A Convergence of Fragmented Conflicts

By David Stockman  |  September 17, 2019

At the headline level, everything seems to be just fine.

We’ve had a bit of digression from the main U.S.-China Trade War plotline. But Bubblevision and the powers it serves would have you believe everything’s copacetic. Indeed, despite this week’s mini oil shock, September’s been good to stocks. The S&P 500 Index is up 2.4% so far this month.

The Attack on Saudi Arabia

And word has it that Saudi Arabia “may soon restore most of the production lost” to those drone attacks last weekend. So, the price of crude oil is down about 5% today. As they say, “Nothing cures high oil prices like high oil prices.”

No less striking, though, are reports from CNN and The Daily Beast that the House of Saud is calling these attacks on Saudi Aramco oil production facilities “their 9/11.” Of course, I’m not the only one pointing out the fact that the first one was theirs too.

Aramco’s long-awaited initial public offering, by the way, will “continue as is,” with a target date within the coming 12 months.

Just to drive it home that nobody in power believes they need to pretend anymore, almost literally moments after he fired the warmonger John Bolton, the Donald stood “waiting to hear from the Kingdom as to who they believe was the cause of this attack, and under what terms we would proceed!”

Perhaps the Great Disruptor really doesn’t know any better.

Still, it raises an interesting question: “Why is it that every time President Trump tries to push the U.S. and the world away from war within a few days there’s an incident which pushes us right back to the brink of it?”

China’s Economy

As the Middle East continues to burn, China continues to fester. And I mean that of the Red Ponzi almost literally, too.

As the WSJ reported, softness was visible last month in nearly every aspect of the Chinese economy in August. Industrial output and retail sales data suggest sluggish demand and low confidence among businesses and consumers.

Observers expected a slight recovery from July, which was China’s worst month in more than 10 years. That didn’t happen.

Here’s Chris Scott to shed some more light on U.S.-China relations in his regular Tuesday dispatch…

Limited, Fragile, Temporary

By Chris Scott

I warned last Tuesday to be wary of optimistic trade war headlines, and – wouldn’t you know it – we’ve had plenty of them to digest since then.

It looks clear that both sides are grasping for ways to create an off-ramp, as Donald Trump gears up for 2020 and the Communist Party of China (CPC) grapples with its greatest challenges in a generation.

This does not mean a comprehensive trade deal is in the works. But the probability of another temporary armistice to cool tensions – as we saw in late 2017 –  has increased considerably.

Here’s What Happened…

The Wall Street Journal reported on Thursday that China was looking to narrow the scope of the trade talks set for October to try and quarantine some of the thornier issues I mentioned on Tuesday.

Bloomberg reported at the same time, citing five anonymous sources, that top Trump trade advisors are considering an interim deal that would involve delaying or potentially rolling back tariffs.

Shortly after that report, a senior White House official told CNBC that the U.S. is “absolutely not” considering such a deal. Like clockwork, the Donald then told reporters that he would consider an interim agreement.

While these headlines were swirling about, the Trump administration decided to postpone an increase in tariffs on Chinese goods by two weeks as a gesture of good will.

They were scheduled to go into effect on October 1, the 70th anniversary of the founding of the People’s Republic of China.

China then announced on Friday that they would drop retaliatory tariffs on soybeans and pork from the US.

Here’s What it Means…

President Trump and President Xi have swerved fully into deescalation mode. There is clearly a sense of urgency amid signs the world economy – as Europe flirts with recession and China slows – is on the verge of melting down.

The upshot here is that some people in the Trump administration – and certainly the Chinese leadership – are hoping for a limited trade deal to keep things from escalating further.

This would be something similar to a handshake “truce” agreed to at the G20 meeting between the two sides in December 2017, potentially with a bit more window dressing.

While the U.S. might temporarily dial back tariff threats, and China may pledge to buy more agricultural products and provide greater protection for intellectual property, this would be a limited, fragile, and temporary arrangement.

Reality Check

Despite gestures of goodwill, China’s Ministry of Commerce also said last week that Beijing would not consider increasing ag purchases without leniency on Huawei – a difficult hurdle to overcome, as I explained last week.

Vice-ministerial meetings have been confirmed for this week. There is no assurance that they will lead to the highly touted top-level negotiations scheduled for mid-October. All the same obstacles that scuttled near-deals several times over the past several years remain – some have even gotten more formidable.

It’s a fool’s errand to be chasing leaked messages from this White House about trade. There is disagreement among top advisors about whether to back down in the fight with China.

The only certainty is that the Tweeter-in-Chief himself always leaves the door open to last-minute changes of heart.

After “Peak Trump”: Charting Uncharted Waters

It’s my pleasure to be delivering the Keynote Address at the 2019 Irrational Economic Summit.

Please join me October 10-12 at the Gaylord Resort & Convention Center at National Harbor, Maryland – right outside Imperial Washington – for what promises to be three days rich with ideas about how to protect and grow your wealth.

The stakes are already high heading into 2020. The U.S. presidential campaign is already underway. And the Tweeter-in-Chief is tied up in the day-to-day movements of the major stock indexes like no president before him.

And the increasingly desperate incumbent will do anything he must to hold the White House.

That’s why I’ve titled my Keynote Address, “After ‘Peak Trump’: Charting Uncharted Waters”.

Leviathan gets bigger, Wall Street gets richer, and Main Street… well, Main Street gets more and more little every day.

We’re rapidly approaching the end of the oldest, weakest economic “recovery” in American history. At this major tipping point, there’s no telling what the Donald’s great disruptions could do to your wealth.

The 2019 Irrational Economic Summit is fast approaching. To reserve your spot today, simply click here, email our team at, or call 866-765-7506.

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David Stockman

David Stockman is the ultimate Washington insider turned iconoclast. He began his career in Washington as a young man and quickly rose through the ranks of the Republican Party to become the Director of the Office of Management and Budget under President Ronald Reagan. After leaving the White House, Stockman had a 20-year career on Wall Street.MORE FROM AUTHOR