Elites Have Destroyed a Possible U.S. – Russia Alliance to Contain China

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There’s no need to rehash the sordid politics of the U.S.-Russia relationship since 2014. That relationship became collateral damage to gross corruption in Ukraine.

The U.S. and its allies, especially the UK under globalists like David Cameron, wanted to peel off Ukraine from the Russian orbit and make it part of the EU and eventually NATO.

From Russia’s perspective, this was unacceptable. It may be true that most Americans cannot find Ukraine on a map, but a simple glance at a map reveals that much of Ukraine lies East of Moscow.

Putting Ukraine in a Western alliance such as NATO would create a crescent stretching from Luhansk in the South through Poland in the West and back around to Estonia in the North. There are almost no natural obstacles between that arc and Moscow; it’s mostly open steppe.

Completion of this “NATO Crescent” would leave Moscow open to invasion in ways that Napoleon and Hitler could only dream. Of course, this situation was and is unacceptable to Moscow.

Ukraine itself is culturally divided along geographic lines. The Eastern and Southern provinces (Luhansk, Donetsk, Crimea and Dnipro) are ethnically Russian, follow the Orthodox Church and the Patriarch of Moscow, and welcome commercial relations with Russia.

The Western provinces (Kiev, Lviv) are Slavic, adhere to the Catholic Church and the Pope in Rome, and look to the EU and U.S. for investment and aid.

Prior to 2014, an uneasy truce existed between Washington and Moscow that allowed a pro-Russian President while at the same time permitting increasing contact with the EU. Then the U.S. and UK overreached by allowing the CIA and MI6 to foment a “color revolution” in Kiev called the “Euromaidan Revolution.”

Ukrainian President Viktor Yanukovych resigned and fled to Moscow. Pro-EU protestors took over the government and signed an EU Association Agreement.

In response, Putin annexed Crimea and declared it part of Russia. He also infiltrated Donetsk and Luhansk and helped establish de facto pro-Russian regional governments. The U.S. and EU responded with harsh economic sanctions on Russia.

Ukraine has been in turmoil (with increasing corruption) ever since. U.S.-Russia relations have been ice-cold, exactly as the globalists intended.

The U.S- induced fiasco in Ukraine not only upset U.S.-Russia relations, it derailed a cozy money laundering operation involving Ukrainian oligarchs and Democratic politicians. The Obama administration flooded Ukraine with non-lethal financial assistance.

This aid was amplified by a four-year, $17.5 billion loan program to Ukraine from the IMF, approved in March 2015. Interestingly, this loan program was pushed by Obama at a time when Ukraine did not meet the IMF’s usual borrowing criteria.

Some of this money was used for intended purposes, some was skimmed by the oligarchs, and the rest was recycled to Democratic politicians in the form of consulting contracts, advisory fees, director’s fees, contributions to foundations and NGOs and other channels.

Hunter Biden and the Clinton Foundations were major recipients of this corrupt recycling. Other beneficiaries included George Soros-backed “open society” organizations, which further directed the money to progressive left-wing groups in the U.S.

This cozy wheel-of-fortune was threatened when Donald Trump became president. Trump genuinely desired improved relations with Russia and was not on the receiving end of laundered aid to Ukraine.

Hillary Clinton was supposed to continue the Obama policies, but she failed in the general election. Trump was a threat to everything the globalists, Democrats and pro-NATO elites had constructed in the 2010s.

The globalists wanted China and the U.S. to team up against Russia. Trump understood correctly that China was the main enemy and therefore a closer union between the U.S. and Russia was essential.

The elites’ efforts to derail Trump gave rise to the “Russia collusion” hoax. While no one disputes that Russia sought to sow confusion in the U.S. election in 2016, that’s something the Russians and their Soviet predecessors had been doing since 1917. By itself, little harm was done.

Yet, the elites seized on this to concoct a story of collusion between Russia and the Trump campaign. The real collusion was among Democrats, Ukrainians and Russians to discredit Trump.

It took the Robert Mueller investigation two years finally to conclude there was no collusion between Trump and the Russians. By then, the damage was done. It was politically toxic for Trump to reach out to the Russians. That would be spun by the media as more evidence of “collusion.”

