Presidents, propping up, and the probable fallout

President Frank Underwood is not a nice man. This mythical presidential character in the most recent House of Cards franchise on Netflix will do anything to stay in power. His shenanigans are legendary, including massive frauds, infidelities and ultimately murder. Both he and then his wife, the First Lady played by Robin Wright, are obsessed by power and money and all that goes with it. But, the more they obsess, the harder it gets to distinguish between what is real and what is not. And currently right now, this is where I feel we are with President Trump and the markets. It feels like an episode from a Netflix boxset.

This week, Trump sends out a tweet underlining how obsessed he is with power, but at the same time should send shivers down the spines of investors. In short, the tweet begins with “RECORD HIGH NASDAQ!” It then goes on to warn that if “sleepy Joe” (Biden) gets into the White House after the up and coming elections, it would all turn to dust. China would own America and the pension pots and savings of Americans would tank. Pure shock and awe scare tactics from a president skilful in doing just that. But, the tweet is in his arsenal of creating fear. Certainly, Joe Biden looks to be in a fairly decent position when it comes to gaining the Oval Office. And, if Mr Biden does get in, the markets may well think, “oh dear, our day of reckoning has come,” and crash. I’m not sure a new President Biden would curry much favour with the current stock markets in the USA. So, yes, perhaps Mr Trump is right on this one. Perhaps indeed, the Nasdaq, Dow and S&P 500 may not like a new democratic president, and the fiscal policies his administration may bring forth.

But, here is the crucial point. At least with Biden, the markets will know exactly where they are. The problem is that currently they are on life support and retail investors don’t know it yet. This brings us to the first part of Mr Trump’s tweet. How delighted he is that the Nasdaq is almost at an all-time high. He is thrilled at such optimal performance from the US indices. He should be, because it has cost him enough. Not him personally, of course. No, that peculiar but remarkable entity called the Federal Reserve has pumped in trillions to make it all happen. Currently, the Fed’s money-printing has resulted in its balance sheet rising to $7.01 trillion. And this quantum should not be lost on us. It certainly is not lost on Present Trump. In fact and in effect, this huge amount of new debt that sits with Americans is propping up the Nasdaq and every other index in the USA.

Of course the US stock markets are buoyant. They are sucking in tens of millions of dollars each week to make them look good. Liquidity is being provided like a gushing tap, which is unmanned and unhinged. It is borrowing upon borrowing, debt upon debt, and just like a house of cards, it could come crashing down if Jerome Powell decided to cut off the supply from the dam. But he won’t, as the Fed chairman knows that if he did, it would be economic chaos and the probable collapse of the dollar. Away from Mr Trump’s tweet, gold, silver and now Bitcoin are all edging up sharply as the smart money shifts out of the markets and into more traditional safer bets. Gold is almost at an all-time high, while the demand for silver is rocketing and looks to be about to head to the moon as some commentators suggest.

Why? Because the smart money knows the house of cards is on shaky ground and built on massive debt. So, it moves to lumps of metal that are less prone to manipulation due to their scarcity. But Mr Trump won’t tweet about this. Not a mention.

No, the truly scary outcome of these presidential elections is not Joe Biden entering the White House. It is another four years of Trump, stimulus, borrowing and over-inflated, greedy stock markets that are being fed on the “never never”.

That is what Americans should be focused on and we too should take note!

Jim Duffy MBE, Create Special

I’m not sure a new President Biden would curry much favour with USA stock markets