A Bearish Positive Carry Trade?

Authored by Kevin Muir via The Macro Tourist blog,

The Eurostoxx outperformance of the past month has garnered a lot of attention, but there is another similar trade many investors are missing. Not only that, but it has a positive carry, something that is sorely lacking in this day and age of NIRP.

 

Since early April, the German Bund / US T-note 10 year yield spread has rallied 35 basis points, rising from negative 220 bps to 185 bps.

http://ift.tt/2rO0j4a

For all those who think quantitative easing is long end fixed income friendly, this move makes no sense. After all, the ECB is busy buying bunds by the bucketful while the Federal Reserve is preparing the market for the eventual winding down of their balance sheet, reducing the rate of reinvestment (and therefore bond buying). Yet, for me, this move makes complete sense. What is a bond investor’s worst nightmare (after default)? Inflation. What is quantitative easing suppose to create? Inflation. Why then does the market expect QE to cause bond prices to rise? If Central Banks are successful, it should actually create the exact opposite reaction.

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Of course, it’s not quite this simple, and no doubt the rate of private sector money creation greatly influences the extent of the inflation created by the Central Banks’ quantitative easing, but fixed income investors shouldn’t cheer when Central Banks write blue tickets.

But let’s step back and think about the current European / US situation. The ECB is the second easiest Central Bank out there (right behind the BoJ), while the Federal Reserve the most hawkish. It might take a while, but eventually, these policies will filter through to the real economy.

And it looks like it might finally be happening. Have a look at the CitiBank Economic Surprise index for both the EU and the US:

http://ift.tt/2rO7bOW

US economic performance versus expectations has plummeted, while Europe is hanging in there at lofty levels.

If you are a big US economic bear, you could try shorting stocks. But I would much rather own US fixed income against being short German bunds.

Even though the 10 year German bund / US t-note spread has backed up 35 basis points over the past couple of months, it is still sitting at extremely depressed levels.

http://ift.tt/2rf5b5m

While you wait, you earn the monster positive carry.

This has long been one of my favourite trades, and even though it has moved my way, I am not taking any off. In fact, now that it is working, I probably should be adding…

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P.S.: For those who don’t have access to a Bloomberg or similar bond calculating program, here is the Position Hedging screenshot for the Eurex Bund future vs. CME US 10 Year T-note future. It is almost 2 TYM7 for each FGBLM7.

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Suspect Statistics From Plastic-Surgeon Society Say ‘Gender Confirmation Surgeries’ Up 19 Percent Last Year

A host of U.S. media outlets are reporting that 2016 saw a 19 percent spike in “gender confirmation surgeries,” a term used by the American Society of Plastic Surgeons (ASPS) to describe an array of elective facial, chest, and genital procedures performed on transgender patients. The statistic comes from an annual ASPS report, which for the first time includes information on such procedures. But are the numbers legit? A day after publishing an article touting the ASPS findings, Reuters wound up pulling the piece, citing the Society’s inability to “vouch for the data which [it] originally supplied.”

Yet as of Tuesday evening, the ASPS website still contains the statistics which Reuters published and pulled. It says there were 3,256 “gender confirmation surgeries” in 2016 and 2,740 in 2015. Some 1,759 of last year’s procedures involved transfeminine procedures (i.e., those performed on trans women) and 1,497 involved transmasculine procedures; the previous year, it was 1,380 and 1,360, respectively. Using these stats, we get a 19 percent increase in gender-related surgeries overall; a 10 percent increase in surgeries for transgender women; and a 27 percent increase on surgeries for transgender men.

A media relations coordinator for MediaSource, which handles ASPS public relations, says these figures are correct. “There’s no problem with the data,” Drew Schaar told me Tuesday afternoon, noting that the methodology used for gender-related procedures was the same process used to tally all cosmetic and reconstructive procedures in the ASPS report—some 17.1 million overall, according to ASPS, though 15.1 of these were the minimally-invasive (i.e., Botox injections, chemical peels, laser hair removal) sort.

