Oy Veh, Oy Veh!
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Hamas rockets Israel then complains at the U.N. when Israel shoots at Palestinians who participate in attacking them. Meanwhile an American school principal allows students to pray for Hamas. Tom Friedman believes the world is flat. I believe heads are flat, the world remains round.
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I have no doubt the Trump meeting with N Korea's leader will stretch out over many weeks if not months. If anything positive comes of it great. However, if nothing comes of it then what is Trump's next move? Does he do nothing and simply waits for N Korea to either test fire more rockets and/or continue to develop their capability of delivering a nuclear bomb attached to a missile?
Does he attack N Korea because he might conclude they led him down a primrose path?
Does he put more pressure on China to press N Korea?
The next few months should be very interesting and I suspect the market will be paying close attention and acting like a yo-yo. After the job report there is little doubt The Fed will defer raising rates.
Trump is correct when he suggests our current trade policies/agreements leave us militarily vulnerable for several reasons but not because our allies have bad intentions. First,we cannot allow ourselves to be dependent on foreign nations, even if they are allies, for critical material used in defense weapons. Second, those who are employed in factories earn more than most of those in service sector jobs. This is how America built a middle class which became America's cement.
We are already dependent upon Russia for space vehicles and engines and finally realized how stupid that was.
Growth through innovation is critical if we are to sustain ourselves economically but certain basic industries also must remain here in America.
I believe, over a sustained period, trade agreements will be modified and the world will avoid serious trade wars but there will be some negative consequence during the period of time it will take for the disputes and posturing to get resolved. Nothing is straight lined. Twists and turns generally are the rule. No nation gives up ill gotten gains easily or benefits derived from stupidity and negotiating weakness on our part. Everything has to be clawed back.
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Ross, Rants again. (See 1 below.)
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Dick
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1)US job growth from here will appear lower than might be expected because there are less and less workers to hire. Keep in mind the new unemployment claims number each week are an absolute number of people, but the total population of workers and population in general is much larger than it was ten years ago, so comparing jobless claims today with earlier periods needs to be kept in relative perspective. There are now 161 million in the US labor force. In 2008 it was 154 million. So the actual number of claims is relatively tiny. April unemployment for women was 3.5%, men 3.6% and whites 3.4%. So as more blacks and Latinos get jobs, the rate will get down to about as low as is possible. Blacks are at 5.9%. That is a historic low. U-6 is down to 7.6% which is getting to the lowest ever of 6.9%.
I doubt tariffs will be on place for long. The EU and others likely thought they could call Trump’s bluff and hold out for what they wanted. They bluffed wrong. Slow learners. By now they should have figured out Trump and his willingness to walk away from the table if he is not getting what he wants. Kudlow essentially said this today. The EU refused to give on quotas etc. So now the real negotiations will begin. The US is harmed far less than the other side. Merkel should have resolved this when she was in DC a short time ago. I guess she is used to getting her way. Not anymore. It is now a matter of who blinks first and it is not going to be Trump. Trump has disrupted the way things were done for 70 years, and Germany liked.
Tuesday blatantly demonstrated why I said Europe is not the place to be invested. Spain ousted its prime minister. Italy has always been a political and economic mess, but now it looks like a day of reckoning is possibly here. The populists won enough seats to have a coalition. They are generally anti EU, but did not come out and say let’s do a Brexit. The proposed economics minister had views about possibly having Italy withdraw, so the Italian president rejected him, and the whole new government collapsed before even taking office. Classic Italian political fiasco. The Italian banks never really recovered from the crash, and now there is real political turmoil. Italy is the third largest economy in the EU. Debt to GDP is around 132%. Basically the country is bankrupt, and has no way to get out from under. The EU probably has to act, but it is unclear what they really can do since the magnitude of the problem is far bigger than Greece. Italian corruption and bureaucracy makes investing in, or starting and building a business near impossible today. If Italy was a corporation it would declare bankruptcy and be liquidated. This mess is going to consume the efforts of the EU just as they are dealing with Iran issues and newly imposed tariffs from Trump. Given that they cannot get much accomplished in the EU- they almost make Congress look efficient, --it is very unclear how this all plays out. So the bottom line is stay away from Europe as an investor. There are a series of crises in progress, and it is going to get worse before it gets better. They have no leverage against Trump now. The US is the only safe place to invest now, but the world mess might restrict the upside in US stocks for a while. However, the US economy is booming. Paychecks are up, employment is essentially maxing out, there are now more job openings than there are unemployed people, home prices continue to rise, consumers are highly confident, earnings are at all time highs, and the ten year just dropped, making financing rates and mortgage rates back in very low ranges. Oil has dropped fast, so energy costs remain low, and could go lower if the Saudis and Russia do increase production as they intend. The Fed may take a little more time to raise rates given events in the EU. The dollar is strong, so that helps keep inflation lower, but exports also lower. Investors are moving money to the US as safe harbor. All of this means markets will be quite volatile all year, so stay calm as it bounces up or down by 400 points.
Italy makes a Brexit deal much harder. The EU needs to make Brexit look very painful for the UK so the Italians, Dutch, Poland and others do not consider their own Brexit. This does not bode well for the UK or EU. The EU even wants to end cooperation with the UK on defense and law enforcement. They make a public point- if you want influence you need to be a member of the EU. That is really stupid policy. No cooperation on critical issues where the UK is a large factor in these areas, and the EU is very weak on terrorism and facing Russia. With Trump stating that Germany and others are not meeting their obligations to NATO, the EU cannot afford to also lose the UK as a partner. Putin must love this.
