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Trade Deals – Bad Deals?

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Through this populist uprising standing in for an election, one issue unites all the candidates that are left. Sanders was always against free trade agreements, like the pending Trans-Pacific Partnership (TPP). Clinton is too, at least now she is. Cruz doesn’t seem to have much time for them, and after years of talking both ways Trump is now firmly against these “bad deals”.

It’s not about TPP or any new trade pacts, either – it’s about (supposed) horrors of the North American Free Trade Agreement (NAFTA) and our current deal with China.

Going over the past is a way to pin down the establishment, which is to say Clinton. But Trump, at least, once to re-negotiate the old deals and turn them back. Was free trade such a bad deal for the US? Is it worth going over old ground?

For all the noise on this issue this year it’s actually not a good issue outside of its value as a populist rallying cry.

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No More Games

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With the Superbowl done, the nation settles in to the depths of Winter. This has been a hard time of year for many reason, not just the sudden end of football. The last few years have been harder to take than what the Panther fans are feeling about now.

This year? It may yet be worse, according to prognosticators. Then again, the worst may be over. Let’s update last year’s big stories to see how this year is coming along to see if there’s reason to hope.

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It’s a Downer Kinda Thang

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“Never forget that the stock market is just a market for stocks.”
– Herman Miller, an old accountant I knew when I was a kid

The bloodletting on Wall Street may have paused, but no one is taking any chances. We’re not technically in a bear market yet – the S&P500 would have to break its resistance around 1863 before that happens. But the world is braced for it. Morgan Stanley has told its investors to hold on at least into the third quarter – exactly what Barataria said a few weeks ago.

Why all the negative sentiment? After all, China’s loss can only be our gain if you believe what you hear in politics. Then again, investors aren’t that gullible. It’s one big financial world and what goes ‘round comes ‘round. While there are some good reasons to take a six month or so pause, most of the reasons for this downturn are indeed lousy. It’s time to run through, and over, these arguments.

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The Dragon Bleeds

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Money is fleeing China. That’s hardly news, since it’s been happening for well over a year now. More accurately, money is now seriously fleeing China – at a rate which shows how little confidence anyone has in the dragon. The mythical creature apparently is made from a wall of paper, but it bleeds like any other economic animal – green, not red.

While the throes of this beast are roiling stock markets all around the world the truth of the matter is that money leaving China has to go somewhere – and “somewhere” is going to be primarily in the US. The situation is much more like Japan circa 1990 than nearly anyone has admitted yet. Where the growing Shia-Sunni war in the Middle East is going to be the policy story of this year, the inflow of Chinese money is already shaping up to be the economic story of 2016.

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Panic – or Laugh?

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“This is no time to panic. There’ll be plenty of time to panic later.”
– Groucho

So far this year the S&P500 has lost 100 points (5%). Where did they put them? Isn’t hard to lose something that is pointy? Despite looking under every sofa cushion the search has so far remained pointless.

It may not seem like the time for humor, but the US market reaction to the meltdown in China is purely comical in many ways. It shows how much the market is responding to emotion rather than reality – and the prevailing emotion is fear. Run away!

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