IMG 1

Russian President Vladimir Putin (l.) has recently named a new Prime Minister, Mikhail Mishustin (r.). This is part of a complex government reorganization designed to extend Putin’s rule beyond existing term limits. This is a setback for democracy, but may be a plus for the economy because it adds stability and continuity to Putin’s programs.

This whirl of false charges, cover-ups, and deep state sabotage finally led to Trump’s impeachment on December 18, 2019. Fortunately, the Senate impeachment trial may soon be behind us with Trump’s exoneration in hand (although new impeachment charges and false accusations cannot be ruled out).

Is the stage finally set for improved U.S.-Russia relations, relief from U.S. sanctions, and a significant increase in U.S. direct foreign investment in Russia?

Right now, my models are telling us that Russia is one of the most attractive targets for foreign investment in the world. Just because U.S. policymakers missed the boat does not mean that investors must do the same.

Russia is often denigrated by Wall Street analysts and mainstream economists who know little about the country. Russia is the world’s largest country by area and has the largest arsenal of nuclear weapons of any country in the world.

It has the world’s 11th largest economy at over $1.6 trillion in annual GDP, ahead of South Korea, Spain and Australia and not far behind Canada, Brazil and Italy.

It also is the world’s third largest producer of oil and related liquids, with output of 11.4 million barrels per day, about 11% of the world’s total. The U.S. (17.8 million b/d), Saudi Arabia (12.4 million b/d) and Russia combine to provide 41% of the world’s liquid fuels. The latter two countries effectively control the world’s oil price by agreeing on output quotas.

Russia has almost no external dollar-denominated debt and has a debt-to-GDP ratio of only 13.50% (the comparable ratio for the United States is 106%).

In short, Russia is too big and too powerful to ignore despite the derogatory and uninformed claims of globalists. Importantly, Russia is emerging from the oil price shock of 2014-2016 and is in a solid recovery.

The stage is now set for significant economic expansion as illustrated in the chart below from Moody’s Analytics:

IMG 2

This graphic analysis from Moody’s Analytics divides major economies into categories of Recovery, Expansion, Slowdown and Recession. Economies revolve clockwise through these four phases. The U.S. is in a Slowdown phase with some risk of Recession. Russia is in the Recovery phase heading toward Expansion. The Russian situation is the most attractive for investors because it offers cheap entry points with high returns as the Expansion phase begins.

Russia has also gone to great lengths to insulate itself from U.S. economic sanctions. Their reserves have recovered to the $500 billion level that existed before the 2014 oil price collapse with one important difference. The dollar component of reserves has shrunk substantially while the gold component has increased to over 20%.

With the recent surge in gold prices, Russia’s reserves get a significant boost (when expressed in dollars) because of the higher dollar value of the gold reserves. Gold cannot be hacked, frozen or seized, as is the case with digital dollar assets.

Russia’s fortunes have been improving not only because of low debt and higher gold prices but also because of higher oil prices. The country is poised for a strong expansion, even if U.S. hostility caused by the Democrats continues.

If Trump regains his footing after impeachment and wins a second term (which I expect), investors can expect warmer relations with Russia and an even more powerful Russian economic expansion than the one already underway.

Regards,

Jim Rickards
for The Daily Reckoning

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Russia: The Lost Opportunity

This post Russia: The Lost Opportunity appeared first on Daily Reckoning.

The biggest story out of China right now is the coronavirus that I addressed in yesterday’s reckoning.

But while it’s important, the bigger story is the geopolitical dynamic between the U.S., China and Russia.

Today I’m going to address that dynamic and show you how Washington has squandered a major opportunity to turn it in America’s favor.

When future historians look back on the 2010s, they will be baffled by the lost opportunity for the U.S. to mend fences with Russia, develop economic relations and create a win-win relationship between the world’s greatest technology innovator and the world’s greatest natural resources provider.

It will seem a great loss for the world. Here’s the reality:

Russia, China and the U.S. are the only true superpowers and the only three countries that ultimately matter in geopolitics. That’s not a slight against any other power.

