More Outs
I am flabbergasted that Trump is considering a $300B reconstruction fund. Gemini says this is ON TOP OF sanctions relief (worth a $500++billion), and unfreezing their funds (worth $100B)? So we are offering a package worth a TRILLION dollars (or more)?!? That is 3+ times Iran’s prewar annual GDP. Seriously – WORST. NEGOTIATOR. EVER! How do you get to that scenario, when walking away costs nothing, resumes the flow of oil and lowers oil prices? Given the revelation that Trump is this stupid and desperate, we are presented with several more “outs” that Trump has with Iran.
But first the week in news:
· Cook said there are risk to both sides of mandate, but the overall risk was tilted toward inflation. She is prepared to raise rates if disinflation doesn’t reappear. Jefferson also thinks the inflation risk is higher (and the employment risk is lower). As hinted last week, it looks like the Governors are all leaning the same way – towards a neutral bias later this month.
· Musalem said that Fed policy is at or below longer-run neutral, and that risks have tilted more to inflation side of mandate. He said it would be concerning if there was no disinflation in next 1-2 quarters, and an interest rate hike may be necessary if inflation does not resume easing within the next 6 months. That would point to a potential hike at the December meeting. But this depends on the trajectory of inflation.
· It appears that Trump wants an easier conquest before the midterms, and he has his sights set on Cuba. He also posted a creepy photo of him and Greenland, but that could turn ugly, and he needs to an easy victory before the elections – not another drawn out (verbal) battle. Maybe Trump can get more leases in Greenland and spin that into a victory. He could squeeze Cuba by the midterms, to put the focus away from Iran.
· As you may have inferred, I don’t have the highest opinion of Trump, even though I am a conservative. And I am not alone. If he ends up going to a Knicks game, the cascade of boos will certainly delay the game. He can’t even get “C” level singers to show up for our 250th anniversary. That is sad. But I am going to say something positive about one of his vanity ventures. If Trump ever gets that $250 bill with his face on it approved (even though it is illegal to put a living person on our currency), go out and secure as many you can. That thing will be one of the most sought-after pieces of currency ever. See? Something positive. The first Democrat that wins will certainly end the printing, causing a massive shortage. I know from watching enough Antiques Roadshow and Pawn Stars that the limited print currencies are highly valued. There is a small tail risk the currency could get banned, but you can probably find some wayward MAGA buddy to still buy it off you for a healthy multiple.
More Outs
The reason why I am dumbfounded about this reconstruction and investment fund is that this is something you do WHEN YOU GET A FRIENDLY REGIME. Why would you set up a fund to build for someone that will hate you and you will see zero return? The obvious answer is that this reconstruction fund could be a way to skim money off the top for some in say, construction. In addition to taking bribes for contract allocation, I believe Messrs Trump, Kushner and Witkoff are all in the construction and/or money allocation business. Because when you start giving away stuff you probably don’t have to, you have to ask, “why?” As we’ve seen with the IRS fund scam, Trump is not shy about diverting funds to his buddies. It’s plausible that the details are such that we never have to pay out, or some other shenanigans. I (along with everyone else) have no idea how the fund will work. But let’s assume that this is a legit proposal to give Iran some money while benefiting US companies. We shouldn’t have to offer this money to begin with.
