We are on the Verge of Economic Catastrophe

[Elixir]

Nasdaq soars, Dow pops, one of them had its longest winning streak since 2024. Nice.

{snip}My investments are down so far into Trump's term and have lost a good several hundred thousand dollars.

So are mine. The stock market has been volatile since the initial announcement of the tariffs.

I sold off in January and am actually slightly up since the Apricot’s economic idiocy.
I am surprised how many people “knew” it was coming, and still sat pat on their hand.

A lot of us can’t sell. The tax consequences would be much higher than the drop in asset prices. But it is close.

Sympathies. It does put a crimp in my ability to raise any MORE cash, and my plans hit a big (for me) bump two days ago. Now I have a realtor writing a cash offer for a property adjacent to my own, and I may have to take some taxable profits to make it happen.

 

[Swammerdami]

All forms of shorts and the like are effectively a zero-sum game played against the top people in the world.

Opportunity arises when uncertainty peaks. Top people in the world don't like uncertainty - it's their living to have certainty.
I don't need certainty if I risk a few buck every quarter century.

I am definitely NOT any sort of expert on trading but I've made a few small bets just for the adventure. DISCLAIMER: Do your own research. Any specifics in this post are just examples and possibly erroneous.

Do you plan to sell shares short? Or to buy put options? I think the former is what big players like to do, while the latter is probably more appropriate for retail players. (For one thing, the rules about cash from short sales are rigged against retail investors -- I'll explain this if there's interest.) Option chains can be displayed at Schwab or several free on-line sites; it may be fun to find the expiration date and strike price most compatible with your guesswork. I pick contracts with large Open Interest to get small bid-ask spread.

Instead of buying puts (which offer a small chance at a big win), you can sell covered calls (with a big chance at a small win). It may be good to buy options when VIX is low, and to sell options when VIX is high. After a brief upward lurch in early April, VIX is middlish right now.

For just $500 you can buy a SPY Put (strike 380) expiring next March. SPY is now $567. If it drops 50% over the next 10½ months, you pocket almost $10,000, yet risk only the $500 purchase. (Of course, you can cash out for a smaller gain after a smaller drop -- if you do this early enough..)

Loren is probably correct that casual players should BEWARE. OTOH the spreads can be small (just $5 in the $500 example I just gave) and one side of that trade will be a winner!

 

[TSwizzle]

Nasdaq soars, Dow pops, one of them had its longest winning streak since 2024. Nice.

But this is Biden’s market. He just said so.

Politics. Silly politics. There is no doubt the market drop was a reaction to the tariffs. Even so, I believe the market was due for a bit of a correction.

 

[Elixir]

Politics. Silly politics

Unless Trump is winning. Then, if that should ever be the case, it's all Trump's doing. He tried to take credit for Obama's success, then blamed him for his own failures in his first term, and took credit for Biden's success while he was out of office, and now blames those whose success he tries to steal, for his epic failures while he is in office again.
Fool a trumptard once, shame on him. Fool the trumptard twice - shame on the trumptard. Fool the trumptard a third time - why even bother trying to 'splain it to them... ?

Those who can't see that, are rightfully called suckers. Because their Felon doesn't give a flying fuck about the economy or immigration or the Homeless Industrial Complex (unless he can get a dime out of it). He is trying to destroy this government - this Country - before it can hold him to account again.
Because next time there will be no corrupt justices to protect him unless he can abolish elections and gain a third or perpetual term as King.
He thinks he will live forever - or at least 200 years.
Part of me hopes he lives long enough to be executed, but most of the time I'd be happy if a supernatural event took place and he just vanished from existence.

 

[Elixir]

I believe the market was due for a bit of a correction.

Every bull market is "due for a correction". That's why the phrase "climbing the wall of worry" was coined and has been ritually applied by economists during every bull market. This is not a correction, it's destruction.
Thing is, the shit always hits the fan under Republicans, and Trump sets a new low bar for absolute shit performance.

 

[TV and credit cards]

And then there were none.
Moody's cuts America's pristine credit rating, citing rising debt
Will it have any effect on Trump's Big Bouncy Bill or will they just badmouth Moody's drawing threats to its Chief Economist?
They have to know this isn't so much Moody's talking as it is buyers of US debt.
Good timing though.

 

[SLD]

And then there were none.
Moody's cuts America's pristine credit rating, citing rising debt
Will it have any effect on Trump's Big Bouncy Bill or will they just badmouth Moody's drawing threats to its Chief Economist?
They have to know this isn't so much Moody's talking as it is buyers of US debt.
Good timing though.

