The Daily Update - That Damned Wall

With one eye on the Fed tonight, one eye on the markets, we need to keep our other eye on congress. So being a cyclops may get you a part in the remake of ‘The seventh voyage of Sinbad’ but is of no use when investing at this time of year.

Congress are at loggerheads once more regarding a US budget with a partial government shutdown, if no agreement is forthcoming, starting as soon as this Friday at midnight.

It would appear that all is agreed except that President Trump wants $5billion to build his wall on the Mexican border. According to sources all that has been offered is $1.6billion and this is a major sticking point putting thousands of jobs on the line over the Christmas period. However, the market impact of a partial shutdown is thought to be minimal and the recent comments from those involved have been rather consolatory.

However, let’s look at the maths. The US-Mexican border is 1,954 miles long and if we use the $1.6billion to start that equates to $419 per meter, if we use Trumps $5 billion figure, that equates to $1,590 per meter. Anyone that’s had building work done will know that the equivalent of £331.22 per meter will not build you much of a wall, indeed unless Mexicans are very small people they would surely be able to step over the smaller wall and hence once again we have a stalemate at congress.

On to the Fed this evening, President Trump is again on the headlines saying he hopes the Fed do not make another ‘mistake’ by hiking rates and asking them to stop with the 50Bs. This we think refers to the $30bln in US Treasuries and the $20billion in Mortgage Backed securities that roll off the Fed balance sheet monthly, thus reducing liquidity in the market. However, the market still has an odds on bet for a hike and the comments after at the press meeting will be most important.

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