GDPhursday – Trump Finally Goes to Vietnam – And Loses


No deal!

Trump called an early end to his long-awaited summit with Kim Jong Un last night, 2 hours before the two were scheduled to have a "joint signing event" to conclude the negotiations.  Our deal-maker in chief said they reached an impasse and "We actually had papers ready to be signed, but it just wasn't appropriate."  Now I guess that sounds fine to a farmer in Iowa but anyone who's been top management at a company knows that when you schedule a closing for deal and people fly around the World to get it done and then it blows up at the last minute – that there was some seriously incompetent crap happening beforehand.

What really bothers me about North Korea is the implications it has for the China Trade Deal as that may end up not happening just as easily as Team Trump was assuring us up to the last second that North Korea was in the bag and Japan's Shinzo Abe has already nominated Trump for a Nobel Peace Prize for "Bringing Peace to the Korean Peninsula" – which hasn't actually been at war for 50 years – but who's counting.  Despite that very low bar of making it through year 51 – Trump has failed – capping off a very bad day where Trump's lawyer provided Congress with a list of Felonies committed by the President, including:  Bank Fraud, Tax Fraud and Campaign Finance Violations.  

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My working theory remains that Trump does not want a trade deal with China because he's taxing AMERICANS hundreds of Billions of Dollars a year in order to balance the tax cuts in his budget.  In other words, the tariffs are nothing more than Trump's way of robbing the poor to give to the rich and, even though Farm Loan Delinquencies have skyrocketed to 19.4% of all loans – despite the $7.7Bn Socialist Government hand-out – yet Trump's base is still too dumb to connect the dots!

This morning, we see how the overall economy has been affected by the Trade War and it looks like Q4 GDP is coming in at 2.6% – better than the worst case but down 0.8% (23.5%) from Q3s 3.4%.  If we can make a deal with China soon (the deadline was March 2nd but has been pushed back to no specific date), then we can expect GDP to rebound but it's also possible that the number is fake and being used to put pressure on China, allowing Trump to say "See China, we still have 2.6% growth – we can continue the tariffs longer than you can."  This is how Trump negotiates – tricks and lies – something that Michael Cohen explained in great detail yesterday…

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And, of course, there's nothing rich people like doing more than foreclosing on farmers, who have millions of acres of land that is ready to be plowed over and turned into cookie-cutter communities and shopping malls.  Trump is a real estate developer and so are most of his friends and family – bankrupting farmers is the best thing he can do to ensure their futures as it will provide them with cheap land they can build on for decades to come.

We'll keep an eye on this crisis as it develops as well as the GDP data.  Many economists expect a more muted pace of growth in 2019 due to weaker global growth and waning effects of 2017’s tax-cut boost, although the U.S. economy still has strong support from low unemployment and rising incomes. The Federal Reserve predicts 2.3% growth in 2019. 

Consumer spending, which accounts for more than two-thirds of the economy, rose at an inflation-adjusted, annualized rate of 2.8% in the fourth quarter, pulling back from the third quarter when it rose at a 3.5% rate. While Americans boosted spending on big-ticket items, their spending on services and nondurable goods slowed.  Exports rose at a 1.6% rate in the fourth quarter, after a 4.9% decline in the third. The Commerce Department attributed the upturn to petroleum and capital goods exports.  The shutdown had little effect on Q4 as it began on 12/22 – it's the Q1 GDP we should be worried about!

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While 2.6% was stronger than expected, we'll be lucky to break 2% in Q1 and, as I noted, I'm not sure I trust the Q4 numbers as this is only the initial estimate.  We're not over our lines yet and we're already well-hedged so it's mostly "Watch and Wait" into the weekend.

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