by David Stockman, Daily Reckoning:
One of Bloomberg’s Wall Street cheerleaders let loose of a deep secret yesterday. When the S&P 500 reversed sharply from its intraday all-time high in response to the Donald’s “fire and fury” demarche, Mark Cudmore explained why the index has probably topped out for the summer:
Not to overplay the value of seasonal patterns, but there’s an intuitive reason why August is by far the worst month for the S&P 500 over the last 20 years — people don’t like fighting the market from the Hamptons.
Say it isn’t so!
The titans of Wall Street are supposed to be doing god’s work pushing the stock averages ever higher, not sipping on a “Hot Skinny Wench” of silver tequila, agave, jalapeno and citrus at their favorite Hamptons watering hole.
Then again, Mr. Cudmore may have been on to something. The casino has become so addicted to central bank liquidity and buying the dip that the only thing which can interrupt the relentless climb of stock prices, apparently, is beach time in the second half of August.
To be clear, we aren’t arguing for a Korea Panic. We just don’t buy CNN’s breathless alarmism about the Donald’s statement or think that nuclear armageddon on the Korean peninsula is about to break-out any time soon. In fact, we are downright suspicious about the “leak” which apparently triggered yesterday’s contretemps.
It seems that just in the nick of time to keep the North Korean nuke “threat” at full boil, the intelligence community (IC) favored the CIA’s house organ, the Washington Post, with a strategically leaked answer to the obvious point. Kim Jong-un’s recent ICBM test doesn’t put Los Angeles in imminent danger. That’s because North Korea hasn’t yet miniaturized its clunky 1950’s vintage A-bombs so that they fit in the cone of a missile.
Well, contrary to common knowledge among experts, suddenly it has.
North Korea has successfully produced a miniaturized nuclear warhead that can fit inside its missiles, crossing a key threshold on the path to becoming a full-fledged nuclear power. The IC [intelligence community] assesses North Korea has produced nuclear weapons for ballistic missile delivery, to include delivery by ICBM-class missiles,” the assessment states, in an excerpt read to The Washington Post. Two U.S. officials familiar with the assessment verified its broad conclusions.
Forgive the cynicism and history reference, but we are tempted to ask: Does Colin Powell concur with the “assessment” of these two anonymous officials?
Are those cited even real spooks, or just some fat guys in the basement of a house in Langley, VA?
When the former national security advisor went off half-cocked based on faulty “intelligence” about Saddam’s WMDs, of course, he did it at the UN in full dress diplomatic language.
By contrast, the Donald was alone with his Twitter account at his Bedminster golf club, where he channeled Mr. Kim’s very own vernacular:
“North Korea best not make any more threats to the United States. They will be met with the fire and the fury like the world has never seen. He has been very threatening beyond a normal state, and as I said they will be met with the fire and fury and frankly power, the likes of which this world has never seen before. Thank you.”
The point is not merely that the Donald’s bluster was inopportune, unscripted, exceedingly dangerous and shockingly blunt. That part of it was made completely “inoperative” within hours by his Secretary of State, who took the Trumpian kettle off the stove and doused it in an ice tub:
Separately, in an attempt at de-escalation, Sec. State Rex Tillerson also stepped in to calm the mood, when speaking to reporters this morning, he says he doesn’t believe there is “any imminent threat” from North Korea, and says that they should “have no concerns about this particular rhetoric of the last few days.” As the AP adds, he downplayed speculation that the US was moving closer to a military option.
In an amusing twist, Tillerson tried to justify Trump’s bombastic threats, saying that “Trump is sending a message to North Korea in language Kim Jong Un would understand.”
What the markets are ignoring is not that Trump’s impulsive tweets might start a catastrophic war, but that the reality is he has already been sunk by the Deep State and its allies.
There is no way that a Secretary of State would gut the words of a President in the manner of Tillerson’s repost from Guam if the President were speaking for the machinery of state.
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