The reason we are losing the economic war with China goes back to Democrats and the Clinton Administration back in the 90s. The 90s really set the “free trade” framework which was responsible for the loss of America’s manufacturing sector.
Republicans under President Bush continued the “free trade” policies of the 90s which culminated in the acceptance of China into the World Trade Organization. It was payoffs, bribes, and corruption at the highest levels of government that allowed a communist country like China into the WTO.
President Obama continued the corrupt policies of his predecessors because he was bought and paid for by special interest groups that supported offshoring and outsourcing.
China successfully paid off the mainstream media inside the U.S. which completely ignored and blocked stories about the destruction of the U.S. manufacturing sector. Both Republicans and Democrats gave China “most favored nation” trading status while enriching themselves through outsourcing and offshoring. The Establishment mainstream media inside the U.S. did not serve the interests of the average American. Instead, the mainstream media corporate oligopoly manufactured its own version of reality that completely hid the fact that both Republicans and Democrats sold off vast swaths of our economy to the Chinese and Mexico and hid it under the guise of “free trade”. I published an article explaining how Adam Smith’s and David Ricardo’s “free trade” has been perverted here.
Max and Stacy of the Keiser Report discuss how the U.S. is in an economic war with China and that we are losing badly.
America’s manufacturing capacity went over to China and so we had a Rust Belt that voted for President Trump.
But when did this actually become an issue in the U.S.? This become an issue in America when Hollywood found out that China was playing their movies over there and they weren’t getting their money so suddenly it’s a trade war because Warner Brothers didn’t get their check this month from China.
But the Rust Belt got eviscerated as millions of Americans lost good paying manufacturing jobs to China and little was reported in the media for over a decade.
The poor people produced as the result of outsourcing to China mattered little to the corporate controlled media. It wasn’t until their own corporate profits were impacted that they began running critical stories on China.
The most important movie to watch about the economic war with China is Death By China: How America Lost Its Manufacturing Base. The movie was produced by my economics teacher Peter Navarro. Peter Navarro is also President Trumps chief trade advisor. Every American needs to watch this movie because you can’t rely on the mainstream media to report this:
The North Korea nuclear test over the long labor day weekend in the U.S. is exactly why we try and close out of all long positions over the weekend news cycle. Sunday’s nuclear test by North Korea had an estimated strength of 50 kilotons which is 3x larger than the nuclear bomb that destroyed Hiroshima in 1945.
The stock market had a big run-up over the last week and so the news of North Korea’s nuclear test could be a catalyst for profit taking and a market pullback; however, this is not the first time North Korea has conducted a nuclear test. North Korea has conducted six nuclear tests, in 2006, 2009, 2013, twice in 2016, and 2017.
2006 North Korea Nuclear Test
The 2006 North Korean nuclear test was on October 9, 2006. On October 20, 2006, Kim Jong-il allegedly said that he was “sorry” over his country’s nuclear test, and wished to return to talk with the United Nations. On October 31, 2006, North Korea agreed to rejoin six-nation disarmament talks.
At a meeting with President Vladimir Putin, Russian Defense Minister Sergei Ivanov stated that the power of the tests carried out was between 5 and 15 kilotons.
2009 North Korean Nuclear Test
The 2009 North Korean nuclear test was an underground detonation of a nuclear device on Monday, May 25, 2009. The estimated yield was 2.35 kilotons.
The 2009 North Korea nuclear test came against a backdrop of uncertainty about North Korea’s leader Kim Jong-il and who might succeed him. Mr. Kim suffered a stroke in August 2008 which prompted him to step up preparations to transfer power to one of his three known sons. Analysts believe the favorite son is his youngest, Kim Jong-un, who was in his mid-20s at the time.
2013 North Korea Nuclear Test
North Korea’s 2013 nuclear test occurred on February 12, 2013. It was an underground test. The USGS detected a 5.1 nuclear tremor. The nuclear blast had an estimated yield of 14 kilotons.
2016 North Korea Nuclear Test
North Korea conducted two tests in 2016. The first test was done on January 6, 2016 and the second on September 9, 2016.
