Tariffic Tuesday – Markets Ignore Another $200Bn Drag on Global Trade

So what?

$200Bn here, $200Bn there – after a while it might add up to something but investors only react AFTER something is a problem and these tariffs don’t even take effect until next week (24th).  Our wise Negotiator-In-Chief has decided to hit China (ie. the suckers who voted for him and actually have to pay this tax) with a 10% tax on $200Bn worth of Chinese goods that are bought in the US and that tax will rise to 25% – taking another $30Bn out of the pockets of the poor so Trump can continue to give tax breaks to the rich.  

But $50Bn worth of taxes on US Consumers isn’t going to be enough for President Trump and he also announced his intention to put another 25% tax on another $267Bn worth of Chinese Goods, costing the suckers who voted for him another $66.7Bn and that, plus the first $50Bn – balances the budget for Trump’s $100Bn additional tax cut to himself, his family and his friends.

Of course, Trump has pushed most of the bite of these ridiculous taxes posing as tariffs out past the November elections because he knows he can baffle his base with BS for another 45 days and probably keep control of the Senate, which will make it difficult for the Democrats to roll back the tortures he is inflicting on the American people. 

As you can see from the cartoon above, at the start of the Great Depression – Trump is nothing more than Herbert Hoover in a new wrapper and history is repeating itself as another one-term President embroiled in non-stop corruption scandals takes a 10-year rally and turns it into an economic catastrophe that almost destroys the country (oops – spoilers!).  Interestingly, like Trump, Hoover also made his fortune through dealings with Russians!  

As was the case in the late 1920s, the markets are shaking off all the signs of a pending Global catastrophe and continuing to move higher, albeit on the lowest volumes we’ve seen this century.  You can see the “smart money” moving out of the market – even as it continues to make new highs as there are plenty of retail suckers still out there, willing to pay ridiculous multilples for future earnings that may never come to pass – despite being harshly reminded of how foolish that is just 10 years ago this week!  

FedEx (FDX) becames the first major victim of rising wages as they missed estimates and guided lower for the year.  It’s getting more expensive to retain employees as strong job demand is fueling competition for existing workers and not enough new ones are entering the work force (and Trump is kicking millions of workers out of the country too!).  FDX also said they see moderating economic activity in China already – and that’s just from the first $50Bn in tariffs – yesterday Trump went to 5 times that amount ($250Bn total) and is threatening to double that to $517Bn – essentially ALL goods imported from China.  

I wouldn’t bet against FDX, as I think they are reasonably priced at $250 as they do make over $15/share but, as with many companies, that’s mainly because they didn’t pay taxes (they got a $219M refund last year on $4.35Bn in profits) thanks to Trump’s bailouts for the rich – so it’s a double-edged sword that does cut some of our Top 1% Corporate Masters.  If FDX were paying ordinary taxes, they would be making about $11/share so nothing wrong with 20x at $220 and even $250 is not so terrible but I wouldn’t play them to break higher.

Now, when you consider that a huge company like FedEx has their earnings overstated by 50% ($4.5Bn vs $3Bn) due to one-time changes in the tax laws, you can imagine how ridiculously over-priced the entire stock market is as it’s all based on a massive pile of hopes and dreams that simply can’t come to pass because our Government can’t survive PAYING companies like FDX 5% of their income instead of taxing them.  

While Trump’s tariffs on Consumers (excuse me, “China”) may offset some of those losses – in the long run, there simply isn’t enough money in the World, let alone the US Budget, to keep funding this madness.

We have the same shorting lines today on the Dow (/YM) Futures at 26,200.  Yesterday’s short idea was good for a $1,000 per contract gain (you’re welcome) !   

At least Coffee (/KCN9) is still cheap at $105.40 and I still like them long but have to take the loss if they fail to hold $100 or, better yet, tight stops at $105 and then try again at $100 with tight stops there too – saves a lot of money that way!

Provided courtesy of Phil’s Stock World.