Submitted by Michael Every of Rabobank
Today’s market optimism is still being largely based on ‘good news’ from the US-China trade war. “Roll Back”, says Bloomberg: “The US and China have agreed to roll back tariffs on each other’s goods in phases as the work towards a deal between the two sides.” Wonderful!
Except that is based on an obvious mistranslation of what the Chinese said yesterday. They didn’t say a deal HAD been agreed, they said tariffs would be rolled back *IF* a deal is agreed. That has ALWAYS been the case. In fact, it’s a tautology. We have rollback when we have a deal, and vice versa. Moreover, this news is supported from the US side by…Larry Kudlow, the uber-bear and China hawk. Is he the ‘White House’? True, Kellyanne Conway also says Trump is “anxious” to sign, and I bet he is - but any deal or a real deal?
The Bloomberg headline also overlooks that Trump’s China advisor Michael Pillsbury states recent good news “may represent wishful thinking on the Chinese side more than a specific agreement”. Moreover, Reuters reports “Exclusive: White House Plan to Roll Back China Tariffs Faces Fierce Internal Opposition; No Final Decision Made.” In short, we are still where we were. China is merely ramping up the pressure publicly – just as it is simultaneously buying more agri from Brazil, France, Canada, in fact everybody but the US. After having told an old Soviet joke yesterday, this reminds me of an old Jewish joke:
Morty shuffles into his favourite restaurant, sits down, and orders matzah ball soup. The waiter brings it over and walks away. Morty calls him back: “Taste the soup.”
The Waiter says, “What, it’s too salty?”
Morty replies, “Taste the soup.”
The Waiter asks, “It’s too peppery?”
Morty replies, “Taste the soup.”
The Waiter asks, “Morty, it’s been the same soup for 40 years! Your favourite! What’s the problem? Too oily?! There’s a fly in it?!!”
Morty sighs, “**T-a-s-t-e the soup**.”
The Waiter gives in, “Ok, ok, I’ll taste the soup already…….where’s the spoon?”
Morty raises a finger and exclaims, “Aha!”
If you don’t get the joke you are presumably foaming in the mouth in excitement about the US-China trade deal. In short, I’m going to have a little sleep; wake me when we have a trade-deal spoon.
Meanwhile, in other market-positive news, Michael Bloomberg is apparently going to run for the Democratic party nomination. According to the press, Bloomberg (the man, not the news service) is concerned that Joe Biden is floundering, which doesn’t say much for Biden or the Ukraine-gate scandal that is apparently going to bring down Trump soon, according to the Democrats.
Surely what is needed in a polarized US political environment, and in a Democratic Party leaning heavily to the progressive left, is an elderly billionaire male parachuting in to save the day at the last minute after skipping all the previous debates. I would suggest that same progressive left might see this as ‘billionaire-splaining’ at best, and ‘plutocracy’ at worst. It will certainly be interesting to see Sanders and Warren have an actual billionaire to rail against on the debate stage rather than an abstract one.
Nonetheless, as with soup we can’t yet taste, markets may savour the prospect of a billionaire vs. ‘billionaire’ Bloomberg vs Trump presidential battle; at least more than the prospect of a Trump vs. Warren or Sanders outcome, which would imply four more years of current tradition-bucking trends or radical policy in another direction.