The earthquake caused by the January 2016 nuclear test was 5.1 magnitude and was estimated to have a yield of 6 to 9 kilotons. North Korea declared that the 2016 test was a “successful” demonstration of a hydrogen bomb. Many expressed skepticism because the explosion was too small. Bruce W. Bennett, senior defense analyst of the RAND Corporation told BBC News that “the bang they should have gotten would have been 10 times greater… So Kim Jong-un is either lying, saying they did a hydrogen test when they didn’t, they just used a little bit more efficient fission weapon – or the hydrogen part of the test really didn’t work very well or the fission part didn’t work very well.”
The September 9, 2016 nuclear test occurred on the 68th anniversary of the founding of North Korea. The estimated yield was between 10 and 20 kilotons.
The UN Security Council finally figured out that China was supporting North Korea’s nuclear program. US Secretary of Defense Ash Carter stated in a press conference that “China has and shares an important responsibility for this development and has an important responsibility to reverse it”. China did not confirm its support for tougher sanctions against North Korea.
2017 North Korea Nuclear Test
North Korea conducted a nuclear test on September 3, 2017. The USGS reported a 6.3 magnitude earthquare near North Korea’s Punggye-ri nuclear test site. This was the largest nuclear weapon test to date with a nuclear yield of between 50 to 100 kilotons. North Korea claimed that they detonated a hydrogen bomb that can be loaded onto an intercontinental ballistic missile (ICBM).
Trumps Failed Talk Tough Policy
President Trump’s policy of “talking tough” has clearly failed.
Right. Well it happened Mr. President. It happened.
Ok so Kim Jong Un made a wise decision to not fire missiles at Guam. If that was wise, what do you call detonating a hydrogen bomb and threatening to put it on an ICBM and fire it at the United States? Perhaps unwise? Talk about straining out a gnat yet swallowing a camel!
The only option left for President Trump is to move forward with a massive bombing and invasion of North Korea. I think this is what the Generals that are advising President Trump are saying. I think John Bolton’s appearance yesterday on Fox News is exactly what the Generals that advise the President are saying:
With all the North Korea drama as well as the fact that September is the worst month of the year for the stock market, a VIX play like UVXY is the way to go IMO. Don’t place a market order to buy UVXY automatically at the open. UVXY could do an open gap up and then fade down or do an open gap down and then fade up. Instead, we want to see what institutional traders and hedge funds with their ALGOs are going to do first. Within 15 minutes of market open, we should have a good idea if we want to go for a quick scalp trade in UVXY.
Doctor Copper is signaling an improved outlook for the global economy as the price of copper has retaken the key $2.86 level.
China is the world’s largest importer of copper using more than three million tonnes a year. In an attempt to improve the environment, China is proposing a copper import ban. China’s copper industry is accelerating copper imports to build stocks ahead of the 2018 deadline. You can read more about China’s proposed copper ban here.
September copper futures trading on the Comex market in New York moved higher as the likely impact of new regulations in China spark another round of heavy buying in the US and Shanghai. Last Thursday more than 3 billion pounds of copper changed hands and the price jumped to $3.048 a pound ($6,720 per tonne) which is the highest in nearly three years. December copper hit $3.07 a pound. Analysts at DoubleView think copper is in a long overdue bullish cyclical move which predicts the next boom for the global economy is underway.
Price of Copper
Whether its a global economy thing or a China thing or even both, one thing is clear: The price of copper has confirmed the break above the key $2.86 level this month.
Federal Reserve Will Push Price of Copper Back Down
The problem I have with the Doctor Copper is signaling a global bull market thesis is the Federal Reserve. The Federal Reserve is hiking rates and that ALWAYS slows down the economy and thus the demand for copper. I talked about this on the Saturday show back in June here. Please make sure you review my commentary on the Saturday show before going long copper. You may also want to use this stop limit order strategy to trade copper.
As for me, I’m not swing trading copper as its too dangerous and I see safer opportunities with higher yields elsewhere.
If you have any thoughts on Doctor Copper, leave your comment below.