According to Schaar, Reuters pulled the article after seeing more information than is publicly available about the data and deciding it didn’t meet the news agency’s own in-house standards. But he could give no more information about what, precisely, failed to pass muster, and said more detailed information about survey methods and findings could not currently be provided. Alas, we’re left to guess what may have made Reuters lose confidence in the ASPS conclusions. But I’ll offer a few of my own observations, based on what limited info is available—the most important bit of which is probably an ASPS fine-print statement that “all values are projected.”

The underlying methodology of ASPS’ annual survey may be flawed. Each year, ASPS solicits survey responses from all of its 7,000-some members, a group that includes 94 percent of all board-certified plastic surgeons in America, according to ASPS. With the 2016 survey, 703 ASPS-member physicians responded, down from last year (when 733 doctors responded) and 2013 (801 responses). Using answers from this member-surgeon sample, ASPS estimates the total number of cosmetic- and reconstructive-surgery procedure—from chin implants to Botox injections to labiaplasty—performed by American Board of Medical Specialties (ABMS) doctors in a given year. The raw response numbers from ASPS members are thus “aggregated and extrapolated to the entire population of more than 24,500 board-certified physicians mostly likely to perform cosmetic and reconstructive plastic surgery procedures.”

This means that only about 2.8 percent of the population allegedly reflected are actual ASPS members who took last year’s survey. So that’s potential limitation one—although not necessarily a disqualifying one. Political polls extrapolated to all of American voters are often based on much, much less. But these are, theoretically, run through researchers’ weighting magic to make them plausibly representative of the population in question.

In this case, it seems suspect to extrapolate info from physicians who have actively elected to belong to a professional plastic-surgeon society to all American physicians who are certified or “likely” to do any sort of plastic-surgery procedures. Yet because ASPS is mum on its methodology, we don’t know if or how they controlled for differences in the practices of ASPS-member doctors and outside doctors. If not done properly, this would have major potential to inflate plastic-surgery rates across the board.

We don’t really know what “gender confirmation surgery” means here. In its main report on plastic surgery in 2016, ASPS breaks data down by procedure. There’s one line for “Buttock Implant” and another for “Buttock Lift.” Liposuction is separate from “Tummy Tucks,” and injectable collagen-based fillers from Hyaluronic acid-filled ones. Yet when it comes to the procedures lumped together as “gender confirmation surgery,” we aren’t given any specifics. Right now, ASPS merely tells us that the category includes an array of “transmasculine” and “transfeminine” procedures, from genital reconstructive surgery to procedures that help make the face more masculine or feminine. (The now-withdrawn Reuters article reported that only 0.9 percent of transfeminine procedures and no transmasculine procedures in 2016 involved genital surgery. For transgender women, 92 percent of procedures were breast or chest operations and 7 percent facial operations. For trans men, 95 percent were chest or breast operations and 5 percent facial operations.)

How does ASPS decide which surgeries and procedures fall in this category? Did this list fluctuate at all between 2015 and 2016? And how did ASPS determine whether patients obtaining various procedures (many of which aren’t exclusive to transgender patients) were doing so for reasons related to gender-identity or vanity or back pain? Again, here is an area where ASPS methods could be perfectly sound but its refusal to relate them leaves room for doubt. If the ASPS methodology is legit, why aren’t specific gender-related surgeries listed like all other procedures? Why the need for such secrecy?

We don’t know how many doctors, or what types, responded. Of the 703 doctors who took ASPS’ 2016 survey, how many conducted any one of the procedures labeled as gender confirmation? We have no idea based on what ASPS has made public. Perhaps only a very small number of survey responses contained any information about transgender patients, making larger extrapolations statistically insignificant. Or perhaps a significant number of members reported a few, but the vast majority came from only a few physicians or practices.

