Newsletters
Dollars and Sense
September 2019
China
August 2019
Dollars and Sense
We need more of both. The U.S. and global economies need more dollars in circulation, and our political leaders need better judgement (sense). Did President Trump cross the “high crimes and misdemeanors” line in his call with the Ukrainian President? Will it make political sense for the Democrats to push forward with an impeachment inquiry and vote? The political stakes have ratcheted higher for both parties with more than a year to go until the general election. We don’t have a call yet on who it will benefit and who it will hurt, although Joe Biden had already been falling in the polls and the prediction markets relative to Elizabeth Warren.
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We have not discussed the trade war with China in this newsletter since it first reared its head last spring. We may be in the minority, but we do not believe it is the biggest threat facing the market and the economy. We still see the deflationary risk brought on by a behind-the-curve Fed as the biggest threat to the market. U.S. imports from China are valued at three to four times the value of U.S. exports to China. The U.S. economy is 50% larger than the Chinese economy. As a result, Chinese exports to the U.S. are six times larger as a percent of their economy than U.S. exports to China. From late September through Christmas Eve 2018, the S&P 500 Index dropped 20%, much the result of the most recent Fed rate increase. As the Fed began to reverse their stance on rates in early 2019, the market reversed its decline and made a new all-time high four months after the December low.
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