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Trade Wars - Not Good, And Not Easy To Win

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  • Moosie
    replied
    Originally posted by Buzz View Post
    It might seem like madness but it's been going on for a very very long time, who are we to second guess whether it will blow up in everyone's face, let alone when. Best imho to buy the beaten down long hold earners .. and hold, and trade the trends on the growth volatiles. Personally it's not helped to second guess or worry about global macroeconomics or markets, they continually confound and befuddle when money is to be made for those who just manage their circumstances right now, not assuming, presuming or precluding anything that may or may not happen.
    "Don't fight the Fed"

    Best advice I ever heeded.

    Leave a comment:


  • Buzz
    replied
    It might seem like madness but it's been going on for a very very long time, who are we to second guess whether it will blow up in everyone's face, let alone when. Best imho to buy the beaten down long hold earners .. and hold, and trade the trends on the growth volatiles. Personally it's not helped to second guess or worry about global macroeconomics or markets, they continually confound and befuddle when money is to be made for those who just manage their circumstances right now, not assuming, presuming or precluding anything that may or may not happen.

    Leave a comment:


  • Beagle
    replied
    Yeap, she's looking like a really well kicked can now !
    Somehow they need to inflate their way out of the quagmire so balance sheet footings look more reasonable but there's hardly any inflation...what to do ? I know...more quantitative easing, bring back Helicopter Ben Bernake

    Leave a comment:


  • Moosie
    replied
    Originally posted by Beagle View Post
    Yes I struggle to understand why the US markets are now just within 2% of their peak.
    Debt. Loads of debt. YUGELY cheap debt. Look at what the RBNZ & RBA doing, cutting rates when markets are at all-time highs, unemployment is at multi-decade lows and the economy is still growing at a reasonable rate. Sheer insanity.

    And guess what? The Fed ain't far behind. Central banks are absolute scared ****less of what they have done in the past decade and are trying to pre-empt the natural business cycle. Just like intravenous drugs, they are disrupting an entire system and keeping ti flowing to keep the good times going.

    Kick kick kick, kick that can for all it's worth!

    Leave a comment:


  • Beagle
    replied
    Yes I struggle to understand why the US markets are now just within 2% of their peak. The best realistic possibility is that Xi actually turns up to the G20 Summit and at a 40,000 ft perspective they agree that they will get back to the negotiation table. As you quite rightly point out Moosie, this is ostensibly an ego assurance trip for the trumpet, desperate to continue to wield his power and appear really important and a good photo op...(hope they include Ivanka so the photos are slightly more palatable).

    Deeply ingrained differences remain regarding IP and theft thereof and what measures to be put in place to protect same...I think the two sides are considerably further apart than they were two months ago. A comprehensive trade deal looks "challenging" to say the very least.

    Leave a comment:


  • Moosie
    replied
    Well, here come the next, and last $300 Billion in tariffs! Be a surprise if Xi doesn't turn up, but there is a 99% chance no deal will come about at such a meeting. These events are overarching, theoretical policy pow-wows on a global scale, not a place to hash out the finer details of trade deals. No doubt Trump cannot see that, however - more than likely just wants some reassurance he's still relevant and not reviled by every world leader with nice, glossy photo ops and handshakes.

    https://www.cnbc.com/2019/06/10/trum...mediately.html

    Funny (and very ironic) that not a year ago Trump did all this:

    Cancels Joint Statement with G7: https://www.bbc.com/news/world-us-canada-44427660

    Cancels meeting with Putin at G20: https://www.aljazeera.com/news/2018/...171206613.html

    Cancels North Korea Summit: https://www.theguardian.com/us-news/...nuclear-summit

    Leave a comment:


  • Moosie
    replied
    Yield inversion on the charts again, with 3 month and 10 year treasuries crossing decisively this time.

    Click image for larger version

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  • Moosie
    replied
    Originally posted by nextbigthing View Post

    If 1% down is all you're expecting then it's hardly worth fretting over chicken little
    Check out the DJIA chart - recently cut major support and sliced through all moving averages. A 1% futures down move is usual a precursor for much steeper falls and in the current downtrend, this flag is waving more rapidly as momentum takes it down fast.

    Leave a comment:


  • nextbigthing
    replied
    Originally posted by Couta View Post
    Trump is a Narcissist with a touch of Dementia. Lol
    Question is, how do we use that information for our own investing benefit

    Leave a comment:


  • nextbigthing
    replied
    Originally posted by Moosie View Post
    Well, as if it wasn't bad enough already, Trump is now going fot gold by threatening his best friend Japan and now imposing tariffs on Mexico starting in a week in a half!

    https://www.bloomberg.com/news/artic...ico-trump-says

    Sounds to me like Trump is going for the triple down in a losing situation strategy. Sounds very familiar...

