Trump’s Plan to Close the Trade Deficit with China

Rags to Riches

Jack Ma is an amiable fellow. Back in 1994, while visiting the United States he decided to give that newfangled internet thing a whirl. At a moment of peak inspiration, he executed his first search engine request by typing in the word beer.
The search results had such a profound impact on Ma that he returned home to China and immediately started his first internet business. After several tries he hit it big with Alibaba. So much so that he’s accumulated a net worth of $27.1 billion USD – over 7.3 times more than President-elect Trump. Not a bad rags to riches story for a poor Chinese school teacher.
Indeed, Ma takes a shrewd, yet casual, approach to business. Back in 2014, he got a little sozzled up and bought China’s most popular soccer team from fellow Chinese billionaire Hui Ka Yan. All in all, the soccer team purchase only cost Ma $192 million. As Yan recounted of how the deal with Ma went down:
‘By accident I got him drunk. I told him my Evergrande soccer team is planning to issue shares and raise money to support strategic development, will you join? He said I will. We finished it in 15 minutes.’

This post was published at Acting-Man on January 14, 2017.

Art Cashin On The History Of Friday 13th In The Markets

In his daily note, everyone’s favorite veteran floor trader, UBS’ Art Cashin, reprises the history of Friday the 13th in the markets, and finds that it is far less scarier than some may believe, and in fact has a mild upward bias as it is up 55% to 60% of the time. There are, however, accidents, and on Friday, October 13, 1989, the attempted LBO of UAL collapsed and the Dow plunged 190 points, equal to 860 points today.
From The Feb 13 edition of Cashin’s Comments
Triskaidekaphobia (A Reprise) – It’s Friday the 13th and all of the negative myths surrounding it pop up. Friday the 13th actually has a mild upward bias in stock market history. It’s up 55% to 60% of the time. Those numbers get stood on their head if Friday the 13th falls in the month of November. In November, Friday the 13th has a 70% negative bias, falling a little under 1%.
We think the overall negative myth may be based on a novel published back around 1910. It told of a plot by an evil stock trader (ain’t they all) to crash the market on Friday the 13th.

This post was published at Zero Hedge on Jan 13, 2017.

Welcome To The Third World, Part 21: This Pension Thing Is About To Get Real

‘The problem with police officers and firefighters isn’t a public-sector problem; it isn’t a problem with government; it’s a problem with the entire society. It’s what happened on Wall Street in the run-up to the subprime crisis. It’s a problem of people taking what they can, just because they can, without regard to the larger social consequences. It’s not just a coincidence that the debts of cities and states spun out of control at the same time as the debts of individual Americans. Alone in a dark room with a pile of money, Americans knew exactly what they wanted to do, from the top of the society to the bottom. They’d been conditioned to grab as much as they could, without thinking about the long-term consequences.’
‘ Michael Lewis, Boomerang: Travels in the New Third World
Though it may not be instantly clear, in the above quote Michael Lewis is talking about public sector pensions and how over the course of several decades, mayors and governors across the US have colluded with police, firefighter and teachers unions to promise outrageously-generous benefits and then failed to put aside enough money to pay for them.
As a consequence two things are happening. In dozens if not hundreds of cities and towns, services are being cut to the bone to pay for ballooning pension benefits, and – when even these cuts prove inadequate – pensions are being drastically reduced.

This post was published at DollarCollapse on JANUARY 14, 2017.

Taiwan Tech Giant May Open US LCD Plant In Response To Trump’s “Make In America” Call

While so far various international and domestic companies have announced, grudginly, they would expand production in the US, and hire US workers, after being called out by president-elect Trump on his favorite “bully pulpit”, Twitter, on Friday the push for insourcing took on an unsolicited twist, when Taiwan’s Hon Hai Precision Industry, also known as iPhone maker FoxConn, and one of the largest employers in the world, and its Japanese subsidiary Sharp, have begun studying the possibility of building an LCD panel plant in the U. S., a Sharp executive said Friday cited by Nikkei.
The Taiwanese electronics contract manufacturer, and its Japanese alliance partner SoftBank Group reportedly told Donald Trump they would jointly make significant investments creating new jobs in the U. S. when SoftBank Chairman Masayoshi Son met the President-elect in New York last month according to the Japanese paper.
The joint investment plan was proposed by Son, the Sharp executive said, and was put ‘on the table’ in response to Trump’s ‘Make in America’ call. While it was reported before that Foxconn may consider making iPhones in the US, that speculation was at a very preliminary stage, with nothing definitive confirmed. It also took place prior to the diplomatic fiasco following Trump’s statement that the “one China” policy is negotiable.
Whether this is “gratitude” by Foxconn exces to Trump for siding with the small island is unknown. Officially, with Trump urging American manufacturers to bring operations back to the U. S., Hon Hai is considering production in the U. S. due to its huge market for TVs and other home appliances.

