March 2025 DDD

[ducati916]

Treasury Secretary Scott Bessent and other Trump administration officials argue that the U.S. job market has been overdependent on government and "government-adjacent" fields, making the economy they inherited weaker than it would appear at first glance.

• They have a point.

Why it matters: In the cyclical sectors that rely purely on consumer and business demand, job creation has been strikingly weak over the last two years. This raises worries about what could happen to the labor market next.

• Administration officials see this as justification for what Bessent calls a period of "detox" for the economy, and their willingness to risk pain to achieve it.
• Economists attribute disproportionate growth in health care and government jobs to the population's aging and to a catch-up effect from pandemic job losses. But some do see overreliance on these sectors as evidence of underlying weakness.

By the numbers: Over the past two years, employment by government (including federal, state and local), the health care industry, the social assistance sector, and private education has risen by 3.2 million jobs, a 6.7% jump.

• Within health care, major drivers of job growth were home health care (employment up 16.2%), nursing and residential care (9.6%), and hospitals (7.6%).
• All other sectors' employment rose by a combined 948,000 jobs, only a 0.9% rise. That's not quite what one would expect in a private-sector recession, as Bessent has put it (employment generally contracts in a recession), but it isn't great, either.

State of play: The Trump administration and Elon Musk's DOGE are looking to cut federal head count and pushing spending cuts that could affect the flow of government money to both state and local governments.

• Medicaid cuts contemplated in House Republicans' budget framework could reduce funding that ultimately is the revenue source for hospitals, nursing homes, and other health care providers.
• Moreover, some of the state and local government hiring was a catch-up effect after the 2021-2022 period when they struggled to attract workers amid a private-sector hiring explosion.
• All of that points to these sectors no longer creating a job growth tailwind. In a note this week, Goldman Sachs economists said they expect hiring in health care, education and government to slow to 15,000 jobs a month in the second half of the year, down from 100,000 now.

What they're saying: "In short, the sectoral composition of job growth does not suggest a rosy outlook for the rest of the year," wrote Preston Mui, senior economist at Employ America earlier this month.

• "Cyclical and rate-sensitive industries are stymied by a Fed that is reluctant to cut rates until they are certain inflation is going to continue lower, which will be difficult due to the day-to-day variation in tariff policy."
• "Meanwhile, job growth in acyclical industries is either slowing, outright negative, or likely to slow later this year."

Two months into his term, President Trump is growing more defiant, creative and ruthless in his pursuit of a central campaign promise: exacting revenge on his political enemies, Axios' Zachary Basu writes.

• Why it matters: From Day One, Trump has delighted in settling scores through the stroke of his pen — breathing life into his MAGA mantra: "I am your retribution."

The big picture: In the final days of the 2024 campaign, Axios identified a list of perceived adversaries who fit what Trump ominously described as "the enemies from within."

• As president, he has taken steps to retaliate against virtually all of them.
• White House principal deputy press secretary Harrison Fields told Axios: "As President Trump has made clear, his only retribution is success — and his historic achievements and soaring approval ratings prove it."

Political opponents​

The Biden administration: Trump has revoked security clearances from former President Biden, Secretary of State Tony Blinken, National Security Adviser Jake Sullivan and Deputy Attorney General Lisa Monaco.

• The Biden family: On Monday, Trump announced he was terminating Secret Service protection for Biden's son and daughter, Hunter and Ashley, "effective immediately."

Former Trump officials: Trump also revoked Secret Service protectionfrom former national security officials who criticized him: Mike Pompeo, Brian Hook and John Bolton, who have all faced credible assassination threats from Iran.

• Gen. Mark Milley: Trump despises his former Joint Chiefs of Staff chairman, who called the president "fascist to the core" in 2023. Trump yanked both his security clearance and personal security detail.
• Former Rep. Liz Cheney: Trump claimed this week that Biden's preemptive pardons of Cheney and other members of the Jan. 6 committee are "void" because of Biden's alleged use of an autopen.

​

Today's N.Y. Post cover

Media and entertainment​

White House Correspondents' Association: The White House took control of the daily makeup of its press pool from WHCA.

• Associated Press: The White House barred the AP from accessing events in the Oval Office and on Air Force One for refusing to use the name "Gulf of America" in its coverage.

CBS, ABC and NBC: Under hard-charging chairman Brendan Carr, the FCC has launched an investigation into alleged "news distortion" during a "60 Minutes" interview with then-Vice President Harris, which CBS denies.

• The FCC also reinstated complaints against ABC for its handling of the presidential debate between Trump and Harris, and NBC for allowing Harris to appear on "Saturday Night Live" without equal time for Trump.

Legal foes and bureaucrats​

Prosecutors: He fired and demoted federal prosecutors and FBI officials involved in the investigation of the Jan. 6 riot, while pardoning thousands of his supporters who were convicted for breaking into the Capitol.

Big Law: At the start of an extraordinary campaign against private practice law firms, Trump revoked the security clearances of lawyers at Covington & Burling who offered pro bono legal advice to former special counsel Jack Smith.

• Trump then targeted Perkins Coie, stripping security clearances and blacklisting the firm's lawyers because of the firm's commission of the Steele Dossier and other work on behalf of Democrats in 2016.
• Last week, Trump signed an executive order targeting New York firm Paul, Weiss for its former employment of Mark Pomerantz, who was involved in the Manhattan DA's Trump investigation.
• He then withdrew that order yesterday after Paul, Weiss agreed to "dedicate the equivalent of $40 million in pro bono legal services" to support the Trump administration on "mutually agreed projects."

It can be difficult to remember that the Mar-a-Lago Accord hasn’t happened yet. Leaders haven’t been convened to Palm Beach, and there’s no agenda for what such an accord could include. But that hasn’t stopped people talking or journalists writing about it. This shows the total number of stories (from all sources) mentioning a “Mar-a-Lago Accord” each day on the Bloomberg terminal for the last year:


But what is it, and can it really happen? There are huge variations, but the common themes seem to be that an accord would be an international agreement designed to:

1. Weaken the dollar, and
2. Prompt far more foreign direct investment into the US.

The overarching aim is to bring back manufacturing jobs at a price that the US can afford or, alternatively, to roll back globalization so that the US can escape its greatest downsides (inequality and the hollowing out of the working class) without sacrificing its upsides (low inflation, strong asset prices and low interest rates). Tariffs should be viewed primarily as a toll to get there, and also as a fallback option if an accord can’t be reached.

These are wholly reasonable aims, for which the administration has a mandate. It’s not clear that they’re achievable, or that other countries have any reason to go along with them. Adam Tooze of Columbia University describes the idea as “on its face a far-fetched policy proposal” in which it’s easy to pick holes. He suggests that the notion is only taken seriously because “we are all struggling to find some kind of rational purchase on the unhinged situation created by the Trump administration.” These are strong words, but the retreat of stocks in the last few weeks is in large part driven by investors coming around to his point of view.

