Bad Mojo

"The truth is, we're all part of it now. Banks, consumers...we're moving around money in circles. We take a buck, we shoot it full of steroids, and we call it leverage. I call it steroid banking."
--Gordon Gekko (Wall Street: Money Never Sleeps)

On several occasions since he has taken office, President Trump has taken credit for increased stock prices. He is not the first president to do so. In fact most do--particularly when higher stock prices can be woven into campaign rhetoric.

But it is extremely bad mojo to do so.

As we know, interventionary forces designed to prop up markets ultimately give way to ever-persistent natural forces intent on wiping out excess and revising prices to reflect true value. The thing of it is, the timing of this 'decompression' is unknowable.

In the case of the Obama administration, enough drugs were shot into the system to prop markets up for virtually the president's entire tenure. In the case of the Bush administration that preceded him, the engineered housing bubble popped at an inopportune moment, thereby draining both asset prices and GOP election hopes in the 2008.

What makes Trump's end zone dance particularly foolish is that he is doing it so early in his tenure. Touting the effect of his policies on stock prices at this stage of the game practically guarantees markets will punish his hubris while he's still on the clock. Measuring nearly ten years in length, this particular phase of interventionary 'steroid banking' policy is so long in the tooth that markets could reverse hard at any time and for any reason.

When prices do begin to spill, of course, Trump's naysayers will take their turn at the podium and point fingers at the president for market declines.

All the while it will have been the cumulative efforts of a century of bipartisan interventions that rest at the root cause of the problem.