Trader Note

Reverse in a place where you can participate in the move.

Post Election 2016

Markets are broken.

Markets traded limit down overnight and then reversed to close. The Plunge Protection Team was very busy rescuing these markets. This move mirrored Brexit and didn't fare well for the British Pound. Such a massive fear move that reverts so quickly shows that these markets are broken. Such markets only move money into the pockets of those in control. Retirement funds, hedge funds and savings accounts are all losers in this marketplace.

 

 

Many amateur traders just lost everything. Margins were raised during the election coverage, so these traders would have been playing at full tilt. They put on positions to try to chop a couple of percent out of the high side of markets, just as the media told them to do. As the coverage unfolded, many probably got 3 am phone calls to tell them to fund their accounts. These S&P futures positions that were meant to take a couple hundred out of the high side of markets actually lost $5000 on the low side. These traders that wen in on size to maximize chop just found out they wiped away their accounts and probably had to fund them. Most brokerages were swamped to try to manage this activity that by the time the phone call came through, their accounts had been puked and they were scrambling to fund.

My condolences to these amateur traders, the markets will miss your money. They made their cash on BTFD on the way up. Then they doubled down at a top. They are supposed to lose everything because THAT is how markets work.

As for me, I am just a bit angry that my S&P puts did not exit at the top. I got greedy and held longer than I should have held. I still made money, but it always frustrates a trader when they could have made more money. I, too, did not expect such a speedy rebound but that goes to show that PPT was working hard to save the shell game.

Gold made a big move and then suffered from the rebound. Long gold is still a good trade, even if market pricing doesn't reflect true value. Precious metals shares should be performing better in a market where oil is low but gold and stock are higher. They have been underperforming (lagging). Look to shares of precious metals whipsaw higher on that realization.

 

Moving Forward

The USA government is now controlled by the Republican Party. They hold the House, Senate and White House. The current makeup of the Supreme Court is 4 Republican and 4 Democratic appointees. The Republicans will be able to put anyone they want into the Supreme Court. So the Republican Party will in essence control all 3 branches of American Government.

Expect them to reverse many laws. Repeal of Heath Care Initiatives will likely be first. Then expect them to make abortion illegal. They will also roll back firearms legislation. It is also likely that there will be draconian legislation put forward for immigration and travel. Military spending will increase as will spending on militarizing police forces. Isolationist policies are likely, which implies an end to Free Trade agreements and higher tariffs.

President Elect Trump has a history of increasing debt. He knows real estate, so expect low interest rates moving forward because easy money sells property. He has isolationist policies that will close borders to goods and workers. This will lead to higher food prices (who do you think picks crops? Not Google employees shopping at Whole Foods!). Overseas goods will also be more expensive because everything comes from China. He has clearly stated that he wants to claw back taxes from many companies that operate internationally, which will move many businesses off shore and take those jobs with it.

When Brexit happened, the British Pound lost 15% against the USD. This led to higher import costs without higher sales. Businesses facing import and export challenges are making an exodus. Business that sought tax protection in Ireland are now looking to move out only a few short years later. Such turbulent governance is not conducive to increased business activity unless you are stripping copper out of abandoned offices.

 

 

Americans have voted to disrupt the status quo. Most will not enjoy the results.

An Australian Farmer said on Landline (ABC Television):

Change is only possible when the pain of not changing is greater than the current pain.

If you don't like the way the USA is headed, my advice is to move to California and get on board this political movement for independence:

http://www.yescalifornia.org/

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