So how does the US propose to make this happen? Various possibilities include:

1. Threats of tariffs.
2. A sovereign wealth fund to manipulate the currency and replace flows of capital from abroad.
3. Coercion on defense; those who agree can benefit from the US security umbrella while those who don’t cannot, or as Stephen Miran, chair of the Council of Economic Advisers, put it: “Countries that want to be inside the defense umbrella must also be inside the fair trade umbrella.”
4. Big cuts to the federal budget to reduce the deficit.
5. Putting pressure on the Federal Reserve (under new leadership next year) to cut rates. (The president opined on Truth Social that “The Fed would be MUCH better off CUTTING RATES as US Tariffs start to transition (ease!) their way into the economy.”)
6. And possibly Tobin transaction taxes, to create a cost for holding US dollars as reserves.

We’ve seen action on the first four already, although with minimal detail on all of them. The fifth, as foreshadowed by the presidential overnight communication, would be most unwelcome on markets. Beyond that, implementation of any of this promises to be a huge challenge.

That’s because, first, the US dollar isn’t as massively overvalued as it was at the time of the 1985 Plaza Accord (struck at a New York hotel that subsequently belonged to Trump for a while), which is the model for an international agreement to weaken the dollar. That makes it harder to bring down in a significant way. On a real trade-weighted basis, the currency is certainly very expensive, but not as extreme as 40 years ago, according to the Fed’s own index:


Further, Plaza involved only the biggest countries in the then-developed capitalist world. The globe has since gotten bigger, making it far harder to find a deal that everyone can live with. While Plaza worked for the US, it wasn’t so great for Japan, which entered a long-lasting slump a few years later. That won’t be lost on those who would stand to lose from a weaker dollar, such as China.

Tiffany Wilding, economist at Pimco, also points to the growth of foreign exchange markets since Plaza:

The sheer scale of the interventions required to create a meaningful dollar devaluation is staggering. Currency markets today see daily average turnover of some $7.5 trillion, according to the Bank for International Settlements. Even after adjusting for inflation, that’s about five times greater than the volume in 1989, in the years after the Plaza Accord.

Any agreement at Mar-a-Lago will not be able to weaken the dollar anything like as much as Plaza did by intervention alone.

Another problem is inflation. Globalization over time minimized it; and public tolerance for rising prices, we’ve learned in the last four years, is non-existent. Further, the concern is less inflation — slowing the rate at which prices are rising — as much as the price level. There’s a case that tariffs don’t create inflation, and the debate has already entangled the Fed’s Jerome Powell. It’s impossible to deny that they create a one-off rise in the price level. Using tariffs to create leverage, or as a source of revenue, is not the simple call it appears. It might hurt US counterparties more, but it will create much political pain at home.

Marko Papic of BCA Research points to a range of polls showing that voters care deeply about prices, while trade doesn’t matter to them. The political difficulty created by a spike in prices after Trump levied tariffs would be hard for the administration to navigate:


The greatest problem for any deal is getting others to agree. This is where the US may have already overplayed its hand. One widely circulating version of a MAL Accord had Europe agreeing to rearm by buying US weapons, in return for avoiding tariffs. But Trump 2.0 has shown itself so willing to withdraw from the Atlantic alliance that now even Germany’s once-staunchly Atlanticist new chancellor says the country needs “independence” from the US. European, not American, arms manufacturers are benefiting. The first act of Canada’s new prime minister has been to discuss defense with European leaders. Rather than accede to US demands, the international response so far has been to look for alternatives. This is understandable, as it grows ever more politically unpalatable for foreign leaders to rely on the US — and a range of countries now appear to be planning their own nuclear deterrents, which makes the security umbrella less important still.

Finally, Trump’s very unpredictability increases his leverage, but also tends to deter people from feeling confident in reaching an agreement with him. Former mentor and colleague Martin Wolf put it this way in the Financial Times:

He has, after all, abandoned Ukraine, put the commitment to NATO into doubt and mounted an assault on Canada. Is this administration capable of making a deal any sane person or country should trust? I think not.

The upshot is that while the US plainly would prefer some help weakening the dollar, the chances are that it will actually impose the tariffs. Trump refers to April 2, when his plan for reciprocal tariffs will be unveiled, as “Liberation Day.” Peter Tchir of Academy Securities argued that global tariffs will mean a “rocky road ahead for the economy”:

There is a lot of “chatter” about uncertainty. My fear is that the market isn’t pricing in what seems more and more certain — global tariffs shocking global supply chains.

Quite. Plenty of people on Wall Street are attracted to the various versions of the Mar-a-Lago Accord that have been circulated. Very few share the president’s enthusiasm for tariffs. It’s best to brace for them to happen.



Google’s $32 billion deal to buy the Israeli startup Wiz Inc. this week was an instant head-turner. It’s among the biggest deals so far under a new administration expected to turbocharge dealmaking. It was also about time, as the expected surge hasn’t materialized. Two months into Trump’s second term, the value of announced mergers and acquisitions involving US companies stands at about $387 billion. That’s basically flat, down roughly 2% compared to this point in 2024:


A recent survey of dealmakers by Gladstone Place Partners found that 63% saw the Trump administration as the macro factor that would have the biggest impact on M&A in 2025 — but his aggressive tariff approach has generated enough uncertainty to counteract this.

Tariff confusion also makes it harder for the Fed to cut rates, crucial to the borrowing and debt-servicing costs for the private equity firms at the heart of these deals. But while the growing doubts make sense, SLB Capital Advisors’ Scott Merkle says that private equity firms and investment bankers are talking about upcoming activity:

Deals in the pipeline that are viable at prevailing rates should move to closing, and the possibility of lower rates ahead may provide another push for M&A activity down the road.

While Trump can’t cut rates, his influence on easing regulatory constraints is unmatched. But progress has been painfully slow. Meaningful deregulation would make a big difference. A&O Shearman found that despite last year’s M&A recovery, more deals were frustrated by antitrust authorities than in any of the previous four years, with a striking 50% rise in transactions abandoned due to antitrust concerns. Trump’s unbridled executive power should make it easy for him to restore confidence.

So far, the Federal Trade Commission isn’t loosening up as hoped. Bloomberg News reported earlier this month that the body is continuing its probe on Microsoft Corp. It’s unclear how this ends, but the optics surrounding the Justice Department’s desire to proceed with a Biden-era goal to break up Google’s business is not encouraging. This shouldn’t be that surprising. A&O Shearman’s report suggests that as much as regulatory easing is expected, a strict approach to M&A in sectors such as technology will remain.

The broader macro backdrop also matters. Rising recession fears and stock market downturns are troubling signs for dealmaking. BofA’s head of US small and mid-cap strategy, Jill Carey Hall, points out that good years for M&A also tend to follow good years for market returns — like 2024. However:

Deal activity tends to be higher when growth expectations for small caps are higher. And while growth expectations have improved, they’re still below average, so not as many great growth prospects in small caps relative to history. M&A is also correlated with economic growth, and economists expect growth to remain healthy but to moderate in 2025.

With some clear-cut action on deregulation, this might still be a big year of deals. Resolving the tariffs uncertainty would also help. Untile then, dealmaking won’t deliver for smaller companies as had been hoped.

