The only problem with our economy is Trump (and the GOP)Thankfully, the stock markets are all closed today. Yesterday's abbreviated session was another miserable down day. When I was much younger, I would get very worried when markets sank the way they have been lately. When you're young, it doesn't matter, unless you're foolish enough to lock in your losses by selling low. Eventually, if you're invested in strong companies, the prices always go back up to reflect values. Now I'm old and I'm not worried-- although if it take a long time to go back up...Trump's freaking out because he's afraid he's going to take the blame, having unabashedly hitching his political fortunes to a rising stock market. Now, with stock prices in retreat, he's looking for someone else to blame and he's "become increasingly fixated on the idea that one man is to blame for the recent rout: Jerome Powell, chairman of the Federal Reserve. After the Fed raised its benchmark interest rate on Wednesday, the fifth consecutive quarterly increase, Mr. Trump fretted to aides that Mr. Powell would 'turn me into Hoover,' a reference to the man who was president in the early years of the Great Depression. Mr. Trump has said choosing Mr. Powell for the Fed job last year was the worst mistake of his presidency and he has asked aides whether he has the power to fire him. But the volatile stock market, which just posted its worst week since 2008, is falling in part because of Mr. Trump’s own policies, including an escalating trade war with China, a shutdown of the federal government and the fading effects of the $1.5 trillion tax cut Mr. Trump ushered in at the end of 2017."Before the markets closed yesterday, CNN was already reporting that Treasury Secretary Steven Mnuchin's attempts to calm investors backfired."
Mnuchin on Sunday released an unusual statement to say he had called the CEOs of the country's biggest banks. He said the executives assured him their banks are healthy and have "ample liquidity" to lend to consumers and businesses. "Markets continue to function properly," he said.The major bank CEOs who spoke by phone Sunday with Mnuchin were "totally baffled" by the session, according to a person familiar with the call, who said the executives found the encounter puzzling and largely unnecessary."It was totally out of left field and an odd thing to do," the person said, describing the timing of the call-- on a Sunday before markets opened-- as strange. All were taken aback by the public nature of Mnuchin's tweet.On Monday, shares in JPMorgan Chase, Wells Fargo, Goldman Sachs, Bank of Americ and Citi all lost ground."This is the type of announcement that raises the question of whether Treasury sees problems that the rest of the market is missing," Cowen & Co. analyst Jaret Seiberg wrote in a note to clients. "Not only did he consult with the biggest banks, but he is talking to all of the financial regulators on Christmas Eve. We do not see this type of announcement as constructive."Mnuchin plans to convene a call on Monday with the President's Working Group on financial markets, which includes the chairman of the Federal Reserve and top market and business regulators.Stocks are on pace for their worst December since the Great Depression. On Friday, the Dow ended its worst week since 2008. The Nasdaq is in a bear market.Adding to the shaky start on Monday: The partial shutdown of the federal government will continue at least until Thursday, and possibly into January. Although the closure of some government services isn't expected to hurt the economy, the inability of lawmakers and President Donald Trump to put politics aside to enact a budget is unnerving to investors."The confusion and disorder surrounding this week's spending debate suggest fiscal deadlines in 2019-- including the debt limit deadline, which we expect to fall between August to October-- could be more disruptive than they have been since the 2011-2013 period," Goldman Sachs economists wrote in a research note.The stock selloff in part reflects concern about a looming slowdown in economic growth. Investors' worries were exacerbated last week when the Federal Reserve signaled no slowdown in its plans to continue raising interest rates next year. The market is also reacting to the Trump administration's trade war with China. The trade war helped knock China's stock market into a bear market over the summer.Still, some market veterans argue that a panicky Wall Street is prematurely pricing in a recession that may not hit until 2020.
Trump was lucky when he inherited a lot of money from his father and then went bankrupt 6 times and was bailed out with taxpayer dollars. More recently, he inherited a very strong economy from President Obama. His policies have been chipping away at what Obama put in place-- especially all the job growth. Now Trump's failed policies have killed the goose and no one doubts he's bringing on the first recession since Bush brought on a doozy with similarly bad policies. I wonder how far the market has to fall, how much pain investors have to feel, before enough Republican senators tell the Democrats to go for impeachment and that they'll be there for conviction. Funny how Republicans are likely to prioritize the markets more than the evidence Mueller finds.Sunday night I went to a Christmas party one for my financial advisors threw. One of her clients is former GOP heavyweight, now retired from Congress but still a relatively young and energetic man. Unprompted, he walked over to me and told me Trump had offered him a pick of a dozen top ambassadorships-- from Russia and Australia to Brazil and Argentina. He was a foreign policy wonk in Congress and he would probably make an excellent ambassador. He told me he was really excited-- until he was told flatly that his job was to represent Trump, not America. He passed on the opportunity. Tighten your belts; this ride is going to get much worse before it gets better.