This post was published at Zero Hedge on Jan 13, 2017.

Market Talk – January 13, 2017

A healthy bounce for the Nikkei ahead of the weekend closing up 0.8% but we only saw a small reversal in the Yen. The currency needs to move at the same time but in opposite directions in order to maximize trend. JPY was last seen this evening at 114.50, almost unchanged for the cash close. Nikkei futures are small down in late trading whilst sentiment around global stocks remains stable. In China the poor trade numbers hit confidence more than stocks with the Shanghai closing -0.2%. Exports were expected to fall 3.5% but released at -6.1% and imports expected 2.7% came in at 3.1%. The Hang Seng performed better following global large cap’s and closed 0.45%. CNH was seen in late US trading around the 6.8500 level.

This post was published at Armstrong Economics on Jan 13, 2017.

No Country Should Be Bigger Than This

From the perspective of the state, one of the benefits of growing larger geographically is that bigness makes it more difficult for residents to emigrate or cross over borders to escape taxes.
In his writings on the origins of the “European miracle” that led to the continent’s economic success, Ralph Raico has noted the importance of small states in Europe and the ability to easily emigrate from one political jurisdiction to another in forming a free and open economy and society. Raico contrasts Europe with Imperial China where the state was more easily able to monopolize both natural and human resources through its large size.
In an earlier article at, we also explored how the creation of a larger number of (necessarily smaller) states creates more options for residents of the existing states, and thus increases the potential for fruitful migration and escape from overweening state power.
Larger states, geographically speaking, work in the opposite direction of this, limiting options for relocation, and placing greater barriers in the way of residents who might be looking to change the the conditions under which they live.

This post was published at Ludwig von Mises Institute on Jan 14, 2016.

DBRS Downgrades Italy, Stripping It Of Its Last “A Rating” And Raising ECB Collateral Haircuts

Update: sure enough, the Italian reaction didn’t take long and as Bloomberg cited an Italian Treasury official, the decision won’t impact the interest in Italian public debt. The “DBRS decision to downgrade Italy rating to BBB High from A Low could have impact on short-term debt, but that will be gauged only in coming months” and that the “rating change will not weigh significantly on cost of interests on Italy’s public debt.”
* * *
When previewing the key events of the week, we noted that today Canadian DBRS rating agency is scheduled to review Italy’s credit rating after putting its credit worthiness on negative watch on 5 August. On 5 December, DBRS issued a press release declaring that they would wait for the impact of the Italian referendum result on the continuation of the reform push before making the final decision. In case of a downgrade, the haircut for a 5y BTP used as collateral for ECB operations, as an example, would rise from 2% to 10%.
Moments ago DBRS did just that when it downgraded italy from A (low) to BBB (high), stripping the sovereign of its final A credit rating.

This post was published at Zero Hedge on Jan 13, 2017.

The Story Of The Fed’s Shrinking Balance Sheet Starts To Pick Up Speed

One of the bigger, if unde- reported, stories to emerge from the various Fed speakers yesterday, is that Fed members, if maybe not Yellen herself, are actively contemplating the reduction of the Fed’s balance sheet, and whether credibly or not, it launched not one but two trial balloon efforts to give those traders who are paying attention advance notice. The first one was when Philly Fed’s Harker said that when rates hit 1%, the Fed will “need to look at unwinding its balance sheet”; several hours later St. Louis Fed’s Bullard added that a “balance sheet rolloff may be better than aggressive hiking.”
Overnight, that theme was noticed by various sellside analysts, who are now making a Fed balance sheet rolloff their base case for 2017, most notably the head of rates strategy at RBC, Michael Cloherty, who in a note previewing the Fed’s balance sheet over the next year, says that “the Fed’s balance sheet will start shrinking in Q4 of this year. Fed Chairs usually like to get major initiatives under way before they leave, and Yellen is likely to feel more strongly about that because some potential successors have talked about a relatively disruptive balance sheet reduction ”
Here is the rest from RBC’s Cloherty, who appears more concerned with the impact of such a rolloff on the MBS market rather than TSYs. We disagree, but we’ll cross that bridge when Yellen does suggest that balance sheet reduction is indeed what she is contemplating.

This post was published at Zero Hedge on Jan 13, 2017.