I’m not a huge fan of seasonal trends in the stock market. Not all of it is entirely useless, but a lot of it is.​

Today I want to shine a light on one particular brand of signal that I do find compelling. I like data that is based on our behavior, not the calendar.​

This chart is Exhibit A (sorry, couldn’t help it) of what I’m talking about, and it comes from SentimenTrader via Daily Chartbook. It shows what happens when the S&P 500 closes at a 6-month low and then experiences consecutive days where 90% of the index is positive.​

​

Why do I pay attention to stuff like this? Because the crowd behaves the same today as it did one hundred years ago. It’s the only data from the 30s and 40s that has any relevance.​

The table shows an environment where the collective mindset of the crowd goes from, “Oh ****. Things are bad and getting worse,” to, “Everyone back in the pool!”​

This type of price action has happened 17 times in the past. So pretty rare, but not so rare that the forward-looking data is meaningless. What caught my attention about the chart is that the stock market was higher 100% of the time two months later.​

While I respect this type of work, like everything else, past performance is no indicator of future returns. Things that never happened before happen all the time in the market.​

Plenty of backtests had a 100% hit rate until they didn’t.​

Buoyed by Trump’s continued pressure on Iran and OPEC+’s renewed efforts to send prices higher ahead of its April meeting by committing to additional overcompensation plans, ICE Brent is creeping back closer to the $75 per barrel mark, posting its second weekly gain. The oil markets have become desensitized to US Federal Reserve meetings and with the awkward implementation of the 30-day ban on energy strikes between Russia and Ukraine, there might be further upside ahead for crude.

OPEC+ Rolls Out New Compensation Plans. Confronted with continuous overproduction by its leading members, OPEC+ issued a new compensation plan with voluntary cuts lasting until June 2026, seeing 300-400,000 b/d output curtailments over the summer months with Iraq forced to cut the most.

US Sanctions First Chinese Teapot Refiner. Ramping up the pressure on buyers of Iranian oil, the US Treasury Department announced new sanctions on entities linked to Iranian oil trade, adding a Chinese refiner (Shandong-based Shouguang Luqing Petrochemical) to the SDN list for the first time ever.

Oil Traders Become the New Drillers. Global trading house Vitol agreed to buy stakes in West African oil and gas assets operated by Italy’s oil major ENI (BIT:ENI) for $1.65 billion, taking a 30% minority stake in the largest oil discovery of 2021, the Baleine field in Ivory Coast, as well as in Congolese LNG assets.

Kazakhstan Drops Energy Minister Amid OPEC+ Rows. Kazakhstan’s energy minister Almasadam Satkaliyev will stand down from his role as the Asian country has been increasingly pressured by OPEC+ peers to comply with its production quota, seeing output from the Tengiz field soar to 1 million b/d.

Gold Soars Again on Fed’s Doomsaying. Gold prices rose to another all-time high this week, surpassing the $3,050 per ounce threshold, right after the US Federal Reserve chair Jerome Powell hinted at only two interest rate cuts in 2025 and reiterated that the Fed is in no hurry to adjust borrowing costs.

Guerrillas Blow Up Colombia’s Pipelines. Colombia’s two main pipelines connectingoil fields in the Andean foothills with the country’s Atlantic coast were bombed this week, presumably by Marxist guerillas, with the Cano Limon-Covenas pipeline already paralyzed due to a prior bomb attack.

Trump Mulls U-Turn on Venezuela Sanctions. Having met top executives from the US oil industry, US President Donald Trump is reportedly considering a plan to extend Chevron’s (NYSE:CVX) sanctions waiver in Venezuela, instead rolling out tariffs for non-US buyers of Venezuelan oil.

Norway’s Equinor Rolls Back Climate Ambition. Norway’s state oil firm Equinor (NYSE:EQNR) lowered its renewable energy mandates, scrapping a previous 50% capital expenditure target for low-carbon projects by 2030 and lowering its renewable energy target to 10-12 GW instead of 12-16 GW previously.

Niger Expels Overpaid Chinese Oil Bosses. The African nation of Niger expelled three Chinese oil executives working at the Agadem project run by state oil firm Petrochina (SHA:601857) for allegedly earning too much, citing an eightfold difference between Nigerien employees and their Chinese bosses.

European Gas Surges on Pipeline Attack. Europe’s benchmark TTF natural gas futures rose to €45 per MWh this week after an alleged attack by Ukraine’s Armed Forces on the Sudzha gas metering station in Russia, greatly sapping the possibility of Russian pipeline gas flows resuming to Europe.

Trump Uses Wartime Powers to Boost US Mining. US President Donald Trump hastapped the 1950 Defense Production Act to ramp up production of critical minerals, facilitating the financing and regulatory support of upcoming domestic projects as 70% of rare earth imports still come from China.

Carlyle-Energean Upstream Deal Collapses. A $945 million deal that would see Mediterranean driller Energean (LON:ENOG) sell its gas assets in Egypt, Italy, and Croatia to US equity fund Carlyle has fallen through due to lack of government approvals from Italy and Egypt before the March 20 deadline.

Saudi Aramco Continues 2025 Retail Expansion. After buying a fuel retailer in the Phillippines, Saudi national oil company Saudi Aramco (TADAWUL:2222) agreed to buy Latin American retail firm Primax, which has operations in Peru, Colombia, and Ecuador, for an undisclosed fee.

Europe’s Largest Airport Halts Operations After Blaze. A fire at an adjacent electrical substation debilitated London’s Heathrow Airport, forcing Europe’s busiest airport (84 million passengers in 2024) to shut down altogether on March 21, with the airport operator warning of further disruptions ahead.





jog on
duc

 

[ducati916]

The bleeding for the moment is staunched.

The fundamentals continue to be terrible and are getting worse. They will deteriorate quickly, making any continuing bull market moot. But bear markets and I think we have seen the top, have brutal rallies. We may rally back to near or just above the high before we collapse.

Much or all will depend on MAGS. Has their aura been shattered for this cycle?

The final pathway remains high inflation. Nominal GDP higher than the 10yr. Nominal means Fed providing liquidity and or capping yields.


jog on
duc

 

[ducati916]

Last week:



This week:



For next week:






So in my previous post I stated that the fundamentals are horrible:



They are. I'll leave you to read the evidence yourself.

Yet...

The 'Technicals' suggest that the market may have 'bottomed' in the short term.

Fed:



We are returning to QE. MBS roll off and are reinvested into UST. LOL.

QT is over.

This is a return to providing liquidity to the market. The Fed has caved again. But very quietly without too much fanfare. Possibly that was the cost...we cave, but no big fanfare that we have caved again.

Long term however, the problems are just getting worse.

10yr rates:



Bessent et al have been trying to scare money into 10yr. For a time it worked. Is that time over?


jog on
duc

 

[DannyB0000]

Uranium miners have perked up the past few days. I'm unaware of any significant news. Both U-miners and LI-miners have moved off their lows. Possibly an early indication of risk-on purchases in beaten up commodities. Trump hasn't threatened tariffs on U or Li yet.

The uranium miners have been really volatile, I wouldn’t buy them unless you’re comfortable with roller coasters rides with its share prices. I’ve held Boss Energy since last April and it’s been up and down with the stock price. Up 20%, then down 40%, at once stage I was down 45% with it. I don’t use stop losses with my investments. When Boss was falling I averaged down and bought another 7 or 8 parcels of shares and more than doubled my position in that stock. Boss taught me to be super patient and don’t panic.

I hold BOE through CommSec.

 

[ducati916]

The uranium miners have been really volatile, I wouldn’t buy them unless you’re comfortable with roller coasters rides with its share prices. I’ve held Boss Energy since last April and it’s been up and down with the stock price. Up 20%, then down 40%, at once stage I was down 45% with it. I don’t use stop losses with my investments. When Boss was falling I averaged down and bought another 7 or 8 parcels of shares and more than doubled my position in that stock. Boss taught me to be super patient and don’t panic.