Following high yield debt is an excellent way to time market swings. A high yield bond (non-investment-grade bond, speculative-grade bond, or junk bond) is a bond that is rated below investment grade. These bonds have a higher risk of default and so they pay a higher yield than better quality bonds. Bonds rated below BBB− are called speculative grade bonds, or “junk” bonds, and fall into the category of high yield debt.
Recessions increase the possibility of default in speculative-grade bonds.
The number of companies issuing high yield debt is abnormally high for August. What is happening is that investors are anticipating higher rates from the Federal Reserve and so the higher yields of safer investment grade bonds start to come into greater competition with junk bonds. It’s the crowding out effect.
Tesla and other debt heavy corporations are front-running the crowding out effect by issuing as much junk bonds as they can before more interest rate hikes occur. You can read about rising junk bond issuance here.
You have to be careful not to equate junk bonds in foreign countries with those issued in the US. In emerging markets like China and Vietnam, bonds have become increasingly important as financing options because access to traditional bank credits is limited, especially if borrowers are non-state corporations.
High Yield Debt Chart
Junk bonds act as a barometer for risk on versus risk off. In a risk on environment, investors chase after maximum yield and so they buy high yield debt. Junk bond investors are not too worried about a recession or default on their junk bonds. In a risk off environment, investors sell out of high yield debt and move to safer, lower yielding assets.
When non-investment-grade bonds spike up or down, the S&P 500 has a tendency to follow within 3 to 5 days.
Last week the high yield debt chart (HYG) spiked higher which is a bullish signal for the S&P 500 over the next 3 to 5 day period.
I’m not buying that the pull back in markets is over so I’m taking out some insurance by going long TWM in my personal trading account.
Looking at the chart of low volatility safe stocks versus risk-on high beta stocks really puts today’s price action into perspective IMO:
Today’s up day doesn’t even register on the TSI which continues to fall.
You would think that with markets up so much today that we would have institutional traders buying. Not so according to the TICK. The TICK chart below, while not EOD which is what counts, shows the absence of broad-based institutional traders buying this market:
Proshares UltraShort Russell 2000 Chart
The up move today in markets looks like an opportunity to short the market. The gambit is that markets will experience a dead-cat bounce. TWM looks like a good way to play this market.
The large players volume has been rising over the last couple of weeks and the Twiggs Money Flow confirms traders are shorting the market on rallies.
President Trump Sanctions China and Russia Over North Korea
President Trump made a big mistake today by putting sanctions against China and Russia over North Korea’s nuclear program. Trump’s actions don’t fix the problem, they just expand the conflict to include more countries who are pushed together in alliances against the U.S. You can read more about the new sanctions against China and Russia here.
The most recent US economic sanctions against Russia has angered our ally Germany. The planned new US sanctions are set to hit German and European companies which have business interests in Russia. The German Economy Minister Brigitte Zypries asked the European Commission to consider countermeasures against the United States for increasing sanctions against Russia that would potentially hit European companies.
Germany said something I told viewers yesterday. The US sanctions against Russia are illegal. The US Congress doesn’t care about legalities. It was illegal for John McCain, Lindsey Graham, and other globalist congressmen to use tax payers money to overthrow the elected government of Ukraine. You think Congress cares about legalities? Congress considers themselves the “law makers” and so the law is what they say it is. That’s why even the SEC can’t touch Congress members for illegal insider trading that private citizens would have gone to jail over.
German Economic Minister Brigitte Zypries told a German newspaper, “We consider this to be a violation of international law. The Americans cannot punish German companies because they operate economically in another country. There are (partnerships) for natural gas and petroleum pipelines (in the region).”
Germany and much of the EU are heavily dependent on Russian natural gas, and German companies working on gas pipelines fear they could be hit with US sanctions because of Congress’ latest move.
Economic Sanctions Against Russia
Sanctions against Russia for defending itself in Ukraine against US based NGOs is misguided policy that will ultimately push Russia into a tighter alliance with China, Syria, Iran, and North Korea.
