Trading Diary: Steel, lumber, Trump and tariffs in the news

Trump Administration's anti-dumping moves against China, Canada, continue to boost Tuesday stocks. Or at least most of them, as housing takes a hit.

Circa 1900 image from the once-robust U.S. lumber industry. This plant was in the Seattle area. (Public domain image via Wikipedia entry on the lumber/wood industry)

WASHINGTON, April 25, 2017 – Stocks are off to the races once again today, continuing the Monday rally kicked off by the Trump Administration’s hard-nosed rhetoric threatening near-term action against China’s blatant dumping of cheap, overproduced steel—a continuing and ruinous vexation for what’s left of the American steel industry.

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Today, the rally continues, more or less, as lumber got a boost courtesy of yet another threat, this one against Canada’s (arguably) heavily subsidized lumber industry which is, surprise, killing America’s once robust counterpart. The Administration is also making noises about the way our friends to the north manage to keep America’s dairy industry out.

The threat of punitive tariffs in these cases has given a boost to America’s corresponding industrial sectors, although the news has also hit U.S. housing stocks, as the proposed 20% lumber tariff on Canada would likely boost prices of new U.S. homes, which, collectively, are primarily built with cheaper Canadian lumber.

Leave it to NBC subsidiary CNBC, of course, to couch this kind of pro-American worker action by the Trump administration as a shabby destruction-derby move via this just posted headline on the CNBC website:

Trump’s Canadian lumber tariff could cost US homebuyers about $1,200 per house

We always love that weasel word “could,” BTW.

Left open by this negatively slanted headline is the question of how much and how many jobs Canadian lumber subsidies have cost workers and companies in the American lumber industry, since this subsidization has been going on since at least the previous three U.S. Presidential Administrations. (Canada disagrees, but it’s a subsidy just the same.)

Fake news continues apace.

Trading Diary

As for us, with the market skyrocketing again today, we’ve done very little with our portfolios, as we generally prefer to buy stocks when the market is getting hit.

We did pick up a small position in Quality Systems, Inc. (symbol: QSII) today, a company that’s primarily involved in electronic patient records and medical records analysis—increasingly key to the current and likely future of Obamacare and/or whatever repeals and replaces it.

We are also looking to pick up some shares of an old favorite, major U.S. oil refiner Valero (VLO). The company pays a swell dividend, and has dropped back today after a monster rally in its shares yesterday.

The stock’s moderate reversal in price is apparently due to news that the company is deep in discussions with the Feds on getting its mandatory renewable fuel mix issues on a more even keel, a little-known and little-discussed issue arising from the government’s unreasonable demands on refineries to pony up for ethanol production they don’t really want or need.

In any event, with an arguably oil-friendly administration now in power in Washington, Valero might finally get some movement on this complicated issue. If not, we might be just a bit sorry if we picked up some shares at this point.

On the other hand, this well-managed refiner has made good money for us before, and it pays a nice dividend, too. So if it remains weak today or tomorrow, we may start establishing a position, a little at a time, which is a good way to buy pricier stocks in the oil patch. Price movements in this business can be extraordinarily volatile, so averaging in to a position is often a better tactic than just buying one, two or three hundred shares at a time.

That’s it for now, as we enjoy day two of this improbable rally.

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Terry Ponick
Biographical Note: Dateline Award-winning music and theater critic for The Connection Newspapers and the Reston-Fairfax Times, Terry was the music critic for the Washington Times print edition (1994-2010) and online Communities (2010-2014). Since 2014, he has been the Business and Entertainment Editor for Communities Digital News (CDN). A former stockbroker and a writer and editor with many interests, he served as editor under contract from the White House Office of Science and Technology Policy (OSTP) and continues to write on science and business topics. He is a graduate of Georgetown University (BA, MA) and the University of South Carolina where he was awarded a Ph.D. in English and American Literature and co-founded one of the earliest Writing Labs in the country. Twitter: @terryp17