BALTIMORE, MARYLAND – This is the big day. The music starts. The lights go on. And the curtain rises…

And there, on stage, President T. is scheduled to meet with China’s leader and decide the fate of the world economy.

Yesterday, Mr. Trump raised expectations of a deal with the Chinese. From Bloomberg:

President Donald Trump said he is very close to “doing something” with China ahead of a planned meeting with President Xi Jinping, raising expectations again that the two leaders may be able to hash out a ceasefire in their trade war.

U.S. and Chinese officials have been working for weeks on the contours of a possible deal for the two leaders to be announced following their dinner on Saturday on the sidelines of the Group of 20 summit in Buenos Aires and a road map for talks to follow.

The stock market wasn’t holding its breath. The Dow sold off slightly.

Targeted Tariffs

Our colleague, David Stockman, thinks investors who bet on an end to the trade spat are going to be disappointed:

Wall Street’s complacent belief that the impending confrontation with China is all about the Donald playing an especially rough hand of the art-of-the-deal is flat-out delusional. He is not even close to compromising on his Trade Wars because, as the Donald sees it, his weapon of choice – targeted tariffs – is essentially a congenial tool and an acceptable end in itself if he doesn’t get sweeping, impossible-to-deliver concessions from the other side.

David’s view got a boost yesterday when it was reported that Trump’s crackpot trade advisor, Peter Navarro, will be with him in Buenos Aires for the meeting with Xi Jinping tomorrow. If anyone can mess up a trade deal, Navarro should be able to do it.

But we’ll stick with our prediction. The Donald is smarter than he seems. And more cunning.

He knows that his reputation as a dealmaker, his claim to have created a “booming” economy, “his” stock market, and his own personal fortune all depend on a continuation of the debt bubble.

And that depends on low interest rates… which depend on the Chinese continuing to play their role.

America needs low-priced products to keep inflation in check. An increase in consumer prices will push interest rates up – which will bring the whole hustle to an end.

Yes, we are more cynical than David. We think Mr. Trump knows what he is doing. And he knows that he has to announce a big “win” when he returns from South America, no matter what is actually accomplished. He will claim victory and preserve the status quo… just like he did with NAFTA.

It’s all showbiz.

Debt Bomb

In the real world, the trade imbalance with China can’t be negotiated away. China makes cheaper, more competitive products. That wouldn’t change, even if trade barriers – including NTBs (non-tariff barriers) – were eliminated completely.

But just because a nation runs a trade deficit doesn’t necessarily mean it has a problem; a trade surplus is no sure sign of virtue, either.

China has the world’s largest trade surplus. But it also has the world’s largest problem. Fueled by America’s fake money, and fooled by China’s own central planners, Chinese businesses have made huge miscalculations. They have over-capacity in almost every major industry. And now, the vultures are circling.

China’s key inputs – oil and iron ore – are both falling. While these trends may have no single cause, it is likely that their biggest customer – China – is cutting back.

Chinese producers aren’t sure what will happen tomorrow, either. If the trade war escalates, they hope to offset lost U.S. sales with sales to Europe, Africa, and South America… as well as more domestic demand.

But the transition will take time. And while it is taking place, China’s $40 trillion debt bomb could explode.

In the U.S., meanwhile, Mr. Trump claims “his” economy is booming. His economic advisor, Larry Kudlow, says it is much stronger than its Chinese competitor. But the picture is not nearly so clear.

U.S. debt levels for households, companies, and the federal government are all hitting new records – just as interest rates go up.

Higher mortgage rates are killing real estate sales already. From Bloomberg:

Contract signings to purchase previously-owned U.S. homes unexpectedly fell by the most since January, reaching the lowest level since mid-2014 amid mounting evidence that the housing market is struggling.

The index of pending home sales dropped 2.6 percent, after a 0.7 percent gain the previous month, according to data Thursday from the National Association of Realtors in Washington. That missed the median estimate in Bloomberg’s survey calling for a 0.5 percent rise. The gauge was down 4.6 percent from a year earlier on an unadjusted basis, following a 3.3 percent decrease.

