China Trade deserves its own thread

Eric Nahlin

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Thoreau'd on Walden
Checking in on the trade war, which as promised has proved to be good and easy to win.


"Our Country has lost, stupidly, Trillions of Dollars with China over many years. They have stolen our Intellectual Property at a rate of Hundreds of Billions of Dollars a year, & they want to continue," Trump wrote. "I won’t let that happen! We don’t need China and, frankly, would be far better off without them."

He continued, "The vast amounts of money made and stolen by China from the United States, year after year, for decades, will and must STOP. Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA. I will be responding to China’s Tariffs this afternoon. This is a GREAT opportunity for the United States."
Easily one of the most tyrannical things a president has uttered in my lifetime.
 

TexanBlood

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Wish it was dos bobby's porch
Easy read to me.

The Chinese saw Trump’s delay as a sign of weakness and chose this is their moment to really stick it to Trump and force him to choose between two bad options, which both ultimately accrue to their benefit:

1) force Trump to capitulate to a deal on favorable terms, or more likely,

2) dupe him into continuing escalation ahead of the Christmas shopping season (a revealed weakness), force the recession and doom his re-election. Unwind all this **** quickly with a Democratic successor.

This move was calculated to be as provocative to Trump as possible. There was no chance in hell they didn’t see an escalation by Trump as the most likely outcome.

Hitting the US with tariffs was a direct challenge to his ego and political persona as being “tough on China”. Trump is the easiest read at the poker table. He just got Sonny Corleone’d.
Trump's fortune cookie....

 

acreativeusername

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Everyone Who Hates the Stock Market Is Feeling a Lot Smarter Now

U.S. stocks have hit 13 records this year and generated $5 trillion of wealth. They’ve stood up to sagging earnings, slowing growth and a surging dollar. The S&P 500 is headed for what could still easily be its best year in six. And yet, sit down with traders and fund managers, and what invariably comes pouring out is frustration.

For anyone wondering why, we give you Aug. 23, 2019. With equities four-fifths of the way to the first up week since July, a flurry of taunting tweets from President Donald Trump stopped bulls in their tracks, triggering the third drop of more than 2% this month. The index just matched its longest streak of weekly declines since 2011.

For all its buoyancy and resilience, this remains a rally that has pervasively failed to convince the institutional class to buy in. Why should it, with a trade war raging and Trump standing by seemingly bent on taking the wind out of every advance with angry escalations?

“You’d think we’d be conditioned to expect the unexpected, but I guess we’re not,” said Marvin Loh, global macro strategist at State Street. “It’s just ultimately difficult to form a very strong opinion on anything when things change as aggressively as they do.”

Rather than jump in, traders are taking cover. In just the past few days, use of bearish options contracts that hedge against declines like Friday’s has skyrocketed, pushing ratios measuring their popularity to the highest since December’s rout. Going by positioning, hedge funds are getting to a point of disaffection not seen in three years.

The S&P 500 lost 2.6% on Friday after the U.S. said it will respond to new Chinese tariffs and Trump lambasted the Federal Reserve’s Jerome Powell following his speech at Jackson Hole. The plunge destroyed what was shaping up to be a 1.2% advance for the week. It’s the fourth time since the bull market began that a Friday rout erased a gain of more than 1% through Thursday, data compiled by SentimenTrader show, a phenomenon that was more or less unheard of in the old days.

Turnarounds like that show why professional speculators are steering clear. A measure of hedge-fund returns attributable to the S&P 500 is sitting near an all-time low, according to Marko Kolanovic, JPMorgan Chase & Co.’s head of macro quantitative and derivatives research. (All else being equal, “such low positioning is positive for equity performance going forward,” he wrote in a note this week.)

Elsewhere, money has coursed out of exchange-traded funds. With investors on edge over trade tensions, U.S.-listed equity ETFs saw withdrawals of close to $18 billion in the three weeks ended last Friday, the most in six months, data compiled by Bloomberg show. A large chunk of those outflows has come from the largest fund tracking the S&P 500, the SPDR S&P 500 ETF Trust, which has seen outflows of nearly $10 billion in August.

