March 7, 3:00 pm EST

As we discussed yesterday, stocks have fully recovered the decline that people were attributing to Trump’s trade barrier announcement last week.

With that, the tariff hysteria seems to have subsided a bit, as they struggle for evidence to support their hyperbole.  Perhaps people may start acknowledging that we are now in a higher volatility environment, and that we will be slowly working out of this recent price correction until corporate earnings and economic growth data start confirming the benefits of tax cuts.

Interestingly, they seem to hate the trade threat, far more than the love the tax incentives and the pro-growth initiatives.  And while trade is a complicated issue, everyone seems to suddenly have an expert opinion on it.  And everyone is an expert on the Smoot-Hawley Act (which, by the way was a tariff on over 20,000 goods) and depression-era economics.

If they indeed were reflective about the economy, I think they would agree that we (and the world) desperately need growth initiatives to save us from terminal central bank life support (which wouldn’t be so terminal given they have fired all of their bullets to keep us afloat as long as they did).  And they would know that we are in for a perpetual cycle of booms and busts (repeat of the credit bubble and burst) if the trade imbalances (mainly between China overproducing and the U.S. overconsuming) ultimately are not corrected.

Now, as more of the conversation on trade turns more toward China, I want to revisit an excerpt from my note in December of 2016 (when Trump was President-elect):

MONDAY, DECEMBER 19, 2016 — “While many think Trump will provoke a military conflict, that’s far from a certainty.  With the credibility to act, however, Trump’s tough talk on China creates leverage.  And from that leverage, there may be a path to a mutually beneficial agreement, where the U.S. can win in trade with China, and China can win.  But it may get uglier before it gets better. In the end, growth solves a lot of problems.  A hotter growing U.S. economy (driven by reform and fiscal stimulus), will ultimately drive much better growth in the global economy.  And China has a lot to gain from both. Though in a fair-trade environment, they won’t get as much of the pie as they’ve gotten over the past two decades. But it has the chance of leading to a more balanced and sustainable economy in China, which would also be a win for everyone.”

Now, why not just focus on China now?  Because they will continue to abuse other countries. And those open trade channels will still allow that product to enter the U.S.  As we discussed yesterday, the global economy has been damaged by China’s currency/trade policy, yet the rest of the world has been relying on the U.S. to lead the fight.  They need to join the fight to create the leverage to make it ultimately work – so that the global economy can find a sustainable path of recovery and robust growth.

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December 13, 2016, 4:00pm EST

Last week we talked about how a visit to Trump Tower was becoming a good predictor of a success for your stock.

Goldman continues to build representation in the Trump administration with the latest addition, Gary Cohn (current COO and President of Goldman Sachs) as the National Economic Council Director.  And hedge funder Anthony Scaramucci, a Goldman Sachs alum and current member of the Trump transition team, is rumored to be in the running for a role in the administration.  Goldman’s stock continues to rise, as the best performer in the Dow Jones Industrial average since Election Day (up 31%).

And remember, we talked about the visit last week of Masayoshi Son, the Japanese billionaire and majority stake holder in Sprint.  Sprint is up 32% since election day.

So now we have the latest, and one of the most important cabinet appointments, Rex Tillerson, who will be Secretary of State. He’s the Chairman and CEO of Exxon Mobil, the biggest energy company in the country and one of the largest publicly traded companies. Exxon was up 2% today, and is up 9% since the election — better than the broader market, but not quite as good as the stocks of some other Trump Tower visitors.

This is a very interesting pick.  Given that the President-elect has openly talked about using oil as an economic weapon (on Iraq… “we should have taken the oil”). We now have one of the world’s most respected experts in oil, and in negotiating around oil, charged with stabilizing the middle east and relations with Russia (to name a few). And given that the hot spot of global instability surrounds countries (or regimes) that are highly dependendent on oil revenue (funded by oil revenue), we have a guy that could credibly utilize leverage emerging U.S. supply, and global demand of the developed world, as a bargaining chip.   His appointment/presence may also end up yielding a stable oil price environment going forward (tempering the manipulation of price extremes by OPEC).

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