There’s surprising weakness in the labor market, too. Initial jobs claims are widely believed to be the most reliable indicator of approaching recession… and they’re going up. Here’s Bloomberg again:

Initial jobless claims rose 10,000 last week to 234,000, the third straight gain and the highest level since May, a Labor Department report showed Thursday. The median estimate in a Bloomberg survey was for a decrease to 220,000. The last two weeks included the Thanksgiving holiday and observance of Veterans Day, and filings tend to show wider swings around such events.

How and when these trends will develop, we will wait to see.

But today, it’s showtime south of the Río de la Plata. And if there’s one thing President T. knows better than anyone it’s how to play to the groundlings. They want to see their hero come out of the ring with his hands held high.

And that’s exactly what he will do.





Editor’s Note: Recently, Bill shared some insights from the Legacy Investment Summit in Bermuda. Our editor highlighted Nick Giambruno’s case for legal cannabis in the United States. Nick is probably right, Bill concluded.

Today, Nick outlines a recent development in the global cannabis market, and reveals why President Trump will likely make pot legal in the U.S. before his term is out.

By Nick Giambruno, Chief Analyst, Crisis Investing and The Casey Report

Regular Diary readers will know that I closely follow developments in the legal cannabis industry.

In October, I showed how legal cannabis and CBD-infused medications could help curb America’s opioid epidemic, something President Trump declared a “national emergency” earlier this year.

That’s one reason why I believe the Trump administration will legalize recreational pot.

But now, there’s even more pressure on the White House to make a move toward legalization. That’s because the U.S. could soon become the only country in North America to not have legal cannabis at a federal level.

That’s because, last month, Mexico effectively legalized recreational cannabis.

On October 31, Mexico’s Supreme Court ruled that cannabis prohibition was unconstitutional. Its ruling is binding on all other Mexican courts.

In other words, cannabis prohibition is no longer enforceable in Mexico.

The Mexican Congress has 90 days – or until January 29, 2019 – to rewrite the country’s drug laws to comply with the ruling. These new laws will dictate how Mexico regulates its legal cannabis market.

Mexico’s cannabis-friendly president-elect, Andrés Manuel López Obrador, takes office tomorrow. And he’s already working on the new legal framework.

Last month, López Obrador dispatched a group of top Mexican officials to Canada to discuss the legalization process.

The group included a key Mexican senator. He has already submitted a bill to the Mexican Congress that would formally legalize cannabis and create a framework for regulating the industry.

The new legislation – propped up by the Mexican Supreme Court ruling – would let adults use cannabis however they want. It would permit cannabis for recreational, religious, medical, industrial, and scientific research uses.

Smoking cannabis in public would also be legal.

This is all playing out quickly. And with legal cannabis already on sale in Canada as of October 17, the map of North American countries with legal pot could soon look something like this:


There’s enormous political and economic pressure to get in on this bonanza. And it showed in the U.S. midterm elections earlier this month.

On November 6 – just a few days after Mexico’s Supreme Court effectively legalized cannabis – new cannabis legislation passed in three of the four U.S. states where it was on the ballot…

Michigan became the tenth U.S. state to legalize cannabis for recreational use.

Utah and Missouri legalized medical cannabis, bringing the total number of U.S. states where medical cannabis is legal to 33.

The only disappointment came from North Dakota, which voted against legalizing recreational cannabis. (The state still permits medical marijuana.)

It’s a big deal every time a new state legalizes cannabis. Each one brings the U.S. closer to the end of federal prohibition.

I also want to highlight that Texas Republican Pete Sessions lost his House seat in the midterms. This is a big boon for legal cannabis.

Rep. Sessions had used his position as the chair of Congress’ Rules Committee to block dozens of cannabis-related amendments from even being debated.

Massachusetts Democrat Jim McGovern is replacing Sessions on the committee. This will help smooth the way for future cannabis legislation. As McGovern told The Boston Globe:

Unlike my predecessor, I’m not going to block amendments for marijuana. Citizens are passing ballot initiatives, legislatures are passing laws, and we need to respect that. Federal laws and statutes are way behind.

The pro-pot developments I’ve covered here have all happened within the past few weeks. Each of these events would be remarkable on its own. But together – all in the same year – they show the unstoppable momentum of cannabis legalization in the U.S.

That’s why I’m convinced President Trump has no choice but to legalize cannabis, and that he will do so before he leaves office. It could happen as soon as next year.

