TRUMP'S YO-YO, OR WHAT THE MARKETS ARE NOW

We don’t really have a stock market anymore. We don’t really have an economy. What we have is hell’s casino. A roulette wheel, that lands on the money or out of the money according to Trump’s whims and moods.

Let’s take the last few days as a lesson.

Trump claimed the war would end soon. It was reaching its apex. Victory, he said, dozens of times by now, in fact, has already been achieved.

And so markets roared. The war was over! Surely, Trump wouldn’t double cross them, would he? Bang. The roulette wheel landed on the money.

And then Trump gave a speech. In it, he said…a dozen things, all of which we’ve heard before. The war had been won. But it was going to go on. For how long? Another “few weeks.” One might hear echoes of a man telling his creditors to hold their nerve, in this, too.

Bang. Markets slumped. Which way was Trump going? Doubling down on the war, or ending it? Escalating it, or finding “off-ramps.” There are no off ramps in hell, my friends.

Welcome to Trump’s Yo-yo. One day, with one social media post, he yanks the markets this way. The next day, with a phrase, sentence, speech, he drops them that way.

It goes on and on, day after day, month after month.

Trump’s Yo-yo. You can see it at work during the course of this war, in vivid, stark detail. He’s dangling from his little hands the strings by which the wheels of the world’s economies turn.

The question is if you will be puppeteered along with this.

All of this is what it means to have an authoritarian economy, by the way. A stock market is always a flawed thing. Still, in better times, it responds to real signals. This company will do well, because the economy depends on this or that. Long-term trends prevail, and “fundamentals” matter, the most foundational of which isn’t really the pursuit of money, but whether or not companies and institutions are well-managed.

An authoritarian economy is very different. In it, the authoritarian’s whims and moods are all that matters. When he’s in a foul temper, then watch out—there may be a war, whether a trade war or a real one. When he’s feeling good, then perhaps the good times may roll. But all this is divorced from economic reality—and of course it’s precisely why authoritarian economies suffer, because investment can’t really ignite or endure this way. Capital runs scared from this kind of risk and folly. Authoritarian economies are systems of patronage, which do not generate wealth in the long-term.

Trump’s Yo-yo is very real. Up he yanks a market today. Down a market plunges tomorrow. This hides the deeper cost of markets and economies becoming a yo-yo in the hands of an authoritarian. Those costs are the risk of a perpetual lack of safety, the divorcing from fundamentals, the constant precipice of instability. And all these costs are real. They are felt in the price of bonds, in credit spreads, in the rudiments of investment itself.

When an economy, and the markets in it, become a casino in the hands of an authoritarian, and he decides which way the yo-yo will climb or fall today, then wealth itself is destroyed. Who would invest in such a system? Who should? And yet this is where we are. To “play the markets” now is to gamble on Trump’s moods and whims, not to invest wisely and well for the future. Who’s to say if there’s much of one?

The correct place to be in the midst of this is to have cashed out. I’ve said it before, and let me reiterate it. Remember the lesson of the last few days. Trump said the war was coming to an end, markets roared, he double-crossed them, as he always does, and bang, they plummeted again. Don’t be foolish. This game doesn’t end here.

When markets become casinos, then of course traditional forms of analyzing them scarcely work. What’s left to us is psychology. It’s precisely why markets now are so struck with manias and frenzies, yet in constant fear of the Big One, the crash we all know is coming.

Trump is who he is. Our world now is in the hands of Thanatos, men possessed by death drive, who’ll happily burn down everything just to smear the ashes all over their chests. And that should tell us something. Do you really think that men like this “end it here”? Trump has wished to be the world’s great force of annihilation all his life. To make the world kneel before him, trembling in fear. Do you suppose he won’t escalate this much, much further, in all the ways that we should know by now?

If you want to gamble, then you can gamble. You might even have better odds. Trump has done what he was always going to do. Just as his businesses were some of the world’s worst investments, so, too, is an economy in his hands.

Do you want to be on the other end of Trump’s Yo-yo? There are many people who’ll take that bet. And so far, they are losing, big time. That should tell you something. Maybe even everything.

Love,

Umair (and Snowy!)