Toward the end of last week, speculators sent a ratio of bearish versus bullish equity options to the highest since December, hedging against further losses after the worst streak for stocks since May.

“It an environment where you need to stay nimble and flexible because the news can change on a dime,” said Ed Campbell, portfolio manager and managing director at QMA. His firm was overweight equities at the beginning of the year but pulled back to neutral in May when trade tensions started to intensify and lightened risk further at the beginning of this month.

“I don’t think it’s one where the risk-reward profile is such where you want to be aggressively overweight equities or risk assets in general,” he said by phone. “It’s one where an above average cash weighting is prudent in the event that opportunities come and we do get significant draw-downs where you can put that dry powder to work.”

On the other hand, August is typically a volatile month. The S&P is still up nearly 15% this year and if history is any guide, the rest of the year could see further gains. Since 1928, when the index has been up through July, stocks have gained an average of nearly 4% for the remainder of the year, according to research from Bespoke Investment Group. And years when stocks have been up more than 10% through July have seen average gains of close to 6% from August through the end of the year.

For John Augustine at Huntington Private Bank, there are reasons to stay optimistic. The September trade talks are still on the books, central banks could be more accommodative going forward, the U.S. consumer is doing reasonably well, and there’s still plenty of opportunity for dialogue between the U.S. and China.

“We’re not losing confidence,” said the bank’s chief investment officer from his Columbus, Ohio office. “Markets are not throwing in the towel.”
 

cctxfan

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Didn't see an update to this thread, but Trump retaliated by raising tariffs by 5%... The **** show continues.
 

JG

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You guys do realize that if they had the balls, the Republicans in Congress could put a stop to this garbage. All it would take would be signing onto a bill taking back control of the tariffs from Trump.

But they won’t, because Trump and his cult of personality have total control of the Republican Party. Those in Congress kiss the ring and do his bidding, and just mumble under their breath.
 

mcb0703!

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Monday should be a bloodbath.
Neither economy can take these tariffs; China's already on the verge of a recession & Trump's trying to tweet us into a recession. I expect a deal will be made, that will include trade, military, the man-made islands in the South China Sea, & Hong Kong issues

& it may be a deal that gives too much to China, but it'll be a deal that Trump will tout in the campaign
 

Duke Silver

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You guys do realize that if they had the balls, the Republicans in Congress could put a stop to this garbage. All it would take would be signing onto a bill taking back control of the tariffs from Trump.

But they won’t, because Trump and his cult of personality have total control of the Republican Party. Those in Congress kiss the ring and do his bidding, and just mumble under their breath.
Democrats control the House. Congress has abdicated its responsibilities for years now.
 

padrehorn11

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Neither economy can take these tariffs; China's already on the verge of a recession & Trump's trying to tweet us into a recession. I expect a deal will be made, that will include trade, military, the man-made islands in the South China Sea, & Hong Kong issues

& it may be a deal that gives too much to China, but it'll be a deal that Trump will tout in the campaign
I think a deal will be cut. The big question though, I think, is not what the deal says, in other words, what (on paper) we give up to China or don't, but rather how closely will China stick to the parts of the agreement it doesn't like. As long as Xi and his puppets hold the power I don't think they'll give a damn about what they 'agreed' to. I'm not sure what we do then, I guess it depends on who wins the election. And if The Democrats win, we'll lose the war(economic, or, God forbid, military) to China in the end. But I'm not sure we'll 'win' if Trump wins. I've given up making any predictions relating to him.

I'm afraid that the thing that has to happen in order to get China to meaningfully change its ways will be enough pain to impel regime change, at least almost breaking the back of China's economy so that we obviously hold the big stick. That will cause really bad pain for the U.S. and the rest of the world too. I personally think that's something that has to be done. Well, either that or, as someone said, see that my grandson learns Mandarin. But I kind of doubt we have the will if the economic pain for us is deep enough or China looks to solve the problem militarily. We've let the enemy become too powerful, hoping they were no longer the enemy and in pursuit of the ideal of global free trade. It's the best thing by far, ideally, but unfortunately the world powers very rarely follow the ideal best path unless its the last resort. Now, no world power seems to understand the problem, much less the solution. I don't think Trump is the only one with a poor understanding of macroeconomics, as his critics seem to think. The current Chinese regime is even more economically ignorant than Trump. Thinking an oligarchial command economy is a good plan is as bad as Trump's mercantilist understanding. Neither one works.

