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Volatility Professor @VolProfessor
, 34 tweets, 11 min read Read on Twitter
1/ On my feed I try to stay in my lane...focusing on

1st.) #volatility specific issues

2nd.) Economic and stock market observation

But this chart, which someone posted yesterday (forgive me I can't remember who posted it) is worth a deeper dive
First some qualifications. I am first and foremost a financial economist, and by nature and study, fiscally conservative. Most finance academics are.

I care deeply about fiscal and monetary policy, but not obtuse enough to believe my opinion is always right

What makes the country great is our ability to disagree passionately about a wide array of subjects but find a working common ground.

I try to refrain from many political topics, especially on this platform, because, what can be accomplished debating on @Twitter
@Twitter 4/
If someone can point to me where a debate was successfully resolved, or an opinion change on twitter, I'll but them a @GuinnessUS

Ok, now to $DJT.
@Twitter @GuinnessUS 5/
#Trump came into office with a roaring economy, control of both the house and the senate, and limited geopolitcal trouble (maybe #Brexit)

It was as easy a transition a as any presidential I can remember...there was an opportunity to do some very productive and positive things
@Twitter @GuinnessUS 6/
In fact, he could have done absolutely nothing...golfed everyday...and we would have been humming along quite nicely.

Yet if we look objectively at what have been his greatest accomplishments versus what he could have accomplished...the gap is historically bad.
@Twitter @GuinnessUS 6/
Top 3 in reverse order of important

3.) U.S social division vs. social unity

2.) Weakening of allies vs. strengthening global partnerships

1.) Fiscal deficit vs fiscal surplus.
A brief comment on the first two.

If Trump had moved to the center, bridge the gap between the Dems and Reps...we could have resolve DACA, immigration, even the court appointments, but his failed style of negotiation has clearly backfired.
The same is true with regards to dealing with our allies versus those that have traditional been perceived as threats. All we need to do is look at the mess #Brexit is, and how it has played out to get an inkling of why not working with our allies is destructive.
If this is because of #Trump and #Russia I can't say..but it is highly suspicious.

But lets really talk about this

Fiscal deficit vs fiscal surplus.

Everything we need to know about #Trump and his management style is evident in that chart, and we all knew it before he was elected. Is there another person you can think off, that claims to be as wealthy as he his, as successful as he is...that has bankrupt as many business

There is nothing in #Trump history that actually suggests he understands economics or finance. I would also suggest he knows very little about business, and for that matter, negotiations.

But there is one thing he does understand. He knows how to borrow money. He also knows how to spend it.

And, I would argue, that he doesn't spend it very wisely.
Now look at that chart again. If that doesn't scare you, especially how the $SPX has played out over these past two years...and then the past three months...then you have your head in the sand.

I'm not saying that we are going to zero....
but if you borrow money and can't afford to pay it back...well as #Trump can tell you, who is an expert in this area, you go bankrupt.

And this is what angers me the most as fiscal conservative. What has happen over the past three months is NOT the #FederalReserve fault.

Do I agree with what Powell has done unilaterally..No, but I think he is doing the right thing overall.

The problem lies, again, with

Fiscal deficit vs fiscal surplus.

The debt overhang is going to be a very large problem, and that is going to slow the economy down. There will have to be a fundamental shift in government spending or in tax policy.

The tax cuts are not working, and our government spends money like #Trump Enterprises

Until this imbalance is sorted out, the $SPX trend line may following along the $DJT pattern...and here is the best was all avoidable.

Republicans controlled Congress- I have to assume the tax cuts were politically motivated to ensure their own control, because most of us, financial economists, didn't agree with them at the time. What we wanted was a reduction in spending.
Which is exactly what a Republican controlled Congress should have done.

But this is what happens when you have politicians/lawyers implementing fiscal policy. They cock it up. They did the exact opposite of what they should have done

When the economy is doing well you don't start doubling down. You should become more conservative...The relative return in relationship to risk is very small. In fact, i would argue the expected return was potentially negative when the tax cuts were implemented.

The market now agrees.

When the economy struggles, that is when you can increase risk (dropping rates, increase spending and liquidity, etc...), similar to what helped in 2008.

You certainly don't do it when the market is doing well.

Now we are in an environment where there were signs that market was ticking over (probably six months ago)...led by housing. And congress overheated it and put the Fed is an unenviable position.

So we are in a economy where we have doubled down, rates are raising, market prices are failing, and there is an increased threat of political instability.

It is a carbon copy of how #Trump ran his business...

Maybe things turn around....forecasting what will happen in the market going forward is very challenging, but there are significant headwinds.

The likelihood of some crazy market days is only increasing.

A limit down day...very possible

A 10% intraday swing...check...

30% retrace...wouldn't bet against it.

We are at the point, where my daily concern of what goes on in the #WhiteHouse keeps me up at night. It is one thing when the damage one man can do is limited to a select number of shareholders and debt-holders.

We are all long the US....
A responsible corporate board would remove a CEO with a similar kind of fiscal recklessness.

Don't we, as responsible shareholders, have a similar obligation.
I'll say it again,

President #Trump management pattern of irresponsibility is following a step by step playbook of how #Trump ran his business. He know nothing else

With most the adults leaving, not just in his #Cabinet, but some fiscally conservative senators, when will the trend end.

If with think the saving grace will be the house Democrats, well I am not so sure.

There will be investigations, and maybe there will be impeachment, but there will be turmoil.

I am not sure how this helps the economy. So I ask, who will lead us to a more fiscally responsible path.

This isn't just about the stock market, it is about global economic stability. For all this talk about the market not being the economy...that is foolish, because the market is a window into economic conditions, and it tends to reveal as harsh a truth as it can mask it.

I'll end on this. DJT Enterprises looked like a great investment in 1996, and 1999, not so much. A levered enterprise is only as good as the market underlying it. We saw the same thing in 2006-2009 with the housing market.

When will we ever learn to manage risk correctly.

I hope I am wrong, and 2019 is a nice calm year...but when there is blood in the streets, buy real estate

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