Is The Trump Trade Over? Here Is The “Barometer” BofA Uses To Decide

Bank of America’s chief investment strategist remains bullish.

In his latest Flow Show note, Michael Hartnett, who several weeks ago penned the term “Icarus Trade” to describe what is happening to the market, writes that “we remain long risk in H1 targeting SPX 2500, oil $70/b, GT30 3.5%, DXY 110 (in that order sequentially); note Bull & Bear Indicator up to 7.0 (Chart 1), needs stronger EM/HY inflows & lower cash levels to trigger contrarian “sell” signal (>8.0)”

To validate his point he notes that global stocks (MSCI ACWI) hit all-time highs today and provides two arguments for what happens nest:

  • bears say “look what happened after Apr’15 high”;
  • bulls say “stocks just 4% above their Oct’07 high.”

To be sure, ongoing fund flows are helping, with the most recent week seeing another $8.5 billion in cash entering stocks (sorry active managers: $9.2 billion of this went to ETFs while mutual funds saw another $0.7 billion outflow).

Still, Hartnett acknowledges that key event risk is coming up and that March could go either way:

  • The Upsides of March: SPX 2450 & GT10 2.75% needs…Trump tax reform/Obamacare certainty (note just 23% investors expect tax reform passage by August) + credible Fed hike (following strong data, e.g. PCE >0.3/0.4%, payroll >275k)
  • The Downsides of March: SPX 2250 & GT10 2.5% needs…Trump delay/dilution of tax reform + Fed no-go (following disappointing jobs/wages/housing data);

And yet, all of the above may be moot depending on which way the famous “off again, on again” Trump trade is heading.

For anyone looking for a short-hand determination which way the Trump Trade is headed next, Hartnett provides what he calls the “best barometer of “Trump/populist/inflation” trade.” The answer: banks versus bonds, or even simpler, the ratio of XLF to TLT. If headed up, Trump is still “winning.” But once it takes a decisive step lower, risk assets may quickly turn sad!

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Who’s Right? Bonds (& VIX & Hard Data) Or Stocks

One of these things is not like the other…

The 30Y Yield just dropped back below 3.00% once again and 10Y is back at February lows – what happens next?

 

Despite the exuberance of hope, protection is heavily bid…

 

And if Utility stocks' demand is anything to go by, bond yields have a long way to fall…

 

Finally – absent the hope-strewn soft-survey data, 'hard' data has decidedly deteriorated…

 

So who's right? Stocks… or VIX and Bonds and Real macro data?

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Justice And “Social Justice” Are Two Very Different Things

Submitted by Gary Galles via The Mises Institute,

Recently, Harvard political theorist Danielle Allen wrote in the Washington Post of The most important phrase in the Pledge of Allegiance” — “with liberty and justice for all.”

Allen recognized that justice required “equality before the law” and that freedom exists “only when it is for everyone.” But she confused democracy — defined as progressives “build[ing] a distributed majority across the country, as is needed for electoral college victory” — with liberty, which is very different. Similarly, she replaced the traditional meaning of justice (“giving each his own,” according to Cicero) with a version of “social justice” inconsistent with it. And her two primary examples of rights — “rights” to education and health care — were inconsistent with both liberty for all and justice for all.

Americans cannot have both liberty and this type of social justice — under whose aegis one can assert rights to be provided education and health care, not to mention food, housing, etc. Positive rights to receive such things, absent an obligation to earn them, must violate others’ liberty, because a government must take citizens’ resources without their consent to fund them. Providing such government benefits for some forcibly violates others’ rights to themselves and their property.

The only justice that can be “for all” involves defending negative rights — prohibitions laid out against others, especially the government, to prevent unwanted intrusions — not rights to be given things. Further, only such justice can be reconciled with liberty “for all.” That is why negative rights are what the Declaration of Independence and the Constitution, especially the Bill of Rights, were intended to protect. But those foundational freedoms continue to be eroded by the ongoing search to invent ever-more positive rights.