But all others are secondary powers (the U.K., France, Germany, Japan, Israel, etc.) or tertiary powers (Iran, Turkey, India, Pakistan, Saudi Arabia, etc.).

This means that the ideal posture for the U.S. is to ally with Russia (to marginalize China) or ally with China (to marginalize Russia), depending on overall geopolitical conditions.

The U.S. conducted this kind of triangulation successfully from the 1970s until the early 2000s.

One of the keys to U.S. foreign policy in the last 50 or 60 years has been to make sure that Russia and China never form an alliance. Keeping them separated was key.

In 1972, Nixon pivoted to China to put pressure on Russia. In 1991, the U.S. pivoted to Russia to put pressure on China after the Tiananmen Square massacre.

Unfortunately, the U.S. has lost sight of this basic rule of international relations. It is now Russia and China that have formed a strong alliance, to the disadvantage of the United States.

China and Russia have forged stronger ties through the Shanghai Cooperation Organization, for example — a military and economic treaty — and the BRICS institutions. Part of it is an anti-dollar campaign.

One leg of the China-Russia relationship is their joint desire to see the U.S. dollar lose its status as the world’s dominant reserve currency. They chafe against the ways in which the U.S. uses the dollar as a financial weapon.

But ultimately, this two-against-one strategic alignment of China and Russia against the U.S. is a strategic blunder by the U.S.

Russia is the nation that the U.S. should have tried to court and should still be courting. That’s because China is the greatest geopolitical threat to the U.S. because of its economic and technological advances and its ambition to push the U.S. out of the Western Pacific sphere of influence.

Russia may be a threat to some of its neighbors, but it is far less of a threat to U.S. strategic interests.

Therefore, a logical balance of power in the world would be for the U.S. and Russia to find common ground in the containment of China and to jointly pursue the reduction of Chinese power.

Of course, that hasn’t happened. And we could be paying the price for years to come.

Regards,

Jim Rickards
for The Daily Reckoning

The post Russia: The Lost Opportunity appeared first on Daily Reckoning.

Now What?

This post Now What? appeared first on Daily Reckoning.

Stocks were up and away this morning, aloft on happy wings. And as stocks went up… records came down.

Both the Dow Jones and S&P established fresh highs today.

Today is — after all — when the United States and China stowed their differences… and came formally to terms.

President Trump and Chinese Vice Premier Liu He signed their names to a “phase one” trade accord late this morning.

What precisely did they pledge? AP draws the overall sketch:

Under the Phase 1 agreement, which the two sides reached in mid-December, the administration dropped plans to impose tariffs on an additional $160 billion in Chinese imports. And it halved, to 7.5%, existing tariffs on $110 billion of goods from China.

For its part, Beijing agreed to significantly increase its purchases of U.S. products. According to the Trump administration, China is to buy $40 billion a year in U.S. farm products — an ambitious goal for a country that has never imported more than $26 billion a year in U.S. agricultural products.

Once the handshakes were over, the president seized a microphone and gushed:

Today we take a momentous step, one that has never been taken before with China, toward a future of fair and reciprocal trade with China. Together we are righting the wrongs of the past.

And so there is more joy in heaven this day. But will there be more joy on Earth the next?

We are not half so convinced. The wrongs of the past — if they be wrongs at all — may well remain wrong.

The warring parties have signed a truce, it is true. But truce is not peace.

Truce may be no more than a mere respite from arms, a temporary cessation of fire, a brief clearing of battlefield smoke.

Consider the terms of this truce…

It cuts in half tariffs on certain Chinese wares from 15% to 7.5%. Yet tariffs on some $360 billion of Chinese exports stand in place.

Perhaps two-thirds of Chinese goods remain under penalty. As do more than half of all United States shipments to China.

Today’s signing scarcely budges them.

Meantime, this phase one armistice leaves unaddressed China’s war aims, its peace terms, its strategic objectives.

