Global Market Comments
September 26, 2019
Fiat Lux
Featured Trade:
(THE HIGH COST OF TRADE TARIFFS),
(JOIN US AT THE MAD HEDGE LAKE TAHOE, NEVADA, CONFERENCE, OCTOBER 25-26, 2019)
Having been at the inception of the international trading order, first for The Economist magazine and later with Morgan Stanley, I can tell you that the initial reasons for unleashing globalization have long been forgotten.
It’s really very simple.
If someone is making a ton of money off of you, they are less inclined to blow you up. Profits are a great pacifier, and no one wants to destroy the people who have been buttering his bread.
During the 1960s, the US defense establishment went into a panic when China exploded its first atomic bomb.
Some 59 years later, the exponential growth of trade between our two countries have caused the risk of a mutual nuclear war to fall to near zero.
And what country in the world today would love to bomb the US off the face of the earth if it had the remotest ability to do so?
North Korea, which conducts no trade to speak of with the US.
There is another big reason why protectionism fails.
It is counterproductive in its impact on the American economy.
And not in a small way.
There are more than 45 million Americans living in abject poverty, stretching every dollar they have to make ends meet, saving nothing.
The apparel industry employs 135,000 Americans.
Can one really justify tariffs that increase the price of clothing for the 45 million in order to save a few of the 135,000 low-wage jobs?
A three-year 15% tariff enabled domestic producers to raise their prices, thereby increasing the costs of many American manufacturers.
By one estimate, each U.S. job “saved” cost $550,000 as the average bolt-nut-screw worker was earning $23,000 annually.
Ronald Reagan imposed “voluntary restraints” on Japanese automobile exports, thereby creating 44,100 U.S. jobs.
But the cost to consumers was a staggering $8.5 billion in higher auto prices, or $193,000 per job created, six times the average annual pay of a U.S. autoworker.
And there were big job losses in sectors of the economy into which the $8.5 billion of consumer spending could not be spent, like clothing.
In 2012, Barack Obama boasted that “over a thousand Americans are working today because we stopped a surge in Chinese tires.”
But this cost about $900,000 per job, paid by American purchasers of vehicles and tires.
The non-partisan Peterson Institute for International Economics says that this money taken from consumers reduced their spending on other retail goods, bringing the net job loss from the job-saving tire tariffs to around 2,500.
I could go on and on.
In researching this article, I stumbled across the map below showing the largest trading partner for each individual state.
While most states have Mexico or China as their largest trading partner, you would NOT believe some of the results!
Nevada-Switzerland
South Carolina-China
Delaware- Belgium
Florida-Brazil
Connecticut-France
So the bottom line here is to let free-market capitalism work unrestrained, and let whatever creative destruction taking place proceed full speed ahead.
Creative destruction is something the US does better than anyone else.
It’s why the US still has the largest and strongest economy by a mile, with the best major country long-term growth rate.
Don’t mess with success. You may not like the alternative.
When the legendary economist, John Maynard Keynes, was asked if the world had ever seen a Great Depression before, he responded, “Yes, it was called the Dark Ages, and it lasted 400 years.”
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to a six-month time frame, Mad Day Trader, provided by Bill Davis, will exploit money-making opportunities over a brief ten minute to three-day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points. Read more
Global Market Comments
September 25, 2019
Fiat Lux
Featured Trade:
(I HAVE AN OPENING FOR THE MAD HEDGE FUND TRADER CONCIERGE SERVICE),
(HOW THE RISK PARITY TRADERS ARE RUINING EVERYTHING!),
(VIX), (SPY), (TLT),
(TESTIMONIAL),
Mad Hedge Technology Letter
September 25, 2019
Fiat Lux
Featured Trade:
(WHAT’S BEHIND THE NETFLIX SLIDE)
(DIS), (NFLX), (AAPL), (T)
Don’t blame the weatherman for the weather forecast.
The writing is on the wall.
Television is dead as the latest iteration of the Emmy’s bombed, reaching just 10.2 million viewers who tuned in to watch Amazon's "The Marvelous Mrs. Maisel" win best comedy and "SNL's" Michael Che and Colin Jost charm the audience.
The paltry numbers were a follow-up to last month's MTV Video Music Awards which reached a record low of 5.23 million viewers, scoring lower ratings than that night's network evening news broadcasts.
Why are viewers dropping like a dead fly on the wall?
It’s difficult to deduce but live TV events including the Super Bowl have lost viewership across the board.
I would attribute part of the blame to the death of the shared center in the American experience.
There are just too many content alternatives.
Viewers have a bevy of channels to choose from and if they aren’t watching television, they have already cut the cord.
This development has removed many millennials out of the traditional TV viewership pool.
To economize time, many consumers review the highlights through a truncated version on YouTube too.
As for the Emmys, the high quantity of content available online means that many people do not even know what shows are up for awards anymore.
We are at “peak tv.”
And the development of content could simply mean that award shows aren’t interesting anymore.
Nobody has time to sit around for hours of commercials when Netflix is one click away.
We have never had so much content before.
Does that mean investors should all buy Netflix and the world is all well and good?
It did before but we need to revisit their narrative.
Netflix doesn’t exist in a vacuum and the internet content space is a fluid situation.
They scooped up the lion shares of the spoils when on-demand streaming content was a monopoly which in fact was an industry created by them.
But the launch of services that could threaten its top position has crashed Netflix’s (NFLX) shares and they are now negative for 2019.
Shares were trading around a comfortable $380 just three months ago and have parachuted down to $250 today.
The alarming underperformance in shares goes hand in hand with an avalanche of negative news engulfing the company.
One of its most popular legacy show “The Office” was sent packing back to its originators NBC, then Netflix followed off that nasty bit with an earnings report that showed negative domestic new subscriber growth for the first time since 2011.
The growth in the international part of the business was underwhelming too, to say the least.
Without much time to recover, Apple (AAPL), Disney (DIS), NBC, and AT&T (T) announced plans to debut new streaming services that would peel off a substantial amount of Netflix demand.
This news, in effect, puts a cap on Netflix raising the price for their streaming service while confronted with the dreadful future of needing to pay higher prices to generate premium content.
The premise behind Netflix was always the super growth engine that superseded any negative aspects.
To add a little more color, most of these new streaming services are priced to undercut Netflix and investors must wonder how Netflix will be able to overcome these various headwinds at a time when growth companies are getting punished by an outsized rotation to value.
I believe that a dead cat bounce should be met with selling short Netflix.
“Broadcast TV is like the landline of 20 years ago.” – Said CEO and Founder of Netflix Reed Hastings
