MIAMI – During the legendary 1998 wrestling match known as “Hell in a Cell,” two professional wrestlers faced off: “The Undertaker” and Mick Foley, aka “Mankind.”

The idea was for the two to do their usual stunts – poking, whacking, tossing, and grappling with each other – in a metal cage.

And in a crescendo of allegro fortissimo, they were supposed to climb on top of the cage and continue their antics there.

Then, the script called for the Undertaker to throw Foley down onto a ringside table that had been specially rigged to break the fall.

But something went wrong. Foley hit the mat so hard, the fans nearby thought he had died. There was blood coming from the side of his mouth. His eyes were fixed, staring blankly, like a dead man. The announcer said:

Good God almighty! Good God almighty! That killed him! As God is my witness, he is broken in half!

Also unscripted was the announcer’s follow up: “Stop the match!” He thought Foley was severely injured… and possibly dead.

It wasn’t acting. Foley had a concussion, a dislocated jaw, a dislocated shoulder, a bruised kidney, a cut lip, one tooth knocked out, and another broken.

Yes, Dear Reader, even scripted, phony battles sometimes go bad.

 

 

Swamp Wars

When we left off yesterday, we were about to tell you why the Great Economic Boom from 1979 to 2018 was doomed from the outset… why it was largely bogus… how it is bound to blow up… and why the trade war might be the thing that sets off the explosion.

But to help us understand the absurdity of what is going on, we turn back to WWE. Yes… to professional wraslin’.

It’s make-believe. It’s ridiculous. But it is a good model to help us understand Swamp Wars. They, too, are staged. And like professional WWE wrestling, they are partly scripted, partly improvised… and often, unintentionally funny.

But there’s a big difference between WWE and the U.S. government.

Professional wrestling is win-win. The fans pay for the entertainment with their own money, the wrestlers participate willingly, and WWE turns a profit.

The feds’ make-believe, on the other hand, is win-lose. The yahoos may love the excitement of the phony wars, and the Deep State may gain power and money, but nobody pays for the wars without a gun to his head.

Yesterday, we saw that periods of prosperity are generally marked by win-win deals. Free trade is win-win. Merchants and consumers decide for themselves with whom they will truck… and on what terms.

They may not like the way Canada treats its baby seals, for example, and decide not to buy Canadian plywood. Or they may think Chinese companies steal intellectual property… and choose to work with the Japanese instead.

It’s up to them!

It’s “free trade” because the feds don’t stick their big noses into the deal.

 

 

Crony Trade

But wait… “They do it, too!” say some dear readers. Yes, of course they do. The Chinese have big noses, too. They have their bayous. And their cronies. They protect their pals. They wallop their adversaries. They hobble their economy and punish their own citizens. But that’s their problem.

The Omaha cattleman doesn’t say, “Hey, I’m not going to sell my beef to you because your government stinks.” Nope. He takes the best deal he can get. So does his Chinese counterpart.

Crony trade is different from free trade. The feds – whether they are in the backwaters of Beijing or the swamp of Washington – play favorites.

They impose their own scripts… rewarding their campaign contributors with special protections… punishing their enemies with price hikes… whacking voters in Sichuan and helping the party bosses in Shenzhen.

In short, they turn win-win deals into “us versus them” win-losers.

But politics is always “us versus them.” And always win-lose. Like professional wraslin’. It lulls the lumpen into thinking that the government is fighting for “us” against “them.” The “them” finds it useful, too – distracting the public from its many failures with a phony battle.

But action begets reaction. Soon, you’ve got a “trade war.” Then, things can get out of hand.

 

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Body-Slammed With Tariffs

Donald J. Trump, citing phony national security issues, and egged on by steel speculator Wilbur Ross and his crackpot economist Peter Navarro, put a headlock tariff on steel and aluminum.

Then, he followed up with a $50 billion “brainbuster” levy aimed directly at China. China, of course, said it wouldn’t take that lying on the mat, proposing its own tariffs on U.S. exports of food and energy.

Last Thursday evening, the former reality TV star now performing in the West Wing, bounced off the ropes, asking his trade representative to consider body-slamming China with $100 billion more in tariffs.

Hours later, China let it be known that two could play this game. China’s Global Times revealed its position:

If the trade war happens, China will show that it has just as many reserve plans as the U.S., if not more. Chinese experts suggest that China could even take actions to weaken the strength of its currency. Since China is the world’s largest trading economy and the largest buyer of commodities like oil products, China could use its influence to push its own currency, the renminbi (RMB), in global markets to reduce the dominance of the U.S. dollar. That would be a heavy blow to Washington.

If this trade war comes to pass, it will be an evenly matched total war between China and the U.S. economies, and not some small scuffle. It would be delusional for the U.S. to think it will be victorious at the end of this trade war.

Delusional is what it would be. And delusional is what it is.

But fantasies are what keep the cash flowing on both sides of the Pacific… which is why Scott Minerd, who runs the massive Guggenheim investment fund, says the economy is “on a collision course with disaster.”

He says he expects equities to lose 40% of their value… mostly in 2019.

He’s an optimist.

More to come…

Regards,

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Bill

MARKET INSIGHT: HARD TO STAY ON TOP

By Joe Withrow, Head of Research, Bonner & Partners

For today’s insight, we once again take a step back to show you a bigger picture…

Today’s table tracks the top five largest global companies by market cap across each decade going back to 1980.