Yeah, and the budget busting bill these morons are trying to pass is going to make matters worse. Now they can’t even collect taxes because they fired a huge number of IRS agents. Seriously feel free to cheat on your taxes. They won’t bother with you if you don’t make at least 1,000,000 a year. They don’t have the ability to go after anyone making less. So how are they going to fund all the shit they’re trying to do? Supposedly they’re going to borrow it. But guess fucking what? That means they’re going to have to pay bigger interest rates or people won’t lend. Really fucking stupid. The other way is massively inflate the economy. Wall Street is waking up to this bullshit. They should have 10 years ago. What a seriously fucked up administration we have.

 

[Swammerdami]

The stock market is now near its highs when measured in dollars, but not when measured in Euros or Yen. I wish there was an easy way to buy Put options denominated in a hard non-dollar currency.

Anyway, MAGAT memes were focused on deficits, inflation and interest rates, NOT on stock prices. MAGATs bragging that stocks have only lost a little under Trump are moving the goalposts.

And then there were none.
Moody's cuts America's pristine credit rating, citing rising debt
Will it have any effect on Trump's Big Bouncy Bill or will they just badmouth Moody's drawing threats to its Chief Economist?
They have to know this isn't so much Moody's talking as it is buyers of US debt.
Good timing though.

Treasury payments just for the interest on existing debt now exceed total US military spending!!!
It will be interesting to see if FedRes resumes "QE" purchases in an effort to prop up these ratings-demoted bonds.

 

[Jimmy Higgins]

GOP House passes bill by one vote. Now it is time for the Bond Market to put in its input.

 

[Swammerdami]

GOP House passes bill by one vote. Now it is time for the Bond Market to put in its input.

Trading has opened at NYSE. EDV (Vanguard Extended Duration Treasury Index Fund ETF Shares) was selling for $65.85 as recently as 16 May -- six days ago. It's quoted at $61.96 as I type.

 

[Swammerdami]

The fascists are invalidating the U.S. Constitution; destroying the safety nets that protected America's underclass from hunger and disease; and committing various other mayhems. This evil attracts so much attention that it's almost overlooked that GOP plans will destroy the U.S. status as the World's financial titan. For a century the U.S. Dollar has been revered, almost serving as a substitute for precious gold!

But that special status is crumbling.

And then there were none.
Moody's cuts America's pristine credit rating, citing rising debt
Will it have any effect on Trump's Big Bouncy Bill or will they just badmouth Moody's drawing threats to its Chief Economist?
They have to know this isn't so much Moody's talking as it is buyers of US debt.
Good timing though.

The special status of the U.S. Dollar -- (recall that during the Bretton-Woods era the Dollar served as a substitute for gold!) -- was deteriorating even before voters turned the reins of power over to the Starve-the-Beast tax cutters. EDV shares -- a proxy for the market value of rolling principal on 30-year Treasury bonds -- was $149 as recently as November 2021, and still $77 during Biden's final month, but has dropped to $63 today. This represents significant financial loss: Who has lost this wealth? More to the point, Who will step up and buy the massive number of bonds which must be sold to finance the huge shortfalls the U.S. government will endure?

• The SocSec Trust Fund has been a significant buyer of Treasury debt; this Fund peaked at about $3 Trillion in 2020. But the Baby Boomers are now retiring in droves and SocSec is no longer rolling over all its bonds as they come due. The GOP are scumbag liars when they declare programs like SocSec and Medicare to be "insolvent", but it is true that the trust funds are no longer net buyers of Treasury debt
• China has been dumping U.S. Treasuries for the past decade. The U.K., for some reason, has stepped up and bought up the $600 billion or so which China has dumped. Plenty of other foreigners and foreign central banks are big holders of Treasuries. But what interest rate will they want on their U.S. bonds with the uncertainties of having a corrupt imbecile running the White House?
• The FedRes banks usually make big profits; they are a profit center! (After all, they invest money which they simply print.) After paying the statutory dividends to member banks, the residual FedRes profit is handed over to U.S. Treasury. But in 2023 FedRes reported a loss of $115 billion. (AFAICT this is the first time the aggregated FedRes banks posted a loss.) In 2024 FedRes lost only $78 billion. Most of these losses are due to the sweetheart deals FedRes makes with its Member Banks to prop up the banking sector -- it pays interest on the funds sitting uselessly in Members' checking accounts at the Fed. (Do you get 4.4% interest on your checking account?)
• From 2023 to the present the central bank has been unloading part of its stockpile of U.S. debt. Does anyone expect that selling to continue as the usual buyers of Treasury debt turn away? In financial systems controlled by a central bank, creating money to buy debt is the mechanism to "print fiat money." And Beware: FedRes has made promises to help bail out hedge funds stuck with Treasuries. (Why would a "hedge" fund park its money in a "super-safe" bond? As part of elaborate gambling! They'll buy one type of bond while shorting another and doing all their shenanigans with borrowed money. Doing all this with full confidence that Scott Bessent and other corrupt stooges will rescue Wall Street if the gambles turn sour.)

