I could see that, if not actually disgruntled, the market
was far from being gruntled.
With
apologies to P. G. Wodehouse
The world’s largest
debtor has picked an unwinnable fight with the world’s largest creditor, and
the world’s largest creditor doesn’t like it. Worse, President Trump seems
determined to start his trade war against China just as the Fed and other
central banks have started the process of “normalising” interest rates. Nothing
good lies ahead for over priced stocks, with the all-important FANGs headed for
increased scrutiny, regulation and worst of all, taxation.
So do stock markets
face a 1987 style crash, a 1973-74 style meat grinder, or a negative wealth effect
correction that brings on the next global recession? All three possibilities spell disaster for
corporations who loaded up with misallocated debt. The next Lehman is out
there, but how many Lehman’s are there, and how do the central banksters turnaround
the next recession, if their starting point is from below two percent interest
rates?
Below, global stock
markets on the brink of armaggedon. Who will blink first? Debtor President
Trump or Creditor President Xi?
“If
you're not gonna pull the trigger, don't point the gun.”
James
Baker. United States Secretary of the Treasury under President Ronald Reagan,
and U.S. Secretary of State and White House Chief of Staff under President
George H. W. Bush.
Stock market ends sharply lower on renewed trade war fears
Published: Apr 6, 2018 4:35 p.m. ET
U.S. stocks closed sharply lower on Friday, led by a selloff in industrials
and financials, as investors continued to fret over an escalating China-U.S.
trade fight.The main indexes sold off in early trade following President Donald Trump’s proposal of fresh tariffs against China. The afternoon selling pressure followed Federal Reserve Chairman Jerome Powell’s speech in which he backed a “patient” approach to raising interest rates.
What are main benchmarks doing?
The Dow Jones Industrial Average DJIA, -2.34% fell 572.46 points, or 2.3%, to end at 23,932.76, bringing its weekly decline to 0.7%. All 30 blue-chip companies finished with losses on Friday.The S&P 500 index SPX, -2.19% dropped 58.37 points, or 2.2%, to finish at 2,604.47, with all 11 main sectors trading in negative territory. More than 95% of S&P 500 stocks closed lower on Friday, according to FactSet. Industrial and financial stocks led the losses, down 2.7% and 2.4%, respectively. The benchmark index lost 1.4% over the week.
Meanwhile the Nasdaq Composite Index COMP, -2.28% declined 161.44 points, or 2.3%, to close at 6,915.11, leaving it with a 2.1% weekly fall.
Read: Dimon: Investors underestimate threat of ‘drastic action’ by Fed, other central banks
Investors fretted over how a potential trade fight between the U.S. and China would impact domestic and global growth.
The White House, in a statement released after the market close Thursday, said that Trump asked the U.S. Trade Representative to consider an extra $100 billion in Chinese goods to face tariffs and to identify the products that could be targeted.
China’s commerce ministry responded to the latest tariff threat by saying it will respond with countermeasures if needed.
“The Chinese side will follow suit to the end, not hesitate to pay any price, resolutely counterattack and take new comprehensive measures in response,” the ministry said via its website, citing an unnamed spokesman. The statement added that China “doesn’t want” a trade war, but is not afraid to fight one.”
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April 7, 2018 / 3:18 AM
China's state media says U.S. tariff action will be defeated
SHANGHAI
(Reuters) - China’s state media has rallied against the United States warning
its trade protectionism actions would end in defeat and that the only option
now was to hit the United States hard enough so it will “remember the pain”.
“If the U.S.
says that it will pay any price, it must be firmly attacked,” China’s official
Xinhua news agency said on Saturday.
China warned
on Friday it was ready with a “fierce counter strike” of fresh trade measures
if the United States follows through on President Donald Trump’s threat to slap
tariffs on an additional $100 billion of Chinese goods.
----Rising trade tensions between the world’s two largest economies follows a U.S. finding that China was engaging in unfair trade practices in connection with intellectual property protections. China rejects the charge.
