Macro Dragon: WK # 40... End of 3Q, Supreme Court Nominations , 1st US Presidential Debates + Trumps Tax Returns

Macro Dragon: WK # 40... End of 3Q, Supreme Court Nominations , 1st US Presidential Debates + Trumps Tax Returns 

Top of Mind…

• Happy Monday Folks & Welcome to WK # 40…

• Hope everyone had an awesome wkd full of half-marathons, couch lounging expert views & more kips than a clowder of cats

• What kind of week are you trying to have up ahead?

• Focus: Its heating up… at the very least that is what the newswires will have you believe, as the beat to the US elections is expected to ratchet up day-in & day-out to the Nov 3^rd date.

• Yet there are likely to be at least three main focus points this wk – all very much tied to US politics. Tactically we continue to be in a vacuum, awaiting the next hit of fiscal and/or monetary stimulus. Strategically, make no mistake, there is no escape from this regime of leviathan liquidity, we will be here for years to come.

• One: Trump has nominated conservative Judge Amy Coney Barrett to fill the supreme court seat of the late & legendary, Ruth Bader Ginsburg

• Judge Barrett came up under the very conservative – & former close friend of the liberal Ginsburg – the late Justice Antonin Scalia.

• This is a legacy trade for Trump, as it would cement a 2 to 1 advantage to conservative on the US Supreme Court – whose members typically serve for life & hence have a huge structural influence on the judicial influence in American society, culture & business.

• The overall consensus view seems to be that the republican dominated Senate will rush this over in record time & will be able to garner the votes needed, with the democrats not being able to do much (for now).

• We touched on the implications of that last wk Macro Dragon: The Notorious RBG! & potential backdraft if we get a blue wave in Nov.

• From the Dragon’s standpoint, if she is successfully put forward (could we see Romney pulling a 180 on Trump, post being called a loser numerous time, as well as a ‘pompous ass’?), it will likely be a net cost to Trump from the voters who have been undecided until now.

• Is it a smart strategy? Well it depends, if you are pretty sure you are not going to be elected – then its pretty smart, also don’t forget Trump’s age, i.e. statistically his theta is limited. Likewise, if your are pretty certain you are going to get a landslide victory & continue to hold the Senate, then its smart from a take no prisoners approach.

• If its marginal in regards to election outcome, then it becomes a super questionable move.

• Net-net, it’s a battle win that the republicans could claim for now, but it is far from winning the war - & yes, net-net the American tax payer is paying for this duopolistic structure. Its really not too different for paying 2 & 20 for a fund manager to have the privilege of underperforming on your assets. At least on the latter, the price you pay (& whom you pay) is a lot clearer.

• Here is a potential sequence of steps needed to bring this home for Trump. Lastly worth noting she is from Florida, which will be one of the key swing states in the elections.

• Two: We get the start of three presidential debates which should fall under the days of Tue 29 Sep, Thu 15 Oct & & Thu 22 Oct. First debate should be 2100 to 22:30 ET.

• Again given how polarized both camps are, its likely less about changing one’s tribe, but about those who are left undecided for now (yep, yep don’t get KVP started on those folks).
  
  
• Also there will be no live audience, which may work to Biden’s advantage – he will likely need it… remember Trump did the Apprentice for +6yrs.. he is a master puppeteer.
  
  
• No doubt, some Dems would love that “I’ll be your huckleberry…” scene from Tombstone, where Biden gets switched for Harris, Bernie, anyone else?! That scene has to be one of the most gangster of all time, yet one needs to watch the whole movie – one again, context is everything. From the Dragon’s standpoint, its pure collateral damage control from Team Biden.
  
  
• Here is a NYT breakdown of the debate calendar.
  
  
• Three: Taxes or lack thereof, early Asia Mon Morning we are hearing that the NYT has a report showing that Trump has not paid taxes in 10 of 15 years.
  
  
• LONG-CONCEALED RECORDS SHOW TRUMP’S CHRONIC LOSSES AND YEARS OF TAX AVOIDANCE
  
  
• Again, likely less relevant to team blue & red as they are as tribal as one gets (i.e. nothing they likely would not have guessed, be it true or not), yet what’s the effect on the undecided voters?
  
  
• Markets: Month & quarter end flows could make this a noisy wk. Given its end of 3Q ladies & gents, we really only realistically have 2.5 months of actual liquidity & action given seasonal year-end effects. I.e. For the traders, make the last few openings of the year count, take your time, be patient, there are always opportunities.
  
  
• And yep, 4 consecutive down weeks in US equities as measured by the S&P 500, but note, the Nasdaq-100 (leader) had a big pop up of +1.96% to 11151, vs. SPX pulling back a further -0.63% to 3298.
  
  
• Economics: Busy one this wk, with final PMIs across the board, as well as Super Friday in the US with NFP, AHE & U/R due – worth noting we got a slight uptick in jobless claims last wk (870K a 850k e 866K r ).
  
  
• Something worth monitoring, as going back to Powell’s last FOMC press conference, he did raise concerns that with no follow through on the fiscal package side, we could start to see that data feed through in unemployment & consumer spending.
  
  
• KVP likely feels we need a few more wks to see if we really are seeing a spike here in jobless claims, maybe even an entire month, as US Flash PMIs were in-line for Mfg. at 53.5e & Serv. missed a touch at 54.6a 54.7p, yet obviously lower that previous 55.0p. So again, potentially not as big an impact into the elections as could have otherwise been the case… yet lets see… bear in mind that some folks have already voted given the mail ballot system in some states.
  
  
• We are also due US Mfg. ISM & final 2Q GDP, as well as PCE data.
  
  
• Politics: Already touched on this, really all about US elections until Nov – this wk focus should be on the Supreme Court Nomination & of course, the 1^st presidential debate between Biden & Trump. Will be interesting to see if the NYT Tax piece is just noise or potential signal this wk.
  
  
• Central Banks: RBI 4.00 % e/p, PH 2.25 % e/p
  
  
• ECB’s Lagarde set to speak on Mon 21:45 SGT & Wed 15:20 SGT
  
  
• Fed Speak: There are at least 12 different interviews & speeches from FOMC members, including Clarida – yet excluding Powell (who was on quite a few times last wk, including testifying with Mnuchin before the House). It is worth noting – something flagged a number of times by our CIO Steen Jakobsen – that we are getting a huge range of mixed messages from the FOMC members.
  
  
• How much of this is discourse to enhance their views or/and a strategy to put the focus & pressure on Congress? (i.e. we need more fiscal, not more monetary policy) remains debatable.
  
  
• Clarida is set to speak on Tues 23:30 SGT.
  
  
• Bottom line, when it comes to the US we are in vacuum where we can likely expect no fiscal & nor monetary boost to the US until we are either on the other side of the US elections, and/or we see a massive fall-out in the equity & bond markets that forces the Fed & Treasury’s hand.
  
  
• Note this does not change the broader backdrop of a Leviathan Liquidity Regime that is unparalleled, but as in all things with huge structural trends, the mean-reversions make us re-question the broader thesis & its assumptions.
  
  
• Holidays: China out on Monday & Friday on bank holidays. HK will be out on Thu & Fri.

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Start-to-End = Gratitude + Integrity + Vision + Tenacity. Process > Outcome. Sizing > Idea.

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