GUALFIN, ARGENTINA – The news is full of absurdities, trivialities, and just plain dumb things. But some of them are revealing.
But we interrupt our dot connecting with a brief travel update. We’re visiting a neighboring farm (6 hours’ drive away) – Pampa Grande. It’s in its own valley, with about 80,000 acres of good cattle land. More on that anon.
Bill surveys Pampa Grande
And now, back to our subject…
Securities Exchange Act
We begin with the Securities Exchange Act of 1934, which made it illegal to manipulate stock prices. We bring it up because Bloomberg reports that the president of the United States of America is doing it:
President Donald Trump is pressuring U.S. trade negotiators to cut a deal with China soon in hope of fueling a market rally, as he grows increasingly concerned that the lack of an agreement could drag down stocks, according to people familiar with the matter.
As trade talks with China advance, Trump has noticed the market gains that followed each sign of progress, said the people, who requested anonymity to discuss internal deliberations. He watched U.S. and Asian stocks rise on his decision to delay an increase in tariffs on Chinese goods scheduled for March 1, one of the people said.
The world’s two largest economies are moving closer to a final agreement that could end their almost year-long trade war, an outcome that would also provide a boost to his efforts to seek reelection in 2020. A new trade accord that would provide Trump with a much-needed win after the collapse of his summit with North Korean leader Kim [Jong-un].
Not that we have anything against fiddling stock prices; that’s what every corporate PR department is meant to do… and it is the purpose of almost all buyback deals… and most important, it’s what the Fed has been up to for the last 32 years; when stock prices correct, it lowers interest rates to un-correct them.
But what is interesting about this report is that it shows two things:
That the whole tariff war with China was just showbiz.
And that stock prices no longer have much connection to the underlying value of the businesses they represent.
As to the first item, we pause to note that, so far, this “tariff man” president, whose campaign promised to cut trade deficits, has actually increased them by more than $100 billion. Again, Bloomberg is on the story:
The U.S. trade deficit widened in 2018 to a 10-year high of $621 billion, bucking President Donald Trump’s pledges to reduce it, as tax cuts boosted domestic demand for imports while the strong dollar and retaliatory tariffs weighed on exports.
We never expected the president to go Full Retard on his trade war. Instead, we thought he would settle the issue… as he did the trade war with Canada and Mexico… in some ongoing, negotiated mush.
In other words, the fake trade war will end in a fake armistice… and a fake victory dance by the administration.
The real winner, however, will be The Swamp, whose lawyers and lobbyists will get to do the negotiations. Instead of more-or-less free trade, we will have cronyized trade… where you may have to pay off some insider, if you want to buy or sell from overseas.
As to the second point, we showed on Tuesday that the feds borrowed $10 trillion in order to increase GDP by only $3 trillion. Bad deal for the economy.
But like every public policy, there are winners and losers. And while Main Street got nothing… Wall Street got plenty. The Dow alone added some $17 trillion in market cap, from its low in February 2009 to the high in October of 2018.
We don’t have anything against making the rich richer, either. But if the working stiffs ever catch on… and realize that it is at their expense, as it is on their shoulders that the debt is piled… there could be hell to pay.
And the Trump Team keeps at it – adding more debt at the rate of $100 billion a month… $1.2 trillion per year.
The U.S. budget deficit widened to $310 billion in the first four months of the fiscal year, underscoring the revenue hit from Republican tax cuts and an increase in government spending.
The budget gap widened 77 percent compared with the same October-January period a year earlier, according to the Treasury monthly budget report released on Tuesday, which was delayed by the government shutdown.
A trillion here. A trillion there. Pretty soon, you’re talking about real money. And real trouble.
Tomorrow… the Green New Deal – an old, dirty shuffle…
Editor’s Note: Today, photos from Bill’s visit to the neighboring ranch, Pampa Grande…
On horseback, Bill surveys a man-made lake
Bill and a gaucho explore Pampa Grande
Over the mountains is the city of Salta
Perhaps Bill could use a new tractor at Gualfin…
MARKET INSIGHT: AN OMINOUS SIGN
By Joe Withrow, Head of Research, Bonner & Partners
The S&P 500’s chart pattern is telling us that another push lower is imminent…
Back in January, we showed you how the S&P 500 was forming a series of “lower highs.” A lower high occurs when stocks fall and then fail to reach their previous peak during the next rally attempt.
When we see a series of lower highs, it tells us the market is losing steam… and that we are moving into a bear market.
The S&P 500 has rallied since we last visited it in January. But as today’s chart shows, the snapback rally appears to have just peaked… And another move lower is coming.
As you can see, the S&P 500 rallied 19% from December 24 to March 1. But when the dust settled, the S&P had failed to break above two of its three previous “lower highs.” That’s an ominous sign…
Chart patterns aren’t our usual beat at the Diary. But as master trader Jeff Clark told readers recently, short-term chart patterns are simply a picture of how investors are responding emotionally. And since human emotions are remarkably consistent, chart patterns can provide strong clues about the short-term future.
As we noted in this column yesterday, these big snapback rallies are common in bear markets. In fact, the S&P 500 rallied 24% during the bear market lasting from 2007-2009. And it rallied 21% during the bear market from 2000-2002.
But if you look at the S&P’s chart pattern during those two time periods, you will see that each of those big rallies failed to break above a clear series of lower highs… And the S&P went on to plunge 28% and 34% respectively after those rallies peaked.
