T-Bash du Jour: Trade War

The hand-wringing is so intense this morning I feel like I should be passing out cans of Burt’s Bees Hand Salve. 

Politico warns us of “How Trump wall could beckon global trade war…”

Over at the NY Times they claim “Tax Plan Sows Confusion as Tensions With Mexico Soar.”

The Washington Post looks at the matter in their Workblog column and title it “Tariff? Border tax? Why it’s so hard for Donald Trump to make Mexico pay for the wall.”

From a more pragmatic (than political) standpoint, the idea of building a Wall with U.S.-made steel sounds pretty good on paper.  However, the cost will be much higher since for years, China has been dumping steel in the American marketplace.

Still, there’s a good reason for the Trump wish to make the Wall of American steel (an aspect of his order that may be illegal over-reach):  It would begin to make America autonomous again.

For those who do not understand the perilous times we are in, we are in a massive global replay of events that happened before in the 1920’s and 1930’s.

We track this “approximate rhyme” with prior history a couple of times per week on our www.peoplenomics.com site, but the chart that explains the most is comparison of how an equally-weighted summation of the Dow, S^P, and NASDAQ compares with the 1920’s Dow should most of what you need to know.

image

 

This week, in case you missed it, lines up with the week of July 18, 1929.  For this to work out, we should continue smashing the records in the market until the middle of March. 

Maybe a pullback today due to disappointing data which we’ll get to in a sec.

However, there is another way to play “guess the high” – and that is measuring days from the Hoover Inauguration to market peak in 1929 (182 days) and then counting from the Trump Inauguration  January 20th to 182 days later this summer.

Our work seems to hint that March is highly possible, however, since Trump is more of a communicator and so are the Trump-bashers.

The point?

Ah!  When you have studied the Kondratiev/Kondratieff Wave for as long as I have, and have read as many Fed Working papers, the thing that strike you is that the RHYME is never precisely the same. 

It varies based on communication of market information.  In other words, news, policies, and actions.

The really defining work (and it’s not that hard a read) is “Bubbles and Market Crashes” which was written years back by Michael Youssefmir, Bernardo A. Huberman, and Tad Hogg.

It’s brilliant because if you look at page 17 of the .PDF of the paper at arxiv.org, you will see a series of peaks evolved that represent the “shape of events” in financial markets based on placement of “information shock.”

This matter of “information shock” in the markets was also brilliantly discussed by Didier Sornette in his book Why Stock Markets Crash: Critical Events in Complex Financial Systems.

The key take-away from both approaches is similar in  that the events that lead to a Crash actually are found in the minutes, hours, and even days and weeks before the onset of crisis.  It is the placement of the  “information shock” that ripples around and then causes issues.

An example:  Remember when I warned that the Deutschebank scuttling of the “dual CEO” approach was failing?  It took a nearly 9-month gestation period for that crisis to be birthed.

The good news is that since this is the week equivalent to July 18, 1929 in one modeling method and January 17, 1929 in the other, we likely still have a good ways to move up before the world comes crashing down.

You see?  Hand-wringing can wait  At least for a little while longer, but you’ll need to keep a sharp eye from trigger events just under the headlines.

Day to Data, Fed “Revises Money”

This being Friday we have two economic reports to deal with in a moment.  But I would draw your attention to the H,.6 Money Supply report Thursday which included this:

For release at
4:30 p.m. EST
January 26, 2017
H.6 (508)
MONEY STOCK REVISIONS
The Federal Reserve revised its measures of the money stock and their components to incorporate updated seasonal factors and a new quarterly benchmark.
This release includes seasonally adjusted measures of the monetary aggregates and components produced with revised seasonal factors, which were derived from data through December 2016 and estimated using the Census Bureau’s X-13 ARIMA-SEATS seasonal adjustment program.1 The updated seasonal factors resulted in minor revisions to the growth rates of seasonally adjusted M2 for individual months in 2016, slightly pushing up the growth rate for seasonally adjusted M2 in the first half of 2016 and pulling it down slightly in the second half of 2016.
This release also includes a new quarterly benchmark, which incorporates minor revisions to data reported in the quarterly deposit reports and takes account of deposit data from Call Reports for banks and thrift institutions that are not weekly or quarterly deposit reporters.2 These revisions to deposit data start in 2015. In addition, this release incorporates data from Call Reports on the amount of small-denomination time deposits held in individual retirement accounts (IRAs) and Keogh accounts; related revisions to deposit data start in 2016. Likewise, the benchmark incorporates revisions to IRA and Keogh balances held at retail and institutional money market mutual funds; these revisions to data on money market mutual funds begin in 2007. This release also incorporates the receipt of historical information from other sources of data.
The effects of both the revisions to seasonal factors and the new quarterly benchmark on the growth rates of M1 and M2 are outlined in appendix tables 6 and 7.
Historical data, updated each week, are available with the H.6 statistical release at
www.federalreserve.gov/econresdata/statisticsdata.htm.