It is very hard to determine what is really happening with China. There are so many issues at once. South China Sea. N Korea, trade. dealings with Iran, and their military build up along with intellectual property theft. All happening at once. Xi is a very good game player and very smart. He and Trump are engaged in a multi level chess match. However, underlying it all, XI needs to have strong economic growth and security. He cannot engage in an all out trade war with the US. He needs N Korea settled peaceably, and Trump just called his bluff with the walk away. Maybe they keep a scoreboard in the White House to track all the issues, and who is up or down at any moment. You need to ignore the rhetoric on both sides and just watch what actually is happening, when it is possible to figure that out. Despite the blather about Trump and the tariffs going back on, reality is, the top economics official from China came to Washington and insisted that China does not require companies to turn over Tech secrets even though that is the absolute rule. It is hard to negotiate with someone who denies what is written in his own rulebook and contracts. That is why Trump said he was reimposing tariffs. My assumption is, both Trump and Xi need to make deals, and the US and China need each other. You have two guys who are smart and tough, with giant egos. This is not getting resolved any time quickly. Just do not react to the daily ups and downs. Do not expect any quick agreements on much of anything. Expect the press to claim Trump is uncontrolled and does not know what he is doing. Xi is playing this to the hilt, and Trump is countering. The press, as usual, has no clue at all. It is a very complex process in each area of conflict, and so it will take a lot of time to get all the tradeoffs worked out. What happens on June 12 will be a key to see what happens next. It looks to me that Xi had his attempt at charm in Mara Lago, but then went home and went back to being the tough leader he really is. Trump was hopeful the charm offensive by Xi was real, but now sees it was just a charm offensive. Now Trump is reacting strongly to Xi’s intransigence and aggressive moves in various places. Think of it as two bull moose pawing the dirt and facing off. They still need each other and they still need to find ways to resolve all the issues.
The whole collusion, Hilary email, Obama led conspiracy against Trump, FBI and DOJ improper actions, etc, plus the upcoming election, make the situation in the US a mess. There was clearly no collusion, no obstruction, and unfortunately Mueller is not going to wrap it up anytime soon. It is a massive distraction from important issues. Horowitz will be the first real report of what happened, but it will not be definitive or complete. We are very far from the truth on a variety of topics from the cover up of the Hilary emails, to informants/spies, the real rationale and impetus for the collusion investigation, the involvement of Obama and Jarrett, and Susan Powers, the dossier, the FISA warrant and on and on. Mueller is not going to clear up much other than vindicating Trump, which is why he is not going to issue any report for several more months. His investigation appears to be flailing all over to try to find something to justify it. If Trump is vindicated, the Republicans crush it in November, and it seems Mueller is in no hurry to help elect Republicans. Jeff Sessions appears to be on sabbatical. No wonder Trump is frustrated with him.
So what to do now. Stay invested in the US. Stocks are still the place to be for me. Ignore all the talking heads on TV about any subject. They are all full of it. Go about your life and stay calm. Just watch what actually happens and ignore all the games by Trump, Iran, the EU, Xi, Kim etc. To quote Trump the other day—everyone plays games. And none of really knows what is really happening behind the curtain.
Starbucks management is more interested in left wing politics than serving their shareholders. They run a company for shareholders, not to be making political stupid statements. Those two guys were aske to leave by manager and then the cops, and they refused. Starbucks policy was if you do not buy, you cannot use the bathroom, and you cannot use a chair. The two guys escalated it by refusing to buy something or leave, not the manager. Now management has empowered all the snowflakes and blacks and homeless. Under the policy now, a smelly, dirty homeless guy can just come in from the cold and sit all day, and there is nothing managers can do, especially if he is black. It will become a shelter for homeless in urban areas in winter. But hey, they are welcoming -just not to nice clean paying customers. It is a terrible precedent and will lead to more confrontations at other coffee shops, diners and restaurants. It was lunacy by Starbucks management, and we are all going to pay a bad price for this. Just watch what the laws become in Seattle, San Fran and Portland, followed by NYC. Business owners will no longer have control of their own establishment. In Seattle apartment landlords must rent to anyone who can pass themselves off as able to pay rent even if they make the landlord very uncomfortable, and their looks and demeanor might degrade the sense of security at the property. They have lost control of their properties. It is like NYC where you cannot look into if someone is a convicted criminal if you are hiring. We are sinking to the lowest common denominator to be politically correct.
Every week there is a story of a guy with a concealed weapon permit, or a homeowner, or a storekeeper, shooting a burglar, or a shooter in a restaurant, thereby saving lives. You don’t hear that on most media. And in Chicago, where they have very strict gun control laws, they killed 8 this past weekend with 30+ wounded. None of the shooters got guns legally, and none applied for a gun permit. Did I miss something here. In Afghanistan there have not been 8 US combat soldiers killed all year. Compare the local and media reaction of the kiddies in Parkland and those in San Antonio. In Texas they don’t have kids exercise their little egos and go on TV like happened in Parkland. They accept reality and move on. It took cops with guns who acted promptly and properly to stop San Antonio from becoming much worse, as opposed to what happened in Parkland. Guys with guns stop people with guns. In places like Chicago gun permits and gun laws are irrelevant.
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