Trump’s Trade War Torpedoes Growth

We reap what we sow.  And that is making investors, and those who have a stake in the stock market, feel dizzy.

Stocks slid again today, continuing the unease that investors feel after assessing new evidence that the world’s industrial sector is weakening in the face of  Donald Trump’s trade war.

The S&P 500 dropped 1.8 percent, its worst day since late August. The Dow Jones lost 494 points. Stocks in Europe tumbled.  Let us be honest and just say the world is trembling in anticipation of what is coming.

The selling this week began after a report on manufacturing activity showed that factory output in the United States slowed in September to levels last seen at the end of the financial crisis a decade ago.   That alone was unsettling.  Added to the manufacturing concern was the quarterly corporate reports which underscored concern in the auto industry.

The data was a fresh indication that the trade conflict between Washington and Beijing is chipping away at the industrial base in the United States.  The damage of the trade war has already impacted factories in Japan, Germany, and cleary in China.

Trump has long told the gullible in the United States that trade wars are easy to win.  So I ask those supporters of Trump if we are winning that war?

For long term investors, these bumps and blips can and will be weathered.  But the larger concern is the plight of the national economy due to reckless and needless trade wars.  While China and the U.S. at times indicate there would be future trade discussions, that is not enough to soothe markets or allow producers to feel any sense of calm concerning the future fate of their businesses.  There is now a hot trade war underway.

There are many ways to view this mess, and ponder how we got here, and how to back away from the cliff.

One matter I have long argued on this blog, as a free trader and internationalist, is that what is happening now could have been handled far differently had we not precipitously and stupidly withdrawn from the TPP.  That was one of the first major bone-headed decisions from the Trump White House.  Had we not jettisoned ourselves from TPP we would be allied with many Pacific Rim countries that represent a larger fraction of Chinese trade.  Now we are waging this battle alone.  Needlessly so.  Let me repeat, TPP was a good plan.

The TPP treaty addressed the issues of intellectual property rights–one of the pressing and nettlesome issues with China–along with foreign companies’ access to markets without resorting to tariffs.   That Trump trashed TPP in favor of 19th-century tariffs is nothing short of the most unenlightened and backward thinking imaginable.

This is what happens when one elects a severely under-educated president.  Thanks, Trump supporters, for the downturn for investors!

Markets Get Nervous Over Donald Trump Gaining In Polls

Did you see what happened around the world when one poll showed Trump with a one-point lead over Clinton? The dollar declined against the yen, euro, and pound while the Trump-proxy Mexican peso fell 0.8%. Most Asian indexes closed more than 1% down and European markets were also falling in early trade as I woke this morning.

Folks who have an information deficit like Trump, but the rest of us need to make sure this dangerous man does not enter the White House.

Can you imagine what will happen to stock portfolios and investments of all types should Trump win?  The red ink the morning after such a disaster could float an ocean liner.

“Fear Is Rampant In The Market Right Now”

What  a day!  And this is only Monday.  (Will the bottom feeders come out on Tuesday to peck at the remains?)

What message will this market reaction send to Washington?

Budget talks must be undertaken with the acceptance by the extremists from the Tea Party in Congress that a real dose of compromise which allows for revenue to be added to the final deal is the ONLY way to steady the markets.  There is no rational way to get past this dreadful time in America without understanding what has caused this mess.

President Bush and conservative Republicans rammed through the needless tax cuts that were disruptive to the economy.  Let us trace backwards and see that the cuts did not work!   Republicans foamed at the mouth for war in Iraq and never…NOT ONCE…found a way to pay for it.

Republicans have proved over and over not to understand the foundation of economics.  Though they spew a great political line, it is not based in sound reasoning.

Yet it is the tea party groupies that want to make a statement about federal spending and how this is all the fault of President Obama.

BS!

It is time to nail the backsides of teabaggers to the wall and let the public know why we are in this situation today.

S.& P. had warned investors earlier this year that it would act if Congress did not agree to increase the government’s debt ceiling, basically a borrowing limit, and adopt a long-term plan for reducing its debts by at least $4 trillion over the next decade. So analysts were asking why the market was acting surprised on Monday. They suggested that a rash of bad economic news, coupled with the debt ceiling talks over the past weeks and then the nation’s first-ever downgrade, had ganged up and bullied the markets.