Continues the AP wire:

The so-called Phase 1 pact does little to force China to make the major economic reforms — such as reducing unfair subsidies for its own companies — that the Trump administration sought when it started the trade war by imposing tariffs on Chinese imports in July 2018…

Most analysts say any meaningful resolution of the key U.S. allegation — that Beijing uses predatory tactics in its drive to supplant America’s technological supremacy — could require years of contentious talks. And skeptics say a satisfactory resolution may be next to impossible given China’s ambitions to become the global leader in such advanced technologies as driverless cars and artificial intelligence.

Adds The New York Times:

The deal also does not address cybersecurity or China’s tight controls over how companies handle data and cloud computing. China rejected American demands to include promises to refrain from hacking American firms in the text, insisting it was not a trade issue.

Affirms Eswar Prasad, who formerly directed the International Monetary Fund’s China desk:

“[The deal] hardly addresses in any substantive way the fundamental sources of trade and economic tensions between the two sides, which will continue to fester.”

And so the generals remain huddled over their charts… the cannons are still loaded… and the troops are ready to answer the bugle.

They only await orders from the commander in chief.

Ultimate peace — lasting peace — will therefore require a “phase two” treaty…

The president has vowed to tackle China’s multiple trade atrocities in phase two of negotiations.

That is why he has held most existing tariffs in place. These represent the stick end of the “carrot and stick” polarity.

He will wield them as clubs, forcing Chinese concessions in this crucial second phase.

But phase two must wait. The president has suggested — strongly — that negotiations may not proceed until this year’s election is decided.

Assume they do proceed…

Will Mr. Trump club China into submission? Will China throw down its arms… and come marching into camp?

Not if it means losing “face,” argues Jim Rickards:

Culturally, saving face may be more important to the Chinese. The Chinese are all about saving face and gaining face. That means they can walk away from a trade deal even if it damages them economically.

Meantime, the truce, the uneasy truce, enters force.

The Lord only knows if it holds…

Regards,

Brian Maher
Managing editor, The Daily Reckoning

The post Now What? appeared first on Daily Reckoning.

Now What?

This post Now What? appeared first on Daily Reckoning.

Stocks were up and away this morning, aloft on happy wings. And as stocks went up… records came down.

Both the Dow Jones and S&P established fresh highs today.

Today is — after all — when the United States and China stowed their differences… and came formally to terms.

President Trump and Chinese Vice Premier Liu He signed their names to a “phase one” trade accord late this morning.

What precisely did they pledge? AP draws the overall sketch:

Under the Phase 1 agreement, which the two sides reached in mid-December, the administration dropped plans to impose tariffs on an additional $160 billion in Chinese imports. And it halved, to 7.5%, existing tariffs on $110 billion of goods from China.

For its part, Beijing agreed to significantly increase its purchases of U.S. products. According to the Trump administration, China is to buy $40 billion a year in U.S. farm products — an ambitious goal for a country that has never imported more than $26 billion a year in U.S. agricultural products.

Once the handshakes were over, the president seized a microphone and gushed:

Today we take a momentous step, one that has never been taken before with China, toward a future of fair and reciprocal trade with China. Together we are righting the wrongs of the past.

And so there is more joy in heaven this day. But will there be more joy on Earth the next?

We are not half so convinced. The wrongs of the past — if they be wrongs at all — may well remain wrong.

The warring parties have signed a truce, it is true. But truce is not peace.

Truce may be no more than a mere respite from arms, a temporary cessation of fire, a brief clearing of battlefield smoke.

Consider the terms of this truce…

It cuts in half tariffs on certain Chinese wares from 15% to 7.5%. Yet tariffs on some $360 billion of Chinese exports stand in place.

Perhaps two-thirds of Chinese goods remain under penalty. As do more than half of all United States shipments to China.

Today’s signing scarcely budges them.

Meantime, this phase one armistice leaves unaddressed China’s war aims, its peace terms, its strategic objectives.

Continues the AP wire:

The so-called Phase 1 pact does little to force China to make the major economic reforms — such as reducing unfair subsidies for its own companies — that the Trump administration sought when it started the trade war by imposing tariffs on Chinese imports in July 2018…

Most analysts say any meaningful resolution of the key U.S. allegation — that Beijing uses predatory tactics in its drive to supplant America’s technological supremacy — could require years of contentious talks. And skeptics say a satisfactory resolution may be next to impossible given China’s ambitions to become the global leader in such advanced technologies as driverless cars and artificial intelligence.

