Today's stock decline is the harbinger of the Democratic Party's counterattack, Mr. Hakubun Takizawa

Publication date: 2017/03/03 07:18

The Dow's decline today was driven by Caterpillar and Attorney General Sessions.
The stock that benefited the most from Trump was Caterpillar.
(Today's Dow drop of 40 points was all Caterpillar.)

Goldman Sachs, Boeing, and even Apple also saw moves, but
Caterpillar, as a symbol of global stagflation,
was neglected in the late Obama administration, and only through financial engineering
did it move around its earnings releases.
There was a revival from there. The reasons were the bold proposals Trump put forward
1) the pipeline 2) the wall on the Mexico border 3) 100 trillion yen in infrastructure, etc.

The decline in Caterpillar was caused by investigations by government agencies such as the IRS and the FDIC at its headquarters.
The reasons for the investigations have not yet been announced.

Meanwhile, Attorney General Sessions appears to have fallen completely into the Democrats' trap.
The following 1)–5) are D. Morris's analysis.

1) At the confirmation hearing, Democrats questioned his ties to Russia,
He said he had no contact with Russia.

2) The Democrat-led Senate deliberately confirmed him,
and at this moment released evidence that he had contact with Russia that had been hidden.

3) This would constitute perjury, and for now Sessions, using his position as Attorney General,
blocked any investigation into himself.

This brings us up to today's events as of now.

4) The Democrats have anticipated that Sessions would not indict him.
This allows the Democrats to demand a special prosecutor.
(During Clinton's scandal, Mr. Starr was in charge.)

5) The special prosecutor, triggered by Sessions' indictment, would then move on to the main target—the impeachment of Trump.

This scandal resembles Mr. Abe's scandal.
(It's not surprising that the same thing happens in Japan and the U.S.)
4) and 5) How Trump will respond when these scenarios become clear.
Personally, I think the North Korea risk has increased, not a joke.
　
In the meantime, the bond market remains wary of Yellen, and the 10-year yield continues to rise.
In the attached ultra-long-term chart of TY futures, the 122-03 (around the 2.6% level) is
likely to break toward 3%, with support around the 119 trendline.

Meanwhile, the VIX cash fell sharply.
The cause is still unknown. (CBOE staff will explain tomorrow.)
As a result, the curve has returned to an upward slope, meaning the S&P is set up for a decline.
(If the VIX futures curve is not right-shoulder upward, SP won't fall.)

Anyway, as scheduled for tomorrow, Yellen will deliver a hawkish, pushy speech.
When the Fed Funds futures are priced in 100%, Monday's market will be in focus.

If from next week onward until the FOMC, a Black Monday or flash-crash-type decline occurs,
and if it doesn't rebound quickly, there is a possibility that there will be no rate hike.

“If the FF futures price in 100% a rate hike, then, conversely, a rate hike cannot be executed...”
It's a bit of a joke, but this also reflects what happened when the Fed did nothing at the February FOMC,
and what was hinted at here.

The scenarios discussed at that time were,
that stocks would rise due to algorithmic and passive robots, and the Fed would respond slowly.
And when humans finally respond, the robots' ladder is removed,
in an excess liquidity market, the focus of many participants shifts from thinking to reacting to headlines.
Of course. Professional managers have been wrestling with the revived animal spirits and the pressure to put the money to work since Trump.

As a result, many became frisbee dogs.


Personally, I think the “joke” has a real possibility of coming true...