The ASPS report leaves us in the dark about the average number of procedures per physician who did see transgender patients, as well as the types of doctors in the survey sample. But if a few doctors in the survey reported most procedures, and most of the surveyed docs reported none, then extrapolating from the sample-population here could still be flawed. The same thing goes if survey respondents included a larger number of gender-identify specializing doctors than are found in the plastic-surgeon population overall.

We don’t know how doctors in the 2015 survey compare to doctors in the 2016 survey. As I noted above, the ASPS survey is sent out to all of the group’s members but only elicits around a 10 percent response rate, on average, over the past few years. Twenty-fifteen was the first year that ASPS posed gender-surgery-specific questions to its members, doing so again last year. Could the inclusion of the new survey question—and this inclusion becoming better known by the 2016 survey—have influenced more plastic-surgeons who specialize in transgender patients to participate? It’s certainly possible.

The bottom line is, we have no idea about the makeup of 2015 respondents versus 2016 respondents overall. The entire 19 percent leap reported here—which, remember, is premised on we-don’t-know-many actual surgeries reported by actual doctors—could come down to a difference of just a few more patients when we look at raw data, and/or be accounted for entirely based on the differing doctor samples from year to year.

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Outrage Ensues As Rambling Maxine Waters Has Her Mic Cut By Democratic Party

African American Caucus leaders are outraged today and wondering whether racism played a role in the attempted silencing of Maxine Waters as he microphone was cut at speech before the California Democratic Party African American Caucus.  From the LA Times:

The head of the California Democratic Party African American Caucus said Monday he was working with state party officials to determine who was responsible for cutting off the sound to U.S. Rep. Maxine Waters’ microphone as she spoke to the group at the party’s convention on Saturday.

 

“This is a very unusual situation, and we are collectively trying to figure out a path forward to address what happened and make sure these things do not happen in the future,” Caucus Chairman Darren Parker said.

Of course, in reality, Waters’ mic was cut because the Caucus meeting extended well beyond its scheduled end time per a contract with their audio vendor…but those are just silly facts.

Meanwhile, after a series of seemingly nonsensical interviews over the past several months, like that time she blasted Putin for “continuing to advance into Korea”,  most people are wondering why anyone still cares what Maxine Waters has to say in the first place?

In any event, here is the first unsuccessful attempt of the Democratic Party’s audio team to shut down Waters’ mic.  As you can see, this was clearly racially motivated because the sound technician is white…it had nothing to do at all with Waters’ endless, incomprehensible rambling.

 

That said, the second attempt at cutting her mic was successful and sent the room of attendees into confusion.  Of course, that didn’t stop Waters who ‘persisted’ and finished her speech to chants of “Impeach 45” from the crowd. 

 

Meanwhile, this guy was very angry.

 

In conclusion, this clip seems to summarize our thoughts fairly succinctly:

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Asher Edelman Says “I Have No Doubt” PPT Behind Market Rally

Billionaire investor Asher Edelman strayed into what must’ve been uncomfortable territory for CNBC during an appearance on “Smart Money” when he discussed his view that the government’s “plunge protection team" the only thing propping up the current market raly. and said he suspects that it has recently been intervening in the market to keep stocks high.

 

 

Edelman simply noted that he doesn’t want to be in the markets right now because “I don’t know when the plug is going to be pulled."

Few can explain the market's recent resilience, holding near record highs despite weak economic data and intensifying geopolitical tensions. The main benchmarks have risen for the fourth straight day following last week’s “Trump Dump" despite a terror attack in the U.K., the worst soft economic data since February 2016, and surprisingly low trading volume.

 

 

The “plunge protection team” was created by President Ronald Reagan one year after the stock market crash in 1987, when the president called for the creation of the “Working Group on Financial Markets.”

