Trump’s Surprise…

And it is not that Trump is going to surprise anyone. we all know who he is and what he stands for.

The surprise is going to be on Trump, compliments of Kevin Warsh. Warsh actually understands what causes inflation, it is excess money in the economy. It is not the price of oil. High oil prices reduce consumer wealth, can lead to deflation if around too long. Warsh also understands that the level of interest rates is what is used to fine tune the economy, too low short-term rates increase speculative activity, while too high long-term rates kill the housing market. I know Bernanke never understood that relationship and Powell at his core was a Wall Street financer type who kind of played games with the numbers.

The markets this year are trying to live outside the economic factors outlined in the paragraph above. First and foremost, this is an election year and Trump lives by power. He will threaten anyone for anything in his quest for a mid-term victory. The one thing that is disturbing about Warsh, which came out today again in the Senate Hearing, and that is that he is afraid of Trump, Warsh is in no way tough. Lucky for him, this problem will not come to the fore front for a while. Powell has the money supply running hot, Trump has the Government Deficit running hot, and the Balance sheet is accommodative. Tie all this together with the AI Circle Jerk where the players roll costs into revenues for each other in a never-ending circle. What is not too like about the frenzy that is about to unfold.

At times I talk about “Animal Spirits” and how I calculate them on a live basis. The algo calculation is basically involves calculating the five market factors that affect the stock market, the dollar, the 2 year interest rate the 30-05 Yield Curve, the gold price and the oil price and then deducting those from the market price of the stock market. To the extent that stock prices are above the core factors price is viewed as “Animal Spirits” by me. By this measure Animals Spirts in the last cycle peaked in August 2025 and then bottomed on March 9, 2026. We are now in first stages of a upside breakout move.