by Jim Rickards, DailyReckoning:
What we have seen so far are just the opening shots of the coming trade war. Think of it as the Battles of Lexington and Concord that opened the Revolutionary War. Much larger tariffs and penalties are waiting in the wings.
Trump will soon receive a report under Section 301 of the Trade Act of 1974. That report has been almost a year in preparation and will reveal that China has stolen over $1 trillion in U.S. intellectual property.
Section 301 of the Trade Act of 1974 is the “nuclear option” when it comes to trade wars.
I don’t want to get too deeply in the weeds here, but Section 301 gives the president broad authority to impose sanctions and penalties. The president will have a completely free hand to impose billions of dollars of damages if not more on China.
Trump could receive this report within days or weeks. Regardless, it is coming soon.
by Alasdair Macleod, GoldMoney:
Anyone who thinks democracy doesn’t matter may be in for a rude shock later this year, when we know the result of America’s mid-term elections. The Deep State is on course to take control of Congress. If this happens, it will be the next step in a global trend of side-lining democracy in the West, driven in large part by American foreign policy. It has led to governments everywhere increasing control over their people, in an inversion of democratic principles.
It affects us all. Since the Twin Towers tragedy, American foreign policy has taken the lead in extending personal surveillance to every nation in the formerly free world. It has forced banks to divulge their customers’ private affairs in the name of preventing terrorism, crime and tax evasion. Governments that resist these moves have been destabilised, and independent agencies, such as the SWIFT banking system, have been forced to implement America’s foreign policy.
by Dave Kranzler, Investment Research Dynamics:
The stock market is is more overvalued now than at any time in U.S. history. Sure, permabulls can cherry pick certain metrics that might make valuations appear to be reasonable. But these metrics rely on historical comparisons using GAAP accounting numbers that simply are not remotely comparable over time. Because of changes which have liberalized accounting standards over the last several decades, current GAAP EPS is not comparable to GAAP EPS at previous market tops. And valuation metrics based on revenue/earnings forecasts use standard Wall Street analyst “hockey stick” projections. Perma-bullishness in Wall Street forecasts has become institutionalized. The trade war threats may be the proverbial “final straw” that triggers a severe market sell-off, but the stock market could be cut in half and still be considered overvalued.
by Wolf Richter, Wolf Street:
“Little or nothing.” Toys “R” Us and its commercial mortgage backed securities.
Here’s what a central-bank induced credit bubble – when investors are chasing yield while willfully ignoring risks – looks like when in full bloom, and what happens when even the worst-case scenario at the outset turns out to have been more hype than realistic.
This is how it started:
In October 2016, about 11 months before it filed for bankruptcy and 17 months before it decided to liquidate its operations in the US, Toys “R” Us sold $512 million in commercial mortgage-backed securities, backed by 123 Toys “R” Us and Babies “R” Us stores across 29 states with a combined 5.1 million sq. ft. rentable area.
by Michael Snyder, The Economic Collapse Blog:
We just witnessed the 5th largest single day stock market crash in U.S. history. On Thursday the Dow Jones Industrial Average plunged 724 points, and many believe that this is just the beginning of another huge wave down for stock prices. After this latest dramatic decline, the Dow is now down 3.1 percent so far in 2018, and overall it is down 9.99 percent from the all-time high in January. A 10 percent decline is officially considered to be “correction” territory, and that means that we are just about there.
So why are stock prices falling so much? Well, USA Today is blaming the potential for a trade war with China, the latest Facebook scandal and “the impact of rising interest rates on the economy”…
U.S. stocks sold off sharply Thursday, with the Dow tumbling more than 700 points amid growing fears of a trade fight between the U.S. and its trading partners after President Trump said he will impose billions of dollars in tariffs on Chinese imports.
The heavy selling on Wall Street was exacerbated by continued weakness in shares of Facebook as well as concerns about the impact of rising interest rates on the economy.
by Gary Christianson, Miles Franklin:
a) Hyperinflation occurs in banana-republics and not modern western countries.
b )Hyperinflation cannot occur in the United States because the U.S. issues dollars – the reserve currency.
BOTH IDEAS ARE INCORRECT. For more, read Bill Holter:
WHAT ARE THE CONSEQUENCES OF HYPERINFLATION?
The hyperinflations of past centuries have hurt the poor and middle classes more than the wealthy because they owned real assets.
Hyperinflation destroys savings, assets, purchasing power and retirement expectations, along with moral values.
The value of the currency is smashed. The economy “resets” and life goes on, albeit much changed.
Hard assets such as real estate, fine art, land, gold and silver fare better than many other assets.
by Pam Martens and Russ Martens, Wall St On Parade:
As front page news focuses more and more on the Russia-Trump investigation, there is rarely an in-depth journalistic investigation into the dangerous risks building up on Wall Street that makes front page news. And yet, as we know from the epic financial crisis of 2008, an unreformed Wall Street presents the gravest threat to America’s long-term vitality and economic might.
Take, for example, what happened this past Monday. The U.S. Securities and Exchange Commission (SEC) awarded a record $83 million to three whistleblowers from one of America’s largest retail brokerage firms, Merrill Lynch, part of the sprawling Bank of America. That bank holds $1.4 trillion in deposits, much of which is FDIC insured and backstopped by the U.S. taxpayer — the same taxpayer that bailed out Bank of America in 2008.
by Michael Pento, Market Oracle:
The prevailing fiction pervading Wall Street right now is that economic growth is picking up in a sustainable fashion and that interest rates will merely rise slowly. Then, soon level off at historically low levels. In other words, they are selling a fairytale; and a dangerous one at that.
This premise is blatantly false. The Fed’s reverse QE program, Government debt levels and Nominal Gross Domestic Product, all dictate that the 10-year Note Yield should be now swiftly on its way to at least 4.5%, from the artificial level of 1.4% found in July of 2016.
Therefore, there is no perfect outcome for the market and the economy and no safe path for the Fed to normalize rates. If they stop raising rates, or just move too slowly, inflation picks up even more steam, and long rates will mean revert rather quickly by rising another few hundred basis points from where they are now. On the other hand, keep on hiking short-term rates, according to the Fed’s dot plot there will be three to four increases this year and several more scheduled for 2019–along with the draining a couple of trillion dollars from the balance sheet–and the yield curve will invert much sooner rather than later.