I hold BOE through CommSec.

DB,

Thanks for the heads up, good to know.

I will also adjust my position in a similar way, so the vol. is actually a good thing, although never comfortable when you are down in the hole.

Want Cheap Power, Fast? Solar and Wind Firms Have a Suggestion.

Renewable energy companies are shifting strategy under President Trump, emphasizing the economic benefits of low-carbon electricity.

www.nytimes.com

jog on
duc

 

[ducati916]

Twenty-five years ago this week, "the roughly five-year dot-com bubble popped, leaving trillions of dollars of investment losses in its wake," Bloomberg reports.

• The S&P 500 hit a new record on March 24, 2000 (25 years ago today), that it wouldn't touch again for about seven years.
• The tech-heavy Nasdaq hit its high-water mark three days later — for the last time until 2015.

Zoom in: "Those peaks marked the end of an electric run that started with the blowout initial public offering for Netscape" in 1995, Bloomberg notes.

• The S&P 500 almost tripled between August 1995 and March 2000. The Nasdaq rose eight-fold.
• "By October 2002, more than 80% of the Nasdaq's value was gone, and the S&P 500 was essentially cut in half."

Crypto pessimism is a favorite pastime of traditional finance enthusiasts, many of whom view digital assets as speculative bubbles. With crypto under pressure again, the argument that it has no underlying value is back on the agenda. There’s a sense in which this is true. So what are the chances that Bitcoin could drop to zero? It’s more than three years since billionaire hedge fund manager John Paulson, who made a killing from predicting the Global Financial Crisis, described cryptocurrencies as worthless in a famous Bloomberg interview with David Rubenstein. In that time, Bitcoin’s value shot up by almost 90%, even after its retreat in the months since Donald Trump’s election victory. That’s a hefty return amid the pessimism:


Serial crypto enthusiasts would argue that the overall performance proves Paulson wrong, although extreme volatility suggests that even they are subject to big doses of nerves. There’s a part of the “anti-crypto” universe where Bitcoin’s value could crash to zero in the next decade — or maybe just to its level when a Florida man spent 10,000 Bitcoins, roughly $853 million today, on two pizzas.

The economist Eugene Fama, a Nobel laureate and godfather of the efficient markets hypothesis, is a chief skeptic, and his assertions shouldn’t be dismissed without parsing his logic. This is how Bitcoin and the Bloomberg Galaxy Crypto Index (which includes a range of cryptocurrencies) have fared since Fama’s interview, when Bitcoin was near its record peak:


Bitcoin was down more than 26% from its high at one point this month. A crude back-of-the-envelope calculation means that for Bitcoin to drop to zero in the next decade, at the current price, it would have to lose at least 79% of its value per annum. It would take something spectacular to produce consecutive falls like that: a government ban, a loss of public trust, or some black swan event.

In this podcast, Fama states that crypto lacks intrinsic value and makes nonsense of the notion of money. “I’m hoping it will bust because if it doesn’t, we have to start all over with monetary theory,” Fama said. “It’s gone. It might be gone already, but you have to start all over.” His University of Chicago colleague Luigi Zingales adds in an interview that there’s a growing belief that Bitcoin isn’t being used as a currency, and indeed that the continuing extreme volatility means that it cannot be. Zingales describes this as “a common belief now.”

Crypto enthusiasts take Fama’s view with a grain of salt. They have already won over many critics, including Bridgewater’s Ray Dalio, who once made a similar doomsday prediction. Time alone will prove whether Fama has it right, but for now the Trump 2.0 boost has waned. The announced intent to set up a strategic crypto reserve, a sort of backstop, has done little to inspire confidence. The administration is also loosening tight regulatory scrutiny on the asset class to appease its crypto fanatics base — although weaker rules are unlikely to help ease the worries of skeptics considering whether to enter for the first time.

Bitcoin’s relatively muted recent performance is a source of pessimism, but the selloff is nowhere close to the one recorded March 13, 2020, Bitcoin’s largest-ever one-day fall:


That plunge was unimaginable even for an asset class noted for wild swings, and it’s come back a long way since. Its market capitalization is pegged at about $2 trillion, and institutional adoption is now commonplace. Frnt Financial’s Stephane Ouellette notes that the past five years have seen a proliferation of the HODL (Hold On for Dear Life) mantra:

On March 13, 2020, the proportion of Bitcoin which had remained unmoved for over two years was 42%. This metric reached a record high of 57% in December 2023 and has since receded to 52%. This growth of unmoved Bitcoin has been interpreted as indicative of increased HODLing, an investment strategy that advocates for the long-term holding of the token. Advocates of HODLing have extreme conviction in the asset’s long-term outlook and are agnostic to shorter-term price volatility. In addition to long-time ardent Bitcoin proponents, investors via ETFs have proven to be HODLers, too.

Bitcoin isn’t the only asset with disappointing returns this year. Tariff threats have left other markets in limbo. But the paralysis strongly suggests that the notion of Bitcoin as a store of value similar to gold begins to look very wishful, given their different responses to the economic uncertainties. And if more Bitcoin remains unmoved, it’s not being used as a currency either, and certainly not for buying pizza. If it’s not a store of value or a currency, the questions will persist.

The Trump administration is expected to soon announce the most aggressive pivot in U.S. trade policy in decades. For a change so big, businesses know surprisingly little about what's coming in mere days. Why it matters: The fallout might be a scramble to adjust to the new trade normal that could jolt the global economy. Trump has called April 2 "the big one" and "Liberation Day," referring to the wide-ranging levies expected to be announced and potentially take effect a week from Wednesday. What they're saying: "Because of the attention President Trump has drawn to April 2, presumably something is going to happen. The hard part is trying to figure out what precisely that might be," UBS economist Jonathan Pingle wrote Friday in a client note. "[W]hatever it looks like and regardless if one agrees with the application or not, let's hope that it's then done so businesses, households and investors can at least have some visibility from all of this and can plan around them," Peter Boockvar, chief investment officer at Bleakley Financial Group, wrote today. Zoom in: The White House might spare specific sectors from the broad tariffs on April 2, as Bloomberg and the Wall Street Journal reported. That's a turnaround from Trump's threats to the auto and pharmaceutical industries. A White House official said no final decision has been made; there might be sectoral tariffs announced on April 2, or perhaps not. In a sign of the thirst for clarity, stocks jumped after reports of a more narrow tariff plan. The yield on the U.S. 10-year ticked up by 6 basis points this morning. The big picture: Treasury Secretary Scott Bessent said during a television interview last week that tariffs would focus on the "dirty 15" nations — a new hint about April 2. Bessent told Fox Business that the administration would focus on this select group of countries that have "substantial" tariffs on U.S. goods. Among them: China, the European Union, Mexico and Vietnam, according to the German Marshall Fund, a nonpartisan policy group. "What's going to happen on April 2 — each country will receive a number that we believe represents their tariffs. For some countries it could be quite low. For some countries it could be quite high," Bessent said. The intrigue: As of this morning, there is a new concept that will be part of the April 2 bonanza: secondary tariffs. In a post on Truth Social, Trump said countries that buy oil and gas from Venezuela will face a 25% tariff on any goods sent to the U.S., effective April 2. It's payback for the alleged gangs Trump says Venezuela sends to the U.S. That raises the prospect of even higher tariffs on China, a top destination for Venezuela's crude oil exports.

