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The Best of What They Said and I Read Week Ending 7/8/2018

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  – July 6, 2018 – Dow Shrugs Off Trade War, Gains on Payroll Surprise – by Ben Levisohn

“Merriam-Webster’s defines a fairy tale as “marked by seemingly unreal beauty, perfection, luck, or happiness.” Based on that, the market is surely living one,  It wasn’t just that the Dow Jones Industrial Average rose 185.07 points, or 0.8%, to 24,456.48 this week, or that the S&P 500 gained 1.6%, to 2759.82, and the Nasdaq Composite climbed 2.4%, to 7688.39—gains that should make anyone happy.”

“It was the seemingly unreal beauty of the market’s rise even as the U.S. imposed tariffs on China on Friday and China responded in kind; the perfection of Friday’s payrolls report, which saw a surge in job growth but little sign of wage increases as more Americans entered the workforce; and the luck that saw the perfect payrolls report released on the same day that tariffs went into effect.”

“…It’s enough to suggest that the U.S. may be more insulated from trade tensions than we thought. Since June 14, when the tariff battle really heated up, the S&P 500 has declined 0.7%, while Germany’s Dax has dropped 4.7% and China’s Shanghai Composite has slumped 9.3%...”

 “…But the trade war could serve as further impetus to internationalize its currency, writes Louis Gave, CEO at research firm Gavekal, something that could begin to have an impact on the role of the dollar as the world’s reserve currency. Gave compares a reserve currency to Microsoft Windows—once everyone’s using it, it’s hard to get them to switch. But with tariffs, the U.S. is essentially saying that it doesn’t want the rest of the world using dollars anymore…If anything, it will accelerate the move away from the U.S. dollar as the region’s sole trade and reserve currency,” Gave writes. “Once that shift has occurred, reversing it will be almost impossible.”  And that could turn a fairy tale into a horror story.”

The Kiplinger Letter – July 6, 2018

…“It’s no longer just a threat of a trade war. This is the real thing…an escalating clash of tariffs and countertariffs with no end in sight. Disputes over trade will widen. The U.S. is now involved in some sort of disagreement with six out of its top seven export markets.  Together they account for 53% of all American-made exports. China remains Washington’s top target…Europe is in President Trump’s crosshairs, too. Ditto, Canada. And Mexico…”

“The White House’s trade strategy is twofold: Show trade partners that it means business by making specific threats and then backing them up, testing other countries’ willingness to punch back. And push for new, bilateral agreements instead of broad pacts involving many countries. The idea: Negotiate with trade partners one on one, giving the U.S. the edge by virtue of being the biggest economy…”

“China may move to placate Trump…Don’t expect many other concessions to Washington, though. The countries that Trump is targeting seem unwilling to give ground. If anything, they’ll fight back. Tensions with Europe figure to rise as Trump mulls duties on imported cars and parts...And several American states are exposed to rising protectionism. The South is particularly vulnerable…Ky., La., Tenn., etc. 29% of Texas’ state GDP is connected to imports and exports. In Mich., next door to Canada, the figure is a whopping 39%.”

MarketWatch  – July 6, 2018 – Record high for Facebook stock pushes Zuckerberg past Buffett – by Max A. Cherney

“…A record high for Facebook Inc. stock has reportedly pushed Chief Executive Mark Zuckerberg’s wealth beyond that of famed investor Warren Buffett.  Facebook shares closed up 2.4% Friday at $203.23, notching a record close for the social-networking company …Zuckerberg is now the third richest person in the world, surpassing Warren Buffett, according to Bloomberg News.  Zuckerberg trails Amazon.com Inc. founder and Chief Executive Jeff Bezos, and Microsoft Corp.  co-founder Bill Gates, Bloomberg reported.  Zuckerberg owns more than $77 billion worth of Facebook stock…”

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