Any time someone jiggers the counting of money, we tend to pay attention.

Still, we are intrigued by what the Fed is doing.  If you look at the 3-month money data in December (most recently completed month) you will see how they ‘stood on the brakes and dragged their feet” on creation of M1.

image

On the other hand, compare that with the most recent 13-week period through Jan. 26 and M1 pops right back up:

image

What this seems to suggest is that the Fed is continuing to keep liquidity fairly high and is not trying to choke down economic growth by keep M1 too tight.  At least so it looks to me.

Durables Not so Durable

As sobering as “recalibrating money measures” is the Durable goods order report just out from Census:

New Orders 
 
  
New orders for manufactured durable goods in December decreased $1.0 billion or 0.4 percent to $227.0 billion, the U.S. Census Bureau announced today.  This decrease, down two consecutive months, followed a 4.8 percent November decrease.  Excluding transportation, new orders increased 0.5 percent.  Excluding defense, new orders increased 1.7 percent.       Transportation equipment, also down two consecutive months, drove the decrease, $1.7 billion or 2.2 percent to $73.7 billion.  
 
Shipments
 
   Shipments of manufactured durable goods in December, up three of the last four months, increased $3.3 billion or 1.4 percent to $238.0 billion.  This followed a 0.3 percent November increase.
 
   Transportation equipment, up following two consecutive monthly decreases, led the increase, $2.0 billion or 2.5 percent to $82.3 billion.      

Unfilled Orders 
 
   Unfilled orders for manufactured durable goods in December, down six of the last seven months, decreased $7.2 billion or 0.6 percent to $1,119.4 billion.  This followed a 0.3 percent November decrease.
 

 Another Bummer is GDP

From the Bureau of Economic Analysis:

“Real gross domestic product (GDP) increased at an annual rate of 1.9 percent in the fourth quarter of 2016 (table 1), according to the “advance” estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 3.5 percent. The Bureau emphasized that the fourth-quarter advance estimate released today is based on source data that are incomplete or subject to further revision by the source agency (see “Source Data for the Advance Estimate” on page 3). The “second” estimate for the fourth quarter, based on more complete data, will be released on February 28, 2017.

The picture of the  GDP growth (annualized) looks like this:

image

For the moment, futures are about flat.  But I wouldn’t be surprised to see some money come off the table for the week later on today. Might even drop under 20,000 as the market tries to sort out how the new administration is handling the future.

With that, we’ll have to send some hand-wringing cream over to CNN which is reporting “Trump to speak with Putin on Saturday.”

Toss in the pessimism from “Mikhail Gorbachev: ‘It All Looks as if the World Is Preparing for War’“ and there’s plenty of reason for despair.

But save your worries for five years or 10.  We are not ready for war, Gorby.  We need to build steel plants up and get manufacturing onshored.  And in this regard,  Trump’s Wall is a fine first move in the era of Second Depression Chess.

Pawns to King’s Wall 2?

Comments

T-Bash du Jour: Trade War — 30 Comments

  1. My great-great-grandfatherx6l immigrated to the United States in 1764 from Ireland. He fought in the Revolutionary War against British tyranny and his sons, grandsons and all male descendants fought in the Civil War, Spanish-American, and both World wars. My husband is directly descended from an ALAMO defender. Who are you, immigrant-from- somewhere -unimportant upstart, to judge who should rightfully be in this country? You are a geeky embarrassment to this country and the state of Texas.

    • Eva/Ricky such trolls you are.
      Go to Vicksburg and the Civil War Cemetery. Count the Ure’s – on both sides. (26 laid it down. so we are not recent/unwashed as you infer.)
      In terms of housing, I don’t apologize for a thing. Have you built 90% of your home? I doubt it.
      And when comes down to the slam on my economic work, where pray tell may I find your almost 20-year history of free, publicly shared insights into economics so I can compare and assess your arrogant superiority? I’m sorry, but I haven’t seen it yet. Just the http://www.link, no more bullshit hyperbole accepted.

