Trump’s Secret Wall Street Plan

In his first address to a joint session of Congress, President Donald Trump defended his controversial policies on Tuesday and said he was eager to reach across party lines and put aside “trivial fights” to help ordinary Americans.

While Trump’s presidency has been defined by executive orders and pronouncements, his initial speech was an attempt to open a new phase for his administration and reflected his sincere desire to work with Congress to get things done.

But for investors, WHAT HE DIDN’T SAY ON TUESDAY NIGHT IS MORE IMPORTANT THAN WHAT HE DID SAY.

And that’s why U.S. stocks, as measured by the S&P 500, jumped higher making a move to the upside of 1.46%. The S&P 500’s activity was notable because it was the first time in more than 55 trading days that the index had fluctuated — up or down — by more than 1%.

Why?

The White House’s secret economic plan will keep stoking the stock market rally.

It’s because President Trump and his administration have a plan for the economy that he didn’t tell anyone about in his address. It’s a plan that Wall Street insiders already know is firmly in place but that the popular press isn’t aware of. And that plan is good for stocks in the short run but has its fair share of land mines.

That’s why, as a champion for the everyday investor, in this article, I’m going to level the playing field and reveal to you the real plan for our economy that President Trump and his inner circle of Wall Street elites are keeping to themselves.

1. Keep intermediate- and long-term interest rates artificially low to raise asset prices which will in turn bail out over-indebted banks and individuals, and keep zombie corporations afloat.

2. Liberalize accounting rules so that potentially “bankrupt” insurance companies and pension funds appear solvent.

3. As the European Central Bank and the Bank of Japan continue to do, and as the Fed previously did, buy increasing amounts of government debt as part of a quantitative-easing or massive money-printing program.

4. Never use the term “financial repression” or mention how artificially low interest rates unfairly penalize risk-averse savers who played by the rules while rewarding reckless bankers. At the same time, publicly state that it’s a problem that the markets will work out.

5. Talk repeatedly about “normalization” of interest rates to maintain as steep a yield curve as possible to keep the economy out of recession … but raise short-term interest rates very, very slowly.

6. Begin to emphasize “fiscal” as opposed to “monetary” policy, but don’t use the term “significant increases in government deficit spending.” Instead use the buzzwords like “infrastructure spending,” “investing in America’s future,” and “lower taxes.” Who doesn’t want their bridges fixed, pot holes repaired and lower taxes?

7. Extend and pretend, which is simply another way of saying pushing out the maturities on U.S. government debt and ultimately rebate all the interest back to the Treasury. Someday it will mean “forgiving” the debt when political circumstances are right.

8. Promote capitalism. Reintroduce the Laffer Curve from the Reagan Era as proof to slash corporate taxes and foster hope. Introduce tariffs on imports to promote internal productivity although the most likely result will be a negative impact on long-term productivity.

9. If you are a policymaker or politician, plan to eventually retire and claim it’s all up to the Millennials to solve the entire mess.

Yes, it’s a simple nine-step program whose aim is to get the electorate accustomed to a massive debt load in the developed world and anemic future economic growth.

In all fairness, President Trump and his team inherited much of this playbook from former President Obama and Fed Chair Janet Yellen, who received it from the grandmaster of the entire scheme, Ben Bernanke. Indeed, steps 1 through 4 were firmly in place long before President Trump took office.

If you have any doubts, here’s a chart that shows the massive build up in the world’s central-bank balance sheets since the onset of the 2009 Financial Crisis (the all-important Step 3).

Click for larger version

So now, just like Trump’s inner circle, you are in on the plan.

But more importantly, when you listen carefully, you’ll be able to spot the plan progressing when you hear Janet Yellen talk about raising the Fed Funds Rate three times this year (Step 5) or see it playing out right before your very eyes when Trump talks about the four pillars of his economic plan that I detailed in my January 20 Money and Markets article (Step 6).

You’ll also know exactly where new Treasury Secretary Steven Mnuchin is headed when he talks about the very real possibility of issuing U.S. Treasury bonds with 50- and even 100-year maturities (Step 7). You’ll recognize the Laffer Curve when you see it in the mainstream media as a justification to cut taxes and introduce tariffs on imports (Step 8).

And, you’ll know why the traditionally dovish Janet Yellen is turning into a monetary hawk as she attempts to reshape her legacy before her term as Federal Reserve chairman ends in January 2018. (Step 9).

In a nutshell, what this nine-step plan means is that we are headed for a long period of slow growth, low interest rates and central bank intervention anytime the financial markets signal a collapse. That’s why equities are marching higher because Wall Street is in on it, too.

The money masters already know that in a slow-growth, low-interest-rate environment, where the world’s central banks are committed to providing a safety net, STOCKS — which represent the only chance at growth — are the best way forward.

What should you do?

Make sure you have the appropriate exposure to equities based on your own individual risk tolerance. But be price conscious because the market has gotten very expensive as more and more players on Wall Street are beginning to understand the plan that I’ve just explained to you.

And look for my Money and Markets article next week where I’ll provide even more strategies to protect and grow your nest egg in these richly priced markets. And for an even deeper analysis of the American financial situation, consider joining my service, Safe Money Report.

Best wishes,

Bill Hall

Bill Hall is the editor of the Safe Money Report. He is a Certified Public Accountant (CPA), Chartered Financial Analyst (CFA) and Certified Financial Planner (CFP). Besides his editorial duties with Weiss Research, Bill is the managing director of Plimsoll Mark Capital, a firm that provides financial, tax and investment advice to wealthy families all over the world.