On July 21, 2017, the White House announced that President Trump will sign into law a bill on the latest set of sanctions against Russia, Iran and North Korea. Congress forced Trump’s hand because of the overwhelming support of sanctions against Russia. Congress passed the Russian sanctions bill with a veto-proof majority of 419-3 in the House and 98-to-2 in the Senate. President Trump needs to delay signing this law and instead take his case to the American people that it’s Congress, and not his Administration, that is on the marching path towards war with Russia.
Did the President make a deal with the devil to get Establishment globalists to leave his family alone in exchange for signing these sanctions against Russia? The timing seems suspect that Democrats would end the Senate Russia investigation right as new sanctions against Russia are passed.
President Putin has not given up on President Trump entirely but the New York Times writes that the way this is playing out in Russia is that US sanctions against Russia are a gift to Mr. Putin.
President Trump has an awesome opening now to take a leadership role in bringing about better relations with Russia by rejecting the new sanctions imposed against Russia by Congress.
These increased sanctions are so dumb and were not really thought out carefully. The problem is that the US has only limited trade with Russia in the first place because of previous sanctions. So to have any meaningful effect on Russia, US sanctions can’t target Russia directly but instead must target Russia’s trading partners like Germany.
Targeting German energy importers is another stupid move by Congress that could be dangerous as the EU doesn’t have any good alternatives to trade with Russia. Obviously Germany will move to protect their trade interests, irrespective of America’s wishes.
Are Sanctions Hurting Russia?
In 2015, sanctions pushed Russia’s economy into a recession with a negative GDP growth of -2.2% for the first quarter of 2015, as compared to the first quarter of 2014. Sanctions on access to financing have forced Russia to use part of its foreign exchange reserves to prop up the economy.
How do you explain to the people of Russia why the US is targeting them and putting them out of work simply because Russia defended itself against US NGOs which toppled the government of Ukraine? The optics are horrible.
Sure the latest round of sanctions imposed by Congress will hurt Russia but they will also hurt many other countries and hence our relationship with many of our allies.
Dmitri Abzalov writes in his analytical article for Russia’s online newspaper Gazeta.ru:
“Their [EU] investment share varies from 30 percent to 70 percent depending on each particular project. A possible cut off in financing will mean a serious blow to European business.”
The Blue Stream natural gas pipeline is a target of the new sanctions by Congress. Blue Stream is a major Black Sea gas pipeline that carries natural gas from Turkey to Russia. The pipeline is being constructed by a joint venture between Russia’s Gazprom and Italy’s Eni.
The new sanctions also will impact the expansion of Sakhalin-2, Russia’s LNG plant which is operated in a partnership between Japan’s Mitsubishi and Mitsui, Gazprom, and Royal Dutch Shell. Another target could be the Baltic Liquefied Natural Gas project, which is also operated by Gazprom and Royal Dutch Shell.
The sanctions also will impact the Nord Stream-2 project expansion into Germany making Germany an energy hub. If the project stops because of new US sanctions, Germany will have to give up on its dream of becoming an energy superpower as it will not be allowed to sell natural gas to Eastern Europe.
Of course the US, who is imposing these sanctions, are telling the EU that we have natural gas they can purchase. However, if the EU opts for American gas, the cost of production in Europe will increase considerably, which will be passed on in the cost of manufactured products. Germans will then be at a competitive disadvantage to cheaper goods manufactured in the US.
What about Japan? Japan has already agreed to invest in Russia’s Kuril Islands, what will it do now?
An interesting side note about the effectiveness of sanctions against Russia. When sanctions were imposed on Russia in 2015, it crashed the country’s currency which gave Russian wheat a price advantage over US wheat. The weakening Ruble allowed Russia to become the world’s #1 exporter of wheat last year. US wheat farmers were not too happy about that.
Current Sanctions On Russia
US sanctions currently against Russia specifically target Russia’s energy sector, which makes up more than half of the country’s Gross Domestic Product. No U.S. oil company can do business with Russia, nor can any companies sell drilling technology needed to access oil and gas reserves.
U.S. banks cannot issue long-term loans to Russian businesses for energy-focused projects.
