Archive for April, 2018

A real tariff war

Posted: April 6, 2018 in Uncategorized

The tariff wars are ratcheting up. But now are more trading tactics and before the 20 May we can see more and more before they come into effect.

Buy this is brutal style of negitiation could lead to some real minor concession from China to let Trump save face. At the end the American is the largest consumer. And nothing would have happened (aside the Republican saving some election in the mid term November election).

If I am wrong I think we should not worry about the markets.

A real trading war will throw the US and West into a depression with inflationary pressure and China food inflation that would turn into insurrection.

The elites, confronted with this scenario, will resort to the traditional solution. A real shooting war China/Russia vs US and the West.

The markets will be the last thing to worry about, unfortunately


The US Q2 earning season is upon us.

While the US economy is improving (and was improving last year) this time there is a difference.

Last year before the earning season, the earning forecast were constantly downgraded, while the general US index was going up.

This was the perfect environment, specially for generalist ultra-cheap Exchange Traded Fund holders.

This season instead the analysts have upgraded the forecasts, while the index was going down.

So there is much more room for error. This environment is perfect for active management (and a very few smart beta ETF)  as there will be clear winners and clear losers.


Another change in the market.

Tariff wars and consequences

Posted: April 5, 2018 in Uncategorized

US and China are trading blows.


As of now it is more a tit-for tat than full blown trade wars. The US has still a negotiating windows till late May and China did not set a date -indicating that it wants to negotiate.

Also strangely, in the retaliation, it included soybeans. Soybeans are strange as China is the largest importer (60% of world production). And, without the US, there are not enough soybeans in the world for China consumption (the other large exporter is Brazil, but does not have enough to substitute the US).

In a sense it is a double edged sword.

Yes it hurts Trump in his Republican States (scary for November elections) – but also wills spike costs in China and bringing inflation.

Inflation brings unrest and lots of unintended consequences for China and also export inflation to the world with a lot unintended consequences for yields.

The communication here is “yes we are prepared to go nuclear, but let’s talk before”.

The most likely case is that some tariffs will be passed, but more as a saving face without hurting too much. Or so we hope.

There is still a third wave – are striction on Chinese investment in the US, probably in June,.

In order to add pressure the Chinese Defense Minister warned the US of growing military ties with Russia.

Per converse the US is still leader in military technology. They are advancing swarm drones combat capability and Lockheed Martin has just patented a technology of nuclear fusion jet engine that could revolutionize air combat.