Perhaps the biggest question for businesses plotting investment decisions is how long the tariffs that arrive may stick. Are they a temporary tool meant for achieving narrow policy aims — reducing fentanyl coming over the border, for example, as is the stated purpose of Canada and Mexico tariffs — or part of a long-term rewiring of the global economy to favor more U.S. manufacturing? Trump and his advisers speak of using tariffs in both lanes, and aren't terribly precise about differentiating which policy shifts are aimed at which goals. Bessent suggested any negotiations ahead of April 2 could avert tariffs altogether. "I'm optimistic that April 2nd, some of the tariffs may not have to go on because a deal is pre-negotiated, or that once countries receive their reciprocal tariff number, that right after that they will come to us and want to negotiate it down," Bessent said. Between the lines: Trump also suggests tariffs will become a major driver of federal revenue, which implies they need to remain in place indefinitely. That has very different implications for global businesses than a world in which tariffs are phased in and out as the president seeks to achieve tactical goals. The latter scenario could mean more volatility month to month but less need to reshore manufacturing activity. The former means that companies may need to rethink how they operate in the long run. The bottom line: It's a rough time to be a logistics chief at a company with a global supply chain. It's not just that we don't know quite what the administration will do nine days from now; it's that we don't know how long-lasting it will prove to be.

Recession indicators:



A recession drives a deflationary bust. That will then require the Fed to go inflationary and BTFP freezing UST yields at +/-2% possibly lower. Trump's policies are accelerating the prospects of a severe recession and bust.

Can they walk the very thin line? Highly unlikely.

This rally, is likely the first bear market rally which will confirm that the markets have topped out.



I'll go with $529 for the moment. Might not make it.

jog on
duc

 

[peter2]

Economy getting weaker, uncertainty abounds. I think we should get what we can from this rally as it may be the last for a while. I'm not as bullish as you and will be pleased if market goes back to 512 (your PP on the QQQ chart) before next sell-off. It may even struggle to get higher than 500.

I've thought for a while now that the US markets after such a strong bullish run up would need a significant pause to reset for the next bullish phase. Trump has accelerated the arrival of this pause. A multi-year trading range has started and I'm not so sure that the March lows have set the bottom. We may see a lower low.

I'm not all doom and gloom. It's just a long pause in the form of a deep range. We'll see smaller rallies in various sectors that will allow shorter term traders to earn. Gold and copper will remain bullish along with other commodities from time to time. I'm expecting inflation to persist so we'll be able to earn from occasional bank rallies. Traders will need to monitor all the major sectors in order to earn from the rotation as larger investors will continue to seek value. Traders out of sync with the rotation will be in for a frustrating time (like me in March).

Bull markets are too easy, trading ranges are our greatest challenge. I'm looking forward to the challenging conditions.

 

[ducati916]

Economy getting weaker, uncertainty abounds. I think we should get what we can from this rally as it may be the last for a while. I'm not as bullish as you and will be pleased if market goes back to 512 (your PP on the QQQ chart) before next sell-off. It may even struggle to get higher than 500.

I've thought for a while now that the US markets after such a strong bullish run up would need a significant pause to reset for the next bullish phase. Trump has accelerated the arrival of this pause. A multi-year trading range has started and I'm not so sure that the March lows have set the bottom. We may see a lower low.

I'm not all doom and gloom. It's just a long pause in the form of a deep range. We'll see smaller rallies in various sectors that will allow shorter term traders to earn. Gold and copper will remain bullish along with other commodities from time to time. I'm expecting inflation to persist so we'll be able to earn from occasional bank rallies. Traders will need to monitor all the major sectors in order to earn from the rotation as larger investors will continue to seek value. Traders out of sync with the rotation will be in for a frustrating time (like me in March).

Bull markets are too easy, trading ranges are our greatest challenge. I'm looking forward to the challenging conditions.

Morning Peter,

The 'speed' of the bounce suggests short covering rather than new longs. If the bounce continues past, lets say point P, that's where we see new buyers being sucked back in.

Or potentially a date, being 2 April and Trump's Tariffs?

So I will be starting to sell long positions at about point P. For example my TSLA position I'll sell at $290/$300 which could be this week.

The economy is starting to break:

In the aggregate, American households' finances are looking just fine. But nobody lives in the aggregate, and there is evidence of rising financial strain for a meaningful slice of the population. The big picture: Cracks have appeared in many household balance sheets over the last year and widened further in the final months of 2024, leaving some Americans more vulnerable to any disruptions that are to come. But it has not been obvious from top-line numbers, as disproportionately affluent families have benefited from a surging stock market, rising home prices, and fixed-rate mortgage debt held over from the low-interest environment of three years ago. What they're saying: "The number of people falling behind on debt payments has risen sharply, even though households collectively built up their holdings of liquid assets" at the end of last year, wrote Samuel Tombs, chief U.S. economist at Pantheon Macro, in a new note. By the numbers: The net worth of American households — the cumulative value of their assets minus debts — edged up to $160.3 trillionin the fourth quarter, up 9.3% from a year earlier. Household debt service as a share of disposable personal income was at 11.3% in Q4, below its pre-pandemic levels, per Federal Reserve data. Yes, but: The share of outstanding credit card debt that is more than 90 days delinquent rose to 11.4% in the fourth quarter, per New York Fed data, the highest in 13 years (it hovered around 8% in the years before the pandemic). Indeed, in the last two decades, it has only been higher during and immediately following the 2008 Great Recession. Looking forward, consumers anticipate further difficulty handling their debts. The average odds people placed that they won't be able to make a minimum debt payment in the next three months rose to 14.6%, the highest since early in the pandemic and well above 2019 levels. Between the lines: Those stresses for borrowers have occurred against a backdrop of rising asset prices and a strong job market. The numbers could shoot higher if federal cutbacks and trade wars generate higher unemployment or further wobbles in financial markets. The end of Biden-era student loan relief efforts could further stress some borrowers, Tombs argued. Further Fed interest rate cuts could ease some financial pressure on households straining under debts, but still-elevated inflation may constrain the central bank's room to maneuver. The bottom line: If you carry stocks, own a house, and have a low-rate home mortgage, there's a good chance you've gotten richer over the last year. If you rent your home, live paycheck to paycheck, and have credit card debt, things look more worrisome.

Data: The Conference Board. Chart: Axios Visuals For the fourth straight month, consumer confidence — as measured by the Conference Board's index — dropped, alongside rising fears about inflation and tariffs. Why it matters: It is safe to say the receding number is no blip. President Trump now faces the same economic discontent that plagued the Biden administration. Consumers' pessimism is raising fears about the economy's health, even as official government indicators suggest healthy conditions. By the numbers: The Conference Board's Consumer Confidence Index fell by more than 7 points in March to 92.9. A sub-index that measures confidence in the short-term outlook for income, business and employment conditions dropped almost 10 points to the lowest level in 12 years. Just one sub-index improved, though only slightly: Consumers' assessment of the current labor market ticked up. The intrigue: Add this to the sign of weakening household balance sheets that we note above: For the first time in months, the group's survey showed weaker expectations about household income. "[C]onsumers' optimism about future income—which had held up quite strongly in the past few months—largely vanished, suggesting worries about the economy and labor market have started to spread into consumers' assessments of their personal situations," Stephanie Guichard, a senior economist at the Conference Board, wrote in a release. The big picture: The Conference Board said consumers' write-in responses indicated that Trump policies, supportive or not, far outweighed other factors affecting Americans' view of the economy. What to watch: Average inflation expectations for the year ahead rose again, to 6.2% from 5.8% the prior month, "as consumers remained concerned about high prices for key household staples like eggs and the impact of tariffs," Guichard wrote.