    This clown is going to cause global chaos. Hope everyone is prepped. US futures down a further 1%+ on the news.
    If 1% down is all you're expecting then it's hardly worth fretting over chicken little

    Leave a comment:


  • Couta
    replied
    Trump is a Narcissist with a touch of Dementia. Lol

    Leave a comment:


  • Moosie
    replied
    Well, as if it wasn't bad enough already, Trump is now going fot gold by threatening his best friend Japan and now imposing tariffs on Mexico starting in a week in a half!

    https://www.bloomberg.com/news/artic...ico-trump-says

    Sounds to me like Trump is going for the triple down in a losing situation strategy. Sounds very familiar...

    This clown is going to cause global chaos. Hope everyone is prepped. US futures down a further 1%+ on the news.

    Leave a comment:


  • Moosie
    replied
    Here we go folks. China making its first big strike back. Rare Earths (RE) a key ingredient in technology consumables. Been murmurs of this for a week or so now, so no surprises to those paying attention:

    China's Communist Party newspaper warned on Wednesday that Beijing was ready to use its influence over the supply of rare earths to strike back against the United States in an increasingly bitter trade dispute.

    Euro stocks getting hammered, US futures down below SMAs and gold getting bid. It's on, again...

    Leave a comment:


  • Crackity
    replied
    Originally posted by Moosie View Post
    Authored by Michael Zezas, Chief Public Policy strategist at Morgan Stanley

    Investors are obsessed, trying to figure out what happens next in the US/China trade dispute. Will the US call China? What do the negotiators really think? Does this last three weeks or three months? Our answer: you could be starting with the wrong questions.

    First, let’s look back. It all seemed to be going so well. After market sell-offs sent signals to the US and China about the costs of trade tensions, they sat down at the G20 in November, called a truce, and appeared close enough to a deal to start planning for a signing ceremony. Then came the week of May 5. The US claimed China had moved the goalposts on key issues and announced another tariff increase, with preparations to levy tariffs on another ~US$300 billion of imports. China responded with counter-tariffs and heated rhetoric. Escalation was back, but the market response was relatively muted. After a 3-4% down move in the S&P from all-time highs and about a 7% down move in the Shanghai Composite, both indices remain well above pre-G20 levels. This suggests the recognition of heightened uncertainty, but no clear idea of what comes next.

    It appears that investors are trying to gauge trade risks by focusing on near-term catalysts. We’re often asked what key players are saying, what might happen at the next G20, where that meeting fits in the timelines for tariff events, and what unconventional action each side might take. But these questions can be counterproductive. Answers require us to intuit the intentions of key players around specific details, while we can only parse their broad intentions from public statements and reporting. Furthermore, this approach risks overemphasizing isolated bits of evidence.

    Rather than guess at the next headline or meeting, define the dynamic at play.

    Game theory takes us back to what shaped our call in 2018. Both sides will continue to escalate until clear market or economic weakness pushes them to reengage. Hence, investors should act as if the next escalation will happen until markets price it in. The situation resembles a repeated Prisoner’s Dilemma game. Both sides start by escalating, perceiving better payoffs for doing so. They can cooperate later on if they realize that the rewards for payoffs from cooperation are greater than from further escalation. Consider:
    • This isn’t posturing, meaningful disagreements exist: Early speculation the week of May 5 was that the game hadn’t changed, rather both sides were framing their compromises for domestic audiences. But the US soon highlighted new areas of disagreements, confirmed by the Chinese side, around IP protections and how quickly to remove existing tariffs.
    • These conflicts reset the payoffs, suggesting that escalation is preferable at this point to meeting the other’s demands: For one side, and possibly both, the payoff for cooperation had diminished as it became clear that their counterpart wasn’t agreeing to key conditions.
    • Market and/or economic weakness could change the game: In 4Q18, we believe that the US administration’s market sensitivity and China’s short-term economic exposure played a key role in bringing them to the table amid weakness in global markets and softer data in China. The payoffs for cooperation became clearer and preferable to escalation. A repeat of these pressures could mend this new rift.