It’s believed – as the name would suggest – that this group’s mandate is to maintain stability in the market and head off any severe crashes like what was seen in 1987. It's believed the group reports only to the president, though the head of the Treasury, head of the Securities and Exchange Commission and Federal Reserve Chairman are also involved. The team, according to Asher, steps in to execute trades on all exchanges when the market isn't behaving as it would like, working only with big banks like Goldman Sachs Group and Morgan Stanley. 

"We have seen the most extraordinary lack of volatility in the VIX since Trump has been in office and it's interesting the night he was elected you may recall the futures came down about 400 or 600 points. You may also recall that the next morning they were even again. Watching plunge protection for years, I had no doubt that's what happened."

Edelman says he believes one sign of TPP intervention is when a smaller, less-liquid stock suddenly rises  late in the trading day.

We’ve noted in the past that there appears to be a rule against mentioning the team on CNBC – with guests routinely getting “Schiff’d” for doing so.

This time, the "theory" was treated with derision by his fellow hosts. "I think we all have so many questions here I don't think I know where to begin, Fast Money host Melissa Lee said.

Some audience members were more enthusiastic.

 

 

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American Exceptionalism: Decelerating Population Growth, Accelerating Money Growth

Authored by Chris Hamilton via Econimica blog,

Since 1971, and the disconnection of the dollar from a finite gold backing, the value of money (the dollar) has been determined by it's purchasing power versus the inflation of the assets to be purchased.  Thus printing more money has not necessarily created "wealth" if the assets to be purchased are rising as fast or faster than the purchasing power of the "money".  The Fed touts it's dual mandate of full employment and stable prices…but the result in prices; not so stable.

The primary global asset purchasable only in US dollars, crude oil, has told a story of wildly gyrating prices.  Since the end of Bretton Woods and the subsequent Congressionally dual mandated roles bestowed on the Fed…crude oil prices have gone bezerk, twice climbing nearly 10x's within a decade.  This is the opposite of stable (particularly compared to the price stability from WWII's end until the?Fed took over).

Soooo, theoretically the growth of  "money" should be linked to the growth of the population, to ensure an adequate and stable money supply exists for the growing population.  In a moment I'll show you anything but a stable money supply.  But first, the chart below shows the total 25-54yr/old US population, those employed among them, and the value in dollars of all publicly traded US stocks (represented by the Wilshire 5000).  Something far beyond population growth or employment growth is pushing up the value of dollar based assets, gauging by US stock markets accelerating appreciation.

With that in mind, the chart below shows the growth of M3 money (the broadest measure of US "money") and the broader 15-64yr/old US population since 1971.  The money supply has grown in excess of 20x's (2,000%) vs. the working age population (15-64yr/olds) which has grown less than 1x (nearly 70% increase).

This results in a rising ratio of "money" on a per capita of the core population basis, as the chart below details.  The total amount of "money" rose from approximately $5 thousand dollars per working age adult to todays $65 thousand dollars per adult…an increase of  13x's (1.300%).

The annual growth of the 15-64yr/old core US population peaked in 2003 and annual core population growth has decelerated by 90% since…while annual M3 growth has doubled over the same time period.  The chart below shows the annual changes from 1980 into 2017.

The chart below from 2000 into 2017 shows the change in both core population and M3 money supply, showing the year over year change on a monthly basis…and the current fall in core population growth will continue downward, likely turning negative at times over the next year (yet another first for America).

The final chart is the growth in M3 money supply per the growth in the adult, working age population.  I'm not an economist or expert on much of anything…but that doesn't look particularly good to me (something to do with "hyper-monetization" or some such thing).

All I can say is the appearance of hockey sticks typically aren't a good or stable sign but their appearance, just like those of black swans, has become the "new normal".

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Don’t Be Terrorized: U.K. Edition

KeepCalmFirst, condolences to those who lost friends and family last night as a result of the terrorist bombing in Manchester, U.K. According to the latest reports, at least 22 people are dead and 59 were injured in attack. The brutal thugs who run ISIS are claiming credit for the murders.