“Fear is rampant in the market right now, the fear that we will have a double dip recession,” said Brian M. Youngberg, the energy analyst for Edward Jones. “It is too early to call that, but once the fear bubbles up it can treat the market very harshly.”

Another analyst noted that the market performance in recent weeks was bringing back echoes of the last financial crisis. “The rapidity of the decline and its force now rivals almost anything we’ve seen in the post-war era,” said Dan Greenhaus, the chief global strategist for BTIG, a financial services firm. “We have fallen so far and so quickly that we are up there with the most vicious sell-offs.”

“We can see that this may force the U.S. to move more aggressively to cut spending,” he said, something that could drive the already weak economy into recession and weigh on the economies of all of its trading partners. “That’s the main driver” of the stock market declines, he said.

Market Meltdown

This is not pretty.

 The Dow Jones industrial average plunged more than 350 points this morning as increasing pessimism about the economy overtook investors around the globe.

The Dow was trading at midday at 11,542, down 353 points, or 2.9%. Broader indexes were down more sharply, with the technology-heavy Nasdaq composite index plummeting 3.4%.

The Dow and the Standard & Poor’s 500 index were both briefly down more than 10% from their 2011 highs, putting them in “correction” territory.

Most stock markets in Europe were down at least 2% as the trading day there drew to a close after prices declined steadily during the day. Investors there are worried about increasing debt problems in Italy and Spain.

Will Wall Street Force Washington To Settle Debt Limit Debate?

Since Monday morning I have been watching the markets for a sign that they are ready to pronounce no faith in Washington, and send a clear resounding message of panic regarding the debt ceiling.    While there have been losses each day, and as I write this the Dow is down 119 points, there has not been the dramatic scene that many are thinking is looming if something does not happen soon in Congress.

Question is how long before Wall Street sends a strong message?

At the end of the day the out-of-control conservatives have to make a decision.   They must join the House Democrats, or the Senate Democrats, along with the White House in an ultimate compromise, or we will default.

The market is watching.

“If at some point, market forces decide that a deal is not there, then you’ll see a huge reaction,” said Sen. Mike Johanns (R-Neb.). “How huge? I don’t know.”

“The reality of the marketplace is going to create a lot of second thoughts,” said Sen. Frank Lautenberg (D-N.J.).

“External forces could be part of this,” Senate Majority Whip Dick Durbin said Tuesday. “I hope we don’t reach that point.”

“I think there’s pressure there, and everybody’s paying attention to it,” said South Dakota Sen. John Thune, No. 4 in GOP leadership. “There are clearly consequences and indications if we don’t act.”

Glad To Know U.S. Senate Passes Bailout Bill For Financial Institutions

Not the perfect way to pass a bill, and too many additional nuggets were added to make it easier for politicians to swallow, but that is how compromises are made, and this bill had to pass.  I am very happy with the leadership that the Senate demonstrated.

As I have said often Congress needed a sober assessment of what was required to add liquidity to the markets, and again get credit into the hands of those who wish to buy cars, add on to a business, or create a new dream.  Without that loud bang of cash infusion into the economy we will suffer in ways that we have only read about in our history books.

I am pleased with the vote, and now the House must pass it soon.

CNN Reports on the passage tonight in the Senate.

The Senate on Wednesday night passed a sweeping and controversial financial bailout similar in key ways to one rejected by the House just two days earlier.

The measure was passed by a vote of 74 to 25 after more than three hours of floor debate in the Senate. Both presidential candidates, Sens. Barack Obama, D-Illinois, and John McCain, R-Arizona, voted in favor.

Like the bill the House rejected, the core of the Senate bill is the Bush administration’s plan to buy up to $700 billion of troubled assets from financial institutions.

Those assets, mostly mortgage-related, have caused a crisis of confidence in the credit markets. A major aim of the plan is to free up banks to start lending again once their balance sheets are cleared of toxic holdings.

But the Senate legislation also includes a number of new provisions aimed at Main Street.

The changes are intended to attract more votes in the House, in particular from House Republicans, two-thirds of whom voted against the bailout plan.