  2. Forgot to mention- URE such a screamingly successful businessman/ journalist that you live in a MOBILE HOME out in the sticks? most real Texans call people like you ” ignorant white trash”. go plot some more hilarious “financially brilliant” economic graphs for the unwashed masses that read your slop…

  3. Where is your brain? How can you defend the oaf in chief ? You must in reality be a very, very stupid man. You lost part of your eyesight, and part of your brain last year. (Please, please move very far away) You are promoting a man who just increased world hatred of the USA a million fold- terrorists are cheering for people like you…mass hatred is what they encourage. You are in the same league as racist scumbag Bannon.

  4. Jon,”…But my travels and exposure to way life in the bigger cities like New York, Boston, Los Angeles, Seattle, San Francisco and Houston …”

    You should travel further and stay there. Like out of the country. You want diversity help yourself. No one is holding you back but not everyone wants what you want.

    Jon,”…a wonderful mix…that are here trying to make themselves a better life, just like my grandparents did in the early part of the last century…”

    Wins best argument for immigration restriction.

  5. Oh LJ, your superiority complex runs amok again. Spare me your liberal angst.

    America is not a “face” but an attitude and a philosophy of life. Assimilation is not accomplished by throwing one’s self on the welfare state and shoveling in tons of ME people that are determined to do our institutions, our way of life an our fellow countrymen harm for quick political gain is treasonous. This is the point you and your elitists willfully disregard in your headlong efforts to turn America into a mirror image of the EU. If Germany doesn’t wake you up in your protected enclaves nothing will until the Islamic insurgents are on your doorstep.

    Since my “turning down the flame” statement went completely over your head I’ll have to explain further. Assimilation is what immigrants do in America. The first generation does its best to understand it but usually has to rely on the second to fully accomplish this. This is what my grandfather went through coming from Greece – legally – while watching his kids grow up Americans. He even had them pledging allegiance to FDR’s picture for a while there. It was just his way of understanding America. Cultural assimilation will always have a good mix of all cultures in our Melting Pot which is what makes America unique in the World. BUT we unite under a commonly agreed upon Constitution, not Sharia Law, and not the importation of the disregard for law that comes with the inundation of people south of the border. How many AMERICANS have to die for your attitudes to change? Will it be one of your family that makes the sacrifice on the altar of “inclusiveness”?

    As far as our Native Americans go they did a pretty good job of annihilating each other as the opportunity presented itself. The “Noble Savage” of liberal myth never existed but that does not mean we need to forget about them. I’m fully behind preserving, recording and coming to a greater understanding of their history as fellow humans on the Earth not to mention taking a better approach to getting them off the old reservations that have outlived their usefulness.

    • And you’ve turned your black robed academics into a photo negative of a bunch of Klansmen. As a southern boy you’ve simply traded one set of prejudices for another. CORN-gratulations.

  6. George, come on. You are smarter than that. Do we have to have a President that has to speak in dumbed down terms to reach the flyovers. Do you know how ridiculous that sounds? What you just said is somewhat a sardonicism on the people that live in those states. But they are probably not smart enough to realize what you just said. And, that is my point. Trump is snickering every time he sounds stupid. Then again, maybe not. Maybe he IS stupid. No I will correct myself. He is stupid. What kind of businessman would recommend a solution that puts a tariff on goods coming into the U.S and call that a way to pay for a wall? Does he think WE are as stupid as he is? That robbing Peter to pay Paul style may work in the slimy world of real estate Development, but not in my country.

    • Can’t remember where but as I recall it was determined the average IQ of the electorate is around that of an 8th grader – hence the simplified slogans that most everyone can at least on face value agree with – Leave no child behind, hope and change, make America great again etch, etc, etc

  7. We might want to avoid a world war.

    1.) sino russian treaty of friendship article 9
    2.) Russia’s heavy machine industry. Among the best, if not the best in the world.
    3.) Chinese hi-tech manufacturing.
    4.) IQ bell curve vs population. China has more geniuses and near geniuses than we have people.
    5.) We have a hi-tech, very expensive military machine w/ a limited supply or experienced and trained people to make it work. (Sound vaguely familiar? Kinda like NAZI Germany & Imperial Japan, perhaps?)
    6.) Putin. Love him or hate, if you under-estimate that man, you’ll end up tired, sorry and sore.