Nick Giambruno

P.S. The global cannabis market, and related industries, will eventually be worth hundreds of billions of dollars. A handful of legal pot stocks will make investors very rich. But as Bill correctly warned, many of these cannabis companies will go bust. Investors could lose all their money. That’s why, if you want to invest in this sector, I encourage you to let a professional help you.

My team and I have logged hundreds of man hours and spent tens of thousands of dollars researching the legal cannabis market. And we’ve already identified early winners. One recommendation soared 145% in four months. Another is up 255% in just over a year. If you’d like to receive our next recommendations, you can join us right here. You’ll even get a book from Casey Research founder Doug Casey. Go right here.


The Fed’s “Policy Wilderness”
Bill has long warned that the Fed’s policy of gradually raising rates would eventually set off a recession and stock market crash. But now, the Fed may be backing off its tightening policy… and wandering off into no man’s land.

The Global Startup City
Silicon Valley has long had a reputation for being a hub for technology startups. And that’s still true. But it’s no longer the only one…

How the Trade War Kickstarts This Forgotten Industry
The trade war may ultimately be a drag on long-term growth. But in one corner of the market, it’s setting up a rebound for a long-forgotten industry.


In the mailbag, dear readers discuss President Trump’s war on General Motors

I agree with what you have written. It makes no sense to me to continue producing something when the sales go down. It doesn’t matter what the product is. I would have thought Trump would have known that. Things are constantly changing. I’m surprised people are going away from small cars, but if that is the case, then that is what is occurring. The petrol, and particularly the diesel, vehicles will, in a few years, be things of the past. The electric car and driverless cars are the things of the future.

– Henry H.

Today’s column is a great explanation of why I define politics as “anti-economics.”

– Tom F.

You know, 10 years ago, Obama bailed out General Motors. It gave its CEO big bonuses. Did it learn anything? I would say not. The company is closing five plants and laying thousands of workers off so its money people can make a profit. Why is it always Trump’s fault when these companies fail because of mismanagement?

– Brent H.

You forgot to mention that GM still owes the USA at least $10 billion from the last bailout. Ford took no bailout. Last year, it announced it was cutting passenger car production and shifting its plants to SUV, Crossover production. The difference is GM is reactionary, a year late, and Ford is proactive. Reactionary is business terminology for poor management, poor quality, poor profits, and poor planning.

GM and our elected officials are a lot alike. Congress and the Senate still believe they are the elected elitist royalty of the USA with their campaign funds they voted to themselves as retirement funds. These elected elitists believe they should be managing business, and not those capitalists who actually built the greatest economy in the world. The more the socialists control, the less that actually gets produced.

– Anonymous

The main point is that GM has made mistake after mistake with its autos and with the marketing of its auto products. Electric vehicles, for one. Here, GM should have been an international leader, not a follower. The millennial is the new make-or-break consumer. Toyota’s Prius sells for nearly $10,000 less than GM’s Volt and does not rely on subsidies.

GM has handled these plant closings with poor PR. What Trump is doing is shoring up his relationships with public unions. Smart, I would say. He is also exposing poor use of public bailout funds, i.e. no future planning.

– Frank H.

I might not understand totally every detail. However, there is one tenet I will always agree with. GM got bailed out of bankruptcy because it did not do what Ford Motor Co. had the foresight to do. If GM had more competent management, it would have changed its culture. It is my opinion that GM should have been split up and sold off when it failed – no Government bailout. Capitalism would have found a way to take advantage of the opportunity, and we would not be having this conversation. It’s a misapplied “too-big-to-fail” theory.

– Tom A.

What our president believes is truth and law, even it is contrary to fact and common sense. So Trump states he will shut down the federal government if Congress doesn’t give him $5 billion for his Mexican Iron Curtain within ten days. That would be purely a dictatorial action, as contrasted with Congress shutting parts of government temporarily through its inaction on Budget, and should be met with a Bill of Impeachment. There is also the fact of weak stock markets. What would be the effect of such a shutdown on the markets? Possibly a freefall of at least 50%. Depression, here we come.

– Chuck B.


Did you see Bill’s recent webinar? Our editor had a candid conversation with fellow newsletter publishers Doug Casey and Mark Ford about his time in D.C… how he first started his business… and what he sees coming next. Catch up right here.