Oil News:

As London-based energy major Shell (LON:SHEL) issued its 2024 annual report ahead of this year’s Annual General Meeting, its general pivot back to fossil energy set the stage for other companies to follow suit.

- In line with higher shareholder returns in the US, Shell hiked its distribution target to 40-50% of operations cash flow, up from the current 30%-40% range, whilst also trimming its investment budget by $2-3 billion to a $20-22 billion through 2028.

- Pledging to maintain ‘material’ oil production beyond 2030, sustaining output around the current level of 1.4 million b/d, Shell will seek to maximize gas production, aiming for 4-5% annual increases in LNG sales in the 2026-2030 period.

- It seems that the new benchmark for low-carbon investment amongst oil majors will be around 10% of capital employed, well below Shell’s 2022 peak of allocating a third of their total capital expenditure on renewables.

Market Movers

- UK oil major BP (NYSE:BP) has agreed to sell its 25% stake in the Trans-Anatolian Pipeline that carries Azerbaijani gas through Turkey to US asset management firm Apollo (NYSE:APO) for $1 billion.

- London-based Africa explorer Tullow Oil (LON:TLW) agreed to sell its entire working interests in Gabon for $300 million in cash to the Gabon Oil Company, as it continues to be weighed down by debt.

- Mexico’s state oil firm Pemex is reportedly in talks with billionaire Carlos Slim to jointly operate the 800 MMbbls Zama offshore field and the country’s largest gas field Ixachi, ceding operator control in a rare move by the Mexican NOC.

Tuesday, March 25, 2025

Donald Trump has been concurrently the biggest oil bear and oil bull out there, and this week has driven bullish sentiment. U.S. sanctions on Venezuela, effectively punishing any country that is buying PDVSA barrels except for refiners in the United States, coincided with a one-month extension of Chevron’s mandate to wind down operations in the country. With market participants wary of less heavy oil in the market, ICE Brent futures jumped above $73 per barrel again.

Trump Slams Tariffs on Buyers of Venezuelan Oil. The White House introduced a 25% tariff for any country that buys oil or gas from Venezuela in case of any trades made with the United States, impacting China as the Asian nation accounted for 55% of Venezuela’s 500,000 b/d exports lately.

US Mulls Taking Over Ukraine’s Nuclear Plants. US Energy Secretary Chris Wright stated that American companies could operate Ukraine’s power plants ‘with very little problem’, arguing that such an arrangement would be the best protection of the country’s energy infrastructure.

Russia-Ukraine Ceasefire to Include Revived Grain Deal. As Russian and US officials met in Saudi Arabia to discuss a potential ceasefire in Ukraine, the Black Sea grain deal could see a revival after the initiative ended in 2023, potentially bringing more Ukrainian agricultural exports to the market.

Iraq Accuses Iran of Forging Documents. Iraq’s oil minister Hayan Abdul Ghani alleged that Iranian oil tankers have been using forged Iraqi shipping documents, rejecting any Iraqi implication in recently detained tankers, as Baghdad remains under US pressure to cut links with Tehran.

Weak Asian Demand Weighs on LNG Prices. The average LNG price for May delivery into Northeast Asia dipped to $13.5 per mmBtu, a three-month low and some $0.50-0.60/mmBtu higher than European delivered prices, as mild weather forecasts and weak Chinese demand cap the upside.

Trading Majors Splash the Cash on Aluminium. Global trading giants Vitol and Gunvor have been ramping up their long positions in physically deliverable LME aluminium contracts, as both the February and March contracts saw one trading entity hold at least 30% of open interest upon expiry.

OPEC+ Mulls Continuation of Output Hikes. OPEC+ countries will most probably continue raising oil output for a second consecutive month as part of the oil group gradually unwinding its production cuts, boosting global production by another 135,000 b/d after April is set to grow by 138,000 b/d.

Glencore Commits to Coal Production Cuts. As benchmark Australian Newcastle coal futures plunged to $97 per metric tonne, down 20% since the start of the year, the world’s largest coal producer Glencore (LON:GLEN) stated that it would cut output by 5-10 million tonnes in 2025.

Antimony Soars on Chinese Export Controls. Chinese antimony prices continue to skyrocket after 99.85% antimony metal started to trade at ¥250,000 per metric tonne ($35,000/mt), up 70% since early February, as Beijing’s export restrictions limited exports to a mere 20 tonnes in January and February.

Indian Refiners Rush Back to Russian Crude. Indian refiners are poised to cut back on spot tenders after offers of Russian crude have rebounded to pre-January levels and March imports are set to average 1.8 million b/d, with most deliveries taking place on non-sanctioned tankers.

Copper Bulls Keep on Loving the Tariffs. Comex copper futures surged to an all-time high of $5.20 per pound this week, further buoyed by Glencore’s mining woes in Chile, as the markets bracing for a Trump tariff impact with an unprecedented 500,000 tonnes of copper sailing now towards the US.

East Africa Eyes Exploration Boost. The East African government of Kenya is planning to auction at least 10 exploration licenses in its first oil licensing round, opening up the bidding process in September 2025, concurrent to auctions taking place this year in Uganda and Tanzania.

Tesla Sales Collapse in Europe. Sales of top US electric vehicle producer Tesla (NASDAQ:TSLA) in Europe have been 43% lower so far in 2025, commanding only 10% of the BEV market in February with total monthly sales of less than 17,000 units, losing market share to cheaper Chinese EVs.



With the major's pulling back on green, nuclear back on the table?




Nobody has ever questioned Donald Trump’s ability to set the agenda with a telling phrase. Suddenly, market conversation is dominated by Liberation Day, the name he’s given to his announcement of reciprocal tariffs on April 2. A count of news stories from all sources on the Bloomberg terminal shows an explosion of interest:


While Trump means the phrase to refer to the imminent liberation of the US from what he calls an unfair world trade order, markets expect to be liberated from the dangerous threat of heavy global tariffs. As Deutsche Bank’s regular survey of traders shows, they were confident that Trump’s tariff bark would be worse than his bite back in December. They’re taking the threat of tariffs much more seriously now, but still think the net effect will be less severe than he trailed during the campaign (scored as a seven for the purposes of the exercise):


Liberation Day, for all that Trump is building it up, could reassure investors that they had it right the first time. Bloomberg’s weekend story that the administration would opt for a “targeted push” was interpreted as meaning it would retreat — even if Monday’s tariff pronouncements were a little more alarming. So what exactly is the idea behind the reciprocal tariffs that will liberate us?

