The Markets Love Trump Right Now. Can He Seal The Deal?
Or Is It "Buy The Rumor, Sell The News"?
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Macro Snapshot/Current News
Biden loses his mind – or rather Biden’s mind-ers lose Biden’s mind…
This week, President Biden, or whoever is pulling his strings at the White House right now, did two very foolish things:
He torpedoed the acquisition of US Steel by Nippon Steel. Here’s why that was dumb:
Hundreds of U.S. Steel employees rallied in Clairton, Pennsylvania, supporting the proposed sale to Nippon Steel;
Workers believed the commitment from Nippon Steel to invest $2.7 billion in U.S. Steel’s operations would secure their jobs for decades to come;
Japan is a key ally (and a significant buyer of U.S treasuries)
He banned offshore, deepwater drilling across 625 million acres of federal ocean waters under the authority granted under Section 12(a) of the Outer Continental Shelf Lands Act 1953.
Ostensibly to preserve marine ecosystems, the ban targets oil & gas drilling and still permits the installation of offshore wind farms whose devastating effect on at least one part of the marine ecosystem - The North Atlantic Right Whale (remaining population <350) - is increasingly apparent.
Trump said he would reverse this ban on the first day of his presidency. However, that may not be as straightforward as he suggests. The Act does not allow such a reversal, and doing so may require Congressional amendment of the legislation.
…and the press loses its collective mind about Trump’s presser at Mar-a-Lago
President-elect Trump gave a comprehensive press conference at Mar-a-Lago. The 80-minute tour-de-force is not a quick summary because, as usual, Trump takes many tangents in response to each question.
At the bottom of this newsletter (Great Shares section), I include two examples of polar opposite reactions: one from David Blackmon's Energy Transition Absurdities and one from
, who declared an emergency supplement to her usual daily newsletter.Both writers watched the same presser (as did I at 2x speed) and responded radically differently.
I subscribe to both.
It’s hard to convey the dissonance between the two extremes. It makes me wary about consuming either as a definitive record of what happened.
On balance, Blackmon is probably closer to describing what took place. Curate your news carefully!
Trudeau resigns - who will replace him, and should we care?
Justin Trudeau resigned as Canada's Prime Minister after ten years following a spate of terrible news and a collapse in support from friends and political allies.
Based on current poll numbers, Canada seems to be moving in a direction consistent with the trend to oust incumbent parties.
The Conservatives under Pierre Poilievre are doing well in the polls. They are campaigning on the themes of personal freedom, fiscal responsibility, and the cost of living. (Does this sound familiar?)
Poilievre’s home province is Alberta, which is blessed with vast natural resources and contributes disproportionately (on a per capita basis) to Canada’s GDP.
With Trump’s increased focus on the relationship with Canada, news coverage will intensify, and the natural resource connection will be a key focus.
The Keystone pipeline originates in Alberta, and the Keystone XL extension, which was banned when Biden took office, is aligned with Trump’s oil & gas priorities.
Reviving Keystone XL will be challenging, but I expect to hear more.
U.S. Forest Service approves reopening the Stibnite mine in Idaho
After a multi-year permitting review, the U.S. Forest Service has approved the final permit necessary for the Stibnite Mine in Idaho, operated by Perpetua Resources, to proceed to production after a permitting process that took well over a decade.
Initially focused on gold, this mine will produce up to 35% of the antimony the US military needs for multiple weapons applications. It was considered sufficiently important to the U.S. military that it contributed ~$60 million of the approximately $1.3 billion in permitting cost.
This mine is significant given China's recent ban on exporting key minerals, such as gallium, germanium, and antimony, to the U.S.
It is tough to go to war with an adversary that controls a key component of your supply chain for weapons manufacturing…
This excellent article (Great Shares below) by David Blackmon again gives details.Market Pulse
In The Markets
The markets went on something of a tear after the election. I talked about this in the immediate aftermath:
Everything was up, including the USD. The expectation was/is that a wave of market-friendly regulatory policies and energy abundance, together with a determination to address some key fiscal issues, would unleash a Reagn-style economic miracle.
This was the rumor - a classic buy signal.
As inauguration day approaches, reality is approaching. Just as Trump’s 24-hour solution to the Ukraine crisis has been pushed back to a more realistic 6-months, the market may be tempering some of its euphoric expectations about the remainder of the extravagant agenda.
Let’s have a look at ‘the news’.
High-yield bonds are currently trading around ~7.5%, a spread of ~2.92% over Treasuries. That’s historically tight, which is a good sign of market sentiment. When it starts to widen, it’s time to rethink.
Bitcoin, at ~$94k, is trading below its 20- and 50-day moving average. There is a ton of optimism about Trump’s pro-crypto bias, but no big moves are apparent.
There are some shifts, though. Institutions are just starting to invest in Bitcoin, and the ETFs are less than 12 months old. Meanwhile, some big miners are beginning to hold onto their mined treasure.
Gold continues to show strength and hovers at ~$2,600, around its 20- and 50-day averages. 2025 will see a footrace between gold and Bitcoin for dominance as a hedge against inflation and continued central bank debasement of currencies.
Stocks are showing more weakness than was generally forecast before the last Fed meeting. Look at the chart for the previous 12 months and then at 2025 YTD. The trend is positive, but the direction in 2025 is showing some pre-inauguration nervousness.
With the 10-year at 4.71%, up 1% since the Fed started easing, bonds are showing some stress.
The ~$2 trillion of corporate debt to be refinanced in 2025, 88% of which is investment-grade, and the ~$3 trillion of government debt that needs to be rolled over will remove much liquidity from the financial markets this year.
I am including (Great Shares below) my favorite tweet this week from Luke Gromen: the beatings [in the bond market] will continue until the USD weakens.
Deep Dive
If you thought Bitcoin mining was bad for the climate, think again.
Bitcoin mining is a perfect complement to renewable energy. I will investigate this…, but not today.
For now, if you want to dig a little further, spend 10 minutes with Natalie Brunell’s podcast:
Great Shares
On Trump’s Presser
On the Stibnite mine
Favorite X-Post (click to expand)
On The Horizon
December Non-Farm Payrolls January 10, 2025.
The consensus range is 150,000-165,000 with an unemployment rate unchanged at 4.2%.
This suggests cooling from November’s number at 227,000. Cooling is what the market is expecting. Let’s see.
Book and Podcast
Final stages of preparation on both - watch this space.
First podcast guest is going to be a blockbuster - guaranteed!
Quote of the Week
“Bitcoin is like gold, just virtual and digital. It’s not a competitor for the dollar; it’s really a competitor for gold.” - Jerome Powell, Federal Reserve Chairman.