 

[Loren Pechtel]

And then there were none.
Moody's cuts America's pristine credit rating, citing rising debt
Will it have any effect on Trump's Big Bouncy Bill or will they just badmouth Moody's drawing threats to its Chief Economist?
They have to know this isn't so much Moody's talking as it is buyers of US debt.
Good timing though.

Yeah, and the budget busting bill these morons are trying to pass is going to make matters worse. Now they can’t even collect taxes because they fired a huge number of IRS agents. Seriously feel free to cheat on your taxes. They won’t bother with you if you don’t make at least 1,000,000 a year. They don’t have the ability to go after anyone making less. So how are they going to fund all the shit they’re trying to do? Supposedly they’re going to borrow it. But guess fucking what? That means they’re going to have to pay bigger interest rates or people won’t lend. Really fucking stupid. The other way is massively inflate the economy. Wall Street is waking up to this bullshit. They should have 10 years ago. What a seriously fucked up administration we have.

They don't have the resources to go after those who make more than that, either.

Basically, make sure your return contains nothing incompatible with any other data source they have and there's pretty much nothing they actually have the capability to do. Even in the past--they didn't catch my fat-fingering tens of thousands of dollars of losses into my return. I caught it the next year when the carryover was wonky. The basis value sat there with the correct 4 digits in the correct order. Plus an extra 4 stuck in there. They had almost a year to find that, they didn't.

 

[Elixir]

"They won’t bother with you if you don’t make at least 1,000,000 a year" is a fallacy according to my accountant. The meat and potatoes comes from middle income people, and it costs least to collect it from them. But the profit margins are of obscene, on any investment on collecting from tax cheats. But not a popular practice with the law-bending lawmakers and their billionaire pals.

I caught it the next year when the carryover was wonky.

You could have waited a couple more years, then fessed up and sent them the money and they would have returned it!

 

[Loren Pechtel]

The stock market is now near its highs when measured in dollars, but not when measured in Euros or Yen. I wish there was an easy way to buy Put options denominated in a hard non-dollar currency.

I don't really care what it does in the short run. It's the long run that matters, not how bumpy the ride.

Treasury payments just for the interest on existing debt now exceed total US military spending!!!
It will be interesting to see if FedRes resumes "QE" purchases in an effort to prop up these ratings-demoted bonds.

Of course they will. It makes things look good in the short run and makes it easier to loot.

 

[Loren Pechtel]

"They won’t bother with you if you don’t make at least 1,000,000 a year" is a fallacy according to my accountant. The meat and potatoes comes from middle income people, and it costs least to collect it from them. But the profit margins are of obscene, on any investment on collecting from tax cheats. But not a popular practice with the law-bending lawmakers and their billionaire pals.

It has been.

I caught it the next year when the carryover was wonky.

You could have waited a couple more years, then fessed up and sent them the money and they would have returned it!

Only if you get the timing just right. And not amending when it became apparent would look like fraud if they were looking. The original mistake didn't alter that return by a penny (I hit the capital loss limit for the year without the oops) so it never propagated beyond D and since I was using a tax program that means it really only showed up on the line it was on. But when it suddenly offset way more gains in the next year than I was expecting that triggered the "hey, something's wrong" sense and would have looked very suspicious if not corrected.

 

[Swammerdami]

Treasury payments just for the interest on existing debt now exceed total US military spending!!!
It will be interesting to see if FedRes resumes "QE" purchases in an effort to prop up these ratings-demoted bonds.

Of course they will. It makes things look good in the short run and makes it easier to loot.

Historically the FedRes operates independently of the federal government; it is charged with responsible monetary policy and long-term national prosperity. Its present chairman Jay Powell, although a multi-millionaire investor, is credentialled and well respected; he was appointed as FedRes Governor by Barack Obama. I think it is very wrong to assume FedRes decisions are based on short-term political corruption.

The role of Central Banks in modern finance is greatly misunderstood. I think I'll revive the thread intended to clarify this which got hijacked by absurd nonsense surrounding the word 'intrinsic.'

Just hours ago Jerome Powell delivered the Baccalaureate address to the Princeton University Class of 2025. Does he sound like a Trumpist lackey?

Federal Reserve chair Jay Powell called on students to protect democracy while praising American universities as “a crucial national asset”, days after the Trump administration escalated its attacks on higher education.

“We lead the world in so many ways, including in scientific innovation and economic dynamism,” the US’s central banker told students in a commencement address at Princeton on Sunday. “Our great universities are the envy of the world and a crucial national asset.”

