Source item

The Deja-Vu FAFO-TALO-TACO cycle galore! This time around it took less than a week for the FAFO-TALO-TACO cycle to come to a full circle. A week ago the Greenlanders, Danish and Europeans pushed back against Trump’s increasing bellicose attempts to take over Greenland (they went into FAFO or F- Around & Find Out mode). Then Trump snapped to the European FAFO with his usual TALO (Trump Always Lashes Out) and threatened to take over Greenland by force and to impose additional tariffs on the European countries supportive of Denmark/Greenland. But on Tuesday - as US markets were closed on Monday - market discipline snapped with a vengeance: equities went sharply down, bond yields higher, dollar lower and gold spiking. Then, it took only 24 hour for Trump to go from his TALO mode on Tuesday to his TACO mode on Wednesday with his conciliatory Davos speech and supporting the “framework” of Rutte’s NATO head. Then on Wednesday following the TACO u-turn the markets had the typical and expected TACO relief rally. So it took only 24 for market discipline (Bond & Stock vigilantes) to turn Trump from TALO to TACO! As I pointed out on Tuesday the Bond/Market Vigilantes are the most powerful people on the world, even more powerful than POTUS. Another lesson: if you are big enough or strong enough (China , Europe on Greenland) to stand up to a bully then your FAFO will lead to TALO but fast enough market discipline and vigilantes will force the bully to blink and move to TACO; thus, you win. But if you are weak and small (Venezuela) then your FAFO leads to big time TALO with no subsequent TACO 🌮! No wonder that the savvy Canadian PM Carney is thinking of alliances of middle powers to have a more credible collective FAFO strategy that forces a TALO bully to switch into TACO mode rather than double down on TALO. In the new world order based on the law of the jungle (where might makes you right) the only option for the small, weak or disunited powers (even the EU at times) is to form stronger coalitions to stand up to the big power bullies.