I'm sure almost all of you (unless you're living under a rock) have heard that U.S and China are resuming trade talks. I wanted to share my take on this since this whole debacle has been going on well for over a year now. For starters, nothing has been signed, nothing is official, but yet the markets, which again only exists in a digital realm, have finished green last week. Whomever works for a MM (Citadel) knows how indices work and how they are marked up when the underlying's are clearly deteriorating. Let me tell you why the markets are ACTUALLY up. The fed is now required to pump in huge sums of money (overnight repos) semiannually until January 2020, due to the again, deteriorating markets, which no one seems to be talking about. DJI, as all of you should know, has underlying's which are slowly crumbling down to the ground. Before you know it, its going to be phase 1 trade talks, and then a year later, "...phase 2 meeting number 14" and so on. This is just my taking, and I'm open for ANY other takes for different point of views.
Trade talk optimism - The Taking
- Thread starter The Humble Bunch
- Start date
The thing that I wish I had known about years ago is the buybacks. This changes everything.
The guys on the street are saying $900 billion in share buybacks per year, and growing. It seems like the companies are just going to manufacture shareholder value.
If the big banks can't hit metrics on loan growth and interest income, then the buybacks will finish the job. Then there is Dragi going full helicopter mode on the Bunds which is causing massive USDX strength and unprecedented low yields on treasuries (bullish for stocks).
The Fed, RBA, ECB, BOJ, and BOC are just going all in on housing.
Housing bubble from $2 trillion increase in mortgages outstanding since 2015.
https://www.federalreserve.gov/data/mortoutstand/current.htm
It's kind of crazy. I wonder if there will be some kind of consolidation like the ESB (European Safe Bonds). Christine Lagarde is gonna take over the ECB? It could turn into a total train wreck. If the EU cracks we will get a financial crisis. The news is that India is in big trouble.
https://www.cnn.com/2019/08/29/economy/india-economy-slowdown/index.html
They say on wall street that there is no alternative to stocks. I think that any crisis will start outside the US.
China needs a deal, but Xi has to make sure the CCP looks strong. The CCP fears an uprising; they hate the Hong Kong protesters. But will Xi look weak if no deal is made? I don't know.
The guys on the street are saying $900 billion in share buybacks per year, and growing. It seems like the companies are just going to manufacture shareholder value.
If the big banks can't hit metrics on loan growth and interest income, then the buybacks will finish the job. Then there is Dragi going full helicopter mode on the Bunds which is causing massive USDX strength and unprecedented low yields on treasuries (bullish for stocks).
The Fed, RBA, ECB, BOJ, and BOC are just going all in on housing.
Housing bubble from $2 trillion increase in mortgages outstanding since 2015.
https://www.federalreserve.gov/data/mortoutstand/current.htm
It's kind of crazy. I wonder if there will be some kind of consolidation like the ESB (European Safe Bonds). Christine Lagarde is gonna take over the ECB? It could turn into a total train wreck. If the EU cracks we will get a financial crisis. The news is that India is in big trouble.
https://www.cnn.com/2019/08/29/economy/india-economy-slowdown/index.html
They say on wall street that there is no alternative to stocks. I think that any crisis will start outside the US.
China needs a deal, but Xi has to make sure the CCP looks strong. The CCP fears an uprising; they hate the Hong Kong protesters. But will Xi look weak if no deal is made? I don't know.
I don't think the market has priced in at all the possibility of an Elizabeth Warren victory in 2020. Wealth taxes (followed by capital flight), higher corporate taxes, more regulation, eliminating the fossil fuel industry, higher costs to business for energy and carbon emissions, the implementation of China-First policies for tech and big banks...all that will result in a much lower valuations.
Warren could win but wont matter if central banks just keep printing money. No one will ever let the market drop due to the fear of the wealth effect causing more trouble for the economy. You can hold other assets which may outperform but in dollar terms markets won't drop, if it did central banks will just begin purchasing equities as a hope to improve the economy and push cash into the system. BOJ is now largest ETF holder in Japan and I believe the swiss central bank was and may still be a major holder of US stocks such as Apple.
ZIRP and NIRP are here to stay. As rates become less responsive to monetary policy the FOMC will just end up buying assets, equities included. The Wealth Tax is a wildcard. If enacted, the consequences would be extreme. Global economy would never be the same.
They claim they want to but both parties always talk about these types of things and tax changes or standing up to big business but they won’t do anything.
China needs a deal to make Xi looks strong. US needs a deal to make Trump looks strong.
Unfortunately those are mutually exclusive objectives.
Yes - Trump states"America first" and no doubt China has a policy of "China first." Question is: are they both intelligent enough to negotiate without either "losing face" ?