Archive for the ‘Tariffs’ Category

Nobody likes Trump. He acts like an idiot. He’s divisive and an awful communicator. He doesn’t inspire trust. He’s arrogant, bombastic, and narcissistic. About as un-presidential as you can get. He’s embarrassing.

I, literally, can’t stand the guy.

He, literally, chased me out of the republican party.

However, here’s what I’ve learned from the last four years: No matter how bad Trump was — and he was awful — he still ran circles around all the other politicians.

Why? Because he got things done. As opposed to politicians, who are too busy, well, being political… i.e., doing and saying whatever they need to to get elected. Because that’s their profession… running for office.

And, once elected, politicians don’t do anything… they just work on getting elected to their next post. Or re-elected to their current post. Because they’re not trained to do anything but run for office.

Those are — in general — the folks we have running the biggest country in the world.

It turns my stomach that career politicians — democrat or republican — are the best we can do.

Trump was different, though (queue the giant “understatement” look). He wasn’t a politician. In fact, he was a political idiot. But he got things done. China has been ABUSING us for decades. Clear as day. Yet there wasn’t a single politician — like ever — that did what Trump did: Call them out on their bullshit. Because, if you’ll recall, that was really politically unpopular when he first started pushing. “Oh, a trade war will cause the stock market to crash! Oh, everything will be more expensive! Oh, how can we be so insensitive to a developing nation?” Bullshit.

And he called a spade-a-spade with China and Covid… and about WHO bias… both resulting in an unbelievable outcry… but both positions proving to have merit. As did closing the airports to China travelers… hugely unpopular… until the whole world followed suit weeks later. Ironically, after getting blasted for being “jingoistic,” Trump then got blasted for “not doing enough soon enough.”

I hated that he trashed the Paris Accord… and I still do… but Trump was right to point out that the agreement was unfair, that everyone else had to start their hard work, but China and India — the two TOP emitters in the world — could actually increase emissions under the agreement?

Huh? That only isn’t fair, it’s dangerous.

But that’s what most politicians do — head-scratching things — because they’ve never really run anything… because all they know how to do is run for office.

Trump was the first president in modern memory to propose that government employees not get automatic raises, but rather, get compensated based on performance. That was really unpopular, too. But smart, when is rewarding mediocrity a good thing?

Trump bypassed normal and ineffective bureaucracy and directly tweeted to China and Russia that military spending was “crazy!”… something that a politician would never do… but in one bold stroke, moved the reduction of military spending to the top of the agenda. Because military spending is insane.

And speaking of military spending, what about NATO? Trump was the first president to have the audacity to hold every nation accountable for the commitments they made… to pay their fair share.

Trump was an idiot on the whole wall thing, but he was right that we have a problem with illegal immigration.

In fact, that was so much of Trump’s problem… that he simply acted like an idiot… that his behavior simply got in the way. I absolutely stopped reading – – caring — about anything he said or wrote unless it was a topic of substance… because about 98% of what he said was narcissistic, immature gibberish.

But… he wasn’t a politician… and, for me, it was eye-opening what a non-politician could do in government.

You would think we could find a few candidates with both real management AND diplomacy skills — and the desire for public service — among 330 million Americans. Instead we’re stuck choosing between embarrassing or ineffective. Unfortunately, as difficult as it is to stomach — AND IT IS — embarrassing trumps ineffective.

So, on this inauguration day where two more politicians will get sworn into office, I fear, yet again, that we’re going to be led by people who are non-doers.

And that’s what’s wrong with government… electing officials that know how to kiss babies… but don’t have the skill set to manage big things.

And one other thing: We knew exactly what Trump was when he got elected… warts and all. That’s why seemingly reasonable and rational people backed a political idiot… because they knew what they were getting… as opposed to yet another politician simply telling them what they wanted to hear.

Anything to get elected, right?

