Friday, November 11, 2016


In a conference hosted by the Central Bank of Chile of all people, Stanley Fisher revealed that in  his opinion it looked as though it was about time for a gradual rise in interest rates.  So much for uncertainty.  The Fed will raise in December and continue to raise until...well, until it catches up with the market.  Oh, the 10 year closed at 2.15% today..  From the standpoint of economic meddling, the Fed is dead and I would bet that the happiest guy in the room is Stanley.

What we are looking at in the near future is exactly what Stan Fisher has been quietly calling for and hoping for:  if there is to be stimulus let it be of the fiscal kind and with it let there be a restructuring of economic governance in taxes, regulation and alike that has been so long needed in this and other western economies.  I don't know what are Mr. Fisher's politics---frankly, I don't know if anyone does--but I suspect he is appreciative of how the markets are responding to Mr. Trump's election and taking the Fed out of a nasty little corner into which they had put themselves.

They are not out of the woods of course.  There is a little matter of $4 Trillion on their balance sheet that they have to work off and there are rather clear signs that inflation is afoot the containment of which is their primary (some think otherwise--some are wrong) mandate through monetary governance.  Spilling their balance sheet into the world is not exactly compatible with controlling inflation but this was always going to happen and one can only hope that there have been a few good folks thinking about this.  And while we are on the subject of thinking, think about the greatest reversal of sentiment we have ever seen.  From stated fears of total destruction of all things in the event of a Trump win we have seen the Masters of the Universe turn on a dime and buy the DOW to an all-time record close in the space of three days.  Who the hell in their right mind would give their money to these guys to manage?

From now the tale will become how much of the Obama "legacy" will be dismantled in the next six months.  Big Danny Tarullo will probably, in an operational sense wind up sleeping with the fishes if he doesn't decide to slip out the back door into the loving arms of Crazy Lizzy who, believing she is Ms. Clinton's natural sucessor, will want no part of him (she needs money...Wall Street has money...Wall Street hates him).  Dodd/Frank will catch a good kicking but not entirely disappear which may not be a bad thing although how they are going to fix it is beyond my poor powers of comprehension.  Somebody had better start thinking about the BIS meetings at which risk accountability will be a primary topic and since the meetings start on January 9, all we have is a very lame duck bunch of bankers and regulators to carry the flag.  Not good.  There had better be quick thought and even quicker action on the part of the Trumpsters in getting a message Over There and finding the right people to do it.  Hint: Lael Brainard is not one of those people.  I can supply a few names if anyone is interested.  This could get ugly...more on that at a later time.  There is so much more.

But the really great thing to watch in the coming months will be the interplay between the Trumpsters and Chuck Schumer in the Senate.  Chuck replaces that most odious of creatures, Harry Reid, and while he will become the leader of the "loyal opposition," Chuck has always known on which side his bread is buttered and that is the side that reads "Wall Street."  He's a nasty piece of political work but he's in a tough spot.  Lizzy on his left, the Street (now) on his right, and his buddy The Donald in the White House..oh yes, they are good friends.  This could be better than "Hamilton."  The happiest guy around?  Why me of course!  I have material for at least...two years?

Have a great weekend!

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