Is this the end?

expatsp

Up till now, this administration has done many things that I personally don't like, but which are pretty undeniably good for business and the stock market, at least in the short run.

But with these steel & aluminum tariffs, he's now (if they actually happen) prejudicing a pretty big segment of US business world (everyone who uses steel & aluminum) for the sake of a tiny segment.

Is this something he'll walk back soon, like so many other supposed policy shifts? A one-shot deal, that he won't repeat and that won't be enough to derail the expansion? Or is this the first of many such unforced errors, with the NAFTA and a global trade war up next? IF so, it's probably the end of this stock market and economic cycle.

What are your opinions?

Ted

@expatsp & MFO Members: "Is this the end?" No, but it could be a short-term blow to an upward bias to the market. He better walk the tariffs back or he will half to deal with the Linkster.
Regards,
Ted

MikeM

He's once again throwing shit against the wall to see what sticks with his ever shrinking base. He most likely will walk it back, again. He can't be that stupid, right? Or quite possibly, just another diversion from dealing with current issues.

Anna

No but I'm hoping the market goes down just a bit a lot more before he announces a subsidy of tax dollars/additional tax breaks for any sector that feels affected and the market (with my new investment dollars) goes shooting up again.

Old_Joe

"He can't be that stupid, right?"

@MikeM- Unduly optimistic. Of course he can be, and most likely is.

Old_Joe

@Ted- Hey, he's your boy. You maybe expected a finely tuned, well thought-through international trade policy? From a confirmed simpleton?

hank

I shouldn’t say this (and may get deleted), but if the guy’s feeling aggressive, I’d rather he take that frustration out by slapping on some ridiculous tariffs than by punching in the codes and hitting the trigger.

Mona

hank said:

I shouldn’t say this (and may get deleted), but if the guy’s feeling aggressive, I’d rather he take that frustration out by slapping on some ridiculous tariffs than by punching in the codes and hitting the trigger.

I hope it's not a roid rage.

PRESSmUP

Unfortunately, I think Hope Hicks served as a throttle or regulator for more contentious imaginings. Not sure who serves that role now.

davidrmoran

All,

Here we go:

https://www.nbcnews.com/politics/white-house/trump-was-angry-unglued-when-he-started-trade-war-officials-n852641

LewisBraham

Hey you kids, get off my lawn!

Old_Joe

Yes, that NBC link squares with information published in this morning's WSJ. Oddly, I can't seem to find that article in WSJ on-line, but that's probably a failure on my part.

@PRESSmUP- That print version article notes that Rob Porter, recently dismissed from the White House because of allegations of spousal abuse, was one of the major players involved in offsetting the "let's have a trade war" contingent. The WSJ article suggests that once Mr. Porter was removed, Trump's worst instincts were pandered to and manipulated.

Crash

Classic projection. Cripes, a "child who's grown old."

MikeM

On Wednesday evening, the president became "unglued," in the words of one official familiar with the president's state of mind.

Trump, the two officials said, was angry and gunning for a fight, and he chose a trade war...

God damn, aren't these some characteristics you want in your president? This has to have an end, right? Even Trump supporters have to know we are in big trouble here.

@Old_Joe , my brain wants to be optimistic, but my heart knows this guy only cares about his ego and not looking like the village idiot. He doesn't care in the least what is best for the country.

Impeach before he instills more ruin I say.

PRESSmUP

Old_Joe said:

@PRESSmUP- That print version article notes that Rob Porter, recently dismissed from the White House because of allegations of spousal abuse, was one of the major players involved in offsetting the "let's have a trade war" contingent. The WSJ article suggests that once Mr. Porter was removed, Trump's worst instincts were pandered to and manipulated.

From watching CNBC this morning, it appears that Wilbur Ross may the one poking Trump in the side with a stick about these tariffs. As Ross noted...after all, a trade war only increases the cost of a can of Campbell's Chicken Noodle Soup by 2.6 cents.

If I were one of the Squawk Box reporters, I would have asked Mr. Ross when was the last time he ever had a can of Campbell's Chicken Noddle Soup?

https://www.cnbc.com/video/2018/03/02/watch-wilbur-ross-use-a-can-of-campbells-soup-to-defend-steel-and-aluminum-tariffs.html

msf

"Is this something he'll walk back soon, like so many other supposed policy shifts?"

One can hope so, but I see three reasons why the walk back is less likely than the others:

1. Trump has almost no positions that are not mercurial. An exception is his faith in tariffs that he has held since the 80s.
2. This plays to his populist base, in much the same way and to same effect as removing safety regulations played to the interest of coal miners. Tariffs sound good until you look 1mm below the surface.
3. To the extent that existing trade is unfair, there is a WTO mechanism to address this, but Trump mistrusts anything but bilateral deals (made by the great "deal maker").

What I don't get is how any country would even think of letting a tariff warrior into the TPP

Mnuchin: Trump rejoining the TPP is 'on the table:
http://thehill.com/policy/international/375984-mnuchin-officials-eye-rejoining-tpp

U.S. Raises Tariffs as TPP Countries Strike a Deal
https://www.dtnpf.com/agriculture/web/ag/perspectives/blogs/ag-policy-blog/blog-post/2018/01/23/u-s-raises-tariffs-tpp-countries

davidrmoran

yes, there is history

https://www.washingtonpost.com/blogs/plum-line/wp/2018/03/02/the-real-reason-trump-wants-to-start-a-trade-war

https://www.nytimes.com/2018/03/02/us/politics/trump-embraces-a-trade-war-which-could-undermine-growth.html

https://www.nytimes.com/2018/03/02/upshot/the-trump-steel-tariffs-are-economically-small-and-symbolically-huge.html

rono

Howdy,

On surface it seems to be another distraction made in a fit of batshit madness. However, it was a campaign promise and he's hell-bent on delivering to the degree that he has cover. In this case, he could modify, congress could temper, the courts could temper and/or the WTC will put paid to his ass like they did to Bush and his tariffs - and he can claim he fulfilled his promise but those bad guys screwed us.

