Trump vs. Powell

Published on
August 26th, 2019
Duration
12 minutes

Trump vs. Powell

Trade Ideas ·
Featuring Joseph Trevisani

Published on: August 26th, 2019 • Duration: 12 minutes

Joseph Trevisani, senior analyst at FXStreet, breaks down President Trump’s response to Jay Powell’s speech at Jackson Hole. In this interview with Jake Merl, Trevisani highlights the current dynamic between the trade war and interest rates, walks through the knock-on effects of a prolonged trade dispute, and reviews his outlook for the U.S. dollar. Filmed on August 23, 2019.

Comments

Transcript

  • MB
    Michael B.
    29 August 2019 @ 00:28
    First off, the video platform you use is really Really difficult for us viewers to use. It's slow to react to clicks like if we would like to go back a few minutes or frames, or just stop the video to read the ppt screen. Please! Up your game in the mktg dept to improve this. Second, the video Boldly shows the time and time left Right In The Middle of the Video. Really? Why do we give a F about this? SO distracting I can't believe a pro org like you would even partner with this entity. Anyway, I'm not here to grind my axe. Go on now.
    • DS
      David S.
      29 August 2019 @ 17:00
      Touch or point on boarder and time disappears. DLS
  • TM
    Todd M.
    27 August 2019 @ 04:43
    Good folks, but I am not sure a single thing was said which was not idle conversation, well known and totally obvious. Quite an irrelevant piece of content. If you know how to find real vision you'd already know what they are saying.
  • DR
    David R.
    26 August 2019 @ 22:08
    Foreign data and TIC data show that there is net zero buying from abroad of US treasuries this year. Because they have a high negative yield on an FX-hedged basis. As yields have dropped and the cost to FX-hedge has risen as markets place a much higher probabitlity that the next big move in USD will be down, not up. But US rates will drop anyway and to be sure, QE will restart soon. Why? Because the Fed will be forced to buy UST to finance the bankrupt USA and its runaway out-of-control deficit spending. As foreigners have collectively baulked at US debt (explained above and proven in the data), whilst the US private sector is incapable of financing the US govt due to grossly inadequate US savings. In proof of the latter point, many US Treasury auctions have failed this summer. Primary dealers were forced to buy them, as they are. Some backdoor QE already going on, with full-throttle Fed QE and balance sheet expansion looming right around the corner, IMHO. The consequence will be a large tumble in the value of the dollar. Of course, this will catch many in the US by surprise - exactly what Mr Market tends to do. The PAIN trade. His specialty. Count on history to repeat. Given the rapidly deteriorating US budget situation, It's an accounting fact that either US interest rates must rise or the dollar must fall. Look to short USD strength, long select currencies on weakness. and long gold & silver on any correction. (THB is up ~10% against USD since last summer and up 50% against USD in the last decade or so). Gold & silver are already shouting that USD will tumble. So are the most recent UST auctions. Jesse Livermore's pivotal market turning points.
    • ZW
      Zheng W.
      27 August 2019 @ 02:07
      What kind of backdoor QE are you referring to? Thanks. Bank reserves are still going down averaged over 4 weeks.
    • DS
      David S.
      27 August 2019 @ 06:05
      David R. - I agree with you, but I have seen markets take many years to adjust to reality as politician play by different rules from the rest of us. Their resources are large enough to challenge FX market in the short run. Japan is a different case, but most of the Bank of Japan's debt is purchased by the Japanese government. The Yen is about the same to the dollar as in 2002 with all that debt purchased. (2002 not chosen for any reason.) What do you think will happen to the dollar as the US follows the same policy with MMT? DLS
    • DR
      David R.
      27 August 2019 @ 10:39
      My understanding from what Dr Lacy Hunt has written is that US is currently a long ways from MMT because laws must change and so on. Traditional bond-buying QE and/or QE for the people (helicopter money) are likely first. As for the dollar, it's hard to say where it'll move vs a specific currency as all engage in a race to the bottom in a currency war that's apparently emerging (I'm scared to be long dollars as Trump & Treasury could anytime suddenly pull an instantaneous china-like devaluation - such as print dollars to buy CNH - sending USD down against all and publicly reason it's trade war retaliation against China). I wrongly thought EURUSD would start rising by now; it's basically consolidating and could drop some still (tho I still expect the next big move in EURUSD will be up to 118-120 rather than down below 103, based on TA and because US has more monetary "firepower" with its higher interest rates). But if christine lagaarde comes in and does krazy stuff, entirely possible because she is a truly radical krazy woman who is just a socialist lawyer clueless about economics & markets). The doves of the fed look almost hawkish compared to her. Sad. ECB needed a proven, competent civil servant like the Bundesbank's Weidmann instead. IMHO. But now in order to keep their currencies competively weak, all the CB's will be forced to follow in the direction of crazy christine and the insane ECB. Again, imho [\rant]
