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Mark's Market Blog
#419 2-5-17: Trump?
by Mark Lawrence

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Markets have been roughly flat since Dec.10. No one knows why. There's a divergence between the Dow and the Dow Utilities, there's a divergence between the S&P and CAPE (corporate earnings). But the 30 year t-bill is rising, which is bad for people with mortgages but good for banks. Japan bonds seem to have bottomed, which could be a very bad sign. Meanwhile Italy staggers towards a major banking crisis and the likelihood of early elections which will question their membership in the Euro, and as always China is walking a razor edge of banking collapse. The S&P all-time highs are not matched by a robust and low risk world.

S&P 500 August 5 2016 to February 3 2017

Trump is already fighting with Germany. He said they had best create more jobs in the US or they would face import duties on cars. The German finance minister replied that if we want Germans to buy more Chevys, we should build better cars. This happens to be something I know a lot about. I sell my motorcycle windshields all over the world: Korea, Japan, Thailand, Malaysia, Indonesia, Australia, UK, France, Mexico, Brazil, Poland, Romania, Russia, Greece and lots of others. But never in Germany. Germany has yearly vehicle inspections, you have to have receipts for every after market part, and every after market part has to be approved by the TUV, the German version of the DOT. I have not supplied multiple copies of each of my couple hundred windshield designs to the TUV for destructive testing, so my windshields are not approved. Germany exports just about exactly half their GDP and imports next to nothing. They're legally set up to make sure that happens, not with duties but with byzantine regulations. Germany is a far worse export criminal than Japan or China ever was. The German export policies are destroying southern Europe - ask any Italian, Spaniard or Greek. If Trump wants to put a 30% import duty on BMWs, Mercedes and Volkswagens, I'm all for it. Personally, I believe Merkel is destroying Europe and I have no interest in any of her policies making their way over here. And if Schauble wants to lecture someone about free markets, he's going to have to find a less informed audience than me.

Secretary of State Rex Tillerson said at his confirmation hearing, speaking of the man-made islands China's military has created in the South China Sea, "We're going to have to send China a clear signal that, first, the island-building stops, and second, your access to those islands also is not going to be allowed."

Steve Bannon, the chief strategist at the White House said several months ago, "We're going to war in the South China Sea in five to 10 years, there's no doubt about that. They're taking their sandbars and making basically stationary aircraft carriers and putting missiles on those. They come here to the United States in front of our face – and you understand how important face is – and say it's an ancient territorial sea."

Defense Secretary Jim Mattis made a statement at South Korea's defense ministry, "Any attack on the United States, or our allies, will be defeated, and any use of nuclear weapons would be met with a response that would be effective and overwhelming." I assure you most strongly, one should not question the resolve of Sec.Mattis.

National security adviser Michael Flynn arrived unannounced in the White House press room Wednesday and announced that "we're officially putting Iran on notice," referring to their recent tests of ballistic missiles. Flynn said Iran-backed Houthi rebels attacked a Saudi warship and Tehran tested a missile, undermining "security, prosperity, and stability throughout the Middle East, American lives at risk." The Saudis have been bombing the Houthi rebels and ravaging their country, Yemen, for two years. Are the Saudis entitled to immunity from retaliation in wars that they start? Where is the evidence Iran had a role in the Red Sea attack on the Saudi ship? And why would President Trump make this war his war? As for the Iranian missile test, a 2015 U.N. resolution called upon Iran not to test nuclear-capable missiles. It did not forbid Iran from testing conventional missiles, which Tehran insists this was. Trump's team is positioning their selves for a war with Iran which, imho, has noting to do with us.

Trump signed an executive order removing the fiduciary duty financial planners have under Dodd-Frank towards pension and retirement clients. He then put two former Goldman-Sachs executives in charge of gutting Dodd-Frank. I consider Dodd-Frank severely flawed, and I think it should be replaced. Reinstating Glass-Stegall would be an improvement. But dismantling Dodd-Frank without a replacement? This is turning Wall Street lose again, and we've already seen this movie. When it ends, the audience is dead.

Australia refuses to accept boat people, so any such refugees are relocated to an island and sent back home. Obama made a deal with Australia to take in about 1500 unvetted Australia rejects. Trump called Australia to tell them the deal was awful and it was off. However, instead of simply using those words, he went on to insult the Australian PM for several minutes.

I'm perfectly content with Trump's actions on immigration. However, his treatment of foreign leaders has been, imho, far to harsh; he's indicating that Wall Street should be let off their already too-long leash; and his people are indicating that they want a war, preferably with China, possibly with N.Korea. I'm not at all happy about these parts of his presidency.

TEPCO quietly announced there was a 1 square meter (1 sq yard) breach in a reactor core, apparently caused by fuel that had burnt through the iron and concrete. Radiation levels ear the breach are 530 Sieverts. 8 Sieverts is considered incurable and fatal. Fukushima is not anything like over or contained.

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Revised Sunday, 05-Feb-2017 23:23:45 CST
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