Time For A Fresh Take
Equities start the day higher as we catch a little bounce from the “Sacking of Kings Landing” selloff. What an episode right? Had to be some of the best TV I’ve ever seen, just an emotional gut punch, and frankly a very appropriate lead in to a massacre in the market the very next day. So look, I needed a few days to let recent events sink in before I could give you a fresh update so here’s where I think we currently stand. It’s been proven that the statement “some kind of trade deal is going to be made because it’s in both sides best interest” is a really bad take. I’ve said it a few times here and in the media and it’s been shown to be demonstrably wrong. I also thought they’d kick the can on raising tariffs so I should probably be leaving international trade policy to my friend Dan Clifton at Strategas. That being said, I do love pontificating so here’s a fresh take: I think the only way China and the US come to some kind of deal is if the market forces them to, specifically thru some kind of negative credit/equity event. Oh and a 5% selloff isn’t said event, on average we see three 5% selloffs a year so that’s not what I’m talking about. We’d have to see some kind of flame out because absent that why would either side budge? If tariffs knock 20-25bps off US growth would that be enough to cave in on negotiations? I doubt it, and if the market just kinda grinds along all summer that wouldn’t be enough either (in fact it would likely embolden MORE tariffs). What I’m trying to say is that I’ve finally come to the realization that “trade war” headlines aren’t going away anytime soon, if ever, so stop randomly buying / selling based on tweets. Fool me once, shame on you, fool me…umm what is it now about 62 times we’ve heard “trade talks are going great!” …then shame on me.
Well, it turns out that the market stopped worrying about tariffs and a trade war all of 10 seconds into the session because we basically went straight up all day. People buying the dip? Sure. Was the market oversold? Maybe, the peak to trough decline yesterday was around 4.6% and downside volume swamped upside volume. Is Arya going to kill Dany? I don’t think so because that seems too obvious. If the stock market doesn’t experience that “event” you mentioned earlier will that embolden the administration to enact even MORE tariffs? Absolutely. What’s the right amount to pay a babysitter? Please weigh in here (I might blog on this topic, I’d love to know what people think in 2019. Feel free to @ me). Up 1.3% by lunch as the first meaningful dip of the year put up a better defense than the Golden Company. I don’t know, I guess I was really surprised by how strong the market was today; nothing has changed in the past 24 hrs. Maybe a 5% selloff was the correct discount for the current level of trade tension? Maybe I should stop using so many question marks in this blog?
We saw a small selloff in the afternoon and a close at 2,834 up 0.8% (late selling is always curious to me). Anyway, my friend @LJKawa wrote a great article today about tariffs and the market. Here’s the money quote: “The danger, though, is that American equities are caught in a so-called Minsky Paradox. Srinivas Thiruvadanthai, research director at the Jerome Levy Forecasting Center in Mt. Kisco, New York, mused about that earlier this year. The logic dictates that unless the market sells off, the president would feel confident in pushing forward with his trade offensive -- in turn raising the risk of an even bigger slide”. Look, I don’t know what the right answer here is. I want the US to protect its IP, I want our trade partners to treat us fairly, heck I think we all do. But ratcheting this thing up, which will happen if the market shrugs its shoulders, could lead to all kinds of crazy outcomes. Or maybe, like the Cold War, this stays with us for an indefinite amount of time and we just get used to it?
- I don’t do a lot of book recommendations (I should do more) but you’re gonna want to read the latest from Prof Galloway. The Algebra of Happiness.
- Todays must read article is a wonderful look at my Generation, Gen X, which kinda feels like the middle children of American history? “Like many things considered “cool,” Gen X is pretty exclusive. You had to be born between 1965 and 1980 to get in to this gloomy, goofy club of forgotten middle children, and only about 65 million of us were. (Both boomers, at 75 million, and millennials, at 83 million, far outnumber us.)”
- If someone tries to scare you by saying China will “sell their treasuries” thus harming the US…tell them they have no idea what they’re talking about: “That means the Chinese would need to exchange their dollars for some other currency — euros, pounds or even the yuan. Putting so many dollars on the foreign-exchange market would weaken the value of the dollar. The effect would be to drive up the price of foreign imports for U.S. consumers and drive down the price of U.S. exports. At some point, the dollar would get so weak that imports from China would be balanced by increased exports. The trade deficit with China would effectively be eliminated — one of Trump’s main goals”.
- Guess this guy’s tryout for Dude Perfect didn’t go so well
- Do you fancy yourself a market timer? Guess what, you have to be impossibly good at it to make it worth your time: “For example, missing a 10% drawdown by 60 trading days (3 months), only provides outperformance of 5% (on average) relative to Buy & Hold. Spending time and energy on such an endeavor may not be worth the hassle, especially if you are wrong. Lastly, there is one huge issue with market timing that I have ignored for this entire article. How do you know when a market decline will be 20% (or greater) before it happens? You don’t. You have to go off some feeling that this decline is “the big one” and not one of the smaller declines that happen more periodically”.
- Dear Millennials interested in a career as a Financial Advisor: We have all of the things mentioned in this article at Baird. Hit us up. By making small modifications to organizational structure and culture, recruiters and human resources professionals can attract and retain a new generation of employees. Below are three practical steps financial firms should take to appeal to millennial advisers
- Why do pictures like this freak me out so much?
- This probably hurt but how lucky was he?
- Think this would be a fun place to take a walk then eat sausage and drink beer? Yes please
I have two final links for you tonight because I love them both equally
First of all, if you are a painter, I think your job is safe from robots
Second, who doesn’t love a good fail video!!