President-elect Trump is starting to build his cabinet and has named two of the most important members: Senator Marco Rubio as Secretary of State and Scott Bessent as Secretary of the Treasury. The names on this second administration have the gravitas that was lacking in the first one, which implies that the Republican Party is willing to back Trump this time. What’s interesting about Mr Bessent is that he has worked for George Soros twice, the last time as CIO of Soros Fund Management. It’s interesting because Soros has probably been the biggest donor of the Democratic Party in this election. In any event, Mr Bessent has the difficult task of funding the government at a time where we have an imminnent debt ceiling cap negotiation and a two of the most important investors in Treasury bonds, China and Japan, are decreasing their allocation to US paper. In the chart below you can see the challenge: the funding needs represented by the dots and the borrowing capacity in the bars. The good news is that we have a good driver, the not-so-good, is that the road is going to get rough.
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