It is the maxim of every
prudent master of a family, never to attempt to make at home what it will cost
him more to make than to buy...What is prudence in the conduct of every private
family, can scarce be folly in that of a great kingdom.
Adam
Smith, The Wealth Of Nations, 1776
This weekend the
world stands at a crossroads. To go down a trade war road, as President Trump
says he will do next week, or to reach some sort of compromise and continue on
the main path of global integration. It
is highly improbable that President Trump will back down from the corner he put
himself in. This weekend our world seems headed for a trade war to add to the
existing currency war. A development the world hasn’t seen since the 1930s.
Below, one last
weekend to save the global economy from self harm.
March 2, 2018 / 3:09 AM
'Trade wars are good,' Trump says, defying global concern over tariffs
WASHINGTON
(Reuters) - U.S. President Donald Trump struck a defiant tone on Friday, saying
trade wars were good and easy to win, after his plan to put tariffs on steel
and aluminium imports triggered threats of retaliation from trading partners
and a slide in stock markets.
The European
Union raised the possibility of taking countermeasures, France said the duties
would be unacceptable, and China urged Trump to show restraint. Canada, the
biggest supplier of steel and aluminium to the United States, said it would
retaliate if hit by U.S. tariffs.
The S&P
500 ended another turbulent week on an upbeat note Friday but major indexes
posted their worst week of losses since early February as Trump’s threat to
impose import tariffs on steel and aluminium rattled investors. The dollar fell
against most currencies, dropping to its lowest in more than two years against
the yen, as Trump’s tariffs proposal raised prospects of a damaging trade war.
Trump said
on Thursday that a plan for tariffs of 25 percent on steel imports and 10
percent on aluminium products would be formally announced next week.
More
March 2, 2018 / 5:55 PM / Updated 13 hours ago
Canada PM warns of market disruption from U.S. steel tariffs
(Reuters)
- Canada’s Prime Minister said on Friday any U.S. tariffs on steel and
aluminium imports would cause significant disruption to markets on both sides
of the border, but he was confident his government could defend the industry.
“
Any
disruption to this integrated market would be significant and serious. But that
is why we were impressing upon the American administration the unacceptable
nature of these proposals that are going to hurt them every bit as much as they
are going to hurt us, and we are confident we’re going to continue to be able
to defend Canadian industry,” Trudeau told reporters at a news conference in
Barrie, Ontario.
March 2, 2018 / 9:06 PM
FOR THE WEEK, THE S&P 500 FELL 2 PCT, THE DOW FELL 3 PCT, NASDAQ FELL 1 PCT
Trump’s tariffs mean higher prices — and maybe even beer in plastic bags
Published: Mar 2, 2018 8:15 a.m. ET
The stock market is stumbling toward a sizable weekly loss, whacked in large
part by trade-war fears.President Trump has “shocked the markets with a regressive, counter-productive and possibly destructive tariff plan for aluminum and steel,” complains Josh “The Reformed Broker” Brown.
Canada, the European Union and China (well, the Chinese steel industry, at least) have come out swinging in response, and Trump is fanning the flames for a battle in trade:
At least the weekend is coming. You can kick back with a beer
— no one will ever mess with that, right? Uh-oh.
That’s the worried message from GQ writer Luke Darby and the Midwest Food Processors Association’s Nick George, who combine for our call of the day.
“
The fallout from these tariffs could be tremendous, including rising prices, layoffs and beer coming in plastic bags like Canadian milk,” says Darby.
He’s suggesting brewers will raise prices for six packs if they have to pay more for aluminum cans, as he also jokes that they’ll switch to using plastic bags. (Yes, many Canadians buy milk by the bag.)
The tariffs “definitely could raise prices” for consumers, says George, president of the Midwest Food Processors Association, according to a Milwaukee Journal Sentinel report.
They’re part of a horde of people worried about the potential impact on the big users of aluminum and steel. There’s buzz about Hershey Kisses, cars, Apple Macbooks and other beloved goods possibly costing more.
More
Hedge fund boss who predicted the 1987 stock crash warns of a selloff in bonds
Published: Mar 2, 2018 7:06 a.m. ET
Paul Tudor Jones expects the 10-year yield to hit 3.75% by the end of 2018
Paul Tudor Jones, a hedge-fund icon, said investors should steer clear of bonds as he considers government paper “overvalued and overowned” and primed for a tumble.That’s a scenario that would drive yields, which move in the opposite direction of prices, sharply higher. Jones is predicting the yield for the 10-year Treasury note TMUBMUSD10Y, +0.29% will hit 3.75% by the end of 2018. Yields stand presently at 2.81%.
Jones is widely credited with predicting, and profiting, from the stock-market crash in October of 1987, which saw the Dow Jones Industrial Average DJIA, -1.68% lose 22% of its value, marking the largest percentage decline for the blue-chip benchmark in its history. Jones founded Tudor in 1980 and became known for trading everything from currencies to commodities. His track record has featured middling returns and an exodus of billions from his hedge fund in more recent years.
