KABUKI THEATRE
BREAKING: White House Official: Trump is likely to fire Powell soon.
I posted on X immediately:
Don't fall for it.
Gold spiking with yields, yen & VIX bid...
Hedges will pay & selling under the surface that started Fri & Tues is definitely gonna make this extended market wobbly.
But I don't believe the rumors.
Not long after:
Told ya. Did not pass the mom smell test:
Trump Now Says Firing Powell ‘Unlikely' -
https://bloomberg.com/news/articles/2025-07-16/trump-now-says-firing-powell-unlikely-whipsawing-markets?srnd=homepage-americas&sref=V6jMetUV
and
https://wsj.com/politics/policy/trump-considering-firing-powell-soon-says-administration-official-8e33497e?st=z5w3BH&reflink=desktopwebshare_permalinkAgain, I believe neither a shadow chair nor demotion is even likely: no precedence = no power. Ergo, Powell isn't leaving until May 2026.
What was useful from this 'experiment' was seeing that the DOLLAR dumped & GOLD spiked - which was the biggest impact from this fake "Trump will soon fire Powell' news.
QQQs said 'bite me' and SPY did its ol' shake-n-bake off VIX for full 180. Yields barely registered it.
What I had just sized up for clients live was USDJPY rejection at 200D & yen bounce off its 200D. That happened but was going to anyway.
My view: this was but an ALGO dress rehearsal to TEASE the markets to BUY protection they later need to unwind.
I still firmly believe the show will go on - with Powell - and Trump is impotent to remove him.
No Precedence = No Power
I had a respectful exchange with author of this great post: Will Trump’s War on the Fed Crash the Markets?
I pushed back that the Truman 'demotion' of Fed Chair Eccles in 1948 doesn't qualify as precedence only Kabuki Theatre.
That Trump will not succeed in bullying Powell into leaving, AND that Trump has no legal legs to fire him, AND there is no real precedence to demote him.
I make this case based on that Jan 28, 1948 event where Truman demoted Eccles... FOUR DAYS from the scheduled expiration of Eccles' term!
Pure politics! Not a true demotion.
Truman simply appointed a replacement as next Fed chair same time he back-handed Eccles before his natural term ended - just in SPITE - to label Eccles with the negative legacy of demotion.
But we know if done sooner, Eccles could have fought it + won.
BIG difference to Trump threatening Powell a YEAR in advance of his scheduled term expiration.
Client Anne is likely right:
“This is a "wag the dog" attempt to divert the news from focusing on the magically disappearing Epstein files.”
Pretty clear that Eccles did not counter as there was no time to defend. Powell will defend all the way to the end.
“I will never, ever, ever leave this job voluntarily until my term ends under any circumstances. None whatsoever. You will not see me getting in the lifeboat.”
“It doesn’t occur to me in the slightest that there would be any situation in which I would not complete my term other than dying.” Powell six years ago
Only thing Trump is doing is making it easier for Fed to hold - and maybe even follow the 80 year tradition of hiking in the final year of a Fed's term.
Stifel: Will Powell be the 1st chair in 80 years not to RAISE rates in their last year?
Ergo, Powell stands pat in Aug (Jackson Hole) and Sept (FOMC) which angers Trump & he runs this headline up a flagpole once again.
Long gold, short dollar is now the 2025 train.