Post Tagged with: "United States"

Some incomplete comments on the current US economic environment

Some incomplete comments on the current US economic environment

This is going to be a quick hit post to get some thoughts down on paper because a few threads are coalescing for me that I want to give some coherence to. The essence of the threads revolves around the tension at the Fed between normalizing policy and the ability of the economy to withstand it. My view has been upbeat about the US economy – and that’s been without a trace of recession worry for the last several months. But there are some negative factors coming together that give me pause. And it begins with housing.

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If foreigners are dumping Treasuries, how should you respond as an investor?

If foreigners are dumping Treasuries, how should you respond as an investor?

One of the lead stories at Bloomberg this morning is an article about foreigners shying away from “financing the US government”. And the conclusion of this article is that it could mean higher interest rates in the US. Is this conclusion the right one though, and how should you respond as an investor? I have some thoughts on that below.

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Republican presidential candidate Donald Trump speaks to supporters as he takes the stage for a campaign event in Dallas, Monday, Sept. 14, 2015. (AP Photo/LM Otero)

If Donald Trump remains a cultural warrior, he will fail

Early on in President Trump’s new administration, too much of his energy is being placed on divisive ‘cultural’ issues and not enough attention is being paid to economic policies. To the degree Trump has turned to the economy, much of his policy has been focused on issues that will not yield long-term economic benefits but contain considerable risk, like trade with Mexico and China. And so, while Donald Trump is only a few weeks into his presidency, I think we can begin to take stock of what his presidency will mean for the US economy.

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Trump is dead wrong on Germany. It won’t matter though

Trump is dead wrong on Germany. It won’t matter though

The FT is reporting that US President Donald Trump sees Germany as a ‘currency manipulator’ of sorts, a view bound to have negative consequences on bilateral relations. What’s more, according to the Financial Times, Trump’s top trade advisor, Peter Navarro, has accused Germany of using a “grossly undervalued” euro to “exploit” the United States as well as Germany’s own EU monetary union partners. This makes three countries in Trump’s sights: China, Mexico and, now, Germany.

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Germany is the biggest loser in 2017

Germany is the biggest loser in 2017

As Donald Trump attempts to make wholesale shifts in American domestic and foreign policy, there are bound to be winners and losers economically and politically. Leading German government representatives from Sigmar Gabriel to Frank Walter Steinmeier to Angela Merkel have all taken a vocal stance against Trump’s policies. But the Trump administration appears to be moving in a direction that would weaken Germany’s hand. And so, Germany risks being one of the losers politically in 2017 – something that plays into Vladimir Putin’s hands.

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The Trump Rally is over

The Trump Rally is over

A lot of people are saying the rally in shares since early November that took the Dow over 20,000 is exhausted. That may be the case. However, short of a 1987-style crash, we’re going to have see a recession before shares retreat dramatically from present levels. And the data don’t support the thesis that a recession is coming anytime soon. Instead, we are now seeing a re-acceleration of growth from a mid-cycle slowdown. And that is supportive of shares.

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Why Canada is the country to watch on Trump’s trade policy

Why Canada is the country to watch on Trump’s trade policy

If you want to know whwere Trump is headed on trade, don’t look at China or Mexico. Don’t even look at the UK. Canada is the country to watch for a number of reasons. First of all, Canada has an existing deal with the US and Mexico under NAFTA. That matters in terms of understanding where Trump is headed on trade. Moreover, Canada is also the 2nd largest trading partner for the US behind the European Union. Finally, the fact that Canada is finishing off its EU trade deal just as the UK is getting ready to exit puts it in a unique position in reconfiguring world trade alliances – wth an Anglo-American group involving Canada a potential outcome.

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The country to watch in 2017 is Turkey

The country to watch in 2017 is Turkey

If I could name three countries that will be particularly difficult for the US to deal with geopolitically, I would pick Russia, China and Turkey. The first two are obvious choices but the third is going to be equally tricky because of the increasingly heavy-handed way Turkish President Erdogan is cracking down on alleged Gulenists in the aftermath of last summer’s attempted Coup d’etat. It is Turkey’s unique relationship to the West via NATO and the increasingly authoritarian rule which will make the relationship tricky in 2017.

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Monetary offset, the strong dollar and China’s currency manipulation

Monetary offset, the strong dollar and China’s currency manipulation

With the Fed talking up the likelihood of three rate hikes in 2017 while other central banks are still in easing mode, the potential for a US dollar rout and a concomitant closing of the US trade deficit is pretty low. Therefore, given Donald Trump’s hawkish rhetoric on China, the potential that the US government labels China a currency manipulator for the first time since 1994 is high.

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Donald Trump the risk taker, trade war edition

Donald Trump the risk taker, trade war edition

This is a follow-up to yesterday’s post about Donald Trump and confirmation bias. But it’s going to be a different beast altogether because here’s where I am going to lay out my thinking about Trump and trade. Let me cut to the chase. I think there is a high likelihood that Trump starts a trade war with China. I’ve written about this before – twice! But now I want to outline some possible economic and geo-strategic outcomes based on this. Some of these outcomes are pretty good. But some are catastrophically bad.

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Republican presidential candidate Donald Trump speaks to supporters as he takes the stage for a campaign event in Dallas, Monday, Sept. 14, 2015. (AP Photo/LM Otero)

Donald Trump the risk taker, confirmation bias edition

My narrative is going to be that Trump is a risk taker. And the conclusion I have drawn is that this risk taking will lead to big surprises — some of them negative, but some positive. Afterwards, rather than give you a bunch of confirming information though — I’m going to tell you about my search for non-confirmatory data, because that’s how my process works.

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More on the coming trade war with China

More on the coming trade war with China

On Monday, I wrote a piece outlining how the US has pivoted away from China toward Russia. And the conclusion I drew from the circumstances was that this pivot will create a lot of geopolitical and economic uncertainty depending both on the importance of the actors on the world stage and the violence of the pivot. As US President Obama is constantly at pains to stress, Russia is not a major player economically. So the pivot toward Russia is one of geo-strategic importance. But the pivot away from China has economic implications. And China-hater Peter Navarro as Trump’s new trade czar is telling us the pivot will be violent.

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