FWIW # 49 - Market Volatility

The pundits say Trump’s tariffs are causing quite a stir, to the glee of both Democrats and Republicans who have been at the core of globalization over the past 65 years. These politicians and their cohorts in finance and business have diverted attention from the structural damage they were causing to the economy and middle-class Americans by touting the benefits of cheap goods from overseas.

            These political disciples of globalization either ignored the cries for fairness from lower- and middle-class workers or paid lip service to “retraining.” The lives, hopes, and dreams they destroyed were away as necessary collateral damage. The carnage rippled through the economy as inequality steadily increased and underpaid and unemployed Americans had to use their government assistance checks to buy cheap goods made in China, India, Viet Nam, and a host of other countries that had thrown up tariffs and barriers to keep “Made in America” goods out.

The profits that the globalists reaped from the structural destruction to the core of America went into the pockets of foreign political leaders and businesses and went to American companies lobbying for more government policies that tilted the economic table from US jobs to semi-slave labor in other countries around the world. Did shareholders reap the rewards? Some, but not all. A huge portion of the “savings” went to the obscene salaries of American senior management or their financial and political lobbyists, then were recycled as contributions to the politicians who make these policies that deliberately crumbled the structural equity of the American economy.

            The long-term destruction of America’s wealth began in 1963 with Lyndon Johnson and his disastrous “Guns and Butter” policies. The financial structure of the economy is now close to or even past the point of no return. Neither countries nor individuals ever know when they’re relying too much on borrowed money and senselessly wasting their true strength: their people and their economic well-being.

            Take time to compare the tariffs President Trump has placed on other countries and the tariffs these countries have placed on the US for decades. If there’s any anger about the situation we’re in, it should be directed at the Democrats and Republicans who have spent the last 65 years in office doing nothing to stand up against the gutting of jobs for the working people of this country or the unfair trade practices of these countries. If there were ever a time a special prosecutor should examine past decision-making, it should be to answer this question: Why did these elected officials allow the wealth and treasure of the American people to be deliberately sent to other countries, to the detriment of our citizens and taxpayers? Why have they amassed fortunes while in office or after leaving office from the policies they fostered or allowed to continue? One economic pundit cried out that ‘Rules Based Trading’ was over. What rules? The only rule that the WTO and our trade representatives have fostered is this: The transfer of American wealth to the elites and politicians of other countries and their co-enablers in the United States government and lobbying offices. Globalization brought America unsustainable debts and, at the same time, an erosion of the net worth of the country.

            We may have a recession, or not. For sure, the elites and globalists will do everything in their power to make any economic adjustment appear worse than it could be. Stop and think when you hear the drivel about a recession. Which country, after imposing high tariffs and barriers against US goods for decades, should not see (smaller) US tariffs on their goods coming to this country? Why should American continue to have their jobs and wealth transferred to other countries for cheap goods when we experience inflation anyway?

            The stock market was too high and, in several sectors, is still too high. Look at the historical charts of the major indices. Even with the drop in the last two days, the still elevated market shows how vulnerable it is. Observers wondered why Warren Buffett raised cash for the last three years. It wasn’t because of Trump. As he has said, good value was too hard to find. What we are experiencing is the forced liquidation by institutions and traders who use substantial leverage in their speculation or allocated too many assets to the stock market. Market speculators are all playing a game in which they must outperform their peers.  What comes next in the selloff are the retail speculators who use leverage or have too much of their assets in the market. They will be forced out by margin calls or fear. Some talking heads say the markets don’t like surprises, and the tariffs were a surprise. If that’s the case, this current selloff has nothing to do with the tariffs. President Trump has been saying since inauguration day that he was going to put in place reciprocal tariffs  on April 3^rd. The market volatility we are experiencing is typical Wall Street. Scare the weak hands out of the market and their investments. Increase the volatility of prices so the brokerage trading desks have the opportunity to reap short-term profits. This is a fool’s game investors don’t play. Even the Fed is trying to stoke the fear. Chairman Powell said the tariffs would increase inflation and slow growth. Really? The price of oil has come down. Since energy is in everything comprising the CPI, the energy decline will reduce the inflation measurement. It’s disappointing that Powell continues to tilt his remarks and actions against President Trump. Even Democrats acknowledge his interest rate cut last September was politically motivated since the “data” did not support the action. Now he is saying the tariffs will increase inflation and slow growth. If we go into a recession, which we may for a short period, inflation will come down because the demand for goods will be less. If the reciprocal tariffs stay in effect, the net offset will be the trade deficit should come in lower than if the new tariffs were not in place. 

You should only want to get rich and stay rich. You know the principles discussed in 19 Rules for Getting Rich and Staying Rich Despite Wall Street. Know what companies you want to own and set a fair price for investing in them. Make sure management is competent, values the shareholder by paying a dividend, and has a strong balance sheet. Spread your investments across sectors. Don’t get caught up in the negative hysteria of the elites seeing their irresponsible attitude toward a strong America exposed.

            One last point: The first rule of politics is to get elected. The next rule is to engineer a recession in your first year so the economy will be improving and building momentum by the time the next election rolls around. In that regard, the price of oil and other goods and services are coming down with the recession talk. Guess what that means? The next few inflation readings will be like the price of eggs since January 20^th, lower than they have been in a long while.