Simon English: Is Donald Trump a Bond villain?

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Is Donald Trump a Bond villain? He definitely looks and sounds the part. It takes little to imagine him stroking a white cat atop a gold encrusted sofa while speaking in short, choppy sentences about how his enemies have displeased him for the last time.

His wife looks like she expects to be dropped in a pool of piranhas any minute now for some perceived act of disloyalty. If they remake Goldfinger, Trump’s a shoo-in for the title role, other duties allowing. (Gert Frobe, the original Goldfinger, is sadly unavailable.)

If you believe what you’ve read lately, the President-elect is another sort of bond villain too.

Analysts and newspapers who confidently predicted a mass-sell-off of shares in the event of a Trump victory (the “Trump Dump” that never happened) reverse-ferreted magnificently last week. Rather than racing to the supposedly safe haven of government bonds, investors instead have been ditching them in favour of equities.

Trump’s pledge to spend some money — $1 trillion or so — on US infrastructure should lead to higher American interest rates and then inflation. Bond yields are up, bond prices down. This is a “global rout” that has seen the “world’s bond edifice shaken”. There’s a “violent rotation”, leading to “nosebleed losses”.

These reports assume two things:  1) That the fall in bond prices is bad. 2) That “markets” will be right in the medium or long run.

An alternative take is this: 1) It’s a result. 2) As a predictor of the future, markets have  lately been worse than the weather forecast, and there’s no reason to think they’ve suddenly got any better at foreseeing rain.

A short list of things this markets man, whoever he is, has lately got wrong: The Scottish referendum, the UK general election, the Brexit Vote, the US Presidential election and who would win the Premier League. In 2007 —  remember, just before the worst financial crisis in history — equity prices were soaring, indicating a bright future. About as hopelessly wrong as it is possible to be, in other words.

Back to bonds. If the bond market really is a gigantic bubble, as we’ve been warned by the experts, it needs deflating before it goes pop. If a few hedge funds get duffed up on the way down, well, we’ll try to hold back our tears.

Rising bond yields bring down the pension deficits that the same experts have been wittering about for years. And if you worry about government spending, a fall in the bond market does at least tell our leaders they can’t necessarily keep borrowing as if there is no tomorrow. There is a cost, and it is going up.

On the other hand, if existing debt gets inflated away, that’s a result too. A rise in interest rates that might follow the increase in bond yields also helps banks, presently moaning that rates are too low for them to make a profit. Banks being profitable is annoying, but not as much as them going bust.

A critic of Trump might say that rising US inflation on the back of a president chucking his money around like a drunken sailor isn’t a good thing. And that his spending is just a new artificial stimulus replacing the old one  — quantitative easing. Maybe.

But someone has got to spend money, and why not the richest country on earth? Artificial stimulus is surely better than none, which seems to be the  alternative.

As for our market experts, they are hardly ever right when it matters. Markets man can predict small things, usually over short periods of time. Beyond that, his value is limited. This week’s trade — dump bonds — might last no longer than  tomorrow before someone has a better idea.

The assumption that we should take note of what markets man is indicating each new morning has been grating for some time. He increasingly looks like a noisy loony who bursts into the room and starts shouting conflicting orders to bemused onlookers.

A sociopath with no manners, in other words — a man with attention deficit disorder, like the worst boss you’ve ever had. Time to stop taking this lunatic so seriously.


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November 16, 2016 |
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