Subject:  Ross Rant , August 11, 2019

Volatility will likely continue through the end of Sept, at least until we see the Fed action, and what comes of the next China meeting. If the tariff increase is postponed, as expected, and if the Fed drops another 50 BP, then the market rallies a lot. If neither goes well, the market tanks. It is more than 50% both will go well, but a lot can happen before late Sept. China is having food inflation of 9% due to swine flu and other animal diseases. At the same time unemployment banking system.

Hong Kong very possibly will be a replay of Tiananmen, and that will be very bad for China. The UK would have to react strongly, and they will push the EU to do so as well. That is why Xi has not acted yet. Hong Kong is becoming a real possible inflection point for China. With a weaker Yuan, inflation grows, and it will not stop companies from moving factories and jobs to other countries. It could get very ugly for XI by winter. However, he will not give on the IP issues. China and tariffs will be a major issue for the election, and for the world economy. As China slows, so does the EU economy which has had China as a major customer.

Meantime, oil is very low cost, which continues to be a big benefit to low income workers. Mortgage rates are now down almost 140 BP below the high of nearly 5%. This is a huge good thing for homeowners who refi and save considerably on cash outflow. Credit card rates will likely also decline as will corporate borrowing costs.

All of these things mean more spendable cash for consumers, and less pressure on corporate cash flow. It also means most consumers stay out of problems. The cost of capital for corporations is now so low that a rate cut will not do much to encourage capital expenditure decisions. It is likely oil will stay very low as the Chinese and EU economies slow further. These things are key to keeping the economic growth in the US going, and unemployment low. If all of this comes about, and there is a postponement of the proposed 10% tariffs, then it is possible companies will make some new capital investments with rates remaining so low and the economy continuing to grow. That will mean more productivity, and so more ability to raise wages. And so the circle goes round.

Of course the Chinese can blow all of this out of the water in September. The US will not likely have a recession despite all of this, but big gains in the stock market are probably over for now. If it goes reasonably well, then Trump is more sure of reelection. If Pelosi stops USMCA from a vote, that hurts the Dems, as would a refusal to reform immigration laws. Then they really look like do nothings. The whole impeachment effort will blow up once the Barr report on the effort to unseat Trump is revealed. The election will likely be decided by what happens in the next 3 months.

Longer term risk. Government pensions, (there are almost no private sector pensions left) are now $4.4 Trillion in the hole. There is zero possibility for this liability ever to get paid. It will mean higher state taxes, less money for real needs like cops, This is a black swan that will explode over the next several years. IL and NJ will be the first to crater, and there is no way to ever to cover those outlays.

The inverted yield curve of the ten year vs two year will continue for months very possibly. If a recession follows, it is more coincidence than causal. The big reason the ten year is so low is the huge flood of capital hiding out in the US. That money is not leaving the US for a long time, as there is no place else to hide. Negative rates in the EU and some other countries are the real problem, and will not lead to a good outcome.

Brexit is almost here. Italy is in another of its political crisis. Germany is suffering a major slowdown, and a major change of government from Merkel to a new PM. Trump has rightly said, if Germany continues to grossly under fund NATO defense, we leave German bases. If we close the major bases, the German economy takes a real hit. Germany continues to think the US taxpayer will continue to fund defense for them. Trump will not let that happen any longer. Poland is possibly the beneficiary if bases are moved there.

Meantime we have Iran, N Korea, Kashmir, Syria and a resurrection of ISIS in Iraq. Trump made a major error similar to Obama by pulling troops from Syria and allowing ISIS to reformulate. If he does not put several thousand more troops back into Syria soon, ISIS will be an issue next year. In addition, Turkey wants some of the Kurdish area to send all the Syrians back to.

Then there is still Venezuela to deal with. Somewhere in the next year, there will possibly be a shooting war between one of these countries and a US ally. Germany and France refuse to send ships to the gulf to protect oil, so the US and UK have to do it, which just reinforces the fact that Germany expects the US taxpayer to cover their protection. 2020 is going to be a very unsettled year. And the Dems want to limit Trump’s ability to react, and to impeach him just as the world heads for a Thelma and Louise moment. That is incredibly stupid and very dangerous of the Dems.

Hopefully the AG and IG report coming in Sept will blow the lid off the Dem conspiracy against Trump, and impeachment will fall away. It is going to be a very ugly report with indictments. Expect 2020 to be chaotic politically as Barr rolls out his report, and as the Dems push impeachment just when they should be coming together with Trump to face the world threats. All this while there is chaos in the EU over Brexit, and maybe a resulting recession, China remains a major problem, and some war might break out in Kashmir, the mid east, or Venezuela.

My suggestion, take the next rocket to Mars for some peace and quiet. Can you just imagine if Pocahontas, Harris, or Bernie or Begaboy was president in the midst of all this. It would be a major disaster. Old gaffe prone, slow-witted Joe would not be much better. He really does seem to be losing it.

You may hate Trump, the loudmouth ego maniac, but he is the only one running who can deal with all of this multiple risk, and get the US through it successfully.

Imagine the Dems getting control and upending the US economic and healthcare systems in the midst of all this geopolitical chaos.

The press attacks Trump as a racist, and promoter of white supremacy and violence, but they put out all sorts of rhetoric from the left and talking heads about Trump which just stirs up the far left, and Madonna famously said burn down the White House, and that is OK for the press. Antifa is allowed to rage in Portland. Students are allowed to be disruptive of speakers on campus. And the Dem’s pontificate about Trump’s attacks and comments about others, while they do the same. They are a bunch of hypocrites. Unfortunately this will just get worse as the election nears and as the Barr report is released.

(When will the mayor’s be arrested for working against the citizens for making the Police STAND DOWN when Antifa attacks?  It is called insurrection.)

We are just at the start of the revelations of who really took advantage of the Epstein parties. This will happen just as Barr releases his reports. It is going to be a press field day, and a nightmare for the Dem’s.

kommonsentsjane