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The Best of What They Said and I Read Week Ending 5/12/2019

Short excerpts from articles I found interesting.  I may not agree with the author and the following material is not intended as investment advice

Barron’s – May 10, 2019 – Dow Drops 2.1% as Tariffs Unexpectedly Return – Ben Levison 

  •  “The U.S. and China are playing a game of chicken with trade—and there may be no winners.   The market had been counting on a trade deal between the U.S. and China, so it was taken a bit aback when President Donald Trump threatened to increase tariffs. By the end of the week, as more details emerged about China backing away from previous promises, he followed through on that threat. The Dow Jones Industrial Average declined 562.58 points, or 2.1%, to 25,942.37 this past week, while the S&P 500 index fell 2.2%, to 2881.40, and the Nasdaq Composite dropped 3%, to 7916.94.”

  • “The market, however, was surprisingly resilient. On Thursday and Friday, the SPDR S&P 500 exchange-traded fund (ticker: SPY) fell as much as 1.5%, only to close back above its 50-day moving average on both days. As long as the 50-day average holds, investors probably don’t have much to worry about regarding the week’s decline.”

  • “…But anyone hoping for a quick deal should think again. It took December’s market plunge for the U.S. and China to make progress on trade talks. But now that markets globally have rallied, the two sides can dig in their heels, explains Ethan Harris, global economist at Bank of America Merrill Lynch. “Both the U.S. and China want a deal, but motivating the inevitable compromise requires some combination of market, economic, and political pain,” he writes.”

U.S. Global Investors - Investor Alert – May 10, 2019 – Frank Holmes 

  • “…Today the Trump administration made good on its threat to raise tariffs on as much as $200 billion worth of Chinese imports to 25 percent from the previous 10 percent. The president also said that a decision could be made soon on whether to impose the same 25 percent rate on an additional $325 billion of Chinese goods, which, all told, would cover approximately the total amount of goods the U.S. imported from China in 2018.”

  • “So what does this mean? As I’ve made clear here, here and elsewhere, a tariff—beside being a strain on international relations—is essentially a tax that must be paid to the U.S. government before a shipment can clear customs. But here’s the kicker: Tariffs are typically paid not the exporting company but by the importer. In other words, it’s U.S.-based companies that are picking up the tab—then passing the extra expense on to American consumers.”

  • “With the exception of the U.S. Treasury, which collects the tariff payments, few stand to benefit here. A February study by Washington, D.C.-based Trade Partnership Worldwide (TPW) estimated that 25 percent tariffs on Chinese goods cost families of four close to $2,300 extra on average per year. They also have the potential to impact upwards of 2.2 million American jobs as well as risk diverting trade to other markets.”

  • “…President Trump is reportedly issuing a roughly one month ultimatum to wrap up talks for a deal (or not) before the U.S. will place another $325 billion of Chinese goods under tariffs…Well, the trade talks haven’t fallen apart yet, and from what Secy. Mnuchin has said, the text and deal were some 90 percent finished before last weekend’s alleged backsliding. And at the end of the day, can’t one argue that the “truce” declared at the end of December has already been extended at this point? Thus the high-stakes game continues, with a higher ante at this point and—at least it seems—a firmer deadline looming to wrap the game up in timely fashion.”

Fortune – May, 2019 – World’s 50 Greatest Leaders – Leo Varadkar Prime Minister, Ireland

  •  “Ireland’s youngest ever Taoiseach – and first openly gay and first ethnic-minority leader – stands out on all fronts.  But it’s how he has positioned Ireland to win big in Brexit that’s most noteworthy.   Varadkar’s commitment to low taxes and low-drama politics has wooed the likes of Bank of America Merrill Lynh and Barclays to move their European bases to Dublin while securing Ireland’s title as Europe’s fastest growing economy.”

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