China’s media,
which is strictly controlled by the government, has come out in defence of the
country, painting the country as a victim of an overly aggressive United States
bent on taking illegitimate unilateral action.
“The White
House has completely lost its sense of reality!,” said the ruling Communist
Party’s People’s Daily newspaper in a Friday commentary, alleging the United
States is acting unilaterally and engaging in trade protectionism.
Meanwhile,
the nationalist Global Times said in an editorial published late on Thursday
that the “Chinese are aware that the only option now is to hit the U.S. hard
enough so that it will remember the pain.”
$60 Billion Manager Considers Selling All
U.S. Assets
By Matthew Burgess
6 April 2018, 08:47 GMT+1
Nader Naeimi, a money manager
at the $145 billion AMP Capital Investors Ltd., is so frustrated by the tariff
fight with China that he’s considering dumping all his American holdings.
“At some point, you just bite
the bullet and say, I’m just going to get out of all my assets, all my
exposures out of the U.S.,” Naeimi, the Sydney-based head of dynamic markets at
the money manager, said in a phone interview. “That’s the No. 1 thing we’re
thinking.”
Naeimi says the risk due to
the tit-for-tat levies between the two countries is starting to overshadow all
the positives in the global economy, after U.S. President Donald Trump ordered
his administration to consider tariffs on an additional $100 billion of Chinese
goods on Thursday. In response, China said it would counter U.S. protectionism
“to the end, and at any cost.”
“We’re torn here,” said Naeimi, who directly manages about $1.4 billion and
helps oversee more than $60 billion for AMP. “On the one hand, there’s great
fundamentals, global growth is synchronized, but the political risk is just
becoming too much to handle.”Naeimi, who says his fund is light on U.S. equities, suggested shorting Boeing Co. of the U.S. and buying shares in France’s Airbus SE. “China’s got a pretty massive agreement, deal with Boeing, so they could easily reverse that,” he said.
The AMP manager says he’s spending time looking for hedges against possible retaliation from China. He bought gold today, he said.
“We’ve got to find ways” to protect the portfolio, he said.
The most radical one? Selling everything in sight.
China Has the Cards to Call Trump's Bluff
Trade numbers alone
don't reflect the balance of power in this fight.
By David Fickling
6 April 2018, 07:56 GMT+1
When a card player doubles
down on a high-stakes bet, is that a sign of strength, or an over-played hand?
That's what investors have to
ask after President Donald Trump threatened to impose tariffs on a further $100
billion of Chinese imports.
In one sense, such a move --
if enacted -- could turn the tide of this conflict in Washington's favor.
Reciprocating tariffs from
Beijing, when added to the $53 billion in trade that's already under threat,
would max out China's ability to retaliate through conventional means. Chinese
imports from the U.S. have exceeded $153 billion in only two years since
it joined the World Trade Organization in 2001 -- and then only by a few
billion or so.
Meanwhile the U.S. would still
be able to threaten another $350 billion or so of trade in the other direction,
thanks to its yawning trade deficit with the People's Republic.
That assumes, however, that
China would only resort to conventional means. Recent experience suggests
otherwise.
Take
the experience of Hyundai Motor Co. The South Korean carmaker had been the
second-biggest marque in China for much of the past decade before rising
tensions over Seoul's decision to deploy a missile shield against North Korea boiled
over early last year.
With lightning speed, state-owned media and social media accounts whipped up an unofficial boycott of Korean products. Yang Bingyang, a former model who's known online as Ayawawa, took a break from dispensing beauty and relationship advice to call for her 2.7 million Weibo followers to join the boycott.
"I will cancel my trips to South Korea and stop cooperating with Korean companies … every penny we spend is a vote on our future world!", the state-owned Global Times quoted her as saying.
---- There are plenty of ways that China could bring pressure to bear in that way. The U.S. is the largest investor in China from outside Asia, with about 3 percent of the foreign direct investment stock, worth about $41 billion in 2016. As Hyundai has learned to its cost, assets held in China can rapidly lose their value if you're in Beijing's bad books.