Jones told Goldman Sachs — for a research report dated Wednesday and titled “Has a bond bear market begun? — that a coming bear market in bonds is the result of easy-money policies that has set the stage for out-of-control inflation:
The bear market in bonds is the natural upshot of the bull market in monetary and fiscal laxity... We are setting the stage for accelerating inflation, just as we did in the late ‘60s. |
The Fed’s dogged pursuit of a 2% annual target for inflation, the level the central bank views as healthy for the economy, is setting the stage for a “sharp spike in inflation, created financial bubbles on the verge of popping, and enabled the recent U.S. fiscal stimulus, which [Jones] thinks we will regret,” the Goldman note said.
More
In other news this
weekend, misery loves company. Bitcoin’s
internals signal all’s not right in the bitcoin mania. Europe seems to want to blow even before
President Trump adds a trade war to his currency war.
Bitcoin's Plunge in Volume Stirs Questions About Its Popularity
By Eddie Van Der Walt
2 March 2018, 07:45 GMT
Earlier this year, when
Bitcoin’s price fell by more than 60 percent from its record close, a
less-noticed Bitcoin figure also plunged: the number of daily transactions.
There are many explanations
for the fall-off in trading, from software- to news-related. What’s less
understood is why the level hasn’t recovered as Bitcoin’s price made a 50
percent comeback since Feb. 5. That’s left some investors wondering whether the
cryptocurrency is waning in popularity.
The average number of trades
recorded daily has roughly dropped in half from the December highs and touched
its lowest in two years last month, even as Bitcoin became a household name and
roared back above $10,000.
The transaction data may be
bad news for Bitcoin bulls, according to Charles Morris, chief investment
officer of Newscape Capital Group in London, who invests in cryptocurrencies.
Trading and purchases on the Bitcoin network, which can be measured by metrics
like transaction volume, is indicative of price direction, he said.
“We had a hype-cycle and now
it’s cooling down,” Morris, who’s working on a project that will facilitate
price discovery in various cryptocurrencies, said by phone from London. “We
just may be entering a bear market” for Bitcoin.
Transactions plunged from a
seven-day average of almost 400,000 in mid-December to about 200,000 this week,
according to research firm Blockchain.info. The last time it was this low, the
currency traded below $500.
Transactions waiting to be
officially recognized by the Bitcoin network dropped from a seven-day average
of 130 million bytes in early January to about 35 million now.
----The decline in prices may itself be
to blame for lower trading volumes in Bitcoin. And websites that once only
allowed payment in Bitcoin now accept a much wider range of digital currencies,
according to Kyle Samani, managing partner at crypto hedge fund Multicoin
Capital. That makes alternative currencies more appealing than the
first-mover in the space. A year ago, bitcoin’s market capitalization was about
85 percent of the total sector. It’s now around 40 percent, according to
website Coinmarketcap.com.
“Merchants, payment processors
and online gambling are moving off of Bitcoin,” Samani, who has $50 million
allocated to the space, said in an email. “Our Bitcoin position as a fund is
small -- I believe Bitcoin is in the process of failing.”
Finally, Italy. A
nice place to visit, a hell of a place to live, Vatican City excepted. Euros
anyone?
Why Italy's Election Is Such a Mess
An interview with Hans
Noel, a political scientist based in Florence.
by Jonathan Bernstein 2 March 2018, 07:00 GMT
No one knows what will happen when Italy votes on March 5 [March 4. Ed].
Polling is inconclusive, and the electoral rules are brand-new. In an
attempt to make some sense of the mess of parties and coalitions competing for
power, I reached out (over email) to Hans
Noel, an associate professor of government at Georgetown University and
author of “Political
Ideologies and Political Parties in America,” a study of
coalition-building and elections. He is spending the year as
faculty-in-residence at Villa Le Balze in Florence.JONATHAN BERNSTEIN: Is Italy likely to come out of this election with any stable government at all?
HANS NOEL: As you know, I’m out of the prediction business, but no. Italy is very likely to come out of this election without a stable government at all. The problem is that there will be three factions with about a third of the vote. The center-right, a coalition that is itself divided roughly in half between Forza Italia and Lega, is likely to come in first, but they will need a coalition partner. The Five-Star Movement, which likely to be the single biggest party, but behind the center-right coalition, has generally said they don’t want to join with the other parties at all. It’s hard to see them align with anyone. The center-left coalition, led by the Partito Democratico, will be the smallest, but they are also the most centrist.
So one likely outcome is a coalition between the PD and Forza Italia (and some minor parties), perhaps led by the current PM, Gentiloni. That is, a continuation of the existing caretaker government. A grand coalition like that one probably won’t last long. FI and PD just have goals that are too different. Other grand coalitions would seem just as unstable. Any coalition with the M5S seems very hard to predict, since their platform keeps shifting.
JB: That would seem to make it difficult for anyone trying to guess what kinds of policies, especially economic policies, to expect going forward. If it is a grand coalition including the PD, does that mean a continuation of the status quo on Europe and other economic policy for as long as the coalition lasts?
HN: Definitely hard to predict. One stabilizing force is that even Forza Italia is more moderate on Europe than most of its coalition. So if PD and FI are in the coalition, they may put the brakes on any kind of reduced relationship with Europe, under whatever nickname we’d give it. The Lega and (probably) M5S would like to see less deference to Europe, as they see it. But unless it’s a coalition of those two (not out of the question), then someone will likely hold them back for the time being.