  8. (OT but the other side of the jaws that Trump is supposedly fighting)

    FEAR news, not just FAKE news…

    http://oilprice.com/Energy/Energy-General/Robots-Over-Roughnecks-Next-Drilling-Boom-Might-Not-Add-Many-Jobs.html

    This entire “Robots Gonna Eat Our Jobs” meme is just beginning to wear me out. The above article is ridiculous, since the patents on the original ‘Iron Roughneck’ are expired! This is repackaged old news!

    These robots have their own set of problems, and require an onsite expert for maintenance. They have zero common sense, so a wrong move by a novice can severely gum up the works, as the robot isn’t really a robot, but a remotely operated machine. Today, if the ‘robot’ (very loosely applied term) futzes up, then the repair guy is hours away, at minimum $2000/hr downtime just to get to the rig, much less repair.

    Cameras don’t work well on rigs, without guys constantly cleaning them and reworking the seals so humidity doesn’t fuzz the lenses. Sensors are always going out and busting loose from their mounts – so garbage in – garbage out, and there better be a human that knows when the data is bad.

    FEAR NEWS is as much a problem as FAKE NEWS, and it seems there is just too danged much crap out there lumped in as news in the first place.

  9. CBS “This Morning” news had a change in programing this morning. At the end of “News in 90 Seconds” they nearly always have 2-3 comedians from the Late Night Shows cracking jokes about Trump or the Republicans. This morning there were none. What do you think that is all about?

  10. CBS This Morning had a major change in programing this morning. At the end of “News in 90 seconds” they always have 2-3 comedians crack some new jokes about Trump or the Republican Part. Today, there were none. Could they be stepping in line?

    • Trump-bashing will be a cyclical thing. Wait till we drop precipitously in the markets later this year (IF). They will then return along with Trumpvilles – which will be like Hoovervilles. Only in the rhyme.
      But too early for that just yet.
      Enjoy the peace and quiet.

  11. I need to remind you that Trump is a grad of the U Penn Wharton School of business. I hardly think his head will spin, nor implode. I’d leave that to the Berkeley types. Hand salve for a brother?

    • George, Cornhusker’s Lotion wouldn’t even help Jon’s chapped…. umm, hands. His concept of a 31-ft ladder vs. a 30ft wall is only one of several missed significant points. To wit:

      JON~~

      1. That big ladder is only on ONE side of that wall. Climbing down isn’t nearly as easy as climbing up and unless Mexican entreprenuers start opening up rappelling academies, the newly-fallen will be deported in body casts intead of
      handcuffs.

      2. Why does every half-wit assume that wall be some simple upright structure devoid of technology? Thirty bucks buys a decent dashcam for your car, but we won’t have state-of-the-art imaging capabilities along our national border? For even less lucre you can pick up a 3-million volt stun gun [mine cost $15] but we can’t somehow figure out how to totally electrify a structure’s surface? – And, how about ground sensors for enterprising Mexican moles? Pretty simple solution to tunnelers and far cheaper than sinking a deep foundation barrier! Jon, in a duel between lasers and ladders who do you think wins? An added plus to this wall will be a surge in the public/private security industries and gadgetry that would make 007 envious. HINT: much of it already exists in the military sector, just waiting for crossover implementation… but another new industry is always welcome!

      3. The AUTHORITY and FUNDING to create the wall was approved by Congress LONG AGO! How does Jon think the first 700 miles of a pretty crude, shoddy barrier come to be erected? But, in typical federal fashion, the project quickly became just another bottomless pit ripe for crooked federal contractors to suck up every loose tax dollar while using Obama’s irrational regulatory systems to their advantage. This is also why today’s faux-wall is a hodgepodge of steel, wood, concrete and chainlink. The only think Congress is haggling about now is how much more money will be involved which will be affected by the following…

      3. Jon, you may expect Trump’s wall to be vastly different. Once existing contracts are cancelled and new ones offering REALISTIC solutions are signed, that wall will quickly become a formidable barrier. I even expect labor costs of constuction to drop along the way. There are plenty of unemployed patriots who would be eager to work on that wall for less than union scale. And speaking of unions, what better way to display national solidarity than to waive their one-sided benefits for a projet that truly benefits ALL americans? If that doesn’t fly we still have the largest prison population on the planet to fill in the workforce.

      FYI: did you know it was prisoners who in the late 1890’s built the original Ft. Leavenworth [KS] Federal prison? Jon, those walls were 40 ft high and extended 40 ft BELOW the ground level. Yet, you serious think we cannot exceed those standards today???