    We expect this dynamic to pressure risk assets and US bond yields lower. If risk markets don’t drive cooperation soon, escalation will likely cause enough economic erosion to move the markets before long. Consider the impacts of further escalation laid out by our economists in their midyear outlook. A three-to-four month extension of current tariffs could dampen growth in China and the US by 20bp and 30bp, respectively, barely avoiding recession. A longer period of tension, including fresh tariffs on ~US$300 billion of remaining China exports to the US, puts 100bp of global growth at risk and pushes the Fed into repeated cuts. Neither of these outcomes is in the price, in our view, and recent conversations with investors suggest that they under-appreciate the downside impact of such scenarios.

    Where could we be wrong? Perhaps the US and China will follow the path lauded by game theorists and marriage counselors alike – communication! Given domestic politics and negotiating stances, we think that it will take weak markets or fundamentals to pry open a channel. Still, any news of fresh, substantive dialogue between the countries should be seen as a positive.
    Click image for larger version

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  • Moosie
    replied
    Authored by Michael Zezas, Chief Public Policy strategist at Morgan Stanley

    Investors are obsessed, trying to figure out what happens next in the US/China trade dispute. Will the US call China? What do the negotiators really think? Does this last three weeks or three months? Our answer: you could be starting with the wrong questions.

    First, let’s look back. It all seemed to be going so well. After market sell-offs sent signals to the US and China about the costs of trade tensions, they sat down at the G20 in November, called a truce, and appeared close enough to a deal to start planning for a signing ceremony. Then came the week of May 5. The US claimed China had moved the goalposts on key issues and announced another tariff increase, with preparations to levy tariffs on another ~US$300 billion of imports. China responded with counter-tariffs and heated rhetoric. Escalation was back, but the market response was relatively muted. After a 3-4% down move in the S&P from all-time highs and about a 7% down move in the Shanghai Composite, both indices remain well above pre-G20 levels. This suggests the recognition of heightened uncertainty, but no clear idea of what comes next.

    It appears that investors are trying to gauge trade risks by focusing on near-term catalysts. We’re often asked what key players are saying, what might happen at the next G20, where that meeting fits in the timelines for tariff events, and what unconventional action each side might take. But these questions can be counterproductive. Answers require us to intuit the intentions of key players around specific details, while we can only parse their broad intentions from public statements and reporting. Furthermore, this approach risks overemphasizing isolated bits of evidence.

    Rather than guess at the next headline or meeting, define the dynamic at play.

    Game theory takes us back to what shaped our call in 2018. Both sides will continue to escalate until clear market or economic weakness pushes them to reengage. Hence, investors should act as if the next escalation will happen until markets price it in. The situation resembles a repeated Prisoner’s Dilemma game. Both sides start by escalating, perceiving better payoffs for doing so. They can cooperate later on if they realize that the rewards for payoffs from cooperation are greater than from further escalation. Consider:
    • This isn’t posturing, meaningful disagreements exist: Early speculation the week of May 5 was that the game hadn’t changed, rather both sides were framing their compromises for domestic audiences. But the US soon highlighted new areas of disagreements, confirmed by the Chinese side, around IP protections and how quickly to remove existing tariffs.
    • These conflicts reset the payoffs, suggesting that escalation is preferable at this point to meeting the other’s demands: For one side, and possibly both, the payoff for cooperation had diminished as it became clear that their counterpart wasn’t agreeing to key conditions.
    • Market and/or economic weakness could change the game: In 4Q18, we believe that the US administration’s market sensitivity and China’s short-term economic exposure played a key role in bringing them to the table amid weakness in global markets and softer data in China. The payoffs for cooperation became clearer and preferable to escalation. A repeat of these pressures could mend this new rift.

    We expect this dynamic to pressure risk assets and US bond yields lower. If risk markets don’t drive cooperation soon, escalation will likely cause enough economic erosion to move the markets before long. Consider the impacts of further escalation laid out by our economists in their midyear outlook. A three-to-four month extension of current tariffs could dampen growth in China and the US by 20bp and 30bp, respectively, barely avoiding recession. A longer period of tension, including fresh tariffs on ~US$300 billion of remaining China exports to the US, puts 100bp of global growth at risk and pushes the Fed into repeated cuts. Neither of these outcomes is in the price, in our view, and recent conversations with investors suggest that they under-appreciate the downside impact of such scenarios.

    Where could we be wrong? Perhaps the US and China will follow the path lauded by game theorists and marriage counselors alike – communication! Given domestic politics and negotiating stances, we think that it will take weak markets or fundamentals to pry open a channel. Still, any news of fresh, substantive dialogue between the countries should be seen as a positive.

    Leave a comment:

HLG

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