TGIF – Trade Progress Trumps Government Shutdown – Again

500 points!  

That’s how far the Dow (/YM) Futures have climbed since yesterday morning on rumors that trade negotiations with China are progressing but China but we’ve seen this fade before so we reserve judgment for the moment and we’re not going to get all bullish into a Holiday Weekend (Martin Luthor King Day on Monday), not with all this uncertainty still in the air. 

We have been, however, very bullish since the bottom on 12/26, only the second time all year we’ve been very bullish and it’s paid off nicely in our Member Portfolios so now is the time to protect our gains – not to add to the risks.  We added hedges to our Short-Term Portfolio and our Options Opportunity Portfolio this week to lock in the month’s gains and now we can happily enjoy the long weekend ahead.  

While the headlines on China SOUND good, let’s consider it from China’s perspective.  Apparently Treasury Secretary, Steve Mnuchin, has floated the idea of pulling back some tariffs in exchange for China doing the same as long as China makes some long-term concessions on policy.  US Trade Rep, Robert Lighthizer is against this but, then again, he has spent his whole career telling people how evil China is (and he’s the guy Trump put in charge of the negotiations), so what else would you expect from him?

So ignoring Lighthizer and focusing on what Mnuchin proposes, he’s essentially saying to China that we began tariffs to make them change their policy and then China said “no, we’re not changing our policy” and placed retaliatory tariffs on US and now Mnuchin says, “how about we drop the tariffs and you change your policy?“  My kids were better negotiators when they were toddlers!  Certainly they were not so transparent about their motives.   

If we were serious about Trade, we’d also be making concessions, not simply saying we’d stop doing something we only started doing so we could use it as a negotiating tool down the road – which is now.  Even if China were that stupid (and they are not), Lighthizer didn’t come all this way just to make a deal.  His goal is the economic destruction of China and he…

Provided courtesy of Phil’s Stock World.