Week In Review – January 18

Better late than never.  The markets are closed today, not much goin’ on.

Summary

  • The risk markets still in bounce mode, led by emerging
  • The U.S. bank index up big for the week
  • Energy and biotech continue to ramp

Commentary – Getting up into for sale territory but need a catalyst to move lower.

Waiting on China deal, which should be a sell the news event, and another Potemkin Village, just as we expected.

WASHINGTON — As a critical round of talks with China kicks off next week, the Trump administration is increasingly pessimistic that Beijing will make the kind of deep structural changes to its economy that the United States wants as part of a comprehensive trade agreement, according to officials involved with the talks.

The United States is now weighing whether large Chinese purchases of American goods and more modest economic changes will be enough for a deal to end a damaging trade war between the two nations and help calm volatile markets. 

A Chinese delegation led by Liu He, China’s vice premier, will meet with Robert Lighthizer, the Trump administration’s top trade negotiator, and Steven Mnuchin, the Treasury secretary, on Jan. 30 and 31. The two countries are racing to strike an agreement by March 2, a deadline set by President Trump and President Xi Jinping of China.  NY Times, Jan 21th

Mnuchin and Malpass are in way over their heads and outmatched by these guys.

And this nonsense,

Pleaaaazzzeeee.  Xi is not obsessed with every tick in the S&P  Shanghai and oversees a command economy not subject to market discipline.  The Chinese negotiators know it.

But Mr. Trump is also under pressure and the window for him to use market-rattling tariffs as leverage is likely to shrink as his re-election campaign heats up next year.

“The damage to U.S. business, consumers and exporters is real and ongoing,” Scott Lincicome, a trade lawyer and scholar at the Cato Institute, said, noting that the risks of this approach only increased if negotiations with China dragged into 2020. “If you’re the Chinese, delay is your best friend.”  – NY Times, Jan 21st

Expectations are waaay too high for a “good” China deal.  At best a “fake deal” as in Potemkin.

Look to the government shutdown as your template as to how Trump and the White House paint themselves into a negotiating corner.

The will be blood sellers.  Count us in.

 

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Check out 2019 v 2018 in Country ETF land.

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2018 Year-End: Only Three Country ETFs w/ Positive Return

week_2018_etfs

 

 

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TOTD: Black Swan Risk

I’ll  take this Black Swan.

https://twitter.com/hipster_trader/status/1087126501835849730?s=12

 

 

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Song For The Week: Balls To The Wall

I won’t back down
Hey Nancy, balls to the Wall, no easy way out
I won’t back down
Hey Rush I will stand my ground
And I won’t back down

 

SFTW – Song for the Week

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How Democrats Should Counter Trump

The Dems need to counter Trump.

It’s a no-brainer.   They can draw it up with a crayon.

  1. Open the government (a deal breaker)
  2. $2 billion for border security
  3. Complete resolution of DACA, including a path to citizenship

The president can’t win politically but the above provides Trump with a way out of the corner he has painted himself into.  Intense negotiations begin on  #2 and #3 provided the government opens on Monday.

Not A Normal Negotiator

The “best dealmaker of all-time” has committed almost every conceivable error of negotiating during the shutdown.   See Harvard Law’s,  10 Hard-Bargaining Tactics to Watch Out for in a Negotiation.

The Speaker needs to realize she is dealing with a non-normal opponent, one who lacks empathy and doesn’t seem to care about blowing up the country.  She has to allow for a face-saving out in which he can boast about a “win” on Fox and Friends.  Who really cares as 70 percent of the country know it is all bull shit anyway.  The other 30 percent are growing smaller by the day.

Learn From JFK 

jkf_niki

 

Chuck and Nancy can learn from President Kennedy during the “thirteen days” in October 1962.  Put something on the table that allows Rush and Ann to get off the president’s back.

After sizing up Khrushchev after his meeting a year earlier,  JFK knew he had to appease the Soviet hardliners to give Khrushchev some room to maneuver — even though it would come at a political cost —  by removing the U.S. Jupiter missiles from Turkey,  the country’s first nuclear-tipped, medium-range ballistic missiles — or risk nuclear war.

Because the alternative was a nuclear holocaust. Kennedy believed and said so to those he trusted that nuclear weapons, if contained in a country’s arsenal, would eventually be used. And he had first-hand reason to believe that Khrushchev was just the man to pull the trigger. At their meeting in Vienna the prior year this has been made stunningly clear. “I talked about how a nuclear exchange would kill seventy million people in ten minutes,” he later told Time’s Hugh Sidey, “and he just looked at me as if to say, ‘So what?’ My impression was that he just didn’t give a damn if it came to that.”

And that’s why he was willing to offer  a trade. If the Russians removed their missiles from Cuba, Kennedy told Krushchev that he would remove American missiles stationed in Turkey. Kennedy’s calculation paid off. Khrushchev accepted the trade. 

…  This is the lesson of the Cuban Missile Crisis that gets overlooked but should be the key to all future confrontations with a dangerous enemy: Always leave the other side a way out. Otherwise, they will only have a way in.  – The New Repulbic

The new Democratic House along with the majority of the country don’t like that “F$@ken Wall” just as much as the former president of Mexico, Vincente Fox.

Tabling the above proposal, however, or something similar puts the onus back on the White House to get the government open, which is the country’s most pressing issue.

If the president rejects the proposal, his poll ratings drop another five points.

If the Dems don’t counter, they lose the high ground.   Just Do It.

 

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Sector ETF Performance – January 18

etf_detf_w

etf_m

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Global Risk Monitor – January 18

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La Grande Entrée!

Go Boogie!  The best starting five in the history of the NBA is now in action!

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More, please!

We all need to get ourselves back to the Garden this place…  The kindness and innocence of a little child.

 

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Ten Good Weekend Reads

 

patents

  • Why do we bother with stock market forecasts?  – Irish Times
  • The Left’s Delusions About Mexico’s New President – New Republic
  • Economists reconsider how much governments can borrow – Economist
  • Public Debt Through The Ages – Barry Eichengreen – IMF
  • ‘Modern Monetary Theory’ Is a Joke That’s Not Funny – Bloomberg
  • Don’t Be So Sure Hyperinflation Can’t Hit the U.S. – Bloomberg
  • Don’t kid yourself, the Federal Reserve isn’t done with interest-rate increases – MarketWatch

 

words per fed statement

  • Global policy uncertainty at record levels, Deutsche Bank says – FT

policy uncertainty

  • 5 puzzles in the international economy – Brookings
  • Goldman Says Rich People Will Drag Down the U.S. Economy by Spending Less – Bloomberg

Bonus

  • The Things John Bogle Taught Us: Humility, Ethics and Simplicity – NY Times
  • Bridgewater’s New Brain: A Millennial Woman Is Blazing To The Top Of The World’s Largest Hedge Fund  – Forbes
  • The Investment Philosophy of Paul Tudor Jones – gurufocus
  • US report says rapidly modernizing Chinese military has set sights on Taiwan – CNN
  • Barry Bonds getting support from early ballots to Baseball Hall of Fame – NBC
  • GOLF’s 2017-18 ranking of the Top 100 Courses in the U.S – Golf.com
  • The Loneliest Generation: Americans, More Than Ever, Are Aging Alone – WSJ
  • Orwell v Huxley: whose dystopia are we living in today? – FT
  • Time for America to embrace the class struggle FT
  • A majority of Americans support raising the top tax rate to 70 percent – The Hill
  • What If Karl Marx Was Right, Mostly? – Econintersect.com

BBC Masters of Money Karl Marx

 

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TOTD: Quantum Mechanics Of Life

TOTD – Tweet of the Day

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