Donald Trump: the art of the scam

The Biggest Pump & Dump in History continues

Good Morning Team.

Day 80 of Trump’s 1,461 days of power in his second term.

You know the old parable: If the universe were 24 hours old, humans would have appeared on the scene for a fraction of a second, appearing just before the end of the day, around 11:59:56 pm…

Trump’s second term feels a bit like that. He’s been here for mere weeks but it feels like an eternity.

Now before we go any further, I want to let you all in on a ‘secret.’

Since the dawn of time, the small cap market has been plagued by pump & dump schemes, shyster management and liquidity crises. You know what this looks like. You will have learnt painful financial lessons.

And this education is about to pay off.

You have trained for this all your life.

When the same names on Twitter post some rampy bullshit on a low liquidity ticker, you know exactly what’s going on. Now imagine, if you will, that instead of a sub £5 million microcap, it’s the multi-trillion-dollar S&P 500.

And that it’s not an AIM non-exec, but the President of the United States of America, the man in charge of the largest economy in the world.

You thought GameStop was memey? Well Trump is the new Roaring Kitty, and he’s swapped the bandana for a made-in-China cap.

The markets will believe anything he says - you won’t. And this gives you an edge.

Here’s what’s happened in the past few days.

Trump & Vance belittle China

Before the pump, Donald tells the world that country leaders are ‘kissing my ass’ to reduce the levies, at the National Republican Congressional Committee’s annual fundraising dinner in Washington DC on Tuesday evening.

He then mocked his supplicants:

‘Please, Sir, make a deal. I’ll do anything. I’ll do anything, Sir.’

He’s a bullying piece of shit. These tariffs may cost Americans jobs. But they cost the poor in countries like Lesotho or Madagascar their lives.

Then you have JD Vance, the final boss of American pseudo-intellectualism.

The Vice President - the man who becomes in charge should Trump die at any point - told Fox News that ‘we borrow money from Chinese peasants to buy the things those Chinese peasants manufacture.’

The Chinese foreign ministry called the comments ‘ignorant and disrespectful.’ They note they will fight to the end on the tariffs.

Let’s be clear here. The Chinese Communist Party are engaged in wholesale mass slavery of Uyghur Muslims and other ethnic minorities in Xinjiang. It is no innocent party.

But this rhetoric is so classless, it borders on diplomatic self-sabotage.

And to rub it in:

It’s like Trump wants the US to be a complete pariah on every level. Forget the market reaction - the damage has been done and the country’s global reputation will not recover in a long time.

Gandhi: ‘Nonviolence is the greatest force at the disposal of mankind. It is mightier than the mightiest weapon of destruction.’

Martin Luther King Jr: ‘Returning violence for violence multiplies violence, adding deeper darkness to a night already devoid of stars.’

I know who he wants to sound like. But Donald, this only sounds magnanimous when you are the non-aggressor.

Bond market is the real power

If you want to know what the real power in the financial world is, then understand this.

It’s not stocks.

It’s bonds.

The bond market turned Liz Truss into a perennial lettuce joke in a matter of days. It cannot be bought, bullied or negotiated with. If your plans are not acceptable to the bond market, you need to change tack or you will run out of money.

It’s like gravity, or water. Utterly fundamental.

Yesterday, yields on benchmark 10-year bonds rocketed, and the treasury auction was fairly muted. Wall Street traders dumped US government debt, raising 30-year borrowing costs to 5%, a two-year high and above the borrowing costs of Greece.

The US bond markets finance a $37 trillion debt (don’t even talk about the off-balance sheet liabilities) and as China is one of the world’s largest holders of US debt, all they had to do to make a stand is not participate for a session or two.

Trump was apparently, ‘watching the bond market. The bond market is very tricky, I was watching it. But if you look at it now it’s beautiful. The bond market right now is beautiful…. I saw last night where people were getting a little queasy.’

This means he was visited by the men in grey suits.

These men actually being Jamie Dimon, who said ‘something had to be done.’

Remember, there’s always a bigger fish. Trump is just the mini-boss - though for fairness, I’d take Dimon’s backseat driving over Musk’s any day.

Yields have now gone down but for a brief moment the US was about to walk into a real fiscal crisis. And sadly, Trump had wanted, ostensibly, to get yields down and refinance trillions of debt cheaply. But recession fears, revenge selling, and forced institutional sales created significant auction struggles.

Can’t sell new debt?

Deficit doesn’t get funded.

Capitulation.

Treasury Secretary Scott Bessent wants you to believe that this move was not due to the market reaction. But he’s clearly not even in the room when the decisions are being made.

The situation as it stands

Here is what we know.

The Trump cult which was defending the tariffs yesterday are all for the pause today. Their minds have been captured by hypnotic fake tan.

The World Trade Organisation is forecasting that goods trade between the US and China could fall by 80% - equal to $466 billion - based on last year’s trade figures where they sold each other $582.5 billion of goods.

I don’t know about you, but I’m not sure that the market is pricing in the world’s two largest economies stopping trading with each other.

It’s 3% of all global trade. WTO head Dr Okonjo-Iweala believes that ‘a division of the global economy into two blocs could lead to a long-term reduction in global real GDP by nearly 7%.’

China is America’s third largest supplier of imports.

Trump’s incoherent policy ramblings went on Truth Social:

China now faces a 125% tariff and the country is yet to respond after already increasing its own tariffs on US products to 84%.

