Australian dollar jumps on tweet of drugged, dead duck maniac

See the latest Australian dollar analysis here:

Macro Morning

DXY was down last night:

The Australian dollar jumped:

Not gold:

Oil rose:

Metals surged:

Plus miners:

And EM stocks:

The junk siren has gone silent:

The US yield curve is steepening:

Stocks to the moon:

And so much for pricing election risk! The failure to pass a $2tr stimulus package was overwhelmed by the tweet of a drug-addled, dead duck maniac that has lost the support of his own party and country but not markets!

The only problem? It’s the Republican senate that won’t pass the legislation. God knows what will happen when El Trumpo ends his five-day uber-steriods course. But let that pass. Buy a random tweet!

Even though:

These days the equity market is reduced to daily jawboning to support key technical levels and let the robots do the rest. From SpotGamma:

It’s not your grandfather’s discounting mechanism that’s for damn sure.

Still, election risk has subsided even as stimulus has crashed. The end of a drug-addled, dead duck maniac in the White House is bullish is it not? And a clean sweep will eventually deliver more fiscal, from Goldman:

1. President Trump’s announcement that he has instructed Secretary Mnuchin to end talks with Speaker Pelosi on a COVID relief bill likely signals that the odds are very low that Congress will pass a large fiscal package before the election. While we had not expected further pre-election fiscal relief, these developments are still surprising, for two reasons. First, the President himself had pressed publicly for an agreement just a few days earlier, so this represents an abrupt shift. Second, one would expect politicians in both parties to want to continue negotiations, if only to maintain the appearance of progress as the election approaches. While President Trump’s decision to call off further negotiations might be an attempt to put political pressure on Speaker Pelosi to compromise, this seems unlikely to produce an agreement on a large fiscal package.

2. The focus now looks likely to turn to piecemeal legislation. Last week, Speaker Pelosi indicated she would be willing to put a standalone bill providing additional relief to airlines on the House floor for a vote. In addition, on Tuesday (Oct. 6), President Trump endorsed standalone legislation to provide more funding for the Paycheck Protection Program (PPP) and another round of stimulus payments ($1,200 per individual). However, the President already supported these policies, so while this represents a shift in legislative strategy, it does not represent a change in position.

3. A piecemeal approach might allow for only a very limited amount of fiscal relief. Since the White House and Democratic leaders appear to support standalone airline relief legislation, enactment of another $25bn in airline aid looks increasingly likely. Passage of standalone legislation authorizing another round of PPP loans for hard-hit businesses is possible but not likely, in our view. A standalone PPP bill is possible as members of both parties support it, but it is unlikely because lawmakers in both parties would likely want to attach additional measures to such a bill, like a renewal of the expired extra $600/week unemployment benefit, or aid to schools. If so, a simple standalone bill could quickly become a renewed negotiation over a broader fiscal package. A standalone bill to authorize another round of stimulus payments to individuals is even less likely, as neither party has made this a priority even though both parties appear to support such payments as part of a broader package.

4. Broader fiscal relief looks like a post-election issue. If the election results in a status quo election outcome (i.e., Republican White House and Senate, Democratic House) then Congress might pass some fiscal relief measures in a lame-duck session of Congress before the end of the year, including further PPP funds, a partial extension of the extra unemployment benefit, and money for schools. By contrast, if Democrats win control of the White House and Senate, we would expect Congress to enact a much larger fiscal package, as we recently described, but we would not expect it to pass until early 2021.

But also large, very equity market negative tax hikes. Oh well! Global growth is slowly returning:

And there is is this, as troubled as it will be:

And Fed minutes may have tantalised markets:

While the economic outlook had brightened, market participants continued to see significant risks ahead. Some noted concerns about elevated asset valuations in certain sectors. Many also cited geopolitical events as heightening uncertainty. In addition, most forecasters were assuming that an additional pandemic-related fiscal package would be approved this year, and noted that, absent a new package, growth could decelerate at a faster-than-expected pace in the fourth quarter. In light of these and other risks, as well as the ongoing pandemic, market participants continued to suggest that the supportive policy environment and the backstops to market functioning remained important stabilizers.

…Participants continued to see the uncertainty surrounding the economic outlook as very elevated, with the path of the economy highly dependent on the course of the virus; on how individuals, businesses, and public officials responded to it; and on the effectiveness of public health measures to address it. Participants cited several downside risks that could threaten the recovery. While the risk of another broad economic shutdown was seen as having receded, participants remained concerned about the possibility of additional virus outbreaks that could undermine the recovery. Such scenarios could result in increases in bankruptcies and defaults, put stress on the financial system, and lead to disruptions in the flow of credit to households and businesses.

Most participants raised the concern that fiscal support so far for households, businesses, and state and local governments might not provide sufficient relief to these sectors. A couple of participants saw an upside risk that further fiscal stimulus could be larger than anticipated, though it might come later than had been expected. Several participants raised concerns regarding the longer-run effects of the pandemic, including how it could lead to a restructuring in some sectors of the economy that could slow employment growth or could accelerate technological disruption that was likely limiting the pricing power of firms.

So, now that those assumptions have proven false the Fed will ride to the rescue?

And so, we solider on into this extreme-risk dystopian future pricing for risk-free utopia.

The Australian dollar dragged along for the ride.

