The Global Macro Monitor defines “macro swan” as any global macroeconomic or financial event with the capacity to spill over into world markets causing risk aversion and lower asset prices. – GMM
The Swans were mixed today as the real action was in the major markets, which are having their epiphany we warned was coming last week.
We suspect trade war tape bombs will dominate the rest of summer. Helmets.
We are reposting a piece we wrote two-years ago.
Ironically, when we were back on the east coast in August 2018, we told one of our friends Trump’s racist dog whitles and blatent rasicm would lead to riots in the American streets. Well, here we are.
The results of last night’s primaries led the Drudge Report to proclaim,
We also find it interesting Mike Huckabee — a so-called “Christian” minister — took down his racist tweet and we had to go out and find it and paste it back into the post. Nothing Christ-like about his post, by the way.
We try to remain nonpartisan at the Global Macro Monitor, have no problem taking shots at both parties, and, personally, are comfortable splitting tickets on an election ballot. However, this tweet from Mike Huckabee strikes a deep nerve in us that really, really pisses us off.
My Late Brother
Today is the birthday of my late brother who was murdered by an undocumented immigrant. As his killer stabbed him in the chest, he declared, “all Anglos need to be exterminated.”
My brother left a two and five-year daughter. It was an incredibly tragic experience that I wish on no family.
If any family has a right or reason to be angry at the immigration situation, it it ours.
However, the Mexican national that killed my brother did so, not because he was Mexican or an immigrant, but because he was a murderous psychopath. Just as the school shooters that are terrorizing and killing our nation’s children do so, not because they are white, and predominantly middle class, but because they are mentally ill.
Not all white students are shooters but a very infinitesimally small fraction are. Should we therefore keep all white students out of high school because they fit the profile of a shooter? That is the same asinine logic driving current immigration policy, if one exists at all.
Stoking Fear and Exploiting Tragedy
Shame on the president and his aides for exploiting the families of those who have suffered the tragedy of losing a loved one in such a situation. Stoking fear, racism, and bitterness to divide us is not going to bring any of our family members back nor will it do anything to solve the problem or prevent further tragedies. On the contrary, it will only instigate more violence.
We need to focus on fixing the problem by first thinking hard and deciding what we want as a nation, not retreating to our default positions of what economists call corner solutions, that is completely open or completely closed borders.
What About Our Ancestors?
Under current law, most, if not all, our ancestors who immigrated to this great country would be deemed illegal and, before last week, would have had their children separated from them. The generous immigration policies of a younger America is what made this nation great. In a graying society immigration is essential to economic growth and cultural dynamism.
Yes, we should enforce the law but what law?
Such an important question needs to be debated in a forum where there is mutual trust and respect. We can start by stopping and condemning the racist tweets like the one below.
https://twitter.com/GovMikeHuckabee/status/1010497564435730434
[The orginal tweet was removed but we found a copy]
And this guy calls himself a Christian, much less a minister of the Gospel? Governor Huckabee’s tweet is pure evil — racist, intended to instill fear and to divide us. Not to mention the tweet bears false witness against the minority leader, his sister in Christ, who graduated from Trinity College in Washington, D.C…
I fear for my brother, Governor Huckabee, on Judgement Day,
Then he will say to those on his left, ‘Depart from me, you who are cursed, into the eternal fire prepared for the devil and his angels. For I was hungry and you gave me nothing to eat, I was thirsty and you gave me nothing to drink, I was a stranger and you did not invite me in, I needed clothes and you did not clothe me, I was sick and in prison and you did not look after me.’
They also will answer, ‘Lord, when did we see you hungry or thirsty or a stranger or needing clothes or sick or in prison, and did not help you?’
He will reply, ‘Truly I tell you, whatever you did not do for one of the least of these, you did not do for me.’ Then they will go away to eternal punishment, but the righteous to eternal life. – Gospel Of Matthew, Chapter 25
Best Policy In Our View
Finally, we favor a relatively tolerant immigration policy because some of the greatest Americans we know are first-generation immigrants and generate a multiple of benefits to our society and economy, much more than they take from it. It also is true at the macro level as reflected in a recent study by the NY Times,
The study found that between 2005 and 2014, refugees “contributed an estimated $269.1 billion in revenues to all levels of government” through the payment of federal, state, and local taxes — which far outweighed their cost to the country. “Overall, this report estimated that the net fiscal impact of refugees was positive over the 10-year period, at $63 billion.” When the study was completed in July, however, it was never publicly released, and the Trump administration dismissed the findings. – Vox, Sep. 2017
Why would the administration spike such a report?
By the way, some of our friends were granted amnesty by the darling of conservatives, President Ronald Wilson Reagan.