The British government defines terrorism as “the use of violence for political ends,” including “any use of violence for the purpose of putting the public, or any section of the public, in fear.” While it’s hard not to be fearful in the aftermath of an attack, especially in our era of wall-to-wall media coverage, knowing just how severe a threat terrorism poses to people’s safety might help keep that fear at bay.

According to The Telegraph‘s comprehensive analysis, 90 people died in Britain between 2000 and 2015 as a result of terrorism. The Telegraph notes that more than 1,000 people were killed by terrorists in the U.K. during the prior 15-year period—basically a reduction of 90 percent. That decline can be attributed to the abatement of IRA terrorism after the Good Friday Agreement in 1998 and the inclusion the 271 deaths from the Libyan bombing of Pan Am Flight 103 over Lockerbie in 1988.

Given that the U.K.’s population is 65 million, that means that the chance of being killed by a terrorist between 2000 and 2015 was less than 1 in 700,000. For perspective, in those same 15 years 42,000 Britons died in automobile accidents. Indeed, more Britons die annually from drowning in their bathtubs. Even if ISIS’ current campaign marks a riskier period for Britain, it will have a long way to go before terror deaths exceed the rates experienced by the U.K. during the last 30 years of the 20th century.

Of course, most of us do not fear car crashes and bathtub drownings as such; they are every day background risks that barely register in the media. The malevolent intentions that motivate murders, and especially those caused by terrorist bombings and vehicle rampages, heighten our sense of vulnerability even if a risk is objectively small.

But with risks this low, those of us who live in western democracies should continue to forthrightly live our lives as though terrorism doesn’t exist. We ultimately vanquish terrorism when we refuse to be terrorized.

Again, condolences for the lost lives and best wishes for the speedy convalesence of those injured by the attack in Manchester.

Bonus link:September 11: Remembering the Lives and Liberties Lost 15 Years Ago.”

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Trump Retains Marc Kasowitz As Private Attorney For Russia Probe

As reported earlier by Charles Gasparino of Fox News and subsequently confirmed by ABC, President Trump has reportedly retained a private attorney for Special Counsel Mueller’s probe of alleged collusion between the Trump campaign and Russian officials.  Not surprisingly, Trump has chosen Marc Kasowitz of Kasowitz Benson Torres LLP whose list of notable representations includes representing “President Donald J. Trump in a wide range of litigation matters for over 15 years” at the very top.

 

Among the firm’s other notable attorneys is none other than former Senator, and rumored front-runner for the vacant FBI Director seat, Joe Lieberman.  That said, we would assume that the retention of Kasowitz implies that Lieberman is no longer being considered for the FBI role.

Of course, this will undoubtedly be viewed by many in the mainstream media as an admission of guilt on Trump’s part.

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Illinois Democrats In Senate Pass 33% Hike Of Personal And Corporate Income Taxes

Senate Democrats in Illinois, with a final vote of 32-26, have just passed a new budget proposal that includes a massive personal and corporate income tax hike and an expansion of the state’s sales tax, after saying they are no longer willing to wait for a broader deal with Republicans. 

As the Chicago Tribune noted earlier this morning, the Democrats’ budget proposal includes a ~33% hike in both the the personal and corporate income tax rates and an expansion of the state’s share of sales tax revenue.  In all, the package would cost Illinois taxpayers an incremental $5 billion.

Democrats spent the weekend tweaking the spending plan, and unveiled an updated proposal late Monday. It calls for spending $37.3 billion after raising about $5 billion through the tax hikes; a floor vote is expected Tuesday, said Sen. Heather Steans, a Chicago Democrat and key budget negotiator.

 

The blueprint relies on the passage of companion legislation that would raise the personal income tax rate from 3.75 percent to 4.95 percent, which is just below the 5 percent rate in place before Rauner took office. The corporate income tax rate would be hiked from 5.25 percent to 7 percent.