But maybe I'm completely wrong once more. It was sure easier to pontificate when I was younger and smarter and saw all problems and solutions quite clearly.
 

SmackBrown

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Maybe China is starting to think Trump is crazy enough to keep going with this.

China announces it seeks 'calm' end to trade war, as markets tank and currency hits 11-year flatline
China signaled on Monday it was now seeking a "calm" end to its ongoing trade war with the U.S., as Asian markets crumbled and China's currency plummeted to an 11-year low following the latest tariffs on $550 billion in Chinese goods announced last Friday by the Trump administration.

Trump said Monday that officials from China called U.S. officials and expressed interest to "get back to the table,” The Wall Street Journal reported. He called the discussions a “very positive development.”

“They want to make a deal. That’s a great thing,” he said.

News of the possible opening in negotiations came shortly after President Trump threatened to declare a national emergency that would result in American businesses freezing their relationships with China. Trump's tariff barrage on Friday was a response to China imposing its own retaliatory tariffs on $75 billion in U.S. goods.

 

TexasPalladin

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Maybe China is starting to think Trump is crazy enough to keep going with this.

China announces it seeks 'calm' end to trade war, as markets tank and currency hits 11-year flatline
China signaled on Monday it was now seeking a "calm" end to its ongoing trade war with the U.S., as Asian markets crumbled and China's currency plummeted to an 11-year low following the latest tariffs on $550 billion in Chinese goods announced last Friday by the Trump administration.

Trump said Monday that officials from China called U.S. officials and expressed interest to "get back to the table,” The Wall Street Journal reported. He called the discussions a “very positive development.”

“They want to make a deal. That’s a great thing,” he said.

News of the possible opening in negotiations came shortly after President Trump threatened to declare a national emergency that would result in American businesses freezing their relationships with China. Trump's tariff barrage on Friday was a response to China imposing its own retaliatory tariffs on $75 billion in U.S. goods.

Hit a bully in the mouth and they decide to be friendly.


Semper Fi
 

J Galt

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China is in the midst of their 70th anniversary celebration of the creation of the Republic. This goes on through October 1. They have highly visible protests in Hong Kong. They are not going to give any concessions while these are going on. They are politically handcuffed until both the celebration has ended and the protests are quelled because any concessions would go counter to their messaging and encourage further resistance. Once we're in campaign mode here in the US, a deal becomes very unlikely. If there is a deal, it will likely come in the window between 10/1 and the Iowa caucuses next year. Until then, hold onto your butts.
 
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J Galt

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With regard to recession indicators, much is made of the "inverted yield curve" headline. While that is certainly a negative market-based indicator, keep in mind, that prior to every recession we've had a doubling of oil prices in the 12 months prior and a deterioration of hiring conditions. Oil prices are certainly not a concern right not but one could make a credible argument that 'this time is different' due to US supply dynamics. Here is a chart of monthly hiring and layoffs (displayed on an inverted scale) from the Job Openings and Labor Turnover Survey. The average levels of these indices is different because the data excludes 'voluntary quits'. The takeaway is that the relatively mild recession of 2001 saw monthly hiring fall by over 1 million while monthly layoffs increased by nearly 500,000. The difference was more striking during the financial crisis of 2007-2009. Perhaps the most important takeaway is that hiring declines tend to precede the recessions (gray shaded areas) while the surge in layoffs tend to happen after the recession has started. Thus, hiring freezes are the better leading indicator and should be watched closely. Currently, they look fine.
46478
 