We Need More Risk Taking Labor
Finally, we have written about the labor shortages the country faces, especially in construction, which are driving up the price of homes putting, say, a starter home out of reach of most young Americans.
Why wouldn’t we want more of these workers, who are willing to risk their lives to come to this country to make a better life for their families. You know, just as the pilgrims did? Is not that the kind of work ethic that will Make America Great Again? Just askin’.
We are better than this, America. Let’s work together to do a good immigration deal. One that secures the borders, maximizes our country’s interest, is respectful to all, and is fair and just. Amen.
Disaster looms.
Good piece in Washington Post on the first U.S. casualties of a trade war with China. You can see it in the charts China has targeted its retaliatory tariffs to hit Trump where it hurts.
While the largest urban and suburban counties are home to almost as many people working in tariff-exposed industries as rural areas, the rural concentration is far higher, about 1 job in 33. In the big cities, it’s 1 job in 200.
Tariff-exposed jobs are more than twice as likely to fall in counties that voted for Republican Donald Trump in 2016 than in counties won by Democrat Hillary Clinton. There are more than 1 million jobs exposed to China tariffs in more than 2,600 counties carried by Trump, and fewer than 564,000 exposed jobs in Clinton’s counties. — Washington Post, June 22
July 6th Deadline
We do hope they strike a deal before July 6th, the date U.S. tariffs on Chinese imports take effect, and same day China’s retaliatory tariffs are expected to launch. We are not optimistic, however, unless the financial markets crater on trade war fears and force the president to cave, and move negotiations to the WTO, where the U.S. will have more leverage to extract concessions from China.
Furthermore, we don’t believe President Trump is a free trader at heart but more of a protectionist and neo-mercantilist. There is no “Art of the Deal” – see his waffling on immigration – and no method to the administration ’s madness to negotiating anything, for that matter, but only driven by impulse and myopia. We hope the markets awaken to this reality before it’s too late.
The administration also fails to understand the overall trade deficit is a function of America’s savings deficit and not the cum sum of trade microaggressions by our trading partners.
The upside to this mess is that Americans will finally realize that trade creates both winners and losers and that the majority of the country is better off with free trade even if it is not perfectly fair and reciprocal. The “best” policy for the majority is to expand trade and remain engaged with the global economic community but also provide a strong safety net for the losers of free trade.
The slouch toward tribalism will destroy the United States and global economy.
What a great match between Germany and Sweden yesterday. The Germans won it in last minute with this goal. Super entertaining!
Summary
Commentary: Q2 GDP should be out soon, and many are expecting 4 percent plus growth. There has been a nice improvement in capital spending, which we suspect is dominated by big Tech CAPEX spending on the buildout of the Cloud. Investments in AI and labor reducing technology, mind you.
The world’s biggest tech companies have clearly gotten that memo. Aggregate spending for 2018 among the 10 largest tech companies is approaching $100 billion each for capital expenditures and R&D, according to new research from Jefferies. Capital expenditure commitments and R&D outlays are seen rising 47% and 24%, respectively, this year. The biggest spenders, which should come as no surprise, are Amazon (AMZN – Get Report) , Alphabet (GOOGL – Get Report) and Facebook (FB – Get Report) .
“We view their outsized investments as positive in extending their leadership for years to come,” says Jefferies analyst Brent Thill of the spending plans of the big three tech names. – TheStreet.com
Increased investment spending should lead to a decent bump in Q2 GDP growth to the upper 3 percent. Better, but far from “greatest economy ever.” The chart below illustrates that y/y quarterly GDP growth since 1948 has averaged 3.2 percent and 2.2 percent since 2000. The data for 281 quarterly y/y growth observations show a relatively normal distribution with a slight negative skew.
Stunning. Vertical farm is 100x more productive per foot and only 10 percent of the water than regular farm. Hydroponics, baby!
See our 2011 post here.
A warehouse in New Jersey is using technology to enhance how crops are grown in a world facing overpopulation. In this week’s Sunday Spotlight, NBC’s Morgan Radford discovers how seasons don’t matter and flavors are controlled in this evolving industry.
» Watch the latest fromTODAY: http://bit.ly/LatestTODAY
The euro periphery was rocked today by the rise to power of two populist Eurosceptic political powers, which has called into question the country’s membership in the euro. Italian 10-year sovereign spreads out 22 bps. Euro banks weaker
EM
EM relatively stable as Argentina solidifies IMF agreement. Brazil 10-year yield up another 25 bps, and 244 since April 30.
SIFIs
An index of the Global Systemically Important Financial Institutions (G-SIFIs) has decoupled from the S&P50 and Nasdaq, losing around 18 percent YTD. Something is not quite right. Watch this space.
Global Macro Monitor 