​

​

Reciprocity​

The idea of reciprocity is simple — even “beautiful,” as the president puts it. Compared to the various plans Trump has aired for blanket tariffs on particular sectors, like those in place on steel and aluminum, they are also far lighter, creating less disruption for the economy and generating much less revenue for the Treasury. Strategas Research Partners’ Dan Clifton estimates sectoral tariffs are roughly twice the size of likely reciprocal tariffs. That’s because, as revealed in UBS research that Points of Return covered earlier, the US is not that hard done by, and its main trading partners’ tariffs are already reciprocal. In general, they’re the countries with which the US already has free trade agreements.

Further, reciprocity is difficult, as products can be subdivided any number of ways. Morgan Stanley’s economics team comments that “to define reciprocity at a product or sector level requires excruciating details not only around product classification but also how products are treated by domestic policy.” They are also further subject to override or amplification by the president after companies and countries have lobbied him. “All we care about is jobs,” Trump said Monday. “We have a lot of people coming in.”

The administration must also convince investors and businesses alike that these tariffs won’t hurt the US. “Countries that sell to the United States are inflexible. They’ve only got the United States to sell to,” Stephen Miran — chairman of the Council of Economic Advisers — told Bloomberg TV on Monday. “So they’re the ones who bear the burden of these tariffs.” This is a good point, but may prove to be overstated. US trading partners are already scurrying to find alternative markets, and to rebuild their own capacity. The European attempt to rearm is only the most spectacular example. But as a broad rule, US tariffs should indeed hurt others more than they hurt the US.

A Reserved Currency​

The dollar is exceptional under MAGA, but not in a good way, and is down by about 4% for the year. At one point, it shed all its post-election gains. Tariff uncertainty is doubtless part of this, but even before “Liberation Day,” it’s legitimate to question whether the weakness is overdone. As Deutsche Bank’s Tim Baker points out, the services purchasing managers index or PMI has rebounded, and the apprehension begins to look overplayed. In part, it’s a reaction to improved growth prospects elsewhere. This chart shows that gross domestic product accelerated in the second half of last year in most developed economies:


Tariffs plainly also a play part, and the foreign exchange market loves the idea that they will be rather more targeted. That’s provided some relief for the greenback, after its lowest sessions since October:


Another key point is that analysts still have the first Trump term as a template. Oxford Economics’ global macro strategist Javier Corominas draws parallels between the dollar’s current performance and Trump 1.0. It suggests the weakness we are seeing is nothing new:


But it’s too simplistic to expect everything to check out and proceed on the 2017 path. That would water down the historic significance of Germany’s fiscal splurge, which could add two percentage points to growth over the next four years. How much could this impact the euro? Corominas argues that Germany’s fiscal sea change is already fully priced. He offers this chart to make his case:



What does the change in yields tell us? Corominas notes that the euro has overshot the relative move in yields over the last month. That may be justified, but he says the implication that the euro will strengthen further doesn’t necessarily follow:

This is not a plain vanilla fiscal boost, and our experience over recent years has made us wary of the risk that projects will be delayed due to planning issues. For instance, it took until 2024 to see a big rise in defense spending in response to the war in Ukraine and the off-budget defense fund that was created in 2022. We also think that, unlike the US, Germany can run sizable fiscal deficits without causing a large inflation overshoot. This is because the economy has ample spare capacity after three years of stagnation. We think the output gap is between 1% and 2% of GDP.

Essentially, he holds that Germany’s release of the debt brake won’t fuel inflation, and the ECB will likely cut twice more this year. That could snuff out optimism for the euro. And of course, Trump could impose a blanket levy on the euro zone, which would be dollar-bullish. But Germany’s outsized fiscal expansion might allow it to deal with the US approach. Deutsche Bank’s global head of FX research, George Saravelos, says front-loaded fiscal policy would offset the blow from tariffs by generating a muted knock-on impact on growth. That would allow the euro to withstand the might of a resurging dollar, at least for now. But there’s unlikely to be much clarity on this from Liberation Day.



On the face of it, there’s just been a “biblical rotation” — to borrow the phrase of MI2 Research’s Julian Brigden — out of the US and into stocks everywhere else, particularly Europe. That leaves investors in no man’s land, and US stocks are bouncing. How seriously should we take that bounce? There’s a decent argument that this is the beginning of a return to US exceptionalism. This correction, very unusually, has played out with the VIX volatility index never exceeding 30. There’s nothing disorderly or panicked going on:


Credit markets — central to a more significant downtrend — are also relatively unconcerned. Bloomberg’s aggregate indexes for investment-grade and high-yield bonds have seen their spreads over equivalent Treasuries rise this month, but they did so from a very low level. Even now, this is nothing like the angst of the regional banking crisis two years ago, or last summer’s carry trade unwind:


Sentiment indicators suggest that it’s time to buy US stocks. The proportion of retail investors calling themselves bears exceeds self-described bulls to an extent that in the past always preceded a big rally. When people are this bearish, it’s generally time to buy:


US macro data has surprised negatively of late, while European data have come in better than expected. This is illustrated by the Citi Economic Surprise indexes and would, again, justify a one-time correction for the US indexes, but not a major sea change:


And then there’s the fact that the US market looked implausibly exceptional. Its outperformance, even if the Magnificent Seven tech platforms are excluded, was phenomenal. What’s just happened is a big correction, but it hasn’t clearly set up a new trend:


That led Morgan Stanley’s chief US equity strategist, Mike Wilson, to contend that US underperformance was “fairly benign in a longer term context,” with the S&P 500’s relative strength returning to the “long-term trend line that has held for the past 15 years.”

Wilson added that US earnings have been revised downward over the last two months to a far greater extent than in Europe, in large part thanks to the strong dollar at the end of last year, which weakens US foreign profits. That’s another reason for the US to bounce back, as the weakening dollar should help US earnings in this quarter.





jog on
duc

 

[ducati916]

Started with




Just had my first coffee of the morning.

Short swing trade. Probably overnight, possibly to Friday.

​

Situational awareness: Ready for a summer showdown? The Congressional Budget Office said the likely "X-date" by which Congress will need to raise the debt ceiling is August or September.

• But it warned that surprise variations in tax collections and federal borrowing could shift that earlier or later.

Government spending cuts, an obsession with more efficient government and an economic growth scare: Those are the dynamics on both sides of the Atlantic.

Why it matters: The U.K.'s top economic official announced deep public spending cuts to account for the huge global shifts, including a surge in borrowing costs, since the initial plans were unveiled just last fall.

• The austerity plans are evidence of governments adjusting to a world market by higher debt and borrowing costs, a turnaround from the conditions that defined the 2010s.

Driving the news: Rachel Reeves, the U.K.'s chancellor of the exchequer, announced billions in welfare spending cuts, slashing benefits for those sidelined by disability or sickness — a surprising development for a member of the Labour Party.

• Reeves also said that the government will look inward and slow the growth in day-to-day spending across departments, with a plan to trim spending by $7 billion more than previously thought in October.

What they're saying: To Americans, Reeves might sound like she took a page from the DOGE playbook.

• "In recent months, we have begun to fundamentally reform the British state, driving efficiency and productivity across government," Reeves said in a speech announcing the fiscal plans today.

Between the lines: The refurbished budget plan was necessary after a big rise in government borrowing costs that sucked up the U.K.'s headroom for spending.