Anyone that reads this blog knows I root for oil to go down, down, down… because, while that doesn’t benefit an outdated oil industry, it does benefit every other person on the planet… and, oh by the way, it benefits the planet, too.

The facts all virtually guarantee oil will keep driving lower… because of lack of demand (remember the world has shut down!)… because of geopolitical bickering… and because — go figure — the world is really, truly almost out of oil storage.

Ha, those are some pretty great facts!

So why would anyone take a flyer on oil going up now, with oil trading in the low teens?

Because that’s what contrarians do… the opposite from what everyone else thinks.

Case in point:  After oil getting absolutely crushed over the last few days, it had a rather big pop today.

So oil can go up, if no other reason than a dead-cat bounce.

Or, let’s say there’s a threat of war… like what may have happened this morning given Trump told the military to shoot at any harassing Iranian gunboats they want.  Military disruption like that tends to spike oil prices.

Or, let’s say Trump just can’t help himself and he starts levying tariffs on foreign oil.  The U.S. is (sadly) the world’s biggest consumer — by a wide margin — so tariffs would mean the price of oil would be artificially raised in a rather meaningful way.

Or, let’s say that the world gets unbelievably creative and somehow finds a lot more storage space… like old train storage containers… or old storage silos or such… because it’s the lack of storage space that caused the extreme oil pricing mania yesterday.  (“What do you mean I have to keep all the oil in my swimming pool?!”)

Or, let’s say of the 70 vaccines in testing right now, one of them makes it to the finish line relatively soon.  The real possibility of the world reopening for business would also cause oil to spike.

Or, let’s say OPEC decides that their 9.7m barrels a day cut from a week or two ago was completely and utterly insufficient… and so they call another “emergency” session and cut oil by 30, no, 40 MILLION barrels a day… way more than anyone would expect… because they know the time for horse-shitting around is over.  That would send oil prices skyrocketing.

And, let’s say Trump can’t stand being out of the spotlight for more than 12 seconds and he politically forces the Saudis and Russians to cut supply… by offering guaranteed cuts from U.S. producers (something that was left off the table the last time OPEC got together).  With oil at perceived negative prices, he just might have the go-ahead to make that type of commitment.

Note that nothing above is, “when aliens invade the planet” crazy.

So, call it contrarian or whatever, but I just don’t trust that something, ANYTHING won’t happen to interrupt the greatest “fuck oil!” party ever.

Sadly.

There’s a lot of noise in the market.

But there’s usually a lot of noise.

By definition — at any point in time — 50% of people think there’s enough bad in the market to sell their shares to the other 50% who thinks there’s good.

Can’t have a market otherwise.  That’s why I always scoff when someone refers to “easy” trading periods.  It’s never easy.

What helps guide you through the noise is whether your fundamental investment thesis is still intact.

Is mine?  I think the two biggest drivers of corporate profits — which drive the market — are the price of oil and interest rates.  Let’s see where they stand:

* While oil took a little run to the upside, I wouldn’t call it misbehaving.  In fact, it’s shed much of its 2018 gain

* Interest rates are spooking everyone… but 10-year is sneaking back down… and Trump’s on fire about the Fed messing things up — so much so that a few Fed governors have had to reiterate that they won’t, uhm, mess things up (i.e., “will still be accommodative for quite a while”)

* Sentiment is negative.  While that’s not comfortable, as a contrarian I prefer this

So, for me, at least right now, the noise is… just noise… and what we’re seeing is some healthy “letting some air out of the balloon”… which we like… so it doesn’t pop.

