Friday, February 2, 2018

And So It Begins: Trump Puts $30 In Everyone's Paycheck But Destroys Their Stock and Retirement Portfolios in the Process

As I have pointed out ad nauseam here at EPJ, President Trump's tax cut is a scam.

If government spending isn't cut along with the tax cut, the money will be taken out of the economy by the government in some other fashion. Today, we had a chance to observe how the money grab is going to occur.

The Dow Jones Industrial Average closed down 2.25% or 665.75 points. This follows a decline of 363 points on Tuesday.

Here is what is going down. Interest rates are climbing. They are driven by the fact that the U.S. Treasury is going to borrow a lot more money because government spending wasn't cut along with the tax cuts.

In order to borrow more money, the Treasury must offer a higher interest rate then the current market to divert resources from other bond issuers and stock market investors. And voila the benchmark 10-year Treasury yield hit its highest level in four years today as traders prepare for the Treasury bond onslaught. When the funds are diverted to the bond market from the equities market stocks fall. Today is a teaser as to what lies ahead under bizarre Trump economics.

I hasten to add, the evil role played by the Fed in all this with their money printing and suddenly slowed money pumping. This always makes a mess of things.

So we have a manipulative Fed, where Trump just named a clueless lawyer to takeover, coupled with a never-ending borrowing Treasury.

This is not going to end well at all. I will have deeper coverage in Monday's EPJ Daily Alert.

In the meantime, enjoy your $30.