European banks are also prohibited from engaging in similar financing arrangements with Russia. The European Union has also sanctioned Moscow which has pushed Russian companies to borrow money from Beijing. Beijing has become the biggest lender to Russian companies.
All of this is designed to weaken a key sector of Russia’s economy in hopes the pressure will entice Putin, over time, to reverse his annexation of Crimea and to withdraw Russian troops and its support of rebels in eastern Ukraine.
The US State.gov website shows the current sanctions against Russia:
Executive Order 13660, signed on March 6, 2014, authorizes sanctions on individuals and entities responsible for violating the sovereignty and territorial integrity of Ukraine, or for stealing the assets of the Ukrainian people. These sanctions put in place restrictions on the travel of certain individuals and officials and showed our continued efforts to impose a cost on Russia and those responsible for the situation in Crimea.
Executive Order 13685 was also issued. Utilizing these Executive Orders, the United States has steadily increased the diplomatic and financial costs of Russia’s aggressive actions towards Ukraine. We have designated a number of Russian and Ukrainian entities, including 14 defense companies and individuals in Putin’s inner circle, as well as imposed targeted sanctions limiting certain financing to six of Russia’s largest banks and four energy companies.
These actions, in close coordination with our EU and international partners, send a strong message to the Russian government that there are consequences for their actions that threaten the sovereignty and territorial integrity of Ukraine. The United States, together with international partners, will continue to stand by the Ukrainian government until Russia abides by its international obligations. The United States is prepared to take additional steps to impose further political and economic costs. A secure Ukraine, integrated with Europe and enjoying good relations with all its neighbors, is in the interests of the United States, Europe, and Russia.
With Germany asking the EU to use countermeasure sanctions against the US for what it deems as illegal sanctions, a whole new level of potential conflicts and countries re-examining their relationships with the US is taking place.
The mess that we are currently in can be traced back to the Obama Administration, John McCain, and other Congress members working with George Soros to destabilize and overthrow the elected government of Ukraine.
Think of what is happening like a game of Chess. When you make a wrong move, your game slowly falls apart as every move after that initial wrong move cascades into a loss.
That’s what happens when you do something wrong. People take sides against you.
The only way out of this mess is for the US to admit it was wrong to overthrow the elected leader of Ukraine and to apologize to the people of Ukraine and Russia and to end all sanctions immediately.
What good is it that President Trump didn’t take lobbyists money in his run for the White House, if he’s constantly being manipulated by Congress who is controlled by lobbyists money? President Trump can take a leadership role in fighting against big oil and natural gas lobbyists in Congress by doing everything in his power to walk back sanctions against Russia and to improve relations with the country before it’s too late.
Putin has retaliated against the US by kicking out 755 US diplomats from Russia. Putin finally showed a crack in his maneuvering with is an opportunity for President Trump to push into that crack and take a leadership role in improving relations with Russia before it’s too late.
I was raised in the “nuclear family” as many of you were. I remember how life was under the Cold War and the constant threat of a nuclear war with Russia. Anybody actually living through that time should be fighting hard to prevent backsliding into another Cold War and nuclear arms race with Russia.
Do you have any thoughts on Germany asking the EU to use counter-sanctions against us? Leave your comments below.
Russia expels US diplomats in retaliation for Congress increasing sanctions against Russia last week. Let’s just get it out of the way. Congress is stupid. Congress can’t act to help Americans who are suffering under a collapsing ObamaCare. Congress can’t help out Americans who are paying too much in taxes. Congress can’t even act to help the failing infrastructure across this country.
Folks I’m on the verge of exercising my constitutional right to take up arms against my government. Alright so maybe that’s not a constitutional right but it should be one! I’m thinking of Thomas Jefferson saying, “a little rebellion now and then is a good thing.”
Sanctions never should have been put against Russia for Ukraine. John “traitor” McCain and others in Congress worked with George Soros and the Obama Administration and used NGOs to destabilize Ukraine and oust an elected leader. It is illegal for the US government to use tax payers money to overthrow an elected leader.
Those inside the US government did it to gain control of the oil pipelines in Crimea and to move NATO missiles into the country to point at Russia.
