Treasury nets Trump's fortune against the $40tn debt
The Treasury will book Donald Trump's personal billions as a 'Strategic Presidential Reserve' on the federal balance sheet, a move veteran bears call the cleanest sell signal since 1929.
The Treasury says it will book Donald Trump's billions as a 'Strategic Presidential Reserve' and net them against the $40tn national debt. Short-sellers call it the cleanest top signal since 1929. Markets rallied, which is somehow worse.
"—and once you net a man against his own government, the exits are locked and the fire has already started," said Marcus Grieve, founder of the short-only fund Cassandra Capital, on Tuesday. "I have waited thirty years for a signal this clean. I am terrified, and professionally I have never been happier."
Grieve was reacting to the Treasury's announcement that it will list Donald Trump's personal fortune on the federal balance sheet. The holding will be called the Strategic Presidential Reserve. Its stated purpose is to net the president's billions against the national debt, which passed $40tn this month.
The plan arrived in a fourteen-page memo. It describes the reserve as "marked to market daily," which in plain terms means valued at whatever the president says it is on any given morning. Listed assets include golf resorts, licensing deals, a cryptocurrency, and "goodwill, broadly defined."
Readers with functioning memories will note the pattern. Japan put the Imperial Palace grounds on paper at more than the state of California in 1989. That worked out the way these things work out, which is to say it did not.
The reserve, itemised
Treasury deputy spokesman Brent Callow told reporters the debt was now "functionally solved." Pressed on the maths, he said the reserve would grow "as fast as the president does," and that the president has been growing very fast indeed since returning to office (a sentence that should be read aloud in a bunker).
Callow confirmed the fourteen line items will not be independently audited. Auditing, the memo says, "introduces doubt, and doubt is deflationary." I have covered markets since before the dotcom top. I have never seen doubt banned by memo. I have now.
How the fortune itself was assembled is its own long story, and one the balance sheet now treats as settled fact rather than open question. Balance sheets love settled facts. Receivers love them more.
The timing is the tell. The announcement lands weeks after the administration reignited its trade war with Canada and threatened an "economic D-day" against Iran. When a government starts naming its policies after beach landings, the smart money is already in the lifeboats, rowing.
The street reacts, wrongly
Stocks rallied on the news, closing at a record high. This is the worst possible sign. Stocks always close at a record high right before they stop doing that, and the gap between those two moments is where retirements go to die.
Priya Vance, chief sovereign analyst at Moros Ratings, called the move "an innovation." Innovation is the word ratings analysts use in the same spirit that coroners use "interesting." She then assigned the reserve a rating of "AA, contingent on mood."
"When the collateral can fire the appraiser, the appraisal is not information. It is a hostage note with nicer fonts." — Marcus Grieve, Cassandra Capital
Grieve went further. "In 1929 they levered stocks against stocks. In 2008 they levered houses against houses. Now we are levering a country against one guy's opinion of his own golf courses. The instrument changes. The gravity does not."
Let me be clear: this is a bubble. Not a metaphorical one. An actual sphere of confidence, expanding on its own exhaled breath, with fourteen line items where the walls should be.
The parenthetical detail that keeps me awake: the memo allows the reserve to be pledged. Pledged to whom, and against what, it does not say. Historically, "it does not say" is the phrase you find in the footnotes of every collapse, written small, three years before the hearings.
The closing turn
Callow ended the briefing on a note of pure sunshine, which sent a chill through every bear in the room. "There is no downside scenario," he said. "We modelled fourteen of them and deleted the file."
So here is where we stand. The debt is now backed by vibes, the vibes are backed by fairways, and the fairways are backed by the man who owns them, who is also the government doing the backing. Analysts call this circularity. I call it Tuesday.
Buy canned goods. Not as an investment. As dinner, for later, when the mark-to-mood cycle completes and the only reserve left is whatever you kept in the pantry.