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TexasPalladin

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With regard to recession indicators, much is made of the "inverted yield curve" headline. While that is certainly a negative market-based indicator, keep in mind, that prior to every recession we've had a doubling of oil prices in the 12 months prior and a deterioration of hiring conditions. Oil prices are certainly not a concern right not but one could make a credible argument that 'this time is different' due to US supply dynamics. Here is a chart of monthly hiring and layoffs (displayed on an inverted scale) from the Job Openings and Labor Turnover Survey. The average levels of these indices is different because the data excludes 'voluntary quits'. The takeaway is that the relatively mild recession of 2001 saw monthly hiring fall by over 1 million while monthly layoffs increased by nearly 500,000. The difference was more striking during the financial crisis of 2007-2009. Perhaps the most important takeaway is that hiring declines tend to precede the recessions while the surge in layoffs tend to happen after the recession has started. Thus, hiring freezes are the better leading indicator and should be watched closely. Currently, they look fine.
View attachment 46478
Does this mean I can back away from the cliff, hide the razor blades and enjoy the football season now? :)
(At least until the first Longhorn loss)


Semper Fi
 

cctxfan

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No one said it was. But at least we're punching back.
That would be valid if China had started the tariff war. Look, I get that China is a currency manipulator and steals IP. But they don’t just target the United States.

Rather than go at this alone, we should have built a coalition with the US, Europe, Australia, and strategic Asian partners like Japan and South Korea to tell China to change it ways or else. That would have been much more effective than Trump going at it alone.
 

padrehorn11

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That would be valid if China had started the tariff war. Look, I get that China is a currency manipulator and steals IP. But they don’t just target the United States.

Rather than go at this alone, we should have built a coalition with the US, Europe, Australia, and strategic Asian partners like Japan and South Korea to tell China to change it ways or else. That would have been much more effective than Trump going at it alone.
I pretty much agree, though given the nature of these sort of "alliances" and our"allies" I'm pretty skeptical about the chances for success.

BUT. IT. DOESN'T. MATTER. The chance for that is gone. So what choices do we have going forward from this point? Ignore the problem? Do what Trump is doing? Something else? Seriously, what are alternatives (if any) at this point since you agree that there are real problems with the nature of our trade with China as it was BT (before Trump).

We can go back in history and debate every major decision every President has ever made. But it won't change what we do about China trade...again, going forward from where we are.
 
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cctxfan

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I pretty much agree, though given the nature of these sort of "alliances" and our"allies" I'm pretty skeptical about the chances for success.

BUT. IT. DOESN'T. MATTER. The chance for that is gone. So what choices do we have going forward from this point? Ignore the problem? Do what Trump is doing? Something else? Seriously, what are alternatives (if any) at this point since you agree that there are real problems with the nature of our trade with China as it was BT (before Trump).

We can go back in history and debate every major decision every President has ever made. But it won't change what we do about China trade...again, going forward from where we are.
I don’t have a good answer. But I do know, and history has proven, that tariffs don’t work and are certainly not the answer.
 
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padrehorn11

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I don’t have a good answer. But I do know, and history has proven, that tariffs don’t work and are certainly not the answer.
As far as an effective instrument of foreign policy I think you're right. Although there are examples of short term tariffs and threats of tariffs such as the threat of the tariffs on Mexican goods earlier this year that have accomplished limited foreign policy goals. But yeah, not large long-term tariffs accomplishing large foreign policy goals. As far as human history goes, War seems to be the most effective foreign policy tool. Some might say diplomacy has also been effective, but a lot of historians argue (and I think I agree) that diplomacy just delays and sets the terms for the next war as often or more often than outright avoiding war.

But tariffs did "work" in the sense of supporting the U.S. Federal Government for the first 75 years or so of U.S. history. Excise taxes and a small income tax were initiated to pay for the Civil War, and excise taxes remained an important component until 1916. You can see what happened after that. So the case can be made from the chart below that they kept Federal Government spending low except in times of war...and the "Forever War" we've been in since 1941. And well, also it's clear that redistributing money from workers to retirees has been another big part of Federal government income/spending during my lifetime.
46756

So, anyway, back to the point; if the the tariffs don't work...yeah I'm afraid that means there's a strong chance of war with China sooner or later. I really hope I'm wrong.