Political
Fallout & Big Budget Bill will Weaken U.S. Economy and Impact the Markets
By Victor Sperandeo with the Curmudgeon
Liberty
Made the U.S. a Great Nation:
The essence
of why America became so successful, with many great companies and a strong
middle class, was due to the promotion of liberty which created wealth and
prosperity. The U.S. Founding Fathers
invented a liberty based political system, which was the first of its kind in a
world ruled by Kings and Dictatorships. That system was based on capitalism,
free markets, no “income” taxes, incentives, competition, and the rule of law. Now
all of that is in danger of disintegrating.
Trump’s
Second Term - Campaign Promises Not Kept:
When
Trump was elected to his second term as U.S. President, most freedom loving
people were optimistic that he would promote liberty and follow the law of the
land i.e. the U.S. Constitution. Almost all of
his campaign promises were directed at the common citizen. They also were aimed
at righting past injustices.
What
a disappointment!
Besides closing the U.S. southern border (which was extremely important)
Trump didn’t do anything else he promised.
Sadly,
Victor views Trump as an overall failure! This has forced him to stop
supporting and voting Republican as the GOP continues to move towards serfdom
of the people they represent. He has been a supporter of the “so-called”
Republican Party, since he could vote in 1964. However, he also voted for several great
Democrats for certain offices like N.Y. Senator Patrick Moynihan in 1977, while
he lived in NYC (where the Curmudgeon was born and raised). Sadly, those types of Democrats are long
gone.
Victor
believes the long-term effects of Trump’s actions will change the current
trends of the markets and the economy to a far more negative outcome than would
otherwise be the case. His reasons for
this metamorphosis are the following:
1. Keeping the U.S.
involved in Russia’s war with Ukraine by funding Kiev.
2. “THE BIG BEAUTIFUL
(UGLY) BILL,” aka pork barrel spending bonanza with a vaudeville act name.
3. Covering up the perpetrators
involved in the Epstein crime and his reported suicide. Much more in the
next sub-head below.
4. Trump’s shoot from the
hip policies of punishing people, companies or even countries for no valid
reason. A recent glaring example is a 50% tariff on all Brazilian imports in
retaliation for what Trump called a “witch hunt” against an “ideological ally”
- former Brazil President Jair Bolsonaro.
The tariffs would go into effect on Aug. 1st, just before
Bolsonaro is to stand trial. This
clearly illustrates Trump’s new willingness to use tariffs to settle political
scores, regardless of questions of legality, as it is not at all related to
U.S. trade with Brazil. Instead, it is
the use of his sheer presidential power to cause economic destruction and
impose intense political pressure.
The
Epstein Cover-Up Explained:
The
actions Trump and his DOJ/FBI cohorts took with the Jeffery Epstein case merit
your undivided attention! Many are
calling it a cover-up of a cover-up, and it is fracturing his MAGA followers.
In an
unsigned memorandum, the U.S. Justice Department (DoJ) concluded
that there was no evidence that Jeffrey Epstein, the disgraced deceased
convicted sexual predator and Trump’s close friend, maintained a client list
or that he blackmailed prominent individuals for various misdeeds. The
memorandum also stated that Epstein committed suicide. Yet that contracted numerous statements by
government officials:
l Pam
Bondi,
U.S. Attorney General, told Fox News in February that the client list was
“sitting on my desk right now to review.” (She later claimed that she was
referring to the Epstein case file, not a specific client list.)
l Before
he was Trump’s director of the F.B.I., Kash Patel told Glenn Beck, a
right-wing radio host, that the F.B.I. had Epstein’s “black book” and that it
was “under direct control of the director of the F.B.I.”
l In
October 2024, JD Vance, then a candidate for vice president, said,
“Seriously, we need to release the Epstein list. That is an important thing.”
l In
September 2024, Dan Bongino, now the deputy director of the F.B.I., told
his listeners, “Folks, the Epstein client list is a huge deal” that would “rock
the Democrat Party.”
Victor
strongly believes that Trump directed the release of the above referenced
unsigned memo - not Pam Bondi, who is seen as the scapegoat and will
likely have to resign. Dan
Bongino, Deputy Director of the FBI has threatened to
leave office due to his dissatisfaction with Bondi's handling of the
Epstein files. Here’s the background:
Ms.
Bondi confronted Mr. Bongino this week, accusing him of leaking his
frustrations to the press about the DoJ's memo on
Epstein. Bongino vehemently denied being the source of any leaks. He reportedly
said that Bondi had "over-promised and under-delivered" on
disclosures about the alleged "client list." Bongino then
angrily stormed out of the meeting, according to those present.
Image
credit: Pat Byrnes / Copyright 2025 Cagle Cartoons, Inc.