Adds The New York Times:

The deal also does not address cybersecurity or China’s tight controls over how companies handle data and cloud computing. China rejected American demands to include promises to refrain from hacking American firms in the text, insisting it was not a trade issue.

Affirms Eswar Prasad, who formerly directed the International Monetary Fund’s China desk:

“[The deal] hardly addresses in any substantive way the fundamental sources of trade and economic tensions between the two sides, which will continue to fester.”

And so the generals remain huddled over their charts… the cannons are still loaded… and the troops are ready to answer the bugle.

They only await orders from the commander in chief.

Ultimate peace — lasting peace — will therefore require a “phase two” treaty…

The president has vowed to tackle China’s multiple trade atrocities in phase two of negotiations.

That is why he has held most existing tariffs in place. These represent the stick end of the “carrot and stick” polarity.

He will wield them as clubs, forcing Chinese concessions in this crucial second phase.

But phase two must wait. The president has suggested — strongly — that negotiations may not proceed until this year’s election is decided.

Assume they do proceed…

Will Mr. Trump club China into submission? Will China throw down its arms… and come marching into camp?

Not if it means losing “face,” argues Jim Rickards:

Culturally, saving face may be more important to the Chinese. The Chinese are all about saving face and gaining face. That means they can walk away from a trade deal even if it damages them economically.

Meantime, the truce, the uneasy truce, enters force.

The Lord only knows if it holds…

Regards,

Brian Maher
Managing editor, The Daily Reckoning

The post Now What? appeared first on Daily Reckoning.

Chris Temple from The National Investor – Thu 5 Dec, 2019

What will it take of the markets to truly care that no trade deal will be done?

Chris Temple wraps up the markets with a look into the recent trade comments out of both the US and China. The most interesting thing is the markets are still optimistic of some sort of a Phase 1 deal even when the overall tone has shifted more negative. With the December 15th tariff implementation deadline approaching will that finally be a time when the markets stop pricing in a deal. We wrap up the call by looking ahead to the jobs data tomorrow.

Click here to visit Chris’s site – The National Investor.

Trade Wars Just Getting Started

This post Trade Wars Just Getting Started appeared first on Daily Reckoning.

Markets are eagerly awaiting the conclusion of the so-called “phase one” trade deal between the U.S. and China.

Both parties are trying to reach a mini-deal involving simple tariff reductions and a truce on new tariffs along with Chinese purchases of pork and soybeans from the U.S.

The likely success or failure of the mini-deal has been a main driver of stock market action for the past year. When the deal looks likely, markets rally. When the deal looks shaky, markets fall.

A deal is still possible. But investors should be prepared for a shocking fall in stock market valuations if it does not. Markets have fully discounted a successful phase one, so there’s not much upside if it happens.

On the other hand, if phase one falls apart stock markets will hit an air pocket and fall 5% or more in a matter of days.

But even if the phase one deal goes through, it does not end the trade wars. Unresolved issues include tariffs, subsidies, theft of intellectual property, forced transfer of technology, closed markets, unfair competition, cyber-espionage and more.

Most of the issues will not be resolved quickly, if ever.

Resolution involves intrusion into internal Chinese affairs both in the form of legal changes and enforcement mechanisms to ensure China lives up to its commitments.

These legal and enforcement mechanisms are needed because China has lied about and reneged on its trade commitments for the past 25 years. There’s no reason to believe China will be any more honest this time around without verification and enforcement. But China refuses to allow this kind of intrusion into their sovereignty.

For the Chinese, the U.S. approach recalls the Opium Wars (1839–1860) and the “Unequal Treaty” (1848–1950) whereby foreign powers (the U.K., the U.S., Japan, France, Germany and Russia) forced China into humiliating concessions of land, port access, tariffs and extraterritorial immunity.

China has now regained its lost economic and military strength and refuses to make similar concessions today.

In order to break the impasse between protections the U.S. insists on and concessions China refuses to give.

This points to the fact that the “trade war” is not just a trade war but really part of a much broader confrontation between the U.S. and China that more closely resembles a new Cold War.

