There are only two commodities left worth anything in the money management business. In an all hands meeting at Ritholtz Wealth, CEO Josh Brown explains…
What China wants: 3 things motivating China’s position in trade negotiations with the US
by ilene - May 22nd, 2019 1:14 am
What China wants: 3 things motivating China's position in trade negotiations with the US
Courtesy of Penelope B. Prime, Georgia State University
Relations between the U.S. and China have deteriorated sharply in recent days after trade negotiations broke down, leading some to suggest we are on the cusp of a new “cold war.”
President Donald Trump blames the resumption of hostilities on China. Specifically, he and his negotiators say their Chinese counterparts backtracked on an agreement to change laws aimed at enforcing the deal, prompting Trump to raise tariffs on US$200 billion in imports and China to retaliate. Only a few weeks earlier, the two sides seemed very close to a deal.
So what led to China’s change of heart – if there was one?
As an expert on China’s development and economic reform, I believe the answer lies in trying to understand the situation from the Chinese perspective.
Chinese and U.S. negotiators seemed close to a deal – until they weren’t. AP Photo/Jacquelyn Martin
China’s rise
China was a poor country not long ago. Its leaders effectively developed its productive and institutional capabilities by learning from foreign countries while allowing domestic companies to flourish over four decades of reform.
While this is commendable, as my research shows, and something other developing economies should emulate, it has also been controversial, particularly as China’s economy has become the world’s second-largest.
In 2015, a 10-year plan known as “Made in China 2025” put in place a set of incentives to encourage Chinese companies to move from basic manufacturing to high-tech sectors such as electric cars, robotics and artificial intelligence. China’s goal is to have its companies globally competitive in these sectors by 2025.
However, in order to meet these ambitious goals, in some cases Chinese companies must rely on subsidies, government funding, forced technology transfer and intellectual property theft. To foreign political and business leaders, these practices smack of unfair competition.
Now that China has established strong capabilities, the threat of overtaking the U.S. in high-tech areas such as AI seems real and the methods being used…
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The Only Two Scarce Resources Left on Wall Street
by ilene - May 21st, 2019 9:39 pm
The Only Two Scarce Resources Left on Wall Street
Courtesy of Joshua M Brown
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White House Planned To Use Huawei As Trade ‘Bargaining Chip’
by Zero Hedge - May 21st, 2019 9:05 pm
Courtesy of ZeroHedge
If there was any lingering doubt that President Trump has treated Huawei like a 'bargaining chip' during trade talks with the Chinese, Bloomberg just put the issue to rest.
In a report sourced to administration insiders, BBG reported that the Trump administration waited to blacklist Huawei until talks with the Chinese had hit an impasse, because they were concerned that targeting Huawei would disrupt the talks.
Plans to punish Huawei – including possible economic sanctions – had been kicking around for months. And prosecutors took their first tentative steps toward holding Huawei 'accountable' by convincing Canada to arrest Huawei CFO Meng Wanzhou.
And once trade talks had broken down, there was a 'scramble' to implement the measures against Huawei.
Though BBG doesn't offer a definitive answer on this, it reports that some are suspicious that Trump is pressuring Huawei to 'gain a negotiating edge' with Beijing (meanwhile, the Chinese leadership are furious about the decision).
Timing of the U.S. action raised questions about whether President Donald Trump is punishing the company in part to gain a negotiating edge with Beijing in a deepening clash over trade. Talks between Beijing and Washington deadlocked this month as Trump accused China of backing out of a deal that was taking shape with U.S. officials, saying China reneged on an agreement to enshrine a wide range of reforms in law.
Another take on what happened suggested that the decision to hold back on Huawei actually came from the bureaucracy, as administration officials were worried President Trump would just scrap the measures as a favor to Xi, like he did last year with ZTE Corp. Those concerns haven't entirely abated.
Washington has offered Huawei some wiggle room by suspending the new restrictions for 90 days. The company has been stockpiling chips, and reportedly already has enough to keep its business running for three months.
But this report effectively confirms that the administration wasn't being entirely truthful when it said there was 'no link' between Huawei and the trade talks. Trump said back in December that he would go so far as to intervene in efforts to extradite Meng Wanzhou if it would help with the trade talks. And although that would be extreme, we should rule it out just yet.
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European elections: a beginner’s guide to the vote
by ilene - May 21st, 2019 8:49 pm
European elections: a beginner's guide to the vote
EPA.
