Trade

The Trade War Will Be Tweeted

By David Stockman  |  May 14, 2019

‘Things aren’t like this,’ he kept repeating. ‘It shouldn’t be this way.’ As if he had access to some other plane of existence, some parallel, ‘right’ universe, and had sensed that our time had somehow been put out of joint. Such was his vehemence that I found myself believing him…

– Salman Rushdie,
The Ground Beneath Her Feet (1999)

Monday’s Trade War damage for the Dow Jones Industrial Average was 617.38 points. That’s 2.38%. The S&P 500 Index was down 2.41%. The Nasdaq Composite shed 3.41%.

Today, they’re up 1.38%, 1.40%, and 1.66%, respectively, an hour or so before the closing bell.

Bubblevision’s story must be “Buy This F***ing Dip for the Trade War Rally.”

Will the Donald realize that he “must make a deal with China to protect the twin pillars supporting his case for reelection, the stock market and the economy”? Even the eggheads – especially the eggheads! – among CNBC’s cavalcade say he surely will…

Let’s turn it over to the Tweeter-in-Chief himself:

The unexpectedly good first quarter 3.2% GDP was greatly helped by Tariffs from China. Some people just don’t get it!

Recent tweets more than suggest the Donald is ready to go the distance here… and he’s ready for all the “easy money” he needs to make it happen:

China will be pumping money into their system and probably reducing interest rates, as always, in order to make up for the business they are, and will be, losing. If the Federal Reserve ever did a “match,” it would be game over, we win! In any event, China wants a deal!

This bears repeating:

If you are…

  1. buying
  2. selling
  3. not buying
  4. not selling

…because a China Trade Deal is on or because a China Trade Deal is off, you’re playing their game. And their game isn’t going to end well.

The S&P had bubbled up to a fresh “Peak Trump” of 2,954.13 on May 1. That’s about 13 points above the old high. The tech-heavy index peaked a couple trading days ahead of the S&P, at 8,176.08 on April 29.

Just as the indexes were hitting those recent highs, the Bureau of Economic Analysis was reporting an annualized growth rate of 3.2% for first-quarter gross domestic product (GDP).

Meanwhile, the muddleheaded nincompoop in the Oval Office was unleashing another fusillade in his unprecedented attack on the Federal Reserve:

China is adding great stimulus to its economy while at the same time keeping interest rates low. Our Federal Reserve has incessantly lifted interest rates, even though inflation is very low, and instituted a very big dose of quantitative tightening. We have the potential to go…up like a rocket if we did some lowering of rates, like one point, and some quantitative easing. Yes, we are doing very well at 3.2% GDP, but with our wonderfully low inflation, we could be setting major records &, at the same time, make our National Debt start to look small!

This is the second time the indexes have scaled to these heights only to tumble.

From September 21, 2018, to December 24, 2018, the S&P 500 fell 20%. The Dow, which peaked and bottomed a little later, lost 19.4% from October 3 through December 26. The Nasdaq declined 23.6% from October 1 to its December 24 low.

It’s hard to find a place to begin when it comes to the stream of bluster, confusion, error, and inanity that is the Donald’s Twitter (NYSE: TWTR) feed. And I can scarcely imagine what’ll happen when the market crashes for real and recession begins to reveal itself in headline GDP numbers.

Of course, his Fed and its operatives, acolytes, and spokesmodels will try.

But all their monetary central planning, financial engineering, political lily-gilding can’t hold back the forces of creative destruction forever.

Blast Shelter

Desperate times call for… “common sense” measures.

And these are desperate times… Markets are corrupted by monetary central planning. They’re confused. And the road back is going to be treacherous.

We’re looking at a major re-pricing for all financial assets. And thousand-point intraday or day-to-day swings are part of that equation. Those can be frightening… for “buy and hold” investors.

I have a different approach, one that combines strategy and tactics into a plan flexible enough for you to survive and thrive amid the coming chaos. It’s called “The Stockman Model.”

All we’re after is a little stability, perhaps a chance to pocket a windfall when opportunity presents…

To common sense,

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David Stockman

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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