Hanged, Drawn, And Quartered

By Michael Every of Rabobank

From a “because markets” perspective, the key story today is President Trump saying he would like the US to shift from quarterly to biannual corporate reporting: “This will save money, and allow managers to focus on properly running their companies… Did you ever hear the statement that, ‘China has a 50 to 100 year view on management of a company, whereas we run our companies on a quarterly basis??? Not good!!!” One can hear the wails of those in the ouroboros of 3-monthly higher/lower games. Yet from an economic statecraft perspective, is this wrong?

Agree there and you have to ask why US firms are supposed to fixate on short-term returns to shareholders rather than a long-run vision. The Chinese EVs sweeping all before them –and cementing control of key supply chains– are losing money hand over fist; does that matter if they can keep it up longer than western markets would allow? Neomercantilism says yes. Accept that, and you quickly turn to what quarterly GDP is and isn’t measuring and is and isn’t “for”.

That is starting to happen, as a quick round-up of geopolitics underlines:

• “America risks making frenemies of old allies”, argues the FT: what did Machiavelli say about being feared vs loved?

• ŸThe US struck a second alleged drug boat from Venezuela, as the State Department approved a possible sale of F-16s to Peru.

• The US announced that it will broaden its anti-narcotics strikes to land and named Afghanistan, the Bahamas, Belize, Bolivia, Burma, China, Colombia, Costa Rica, the Dominican republic, Ecuador, El Salvador, Guatemala, Haiti, Honduras, India, Jamaica, Laos, Mexico, Nicaragua, Pakistan, Panama, Peru, and Venezuela as countries with drug production inputs, facilities, or key transit channels. Monroe Doctrine, anyone?

• The US struck a second alleged drug boat from Venezuela, as the State Department approved a possible sale of F-16s to Peru.

• ŸIsrael’s invasion of Gaza City has begun for real, with the region in turmoil over that and the recent Israeli strike on Qatar, which sources say Trump was informed of in advance. Negotiations are apparently also taking place behind the scenes to try to avoid a full  invasion.

• Australia’s Papua New Guinea defence treaty will require both to ‘act’ if either is attacked, though it’s still unsigned, Vanuatu hasn’t signed the same deal, and PM Albanese is now aiming for Fiji as whispers are of Chinese regional counter-lobbying.

• ŸIn Europe, Denmark will bypass more than 20 laws and regulations to allow Ukraine’s Fire Point to build a solid rocket fuel plant near a Danish airbase.  

Geoeconomics makes the same point:

• Poland closing its border with Belarus has frozen €25bn in EU-China rail trade.

• ŸChina threatened “decisive countermeasures” should Europe and the US impose secondary sanction tariffs on it for buying Russian oil.

• Reuters underlines China and Russia are using bilateral barter to avoid the US dollar.  

• Ÿ‘China’s curbs on defence metal germanium create ‘desperate’ supply squeeze’ (FT): prices are at a 14-year high for the crucial input a GDP-and-P/E-focus saw China gain total control of.

• China says Nvidia violated anti-monopoly laws, escalating tensions with the US, though the two have reached a TikTok “consensus’, perhaps setting up a Trump-Xi call, as Treasury Secretary Bessent underlined China is making “aggressive asks.”

• Australia has unveiled plans to boost its exports to China even as it suffered economic coercion on that front in recent years, and as it tries to sign defence treaties with Pacific nations which could risk that happening all over again.

• ŸAn India-EU trade deal has been hit by a basmati rice dispute as Pakistan says the vaunted grains are theirs, leaving Brussels to play for time. It certainly symbolises how the usual “grain-ular” EU approach on free trade doesn’t work in a geopolitical world.

• Indeed, Israeli PM Netanyahu stated his country is economically isolated and will need to become self-reliant for the weapons it needs: he even mentioned “autarky”.

Political news also flows away from a business-as-usual focus on GDP and quarterly earnings:

• Politico argues ‘Why Macron thinks Lecornu can save France from the abyss’

• ŸThe AfD tripled its vote share in a key western state in Germany

• A Tory MP defected to Reform UK as a poll has the party 16 points ahead of Labour and the Conservatives; “Labour MPs talk openly about replacing PM, as third senior ally in two weeks departs after publication of messages”

• ŸThe White House says it will crack down on the political left

• ŸThe Wall Street Journal notes “fascist” has been normalised as an insult by all in US politics

• ŸA US free speech lobby group poll of Harvard students has 32% backing violence to stop political voices they oppose on campus.

In markets, an appeals court ruled Trump can’t fire Governor Cook before the next Fed meeting, so how will Cook vote – unless the Supreme Court quickly steps in? That’s as Trump appointee Miran won confirmation to the Fed, which Bloomberg calls a “Watershed policy moment”. The current trend suggests a lot higher watersheds than that to come.

Meanwhile, Thailand is weighing taxes on physical gold trading as the metal is dragging THB higher as the struggling economy needs a lower exchange rate; and the Bank of England proposes strict limits on stablecoin ownership – that’s one way to avoid the threat of dollar stablecoins, but I doubt the US will stand for it. Does either move say, “because markets” or “expect further changes to the global architecture”?

To summarize all of the above, just looking at the usual numbers in the usual “because markets” ways at times like these risks seeing you hung, drawn, and quartered.