• The U.K.'s surge in government bond yields was partly the result of President Trump's election, which set off a global bond sell-off in fear of his spending plans.
• The other factor was domestic: In the fall, the U.K. announced a budget with huge spending plans to jumpstart growth that spooked bond investors.
• At the beginning of October, the yield on the U.K. 10-year gilt was about 4.1%. After the yield hit almost 4.9% at the start of 2025, it is now at 4.7%.

The big picture: There is a growth scare underway in the U.K. The nation's Office for Budget Responsibility — similar to the Congressional Budget Office — slashed its expectations for U.K. growth this year in half, to 1%.

• The hope is that Reeves' investment plans — in defense, particularly — help jumpstart the economy in the long term. Economic growth down the line looked more promising.
• In the U.S., the risk of an economic slowdown from tariffs, immigration cutbacks and more could pressure the revenue side of the ledger and keep deficits high.

Reeves said the budget plans come on the back of a "world that is changing before our eyes."

• "The global economy has become more uncertain, bringing insecurity at home as trading patterns become more unstable and borrowing costs rise for many major economies."

​

About 20 years ago, there was one fear above all that kept investors and regulators awake at night: global imbalances. In particular, there was fear over the huge growth in Chinese holdings of US Treasuries as the world’s new exporting powerhouse looked for a place to stash its profits. Why was this a problem? First, there was a belief that it kept long-term interest rates low, and hence contributed to the lax credit conditions that eventually sparked the Global Financial Crisis. The Federal Reserve hiked short-term rates, but 10-year yields held below the 5% level — and all hell broke out when they finally surged through that landmark in the summer of 2007. Second, there was a fear that all those holdings gave China a hold over the US. They represented liabilities that Uncle Sam owed to Beijing. How could this go well? And what if China decided to declare economic war and dump its Treasuries in a hurry? Acting like a Bond villain, China’s leader could threaten to tank the US economy in one fell swoop. After a while, people worked out that China had a lot at stake in the value of its Treasury holdings, and that any such threat would also inflict terrible damage on its own economy. Global imbalances remained, peaking after the GFC. A very gradual decline in Chinese holdings has in the last three years accelerated, in a way that does overlap with the beginning of a secular bear market for Treasuries. But now, this is perceived as an act of self-defense as China battles its own problems, and not as anything aggressive: The reason to bring this up now, as the world braces for a concerted attempt to deal with imbalances in trade flows, is as a reminder that it hasn’t been long since the greatest worry was over imbalanced capital flows. And ironically, capital imbalances have accelerated since the GFC, to a far, far greater extent than trade flows. America’s net international investment position, in which foreign holdings of US assets are subtracted from US international stakes, has collapsed in the years since the crisis. Incredibly, the deficit is now equivalent to more than 80% of gross domestic product. Nobody is worrying about some Bond-villainesque move to sell all of those holdings at once, because it isn’t going to happen. But the scope for damage to US assets if that money begins to retreat is obvious: Those who hold US assets are beginning to look worryingly overexposed. David Kostin, chief US equity strategist of Goldman Sachs, shows that the US share of the global equity market reached an all-time high before the recent turnaround, overtaking the previous record from the dot-com era. Of course, much of this is because of superior performance by US companies. But not all of it. The US share of global earnings remains well below its highs from 25 years ago. That’s even after accounting for the phenomenal global success of US Big Tech: Foreign owners have a far greater role in the US equity market than they once did. This chart from Kostin shows how ownership of US equities has moved since 1945. Once dominated by wealthy American households, the market first institutionalized as mutual funds, pensions and then exchange-traded funds took dominant positions. Since the GFC, the story has been of the returning influence of individual owners (both a symptom and a cause of growing inequality), and ever greater foreign influence: Flows have become particularly extreme since the pandemic. This is in part because of the excitement around the Magnificent Seven and also reflects the collapse of confidence in Europe. Flows out of Europe and into the US, detailed here by Alliance Bernstein’s Inigo Fraser-Jenkins using EPFR data, have been spectacular in the last year: The upturn in flows to Europe is just faintly visible at the end of the chart if you squint. The continent accounts for 49% of foreign ownership in the US, so these flows matter. Now, the question is whether the money could leave as quickly as it came. The reasons so much money arrived in the first place are profound. Fraser-Jenkins summarizes them as follows: 1. A highly favorable demographic outlook versus other developed economies and China; the growth in the US working-age population is set to decline but remain positive, whereas in those other regions it is in outright contraction. 2. A structurally higher level of profitability for US companies and a successful tech sector that imply an ongoing ability to earn higher margins. 3. Stronger geographic security of supply chains than other regions. 4. Benefits from the scale of its home market. 5. The dollar’s reserve-currency status; despite attempts to undermine this, it is set to remain in place for the foreseeable future. None of these can go away quickly. It’s therefore hard to see the money flowing out as fast as it arrived. The risks are softer and more intangible. Current American behavior appears designed to lose friends. As Points of Return has been saying, the critical question is whether the world has lost its trust in the US. If it has — and the way Canadians are boycotting US goods in combination with the dismay in Europe strongly suggest as much — then the nightmare scenario that people batted around 20 years ago with respect to China begins to get believable. Beyond that, the emerging narrative involves a world with several spheres of influence that try to be self-reliant. That will involve capital flowing home. And as we’ve seen, that’s potentially mega-bearish for the US. There’s also the problem that capital can move very, very easily. With ETFs, you can switch millions out of the US with the press of a button. Changing pension regulations can require funds to bring money home at the drop of a hat. This isn’t notional. Sixteen years ago, when still in the worst of the GFC, I wrote for my old employers about a ruse Mexican pension regulators used to abort a run on the peso. All public pension managers were abruptly told to end international diversification and bring money home to Mexico. The result was a rally for the currency and a big surge for the stock market. As countries arm themselves with sovereign wealth funds, capital protectionism like this gets easier and easier to do. Canadian travel to the US is plummeting. Photographer: James MacDonald/Bloomberg Six years ago, I argued for Bloomberg Opinion that capital wars were easier to win than trade wars, after a campaign led by Marco Rubio, now secretary of state, to make federal pension funds divest from China. In an era of indexes and ETFs, it’s easy to do. And it doesn’t need much direction. If pension trustees believe they will get a quieter life if they avoid investing in fossil fuels, or Israel, or woke companies or whatever, then that’s what they’ll do, very easily. Judging by Canadians’ changing travel plans, investment groups there might find a similar temptation to make life easier by keeping out of the US. None of this can happen overnight. But it can happen a lot quicker than trade flows can adjust, and America has the most to lose. Even if it doesn’t have to contend with Ernst Stavro Blofeld. ​

US stockmarkets are increasingly vulnerable to foreign capital flows, which has also increased significantly the trade deficits. Trump ordering capital flow controls has initiated the selloff.

A consequence will be reduced tax receipts. The market can't not go higher. Going down is really bad.





Why individual stock investing is hard when it's buy and hold.


From JC:

Gold ripped through $3,000, and that trade was a home run. The question now? What’s next? When gold makes a big move, the rest of the commodities market plays catch-up. And right now, that’s exactly what’s happening. Copper is now knocking on the door of new all-time highs.

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Meanwhile, Silver is testing a 13-year breakout. Look at the size of this base:

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The big money has already started shifting — are you paying attention?

jog on
duc