Here Are The Winners And Losers From Trump’s “Border Tax Adjustment”

In late December, we explained why of all Trump economic proposals , the “border tax adjustment“, while most controversial, could have the biggest impact on US assets.
As a quick refresher, the proposal would tax US imports at the corporate income tax rate, while exempting income earned from exports from any taxation. The reform would closely mirror tax border adjustments in economies with consumption-based VAT tax systems. If enacted, Deutsche Bank predicted that the plan would be especially bullish for the US dollar, sending it higher by as much as 15%. What’s more, it would have a transformational impact on the US trade relationship with the rest of the world. Consider the below:
A ‘border tax adjustment’ would, roughly speaking, be equivalent to a 15% one-off devaluation of the dollar. Imports would be 20% more expensive, because corporates would have to pay the new 20% corporate tax rate on their value. Exports would be roughly 12% ‘cheaper’, because for every $33 of earnings earned from $100 of exports (we use the 33% gross margin of the S&P), there would be a 12% tax cost ($33 earnings*35% current tax rate) that would no longer be imposed on corporates. Taking the average impact on the prices of exports and imports is equivalent to a 15% drop in the dollar. A border tax adjustment would be very inflationary. The price of exports doesn’t affect the US consumption basket so would have no impact on CPI. However, the cost of imports would go up by 20%, which based on a simple relationship between import PPI and US inflation would be equivalent to a 5% rise in the CPI. Corporates may of course choose to absorb part of the rise in import costs in their profit margins. But either way, the order of magnitude is large.

This post was published at Zero Hedge on Jan 13, 2017.

Confirmed: “Unknown” Republican, Democrat Paid For Anti-Trump Report

Having learned previously both the identity of the former British intelligence officer who compiled the “Trump dossier”, revealed by the WSJ earlier this week as former MI-6 staffer Christopher Steele, currently director of London-based Orbis Business Intelligence, and that John McCain was the person who delivered the report to the FBI, one question remained: who commissioned the original report meant to uncover a material, i.e., campaign-ending, weakness in Donald Trump’s past.
We now have an answer, or least a partial one. But first, a brief detour into just how Steele allegedly went about compiling his data.
In a report in Mother Jones, David Corn, who first broke the story that a former Western counterintelligence official had sent memos to the FBI with troubling allegations related to Donald Trump, writes about Steele’s experience shortly after being retained in June by a “private research firm” to look into Trump’s activity in Europe and Russia. Steele recalls that “It started off as a fairly general inquiry.” One question for him, he said, was, “Are there business ties in Russia?” Corn then writes that the former intelligence official went to work and contacted his network of sources in Russia and elsewhere.
He soon received what he called “hair-raising” information. His sources told him, he said, that Trump had been “sexually compromised” by Russian intelligence in 2013 (when Trump was in Moscow for the Miss Universe contest) or earlier and that there was an “established exchange of information between the Trump campaign and the Kremlin of mutual benefit.” He noted he was “shocked” by these allegations. By the end of June, he was sending reports of what he was finding to the American firm.

This post was published at Zero Hedge on Jan 13, 2017.

Deutsche Bank Rejects Charge It Is An “Economic Terrorist”

Over the year, Deutsche Bank has been accused – and found guilty – of doing many illegal things (and paid handsomely for it, both in terms of penalties as well as sacked CEOs), but what happened yesterday was new.
As we observed yesterday morning, as part of his latest attack on currency speculators, Erdogan compared FX traders to terrorists, saying that “terrorists with dollars and with weapons have no difference.” Furthermore, on Thursday the government friendly daily Yeni Safak reported that Deutsche Bank and other German institutions were attempting ‘economic terror’ against Turkey by recalling loans to companies before their their due dates.
The German lender was not happy, and on Friday Deutsche Bank’s Turkish unit rejected claims that it’s plotting to undermine the economy, and said it’s ‘unacceptable’ for the lender’s name to be associated with terrorism. ‘Claims in the story about calling loans before their maturity and conducting operations in coordination with other institutions are totally groundless,’ the bank’s Istanbul-based business said in an e-mailed statement Friday quoted by Bloomberg.
Like many other failing regimes, most notably Venezuela, Erdogan and his aides often invoke a conspiracy against Turkey by outside powers when the lira declines, “saying other nations are jealous of the country’s economic growth under his leadership.” On Thursday, Erdogan accused Turkey’s enemies of speculating in the lira and again called on Turks to ‘thwart these games’ by selling their holdings in other currencies.

This post was published at Zero Hedge on Jan 13, 2017.