    • DS
      David S.
      29 August 2019 @ 01:48
      David R. - Thanks. The massive debt burden and so many heads-of-state trying to disrupt the world makes it impossible to predict the future. Right now I am trusting in gold and US short-term bonds. The US will print money to pay back my bonds. Long-term investments seem out of the question in this environment. Thanks for your response. DLS
  • MS
    Martin S.
    26 August 2019 @ 14:34
    I think this narrative of the trade war is dead wrong. Trump already lost. He cannot take a worsening economy going into an election year and he would certainly get the blame for anything but accelerating GDP growth. His erratic behavior could lead to a sudden resolution as he crawls back, and that would be yet another turning point in the current narrative around a recession.
    • DR
      David R.
      26 August 2019 @ 22:33
      Trade repercussions seem overblown. China's imports from US and US imports from China are a small dent in both of their respective total production and sales. Sure trade is a factor and a couple of specific sectors are hurting, but on balance overall it's an overblown consideration. US and China would be having slowdowns regardless of trade, which continues albeit with a modest tax on a small segment of their total economies. Neither country is going into recession tho. At 6.2% growth, 4% increase in total exports globally and with waaay higher interest rates (lots of room to cut if necessary), China is miles away from any recession. And US isn't going into recession because the Fed will resume QE soon to finance the US gov't and goose the US economy. No recession will materialize in either country, yay. Just a recession "scare". But yeah, it sure would be nice to have a leader who is less unhinged and erratic, as it's impossible to run a business anymore or trade around someone who repeatedly & frequently blindsides them with kneejerk policy actions and retractions. THAT is more responsible for the US capex-business slowdown and decelerating US economy than the trade tariffs IMHO.
    • MS
      Michael S.
      27 August 2019 @ 03:52
      It's simple -- Xi can wait out the U.S. election cycle. And China has way more gold than they let on, so they won't worry about devaluing.
    • DS
      David S.
      27 August 2019 @ 06:16
      I agree except about the recession. The US consumer will purchase enough to balance the manufacturing recession - 15% of US GDP. The only caveat is the money in the hands of consumers needs to offset declines in debt repayment, reduced corporate capital investment, etc. per Mr. Koo's theories. I would like to hear Mr. Koo's opinions again on RVTV. DLS
    • DR
      David R.
      27 August 2019 @ 10:49
      David S, yes I agree about the manufacturing recession. And even a profits recession. But not so sure about a classic technical recession. As I really expect the Fed to start QE'ing and stuff soon as I explained above. I worry that the stressed banking system, very weak especially in numerous places outside the US, would collapse under the weight & deflation from a classic real recession. Precipitating a global financial contagion. I think they know that and it's why they're all pivoting fast to more monetary madness. Also, in such an environment, I can't see nominal stock values collapsing in half as some gloomsters have predicted. Likewise, corp bonds can/will be bought by CB's to mitigate collase in bond nominal values too. In real terms, they might possibly lose significant value, but not so much nominally. Thus, gold & silver to the moon? ... lol sound like a gold bug now.
    • DS
      David S.
      9 September 2019 @ 08:49
      David R. - QE will not help economy in "balance-sheet recession". It may raise equity prices as it has no other place to go.DLS
  • RS
    Robert S.
    26 August 2019 @ 09:45
    The layout of that room doesn't seem to make people relaxed. How about a couple of sofas instead of chairs?
    • DD
      Dominik D.
      26 August 2019 @ 18:16
      Or lie-down beds with a massage function with grapes being fed to them by RV interns? I think they're there to work and chairs are appropriate.
    • DR
      David R.
      26 August 2019 @ 22:38
      Dominik, yes I've repeatedly turned down requests for interviews by RV in the absence of those creature comforts you describe.