Finance

The Peakiest Peak

By David Stockman  |  May 24, 2019

But I went down to the demonstration
To get your fair share of abuse
Singing, “We’re gonna vent our frustration
If we don’t we’re gonna blow a fifty-amp fuse”

– The Rolling Stones,
“You Can’t Always Get What You Want” (1969)

The Dow Jones Industrial Average was down 448.52 points at its Trade War low Thursday.

It clawed back 162.38 of them before the close, and then Reuters reports Friday morning that U.S. stock futures were up “on cautious optimism after President Donald Trump predicted a swift end to the ongoing tariff war with China.”

“Peak Trump,” indeed…

They’ve placed their faith in the author of this recent thread:

Talks with China continue in a very congenial manner – there is absolutely no need to rush – as Tariffs are NOW being paid to the United States by China of 25% on 250 Billion Dollars worth of goods & products. These massive payments go directly to the Treasury of the U.S….

….The process has begun to place additional Tariffs at 25% on the remaining 325 Billion Dollars. The U.S. only sells China approximately 100 Billion Dollars of goods & products, a very big imbalance. With the over 100 Billion Dollars in Tariffs that we take in, we will buy…..

….agricultural products from our Great Farmers, in larger amounts than China ever did, and ship it to poor & starving countries in the form of humanitarian assistance. In the meantime we will continue to negotiate with China in the hopes that they do not again try to redo deal!

Tariffs will make our Country MUCH STRONGER, not weaker. Just sit back and watch! In the meantime, China should not renegotiate deals with the U.S. at the last minute. This is not the Obama Administration, or the Administration of Sleepy Joe, who let China get away with “murder!”

Tariffs will bring in FAR MORE wealth to our Country than even a phenomenal deal of the traditional kind. Also, much easier & quicker to do. Our Farmers will do better, faster, and starving nations can now be helped. Waivers on some products will be granted, or go to new source!

It’s more proof that nobody knows anything, least of all the Tweeter-in-Chief.

Then again…

The Donald is a complete ignoramus on economics and trade. But, really, what’s more ludicrous? His Twitter ravings? Or those inside the bubble following his lead?

Indeed, the whole easy-money-blown kit and caboodle – Wall Street, Imperial Washington, Bubblevision, even the Deep State – is reduced to a pathetic state of “hopium” addiction.

Maybe it’s time they realize you can’t always get what you want.

[Click to Enlarge]

Heading into the last trading session before the long Memorial Day Weekend, the Donald is set to levy a 25% tariff on “just about everything else China imports into the U.S.” That’s another $325 billion worth of items. And it’s going to happen in a matter of weeks.

The Donald’s straw-for-brains Secretary of the Treasury Steve Mnuchin reportedly held that gun to the head of Vice Premier Liu He during the most recent round of negotiations in early May.

In a hearing before the U.S. House of Representatives Financials Services Committee, he said a decision wouldn’t come “probably for another 30 to 45 days.”

Whatever the specific timeline, the fuse is lit. And the meeting between the Tweeter-in-Chief and President Xi Jinping at the G20 Summit in Japan June 28-29 might be detonation day.

It’s a $140 billion economic timebomb.

And it’ll splatter all over the U.S. economy and the entire China-focused global supply chain. That process of total trade with the world sends $7.2 billion of goods into U.S. ports each and every day, including Sundays, holidays, and snow days.

Yes, some paint-by-the numbers Keynesian economist or sell-side stock-peddler is likely to say “not to worry” because the Donald’s 25% tariff on all China’s $563 billion of exports to the U.S. amounts to only 0.7% of annual gross domestic product (GDP).

But stuff doesn’t happen on the macroeconomic average. It happens on the microeconomic margin. It’s a never-ending daisy-chain, one thing impacting the next.

If we do get the full Trumpian Tariff in two weeks – and Bubblevision seems to be laying the anti-intellectual framework for it – it’s Katie-bar-the-door time.

That’s because the Tweeter-in-Chief has thrown down the mega-trade gauntlet right when Wall Street and Imperial Washington have run out of room to kick the can. That goes for global commerce as well as a whole host of other incendiary issues.

It’s plain that:

  • the Fed, now a confused tower of babble, is sure to destroy confidence, not instill it;
  • D.C., bitterly divided, is paralyzed like never before;
  • the national debt is soaring, with zero political will to arrest the hemorrhage; and
  • the Orange Swan is off his rocker and out of control.

The system simply can’t take any more shocks.

Enjoy Your Long Weekend…

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