Sunday, September 20, 2020

The Most Expensive Rigged Election In World History

The inconvenient truth of the past four years is that Banana Republicans have become far too addicted to rigged markets and rigged elections. Corruption is a slippery slope, especially for the morally compromised. Going into this 2020 election, The Grand Old Circle Jerk is record lubricated for what comes next...

Four years ago this week, Trump warned that the Fed's "big, fat, ugly bubble" would burst as soon as Obama left the White House. That never happened, however due to his exceptional "skill", Trump went about increasing the size of that bubble by orders of magnitude. No one in the Republican camp apparently sees that as a problem. Why? Because the double standard between what a GOP president can get away with versus a Democratic president stands at a now ludicrous level.

Heading into election at this same time in 2016, the stock market was sagging. The momentum deflation trade was rolling over and the cyclical trade was lagging as global Brexit stimulus waned. Clinton was far ahead in the polls and looked all but certain to win the election. However, on October 28th 2016, days before the election, the FBI sent a letter to Congress stating that new emails had emerged from Clinton's private server back from her days at the State Department. She tanked in the polls. On the eve of the election the FBI closed the investigation, but it was too late the damage was done. On the night of Trump's improbable election, the futures crashed in Europe when it was announced he was elected. However, the Trump Team very quickly made it clear that they would be highly pro-Wall Street and that a big fat tax cut was on the way. By morning U.S. time, the futures were green. So began a 14 month straight line vertical rally into the tax cut.

Trump's approval rating peaked on the day of his inauguration in January 2017, but then it quickly crashed when it became clear that he was a circus clown of biblical proportions. When Trump fired FBI Director Comey in May 2017 and it became clear that the Russians had helped him win the election, his approval hit rock bottom. The Mueller investigation was launched. Trump spent most of 2017 doing everything possible to destroy Obamacare with the goal of freeing up that money to fund a massive tax cut for the ultra-wealthy. In late July 2017 however, his efforts to fully dismantle Obamacare were thwarted by John McCain who voted no to disabling the Act, while on his deathbed.

Undaunted, Treasury Secretary Mnuchin announced in late August that the tax cut was the next order of business. In what would be an eerie precursor to the 2019 repo rally, stocks ramped into the end of the year 2017. The week the tax cut came into effect, at the beginning of February 2018, the market crashed. It was called VixPlosion - the fastest spike in the VIX in history. 

As expected by Republicans, their tax cut was skewed entirely to the wealthy, while interest rates rose for the middle class. However, to make the tax cut appear FAR larger for the middle class and thereby to rig the mid-term election, Mnuchin had ordered the IRS to reduce paycheck withholdings. A mass deception that would not become widely realized until tax season 2019. 

January 10th, 2018:

 "The IRS is facing its first big challenge implementing the new tax law: deciding how much in taxes to withhold from millions of Americans’ paychecks. The agency is under pressure to take as little as possible so people will see big increases in their take-home pay ahead of this year’s midterm elections. But that would come at a cost: smaller or even nonexistent refunds next year, though millions rely on them to plug holes in their family budgets."

As is continually unexpected by Republicans, their tax cut for the rich and higher interest rates for everyone else, was highly deflationary, which is why by the end of the year 2018, stocks had tanked -20%. So what to do, Trump picked up the phone and ordered Chairman Powell to stop raising interest rates. In early January 2019, Powell "pivoted" and stocks once again skyrocketed.

The Mueller report of course was a total fucking waste of time and money. The FBI found unequivocal evidence of Russian election interference, however no direct tie back to Trump. The Keystone Kops were looking for the smoking letter wherein Trump implored his buddy Vlad to rig the election, but never found it. Shocking, I know. Emboldened by "no collusion" and a soaring approval rate, Trump immediately picked up the phone and ordered the Ukraine dictator to put out some dirt on Joe Biden's son, as a quid pro quo for direct financial aid which had already been approved by Congress. In the event, Trump was impeached by the Democrat House and exonerated by the Roman Senate. His approval soared as did markets. 

Going into the second half of 2019, all was going well for Trump's "greatest economy ever" which was entirely borrowed money, featuring a $1 trillion deficit in 2019, 4.6% of GDP, for a 2.3% growth rate. A recession at any other time in U.S. history. However, the stimulus gimmicks were only getting started. In August 2019, the financing of Trump's massive deficit started putting strains on the overnight lending "repurchase" (repo) market. The U.S. government was crowding out the credit market, as Econ 101 would expect. So what to do, the Fed stepped in to fully monetize Trump's deficit. That combined fiscal and monetary lubrication set off another year end rally deja vu of 2017. Which, similar to the 2018 VixPlosion melted up into early 2020 and then exploded in February at the COVID high.

And of course, the ensuing March crash forced the Fed to go ALL IN, to Trump's delight ahead of the 2020 election.

Which gets us to now, because deja vu of 2016 AND 2018, stocks are rolling over in front of the election.

What we notice from this chart of Trump's daily (Rasmussen) approval, is that stocks and his approval rating are highly correlated. When stocks rise his approval rises which makes people buy more stocks assuming he will get re-elected. However, once gamblers get over-lubricated, the market crashes.

In summary, this is the most expensive rigged election in world history. Which means that the Grand Old Circle Jerk is record lubricated for what comes next:

Any questions?