The President continues to go after China, Mexico, and now even Germany with talks of tariffs and/or sanctions. Is there a method to this madness, or just madness? These antics are causing a lot of uncertainty and markets do not function well with uncertainty. Weaponizing tariffs may get the Mexicans to the table, but will this be so with the Chinese? Also, we discuss a recent ABC News interview with the President where he claimed he would look at information from a foreign entity regarding a political opponent. I would have hoped that the President would’ve learned his lesson during these last two years in relation to the Mueller Report. Nevertheless, the liberal MSM is throwing a hissy-fit at the comments, yet seem to forget that Hillary Clinton and the DNC received info from the Russians for the Steele dossier. More hypocrisy and more double-standards.
Of course we’re talking about the trade deal or lack thereof between the US and China. It was only a month ago that we were being told by the President that China “broke the deal” and walked away from negotiations. Now, we’re being told by the President that he, himself is holding up the trade deal. Of course the general public has zero idea as to whether or not this is true. We don’t hear much from White House members or party leaders in China confirming or denying. This makes things interesting as the President also claims that China wants to badly make a deal. However, the US and Chinese leaders are perhaps set to meet later this month in Japan during the G-20 meeting – will these latest statements from the President make it more likely or less likely for President Xi to come back to the table? Also recall that the President has threatened to increase tariffs on Chinese goods if Xi and Trump do not meet. So there’s that…
So the 2020 Presidential campaign antics are already taking shape with President Trump calling Joe Biden a “loser.” Meanwhile, Biden is telling Trump that he needs to, “fix himself.” These comments were made as both men were campaigning in the state of Iowa – the first state to kick off the Presidential primary season. It’s also a swing-state and one filled with huge ties to the agricultural industry, which has been taking a hit during the many trade negotiations. While we have several structural issues facing this nation, it’s nice to see that our fearless “leaders” can find the time to name call, but seemingly can’t find the time to provide solutions. Further, the President was talking about his secret deal with the Mexicans. Newsflash, Mr. President, this is a Constitutional Republic – meaning the people are supposed to be aware of deals struck between the US and other nations and their details. These petty games for the camera need to stop!
Tariffs, tweets, and trade, oh my! What kind of week would it be if we didn’t have some crazy tweets? A peaceful week, that’s the kind. Nevertheless, the President and his team are ramping up the rhetoric when it comes to implementing tariffs against not only China, but also on Mexico. Despite having negotiated the USMCA, which is like a NAFTA 2.0, the President was and is willing to slap on new tariffs. How are the Chinese to interpret this? Will this bring them closer to the table or force them to dig in even deeper? Regardless, there is much more that we have to note as last week we witnessed only 75,000 jobs created for the month of May, well off estimates for 180,000. No tweets from the President on this by the way. Nevertheless markets rallied, because we are back in the, “bad news, is good news” cycle because the crackheads on Wall Street want their fix and the Federal Reserve may just come through. So any bad news that comes out is actually “good” because it means the Fed is more likely to cut interest rates. You know, that policy that caused huge malinvestments and is likely to bring the world to its knees – yeah, that one!
So President Trump was and is back at it with his favorite tariffs. This time, he’s targeting the Mexicans and threatening new tariffs unless they act on the southern border. Well no surprise, in an 11th hour deal, the tariffs are now indefinitely suspended. Of course, the President is already back out there saying that if the Mexicans do not follow through with the new deal, then the tariffs will go into effect. This news has moved the markets and now we question how this is going to effect the trade negotiations with China. Will they be able to trust a President who is so willing and eager to threaten more tariffs even after striking a deal? You know, like the USMCA…
Ep. 75B - Oil Drops Big! + Deutsche Bank Contagion?
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We continue to see weak economic numbers surrounding the housing market, the oil market, and within the services and manufacturing sectors – both hitting multi-year lows on PMI readings. In addition, oil lost 5% today on the back of market concerns that the US/China trade deal is still miles away. We, however, happen to believe that the drop is more likely based on the back of financial markets finally catching up with reality and coming to grips that the global economy is slowing. Additionally, we discuss the poor performance of Deutsche Bank. This is a major global bank and given its recent troubles we must pay attention to this bank because should it collapse, it will cause a global financial contagion.
We are now in the midst of the EU elections, which started today with the UK and the Netherlands, however, we will not know the results from all EU member states until Sunday evening. We are anticipating a rise in populism across the EU, thus sending many Euroskeptics to the EU parliament. If this occurs, then we can imagine that the EU may very well begin to disintegrate, as individual countries want to re-take their sovereignty. Even if it’s not a disintegration, if populists make sizeable gains to EU parliament, we can expect several structural changes. We also discuss the do nothing government in the US – what if anything will be accomplished domestically prior to the 2020 Presidential election?
Rest easy everybody, because Jay Powell, Chairman of the Federal Reserve, says that while the US corporate debt market requires some “reflection,” it is not a subprime crisis. We happen to agree with the Fed Chairman because it is not another subprime crisis, it will be worse than the subprime crisis. We also have other central banks the world over getting ready to cut interest rates, if they haven’t already. This is a complete 180, to what we were hearing last year from central banks whom were either in wait-and-see mode or were more likely to hike interest rates. Now of course we’re in the midst of slowing global demand and policy tools are wearing thin, so central banks are coming to the “rescue.” Only problem is, even some of them are starting to question the efficacy of their own policies – uh-oh!
So we have a new deal, same as the old deal, as far as Brexit is concerned. PM Theresa May was out today providing new details to her deal to finally leave the EU. Of course this has to go to a vote before Parliament – for the 4th time mind you. This deal is basically the same, with a few “carrots” provided to appease some members of Parliament to finally pass the deal – will it pass is anyone’s guess. We also look at the underemployment rate regarding recent college grads and how this is likely to take center stage during the 2020 campaign. We have the President on one side, claiming that this is the best economy in US history, and on the other side, we have people who live in the real world, who are sacked with debt, are underemployed, and see a different economic picture. It will be interesting to see how this all unfolds and we discuss some scenarios.
We have a lot of events taking place this week along with economic headline news. Of course we have the EU elections, we had the Aussie and Indian elections, the Brexit chaos continues, a further escalation in the US/China trade war, Ford is cutting 7,000 jobs globally, and a Fed index is showing a slowing in US growth, and more. Lots to discuss, so let’s get to it!
