Lighthizer comments, Powell, Cohen hearings, Trump-Kim talks roil stocks
WASHINGTON. Wednesday’s headline news thus far: US Trade Rep Robert Lighthizer throws a curveball on current China trade talks. Fed Chair Jerome Powell steps up for his second day of Congressional testimony before a hostile, Democrat-controlled House. And as we write this, Michael Cohen is also before a House committee, trashing his former client, President Trump as expected. Postponed earlier in the month, Cohen’s rescheduled show trial was clearly moved to the current date to embarrass President Trump during his current get together with North Korean dictator Kim Jong-un in Vietnam.
Clearly, the final days of February are generating enough scary headlines that Mr. Market suddenly finds himself in a state of near-terminal confusion. After partying hearty for most of this month, major market averages are in negative territory for the second day in a row this week. Bullish investors are getting scared once again. Hopefully not as badly as they got scared in Q4 2018.
Lighthizer comments scare investors
Fox Business and others led this morning with headlines blaming today’s Wall Street nervousness on less-than-optimistic comments on a prospective China trade deal.
“Stocks extended losses after comments by U.S. Trade Representative Robert Lighthizer that issues with China are ‘too serious’ to be resolved by promises of more purchases of U.S. goods by Beijing.”
That’s certainly true. But it’s not what Mr. Market wanted to hear Wednesday. Stocks and market averages got hit right at this morning’s opening bell, with the Dow taking a particularly nasty hit. As we write this, market averages are well off their earlier lows. But at the noon hour E.T., the trading day is still young.
Jerome Powell is back before a hostile House committee
Fox took note of Fed Chair Jerome Powell’s second day of testimony. After an easy day before the Senate Committee on Banking Tuesday, Powell gets to face Washington’s toughest capitalists today in the House Financial Services Committee. Namely, Committee Chair Auntie Maxine Waters and Green Meanie committee member Alexandria Ocasio-Cortez. Powell is sure to face some serious re-education from both these monetary theory giants. AOC in particular is sure to rise to new levels of uninformed outrage after Powell’s earlier unkind but accurate comments before the Senate with regard to her lighter-than-CO2-free-air monetary theories.
In somewhat related news, Fox also reported that December economic news looked flat, possibly underpinning the Fed’s sudden decision to ease off on its Tiger-Mom approach to aggressive interest rate hikes and massive bond inventory dumping.
Michael Cohen is on the Hill trying to make Democrat friends
In Congressional testimony suspiciously rescheduled a couple of weeks ago to coincide with President Trump’s crucial second meeting with North Korea’s Fearless Leader Kim Jong-un, Michael Cohen launched his appearance with pre-prepared remarks that paint the President as a scoundrel far worse than Quentin Tarantino’s Inglorious Basterds[sic]. No doubt House Democrats and Republican #NeverTrumpers were giggling with glee as they took notes to support their inevitable drive to impeach our duly elected President. Perhaps, like MSNBC’s resident troll, Chris Matthews, some of them are even getting a little tingle up their legs.
US-North Korea Summit #2
Trump had more serious things on his mind, however. Details on the current meeting are scant as we write this. But Day two of his meeting with Kim is apparently on schedule. Realists still don’t expect any real breakthrough. But at some point, Trump’s novel approach to this intractable American-Korean flashpoint issue is, as they used to say in World War II B-movie, “it’s so crazy that it just might work.”
Realistically speaking, a series of American presidents dilly-dallied far too long as North Korea relentlessly pursued the nuclear arsenal it now possesses. Trump knows he may or may not be able to change this fait accompli. However, as the world’s most visible pro-capitalist leader, Trump has been dangling the very big carrot of economic success and happiness before Kim.
Trump’s novel approach to the North Korean nuclear powder keg
If Kim takes the bait, he’ll likely still retain his position as head of the North Korean government. But even better, if the average starving North Korean can finally get three square meals a day and discover affordable, useful items of interest in whatever passes for department stores in Pyongyang, Kim’s own people might actually start to like him. Shopping malls, multiplex theaters and perhaps even glittering gambling casinos might pop up on the horizon of a suddenly all-new, fashionable, and maybe even prosperous North Korea.
Yes, this vision might appear, at the moment, to be as silly and fatuous as AOC’s deep economic theories that were so curtly dismissed by Jerome Powell. But it’s a tempting vision nonetheless when dangled before a ruthless dictator who not so secretly loves very cool Western stuff. To get involved in the whole glamorous game, with American help and know-how no less, could prove astonishingly appealing to Kim and his entourage.
The rest of the story?
We won’t hold our breath for this outcome. But Trump’s carrot probably has a better chance of getting some traction than his presidential predecessors’ blundering, thundering and ultimately toothless approach to slow or stop the North Korean War Machine.
So don’t laugh. Turning this widely shunned country in an unexpected new direction is certainly worth a try. It’s blindingly obvious now that previous US threats against a succession of North Korean regimes simply inspired them to do the opposite of what we wished.
If there’s even a hint of a North Korean turn in this new direction after the conclusion of these current meetings, the market might actually get a bullish pop. If not, Mr. Market will fixate once again on the ongoing Capitol Hill kabuki and the Democrats’ longed-for election year recession. Currently, they have absolutely nothing else to offer, save for endless miles of titillating footage for their allies at CNN and MSNBC.
Wall Street at 1 p.m. ET
No point in posting current market averages here. Lately, numbers we’ve cited in this column have gone stale even as we post each article. But at the moment, in general, major averages are still down on the day. But for some indiscernible reason, the Dow, at least, has recaptured 2/3 of its earlier loss Wednesday morning. Do the insiders know something we don’t? Are we going to rally after 2? Or will Mr. Market simply decide to roll over again and hit its lows for the day at the 4 p.m. bell. No one really knows. But the ultimate outcome of today’s collection of headlines will be determined very soon.
Keywords: Robert Lightheizer, Jerome Powell, Michael Cohen, Donald Trump, Kim Jong-un, China, trade negotiations, Maxine Waters, AOC
— Headline image: Cartooon by Branco, reproduced with permission and by arrangement with Comically Incorrect.