Echoing John Locke, The Declaration of Independence asserts that all have unalienable rights, including liberty, and that government’s central purpose is to defend those negative rights. Each citizen can enjoy them without infringing on anyone else’s rights, because they impose on others only the obligation not to invade or interfere. But when the government creates new positive rights — which require extracting resources from others — these new “rights” violate others’ true unalienable rights. In other words, people recognize these positive rights as theft except when the government does it.

Almost all of Americans’ rights laid out in the Constitution are protections against government abuse. The preamble makes that clear, as does the enumeration of the limited powers granted to the federal government. That is reinforced by explicit descriptions of some powers not given, particularly in the Bill of Rights, whose negative rights Justice Hugo Black called the “Thou Shalt Nots.” Even the Bill of Rights’ central positive right — to a jury trial — is largely to defend innocent citizens’ negative rights against being railroaded by government. And the 9th and 10th Amendments leave no doubt that all rights not expressly delegated to the federal government (including health care and education) are retained by the states or the people.

Liberty means I rule myself, protected by my negative rights, and voluntary agreements are the means of resolving conflict. In contrast, assigning positive rights to others means someone else rules over the choices and resources taken from me. But since no one has the right to rob me, they cannot delegate such a right to the government to force me to provide resources it wishes to give to others, even if by majority vote. For our government to remain within its delegated authority, reflecting the consent of the governed expressed in “the highest law of the land,” it can only enforce negative rights.

Our country was founded on unalienable rights, not rights granted by Washington. That means government has no legitimate power to take them away. However, as people have discovered ever-more things they want others to pay for, and manipulated the language of rights to create popular support, our government has increasingly turned to violating the rights it was instituted to defend. And there is no way to square such coercive “social justice” with “liberty and justice for all.”

 

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President Trump Addresses Conservative Conference – Live Feed

A year after skipping the event for lack of support, writing that he “looks forward to returning next year, as President of the United States,” President Trump is due to speak at the Conservative Political Action Conference (CPAC) this morning.

Trump’s statement last year

The Donald J. Trump for President Campaign has just announced it will be in Wichita, Kansas for a major rally on Saturday, prior to the Caucus. Mr. Trump will also be speaking at the Kansas Caucus and then departing for Orlando, Florida to speak to a crowd of approximately 20,000 people or more. Because of this, he will not be able to speak at CPAC, as he has done for many consecutive years. Mr. Trump would like to thank Matt Schlapp and all of the executives at CPAC and looks forward to returning to next year, hopefully as President of the United States.

And so here he is, and we suspect he will have a few barbed words for this room of conservatives before he is done speaking.

As The Hill reports, Trump’s administration has taken center stage at this year’s CPAC, with Vice President Mike Pence, chief of staff Reince Priebus and senior counselor Stephen Bannon all speaking Thursday at the event.

Also scheduled to speak Friday at CPAC are British politician and Brexit leader Nigel Farage, National Rifle Association executive vice president Wayne LaPierre, former U.N. ambassador John Bolton and more.

Trump is due to speak at 1020ET…

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Consumer Confidence Dissonance: “Democrats Expect Recession, Republicans Expect Robust Growth”

Consumer confidence fell for the first time since November’s election, as party lines divided Americans following a boost in enthusiasm for Trump's economic policies.

As Bloomberg reports, while confidence is still above pre-election levels, Democrats and Republicans are sharply divided on whether they expect a boom or bust, with independent voters leaning more toward optimism to boost the broader gauge, according to the survey. Democrats were also more positive than Republicans on their current financial situation; the opposite was the case for year-ahead views of finances.

Richard Curtin, director of the consumer survey, is suddenly much more eager to opine on the survey, than he ever did during the Obama years. He had this to say:

While consumer confidence edged upward in late February, it remained slightly below the decade peak recorded in January. Overall, the Sentiment Index has been higher during the past three months than anytime since March 2004.

