US-China trade deal: 3 fundamental issues remain unresolved
by ilene - December 13th, 2019 5:57 pm
US-China trade deal: 3 fundamental issues remain unresolved
The game is far from over. rawf8/Shutterstock.com
Courtesy of Penelope B. Prime, Georgia State University
The U.S. and China have reportedly reached a so-called phase one deal in their ongoing trade war.
While few details have been disclosed, the agreement principally seems to involve the U.S. calling off a new round of tariffs that were slated to take effect on Dec. 15 and removing others already in place in exchange for more Chinese purchases of U.S. farm products.
Good news, right? The end of the trade war is nigh? Don’t get your hopes up.
While business leaders in both countries will be temporarily relieved, the underlying tensions between them will not end easily.
As an economist who closely studies the U.S. relationship with China, I believe there are fundamental issues that won’t be resolved anytime soon.
Doing it in phases
Tariffs and other trade issues have received most of the attention during the trade war, but the more fundamental – and difficult – challenges are with lax intellectual property protection and China’s industrial policy.
The U.S. is unhappy with China’s use of these tools to develop its economy, and to help its companies compete – unfairly, from the U.S. perspective. And many of the Trump administration’s demands challenge China’s normal business and policy practices.
China’s leaders can’t be seen by Chinese citizens as giving into the U.S., while Trump wants to show that he is tough on China ahead of his reelection. This makes the negotiations very sensitive on both sides.
That’s why American and Chinese negotiators, who have been engaged in talks for almost two years, decided to try to get to an agreement in phases.
Phase one has focused on the trade balance and tariffs. Phase two is expected to then deal more deeply with intellectual property enforcement and economic reform in China.
Given the negotiations have gone on so long with fairly little to show for it, it’s fair to ask, why are these issues so difficult to resolve? I believe there are basically three…
 Twitter
|
LinkedIn
|
 del.icio.us
|
|
Fabulous Friday – China Deal at Last!
by phil - December 13th, 2019 8:23 am
Dow 30,000 or 10,000?
30,000 could happen now that we have our trade deal with China though, as you can see from the 1920s wedge (100 years ago next month!), it ain't over until the Great Gatsby sings. Sure it's a stupid, pointless deal that has no teeth and is no better than what we had two years ago – before all the suffering – but, hey, it's a deal and, as President Trump noted in "The Art of the Deal":
"The final key to the way I promote is bravado. I play to people's fantasies. People may not always think big themselves, but they can still get very excited by those who do. That's why a little hyperbole never hurts.
So we can expect to hear that this is "The best Trade Deal Ever." We don't actually know what it is yet and nothing has, so far, been confirmed by China so it's possible the whole thing is nothing more than a way for Trump to distract us from today's Impeachment Vote – which he thought was going to happen late last night but was rolled over to this morning – infuriating the GOP – who worked so hard to drag yesterday's session long past bed time, so most Americans would miss it.
As to the "Trade Deal", although not fully announced, it seems that China is agreeing to purchase $50Bn worth of US Agricultural Products (they used to buy $40Bn anyway) in exchange for $50Bn worth of tariff reductions so, essentially – we are GIVING China $50Bn worth of Agricultural Products and the differenct to the Treasury will, of course, be paid by the American people – as usual. What a deal!
As you can see from this IMF chart, clearly the damage has already been done and hopefully we're in time to undo it before things get worse – like 2008 worse…
I said a very long time ago the economy was suffering from "Self-Inflicted Wounds" and could easily recover if we simply stop this Trade War nonsense and Brexit nonsense and both look like they might end soon so now we'll…
|
Twitter
|
LinkedIn
|
del.icio.us
|
|
The PhilStockWorld.com Weekly Trading Webinar – 12-11-19
by clarisezoleta - December 12th, 2019 3:33 pm
For LIVE access on Wednesday afternoons, join us at Phil's Stock World – click here.
Major Topics:
00:02:48 Checking on the Markets
00:03:58 Checking on the Portfolios
00:13:12 5 Trade Ideas to Make $25,000 in 5 months
00:21:02 Top Trades
00:22:50 Tanger Factory
00:37:49 3 New Trades
00:38:38 "Future is Now Portfolio"
00:58:22 FOMC Meeting
01:05:03 CSCO
01:09:24 FTR
01:17:20 LB
01:19:14 CSCO Trade Ideas
01:25:28 FOMC Statement
01:30:59 Summary
01:39:00 AMZN
Phil's Weekly Trading Webinars provide a great opportunity to learn what we do at PSW. Subscribe to our YouTube channel and view past webinars here. For LIVE access to PSW's Weekly Webinars – demonstrating trading strategies in real time – click here to join us at PSW!
|
Twitter
|
LinkedIn
|
del.icio.us
|
|
Future Stock Thursday – Building a Portfolio for the 21st Century
by phil - December 12th, 2019 8:30 am
The Future is Now!