Gold, Silver, and US Equities – A Telescope Into Eternity

“Never, never be afraid to do what’s right, especially if the well-being of a person or animal is at stake. Society’s punishments are small compared to the wounds we inflict on our soul when we look the other way.’
Martin Luther King
‘The tyrant dies and his rule is over; the martyr dies and his reign begins.’
Sren Kierkegaard
“Csar was swimming in blood. Rome and the whole pagan world was mad. But those who had had enough of transgression and madness, those who were trampled upon, those whose lives were misery and oppression, all the weighed down, all the sad, all the unfortunate, came to hear the wonderful tidings of God, who out of love for men had given Himself over to be crucified, to redeem their sins.
When they found a God whom they could love, they had found that which the society of their time could not give to anyone – happiness and love.
And Peter understood that neither Csar, nor all his legions, could overcome the living truth – that they could not overwhelm it with tears or blood, and that now its victory was beginning. He understood with equal force why the Lord had turned him back on the road. That city of pride, of crime, of wickedness, and of a lust for power was beginning to be His city.”

This post was published at Jesses Crossroads Cafe on 13 JANUARY 2017.

Addicted To Gov? Ben Carson And The 30 Year Mortgage Backstop (HUD Secretary Hearings)

This is a syndicated repost courtesy of Confounded Interest. To view original, click here. Reposted with permission.
Poor Ben Carson. He is being subjected to ‘addicted to gov’ crowd in the US Senate (those Senators who can’t envision a world without Federal subsidies and regulation). But are the savings from a residential mortgage backstop large enough to justify its existance?
(Bloomberg) – By Joe Light – Ben Carson, President-elect Donald Trump’s nominee for the top U. S. housing-policy job, told lawmakers that he questions the need for a government backstop of the market for 30-year mortgages, saying the private market could take on much of the responsibility.
Carson commented in response to a question Thursday at a Senate confirmation hearing where some Democrats questioned his qualifications to lead the Department of Housing and Urban Development, which has responsibilities ranging from insuring low-down-payment mortgages to administering rental assistance for low-income home owners. The housing industry has defended the federal backing as essential in keeping down mortgage costs.

This post was published at Wall Street Examiner by Anthony B. Sanders ‘ January 13, 2017.

Surge in Consumer Confidence Turns to ‘Dismal’ Retail Sales beyond Autos, Gasoline

Pundits sent back to the drawing board.
Consumer sentiment surveys have captured the ‘Trump Effect’ elegantly. All major sentiment surveys agree: Consumer confidence has surged since the election. The University of Michigan consumer sentiment survey, released today, at 98.1 – while down a tiny 0.1 from the miraculous post-election jump a month ago – was still the second highest in 12 years, last month having been the highest.
But there’s now an intense partisan line dividing how consumers feel about the economy.
‘The post-election surge in optimism was accompanied by an unprecedented degree of both positive and negative concerns about the incoming administration spontaneously mentioned when asked about economic news,’ explained the survey’s chief economist, Richard Curtin.
This partisan divide between those who favorably mentioned the policies of the next government, and those who unfavorably mentioned them reached an extraordinary gap of 42.7 points in the expectation index.

This post was published at Wolf Street by Wolf Richter ‘ Jan 13, 2017.

“They’ll Regret It” – Trader Warns Unquestioned “Trumpflation” Dogma Will Be Tested

The vast majority of market participants are showing a surprising lack of flexibility and adaptability when it comes to the Trumpflation trade. As Bloomberg’s Mark Cudmore warns, they may regret it.
The dollar can still correct a chunk more without 2017 being a write off. The rush to rapidly buy the smallest dip, without proper consideration for the risks, is fraught with danger.
They may be correct, but the incredible conviction and seeming inability to add some nuance to the view is worrying. It’s verging on religious fervor, and shows a level of defensiveness that normally only comes from someone on the back-foot.
The Bloomberg Dollar Spot Index remains more than 5% above where it closed on election day. It can still fall another 2%, and remain comfortably in a medium-term uptrend.
Similarly, U. S. 10-year Treasury yields remain more than 50 basis points higher and can drop another 20 basis points without destroying a 2017 theme of rising rates.

This post was published at Zero Hedge on Jan 13, 2017.


Gold at (1:30 am est) $1195.30 down $3.60
silver at $16.72: DOWN 6 CENTS
Access market prices:
Gold: $1198.00
Silver: $16.81
The Shanghai fix is at 10:15 pm est last night and 2:15 am est early this morning
The fix for London is at 5:30 am est (first fix) and 10 am est (second fix)
Thus Shanghai’s second fix corresponds to 195 minutes before London’s first fix.

This post was published at Harvey Organ Blog on January 13, 2017.