Category: Politics

” . . trade wars are good, and easy to win.” Wait . . . . whaaat? $SPY $QQQ $DIA $IWM

” . . trade wars are good, and easy to win.” 

Uh . . . no, they are not good, and they are not easy to win. 

President Trump tweeted these words, among others early this morning. During my morning run, my last for a while here on Maui, I heard some reporting about how the announcement yesterday came to be. 

Apparently the announcement of the new steel and aluminum tariffs was on again and off again. The CEOs were gathered in a room awaiting the President and after about a half an hour away in another meeting he returned, summoned the press to the room and then polled the room before making his decision. 

After the announcement the market reaction was swift, and lower. Well, except for steel and aluminum stocks.  

Though we may never know exactly how this President thinks, there are some theories on why he did it and how he did it. Among these theories: 

  • The President tends to play to the audience he is in front of. In this meeting the audience was predominantly steel and aluminum executives. He certainly made them happy and they responded enthusiastically. Reporting said that Gary Cohn argued against them but was a lone voice in the discussion. 
  • The President is shoring up his Rust Belt support. After all, he just announced his re-election bid, the earliest an incumbent has annouced before. He is also playing to his base, who love restrictions on free trade.  
  • The Russia investigation is heating up and there is chaos in the White House and there is need for a new distraction. Hope Hicks just left and Jared Kushner has lost some security clearances pouring more gasoline on the need to distract. 
  • The President truly believes that trade wars are good, and easy to win. 

The last theory, the one where he believes this is a good course would be the most disturbing. There is no other voice besides Wilbur Ross that thinks this is a good idea. 

We can only hope that The President listens to someone else than Wilbur Ross over the course of the next week. 

In my next post I’ll outline why I think that if this policy is actually played out, it could be a real monkey wrench in this market rally. 

I’m a Baby Boomer. Millennials, you shouldn’t trust me. $X $BA $AAPL $SPY $DIA

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.  

Politics, Social Issues, Attention Merchants, Emotions and Trading/Investing

 

Aloha and Greetings from the North Shore of Maui! I’ve decided to take the trading desk halfway across the Pacific Ocean to the Island of Maui! 

I come here several times a year. You could say it’s my home away from home. Originally, I started coming for the wind and the water. I started windsurfing in the 80’s and in the new century I’ve changed to kitesurfing. I hang out on a section of Kanaha Beach Park that’s called “Old Man’s”. When I first heard that term, I was insulted. But now I realize it’s accurate. There are a bunch of old men (and women!) there, and I’m one of them. 

When I’m over here I feel a bit removed from the drama happening on the Mainland. But, this could change with one missile warning! 

I think it’s a good idea to remind myself and the other two or three people that might read this that we trade and invest better when we keep our emotions in check. This is easy to say, hard to implement. 

But I think the best way to achieve this goal is to realize where the drama, anger and upheaval comes from.  

There is an industry that has a great deal of interest in making you feel scared and angry. When you are scared and angry you pay attention. It’s just plain survival. You have to be aware of threats in order to meet them effectively. 

This industry deals in attention, your attention specifically, and it wants as much as you are willing to give it.  

As this article on Vox states: there’s a war for your attention and you’re probably losing it.

For us, one of the main arms of this industry is CNBC. They are not nefarious, but they want you to watch them. Constantly. Their teases are not about how things are rocking along pretty well, but when the next 30% crash is coming in stocks, or bonds, or Bitcoin. 

Same with the other networks. Same with Facebook. 

On Twitter you see this in content providers posting more and more hyperbolic tweets. In fact, I think I will post this one with the tweet of how to spot the next 30% crash, just to see if I can get my viewership from 2 or 3 up to 5! 

So, don’t be scared. Don’t be angry. And don’t let your political beliefs guide your investment decisions. Great post on this by Barry Ritholz you can read here.  

Depending on your political leanings, its easy to be defensive or righteously indignant right now. That’s ok, but just don’t pay for it with losses in your investing capital.