The Fool Or The Ones That Follow?
- MAC10
- Apr 23
- 3 min read
A very interesting thing happened this week.
Over this past weekend, there were reports that Trump was looking for any way to replace Powell as head of the Federal Reserve so that Trump himself could control interest rates via his own handpicked Fed sock puppet. On Monday, stocks crashed on the news. But then on Tuesday stocks sky-rocketed because there were new rumors that Trump was no longer planning to replace Powell and instead Trump wants to keep Powell in place so that he can BLAME Powell for the disaster Trump created:
“There is virtually no inflation,” he said, blasting Fed Chair Jerome Powell as “Mr. Too Late” and “a major loser.”
I would remind everyone of a few points that Trump & Co. seem to be forgetting with regard to those 2024 "politically biased" rate cuts mentioned in the article: First and foremost, the Fed laid the groundwork for the 2024 rate cuts several months ahead of the election when Trump was leading Biden in the polls by a HUGE margin. Secondly, Trump won the election, so how can he claim those rate cuts helped Kamala Harris? In addition, the third and last rate cut came AFTER Trump was already elected. What is far more likely happened, is that those rate cuts reinvigorated inflation and now Trump wants rates lowered AGAIN which will stoke inflation MORE, which is why markets freaked out at the thought of Trump controlling the Fed.
Nevertheless, after hours on Tuesday, Trump confirmed that he is no longer trying to replace Powell. In fact he went a step further and said he was never intending to replace Powell, which is an abject lie. However, buffoonish lying-as-usual aside, the salient fact is that Trump is now ADMITTING that his trade war is an economic disaster.
That is now the bull case in a nutshell - Trump is creating an economic collapse and then he is going to blame Powell for the hard landing. Recall that it was a mere two weeks ago that Trump told everyone to buy stocks because the market is going to boom due to his trade war. That advice came when stocks were at a HIGHER level than they are today:
In other words, the bull case went from owning a market that is going to sky-rocket due to Trump's fantastic deal-making ability, to this new bull case in which he has selected the perfect scapegoat for the disaster he is creating. Which means that bulls are now trapped by Trump's trade war quagmire, and their sole consolation for financial wipeout will be knowing that Trump lied about who is to blame. Bulls need to consider the other critical fact that now that Trump has a scapegoat in mind, what incentive does he have to cut any actual trade deals?
ZERO.
Turning to the casino:
Trump's market manipulation strategy of first creating a crisis and then "fixing" it days later by reversing policy in order to generate massive short covering rallies, may sound like a great idea to bulls but the net effect has been to make the market OVERBOUGHT but at a much lower level.
This chart shows the market has round tripped back to the Trump tariff pause of two weeks ago, however the oscillator is the most overbought since the all time high.

Here is where it gets interesting and dangerous for bulls.
In this chart we see the Mag 7 have staged another miraculous rally off of key support on the "news" that Trump doesn't want to fire Powell, he wants to blame him for recession. Note that implied volatility (VIX) is much lower now than it was last August and at the start of April. However, realized volatility continues to move higher.
In summary, an overbought market at key support on exploding realized volatility, extreme investor complacency, and a president who already has a scapegoat picked out for when this all explodes.
What's not to like?