 

Normally, the implication would be that consumers expected Trump’s election to have a positive economic impact. That is not the case, since the gain represents the net result of an unprecedented partisan divergence, with Democrats expecting recession and Republicans expecting robust growth. Indeed, the difference between these two parties is nearly identical to the difference between the all-time peak and trough values in the Expectations Index —64.6 versus 64.4.

 

While the expectations of Democrats and Republicans largely offset each other, the overall gain in the Expectations Index was due to self-identified Independents, who were much closer to the optimism of the Republicans than the pessimism of the Democrats. (Note: the February Expectations Index was 55.5 among Democrats, 120.1 among Republicans, and 89.2 among Independents.)

 

Since neither recession nor robust growth is expected in 2017, both extremes must eventually converge. Although the data indicate a growth rate of 2.7% in consumption during 2017, the data also indicate we can expect greater volatility and discretionary spending differences across subgroups.

So to clarify – a near 13 year high in Consumer Sentiment is NOT, repeat NOT, positive (according to Curtin), because of the division in the nation. Seems like it's time for Mr. Curtin to get back to work with some over-sampling.

Notably 'hope' (expectations six months from now) dropped to 86.5 from 90.3 in January (but bunced from the preliminary February measure of 85.7).

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New Home Sales Disappoint As Median Home Price Rises 7.4%

“Soft”, survey and optimism-based, data may (still) be euphoric, but when it comes to “hard”, actual economic data, moments ago the Census reported the latest disappointment when it comes to New Home Sales, which rose to 555K in January, missing expectations of 571K, and up 3.7% from a downward revised 535K in December. The data for all three prior months was revised lower (Dec from 536 to 535), November (598 to 575 and October 571 to 568), as US housing remains unable to capitalize on so-called economic recent strength.

More troubling, however, is that one decade after the last housing peak, new home sales are well below half their peak hit in 2005.

Despite the miss, both New and Existing home sales continue to rise, although if mortgage applications are any indication, sales of housing are due for a sharp pullback in coming months.

Finally, what is notable is that while the Median Home Price dipped in January from $316,200 to $312,900, it was still 7.4% higher compared to a year ago, suggesting that somehow many Americans can still afford to keep chasing offers even without the benefit of new mortgages, which for us is a big red flag, that the Census Bureau is largely goalseeking trends and numbers, if only for the time being.

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George Soros Denies He Is Funding Townhall Protests

In response to reports of the coincidental geographical location to one of George Soros' largest funded activist groups, the Democratic mega-donor has felt it necessary to make a statement denying he is funding protests at GOP lawmakers’ town hall meetings.

As we noted yesterday, Jimmy Dahman, a former field organizer for the Clinton campaign in Iowa, founded the Town Hall Project. Dahman claimed on CNN that the town hall events are "all organic and happening at the grassroots level."

Dahman's group is closely involved with MoveOn.org, a major progressive activist group that recently launched a website, called ResistanceRecess.com, to encourage activists to attend town hall events.

The Town Hall Project's parent company is The Action Network, which was involved in demonstrations against Walmart and the protests in Ferguson.

Finally, we note the projects potential links to billionaire George Soros…

The Action Network is located at the same Washington, D.C., address as United We Dream, the "largest immigrant youth-led organization in the nation." United We Dream has received funding from liberal billionaire George Soros. It began organizing "sanctuary campus" anti-Trump protests shortly after the election.

 

The Action Network also shares the same address as Change to Win, the labor organizing group.

And now, as Politico reports, a spokesman for the Soros foundation said in a statement…

"There have been many false reports about George Soros and the Open Society Foundations funding protests in the wake of the U.S. presidential elections, there is no truth to these reports."

As The Hill reports, Trump and some Republican lawmakers have dismissed the protests as the work of “liberal activists.” Vice President Pence echoed that sentiment on Thursday during a speech at the Conservative Political Action Conference, saying that “liberal activists” at town hall meetings could not prevent Republicans from repealing the Affordable Care Act. “Despite the best efforts of liberal activists at town halls around the country, the American people know better,” Pence said. “Obamacare has failed and Obamacare must go.” Soros has long been a subject of ire on the right. The billionaire investor has spent millions of dollars underwriting Democratic and progressive causes and political campaigns.