The
controversy was further fueled by the release of surveillance video from outside Epstein's cell, which the DoJ
presented to support its suicide conclusion. However, a "missing
minute" in the 10-hour video, which the administration attributed to
technicalities of an old surveillance system, has been seized upon by some MAGA
commentators as evidence of a cover-up, putting the administration, and by
extension Bongino who reportedly approved the release of the video, in a
difficult position.
Indeed,
the question about Epstein’s cause of death looms large. It occurred in a highly secure federal prison
while he was on suicide watch, raising immediate red flags. Significant
procedural lapses, such as guards falling asleep and cameras malfunctioning,
fueled suspicions that his death was not accidental or self-inflicted.
The
MAGA claim that “Epstein didn’t kill himself” was so popular that it
leaked out into the wider American culture producing many conspiracy
theories. Tucker Carlson was furious.
“The whole thing that this tape shows that he didn’t kill himself is, like, a
joke, but worse than that, it’s a joke that we all get,” he said. “I feel like
we’re at a dangerous point now.” CNN’s Kaitlan Collins reported on Friday
that “it’s hard to overstate the infighting” in MAGA over the Epstein case.
Inexcusably,
Trump mocked law abiding Americans with a “why do you even care remark”
about the Epstein case. “You still
talking about Jeffrey Epstein?” he
responded to a reporter’s question at a cabinet meeting on Tuesday, the day
after the Justice Department released the aforementioned memo
concluding that “no further disclosure would be appropriate or warranted”
in the investigation of the case.
Trump
doubled down on his arrogance in a bizarre Saturday
Truth Social post:
”We have a
PERFECT Administration, THE TALK OF THE WORLD, and “selfish people” are trying
to hurt it, all over a guy who never dies, Jeffrey Epstein. For years, it’s
Epstein, over and over again. Why are we giving
publicity to Files written by Obama, Crooked Hillary, Comey, Brennan, and the
Losers and Criminals of the Biden Administration…They created the Epstein
Files.”
Those
who believe in the law were shocked at Trump’s nonchalant attitude of
effectively allowing unidentified rapists to get a free pass. Dismissing the
people involved in statutory rape is an unforgivable gross injustice. It shows
Trump has become part of “THE ESTABLISHMENT.“ Effectively, he is protecting the criminal
elite without caring about the law.
Epstein
acted as a pimp and, in some cases, forced underage girls (see U.S. Code §
2251 - Sexual exploitation of children) to stay in his homes or compounds,
which is effectively kidnapping. By not
proceeding with the Epstein investigation, Trump was protecting his powerful
rich Johns/tricks from prosecution.
Laura Ingram, a
conservative Fox News host and in general big defender of Trump said: “This
is a COVER-UP of the most heinous crimes against children.” James T. Walsh, a Republican who
served in the House of Representatives for 20 years said, “The sexual abuse and
exploitation of children is one of the most vicious crimes conceivable, a
violation of mankind's most basic duty to protect the innocent.”
--> If Trump can ignore this important moral law to save the
most vile, illicit, and powerful rich felons (the “lowest of the low” criminals
on earth), he can break any law. Voters seem to be more
concerned with justice than lower taxes or the minor political victories which
Trump claims.
Political Fall-out:
l Conservatives
across the board are extremely upset and angry at the deviation of Trump’s
policies/ actions from his campaign promises and his repeated lies.
l As a
result of the aforementioned problems, Trump’s
approval ratings are in free fall. The
latest Economist (July 11) and Civiqs (July
10) are at 54% unfavorable. Rasmussen
(the best conservative leaning pollster in Victor’s view) shows only 32%
“Strongly Approve” Trump vs. 41% who “Strongly Disapprove“ as
per their July 11th poll.
l Victor forecasts that voters’ disapproval of Trump’s policies will
cost the GOP at least 5% to 8% of GOP votes in the 2026 mid-term elections.
He says that the Democratic party will win the most seats in the House
of Representatives in the November 2026 elections
Impact
on the Economy and Markets:
The
Big Beautiful (we say UGLY) Budget Bill will sharply increase U.S. budget deficits
for years to come. The Congressional Budget Office (CBO) estimates
the bill would add $3.3 trillion to $3.4 trillion to federal deficits over the
next 10 years. Including interest expenses, that translates to a $4 trillion
increase in the U.S. national debt.
Equity
investors have (till now) dismissed deficits as they have NOT been a direct
issue for the U.S. economy for over 45 years. Further, they have been good for
corporate earnings…so far. Our colleague
Lacy Hunt says that research shows that for every + 1.0% in debt you lose -
0.1% in real growth. If so, GDP growth will be negatively affected by 2026.
It
should be mentioned that in this ridiculous new pork barrel bill there is a
heavily lobbied for law permitting corporations to expense virtually
everything. Therefore, if you build a factory for a billion dollars you can
fully deduct it. This is a big benefit for large U.S. companies, but it will
reduce tax revenue, and increase deficits, which the bond market already sees
as a huge negative (the yield on the U.S. Treasury bond yield this past
Friday was 4.96% - up substantially from one year ago).