This big-picture analysis has been outlined in a speech given by Vice President Mike Pence in October 2018 and a follow-up speech delivered on Oct. 24, 2019. Both speeches are available on the White House website.

Secretary of State Mike Pompeo has also added his voice to the hawks warning that China is a long-term threat to the U.S. and that business as usual will no longer protect U.S. national security.

IMG 1

Pictured above are Vice President Mike Pence (l.) and Secretary of State Mike Pompeo (r.). Pence and Pompeo have taken the lead in the public criticism of China by the Trump administration. In a series of speeches and interviews they have pointed out egregious human rights violations, blatant theft of intellectual property and threatening military advances that should cause the U.S. to treat China as more of a geopolitical adversary than a friendly trading partner.

The views of Pence and Pompeo, often captured under the heading of the Pence Doctrine, were neatly summarized by China expert Gordon G. Chang, author of The Coming Collapse of China, in a Wall Street Journal Op-Ed on Nov. 7, 2019, quoted below:

The Trump administration is heading for a fundamental break with the People’s Republic of China. The rupture, if it occurs, will upend almost a half century of Washington’s “engagement” policies. Twin speeches last month by Vice President Mike Pence and Secretary of State Mike Pompeo contained confrontational language rarely heard from senior American officials in public.

“America will continue to seek a fundamental restructuring of our relationship with China,” the vice president said at a Wilson Center event on Oct. 24 as he detailed Chinaʼs disturbing behavior during the past year.

Some argue the vice presidentʼs talk didnʼt differ substantively from his groundbreaking October 2018 speech, but these observers fail to see that in the face of Beijingʼs refusal to respond to American initiatives, Mr. Pence was patiently building the case for stern U.S. actions.

Moreover, the vice presidentʼs thematic repetition was itself important. It suggested that the administrationʼs approach, first broadly articulated in the December 2017 National Security Strategy, had hardened. That document ditched the long-used “friend” and “partner” labels.

Instead it called China — and its de facto ally Russia — “revisionist powers” and “rivals.”

At a Hudson Institute dinner last Wednesday, Mr. Pompeo spoke even more candidly: “It is no longer realistic to ignore the fundamental differences between our two systems and the impact… those systems have on American national security.” Chinaʼs ruling elite, he said, belong to “a Marxist-Leninist party focused on struggle and international domination.” We know of Chinese hostility to the U.S., Mr. Pompeo pointed out, by listening to “the words of their leaders.”

The U.S.-China trade war is not the anomaly globalists portray. It’s not even that unusual viewed from a historical perspective. Retaliation from trading partners is all in the game.

Free trade is a myth. It doesn’t exist outside classrooms. France subsidizes agriculture. The U.S. subsidizes electric vehicles. China subsidizes a long list of national champions with government contracts, cheap loans and currency manipulation. Every major economy subsidizes one or more sectors using fiscal and monetary tools and tariffs and nontariff barriers to trade.

Trump’s tariffs on China in January 2018 were reputedly the start of a trade war, but the war was actually begun by China 24 years earlier when China devalued its currency (1994) and continued when China joined the WTO (2001) and immediately started to break WTO rules.

The trade battle is now joined, but no critical issues have been resolved and none will be in the near future. The U.S. cannot accept Chinese assurances without verification that intrudes on Chinese sovereignty.

China cannot agree to U.S. demands without impeding its theft of U.S. intellectual property. This theft is essential to escape the middle income trap that afflicts developing economies.

The EU is caught in the crossfire. The U.S. is threatening to impose tariffs on German autos and French agricultural exports as part of an effort to force an end to German and French subsidies to favored interests.

The U.S. will win the trade wars despite costs. China will lose the trade wars while maintaining advantages in intellectual property theft. Trade wars will continue for years, even decades, until China abandons communism or the U.S. concedes the high ground in global hegemony.

Neither is likely soon.

Regards,

Jim Rickards
for The Daily Reckoning

The post Trade Wars Just Getting Started appeared first on Daily Reckoning.

Wall Street Falls for the Ruse

This post Wall Street Falls for the Ruse appeared first on Daily Reckoning.

