SALTA, ARGENTINA – Up. Down. Up. Down.
We followed the action on Wall Street yesterday, wondering… where was it going?
The headlines told us that investors were nervous about a trade war.
Bloomberg was on the case early:
Fears of a trade war between the world’s two largest economies returned to haunt markets on Wednesday, mauling U.S. stocks and sending investors into haven assets from Treasuries to gold.
The S&P 500 Index tumbled through its average price for the past 200 days, with all 11 sectors lower after China said it would levy 25 percent tariffs on imports of 106 U.S. products including soybeans, automobiles, chemicals and aircraft. Boeing lost almost 5 percent and semiconductor shares fell nearly 3 percent. The Cboe Volatility Index jumped to 23.55, almost double its level for the past year.
“Markets don’t like uncertainty, and this back and forth with what the U.S. is doing with tariffs and targeting specifically Chinese products and Chinese trade relationships and policies, they’re obviously not good,” Omar Aguilar, chief investment officer for equities at Charles Schwab Investment Management, said in an interview at Bloomberg’s New York headquarters.
Markets don’t like uncertainty. Sure. Sure. But uncertainty is what we’ve got.
And who knows? Even presidential advisors Peter Navarro and Larry Kudlow – wrong about just about everything for just about forever – could be right this time.
Maybe the economy really is as strong as an ox. And maybe stocks will go up from here to eternity. But it’s not what we see when we try to connect the dots.
Not that we are always right. We rush to assure cynical, suspicious, and realistic readers that we have no illusions on that score.
Yes… our error was that we misjudged the power of wrongheaded claptrap. Fake money talks louder… and BS walks further than we thought!
We thought the fake money-pumping scheme had reached its end back in 2009.
We were wrong.
There was a lot more juice in that rotten fruit. And now, the whole world economy clutches its stomach and holds its breath – with $230 trillion of debt worldwide, and millions more people dependent on ultra-low interest rates forever. (The Fed’s key rate, at 1.6%, is still below zero in real terms, since inflation is running at about 2%.)
In 2009, households could no longer borrow to buy houses. The housing market collapsed, dragging down mortgage lenders first… and then the rest of the economy. What will give way this time? Pension funds? The auto market? China? Tesla… the techs… and the stock market itself?
We don’t know. But interest rates do not stay ultra-low forever. Not when the Fed itself is actively, intentionally raising them and the federal government is running $1.2 trillion deficits.
Yesterday, stock markets bounced back in the afternoon, after investors began to think that maybe Donald Trump wasn’t really serious about a trade war.
One day, perhaps soon, they won’t be in such a good mood. And the market won’t bounce back. Not that the end is necessarily nigh… but, in theory, it must be out there somewhere.
Expect a severe market correction… followed by some more desperate funny-money maneuvers, urged on the president by his quack economists, Navarro and Kudlow… which will inevitably make the situation worse.
The Fed will quickly reverse from QT to QE (going from rolling bonds off their balance sheet to buying more)… pushing real rates deeper into negative territory.
The Trump Team will propose huge increases in federal spending – with deficits soaring to $2 trillion per year.
Cash may be banned. A one-time tax credit may be offered. A guaranteed minimum income may be enacted.
You think things are crazy now? You think you’ve seen what fake money and BS can do?
Just you wait!
ECONOMIC INSIGHT: THE BEST COUNTRIES FOR BUSINESS
By Joe Withrow, Head of Research, Bonner & Partners
The United States is now only the sixth-best country in which to do business…
That’s the story of today’s chart, which ranks the top 8 countries according to the World Bank’s annual “ease of doing business” report.
The ease of doing business report ranks every country across 10 different metrics according to how conducive the regulatory environment is to business. The greater the regulatory burden, the worse the ranking.
As you can see, the United States came in sixth place this year. For comparison, the U.S. was ranked fourth back in 2010…
– Joe Withrow
How Goldman Almost Lost $500 Million on a Computer Glitch
Back in 2013, Goldman Sachs bank almost lost $500 million thanks to a minor computer glitch. The story illustrates the early days of robo-trading… and shows just how far the machines have come.
FANGs Are in “Fairyland”
With the recent data breach at Facebook, and the subsequent drop in share price, investors may be falling out of love with Big Tech. See why one analyst said that the FANGs (Facebook, Amazon, Netflix, and Google) were living in a “fairyland.”
And read also…
Bill, where the heck are you getting your news? Stormy Daniels has not said she is running for president, nor could she win. A president cannot depose and then select a vice president at will. And Oprah would never work for Trump. You are spreading utter nonsense and it has completely destroyed my confidence in your judgment.
– Mike P.
I’ve been reading your letter for 10 or more years. I love its sensitivity and real worldly humor. Keep it up. And I appreciate the access to Bonner & Partners, particularly with the world tottering after a turn at the “Bling” for so long. It will be interesting to watch, I think.
– Calvin O.
If the world was not getting more ridiculous every day, this April Fools’ essay would be hilarious!
– Steve S.
Meanwhile, gratitude for Bill’s recent birthday party story…
I am amazed. I expected to find something more pedestrian when I opened your email this morning here in Phoenix, Arizona. I am fascinated and in an internal conversation with all the delightful words that you’ve delivered right to my inbox. Thanks for going the extra mile to make reading you an enriching cultural experience.
– Silver R.
In my childhood, my parents visited our grandparents during summer vacations in Turkey. There, my parents would go buy live sheep in the Taurus Mountains. My grandfather sacrificed the sheep and invited the nearest neighbors for the grill, too.
Now, I live in Germany with my daughter and we never see the killing of animals. We had such a nice lake (Beyşehir Gölü is the name) in front of our house with mountains behind, and we spent nice times with family there in Turkey. When my mom was alive, I played their music on her electronic piano. It was easy to transport on a plane. Now, most of my friends don’t eat meat; they are vegetarians. Thanks a lot for the stories because I miss my family in Turkey and my childhood. Greetings from Germany (nearby Berlin).
– Nejla H.
I just wanted to say that when the country splits – and it will split – I will be on the Bill Bonner side of things.
– Jeff H.
IN CASE YOU MISSED IT…
If you’re easily offended, DO NOT buy this book…
Casey Research founder Doug Casey just released a follow-up to his 2013 book, Totally Incorrect. Doug calls it Totally Incorrect, Volume Two.
And the name says it all. Doug gives his unique take on everything from genderless babies… to the modern space race… and the NFL protests. In today’s politically correct world, this book would likely be banned from bookstores. But you can get your own copy right here.