The Morning Line

‘Golden Era’ Could Face a Deep Valley First

0 comments

Here’s some cold water on the notion that Trump’s radical trade policies could help bring about an economic golden era. I’d written here last week that punitive tariffs might be the only medicine strong enough to jolt the world into doing honest business. Foreign manufacturers would leap to relocate their plants to the U.S. in order to avoid the levies and also greatly reduce delivery costs.

 

There’s just one problem with this, wrote a subscriber, Ben, who posts regularly on the site. “I don’t think Trump has the time to re-shore to any great extent. He has 3.5 years, but this is something that takes more than two presidential terms to accomplish.” Indeed, as ambitious as Trump’s plans are, there is no political consensus to implement them.” Even some Republicans are resisting the idea of re-shoring.

 

Bear Threat

 

An additional problem is that a shake-up of global trade could trip stocks into a bear market, weakening the ability of middle class Americans to cope with the enormous cost of putting America first. High tariffs cannot but dramatically inflate the price of cars, appliances and other big-ticket items that Americans depend on from sources outside the U.S. Is Trump just bluffing? Even if he is, investors don’t have the luxury of counting on it.

 

A more immediate and intractable problem Trump will face is the ongoing collapse of commercial real estate. In dollar terms it is a huge number, and yet no big cities have taken commensurate writedowns. Instead, they all seem to be hoping that a massive economic upswing brings workers back to their offices. One San Francisco developer bet a hundred million dollars on this, buying an 11-story building for $40 million that had been assessed at $140 million. He plans to put $50 million of improvements into it, but the investment evidently is predicated on the fantasy that AI workers will fill San Francisco’s empty towers.

Rick's Picks for Wednesday
$ = Actionable Advice + = Open Position
Search touts by symbol

$ESM25 – June E-Mini S&P (Last:5640.75)

0


Rick’s Picks Member-only content.You must be logged in to view this post

$MSFT – Microsoft (Last:378.80)

0


Rick’s Picks Member-only content.You must be logged in to view this post

$GCJ25 – April Gold (Last:3085.60)

0


Rick’s Picks Member-only content.You must be logged in to view this post

$SIK25 – May Silver (Last:34.814)

0


Rick’s Picks Member-only content.You must be logged in to view this post

$GDXJ – Junior Gold Miner ETF (Last:56.85)

0

Because this symbol is overdue for a correction, I’ve arbitrarily drawn a chart that could signal the start of one if GDXJ falls to 55.17. That would trigger a theoretical ‘sell’ signal with downside potential to at least 51.74.  An additional ‘hidden’ support at 55.63 could provide a tradable bounce. The supports should not give way easily, and that is why we can safely assume Mr Market means business if they do.

This is a free forecast (Tout) by Rick. Get a free trial of Rick’s Picks to see full member content.

$TLT – Lehman Bond ETF (Last:1.33)

0


Rick’s Picks Member-only content.You must be logged in to view this post

$BTCUSD – Bitcoin (Last:82,357)

0


Rick’s Picks Member-only content.You must be logged in to view this post

$TNX.X – Ten-Year Note Rate (Last:4.308%)

Expect ten-year rates to continue ratcheting lower, at least to the 3.959% ‘secondary pivot’ shown in the chart. The breach of p=4.242% was not decisive, and rates have yet to close for two consecutive weekly bars below it. However, the initial downside penetration reached the ‘sweet spot’ between p and p2, implying that an uptick in rates to the green line (x=4.526%) would be a short sale.  The chart is inconclusive about whether d=3.675% will be achieved, but an overshoot of p2 would shorten the odds. It is my maximum downside target, nonetheless.

This is a free forecast (Tout) by Rick. Get a free trial of Rick’s Picks to see full member content.

$CLJ25 – April Crude (Last:67.04)


Rick’s Picks Member-only content.You must be logged in to view this post

$DXY – NYBOT Dollar Index (Last:104.15)

Time for a tone change. This is a tough call, since I’ve been a hard-core deflationist since the mid-1970s after reading a persuasive book by the late C.V. Myers, and later another, The Great Reckoning, by James Dale Davidson and Lord William Rees-Mogg. Myers’ thesis was that the endgame for the epic credit blowout of the last 40 years would feature a dollar so strong that all who owed them would be crushed by imploding debt. The implied tsunami of bankruptcies would be even more devastating than the 1930s experience, wiping a dozen zeroes from the global balance sheet. The resulting shortage of dollars would become the catalyst for a Second Great Depression from which it would take a generation or longer to emerge. I still believe this is how things must end. But not now. Trump, who is verging on political omnipotence, clearly favors a weak dollar, and this will hold the coming bust at bay for a while. But the chart suggests the dollar is tough enough to stand up to such moderate debasement as Trump’s patriotism and nationalistic pride can abide. I have adjusted my outlook for the dollar accordingly: Look for weakness down to the range 95-100; then, an explosive rally that will end inflation for 60 years. _______ UPDATE (March 14): The Dollar Index has come down hard to the 102.99 ‘d’ support of this pattern.  It is sufficiently clear and compelling that we ‘should’ see a tradable bounce. If there is none, that would darken my outlook significantly. _______ UPDATE (Mar 21): DXY has bounced 2% from within 20 cents of the 102.99 ‘hidden’ support furnished above. The rally would be more persuasive, however,  if it exceeds several ‘external’ peaks ranging from 104.32 to 104.67 recorded in the first week of March. Here’s the chart

This is a free forecast (Tout) by Rick. Get a free trial of Rick’s Picks to see full member content.