The president has spoken…

A China trade accord can jolly well wait until next year’s election is done, he announced yesterday.

While the president spoke, the United States House of Representatives legislated…

China is allegedly roughhousing its Uighur (wee-gr) Muslim minority.

The House has passed legislation that denounces the inhumanity… and sanctions certain Chinese officials for their villainous participation.

Beijing is unamused — toweringly unamused.

Swift retaliation it has promised if the Uighur Intervention and Global Humanitarian Unified Response Act of 2019 assumes force of law.

In brief, neither party presently negotiates from goodwill.

Meantime, the Dec. 15 deadline draws near.

On that date fresh tariffs enter effect — absent a resolution.

Given the mutual asperity presently prevailing… a resolution is far from certain.

Is it any wonder the stock market turned in losses three consecutive sessions?

Thus today was the ideal occasion for a lovely trade rumor… a gorgeous sprig of catnip to excite, vivify and invigorate the animal spirits.

Global Times editor Hu Xijin, late yesterday:

I predict there is a high probability that President Trump or a senior U.S. official will openly say in a few hours that China-U.S. trade talks have made a big progress in order to pump up the U.S. stock markets. They’ve been doing this a lot.

You may hand that man a Gurkha Royal Courtesan cigar. His forecast rang dead center…

Word crossed the wires at 4:06 this morning, coming by way of Bloomberg:

The U.S. and China are moving closer to agreeing on the amount of tariffs that would be rolled back in a phase-one trade deal despite tensions over Hong Kong and Xinjiang, people familiar with the talks said… Recent U.S. legislation seeking to sanction Chinese officials over human rights issues in Hong Kong and Xinjiang is unlikely to impact the talks, one person familiar with Beijing’s thinking said.

The rumor’s source requested anonymity. But the scalawags at Zero Hedge point a razzing finger at Mr. Larry Kudlow:

There were naturally questions about the Bloomberg piece: like why does an “unknown” source who “thinks” the deal is imminent take precedence, when very known people, i.e., the U.S. president and [senior trade official] Wilbur Ross, both said a deal may not happen for almost a year… or why was this “respected” Larry Kudlow source so terrified to give his name on the record if everything checks out?

Mr. Kudlow is of course the president’s senior economic adviser — and professional optimist.

We confess it: We trust the rumor no further than we could heave a horse by its tail.

It claims, for example, “U.S. legislation seeking to sanction Chinese officials… is unlikely to impact the talks.”

But would you shake the hand of a man preparing to stab you with the other?

And we might remind you: The Chinese are notoriously sensitive to slights.

But the computer algorithms running Wall Street are gullible dupes. They will fall for anything…

Jilted 100 times by false promises, they salivated, swooned and fell for the 101st.

It is time to buy, they concluded… and set to work.

S&P futures jumped immediately on Bloomberg’s “news.” And the Dow Jones opened the day 200 points to the good.

The president did his own part to meet Mr. Hu’s overnight prediction… and goose the stock market.

Trade talks were “going very well,” he claimed this morning — one day after suggesting a deal could go on ice until next year’s election is decided.

The computers chose to believe this morning’s comments. The market leaked some steam towards the end of the day, it is true.

But the Dow Jones still posted a 147-point gain. The S&P came out 19 points ahead; the Nasdaq, 46.

But we come now to this question:

What happens to the stock market if Dec. 15 passes without a trade deal?

Won’t the same computer algorithms that pushed stocks up today… pull them down?

We suspect strongly that they will.

But by how much?

Regards,

Brian Maher
Managing editor, The Daily Reckoning

The post Wall Street Falls for the Ruse appeared first on Daily Reckoning.

Chris Temple from The National Investor – Fri 15 Nov, 2019

As the melt up continues don’t ignore the issues in Hong Kong

Chris joins me to wrap up the week that again saw money flow into risk on assets and push US markets to all time highs. More optimum around trade and the Fed put, as Powell outlined in front of Congress continues to be the main support for these moves. However don’t forget about the issues in Hong Kong and how China’s potential actions could impact the entire financial system.

Click here to visit Chris’s site – The National Investor.