Tariffs on steel, aluminium and cars remain unchanged - a universal 25% import tax is still being applied. The new baseline 10% tariff applies to everyone except China, Mexico and Canada, with US-Mexico-Canada agreement trade tariff-free and non-USMCA trade tariffed at 25%.

The pause is only for 90 days, so the market needs to deal with that uncertainty into the summer.

Trump notes that ‘Xi is a smart guy and we'll end up making a very good deal...one of the smartest people in the world. We will get a phone call at some point and then it's off to the races. A deal is going to be made with China.’

Maybe.

Maybe not.

But the bottom line is that whether this rally is a bull trap or a bull market recovery is a binary bet on China and the US burying the hatchet.

For context, Bloomberg notes that yesterday’s changes amount to reducing overall US tariffs from 27% to 24%. Fundamentally then, nothing has actually changed.

But to add to the uncertainty, Trump also said he might consider exempting some US companies from the tariffs over the 90-day pause period.

Decisions would be made ‘instinctively.’

Get your bribes in.

A few technical considerations

First up, Jim Cramer strikes again! And if you want to follow a Trump for stock picks, use Donald for calls and Eric for puts.

But jokes aside, yesterday was the second largest single day gain in NASDAQ history (12%). Top spot goes to 3 January 2001 (+14.17%) and bronze to 13 October 2008 (+11.81%).

In the other two cases, the NASDAQ then fell to new lows.

Yes, it’s different this time.

But also - it’s often not.

So yes we have the best day ever since 2008, but you might want to check out what happened two days later.

Prior to the tariff rollback, the S&P 500 was down 15% year-to-date. It’s only finished in the green three times when it’s been down 15% at some point in the year: 1982, 2009, and 2020.

Do with that data what you will.

This was the eight best day ever for the S&P 500:

But if you look at the dates of other massive rises….

Oh

Oh no.

Also - I’m not sure why Apple is rallying when its China tariff just got even worse.

But the bottom line is that investors who listened to Trump enjoyed a one year return in the space of a couple of hours. Those buying options (whether lucky or more likely informed early) made a killing.

$5.5 trillion was ‘added’ to the stock market yesterday.

And the sweetener? Goldman Sachs has rescinded its recession warning. Clearly they believe Trump or Xi will break.

Let’s see.

The Meme Market & the death of trust

Do we really want government by President-owned media?

I don’t.

On Monday, stocks rallied by 10% within minutes on a ‘fake headline’ that Trump would pause tariffs for 90 days. This wasn’t fake; it was a test designed to see the market reaction.

Only then could Trump et al place their bets.

Consider:

Of course he did.

We saw the impact it would have on Monday. Poor Walter Bloomberg. Perhaps an account to follow now!

But here’s your criminal activity:

How is this not manipulation?

The answer is that it is. It’s just that Trump feels invincible right now.

9:37 AM ET: Trump posts that it's a ‘great time to buy.’

1:18 PM ET: Trump posts that he is pausing tariffs for 90 days.

Even AIM directors would get a slap on the wrist and a stern talking to for that. I also notice that the President did not include the standard warning that this was not financial advice - or talk about past performance as an unreliable indicator of future returns.

I suppose compliance just isn’t an issue for him.

This is a big, big problem for the United States.

Trump even told reporters that this was ‘The biggest increase in the history of the stock market. That's pretty good. If you keep going, you're gonna be back to where it was four weeks ago.’

First, this is factually incorrect. It was close to, but not the largest, move. Second, is this ramping designed to suck retail in for the institutions to get more exit liquidity?

But worse, Trump has capitulated to the bond market and lost his leverage. He’s exposed, on a global scale, just how vulnerable the US is to a trade war.

Senator minority leader Chuck Schumer notes Trump is ‘reeling, he is retreating, and that is a good thing.’ He further noted that this is ‘government by chaos.’

I suspect there are a number of Republicans who might agree. Perhaps there’s a Brutus in there.

Of course, Trump did campaign for a 10% universal tariff and a much higher rate on China - so it may be the case that investors are prepared to swallow the pill for now. And markets may simply be relief rallying into the idea that Trump can be controlled.

By the bond market.

But depending on your perspective, he’s won. The US market is now a meme stock in total thrall to a President drunk on unchecked power.

But you can only manipulate a market for so long before investors walk away. Small cap investors know this.

And this is the big leagues, not the minnows. Trump may have enriched himself - and the cronies who will support him into the future - every step of the way, but foreign investors now perceive the US market as rigged.

When a market is rigged, it loses trust.

And when trust goes, you have capital flight into stabler jurisdictions. Then you have a liquidity crisis - which is effectively what 2008 was at its heart.

The US has always been seen as a safe haven - and by extension the US Dollar became the global reserve currency. Strong institutions, powerful independent regulators, deep liquidity and managed corruption.

This has changed in a single day at the whim of one man.

Who will trust the SEC when they lack the power to deal with this? Retail might be buying, but pension funds, insurance titans and sovereign wealth funds will soon start to rebalance.

Because certainty cannot be found in a casino.

And Trump has bankrupted enough of those.

In 2008, trust in the US evaporated - for good reason - and if the bond and stock market continues to swing wildly due to manipulation and foreign actor movements, then the US is headed for chaos.

And there’s still tariffs in place against China.

Really, there are currently no fundamentals or technicals. Just gambling on Donald Trump’s social media account.

It’s 100% organic, pure, distilled Retardium.

Drink up.

The bear market is not over.

It’s only half-time.