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Trump Stock Rally Fallacious and/or Based on Corruption

Economist Noah Smith says the blog post I’m about to write is full of crap:

The Fundamental Fallacy of Pop Economics (which I get to name, because this is my blog and I can do whatever I want, mwahahaha) is the idea that the President controls economic outcomes [Noah Smith, “The Fundamental Fallacy of Pop Economics,” Noahpinion, 2016.12.24].

If Presidents don’t control economic outcomes, Presidents-Elect certainly can’t. That’s all we should need to laugh at Donald Trump’s holiday effort to take credit for the stock market rally.

But let’s climb some numbers, because, like Black Elk Peak, they are there (not to mention not as tall as we think).

In 2016, the NASDAQ was up 6.62%, the S&P 8.63%, and the Dow 12.58%, not far from historical average annual increases. The S&P grew every year under President Barack Obama at an average annual rate of 14.3%, making up for the ground President George W. Bush lost with his double-recession negative S&P annual rate of –0.67%. Since 1928, Democratic Presidents saw average S&P growth of 14.42%. Over the same period, Republican Presidents have coincided with 7.83% growth in the S&P.

Stock gains since November 8 are mostly in financial stocks. If those gains have anything to do with President-Elect Trump and his frothing Congress, its the deregulatory hopes of corrupt Wall Street raiders:

Instead, this recent rally is rooted mostly in corruption — now and in the future. And a rally built on corruption is bound to fail. Here’s why:

Financial stocks are responsible for much of the U.S. market’s recent move, and the rally in financials is rooted in hopes for government deregulation of the industry. Financial stocks represent about a third of the S&P and are up around 17% since the election. Take them out and there is no rally, Trump or otherwise.

…the enthusiasm for financials is more about prospects for repeal of the Dodd-Frank bank reform bill, as well as the Obama administration fiduciary rule that requires financial advisers, brokers, and asset managers to put clients’ financial interests ahead of their own.

…The market is usually one of many things that makes you, to borrow Trump’s Twitter wording, hopeful to be American, because it’s typically a monument to the creativity of our Elon Musks and Steve Jobses. Right now, something else is happening. It’s ugly, it’s cynical — and it won’t work [Tim Mullaney, “U.S. Stocks Riding a Bull Market in Corruption,” MarketWatch, 2017.01.04].

Now I get it: bull market refers to the bull—- artists looking to fleece us again.

Tangentially Related: Maybe Presidents and Presidents-Elect don’t control economic outcomes, but a President-Elect can nudge stock prices with his Tweets… briefly—Lockheed Martin has mostly erased whatever Trump did to its stock on December 12; Boeing is up 4.2% since December 5, the day before Trump’s Air Force One tantrum-Tweet. Don’t try cashing in on Trump’s outbursts, though—Skynet will beat you to it every time:

“There are people diligently working to create algorithms for Trump’s tweets, and if he continues to increase the size of the data set then we’ll likely see full automation sooner than later,” Zachary David, a senior analyst at KOR Group, a consulting firm told Politico last month.

…How fast are the bots? This Slate article, which quotes, an unnamed options trader, suggests that it takes a matter of moments for the stock market to react to news on Internet. “The speed is unbelievable. They’re buying everything within like 3 seconds of it coming out, which is not possible for a human,” the trader told Slate. Trading robots can react to other information — like trading orders that appear at stock exchanges — even faster, within millionths of a second [Ian Salisbury, “Can You Make Money from Donald Trump’s Tweets?Money, 2017.01.03].

Of course, if Trump is a robot, and he’s talking to stock robots, we’re doomed. Or maybe he’s just building the robots….


  1. jerry 2017-01-04

    I think that it is fine for Don to take credit for this fake rally. About the time the repeal takes place, the thing will drop like an anvil in thin air.

    When the bough breaks,
    the cradle will fall,
    and down will come Donnie,
    along with us all.

  2. John Tsitrian 2017-01-04

    Old adage from my market-making days at the Chicago Board Options Exchange: He who lives by the Dow dies by the Dow.

  3. mike from iowa 2017-01-04

    Car gas has gone up by thirty cents a gallon or more since Putin declared Drumpf Premier of Russia-America. He is solely responsible for that.

  4. jerry 2017-01-04

    As fuel prices rise, the need for smaller cars and electric ones just increases. There sometimes is a silver lining in a false economy built on fossil fuels.

  5. Robert McTaggart 2017-01-04

    There is this thing called OPEC that may have something to do with the jump in gas prices too.

    The only reason to go smaller is to try to make some gains in fuel efficiency. If you have a plentiful energy source available to you, then miles per gallon is not as critical.

    But it will be interesting to see if there are more electric cars in the next 5-10 years or not. That will depend on how much they cost and how easy it is to recharge them…and whether we produce enough energy to recharge them.

  6. mike from iowa 2017-01-04

    With wingnuts in charge there will be oilwells everywhere and more and bigger gas guzzlers built just to prove global warming is a Chinese hoax. Wouldn’t surprise me if Drumpf gave wind turbines to Exxon so they could be used to pump oil instead of generate electricity. Welcome to what used to be America-nightmare.

  7. Bill Dithmer 2017-01-05



    Adolf Hitler



    Jim Jones


    With all the talk about how bad Obama has acted during his presidency, its interesting that it has become the religious right that has suspended the Ten Commandments to get what they want. I guess its the end justifying the means but it also exposes the complete hypocrisy of their faith.

    Donald Trump is the new Jim Jones, and the old Adolf Hitler all rolled up in one pussy grabbing, homophobic, bigoted, racist, big orange blackhead on the ass of society.

    This is only my opinion, and it is my mind both on drugs and not.


    The Blindman

  8. caheidelberger Post author | 2017-01-06

    That’s kind of a scary comparison, Blindman. Trump already convinced a lot of the working class to drink the Kool-Aid and commit economic suicide on Election Day. I wonder how big a suicidal move he’d have to call for to finally rouse his supporters to their senses and realize they are following a madman who doesn’t care about their well-being?

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