Here comes another scary headline: Trump plans tariffs on $200 billion in Chinese imports. They forgot to mention that the tariff is a measly 10%, or $20 billion. $20 billion doesn't even get you a week of QE in this day and age. So with 25 percent on $50 billion and 10 percent on $200 billion, that adds up to $32.5 billion in possible tariff taxes. By comparison the tax cuts and government budget bill are $550 billion and $150 billion per year of fiscal stimulus for the next 10 years. So $700 billion vs. a possible maximum $32.5 billion.
That is why the US market is shrugging off the trade war. Its a lot of fear mongering from so-called financial analysts who parrot each other. Now I am sure there will be those that say look at the reaction to the news in after hours yesterday on the $200 billion in goods waiting for tariffs. However, the SPX is still trading near the highs post February. Trade war sounds scary, just because it has the word war in the headline. This is not a war, it is just taxation of certain imports, which is completely overwhelmed by more than an order of magnitude by the tax cuts earlier this year. But you will never hear that on CNBC or any of the other financial networks.
I am long term bearish for various other reasons, and this trade war has been a red herring obfuscating what really matters for this market.
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6 comments:
why are u bearish? all the leading macro indicators are good for at least another year of bull market. also, I've been following you for a long time, I think since 2010 as part of my blog list but i dont really understand the direction your writing is going anymore. you've only had a handful of trades in the past year, and you are constnatly bearish (which is fine i guess, but what about trades?)
:/ no disrespect intended
I am long term bearish because of Fed tightening, first, and overvaluation, second. You can add slowing global growth. When you look at leading macro indicators, you are only focusing on the US. The other economies have already rolled over. And US leading indicators are not signaling an acceleration, just a maintenance of current growth. Don't forget a huge portion of SPX earnings come from overseas, which is why Russell 2000 is outperforming the SPX. And I am not providing a trading service here, so I don't mention all my trades, especially individual small cap stocks which I trade, but I have provided a lot of trading advice throughout the years which aren't buy and sell calls.
Ok fair enough. It would be interesting content if you discussed some of the stocks you're watching. But it's your blog though and i'll continue following along. Thanks.
Most of these individual stocks that I am trading are small caps and on a very short term time frame. And often on the short side, and most of the stocks that I am shorting are hard to borrow, so most traders wouldn't be able to do the same trades. I have multiple brokerage accounts just to get access to as much short inventory as possible, and it gets harder each year to find borrows. Back in the golden days, I grew my account almost exclusively through short selling, and it was much easier to find borrows and there were no fees.
But these days with the exorbitant borrow fees and interest rates for holding hard to borrow short positions, the shorting game is harder than its ever been in my career. It is something I don't recommend for anyone except the die hard skeptical veterans.
Your last comment reminds me of Timothy Sykes
Timothy Sykes makes most of his money from selling DVDs, not trading. Sykes knows what he's talking about, and he's one of the few who are competent, but he doesn't have real skin in the game. Trading is my only source of income, and I have no interest in becoming a trading vendor.
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