The Greater Snafu

If you tried to access this pathetic blog on Sunday and came up empty, well, sorry. If you managed to hit the site but found yourself sitting in an empty, lonely landscape of commentlessness, you did better than me. Void. Nothingness. Blog withdrawal.

Webmaster William was all over the issue, which turned out to be a network one. Don’t ask me to explain. I can’t. As of Sunday afternoon the thing was still limping along on one wheel. No comments. No interaction. Imagine Sandra Bullock drifting off in her spacesuit into the bleak nothingness from the irreparably-damaged space capsule. That’s us. Disconnected. Destination unknown. But it can’t be good. Did the Chinese hackers and denial-of-service guys finally do us in? Or did someone forget to change the oil in the server?

Beats me. Hang in there. We shall meet again.

So stock futures exploded higher on Sunday — about 1.5 percent or more than 300 points on the Dow. This comes in the wake of a 306-point romp at the end of last week, and after Donald Trump had a withering phone call with the heads of some of the major US banks. The word, ‘dickhead’ may not have been used but it was surely recalled.

The market volatility stems from the Trumpian trade war, which came in the tenth year of an economic expansion now growing old. It was the last thing the world needed, now steeped in debt, struggling with negative interest rates, inverted yield curves, populist politics, Brexit, Hong Kong, Argenuela, Iran and crazy Putin. The latest White House salvo — another 10 percent tariff on hundreds of billions in Chinese goods on September 1st — was just too much. Mr. Market turned tail.

The US is not in recession or even near one. Unemployment’s at a 50-year low. Last week’s retail numbers were robust. Corporations are making money and consumer sentiment is fine. But expansions don’t last forever and bull markets usually die of shock, not old age. It looked last Monday like Trump was delivering exactly that.

But a week later, maybe not.

This weekend the White House was walking back the rhetoric. News emerged that Chinese tech heavy Huawei will get a reprieve to continue buying supplies from US companies. Then Trump economic advisor Larry Kudlow announced that trade talks with Beijing would be continuing within the next 10 days, “and if those deputies meetings pan out…we are planning to have China come to the USA”.

Meanwhile China’s boss, Xi, would probably love to dial back the hostilities with America and come up with a trade detente as a distraction from the mess in Hong Kong, where his authority is being tested. It’s the hubris of these two men that has taken things too far. But it’s clearly in the interests of America, China and Trump’s re-election in 2020 that the trade war ends.

In fact the quixotic US leader is now telling voters they have no choice but him — or the markets will crash, wiping out retirement savings. Maybe last week’s 800-point one-day drubbing on the Dow was engineered to send exactly that message. Could he be that Machiavellian?

Hell yes!

So, here’s what to expect. (a) Softer language from the White House, fewer threats, a gentler Trump. (b) Trade talks that don’t end in a fight. (c) Another decrease by the Fed when it next sets rates on September 18th. (d) Maybe one more on October 30th. (e) New record highs for the Dow and the S&P.

None of this means there won’t be a recession ever. One’s overdue.

But it does mean the slowdown could be shoved out until after the 2020 presidential election. It might mean four more years of you-know-who. And don’t be surprised if he throws another tax cut around in the meantime.

So you can endure the coming 1.5 percent GIC yields, or stay invested in a balanced and diversified and enjoy the ride. Some choice.