 

P.S.  A great example of “noise” was Caterpillar earnings.  They beat top & bottom line.  But everyone was fretting about China and tariffs… and the stock got pounded… even though if you read their commentary, you find CAT itself wasn’t so worried about the effect of China or tariffs on its business.  Here’s some commentary from their 10/23/18 earnings call:

* CATERPILLAR SAYS FEEL GOOD ABOUT EQUIPMENT DEMAND IN CHINA NEXT YEAR

* CATERPILLAR SAYS EXPECT BUSINESS TO CONTINUE TO IMPROVE IN 2019 VERSUS 2018

* CATERPILLAR SAYS CONTINUE TO EXPECT INDUSTRY SALES IN CHINA FOR 10-TON-AND-ABOVE EXCAVATORS TO BE UP ABOUT 40 PERCENT FOR THE FULL YEAR

* CATERPILLAR SAYS EXPECT IMPACT OF 25 PERCENT IMPORT TARIFF ON ADDITIONAL $200 BILLION CHINESE GOODS TO BE ‘QUITE MINOR’

These are all good things, right?!

I have to hurry this post because Microsoft is about to announce earnings.

For the first time in many years, Microsoft’s earnings are incredibly relevant again.

As many know, MSFT is in the process of successfully reinventing itself… to be a big-time cloud competitor.

Their earnings after the market closes today are important because the market is in desperate need of some kind of clear signal… either that things are still ok in tech land… or they’re not.

It just so happens MSFT is announcing before Apple, Amazon, Google, and Facebook… which means all eyes will be on their report.

Now, Microsoft has a reasonable stage set.  Adobe reaffirmed guidance last week… which I believe single-handled stopped the market from another 5-10% slide… since everyone was/is feeling like we’ve driven off a cliff… given tariffs… and global tensions… and interest rate hikes… and Trump acting decidedly unpresidential most of the time.

And Netflix killed their earnings, too, which even though it doesn’t seem like it, also helped provide some footing in this decidedly negative market.

But some disturbing things are still happening.  iRobot (IRBT), makers of my favorite electronic device in the world (Roomba!), killed their numbers, too… and the stock was still hammered today… simply because they cited some potential tariff impact… even though they still raised guidance.

What the market wants — craves — now is more assurance… that the consumer is still spending… that interest rates, while increasing, will increase in a slow and measured pace… that oil isn’t going to spike… that tariffs are having a positive effect somewhere in the food chain…

… essentially that the foundation for investment is still sound.

A good report from the once most dominate and influential tech company in the world… that has clawed its way back into relevance… could turn everything on a dime.  Stay tuned!

UPDATE:  Earnings were solid.  Beat on both top and bottom lines.  Stock was up almost 5% at one point in the after-hours market.  (BTW, Tesla TSLA also reported and nailed it… it’s up over 10% in after hours… and ironically they mentioned tariffs and it doesn’t seem to be impacting the pop.)

Dear President Trump–

I may be the only guy in American that loves what you are doing with tariffs.  (Please see here and here and here.)

And I love that you’re turning up the heat.

But, if you want to win this in our lifetimes OR until another president takes office (whichever comes first), you need to enlist the support of the rest of the commercialized world.

This might be difficult since you’re trying to create a level playing field with them, too…

… or, said another way, you’re hammering the rest of the world into submission as well.

But maybe you can pitch a win here.  Something like, “look at what we’re doing to China… so you know we can easily do that to you, too.  Net-net is you’re going to lose a little to us, it’s inevitable.  But opening up China isn’t… unless we go to China together… and if we do go together, we’ll both really, truly gain a huge new market, second largest in the world!”

To make this work, though, it has to be China vs. THE ENTIRE WORLD.

That’s because China is too proud to be “defeated” by just the U.S… and going it alone only forces them to act more defiantly… which includes them dragging things out in hopes of a political regime change… regardless of how long that takes.

So the only way to get this done in a reasonable time frame is to turn up the heat on the rest of the world… THEN, as a group, approach China.  This will allow China to compromise with dignity… because it won’t be perceived as a fight, rather, that “everyone” came together and “mutually” agreed to change, uhm, all the rules.

No loss of face for the Chinese.  100% victory for the world (and the U.S.).  Wrapped up before the next presidential election.

Tough timing but that’s what you have to do to bring this home.

Break a leg–

–Royal.