 percent and 19.4 percent.

Make the American people question his tariffs and other trade dealings with China and Europe. This makes sense from the left, since most have a globalist view as witnessed by their actions on the border wall. Open borders for immigration and unfair trade pacts for America are their bread and butter.

I have touched on this last week as it was going on. But the volatility in the markets in the last quarter of the year shows that this was a battle for votes. The hundreds of points moves in the market on almost a daily basis as some institutional investors tried to move the market higher based on fundamentals, only to be licking their wounds at the end of the session as big liberal left money managers booked gains and then sat on the sidelines.

Federal chief Jerome Powell’s actions seems to be working in cahoots with the left. Where was/is the inflation that the Fed appears to be fighting? It’s not there with crude falling and wages only moving up marginally.

Only if you take stock market gains as an inflationary bubble, do you have a modicum of intent. But those profits are only realized when you sell, not when they are paper profits.

The second mandate of the central bank is to achieve full employment, which we basically have now. But if you continue to raise rates — four times last year — you will curtail new hirings as the cost to bring new employees outweight the benefit of staffing up.

In the broader markets, the S&P 500 index fell more on a percentage basis to close the year off down 6.2 percent. The Nasdaq fell 3.9 percent as the high-flying tech giants fell from grace as hedge funds were forced to sell the good to pay for the bad bets made in 2018.


Have a wonderful New Year’s Day and a better 2019. Please like and retweet if this post is informative to you.