 

Meanwhile, the state’s share of the 6.25 percent sales tax would be extended to various services not currently covered, such as dry cleaning. The proposal also calls for ending three corporate tax breaks, including requiring companies that drill on the outer continental shelf and do business in Illinois to pay income taxes.

Of course, the Senate bill passed by Democrats is unlikely to become law as Illinois’ Republican Governor Bruce Rauner, presumably along with a fairly substantial percentage of Illinois residents, oppose such massive tax hikes.

Some Republicans have said they would only sign off on a plan to raise the income tax rate if it’s coupled with a property tax freeze, a key component of Rauner’s agenda. The Democratic budget plan does not contain a property tax freeze, which Democrats have argued would hurt local governments and schools that rely on the money.

 

A Rauner spokesman declined to comment Monday evening. But Brady warned that anything that passed without GOP votes was unlikely to win approval from Rauner.

 

“I can’t imagine a budget that could pass with only Democratic votes is one that the governor could support,” said Brady, the GOP senator, who added that any action could undermine ongoing talks.

Meanwhile, as we’ve noted multiple times in the recent past, with Illinois pension systems roughly $130 billion underfunded, state politicians pretty much have to raise taxes because anything less would entail finally admitting what most of us have known for some time, namely that the state of Illinois is insolvent and undoubtedly headed for bankruptcy and/or a federal taxpayer bailout.  That said, the latter solution is not very ‘politically expedient’…better to kick the can down the road for as long as possible.  Here is a brief excerpt from our previous post entitled “Illinois Pension Funding Ratio Sinks To 37.6% As Unfunded Liabilities Surge To $130 Billion“:

That said, certain states are better at the ponzi game than others and the great state of Illinois, we must say, is one of the best.  As we noted a few months ago, Illinois governor Bruce Rauner even admitted to being a willing participant in his state’s pension ponzi warning that should his largest public pension fund do what it should have done long ago, it would put a big dent in the state’s already fragile finances and lead to “crippling” pension payment hikes.  But, if you ignore the problem then surely it will just go away…good plan.

 

And, while the pension ponzi can likely outlast Rauner’s term as governor, eventually funding for current claims can only be borrowed from future generations for so long before finally running out of cash.  As the latest “Special Pension Briefing” report from Illinois’ Commission on Government Forecasting and Accountability (CGFA) points out, that time may be getting very near.

 

Per the latest actuarial valuations, the 5 largest publicly-funded Illinois pensions are now $130BN underwater and only 37.6% funded.

IL Pension

 

Meanwhile, the problem with hiking taxes at the state level is that people can simply choose to move to another state, something which Illinois residents are doing in record numbers already (see “People Are Ditching Chicago In Record Numbers As Windy City Leads U.S. In Population Loss“):

The metro area declines are heavily concentrated in Cook County, but show signs of spreading to outlying counties, too. For instance, the bureau estimates that DuPage County lost 3,000 people in the past two years, and that Will and Grundy counties had small population losses last year.

 

The bureau did not break down the data by municipality, so it’s impossible to tell for sure if the Cook County decline was in Chicago proper, suburban areas, or both.

 

One particularly stunning figure: net domestic migration, with an estimated 89,000 more people moving from the Chicago area to other portions of the country in the past year than those who moved in.

DOmestic Migration

 

Perhaps it’s time to admit that the socialist utopia of America’s Midwest has failed?  Nah, that level of honesty wouldn’t help anyone get re-elected.

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Trump’s Budget Plan: The Good, the Bad, and The Ugly

As Ronald Bailey notes, Donald Trump’s first full budget plan is based on what Ronald Reagan’s budget director David Stockman denounced as “rosy scenarios.” Trump’s budget rests upon an assumption of 3 percent annual growth, which is in stark contrast to the 1.4 percent average growth between 2008 and 2016.