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MSM Touts New Poll Showing “Record” Obamacare Support; Ignores 14-Point Dem “Oversample”

Throughout the day the mainstream media will undoubtedly be “informing” you about a new poll from the PewResearchCenter (PRC) that concludes that support for Obamacare has surged to new record highs in recent months just as Republicans in Congress get set to repeal and replace the legislation, how convenient.

We, on the other hand, would like to inform you that, in reality, there is no “news” to be reported as a result of PRC’s latest work, but rather just another “rigged” poll that utilized an aggressive 14.4-point Democrat “oversample” to goal seek a desired result.  But don’t take our word for it, here is the sampling data as presented by PRC:

Pew

Somehow we suspect that if Democrats really enjoyed a 14.4-point advantage among registered voters that Donald Trump would not be occupying the White House right now…but maybe the Russians are just that good.

But, if the sampling data above isn’t quite egregious enough to convince you of it’s “fakeness”, below we present to you the survey methodology of PRC’s previous Obamacare poll, conducted just two months prior to the current oneNotice that the sampling advantage for Democrat/Lean Dem pool in this poll was 4.7 points lower than the poll above.  And to our ‘complete shock’, this poll showed Obamacare’s approval rating roughly 6-points below the poll above at 48%.  Shocking…less Dems equals less support for Democrat policies. 

Pew

So did the number of registered Democrats surge nearly 5 points in just over 2 months?  Somehow we sincerely doubt that…but it was a very nice try. 

And that’s how you engineer trends like this where widely-held historical opinions suddenly ‘shift’ dramatically in a matter of weeks…except they didn’t.

Pew

 

And, even though we find the data to be largely useless due to the obvious sampling bias, here is a quick review of the conclusions drawn by PRC which will frequently be drilled into your head by the likes of CNN, MSNBC, NBC, ABC….throughout the day.

Apparently a  record-high 54% of voters now suddenly approve Obamacare even though PRC’s own historical polling data shows that a plurality of voters have pretty much always disapproved of the legislation since it’s passage in 2010.

Currently, 54% approve of the health care law passed seven years ago by Barack Obama and Congress, while 43% disapprove, according to a national Pew Research Center survey conducted Feb. 7-12 among 1,503 adults.

 

Throughout the law’s history, opinions about the Affordable Care Act have tended to be more negative than positive — or, less frequently, divided. As recently as December, about as many approved (48%) as disapproved (47%) of the law.

 

The new survey finds that when those who disapprove of the law are asked about what should happen to it now, more want GOP congressional leaders to focus their efforts on modifying the law than on getting rid of it. One-in-four adults want Republican leaders to modify the law, while 17% want them to get rid of it entirely.

PEw

 

Meanwhile, approval among “Independents” also surged in PRC’s latest poll even though we prove above that the “surge” is easily explained by the “oversample” of “Independents” that “lean Democrat.”  Nice try, but nobody’s buying it.

Pew

 

Fake News!

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Remix Culture Meets the Scolds

These days the internet is littered with political remix videos, but they were still novel when Don Was made “Read My Lips” in 1992. So PBS aired the item—which dinged President George H.W. Bush for breaking his no-new-taxes pledge, among other complaints—and then invited a pair of eminences to discuss this strange new thing they’d just witnessed.

The video itself is only mildly interesting—it may be an early political remix, but it wasn’t the first and it’s far from the best. But the roundtable is pretty amazing to watch today. Bill Moyers opens, in his TV-for-people-who-say-they-hate-TV way, by asking what “happens to the political sensibilities of young people watching a political discourse like that.” The publisher of The Hotline replies that the video “debases the process”; the dean of the Annenberg School for Communication calls it an “invitation to cynicism that I think is very unhealthy.” And they both go on from there, condemning in advance the entire media landscape of 2017. I’m not sure 1992 has ever felt as distant as it does while I’m watching this:

(For past editions of the Friday A/V Club, go here.)

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