Chart

As you can see, each decade features almost entirely new names.

The 1980s featured IBM, AT&T, and three oil companies. The 1990s were dominated by Japanese companies. The 2000s featured four newcomers, as well as Japan’s NTT – the top company of the ‘90s.

Fast forward to today, and you see that big techs have stolen the show.

The message: It’s hard to stay on top.

The notable exception is Microsoft, which managed to stay in the top five from 2000 through 2017.

Joe Withrow

FEATURED READS

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Don’t Blame Amazon for the Retail Apocalypse
Traditional retail stores like Sears are at a fraction of their former glory. Most, including the president, point fingers at e-commerce giant Amazon for this “retail apocalypse.” But it may not be all Amazon’s fault.

What Mark Zuckerberg Won’t Tell Congress
Facebook CEO Mark Zuckerberg will testify before Congress this week in response to the recent data breach at his company. But here’s what the billionaire WON’T tell Congress or the American people…

MAILBAG

After Bill’s story of the birthday party, one Dear Reader has some choice words for our editor…

I felt that I must make a response to your newsletter. Because in this newsletter, you, the “master of connecting the dots” have failed to do so. How so? In this edition, you made a great macabre sideshow of animal butchery, distracting your faithful sycophants from a foreboding and much deeper consequence of our glorious, technical civilization.

Really, patrón? No, you and your worshippers don’t have any idea of what the worst entails, given what the children of the technology revolution have been subjected to for decades. And then, in your ignorance, you go on to say: “But there’s a ‘better’ side, too. Could this be the solution to the originario problem? The younger generation – raised on GTA, TV, and welfare payments – would prefer to live in cities, with automobiles and air conditioning. Why fight with us to preserve a life that is rugged and hard?”

Your ignorance amazes me, Mr. Connect the Dots. Please allow me to delineate for your uneducated baby boomers exactly what the video game Grand Theft Auto entails. It is a game where violence prevails through criminal activity. The more successful you are as a criminal personality, the more you are rewarded. It teaches that crime pays. In this game, you can physically assault other players, carjack their car, run over them, steal, mug, rape, and murder them. As a player in this game, you can pick up a prostitute, have graphic sex with her, and then slit her throat and steal her money. What the heck is going on here? Let me connect some dots, my master “Bill.”

I’m a substitute teacher in the public school system. Today, in anticipation of writing this review, I conducted an impromptu, voluntary survey of the students in my classes about their gaming activity. Here are the results: Of the students who participated, 82% admitted to playing video games. 73% said that they play at least one hour a day; 41% said that they play three hours or more a day. 85% admitted that they play video games with a varying degree of violence. 29% said that they play the ultra-violent game of Grand Theft Auto. 48% said that they play other overtly violent games like Call of Duty. They have been playing these games for an average of six years since they were four years old.

I think you are missing the point of all of this. You are not connecting the dots – which will lead to your downfall. The object that these video games teaches is that violence gets you to the next level, where you become all powerful. The originarios that you speak of: The fathers played Grand Theft Auto before their sons; they are just passing it along.

– Chad G.

Bill, I do enjoy your reports from Gualfin. I only wish that I could experience some of these adventures with you (I live in Annapolis, and I’m ready to move on). I’m still chuckling about your birthday party experience. I can only imagine the hate mail you’ll receive over the descriptions of the dinner preparations. Everyone in “civilized society” knows that beef, pork, lamb, etc. come from the grocery store – shrink-wrapped! I enjoy the Diary, and I relate to most everything that you write about. I’d love to meet you one day.

– Tim L.

Meanwhile, politics and the trade deficit are on readers’ minds…

I find it odd how everyone is fretting about federal budget deficits but defending – or at least, are unconcerned about – trade deficits, which are equally on a path of no return. In my honest opinion, they are of greater concern.

“Fake” money allowed us to keep buying and improving our living comfort, but it is unsustainable. It will either end in total collapse or by turning the tide on to a different path. Politicians have been whining for years about losing the trade war, Trump is finally retaliating. Pundits have it all wrong. One cannot consume more than one produces and survive over time. A win-win (buying goods with IOUs) will soon turn lose-lose when the IOUs lose value (84% since 1971, according to Joe Withrow’s article). A trade deficit with one nation or industry has to be balanced with a surplus elsewhere.

For the U.S., it isn’t just China, but practically every other nation that is getting the better of us. There is no balance, and that spells ruin. You can fix the government budget deficit, but still float down the river without paddles.

– Erich K.

Thank you so much. It is so refreshing to hear a voice of clarity coming out of the general swampland of financial analysts and political pundits. I really appreciate this writing today. You’re one of the few people I listen to as far as your assessment of what’s really going on. Now to figure out how to make some real money from a small (very small) portfolio. Hail Mary time; pushing 60, and it’s definitely a struggle out here, but I’m staying optimistic on my good days. Again, thanks so much for your writing. I’ll look forward to getting some help soon. The traditional path is definitely a joke for most of us.

– Michael P.

IN CASE YOU MISSED IT…

Bitcoin is down more than 65% from its peak. Crypto traders are nervous…

But Jeff Brown, Bill’s top technology expert, isn’t worried at all. That’s because Jeff has found a better way to profit from the crypto market: by betting on the technology behind cryptos. Here’s how he’s doing it.

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