Some are suggesting that an unstable grand coalition will lead to new elections very soon. If another election is on the horizon, then major policy change will probably be on hold.
More
March 2, 2018 / 12:20 PM
Polish lawmaker: due reparations from Germany could stand at $850 billion
WARSAW
(Reuters) - Warsaw has the right to demand reparations from Germany potentially
worth $850 billion (616.34 billion pounds) for destroyed property and people
killed during World War Two, the politician in charge of reparations said on
Friday.
The Polish
ruling Law and Justice party (PiS) has revived the issue of war reparations at
a time when Israeli politicians accuse it of attempting to whitewash the role
of Poles in German war crimes against Jews during the conflict.
German
parliamentary legal experts said last year that Warsaw had no right to demand
reparations.
The Polish
government stopped short of making a direct claim to Germany but the issue
could lead to tensions between the two EU governments, analysts say. Germany is
Poland’s largest trade partner and Poland is the biggest recipient of EU aid.
“We are
talking about very large but justified sums for war crimes, for the destroyed
cities, the lost demographic potential of our country,” Arkadiusz Mularczyk,
the head of the parliamentary committee on reparations, told Polsat News
broadcaster.
Mularczyk
said the value of reparations due from Germany could reach $850 billion but
this sum could be revised as new estimates would be made later this year.
The PiS
lawmaker said Poland, which came under Soviet domination for more than four
decades after the war, never received war reparations from Germany.
More
March 2, 2018 / 10:12 AM
Euro zone bonds sailing into weekend of risk events
LONDON (Reuters) - Germany’s 10-year government bond yield
hit a five-week low on Friday, as an Italian election and a milestone in German
coalition politics this Sunday together with worries about a global trade war
boosted demand for safe-haven debt.
Italian bond
yields fell to a three-week low, pushing the gap over German peers to its
tightest in two weeks and suggesting some confidence among investors heading
into Sunday’s election.
U.S.
President Donald Trump on Thursday announced plans for hefty tariffs on
imported steel and aluminium to protect U.S. producers. That stoked concerns
about a trade war, rattling stock markets and pushing U.S. and European bond
yields down.
The worries
sparked a broad sell-off in European stocks, weighing particularly on the
export-oriented German DAX index, which fell 1.8 percent to a six-month low.
In the euro
zone, the focus turned to two potentially major risk events this weekend.
On Sunday,
Italians vote in an election that is expected to result in a hung parliament,
with former prime minister Silvio Berlusconi’s alliance of centre-right groups
emerging as the largest bloc, while 5-Star looks certain to be the biggest
single party.
Germany on
Sunday gets the result of a ballot of Social Democrat (SPD) party members on a
coalition deal with Chancellor Angela Merkel’s conservatives, the outcome of
which could seal or end Merkel’s hopes for a fourth term in office.
“The base
case we have is that we get through Italy with some sort of broad coalition
that is market friendly, that Germany resolves its government situation and
then there’s two years where some of the larger European questions can be
solved,” said Mark Haefle, global chief investment officer at UBS Wealth
Management.
Most euro
zone bond yields were down 0-2 basis points.
More
March 2, 2018 / 10:10 AM
SPD coalition 'no' vote would hurt Germany, EU - party official
BERLIN (Reuters) - Germany and Europe would both suffer if
the Social Democrats (SPD) vote‘no’ in a ballot on a coalition with Chancellor
Angela Merkel’s conservatives, a senior party official said.
The SPD’s
464,000 members have been voting in a postal ballot on whether to endorse their
party leadership’s decision to renew for another four years the‘grand
coalition’ with Merkel’s conservative bloc that took office in 2013. The result
is due on Sunday.
Stephan
Weil, SPD premier of the state of Lower Saxony, said during his last visit to
Brussels everyone he had spoken to was adamant Germany should not drift into
uncertainty.
“It would be
bad for Europe, Germany and the SPD. There would be a period of political
uncertainty,” he said.
French
President Emmanuel Macron is keen to push ahead with reforms to the euro zone,
but without a German government in place soon the window of opportunity to
inject fresh dynamism into the European project will quickly close for this
year.
Asked in an
interview with daily Die Welt if an SPD‘no’ vote would result in a national
crisis, Weil said:“No, I wouldn’t go that far, but many people’s confidence in
our political system would erode even further.”
The SPD’s
Jusos youth wing has been lobbying party members to vote against a re-run of
the grand coalition, arguing they would do better to rebuild in opposition
after suffering a battering in last September’s election.
More
By means of glasses, hotbeds,
and hotwalls, very good grapes can be raised in Scotland, and very good wine
too can be made of them at about thirty times the expense for which at least
equally good can be brought from foreign countries. Would it be a reasonable
law to prohibit the importation of all foreign wines, merely to encourage the
making of claret and burgundy in Scotland?
Adam
Smith, The Wealth Of Nations, 1776.
And lastly,finally, some
interesting observations and comments from Jason Jencka in Lake Tahoe.
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