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Here Comes Your Next Black Swan | The Mesh Report

Here Comes Your Next Black Swan

John Thomas July 27, 2017 Comments Off on Here Comes Your Next Black Swan

The Dow Average just hit my target for the end of 2017, up 12%, including dividends

My Mad Hedge Market Timing Index is just short of a new high for the year at 78.

Donald Trump has launched an unremitting Twitter attack all week against his Attorney General Jeff Sessions, one of his earliest and strongest supporters.

Special Prosecutor Robert Mueller has gone quiet.

August starts on Tuesday.

It all makes me feel like I just received a below the belt kick at a karate competition in Tokyo.

Call me cautious, call me old, but there’s one thing I know for sure.

As they teach you in Marine Corps flight school, “There are old pilots and there are bold pilots, but there are no old, bold pilots.”

If all the above play out in the wrong way, it could lead to the first real “black swan” of 2017.

Here’s how it goes.

Trump fires Sessions. His replacement fires Mueller. Congress moves for impeachment but fails. The Democrats retake congress in 2018 and relaunch an impeachment effort, which succeeds.

In the meantime, criminal proceedings against Trump by individual states ensue, where he has no legal protection, especially in his home state of New York, where he polled 37% of the vote.

You can kiss tax reform and an infrastructure bill goodbye.

Best case, we get a 10% correction. Worst case, we get a new bear market.

With the Dow Average (INDU) at $21,711, the SPY at $247.43, all time highs, and the Volatility Index (VIX) kissing an intraday low of $8.80, the markets are assigning a probability of this occurring at zero.

The actual probability is closer to 50%.

In fact, University of Pennsylvania professor Jeremy Siegel, who has been dead on in his market forecasts for the past decade, is even predicting that stocks will rise another 10% by year end.

I have known fellow Marine Corps Captain Robert Mueller for more than a decade, and he embodies the philosophy of another late Marine friend of mine, General “Chesty” Puller: Attack, Attack, Attack.

He could go into a convent full of nuns and find every one guilty of a 20-year felony.

Ever wonder what the conviction rate is for federal crimes? It’s 98.50%, almost a mathematical impossibility.

But Robert won’t bring a case until he has an airtight one, with every “i” dotted and every “t” crossed.

Hence, the prolonged silence.

And here is the problem.

Last week, we learned that the federal investigation was expanded to go beyond the Russian election tampering issue to include all Trump business activities of the past decade.

New York real estate is a rough and tumble world. Little of it would stand the light of day. I know because I was a banker there for many years. I heard all the stories.

NO ONE there could survive the laser like intensity of a full on federal investigation.

Trump’s most recent hotel project was in Azerbaijan. You can’t cross the street in Azerbaijan without paying a bribe. Mueller is going to have the paper trail for all of this.

Even if Mueller gets fired he can be subpoenaed to disclose what he has learned, even classified information.

So if your still partying like its 1999, let me be your conscience, the guardian angel sitting on your shoulder advising caution.

As my late mentor Barton Biggs used to instill in me, always let the next guy take the last 10% of a move.

If you have any kind of leverage left in your trading book, get rid of it. Shrink it down to a size that can handle some real volatility. Same for you serial put sellers out there.

If the market keeps going up, just let the other guy pay for the next dinner. It will be the best bargain you ever had.

Just thought you’d like to know.


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