WASHINGTON. For what seems like the second or third time this week, in our most recent column we complained yet again that the US stock market remains stubbornly hard to parse. After tanking late last week, and taking a Wile E Coyote-style swan dive off the cliff Monday, Mr. Market is once again a happy dude Thursday. Even as the US / China trade war intensifies, investors are bullish as the Dow rallies. It’s up 300 points as of 12:30 p.m. ET. We’re dazed and confused. Are you?
Leave it to CNBC’s resident Socialist, the lugubrious Steve Liesman to headline the network’s top online story today with the following anti-Trump headline.
Trump’s tariffs are equivalent to one of the largest tax increases in decades
CNBC’s dazed and confused Liesman follows the wrong trade war tangent, misses the real story
Liesman is a Johnny One Note when it comes to anything Republican, and can never give credit where credit is due. For some reason, stocks are rallying this week even as the trade situation seems in critical need of a major breakthrough. Rather than trying to parse this situation, however, Liesman, showing his true NBC Network colors, just tosses in another boilerplate attack on Trump’s tariff tactics
“President Donald Trump, having championed one of the larger tax cuts in recent years, has now enacted tariffs equivalent to one of the largest tax increases in decades.
“A CNBC analysis of data from the Treasury Department ranks the combined $72 billion in revenue from all the president’s tariffs as one of the biggest tax increases since 1993. In fact, the tariff revenue ranks as the largest increase as a percent of GDP since 1993 when compared with the first year of all the revenue measures enacted since then, according to the data.
“Only the revenue raised in the fourth year of the Affordable Care Act is greater, but not by much.”
Seriously, Steve? You must have spent hours fishing for that irrelevant and non-comparable snippet of data.
Beware that “nonpartisan” moniker
Liesman next dazzles us with stats from the “nonpartisan” Tax Foundation. “Nonpartisan” is the word leftists like to use to describe anything that agrees with the left-wing Democrat-Socialist narrative.
“The nonpartisan Tax Foundation estimates all the tariffs enacted by the president, including the latest increase from 10% to 25% on $200 billion on Chinese goods, will raise $72 billion in revenue, equal to 0.34% of U.S. gross domestic product. Revenue raised in the first year of the 1993 budget and reconciliation act equaled 0.36% of GDP.”
0.34 percent of the US gross domestic profit. Wow. The horror! The horror! That’s scarcely a drop in the bucket compared to all the other costly, redistributive nonsense Obama pushed through during the 8 miserable years he spent destroying the Federal government and weaponizing it against the American people.
The cost of tariffs, while certainly debatable, is not the main story today. The real story – should any enterprising, well-paid network pundit or actual reporter choose to dig up the details – is the reason or reasons why Mr. Market decided to party hearty even with all the apparently bad news on the international trade front. Like most lefties, Steve is also dazed and confused. Problem is, he doesn’t know it. We do.
Other pundits and TV blowdries admit to being dazed and confused. Trade war = bullishness??
The Tylers, over at ZeroHedge, poked around a bit more than Liesman, and dug up this little nugget. Dazed and confused themselves, they start out with a useful chart. They end up quoting useful verbiage provided by an acknowledged. investment pro. He, too, seems as dazed and confused as we all are as to why the markets are rallying strongly, since we’re all going to die! At least according to Liesman and friends.
“The gap down [in market averages] from China trade war escalation on Sunday night has now been filled.
“Trade War escalation is now a positive?”
The Tylers follow with their chart (above). It traces market action from Monday’s plunge to Wednesday’s Happy Dance as the Dow rallies despite the ongoing trade war hangover.
Richard Breslow comments as the Dow rallies. Again.
Next, they add some spot-on observations from investing pro Richard Breslow.
“A clearly frustrated – and rightfully so – Richard Breslow, vents his former fund manager and FX trader feelings in a brief note that we suspect will ring very true for many readers amid this farcical market where ‘bad news is good news’, ‘constructive’ can catalyze 500-point Dow ramps, and retaliatory trade tensions are buying opportunities because of the central banks’ brainwashed-conditioning of the world’s investors’ risk attitudes…
“Trade tensions have eased. Trade tensions have ratcheted up.
“Things will get better. They have to. It’ll get worse before it gets better. Neither side can afford to back down.
“Use game theory to figure this whole situation out. Use it to create a game plan.
“React to every comment. It’s the only way to survive.
“Buy the dip. Derisk. [i.e., De-risk, or exit riskier investments in your portfolio.]
“And, of course, what is really the punchline: The global economy is set to grow and is in a “good place;” the numbers are cratering fast.
“Which is it?”
And now, Breslow gives us The Answer. Drum roll, please.
“The answer is we can’t know. It’s an old saw to point out that markets don’t like uncertainty. It’s overused and misused. But in this case it’s valid. And it is causing various asset classes to send out conflicting signals. That’s making a consistent, or even coherent, investment thesis hard to construct.
“And this means investment commitments will continue to be delayed. Kicking the can down the road is a tried and true policy strategy. It won’t work here. You can’t easily rotate out of a partially built factory….
“Bonds will continue to be in favor.”
Like my old government contracting boss used to say, “You don’t know what you don’t know.”
What to do about our still mostly-invested portfolios?
I’ve been trying to back out of some marginal investments in our portfolios. But at this point, I’m reluctant to go too far. If I go overboard, it’s like a jinx. The Dow instantly rallies, along with everything else. And I end up feeling like an idiot. Like nearly everyone else who plays this game at home. Dazed and confused is default mode.
Typically, little-guy investors sell everything after a few rotten down-days on Wall Street just to dull the pain. Just as typically, however, at some un-knowable random point, Mr. Market guzzles a couple bottles of Kickapoo Joy Juice. Then it’s off to the races for the Dow, the S&P, the NASDAQ, and nearly every other measure of investor sentiment.
The most profitable days of these ultimate, big time reversals are usually the first few. And those who stuck out the nasty bearishness typically recoup most of their losses during those days when the action is most intense.
Once the little guys glimpse the action, they begin to buy. But usually just before Phase 1 of the new rally peaks and corrects. Which leads to more frustration. Frequently, they can’t get back to breakeven for months or even years. You have to be in at the very beginning when the Dow rallies big time. Or you miss much of the fun.
Truth or Consequences?
So this week, we all find ourselves at the same weird juncture. On the surface, there seems to be no reason for this huge rally, which has us heading back to our previous market highs. The Chinese want to drag out this trade dispute, thinking they can help oust Trump and restore some supine, Democrat-led administration that will cave on these trade negotiations. It doesn’t really look good.
But if we dump too many stocks now, no matter how badly they’re hurting, we won’t be able to remedy the losses we sustained last week and Monday. Missing big Dow rallies – or S&P or NASDAQ rallies for that matter – is rarely a good thing.
But what’s next? More bullish fun? Or another rocket-sled ride to a new market bottom?
Hell if I know. I’m still dazed and confused. Richard Breslow essentially says the same thing.
I continue to clear our portfolios of stuff I seem to have misjudged. But I’m still about 85 percent invested.
At this point, we’re all guessing. Barring some real news that apparently at least some big investors seem to know. As for me, I remain dazed and confused.
— Headline image: Cartoon, “Wall Street bubbles – Always the same”. American financier J. P. Morgan is depicted as a bull, blowing soap bubbles for eager investors. Several of the bubbles are labeled, “Inflated values.” Public domain image from US Library of Congress (LOC) via Wikipedia entry and caption under “Market Trend.”