Ukraine is right on the doorstep of Russia. How would we feel if China used NGOs to overthrow the government of Canada or Mexico so that they could control the flow of oil from Canada into the US and point missiles at us from across the border?
President Trump Is a Colossal Failure On Dealing With Russia
President Trump should have ended sanctions against Russia and apologized for what the former Administration and those in Congress like John McCain had done. Instead, Trump got manipulated by the Establishment like a school boy going to the restroom without a hall pass.
The Hong Kong Stock Exchange will now have have competition for China mainland stocks after the MSCI approved plans to add China’s mainland A shares to its index. According to a report in the WSJ (link above) this will bring billions of investment dollars into China stocks.
MSCI’s decision Tuesday to add China A-shares, stocks denominated in yuan and listed in either Shanghai or Shenzhen, to its MSCI Emerging Markets Index stands to boost demand for Chinese stocks by billions of dollars over time.
MSCI announced earlier Tuesday a long-awaited decision in favor of adding stocks, known as A shares, to the firm’s emerging markets index, which is tracked through an estimated $1.6 trillion. As a consequence, non-Chinese investors that follow the MSCI Emerging Markets Index must buy Chinese A shares to match the updated version of the index.
MSCI said 222 companies would be eligible for inclusion, increasing China’s weighting in the emerging-market index by 0.73 percentage point from its current 28%. The change will also be reflected in other indexes, including the MSCI All Country World Index.
But U.S. asset managers have been eager to push into the local market. China has the largest weighting in the MSCI Emerging Market Index, at 27.66 percent, although that only includes Hong Kong and U.S.-listed shares of Chinese companies.
Because of limited access to the mainland Chinese stocks, foreign investors own less than 1.5 percent of that market, Chin Ping Chia, head of research for Asia Pacific at MSCI, said on a conference call with journalists after the inclusion decision was announced. He estimated $17 billion to $18 billion could flow into Chinese A shares.
Adding China to the MSCI index will expose foreign investors to a market still plagued by limited transparency and frequent government intervention, were some of the concerns cited by the index provider in the past three years following rejections. Even as China aims to attract more global capital, authorities continue to intervene in domestic stock and currency markets, and take on speculators.
MSCI indexes already include Chinese companies shares listed in on the Hong Kong stock exchange and New York, but not those in mainland China.
Front Running the MSCI Decision In China Mobile
I like China Mobile as a way to front run the MSCI decision with the idea that a rising tide will raise all ships. China Mobile is a huge corporation that should benefit from an increase in investment inside China. The stock has really sold off over the last couple of months as well.
The stock has been a little too volatile recently for an entry. I would prefer a consolidation move and then a candle over candle reversal before entering.
The Effective Volume shows large players are buying up China Mobile into the downward move and the Twiggs Money Flow shows a positive divergence which suggests increased buying pressure as the stock drops.
Baozun’s stock is set up for a beautiful short squeeze after the company reported earnings back on May 16, 2017. The company reported Q1 EPS of RMB 0.54 per ADS versus the RMB 0.50 estimate. Revenue also beat coming in at RMB 804.9 million versus the RMB 802.98 million estimate.
A whopping 49.24% of the float is short so while short sellers have piled in, institutional traders have increased their long positions by an excellent 11.39% over the last 3 months.
BZUN has a Current Ratio of 3.21. This indicates that BZUN is financially healthy and has no problem in meeting its short term obligations.
When comparing the Debt to Equity Ratio of 0.00 to an average industry Debt to Equity of 0.32, BZUN is way less dependent on financing that its industry peers.
An Altman-Z score of 20.46 indicates that BZUN is not in any danger for bankruptcy at the moment. The Altman-Z score of BZUN is much better than the industry average of 4.23. BZUN has a better Altman-Z score than 90% of its industry peers.
Founded early 2007, Baozun Inc. is a leading, digital and e-commerce service partner in China, helping brands and retailers build e-commerce success. We provide end-to-end services, including website design, development and hosting, IT infrastructure, customer service, warehousing and logistics services, as well as digital marketing.