Wait until all the 'trump market' gains disappear.

and so it goes,

peace,

rono

expatsp

@davidrmoran @msf So are you selling equities and other high risk assets? If we're headed for an all-out trade war, that can't be good for the markets.

davidrmoran

not I ---

by history I meant only Trump's own prior idiot kneejerk base-pandering "policies", such as they are

no, I myself am sitting tight w DSEEX plus some other equity funds and spec crap equities at the edges, and PONDX plus some gogo bond etns at the edges: 50-50 stock-bond, plus or minus

msf

I don't try to time markets - as is oft noted, you have to be correct twice, both getting out and getting back in. And I'm in for the long term. So I'm not selling equities.

But ... I do dabble in guessing the best time for Roth conversions (you only have to be right once there, and you've got to pick some time to do the conversion). This might be a good time to convert - assuming that one expects the market to end the year higher than it started.

expatsp

@davidrmoran @msf, Yes, in principle I'm against market timing too, but there's a chunk of money I may need in about 12 months, to buy a house, if various plans work out... It would involve dialing down my equity holdings from 80% to about 65%. I guess the standard advice is that if you'll need the $ in less than 5 years, get out of the market.

I could ride out a 10 or 20% correction without it interfering with my plans, but not a 50% one like in 2008. And if we get a global trade war, plus surging interest rates and some kind of financial debacle (e.g. Lehman Brothers) I've zero faith that this government could handle it.

The catch is that right now I'll have to pay about 10% state & city capital gains tax on top of the feds' tax, but starting in July I'll be in a lower tax state.

msf

One option (no pun intended) is to use index options to protect against major losses. This could make sense in your situation since you have a specific short term target date - either the date of your move when you can sell with lower taxes, or the date you expect to purchase a home. This does require finding an index that approximates the behavior of your equity holdings.

One way you could do this would be to simply buy out-of-the-money puts (say 10% below current market price). Regardless of how the market (and your portfolio) does, you're out the cost of the puts, but you've bought pretty cheap insurance against the market falling over 10%.

If the market declines by 15%, you can buy the index (15% below current prices) and sell it using your puts at 10% below current prices. So you pick up 5% to offset the approximately 15% loss in your portfolio (assuming the index performance is similar to your portfolio's). Alternatively, you could sell the put directly (since it would be in-the-money) for a similar 5% gain. "Worst" case - the market declines by less than 10% or even goes up, and you're just out the cost of the puts.

If you want a cheaper alternative, you could use options to "collar" your portfolio. You buy the puts as above, but also sell calls above the current index price. Done "correctly", you can make as much selling the calls as you pay purchasing the puts. If the market goes up you won't make much profit on your portfolio because you'll have to use some of that gain to pay off on the calls. But right now your main concern is just locking in value, not making a lot more profit. The risk here is that the index you choose may not track your portfolio well, so the index might go up say 10% while your portfolio goes up 5%, so you're out an additional 5%.

I've described two of the four strategies that Schwab discusses here (strategies #2 and #4):
https://www.schwab.com/active-trader/insights/content/portfolio-protection

I don't trade options (I rarely even buy individual stocks), so I'm speaking purely theoretically. Note that you'd likely want "European style" options - ones that can be exercised only at their expiration date - since the whole idea is that you won't have to sell your portfolio before you move or before you're ready to close.

bee

@msf,

Note that you'd likely want "European style" options - ones that can be exercised only at their expiration date - since the whole idea is that you won't have to sell your portfolio before you move or before you're ready to close.

I could imagine this type of a strategy might be useful for soon to be retirees. This might have been one way to have protected one's nest egg back in 2007-2009 if your retirement happened to coincide with those down years in the market, especially if part of the nest egg was going to be exposed to sequence risk...spending down equities in a down market. Thanks for the Schwab link.

Sven

Impeach before he instills more ruin I say.

@MikeM, the alternative (Pence) could be much worse especially when Congress failed over and over again to act as check-and-balance from the executive branch.

Without Hope Hicks serving as a filter to his ideas, we are seeing the raw reaction to the mounting pressure that he is facing. Did you notice that something always crop up whenever the Russian investigation heats up? This diversion tactic is to draw attention away from the main issue as more and more of the original staff are either indicated, resigned, or fired. Someone else behind the scene are pulling all the string just as we saw the hand-written note on his hands when he met with the Florida's students.

davidrmoran

uh, let us not forget that Hicks was a model and adviser on Ivanka's fashion line, nothing other, before making her political debut with the campaign

expatsp

@msf Thanks for the idea. It's something I'll look into, though I tend to like to keep it simple. And I'm leaning more toward raising the cash, especially after this weekend's tweets seem to indicate Trump really thinks he can win a trade war.

The question is how much influence Trump has on the Trump administration's economic policies? Up till now, the answer seems to have been, not much, since he doesn't really care. But trade, he cares. I also get the sense that Mueller is closing in, and we've got some political instability coming up.

I'm not going to zero, just bringing down my equities to 65% from 80%, so I'll have enough cash & conservative bond funds to not care if the markets have a bad year or five.