I was posting some news on Tuesday in our Live Member Chat Room and McDonalds (MCD) was selling Artificial Beef (BYND), the Freeport LNG Terminal was coming on-line in Texas to supply Japan with Liquefied Natural Gas, Virgin Galactic (SPCE) got an upgrade based on Hypersonic Travel and Wal-Mart (WMT) is testing Autonomous Grocery Deliveries. I wasn't looking for them but that was all in one morning's news, which led me to comment to our Members:
I'm thinking we should put together a portfolio of "Future is Now" stocks like SPCE – Something that represents the leader in each Future Field like CRSP, ISRG, etc…
As I noted in yesterday's Live Trading Webinar, it's tough to pick winners this early in the game but we can pick the sectors that are likely to be important in the next 10-20 years and then, within those categories, we can find stocks we currently think are a reasonable value within a growing sector. In yesterday's Member Chat Room and during the Webinar, we came up with the following ideas:
- Virgin Galactic (Space Tourism) – SPCE
- Tesla (Electric, Self-Driving Cars, Battery Storage) – TSLA
- Beyon Meats (Plant-Based Meat) – BYND
- Sunpower (Solar Cells) – SPWR
- Lockheed Martin (Fusion, Weapons) – LMT
- Disney (Entertainment, Virtual Reality, Robotics) – DIS
- Xylem - (Water Conservation and Treatment) – XYL
- Waste Management (Recycling, Reusing) – WM
- Crisper (Gene Thearapy) – CRSP
- IBM (AI) – IBM
- Qualcome (5G…) – QCOM
- Intuitive Surgical (Robot Doctors) – ISRG
- Ballard Power, Plug Power, Fuel Cell Energy (Hydrogen Fuel Cells) – BLDP, PLUG, FCEL (not sure which)
- Amazon (Smart Homes, Smart Devices, Drone Delivery, On-line Shopping) – AMZN
We're very open to additional suggestions and, over the next few days, we'll be refining this list and then deciding who the actual leaders in each space is and then deciding what the best plays to make in each category are going to be and then we'll have a new portfolio. Easy peasy!
Not much going on otherwise, the Fed didn't raises rates yesterday and that dropped the Dollar back below 97, so down 1.5% for the month and the S&P is right where we started the month, at 3,150 so, in Dollar terms, your S&P stocks may now be exchanged for 1.5% weaker Dollars than they could be on Dec 2nd. Is that progress?
|
Twitter
|
LinkedIn
|
del.icio.us
|
|
‘Robotic blacksmithing’: A technology that could revive US manufacturing
by ilene - December 11th, 2019 2:01 pm
'Robotic blacksmithing': A technology that could revive US manufacturing
Robots already assemble and weld products in factories. Can they make the components parts themselves, too? Factory_Easy/Shutterstock.com
Courtesy of Glenn S. Daehn, The Ohio State University
Although it may not be obvious, there’s a close link between manufacturing technology and innovation. Elon Musk often talks of the “machines that build the machines” as being the real enabler in both his space and automotive businesses.
Using less-expensive, more scalable processes allows Space X to launch missions on budgets and with speed that would be unthinkable using NASA’s old-school manufacturing methods. And the new Tesla Cybertruck’s unorthodox design appears to take advantage of a simplified manufacturing process that does away with “die stamping” metal in favor of bending and folding metal sheets.
Tesla has invested heavily in manufacturing as a way to build products faster and more efficiently. The design of newly unveiled Cybertruck is driven in part by Tesla’s production plans. Tesla Motors, CC BY
Now a new manufacturing method dubbed “robotic blacksmithing” has the potential to revolutionize the way high-quality structural parts are made, resulting in a new class of customized and optimized products. I am part of a loose coalition of engineers developing this process, a technique I believe can help revive U.S. manufacturing.
Today’s technologies
Metal parts are used in all kinds of high-performance and safety-critical applications in transportation, mining, construction and power-generation equipment such as turbine engines. Most are made using one of a small number of classical manufacturing processes that haven’t changed much in decades.
Machining cuts away raw material to get a desired shape; casting involves pouring molten metal into a mold; and forming or forging deforms and squeezes metal into new shapes. Casting and forging to shape usually needs custom molds or dies that can take considerable time and expense to design and manufacture, but once running are very productive; parts are inexpensive with highly reproducible properties. This is why nuts and bolts can be cheap and…
|
Twitter
|
LinkedIn
|
del.icio.us
|
|
Federally Fueled Wednesday – Low Rates and Tariff Delays – What Can Go Wrong?
by phil - December 11th, 2019 8:26 am
The Fed makes their final decision at 2pm.