The impact could be felt well beyond the usual suspects. Most U.S. businesses with substantial revenue in China have so far been spared from the country's retaliatory wrath, but tech companies such as Apple Inc., Qualcomm Inc. and Intel Corp. are directly in the firing line if things heat up.
Boeing Co., General Electric Co. and United Technologies Corp., whose substantial Chinese aerospace businesses have so far been largely spared, could also be targeted. Caterpillar Inc. risks getting locked out of the Belt and Road infrastructure bonanza.
Other firms could be damaged by local action that barely touches on formal goods trade.
Las Vegas Sands Inc., controlled by 2016's biggest conservative political donor Sheldon Adelson, doesn't technically export anything much to China -- but if Macau authorities decided to strip away the license for his casinos that's up for renewal in 2022, the company could lose three-fifths of its revenue in a flash.
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Why stocks could fall nearly 40% over the coming 18 months
Published: Apr 6, 2018 5:04 p.m. ET
The U.S. stock market has seen extreme volatility over the past two months,
as investors grapple with the
prospect of a trade war, potential regulation for large-capitalization internet
companies, and changing monetary policy from the Federal Reserve.No doubt, many investors are wondering how bad things could get, and how far the market could reasonably fall. According to one analyst, the level where the S&P 500 SPX, -2.19% could bottom depends on what kind of selloff Wall Street sees. But in any of three potential paths, more pain can be expected ahead.
Nicholas Colas, co-founder of DataTrek Research, offered three downward scenarios that the equity market could take: a sudden crash, akin to October 1987, where stocks drop sharply over a short period; a “slow motion train wreck” where the time until the bottom is longer but daily losses along the way are shallower; and a “catalyst-driven price reset,” as investors fret that a recession could be on the way, even if one doesn’t materialize.
Colas emphasized that “we are not expecting a U.S. equity market crash or even a snarly bear market,” but admitted, “There’s no sense in denying the obvious—U. S. equity markets feel shaky.”
Don’t miss: Why the Fed is ‘Public Enemy No. 1’ for the stock market
The first scenario, an abrupt crash, may sound worse than it would end up being, he wrote in a research report. He noted that after 1987’s Black Monday—still the single-largest one-day percentage drop for the Dow Jones Industrial Average DJIA, -2.34% ever—stocks still closed higher for the year, and ended up nearly 10% from the low of that crash.
Colas used Black Monday as a guide, calculating that at the close of trading on that day, the S&P 500 had a forward price-to-earnings ratio of 9.3 while the U.S. 10-year Treasury note TMUBMUSD10Y, -1.97% yielded 8.9%. He added the P/E to the yield, for a total of 18.2, which he said could be used as a proxy for measuring the valuation of the two markets. Currently, the 10-year yields around 2.80%, so to reach the same combined valuation, the S&P’s P/E would have to drop from its current level of about 16 down to 15.4.
In order for the S&P to reach that P/E, the benchmark index would have to fall to 2,187, which Colas dubbed a “1987-style low.” Based on Friday’s close, that hypothetical bottom would represent a drop of 16%, and a drop of nearly 24% from the S&P’s record high, which would be enough to put the S&P into bear-market territory. “Not great, but hardly awful either,” Colas wrote—particularly compared with the other prospects.
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"We finished the
year, and we reported that we had $17 billion of cash sitting at the bank's
parent company as a liquidity cushion. As the year has gone on, that liquidity
cushion has been virtually unchanged."
Alan Schwartz, CEO Bear Stearns,
March 12, 2008. Bust March 16, 2008.
The monthly Coppock Indicators finished March.
DJIA: 24,103 +272 Down
10. NASDAQ: 7,063 +300 Down 13.
SP500: 2,641
+202 Down 10.
All
three slow indicators moved down. For some a new bear signal, for others a take
profits and get back to cash signal.
DJIA. Buy:
29/7/16 - 18,432. Sell: 29/3/18 –
24,103.
SP500. Buy: 29/7/16 –
2,174. Sell: 29/3/18 – 2,641.
NASDAQ. Buy: 29/7/16 –
5,762. Sell: 29/3/18 – 7,063.
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