An Excuse to Bring the Market Down

I am one of the people who has expected to get a correction in the Equities Markets for some time now. I think there are many data points that support this position but the general market sentiment and certainly that of the financial media has been quite rosy of late. It was like the market wanted to find an excuse to blow off a little upward pressure. I think we may have had the excuse come to be in the Obama administrations tariff on Chinese Tires. I have read the details of this tariff, and have heard attempts at justifying it, but it bewilders me as to how this came about at this time, and I see absolutely no gain from it's imposition. Of course China immediately replied with threats of action against American Chicken and Auto Parts.
Asian markets, Oil, and Gold are all being hit hard as I write this on Sunday Night a little after 10 EDT, and U.S. Equity futures are being taken down as well.
The Administration better make a statement appeasing the Chinese or at least saying something that reduces the appearance of a possible trade war we are in a poor position to fight. Just so I don't get too pessimistic sounding, like I am worried about losing a trade war, I think China is not in that good a position to fight one either. Of course just the perception that one is possible is going to be looked at negatively by the market. You have heard nothing but the "China will lead us out of this", "China is 1.6 Billion potential customers" and statements like that, now we pick a fight with them, putting those potential customers in danger of being some other countries customers. That strikes me as counterproductive in the extreme and frankly worries me that the people making those decisions are acting in a less than sensible manner.

The fact that the Admin chose this time to open this can of worms is really unfathomable and I wonder what the thought processes were that went into it. I think if this is not immediately stopped it will end badly for the markets short term and the economy long term, and I am really irritated that this works against my US Treasury short position theory I laid out on Friday over the near term. If it continues for any length of time the Chinese will undoubtedly threaten to pull out of US Treasuries and my thesis will be valid again, likely in a major way, but I don't know I have the stomach for the transition. To paraphrase John Maynard Keynes, The Government can stay irrational longer than we can stay solvent, and it doesn't seem to matter which party is in power. Stay tuned for an entertaining few days in the markets.


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