We'll be doing our Live Trading Webinar at 1pm, EST so we'll be reacting to the FOMC announcement live but, other than yesterday's little dip, we've been chugging along so far this week and I think only bad trade news can derail us now.
With this President, we won't know for sure until midnight on Sunday whether or not there will be another round of tariffs placed on China. Yesterday morning there was a rumor the tariffs were delayed but now the signals are back to being mixed and the situation changes by the tweet. Trump is busy at the moment, lashing out at anyone not helping to get him out of his impeachment mess but it's too late now and this will drag on into next year – but traders don't seem to care.
As it's December 11th, we only have a month to go on our "5 Trade Ideas to Make $25,000 in 5 Months" so we'd better go over them and see if it's worth risking over the volatile holidays. We hedged our Member Portfolios last week but these were just 5 trade ideas to make money to spend for Christmas – so it really is time to take them off the table:
- Sell 5 VAC April $85 puts for $5.70 ($2,850)
- Buy 7 VAC Jan $80 calls for $20 ($14,000)
- Sell 7 VAC Jan $90 calls for $12.80 ($8,960)
The net cost of the spread is $2,190 and, if successful, it pays $7,000 at $90 or
…
|
Twitter
|
LinkedIn
|
del.icio.us
|
|
A brief guide to how the China-US trade war will affect your holiday shopping
by ilene - December 10th, 2019 4:05 pm
A brief guide to how the China-US trade war will affect your holiday shopping
Some gifts may soon get more expensive. imtmphoto/Shutterstock.com
Courtesy of Charles Hankla, Georgia State University
With more tariffs on Chinese imports set to take effect this month, holiday shoppers in the U.S. face a dilemma: buy the Apple iPhone 11 or Hasbro toy action figures now or risk facing higher prices later.
On Dec. 15, in the middle of the holiday shopping season, the Trump administration plans to slap new 15% tariffs on US$160 billion of electronics, toys, clothing, power tools and many other consumer goods.
U.S.-based importers have to pay the extra tax before bringing those products into the country. Whether or not they pass the bill on to consumers is hard to predict, but a recent report put the cost for the average household at $1,000 a year once the newest tariffs take effect.
As a political economist, I usually write about how President Donald Trump’s trade policies affect things like industrial production, employment and international relations. But with the China tariffs and even a 100% tax on imports of French champagne and cheese looming over holiday shoppers, I thought it would be helpful to offer a short guide on how these issues affect consumers.
Hasbro currently makes most of its toys in China. Kamira/Shutterstock.com
Trade war timeline
Trump’s trade war began in January 2018, when he ordered tariffs on solar panels and washing machines, followed by duties on steel and aluminum with exemptions for some countries.
Then came the main event: the conflict with China. It began small, with tariffs on about $50 billion of Chinese imports. That sparked retaliation and then a tit for tat cycle until about $370 billion of Chinese goods became subject to additional tariffs of as much as 25%.
If Chinese and American negotiators fail to reach some sort of deal by Dec. 15, virtually all $540 billion in imports from China – approaching a quarter…
|
Twitter
|
LinkedIn
|
del.icio.us
|
|
Tariffic Tuesday – Trump Adds $7.2Bn to his Slush Fund
by phil - December 10th, 2019 8:34 am
"That was the advice given to Watergate reporters Woodward and Bernstein by their source "Deep Throat" (don't Google that!) suggesting that political corruption can be brought to light by examining money transfers between parties. The Trump Administration took in $7.2Bn in tariffs in the form of taxes paid by American Consumers and Companies in October alone. That number will increase to over $10Bn/month if Trump goes through with his threat to add more Tariffs at the Sunday night deadline.
“According to an analysis of data from the President’s own Department of Commerce, American businesses, farmers and consumers – and not China – have paid $42 billion in additional taxes because of these tariffs,” stated Americans for Free Trade spokesperson Jonathan Gold. “Yet even when faced with this staggering number, it’s still unclear whether the president will follow through with his threat to raise taxes yet again on December 15th with another rounds of tariffs, this time on primarily consumer-facing products like toys and consumer electronics.
China’s government and companies in China do not pay tariffs directly. Tariffs are a tax on imports. They are paid by U.S.-registered firms to U.S. customs for the goods they import into the United States. Importers often pass the costs of tariffs on to customers – manufacturers and consumers in the United States – by raising their prices.