Courtesy of Tatiana Coutto, University of Warwick
The European Parliament elections are not unlike cricket. Both can last for quite a few days and it can be pretty hard to understand the rules. This year’s European elections take place between May 23 and 26 and different countries vote on different days.
It’s not surprising that few people bother to vote in these elections, either because they find the whole process too complicated or because they find it boring (some people feel the same about cricket).
But this year’s vote is shaping up to be more interesting than most. The populist surge across Europe is being felt in Brussels, as eurosceptic parties aim to cause trouble from inside. The UK’s failure to secure a Brexit deal has left it in the bizarre position of needing to stand candidates despite its planned departure from the bloc.
Parties across the political spectrum have launched initiatives to encourage 400m EU citizens to register and vote. The European Parliament (EP) launched the “This time I’m voting” campaign with the same objective, and an app with information about registration and voting in all member states.
Here’s how the vote will work and why these elections are actually very important.
The basics
EU citizens will be voting to fill 751 seats in the European Parliament. Although, if the UK pulls out at the last minute in the unlikely event of agreeing a Brexit deal, they will be voting to fill 705 seats.
EU citizens vote for the candidates or parties of their country of origin or residence, provided that they are registered. Those living overseas can use their country’s embassies, consulates or schools to vote for a candidate running in their home country. The minimum age is 18 except in Austria and Malta (where it’s 16) and Greece (where it’s 17). Voting is compulsory in Belgium, Bulgaria, Cyprus, Greece and Luxembourg – although this rule is not always enforced.
Each member state is allocated a certain number of seats in the European Parliament, according to the size of its population (economic indicators or…
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“This Is Unfathomable” – Nike, Adidas Pen Letter To Trump Calling Proposed Tariffs “Catastrophic”
by Zero Hedge - May 21st, 2019 5:05 pm
Courtesy of ZeroHedge
Footwear companies Nike and Adidas are publicly airing their grievances and having their say about President Trump's pending decision to slap tariffs on footwear made in China. The companies are calling the policy “catastrophic for our consumers, our companies and the American economy as a whole,” according to Bloomberg and a letter released publicly by the shoe industry’s trade association, the Footwear Distributors & Retailers of America, on Monday.
The two giants have been joined by 171 additional footwear companies in asking the President to hold off on raising tariffs further. The letter was also addressed to Treasury Secretary Steve Mnuchin, Commerce Secretary Wilbur Ross and National Economic Council director Larry Kudlow. The industry estimates that the tariffs, if implemented, would add $7 billion in new costs per year that would need to be passed onto the consumer.
They wrote:
"On behalf of our hundreds of millions of footwear consumers and hundreds of thousands of employees, we ask that you immediately stop this action to increase their tax burden. Your proposal to add tariffs on all imports from China is asking the American consumer to foot the bill. It is time to bring this trade war to an end."
President Trump has recently threatened tariffs as high as 25% on Chinese goods. The U.S. Trade Representative’s office released a list of products that could see higher import duties, including footwear, last week. Trump is set to talk to Xi Jinping next month to discuss the issue further.
Michael Jeppesen, president of global operations for Wolverine World Wide Inc., which also signed the letter, said of the tariffs:
“We don’t make enough to absorb that. The only way it can is to be passed onto the consumer.”
Duties have always been higher for footwear makers due to longstanding tariffs that already sometimes exceed 30% for those in the industry. Nike makes 26% of its apparel and footwear in China while Sketchers produces about 65% of their products there. In Sketchers' case, not all of the products manufactured in China are imported to the United States. Under Armor gets about 18% of its products from China, down from 46% in 2013, and has goals of getting that number down…
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The 5 Fatal Flaws of Trading
by ilene - May 21st, 2019 1:17 pm
The 5 Fatal Flaws of Trading
Courtesy of Elliott Wave International
Close to ninety percent of all traders lose money. The remaining ten percent somehow manage to either break even or even turn a profit — and more importantly, do it consistently. How do they do that?
That's an age-old question. While there is no magic formula, Elliott Wave International's own Jeffrey Kennedy has identified five fundamental flaws that, in his opinion, stop most traders from being consistently successful. We don't claim to have found The Holy Grail of trading here, but sometimes a single idea can change a person's life. Maybe you'll find one in Jeffrey's take on trading. We sincerely hope so.
The following is an excerpt form Jeffrey Kennedy's Trader's Classroom Collection eBook.
Why Do Traders Lose?
