Let’s be clear about the unfolding political and economic landscape: It is the desire of the Trumpians and the anti-Trumps to control the political dialogue. The media is putting President trump and his appointees under a microscope, which is what the press should always be doing. (My apolitical belief for the fourth estate is that a free press should be responsible in pursuit of the “facts,” but if they have a bias it should be “to afflict the comforted and comfort the afflicted.”) In my opinion, during the past 20 years the U.S. press has devolved into a sycophantic mob as everything becomes about access to those with the greatest celebrity status, which usually means wealthy. The financial media especially bows to the rich because if you are a billionaire your views go unchallenged for fear of being shunned as it undermines the concept of, “if you’re rich, they think you really know.”
When Donald Trump was merely The Donald, journalists would gush over the witty star of the Apprentice and journalists–especially the CNBC group–would do everything to elevate the ratings star. Fortunately, the game has changed as the PRESS is now at WAR with the White House as journalists seek relevance while Steve Bannon tries to make the media irrelevant if they only wish to be, to quote Spiro Agnew, “nattering nabobs of negativity.” The point is that there is a battle to control the narrative, which means that NOTES FROM UNDERGROUND will be more vigilant in pursuing the underlying concepts in detecting financial opportunities. I take nothing on its face. If the media actually becomes aggressive in its investigations we will all be better served.
***The most important FACT of the day: President Trump had the CEOs from the U.S. auto industry at the White House for a meet-and-greet breakfast. The President pushed for GM, FORD and Fiat-Chrysler to try and increase their production in the U.S. The Presidential bully pulpit has been on full display. When the media interviewed Ford CEO Mark Fields after the meeting, they asked Fields about President Trump’s executive order to halt further action on the Trans Pacific Partnership (TPP). Ford’s boss surprised me with his comments supporting Trump’s executive action because I thought a global producer like Ford Motors would have been in favor of all regional and international trade agreements. Instead, Fields thought the TPP was flawed for it failed to discuss currency manipulation. He called currency manipulation “… the mother of all trade barriers,” adding “the TPP failed in that.”
This was a direct assault on the Japanese because China was not in the TPP and of all the signatories to the trade agreement Japan is the largest automobile producer. The comment from Fields suggests that the National Association of Manufacturers (NAM) will be leading the charge for President Trump to battle back against the currency manipulators. Twenty years ago such a statement from a major U.S corporate executive would have caused the YEN TO RALLY. In today’s algo-correlated world, EQUITY MARKETS were up and the YEN was down as the risk-on trade was in full swing. HOWEVER, I CAUTION ALL DOLLAR BULLS TO BE CAUTIOUS AS THE GREAT NEGOTIATOR WILL USE WHATEVER LEVERAGE HE CAN TO CRAFT BETTER TRADE DEALS. Historically, the Japanese have been sensitive to verbal attacks on a weak yen and thus allowed an appreciation of its currency. Just something to be aware of as the world is BULLISH the DOLLAR.
In reference to today’s comments from the Ford CEO, I cite a December 30 Project Syndicate piece written by Carmen Reinhart, one of my favorite economists, titled, “Will Dollar Strength Trigger Intervention in 2017?” Professor Reinhart wrote: “President-elect Trump campaigned on a promise to bring back U.S. manufacturing, even if doing so requires imposing tariffs and dismantling trade arrangements. Yet a strong dollar is a major obstacle to fulfilling his promise. Perhaps financial markets will begin to perceive the dollar as currently overvalued and retrench. If not, will it be time for another Plaza-style accord? More important, who would be willing to cooperate?”
Reinhart concludes by noting that 2017 is not 1985 and any effort to weaken the DOLLAR would be a unilateral move to intervene. Of course, any unilateral intervention would contravene G-7 and G-20 agreements but this administration has revealed its respect for international confabs. (HAT TIP: KEVIN M.) Be vigilant to any type of market rebalancing of LONG DOLLAR positions.