The trade war has hit swing states particularly hard. In seven of the top swing states (Florida, Iowa, Michigan, Minnesota, Ohio, Pennsylvania and Wisconsin), Americans have paid a combined additional $7.66 billion in taxes because of these tariffs. In Michigan alone, businesses, farmers and consumers have paid an additional $1.8 billion in taxes. For the month of October, people in these seven states have paid an extra $687 million, including almost $138 million in Ohio alone.
As these states face higher and higher tariffs, their economies begin to suffer. Unemployment is rising in key swing states like Michigan and Wisconsin, with Moody’s Analytics estimating the trade war has reduced U.S. employment by 300,000. Farm bankruptcies have risen 24…
|
Twitter
|
LinkedIn
|
del.icio.us
|
|
The Myth Of The “Great Cash Hoard” Of 2019
by Zero Hedge - December 9th, 2019 10:40 pm
Courtesy of Lance Roberts, RealInvestmentAdvice.com
Tell me if you heard this one lately:
“There’s a trillion dollars in cash sitting on the sidelines just waiting to come into the market.”
No.
Well, here it is directly from the Wall Street Journal:
“Assets in money-market funds have grown by $1 trillion over the last three years to their highest level in around a decade, according to Lipper data. A variety of factors are fueling the flows, from higher money-market rates to concerns over the health of the 10-year economic expansion and an aging bull market.
Yet some analysts say the heap of cash shows that investors haven’t grown excessively exuberant despite markets’ double-digit gains this year, and have plenty of money available to buy when lower prices prevail.”
See…there is just tons of “cash on the sidelines” waiting to flow into the market.
Except there isn’t.
The Myth Of Cash On The Sidelines
Despite 10-years of a bull market advance, one of the prevailing myths that seeming will not die is that of “cash on the sidelines.” To wit:
“’Cash always makes me feel good, both having it and seeing it on the sidelines,’ said Michael Farr, president of the money-management firm Farr, Miller & Washington.
Stop it.
This is the age-old excuse why the current “bull market” rally is set to continue into the indefinite future. The ongoing belief is that at any moment investors are suddenly going to empty bank accounts and pour it into the markets. However, the reality is if they haven’t done it by now, following 4-consecutive rounds of Q.E. in the U.S., a 330% advance in the markets, and ongoing global Q.E., exactly what is it going to take?
But here is the other problem.
For every buyer there MUST be someone willing to sell. As noted by Clifford Asness:
“There are no sidelines. Those saying this seem to envision a seller of stocks moving her money to cash and awaiting a chance to return. But they always ignore that this seller sold to somebody, who presumably moved a precisely equal amount of cash off the sidelines.”
Every transaction in the market requires both…
|
Twitter
|
LinkedIn
|
del.icio.us
|
|
Monday Market Movement – Fed Wednesday, More Tariffs on Sunday
by phil - December 9th, 2019 8:56 am
500,000 Jobs!
That's the NEGATIVE "adjustment" we're going to see in the prior year (March 2018-2019) Non-Farm Payroll report according to the BLS, when they announce their revision in February. That means that the average job reports have been exaggerated by 40,000 jobs per month. That's a staggering number – it's a number so large it's never happened before - yet not a peep about it in most of the MSM? One of the most critical data reports we get in the US is overstated by an average of 20% per month!
None of this, of course, makes any difference to Traders, who are still paying whatever price the market gets marked up to – even while Investors (who are NOT traders) pulled $135.5Bn OUT of the US market so far this year – more than they pulled out in 2001, 2008, 2009 or any other year on record – EVER!
As you can see from the chart, this is no small event and now it's 3 of the last 4 years that money has flowed OUT of the market – even as the market has gotten more and more expensive for those that stayed in it. We got out in September – cashing in our bloated Member Portfolios and we've only put a small amount of that cash back to work since and perhaps we're being overly cautious but a chart likes this makes me think we're not being cautious enough.
Analysts say the trend highlights investors’ apprehension toward a stock market buffeted by the long-running U.S.-China trade war and lingering worries about a potential recession. Stock funds have bled money over seven consecutive quarters, dating to the second quarter of 2018—when trade tensions between the U.S. and China ratcheted higher. As much of this money floods into Treasuries, it's also a key factor in keeping rates down (so far, with higher note prices indicating lower rates).
All this can reverse in a heartbeat and that would be very inflationary, potentially caused by a Trade Deal with China, which could have people running out of bonds and back into the market. That means we can certainly expect to see some "Secret Santa's Inflation Hedges" for 2020. We haven't done those since 2017 as…
|
Twitter
|
LinkedIn
|
del.icio.us
|
|
German
Spanish
French
Italian
Portuguese
Japanese
Korean
Russian
Chinese
Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the site