If you've been trading for a long time, you no doubt have felt that a monstrous, invisible hand sometimes reaches into your trading account and takes out money. It doesn't seem to matter how many books you buy, how many seminars you attend or how many hours you spend analyzing price charts, you just can't seem to prevent that invisible hand from depleting your trading account funds.
Which brings us to the question: Why do traders lose? Or maybe we should ask, "How do you stop the Hand?" Whether you are a seasoned professional or just thinking about opening your first trading account, the ability to stop the Hand is proportional to how well you understand and overcome the Five Fatal Flaws of trading. For each fatal flaw represents a finger on the invisible hand that wreaks havoc with your trading account.
Fatal Flaw No. 1 — Lack of Methodology
If you aim to be a consistently successful trader, then you must have a defined trading methodology, which is simply a clear and concise way of looking at markets. Guessing or going by gut instinct won't work over the long run. If you don't have a defined trading methodology, then you don't have a way to know what constitutes a buy or sell signal. Moreover, you can't even consistently correctly identify the trend.
How to overcome this fatal flaw?
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FT Editors Warn Washington’s “Coercive Steps” Against Huawei Are “Seriously Misguided”
by Zero Hedge - May 21st, 2019 1:10 pm
Courtesy of ZeroHedge
The FT's editorial board rarely agrees with the Trump administration, and when it comes to Washington's decision to blacklist Huawei, the paper's editors believe Trump is making a massive miscalculation.
FT reporters warned yesterday that Google's decision to cut Huawei off from most Android-related offerings represented a "hammer blow" to the telecoms giant's rapidly expanding smartphone business.
Analysts quoted by the South China Morning Post on Tuesday warned that "as far as overseas markets go, this move just turned Huawei's upcoming phones into paperweights."
Beijing, for its part, has sworn to cultivate whole supply chains and app-based ecosystems out of nothing to insulate Huawei from Washington's blacklisting. In this, the FT editors apparently believe the Chinese might succeed.
And the worst possible outcome of the Huawei crackdown – for the US, at least – would be for Huawei to survive by building a fully independent supply chain. That could help 'decouple' the American and Chinese tech industries, which are deeply intertwined due to the components trade.
They amount to an effort to decouple the US and Chinese tech sectors, leading to a bifurcation of the global industry. This reflects a view reaching beyond the Trump White House and deep into the US security establishment that President Xi Jinping’s China is a malign actor, and that its technology is on course to outstrip America’s. Indeed, the US steps appear part of an attempt to constrain China’s rise.
Echoes of the Soviet era abound, but Soviet industry was never entwined with America’s in the way China’s is. The latest US moves seem designed to cripple or crush one of the first Chinese tech companies to become globally competitive — and one that relies on American suppliers in both mobile phones and network equipment.
Other countries might also chafe at Washington once again imposing its will on global markets, which could galvanize support for an alternative to the US-dollar-based global financial system. And if China is forced to divorce its tech industry from the American tech industry, it could accelerate the 'splintering' of the Internet.
What's more, the European countries that have decided to tolerate the 'security risks' associated with allowing Huawei…
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Xi Warns ‘Prepare For New Long March’ As Beijing Braces For Drawn-Out Trade Fight
by Zero Hedge - May 21st, 2019 12:30 pm
Courtesy of ZeroHedge
In what the SCMP described as the "most dramatic sign to date that Beijing has given up hope of reaching a trade deal with the United States in the near term," President Xi called for the Chinese people to begin a new "Long March" and "start all over again."
Though he didn't specifically mention the trade spat, the message here is unequivocal: The Chinese people must prepare for economic hardship from the burgeoning trade spat. Xi delivered the speech from Jiangxi, the city where the defeated Red Army started the original "Long March" in 1934. And as if the implications for the trade war weren't already clear enough, Xi delivered his speech while accompanied by Vice Premier Liu He.
"We are here at the starting point of the Long March to remember the time when the Red Army began its journey," Xi told cheering crowds on Monday, in footage posted on state broadcaster CCTV’s website on Tuesday. "We are now embarking on a new Long March, and we must start all over again!"
For readers who aren't familiar with this singular triumph in the military history of Communist China, here's a quick explanation:
The Long March was a military retreat between 1934 to 1936 undertaken by the Red Army, the forerunner of the People’s Liberation Army, to evade Kuomintang troops during the Chinese civil war. The thousands of marchers covered some of the country’s harshest terrain and the feat is often evoked as a symbol of Chinese unity by the ruling Communist Party.