As important and despite headlines talking about the massive spending cuts embodied in Trump’s plan, his budget increases spending:

When you look at the overall numbers (above), spending increases to $4.1 trillion in 2018 and rises to $5.7 trillion in 2027. So much for reductions. When figured as a percentage of the economy (GDP), we see a slow decline from 20.5 percent next year down to 18.4 percent in 2027, but those figures are screwy because they’re based on the phoney-baloney growth projections. The same goes for receipts, whether estimated in dollars or percentages. Only in the fantasyland of government accounting can a budget that projects spending $900 billion more in 2027 than 2018 be described as “Trump seeks to slash $3.6 trillion in austere budget.

If Trump’s rosy growth projections are bad and his year-over-year increases in spending are ugly, what’s good about his budget? The president is calling for the elimination of no fewer than 66 programs, including four in the Department of Agriculture that will spend nearly a billion dollars, another four in Commerce that cost $633 billion, and almost $5 billion worth in Education. Similarly, he is calling for rolling back food-assistance programs whose ranks swelled during the recession but have stayed high despite low unemployment rates. While many of these sorts of cuts won’t be realized at all, it’s always worth pushing the idea that government programs shouldn’t always become permanent fixtures.

In this sense, Trump’s budget encapsulates his promise and peril as president. He is devoid of clearly articulated principles and there are many reasons to expect him to do real damage to the economy and the country. At the same time, he also may well augur the end of the slow car wreck that represents consensus politics in the post-World War II era. The United States is running out of other people’s money and we need to start the hard work of figuring out a sustainable level of government that we can both pay for and thrive under. In some of his deregulatory gestures, Trump points in that direction, and he has clearly shown himself willing and able to push hard against the status quo.

If we’re lucky, he is the last 20th-century president and will set the table for a much-needed, much-delayed way of doing politics for the 21st century.

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Trump: Uniquely Qualified for an Israeli-Palestinian Peace Deal?

For decades American presidents have tried, with varying degrees of effort and to varying degrees of success, to negotiate a peace between Israel and the Palestinians. Donald Trump, with his apparent lack of interest both in policy detail and in pretending the U.S. is a neutral party, could be uniquely qualified to accomplish what has eluded his predecessors.

Since the Camp David talks of the mid-1970s, the term “peace process” has mostly meant American-led negotiations. That in itself is a problem: When the U.S. takes too large a role in the talks, it removes the pressure from Palestinian and Israeli diplomats to arrive at a deal on their own. But Trump has shown little capacity for the kind of long-term, sustained attention that allows Israelis and Palestinians to abdicate their leadership.

That attention, full of “shuttle diplomacy” and frenetic attempts at legacy-building, rarely moves the peace process forward in a meaningful way. U.S. disengagement, by any avenue, could create the space for real progress.

Trump has also shown little interest in upholding some of the fictions of American diplomacy. When he declares that his administration will “always stand with Israel,” he adds none of the nuance of the Obama era, when such language of friendship was constantly coupled with promises to hold Israel accountable. Trump’s rhetoric matches the reality on the ground: Since Israel is one of the top recipients of U.S. military aid, negotiators won’t see Washington as a neutral party even if the U.S. would like to assume that role.

Trump has, in fact, said he wanted to remain neutral in the Israeli-Palestinian conflict. “Let me sort of be a neutral guy,” he said at one campaign stop last year. “I don’t want to say whose fault is it. I don’t think it helps.” This desire did not stop Trump from making unabashedly pro-Israel statements during the campaign or since taking the presidency. With any other politician, a desire for neutrality would be incompatible with statements of unqualified friendship. But Trump is not a typical politician, and his propensity to make contradictory statements without even attempting to reconcile them has arguably destroyed the credibility of his presidency.

Whatever else that might do, it could have the salutory effect of giving Israeli and Palestinian negotiators the impression that they’re on their own. A long series of active and respected American presidents have been unable to move the peace process forward. Maybe an inactive president with little credibility is just the jumpstart the negotiations need.

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