A U.S.
recession or at least an economic slowdown is coming. As the federal government does not like to
show declines in GDP the last declines (1st and 2nd
quarters of 2023) were recently erased through adjustments. Tariffs are not necessarily inflationary, but
prices will stay high so consumers will materially slow spending as they won’t
be able to afford the higher prices. If
Trump’s tariffs come to fruition on August 1st ,
they will cause a sharp slowdown in global trade with the U.S.
As a
result, the U.S. stock market will decline as earnings decline. Treasury
Bonds and Notes will likely rally in this scenario, but only temporarily. The
question is how much and for how long?
Interest
rates will be cut by 25 bps at the September FOMC meeting and the Trump
administration’s pressuring Fed Chair Jerome Powell to resign will continue
unabated.
Victor’s
Conclusions:
MAGA
advocates now believe that Trump is like every other politician that backs rich
elites. That will result in the Republican party losing its majority in the
House of Representatives in the November 2026 mid-term elections. A conservative pollster suggests that the GOP
could also lose the Senate! As a
result, Trump is dead and doesn't know it!
Elon
Musk’s new “American Party” will take many previous GOP voters away from
the incredibly FECKLESS and CORRUPT Republican Party, which does nothing for
the American worker and other citizens. Instead, they sell their votes (bribery) for campaign
contributions from corporations whom they then favor when (re) elected. This
game is played by most U.S. representatives in the House and Senate who vote to
spend government money on special interests or give their donors tax breaks.
The DoD’s
budget in the current fiscal year (from September 30, 2024, till September 30,
2025) is $850 billion. (National defense discretionary spending was $874
billion in FY 2024.) The BIG BEAUTIFUL BILL will increase U.S. defense spending
by another $150 billion, according to the House Armed Services Committee and Federal News Network. This
increase is part of a broader reconciliation bill aimed at strengthening
national defense and fulfilling President Trump's "Peace through
Strength" (?) agenda. Compare
that to China spending $317.6 billion and Russia $150.5 billion on national
defense.
….…………………………………………………………………………………………………………………………..
Curmudgeon
Note: The
U.S. fiscal situation is even in worse shape!
As of FY 2024, and projected to continue in FY 2025, the interest on
the national debt is greater than the amount spent on national defense.
This represents a significant shift in US federal spending priorities, driven
by a combination of factors including a high and rising national debt and
higher interest rates. This trend is
raising concerns about the long-term sustainability of U.S. fiscal policy,
according to the Bipartisan Policy Center. The increasing burden of debt
interest could limit the government's ability to fund other essential programs,
including defense. Yet our elected representatives that voted for the Big
Beautiful Bill evidently don’t care~
….…………………………………………………………………………………………………………………………..
Bottom
Line:
Victor and the Curmudgeon agree that the cumulative negative effects of the BIG
UGLY budget bill, combined with other detrimental Trump policies, will be
"the straw that broke the camel's back." We don’t know when that will
happen, but it will cause an unpredictable, earthquake-like reaction within the
next few years.
End Quotes:
“The
average age of the world's great civilizations has been two hundred years. (The
U.S. from 1791, the year we ratified the Constitution) is 235-year-old ).These
nations have progressed through the following sequence: from bondage to
spiritual faith, from spiritual faith to great courage, from courage to
liberty, from LIBERTY TO ABUNDANCE, from abundance to selfishness, from
selfishness to complacency from complacency to apathy, from apathy to
dependency, (TODAY we are here) from dependency back to bondage.”
Alexander
Fraser Tytler (1747-1813)
From an AXO Copper interview with MARC FABER (aka Dr. Doom):
AXO -Question -Why do you think
Trump raised the tariff on copper to 50%?
At the 10:28 mark of this
interview, Marc FABER answers: “The simple answer is because he is economically
deranged.” And that says it all!
….………………………………………………………………………………………………………………………………
Wishing
you all the best and especially good luck, because you will need it!
The Curmudgeon
ajwdct@gmail.com
Follow the Curmudgeon on Twitter @ajwdct247
Curmudgeon is a retired investment professional. He has been involved in financial markets since 1968 (yes, he cut his teeth on the 1968-1974 bear market), became an SEC Registered Investment Advisor in 1995, and received the Chartered Financial Analyst designation from AIMR (now CFA Institute) in 1996. He managed hedged equity and alternative (non-correlated) investment accounts for clients from 1992-2005.
Victor Sperandeo is a historian, economist and financial innovator who has re-invented himself and the companies he's owned (since 1971) to profit in the ever-changing and arcane world of markets, economies, and government policies. Victor started his Wall Street career in 1966 and began trading for a living in 1968. As President and CEO of Alpha Financial Technologies LLC, Sperandeo oversees the firm's research and development platform, which is used to create innovative solutions for different futures markets, risk parameters and other factors.
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