There are some top government posts which by tradition are treated as beyond the President's power of disposal. Early in 2017 Trump wanted to (and eventually did) fire the FBI Director James Comey. Whether or not he should do this became a consuming debate in the the White House. To fire such a man is regarded as a grave abuse of Presidential power, worse than sending thousands to torture chambers or threatening ridiculous tariffs on our closest allies.

Trump happily promotes ridiculous fiscal policies that are causing the dollar to plummet, but will he dare to fire the FedRes Chairman who is, so far, preventing the Dollar from a chaotic free fall? He surely wants to but has been sternly advised against it. Yes, he MIGHT end up firing Powell sooner rather than later and replacing him with a MAGAt stooge. But he hasn't done that yet.

 

[barbos]

Treasury payments just for the interest on existing debt now exceed total US military spending!!!

So a family of 4 pays
$882e9/350e6/12*4*2 = $1680 per month for debt+defence
That's not too bad.

 

[Swammerdami]

It will be interesting to see if FedRes resumes "QE" purchases in an effort to prop up these ratings-demoted bonds.

For almost three years FedRes has pursued "QT" -- it is SELLING Treasury bonds. IIUC recent advisories imply that QT is still on-going.

Curiously(?) FedRes has been BUYING bonds lately, despite not changing policy in its public statements. These purchases are not secret, but it appears that FedRes is hoping they are "under the radar" and go mostly unnoticed.

The Federal Reserve (The Fed) recently made a surprising move by purchasing USD 20 billion in 3-year Treasury bonds in a single day. The action was taken without any official announcement, press conference, or widespread media coverage.

According to dailyhodl.com FedRes purchased $43.6 billion of Treasury bonds during that week.

Typically, QE is announced publicly with a high degree of transparency. However, this latest purchase occurred in silence.

An analyst noted that the move effectively amounts to money printing by the Fed, even if not physical, as the central bank simply credits the balance sheets of targeted banks. “This increases the money supply. The question is: what is the money for?”

That question found a partial answer on the same day, 9 May 2025, when the US Treasury attempted to auction USD 150 billion in bonds but managed to sell only USD 78 billion—leaving a substantial shortfall of USD 72 billion.

As a rule, investors flock to buy Treasury bonds, "the safest investment in the world." Yet despite high yields, $72 billion remained unsold?? !

(Note that FedRes may not legally buy bonds in Treasury auctions; QE and QT transactions occur in the secondary market.)

Rather than announcing the move as a new policy, the Fed remained silent.

This kind of action is often referred to as “Stealth QE”—the Fed injecting liquidity into the financial system without formally labelling it as quantitative easing.

Had the move been made publicly, markets might have responded negatively, viewing it as an admission that the economy is more fragile than claimed, or that interest rates are excessively high.

Here's a YouTube discussing the Dollar's special status as the World's reserve currency. For better or worse, no other currency is ready to take its place. [TLDR: "Will the US default on the Dollar?" -- "Who knows? It's all up to Trump."]

 

[bilby]

For better or worse, no other currency is ready to take its place

The euro seems just as good a choice as the US$. Perhaps better, given the absence of a European position analagous to that of POTUS, whose occupant wields massive individual power to harm the currency at a whim, or unintentionally through a verbal gaffe.

 

[Swammerdami]

For better or worse, no other currency is ready to take its place

The euro seems just as good a choice as the US$. Perhaps better, given the absence of a European position analagous to that of POTUS, whose occupant wields massive individual power to harm the currency at a whim, or unintentionally through a verbal gaffe.

At present most of the world's global reserves are denominated in dollars, and three times as much compared with euros. 81% of trade finance is denominated in dollars Trade between non-dollar countries is often denominated in dollars.

New York is by far the world's greatest financial center. London is #2 but not even a euro country. One list of the "ten biggest financial centers" shows 3 in the U.S., 4 in East Asia, and Frankfurt in the #10 slot, behind even Zurich.

The U.S. has been a major borrower, both to support its trade deficit and to support government deficit. This willingness to spend dollars is key to the reserve status! Foreigners have been happy to buy U.S. stocks and bonds.

Yes, turning the U.S. government over to an incompetent and corrupt psychopath will weaken the dollar and lead to wishful thinking about an alternate currency, but in the short- to medium-term there is no alternative. The Euro lacks the rigid central control of the Dollar: a renegade European country can create Euro money with its own banking system, something a U.S. state cannot do.

The dollar may be weakening but this is not a zero-sum game where non-dollar countries are gleefully hoping to profit. Just the opposite: If the dollar crumbles the world will plunge into chaos.

Despite Trumpist mayhem, U.S. stock indices are now 4% HIGHER than they were at the time of the November 5th disaster. Many of the investors are in fear of Trump but desperately hoping that the U.S. economy prevails.