David Llewellyn-Smith
Latest posts by David Llewellyn-Smith (see all)

Comments

  1. The problem appears to me to be everyone is trying and expecting to time travel to 2019. Spend next year will be good for PM’s and undollar.

  2. Article above states this:

    The only problem? It’s the Republican senate that won’t pass the legislation.

    that implies that the senate has passed the $1200 stand alone stimulus with no debt relief for democrat strong holds attached and it is the republicans who have blocked it?

    Or has this not in fact happened.

    Republicans have approved a $1.4 Trillion stimulus bill – Democrats have added on a further $1.2 trillion for debt relief for blue cities which are effectively bankrupt. That is a long way from stand alone $1200 stimulus cheques – or again – is there something missing.

      • You’ve banned previous subscriptions for asking the same VERY REASONABLE questions being asked today.

        Why would people continue to subscribe when all you do is ban anyone who does not repeat your views.

        Not just once David – but multiple times myself and others I know (I work in the industry) have been banned for completely reasonable posts with accounts.

        We have been on this website since day one – your “bans” have varied from incredibly accommodating to people like “coming” and “mig” who eventually get “time outs”.

        But to those who question your American allegiance, undermining of the entire Australian export sector, push for American ownership of Australian public service, resources, commodities its an instant ban.

        Other bans revolved around your stance on the NBN, spurious claims regarding CBD in your push against fast trains (a clue) and unrelenting advocacy of urban wasteland expansion to mitigate house prices (startling ideas to many).

        Again – there is no reason to ban other than you do not like anyone questioning your ideas – very reasonable questions indeed.

        • I think DLS is venturing into that bloke Chris Becker territory with his TDS….not a good sign! Ah well his abysmal record on predicting politics is matched only by his authoritarian impulse to silence dissent. You are exposing him for the hypocrite he is!

        • Moreover, an ineffective product could actually worsen the pandemic—those who received the vaccine might stop taking precautions against contracting SARS-CoV-2.

          Tnx for the link, this perspective is something i learned from the article, a view few will contemplate

          • A bit like masks.
            I was in a store the a few weeks ago and the lady serving me had a mask on, the centre was black with saliva. IN the minute or two she was serving me she adjusted it by holding and moving it on the sodden section 3 times before handling and scanning my products.
            Probably one of the reasons early on everyone was told not to wear one.

          • Ronin8317MEMBER

            Put in another way : if the saliva is not on the mask, it’ll be everywhere else instead!!

            It doesn’t stop a person from getting it, but it significantly reduces the chance a person will spreading it.

          • Wherever the saliva ends up, it is not quite the place we all expect (or don’t) hence the pros and cons.

            Above quote i did on the ineffectiveness is a side that relies on behaviour change that can have potentially very dangerous consequences.

        • Agreed. Why don’t the ZeroHedge crowd go where their psycho-virus, climate-denying, orangeman-loving, antiscience opinions are welcome?

          • Because half the reason we’re in this mess is that we’re unwilling to hear the opposing views on a subject.

          • Bullshyt. We’ve heard all the lame, logic-free “arguments” for years now. It’s just an obstruction of constructive discussion at this stage, a deliberate attempt to spread FUD, or as the professional tobacco and climate deniers say “Doubt is our product”.

          • What, only half?

            I reckon all the problems with pollution reduction acceptance comes from nut job alarmists calling crywolf too many times which created the opposite end of spectrum nut jobs and now we have them both drowning the important parts of science with constant shouting and hysteria

  3. “Money is a commodity, like oil or water. And that American Dollar is the best brand there is in the world” – Miami Vice (1985)

    “Run. Run fast and run far…” – Peter (2020)

  4. It was the unchallenged position that central banks needed to emphasize their inflation-fighting capacities at every opportunity….No one seems to have asked whether (it was) the increasingly unmeasurable monetary system which had gone haywire (or) might go haywire in the future …central bankers worldwide refuse to admit that markets can identify the problem for them.
    Why do they refuse? Because in identifying the problem these markets are pointing the finger back at them!
    Not only do markets tell them what they don’t want to hear, but the increasingly explicit unreliability of their own models also backs up that very contention.
    And in the absence of credibility, what’s really left? Lie….

    https://alhambrapartners.com/2020/10/06/inflation-targeting-you-can-me-al/

  5. After the election, there will be no more pressure either to GOP or Dem to pass any large stimulus package.Millions will be in poverty very soon, so many small businesses will fold definitively.

  6. “The only problem? It’s the Republican senate that won’t pass the legislation” they won’t even get a chance if the democrats never table it. Trump said he is ready to sign it, it’s th3 Democrats holding the stimulus hostage.

    Never go full TDS.

  7. MBers, if Trump wins in November should Dave and Chris
    1. Spend the next 4yrs praising everything Trump does
    2. Buy Trump a sub
    3. Say sorry to everyone on here who supported Trump
    Feel free to add to the list

    • First 2 years I thought Trump was great for de-globalisation (particularly China, well just China), but I can’t support the guy, he’s batsoup crazy, best would be for him to be forced to stand down and someone not so insane to step in, don’t think Dems have the balls to contain China

      • yes once Trump is gone, we (and Scommo) better bow to our Chinese masters and apologise to them (and MB should be wise to delete all their anti-chinese posts, that could come to bite them)

      • Yes Mark I was of the same opinion as you, but it wasn’t Trump that caused this mess when you think about it. Despite all his rhetoric, it was Covid-19 that really has done the damage and unwound a lot of globalisation.