      Think again, Son!

    • The Wall is a statement, a functional and expensive one, but it says that the end of the attempt by the far Left Libt**ds, both “D” and “R”, to force the change of the face of America, to lower the flame of the Melting Pot and overwhelm the population with non-American faces and ideas is to come to an end – NOW. Considerable economic and, more insidiously, cultural damage has already been done by traitorous politicians bringing people in from the ME and the South.

      What I do not understand is how these destroyers in the government think they’re going to control the country when things go completely insane with this non-homogenous mix? True martial law? For how long? What will be left of an economy when that is over? Will we have some hubristic 5 year plan, a command economy, to get things back on track? Or maybe complete dissolution of the borders they once talked about in a grand merger of the North American states? There is no easy way out of what has been done over the past 40 years.

      http://www.zerohedge.com/news/2017-01-27/what-trumps-wall-says-world

    • I think you miss the point Jon that Trump’s limited lingo base is how he communicates with the Mass in FlyOver. Fact is, sometimes messages have to be simplified massively in order to but through the noise floor which he has repeatedly demonstrated.
      And since he’s a successful developer by all accounts and has had to get plans through government approvals, perhaps the art of “speaking stupid to get the point across” — has worked well – and seems to arguably still be working…
      Never confuse erudite with productive nor simply-spoken with stupid. Bad, bad oversight if you do it.

    • LJ’s misreading is intentional George. If it doesn’t come from his Ivory Tower crowd it will never be valid to him. That’s how the elitist mind works.

    • p.s. Asians are now a larger undoc’d group than Mexicans, how will Emperor Trump build a wall for this:

      https://www.theatlantic.com/politics/archive/2015/08/asians-now-outpace-mexicans-in-terms-of-undocumented-growth/432603/

      Of course you’ve heard of the Chinese birthing centers:
      http://www.rollingstone.com/politics/news/welcome-to-maternity-hotel-california-20150819

      And the Chinese Real Estate Torture, recently increased by Vancouver BC putting a tax on foreign buyers (thereby sending the Chinese south to Seattle, etc):
      https://www.realwealthnetwork.com/learn/news/chinese-real-estate-investors-buying-markets/

      re-posted:
      http://www.sfgate.com/news/politics/article/Trump-wants-to-build-a-wall-Finding-workers-10886270.php

  12. “For those who do not understand the perilous times we are in, we are in a massive global replay of events that happened before in the 1920’s and 1930’s”

    Now you’re talking my language, but I love all YOUR writings. A propo the border wall, why not mine the border with warning signs? It used to be OK to sink battle ships with 1000 of the best. Firebomb Tokio and Dresden, and now we pretend that we’re all so kosher.

    • Fascinating topic. George is not alone in his conclusions. History is the biggest indicator regarding what precipitates an economic crash and also armed conflict. The two are almost always interrelated. The global financial crisis of 2008 was the strongest indicator yet that the fuse to the next war had already been lit. How? According to author Richard Kelly Hoskins in “War Cycles Peace Cycle,” the global economy drives an approximate 20 year buildup cycle to war. In Hoskins’ model, the best financial indicator for looming war resides in commodities prices. The bottom for the commodities market was reached somewhere around 2000, meaning ‘if’ large scale armed conflict is going to occur, it will happen sometime around 2020. It is worth noting that near this 20 year cycle’s midpoint (2008), super-high subprime mortgage rates accelerated the global banking crisis when mortgages defaulted in massive numbers and late payment rates skyrocketed, ultimately bursting the massive housing bubble. Fraudulent underwriting, predatory lending and banking deregulation were major contributing causes to the bubble collapse. America began re-inflating the economy in late 2008 thru periodic ‘quantitative easing,’ where the Federal Reserve lent funds to banks at zero percent (or very low) rates and printed new money to stave off a full blown depression. Borrowers could pay off their loans at very low rates until inflation eventually started creeping in once again. That is the inflection point we have just recently begun to reach. Soon, the shock of inflation and huge amounts of available cash will max out commodity prices, the key indicator in a Hoskins’ 20 year war cycle. If Mr. Hoskins theory is correct, we’d all better start prepping.

      • Agreed, we are prepping! Other people from other ways of ‘seeing’ see it the same as you and George, etc. For those that have eyes to see and ears to hear.

  13. HA ! Nice finish George, although we might want to send CNN a bag of diapers to guard against uncontrolled wetting of them selves. KIDS, any hob-goblin can send them running !!