Brian Sullivan just said, “the market is selling off, but the steel and aluminum stocks are moving up”.
The reason for this is that another, somewhat older, Baby Boomer just made a decision to favor one old sector of the US economy over, well, all the other sectors. Stocks, except for the one favored sector, are predictably selling off.
Of course, what I’m talking about is the decision by President Trump to slap tariffs on steel and aluminum imports. He was flanked by Wilbur Ross, who is decidedly not a millennial.
I have argued here on my blog that one shouldn’t trade based on politics. But I also feel you shouldn’t trade based on ‘old’ thinking. What President Trump and Wilbur Ross just decided was to look to the past to make a present decision.
Being an old white guy, I think I have a little insight into how old white guys think. And what old white guys think is that there was a golden age in the past that we should strive to return to. The whole ‘Make America Great Again’ thing is a political expression of this thought. The reason for this, I believe, is that when one has been privileged for a long time, a movement toward equality irrespective of age, sex or race feels like we are losing something.
I listened to the televised ‘news conference’ announcing the tarriffs and there was a decided feeling that the US steel and aluminum industry used to be great, and now they are not. It’s time to return to the old days when steel and aluminum were dominant industries.
The fallacy is that our economy is not based on that anymore. The world’s largest company makes cell phones. Microsoft, who is in the top 5 of companies, makes nothing tangible at all. If we open up a trade war with other countries, what is that going to do to exports of iPhones or software? Certainly, can’t help.
We’ve seen this short sighted, old thinking before. We got a taste when we, and everyone in West Virginia, was told we were going to bring coal back, saying that the previous administrations had struck it a death blow.
What hurt coal was not policies, but natural gas. It got cheap, coal can’t compete with natural gas. Never mind that there were more solar panel installers in the US now than coal miners. Oh yeah, I forgot there were tariffs previously placed on solar panels.
These tariffs raise the price of the commodity and that is passed on to the consumer, eventually. If solar panels are more expensive, less people will opt to install them. When steel goes up, the cost of construction goes up and the cost of something like cars go up. When aluminum goes up, the costs of planes goes up.
And here’s where it gets real for a lot of us. Although US Steel is up 5.6%, the recent darling Dow stock, Boeing is down about 4%.
And Boeing is just the tip, the Dow is down 2% and the S&P is down 1.65% as I write this. Even Apple is down 2.5%.
Old thinking can be expensive.