So, investors should be very cautious here. If history rhymes, the S&P 500’s recent activity suggests that lower stock prices are ahead.
– Joe Withrow
Struggling to Flee High-Tax States
It’s tax season. And some of the nation’s wealthiest have a decision to make: Stay in a high-tax area and surrender more of their money to the government, or… move to a lower-tax area and hold onto their wealth. Many are choosing the latter… but not before a state tax auditor stops by for a chat.
Facebook’s New Manifesto
The embattled Facebook has a new vision. So says the company’s CEO, Mark Zuckerberg. The future of the platform, the chief executive says, will begin shifting away from public online pronouncements and towards encrypted private messages. Is this a genuine privacy pivot? Or a last-ditch PR effort?
And read also…
What Replaces Facebook
It won’t happen right away. It won’t be next year… or even the year after. But one way or another, centralized data collectors like Facebook are going extinct. That’s the message from Jeff Brown, Bill’s top technology expert. What makes Jeff say that? And what will replace today’s Big Tech firms? Read on…
In the mailbag, it’s more talk of socialism vs. capitalism. But, at least, according to one dear reader, there’s little difference between the two. Either way, someone gets screwed…
There is little difference between capitalism and socialism. Someone gets screwed under both forms of government. Under capitalism, the poor take the hit, and under socialism, the rich get the short end of the stick. We could go a long way toward solving the problem if we would just love our neighbor as ourselves, and voluntarily see that everybody gets a fair share of the pie. It is detrimental to society for Wall Street executives to receive multimillion-dollar salaries, plus benefits, while the workers who support their extravagant lifestyle barely survive, with no hope of future improvement. Everybody benefits from fair compensation, even though our elite need to make some sacrifices in return for the privilege of living in a happy, vibrant society that is at peace with itself.
Everybody seems to be getting all hyped up about our recently elected congresswoman, Alexandria Ocasio-Cortez (AOC), but I say, “More power to her! It’s about time somebody woke this country up before we go over the edge, anyway.” This young lady is our own creation, and our children aren’t far behind.
– Fred G.
This is sheer ignorance: I say to those who do not want any socialism – please do not accept Social Security, public schools, the armed forces, fire and police departments, etc. This is terrible propaganda or mass ignorance. All civilized countries have socialism of one kind or another. It is a way to benefit the whole of society, as opposed to going back to the days of indentured servants and massive economic polarity and dictatorship. The only reason some of it does not work properly is the dysfunction of those who run the programs and fraud on the part of many benefactors that needs better watch dogs to catch it.
– Marilyn P.
AOC needs to prove her economic theories… preferably in Venezuela. If it works there, it’ll work everywhere!
– Margret H.
Do you believe in justice, Bill? I do. How did America fall from the heights of 1942 to the lows of 2019? Why is the Western dogma of capitalism, “win at all costs,” and the worship of money under attack from all sides, all around the world? Justice.
You are a student of history, so you know the story that is too long to relate, here. The Age of Colonialism, slavery, American interference in the governments of other countries throughout the 20th century, by propping up pro-American dictators, carrying out coups, and political assassination… Someone has been watching. Someone has been keeping score. Someone has been tallying up the books.
It’s easy to blame the “foxes” of the Deep State for all of our woes, but the problem goes much deeper than that, and it’s not “us vs. them.” It goes right down to the core… to the basic fundamental belief system of America.
Is Trump the problem? No. Trump is a symptom. America is the problem. America put him in office. Why are we on the verge of an inevitable economic and social collapse? See above.
– Dale A.
Meanwhile, a question: Why can’t the United States just go “full Japan”?
Japan’s stock market crashed and burned over two decades ago and is still a very long way from recovering. Its central banks has been printing money like crazy, financing its debt and propping up the market by buying almost everything in sight, and nobody seems to care. They are still around and the yen gets bought as a “safe haven.”
What makes you think that the USA can’t do the same thing and get away with it for just as long, or longer? If I’m blessed, I may have about 10-15 years left and will probably not be around to hear “dolla’ no good, want gold.” Keep connecting the dots, it’s good food for thought.
Editor’s Note: This was the central topic of a recent issue of The Bill Bonner Letter. Dan Denning, the Letter’s coauthor, had this to say:
If we’ve learned one thing since the dark days of 2008, it’s that the central bank bag of tricks is bottomless. We should expect nothing less from people who conjure money out of thin air ($22 trillion and counting, through various global quantitative easing (QE) programs). It prompted a question I asked a speaker at a private event Bill and I attended in Washington, D.C., in December: Is there any theoretical limit to what a central bank can buy, or how much of it?
“No,” was the answer. And Japan was given as evidence. Japan’s central bank owns almost 78% of the ETF market in Tokyo. It’s bought $53 billion worth of ETF shares in 2018, a record. The Bank of Japan isn’t supporting the ETF market. It IS the ETF market. This is a preview of what to expect from President Trump and the Federal Reserve in 2019 and beyond.
IN CASE YOU MISSED IT…
Something strange is being discussed at the highest levels in Washington…
That’s the message from Dan Denning, Bill’s coauthor on The Bill Bonner Letter.
Call it socialism… call it financial martial law… call it the death of win-win capitalism. It’s all the same thing. And it’s coming faster than you think. Full story here.