The House is expected to take up the Senate measure for a vote on Friday, according to aides to Democratic leaders

FAUX News Video: John McCain Says He Might Suspend Campaign Again

After the complete farse and political gimmickry from John McCain about ‘suspending’ his presidential race before the first debate, comes this FAUX News nugget.   For all the good that McCain did while in ‘suspension’ and working for a deal, I think we need his help again as much as Galveston needs another hurricane.  But those fair and balanced ‘reporters’ at Faux News are eager for intervention ‘McCain style’.

Technorati Tags: JohnMcCain, Congress, WallStreet, FAUXNews

Economic Crisis Grows

The economic crisis may be hard for some to understand, but newspapers today are showing how the problems are hitting home.  After all the reasons from Americans as to why they felt it unwise to act with a package of assistance to financial institutions, comes the harsh facts of what a perfect financial storm looks like.  This is pretty basic stuff but as I read and listen to more and more Americans I am aware that there is a steep learning curve to be dealt with on this crisis.

The Chicago Tribune paints a great picture of the links between Wall Street and Main Street.

On Monday, as the credit crunch claimed a fresh list of major financial institutions on both sides of the Atlantic, the U.S. Federal Reserve pumped $630 billion into the global financial system, hoping to loosen up short-term credit markets.Wachovia Corp. “If banks aren’t lending, cars don’t get sold, equipment doesn’t get bought, and people don’t get hired.”Treasury Secretary Henry Paulson has argued that by purchasing toxic mortgage securities, his plan would give banks that capital. But some critics worry that this method would be too slow, complicated and indirect.

But rates barely budged, said Kevin Giddis, head of fixed income for Morgan Keegan & Co. in Memphis, and by the end of the day the spread between the federal funds rate and the interbank rate had moved back to historic levels, indicating lenders are frozen in place.

“Nobody trusts each other,” he explained.

That freeze is what worries economists the most, since it is a sure sign that the problems on Wall Street threaten the broader economy.

“What people don’t seem to understand is that Wall Street and Main Street are entirely linked,” said John Silvia, chief economist at

The ultimate solution is that banks need more capital to replace losses from the housing crisis. Otherwise, they simply won’t resume lending.

For many observers, however, Monday’s market convulsion proves global markets badly want a sign that the U.S. government is serious about providing some sort of bailout. Restoring confidence, they say, may be a crucial first step to stabilizing the markets. If the Paulson plan isn’t working, it can be adjusted or abandoned for a better solution.

“This is a taste of what might be in store if we don’t get some government intervention,” said Wells Fargo economist Scott Anderson. “It’s pretty close to a panic situation, especially in the bond markets.”

Meanwhile the Boston Globe shows why states will feel the effects over the lack of a measure to turn the crisis around.

In an example of how fragile credit markets have become, the state of Massachusetts yesterday tried to borrow $400 million to make its routine quarterly local aid payments to cities and towns. State treasury officials said the credit markets abruptly froze midday, leaving them $170 million short. The state will have to use its own funds to complete the local aid payments, draining the state’s balance to extremely low levels.

“I don’t think any treasurer alive could say they’ve ever seen anything like this,” said Timothy P. Cahill, the state’s treasurer. “There have always been cash shortages, but you could always go to the market and get more. This is the first time we haven’t been able to do that.”

Cahill said he believes the credit market will in effect remain shuttered today as the nation’s largest lenders hold on to their cash amid uncertainty over plans for a federal bailout. In short, the House’s rejection of a $700 billion Wall Street bailout plan takes Massachusetts and the rest of the US economy into territory that few policy makers and analysts wanted to explore.

The International Herald Tribune underscored the alarm that is felt worldwide.

EU Commission spokesman Johannes Laitenberger said that the “United States must take its responsibility in this situation, must show statesmanship for the sake of their own country, and for the sake of the world.”

“The turmoil that we are facing has originated in the United States,” he added. “It has become a global problem. The United States has a special responsibility in this situation.”

Belgium’s Dexia bank became the country’s second to get a government-assisted bailout in as many days, while Ireland boosted bank stocks by guaranteeing all domestic bank deposits. Central banks continued to pump short-term credit into banks in an effort to unfreeze interbank lending.

Technorati Tags: Congress, WallStreet, Economics