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Never Before Has Politics Been So Important to Markets

Dec 17, 2016

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BALTIMORE - Stocks hesitated on Wednesday after the Fed announced its puny rate increase.

Then, yesterday, they continued their march to glory, coming to rest just 150 points shy of the Dow's 20,000 mark.

And the dollar hit a 14-year high as cracks widened in the huge emerging-market bond market.

But our thoughts turn to poor Christine Lagarde...

The IMF director and Deep State operative has been in French court defending herself against the charge of 'negligence' with the taxpayers' money.

No kidding.

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Epic Waste

The details are complicated...and don't matter anyway. It's the accusation that is so stunning.

If you locked up every public official who has been negligent with the taxpayers' money, Washington's expensive restaurants and cheap bars would be empty.

And the prisons would be crowded. Almost every politician, department head, and flag-rank officer would be behind bars.

The amount in the Lagarde case is trivial, just $450 million. The Pentagon wastes that much every day.

A recent Reuters investigation revealed that the US military had 'lost' $8.5 trillion over the last 20 years, in what it described as 'epic waste'.

Let's see... If we did the math right, that's $1.1 billion a DAY.

Donald Trump is on the case, though.

He's already tweeted his opposition to cost overruns on Air Force One and on the F-35 fighter jet.

Trigger Warning

And now it's time for a trigger warning: The Diary is no 'safe space'.

Universities may be able to get away without challenging the silly ideas of students and faculty. Blah...blah...blah - one bad idea after another. Who knows? Who cares?

But in the world of money, bad ideas are marked to market. Dumb ideas sell off. Especially those that 'everybody knows' are right.

There's no profit in knowing what everyone else knows or believing what everyone else believes - not in the investment world. Those positions are fully bought...and almost always wrong. It's finding something others don't know about...or finding where they are wrong...that pays.

'Find the trend whose premise is false,' says one of the most successful speculators of all time, George Soros, 'and bet against it.'

You don't find those false premises without looking for them. And you don't see them at all unless you're willing to confront your own prejudices and desires.

Over the next few days, we will be examining some of our readers' fondest hopes.

Can you really negotiate 'better trade deals'? Will tax cuts 'pay for themselves'? Will infrastructure 'investments' improve productivity?  Can anyone 'make America great again'?

And yes, we will roll these questions over, scratch them on the stomach, and have a good look.

Specifically, we're going to look more carefully at Donald J Trump - trying to figure out what he will do...and what it may mean...before he does it.

Why?

Because never before in our lifetime has politics been so important to markets. That is partly because politics intrudes on money more aggressively than ever before - setting the terms of trade and the price of credit and indirectly bumping into stock and bond prices, too.

And don't forget the Fed's trillion-dollar wealth-distribution plans disguised as 'economic management'.

Devil or Saviour?

And there's another important reason politics matters.

The feds have created a monster. Now, they are afraid it will get loose.

They are desperate to keep it happy...well-fed...and, most importantly, locked up. When this $35 trillion Frankenstein gets loose, there will be hell to pay.

Many believe Mr Trump is the saviour they have been waiting for. Others believe he has horns and a tail.

What do we think?

We don't know. Maybe he is both. Maybe neither.

We squint and look carefully. Wait... What is that in his hand?

A key!

Uh-oh...

Regards,
BILL BONNER Founder, Agora Inc
Bill


Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.

Disclaimer: The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

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