Xinhua echoed some of Xi's sentiments in an editorial, where he blamed Washington's "bullying" for the collapse of trade talks. Beijing has previously warned that there's no point in holding more talks if the US isn't "sincere" about wanting to achieve a fair outcome.
A long article by the official Xinhua News Agency on Monday claimed that "bullying by the US side" was the cause of the failed trade talks.
"The People’s Republic [of China] has been standing tall in the East for the last 70 years, it has never lowered its head and it has never feared anyone," Xinhua said. "History will prove again that bullying and threats
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Tesla Slashes Car Prices For The Third Time In 3 Months
by Zero Hedge - May 21st, 2019 11:40 am
Courtesy of ZeroHedge
Tesla is cutting prices yet again, a clear sign that "demand hell" has set in for the embattled automaker, and that the weather in Shortsville may continue to be 85 degrees and sunny heading into the summer where Morgan Stanley now sees the "bear case" scenario for the stock as low as $10 per share.
Perhaps Tesla has finally figured out that there is simply not enough demand for its cars at the current price point, or worse, that its business model isn’t sustainable, resulting in what has been a 2019 full of business model changes, price cuts and employee layoffs.
On Tuesday morning, electrek reported that Tesla had again lowered the base price on its Model S and Model X vehicles. The company's demand issues were highlighted on Tuesday morning in a Morgan Stanley note that saw former Tesla uber-bull Adam Jonas lower his worst case price target for the the company to a paltry $10.
Tesla brought back a ‘Standard Range’ option for both vehicles as a part of the cuts. Tesla has reportedly updated its online configurator to reduce the price of the Model S and Model X by $3,000 and $2,000, respectively. This represents the third price cut in three months for these models.
Bizarrely, the company's attempt to fine tune the equilibrium price only took place after a modest price hike which was immediately reversed: Reuters reported that according to a Tesla spokesman "Last week, we raised U.S. Model 3 prices by 1%". Shortly after, the company cut prices.
In any case, the company still has not consistently offered a $35,000 base model for the Model 3 on its website and the vehicle can reportedly only be ordered by going into a store or calling the company. Recall, the promise of a $35,000 Model 3 with a full EV credit is how Musk drummed up "420,000" Model 3 reservations more than 3 years ago.
Tuesday morning's MS note saw Jonas ponder if a collapse in the company's stock price could become a self-fulfilling prophecy among counterparties and employees. He also called into question the year's "sharp deceleration in demand":
We have long held that Tesla’s share price performance
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How Bad Are Things on Wall Street? JPMorgan and Goldman Sachs Offer No Minimum Accounts
by ilene - May 21st, 2019 10:29 am
Courtesy of Pam Martens.
After chasing the super rich for a century, JPMorgan and Goldman Sachs are now offering no minimum accounts. As we will explain shortly, their motives may not be all that altruistic.
In March of 2016, the Wall Street Journal’s Emily Glazer reported that clients of JPMorgan Chase’s Private Bank “will be required to have at least $10 million in investible assets, twice the current minimum of $5 million.”
What smells like real money to Goldman Sachs has also been eight-figures and higher. In 2013, the New York Times reported that Goldman had a $10 million minimum to manage private wealth and was booting out its own employees’ accounts if they were less than $1 million.
High net worth individuals are what each of the mega Wall Street banks look for since the more money the bank invests, the more fees it generates and the fatter its bonuses are to its traders and executives. And the super rich do not want to be seen coming through the same doors to invest with the main street common folks.
For more than a century, it has been something of a sacrosanct oath for JPMorgan and Goldman to keep out the hoi polloi. When Nomi Prins, the prolific author and former Managing Director of Goldman Sachs penned her 2004 book, Other People’s Money: The Corporate Mugging of America, she wrote that Goldman was “too conceited to have its name or logo visible from the sidewalk of its 85 Broad Street headquarters.”
When Goldman Sachs was negotiating its deal with New York City in 2005 to build its new headquarters building at 200 West Street, one of its requirements was that it have a seat along with the New York City Police Department in a taxpayer-funded spy center to keep the Main Street riffraff under surveillance. Goldman wanted the new surveillance center to be in place no later than December 31, 2009. Curious, isn’t it, that Goldman was prescient enough to think that the pitchforks might be coming out after an epic crash on Wall Street. The spy center was, indeed, built and both Goldman and JPMorgan Chase were given seats, along with the New York Fed, Citigroup and others. (See Wall Street Firms Spy On Protesters in Tax-Funded Center and 60 Minutes Takes a Pass on Wall Street’s Secret Spy Center.)
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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