The Great Global Trade War of the 21st Century is not bullish
Stock markets getting crushed this morning. Why? Well, escalating tensions in The Great Global Trade War of the 21st Century (trademark Cody Willard) are, well, escalating.
Last week, I wrote: “Escalating tensions are what I’ve been talking about since the very first moment that Trump started talking about tariffs and trade wars. You can’t be the leader of the so-called free world and start talking about tariffs and start talking about trade wars without starting a trade war. The minute he talked about it, that is the first shot of the war. Since that time, that’s all I’ve talked about when I talked about the trade wars. Friendly fire, fog of war, unintended consequences. Absolutely these are real problems, real and developing problems, yet another reason I want to be just a little more cautious right now, because that is a new economic problem, a new profit problem that has not coalesced yet, but is certainly recognizable as a possibility and looking increasingly likely.
If Tim Cook, which he said, he’s on crack if he thinks he can tell his shareholders like me that he knows that Apple is not going to be affected by this tariff and trade war stuff. Uh-uh, man. Six months from now, Apple could very well be suffering in a multitude of ways. What if China itself starts playing nasty and disrupting Apple’s supply chain itself?”
Cody back in real-time June 25 now. Really, the markets are coming to terms with all of this now, it seems. And cconomically-speaking, you’re seeing a steady stream of anecdotes revealing cost pressures, stockpiling, supply chain disruptions and other similar issues starting to impact the real-world economy.
One of the most important but least noticed aspects of these tariffs and escalating government control of global trade is that, as always, governmental control gets corrupted. And the government then starts picking winners.
Read this article that explains that the government that just created the tariffs then turned around and “granted seven companies the first set of exclusions from its metal tariffs this week and rejected requests from 11 other companies, as the Commerce Department began slowly responding to the 20,000 applications that companies have filed for individual products.”
So let me summarize in economic/political terms for you: If you are well-enough connected, paying enough bribes or otherwise lobbying and enriching the regulatory system and beg the government, they will suspend the rule of law for you. How do you think they decide which companies to exempt from the tariffs?
As always, I will implore the government to just enforce the laws that it creates equally across every person and/or company in the land. You do realize that it’s completely a farce to say that the government is “deregulating” anything, when you can clearly see that there are endless new regulations (and corrupt exemptions to those regulations) created by the tariffs and the other policies/rhetoric from The Great Global Trade War of the 21st Century.
No industry has ever been “deregulated” in my lifetime — heck, the new social media regulation regime is another example of something that was literally written by the social media lobbyists and lawyers. I’ve repeatedly pointed out that these new regulations would actually help create new barriers to entry and make it prohibitive for any start up to become a social media company now. These new regulations from the EU and our own government are bullish for Facebook, Twitter and Snapchat.
It’s always instructive to remember that the tariffs and every other policy from every Republican and every Democrat that I’ve seen in my lifetime has been lobbied by for an organization, usually a giant corporate industry lobbying group, that will profit from it.
But let’s back to the impact of all of this on the stock markets.
For the last eight years as I’ve been so bullish and investing in so many Revolutionary companies, my analysis has continually pointed to a Steady Betty Economy and a Bubble-Blowing Bull Market. The earnings and employment and inflation and policy trends (video from 2013 interview) have been steadily strong and improving for those eight years (I’d also remind you that I’m no “perma-bull” and that, as I did in 2007 when I closed my hedge fund and took a job as a TV news anchor, I’m always looking for the “other” side of my analysis and am willing to almost sell everything and become extremely bearish.)
The Great Global Trade War of the 21st Century has already started impacting that Steady Betty Economy. I’m not sure we’re about to crash or even if the Bubble-Blowing Bull Market is truly over. But as I keep telling you guys since the markets hit their new highs earlier this year, I want to be more cautious, have more cash and more hedges right now than at I have had at any point in the last ten years.
I do think we’ll have some great pitches to swing at, some new names to invest in at lower levels and other opportunities to make some big profits in coming weeks — and maybe in the next few days if the sell-off really gets ugly.
But for now, stay cautious!
COOL
