In these puzzling times, traders might not be able to rely on trading strategies that worked well in the past.
For example, the bad new is good news idea that made some traders quick bucks during the heydeys of massive monetary easing may not apply going forward.
Post-2008 financial crisis that play went something like this; traders bought on the bad news (they piled their chips sky-high on risk assets), then waited for the central bank's quantitative easing (QE) bond buying program which flushed the market with an insane amount of liquidity. So with more cash chasing a finite number of assets that meant prices had only one way to go up, up and that led to a price earning ratio that screamed bubble too.
Front loading the central bank's next move was the best (maybe only) game in town. Commercial banks probably figured out why bother making productive investments and taking risks when fast money can be made on the world's biggest casino. Moreover, with the commercial banks rigging the market and having their puppet heading the major central banks (the revolving doors between Goldman Sachs and every major western central bank is obvious) it was a one-way bet. It would be naïve to think that a handful of connected traders working for the commercial banks were not given a heads up every time the bull market was about to be injected with monetary drugs.
Wall Street's money machine served the choose few so well but it impoverished the many. Financial engineering has resulted in a stratospheric wealth distribution curve (just 62 people on the planet are as wealthy as half the world's population). But that was then.
So will a former casino owner, Trump now US President be able to put right the world's largest casino?
The knight on the white horse has risen to power because the populous figured out that something is wrong (they may not understand the mechanics of why). Trump is perceived to be a leader that cares for the growing rank of poor-he will "stop the carnage."
Then putting a halt to this type of financial engineering would be a genuine start.
But with a cabinet stuffed with all the President's billionaires
As a member of Forbes' wealth team I write web and magazine stories about billionaires, plus help put together The Forbes 400 and World's Billionaires lists.
and neo-conservative generals surely any inquiring mind is now wandering whether Trump is just an elaborate psychological operation (PSYOP) to lull the populous back to sleep.
Think about it. The billions of dollars of corporate investments in plant and machinery announced by numerous manufacturers (so far) are not much more than a public relations exercise. Many of these companies are downsizing and laying off workers.
So who have really been the biggest winners thus far from a Trump administration?
America's 10 Richest Gain $16 Billion During Trump's First Week.
What about Trump's pledge to "drain the swamp". That too was just sweet words-Ex Goldman Sachs alumni occupy every important financial position in Trump's cabinet. Indeed, the market riggers are in situ.
What's more, Trump is currently ordering a review of the Dodd-Frank act which will significantly scale back the regulatory system that was put into place in 2010 following the financial crisis of 2008.
President Donald Trump will order a sweeping review of the Dodd-Frank Act rules enacted in response to the 2008 financial crisis, a White House official said, signing an executive action Friday designed to significantly scale back the regulatory system put in place in 2010.
In short, this would give more freedom to an already powerful group of financial service operators on Wall Street. Critics argue that it would take away protection from the average investors and the global banking financial system.
Trump argues that the law had damaged the country's "entrepreneurial spirit" and limited access to needed credit. Bank stocks are moving up the news (as I write this piece).
The Fiduciary rule which requires advisers on retirement to work in the best interests of their client is also coming under review.
The idea is "to open up investor options." Relaxation of the fiduciary rule is likely to raise the successful of brokers.
In short, this is the most disruptive administration in memory. Thirty-year-old multilateral trade agreements are being ripped apart, old alliances are being tested to the limited.
Moreover, practically everything done by the previous administration is being dissolved.
However, the fractional reserving banking system is being supported along with the fiat debt monetary system. Put another way the elites at the peak of the food chain remain in control, in fact, they are consolidating their position.
But the era of massive monetary easing is probably over, in other words, bad news may indeed be negative for risk assets going forward. Corporate earnings drought doesn't support the current bubbly stock prices, so risk asset prices could be vulnerable to bad news, particularly in an era where central banks appear to be playing a retreating role.
The opportunity/risk is this market could be front loading the Trump administration's next move.
Already trader's witnessed this week that Trump's anti-liberal views (Muslim ban) sent the Trump rally tanking. The political risk is that the current administration becomes even more authoritarian in an attempt to squash dissent which then fuels a US antifascist uprising. This existential risk requires ongoing monitoring.
Meanwhile, the opportunities came from regulations that lifted burdens on businesses which gave the banking sector a boost.
But the real shock could come from Trump's foreign policy. Perhaps we are already seeing the first U-turn from this administration regarding Israeli settlements. The neocons are pushing for war, particularly with China and Russia, (Trump has surrounded himself with neocon generals).
Already we are seeing hostile posturing towards China. Will it be carried through to Russia too?
Perhaps betting on the lifting of Russian sanction might be too optimistic. Time will tell.