Market update: Senate passes the tax reform, US and South Korea start unprecedented military drills

4 Dec

by Mihály Tatár


Good Morning!


  • To the shock of cynics, the Senate easily passed the tax-cut legislation early Saturday (EURUSD 1.1850, US 10Y yield 2.42%, Gold 1272 USD), clearing most of the way to passing it as a  law (what is left is a harmonization of the House and Senate bill, with the situation somewhat complicated by debt ceiling issues that come up this week). Personally, it still amazes me how unpopular this tax reform is in the mainstream media and among popular economists – a Bloomberg poll shows that the majority of economists expect ’modes growth’ or ’even recession’ in 2019, with some, like Lawrence Summers, talking about the tax plan ’causing thousands to die’. (Excuse me? A quick recap: US unemployment is at a 17-years low and corporate profits are at record high. On top of that we now  get the first US fiscal stimulus since the crisis.) Anyway, Friday’s trading has been pretty volatile (SPX dropping by 1.6%, only to later bounce to -0.20%, and DAX falling by 1.25%), after former National Security Advisor Michael Flynn pleaded guilty for lying to the FBI on his communication with Russia,  which was presented by ABC news as something that happened before the elections (tanking markets as this would mean a collusion by Trump). Later it was clarified that the events happened after the elections – thanks, ABC -, in essence meaning that Flynn was simply doing what Trump promised voters during the campaign. (Kissinger had been given a medal for this. Something, however, is indeed not right around Flynn, who had way too many friends abroad.)


  • The US and South Korea suddenly launched their largest-ever joint aerial drills (deploying more than 230 aircraft including stealth bombers, – I hope the snoozing EU Common Army bureaucrats are taking notes), with leaks that the Pentagon is planning to install the THAAD anti-missile system along the West Coast. To me, all these sound very similar to the slow but massive military build up before the 2003 Iraqi invasion, and one has to wonder what Trump will do with his free time when the tax reform is passed.


  • The debate on Bitcoin remains heated, with Bloomberg noting that the crypto currency is super hot until one wants to spend it: In the US, for example, contrary to the media impression and that everyone talks about it, less and less businesess accept it for payment, from online travel agencies to restaurants. (The article even mentions that the only online pizza website that accepts Bitcoins in New York charged 0.0036 bitcoin – 34 USD – instead of the normal 9 USD price). It seems that the main legal users of the alternative currency are still those with strong stakes in it – for example PWC, which just announced that it would allow payments in it for its services, because it is increasingly working with clients who invest in crypto projects.


Have a nice week,



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