Journalist: And now what? Should we prepare for nuclear retaliation? Between Biden leaving, and Trump not taking office until January; Biden allowing Ukraine to use US missiles to attack Russia and Vladimir Putin’s new stance, which raises the possibility of responding with a nuclear response, what should markets do? Buy Treasury bonds, from which you have been fleeing the last two months like the plague? Forget about the stock rally?
Gordon Gekko: Don’t worry. Dog that barks, does not bite.
Q.: But Ukraine has already used the missiles, it would have launched six in the Bryansk region. Russia denounces that this is an unacceptable escalation of the conflict. And it says that the collaboration of Washington, a nuclear power, authorizes it to respond with its entire arsenal, including nuclear weapons.
GG: As long as Moscow explains what it can do, there are no problems other than a miscalculation. And that is limited to the use of conventional weapons. Look, the White House changes occupants on January 20. And Trump’s position, that of forcing peace by maintaining the status quo, is very convenient for Putin. That is why Ukraine has to improve its situation now because with Trump in power it will be impossible. Putin is not going to do crazy things, he is not going to ruin this opportunity. And it is clear, in the meantime, he has to stop Zelensky’s offensive, and try to dissuade his supporters from getting involved.
Q: The transition in Washington is very peaceful. Trump visited Biden and they took the photo together that was missing four years ago. But in the conflict terrain, the war is accentuated in the transition. At least until the change of command occurs and Trump takes the reins.
GG: One assumes that this matter was discussed in the conversation between the two. Biden later announced the decision to allow Ukraine to use ATACMS missiles on Russian territory. Trump did not speak. And he who remains silent grants.
Q: What will the markets do until the drums of war calm down?
GG: The first reaction to Putin’s announcement is a reflex action. They sell some stocks and take refuge in Treasury bonds. No more than that.
Q.: Last week the 10-year rate touched 4.50%. And today it sank below 4.35%. Will this movement last?
GG: If the dog barks and barks and doesn’t bite, no. The war did not begin yesterday but in February 2022. And the end seems to be much closer. Peace has a prominent place on Trump’s agenda. It will be a very strong internal political coup.
Q: Do you think that the tension in the interim can derail the stock market boom?
GG: Honestly, no. Nor will it generate a demand for Treasury bonds that could prevent the upward trend in long rates. And not because of what Biden does or doesn’t do. It’s not because of the wars. It is Trump’s agenda that moves the ammeter.
Q: However, this agenda is still surrounded by great uncertainty. One thing is what was said in the campaign. Another is what the government actually wants to promote. Jay Powell already said it, we are not going to speculate on the official measures, we are going to wait for them to be announced. And then, if necessary, we will adjust the policy.
GG: The markets are not going to wait that long. They don’t have that luxury. But it is clear that Trump did not define his course of action regarding economic policy either. He did not delay in making appointments in his cabinet. It is his intention to demonstrate that, unlike his first term, he knows what he is going to do and with whom.
Q.: You appointed Marco Rubio as Secretary of State with lightning speed. But another key position such as Treasury secretary is in doubt.
GG: To make matters worse, the struggles to cover that position came to light.
Q: Scott Bessent or Howard Lutnick? Elon Musk criticized Bessent. He said it was more of the same, and that was what needed to change. And you publicly supported Lutnick, didn’t that end up sinking him?
GG: It is possible. Lutnick will go as Secretary of Commerce. But Trump is undecided. It was also circulated that Marc Rowan of the Apollo Group had made a very good impression on him. However, the favorite of these last two days is Kevin Warsh.
Q: A former collaborator of George Bush Jr. and former governor of the Fed.
GG: In the difficult times of the Lehman Brothers crisis.
Q: Warsh was widely criticized when he joined the Fed for his lack of experience. But Ben Bernanke, the boss at the time, recognized his contribution. He came from the mergers and acquisitions area of Morgan Stanley. And he was very useful because of his many contacts on Wall Street when the financial system was burning.
GG: Of all the names that sound, it is the least aggressive, by far, for long rates.
Q: But how compatible is it with Trump’s ideas?
GG: Precisely for that reason. In the past he has been a critic of fiscal irresponsibility, even a hawk on monetary matters (at a time when it proved to be an inadequate recommendation). And he is not a champion of the uncontrolled application of tariffs either. It would be a first sign of moderation from Trump. Not that he gives up anything he wants, but an indication of promoting a reasonable policy that does not cause unnecessary anxiety.
Source: Ambito
