Does Trump have an UNO Reverse card?
Maybe Trump doesn't need another TACO.
Trump is stuck between some very hard and heavy rocks right now. It seems he has no way out, as his problems continue to mount.
- The US 10-Year Yield is once again faced with the critical 5% level
- US Government Debt hit $40 trillion – with the deficit for the year expected at $2 trillion
- The war in Iran is kicking off, with a vengeance
- and Midterms are in less than 2 months...
The polls point to the Democrats winning back the House, and a very tight race on who wins the Senate.
That would be a major blow to the Trump Admin., which needs to defend both chambers – signalling a successful first two years of the term, and keeping Republican hopes of winning the next election alive.
“The market and the economy have become hooked, become addicted, to excessive government spending and there’s going to be a detox period.”
—Scott Bessent
When Bessent was incoming Treasury Secretary, he warned that this administration represented America’s last chance to get its fiscal house in order.
His prescription was fiscal prudence: rein in excessive government spending and grow the economy fast enough to escape the mountain of debt.
In Bessent's Detox, we deconstructed his plan, to uncover their actual fundamentals. We saw no merit in what Scottie boi was promising, and discarded it as merely the product of hopes and dreams... or just simply political posturing.
Baby Yoda here holding a cup of warm Kool-Aid...
Bessent's Relapse
It turns out the detox period never happened, because Trump-Bessent knew they had to keep themselves in power and the economy strong by keeping the money printers running at full speed.
Less than two years later and Bessent is buying back US treasurys to keep yields from breaching 5%. It turns out, persistent fiscal recklessness rerates your cost of borrowing – risking an event where the whole house of cards comes tumbling down.
Rather, spend time understanding capital allocation and real assets – to guard yourselves from currency debasement.
Coming up on Philoinvestor
Currency Debasement for Dummies: Real Assets
Iran War Blowing Up
And then there's Iran. After a break in hostilities, we are now back to full-on exchange of blows between Iran and the US.
Donald needs a deal in his own terms, the Iranians have set their terms and aren't budging. That includes $300bln in reparations and a full retreat of American forces from the Gulf as well as a full reversal of sanctions, a release of frozen Iranian assets – basically a complete surrender by the US.
Donald isn't taking that deal, and he feels more military pressure towards Iran would push them to help their mind. The Iranians in turn are raising the stakes, and escalating even further, as a response...
WEN TACO?
It's true. Donald conditioned us to expect a TACO for every season and occasion. And it's worked every time. But in this case, he's in too deep.
He's pressed for time to show results after a disastrous war with Iran, which has delivered no breakthrough.
The Iranians have explicitly said they will hold out until the midterms and beyond, to break Donald's back.
No more negotiations. We are moving into a new phase of the conflict.
Americans must have understood that the era of proportionate responses is over. The game is now changed. Any aggression/attack against Iran's interests and security will receive a faster, heavier and more painful response.
Remember our Brink and Back thesis?
Donald would take markets to the brink and then back off before things got out of hand. But that implies one can back off. And as we've established above – I don't think they can.
But Trump may have an UNO Reverse Card up his sleeve....
