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What a mess!

All of our summer gains are completely wiped out – thanks to the Tweeter in Chief, who sent the markets flying lower by proclaiming additional tariffs on China after this week's meeting yeilded no progress.  Of course the meeting was just an excuse to place more tariffs as the US could hardly be serious taking a 14-hour flight to Beijing to have a 4-hour meeting and then not schedule the next one until September.

This is just political theater aimed at dragging out the negotiations while Trump places more taxes on the American people to add to his re-election slush fund that lets him hand out "relief money" to his biggest donors.   Fortunately for Trump, as I pointed out Wednesday morning, his base is too dumb to know they are being robbed by the President, who confidently repeats the lie that China is paying these tariffs so often that it really is hard to keep a grip on reality.

Even by the President's own warped logic that China somehow magically pays for the tariff tax that is solely levied against US Citizens and Corporations, what about the retaliatory tariffs China has placed on US Goods?  Wouldn't that mean that we are paying for those?  Of course China makes no such claim because their people aren't idiots and, so far, China has "only" placed $113Bn worth of Tariffs on US goods but China last night said they will retaliate against Trump's new round of Tariffs.

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As I've been saying since this began – this has nothing to do with China. Trump wants to tax the American people $125Bn to pay for the tax breaks he gave to his family and his Top 0.1% buddies and that's also why Trump was so gung-ho to ram a budget bill through that would raise the debt ceiling (and our debt) by $2.5Tn – BEFORE his tax breaks became an issue and were possibly repealed.  Now he's got his tax cut extended for 2 more year and the first thing he does is go out and place more tariffs because that's "found money" in his budget that he can then turn around and hand out as favors – this is all about keeping Trump in power and keeping Trump from paying taxes.

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Clearly our economy is suffering as a result and, although you sure can't tell from the stock market – the labor market is heading for a tipping point as over 1 Million jobs are now on the chopping block over tariff issues and those are PLANNED cuts that haven't hit yet but will sharply impact the US into the end of the year.  

We have a Non-Farm Payroll Report this morning at 8:30 with about 170,000 jobs expected but those numbers have been all over the place so I'm not even going to hazard a guess.  Last Payroll came in at 224,000 but it was padded by a lot of Government hiring and the US Census will boost Government hiring for the rest of the year as huundreds of thousands of people are needed to count the other 300+M of us.  

8:30 Update:  164,000 jobs but it's a SCAM! as the prior two months were revised down by 40,000 jobs so June was actually 193,000 jobs, NOT the 224,000 jobs that rallied us from 26,900 on July 5th.  The scam in NFP reporting is that they "make up" (because they do not have all the data) a number on the first Friday of the month and, by the time they revise it two AND three months later (it takes that long to get all the numbers) – people hardly pay attention to the revisions BUT the revisions also afftec the current month because the Jobs Number reflects the change in total jobs so, by reducing the total jobs by 40,000 in the prior two months this morning, we turn a 120,000 net jobs gain this month into what looks like 164,000 net jobs gained this mornth but what we really did was add 120,000 jobs here and subtract 44,000 jobs there and give you the net total.  See – it's all BS!

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The great thing about the job number shuffle is that you can do it over and over again so next month, when they revise this month down from 164,000 to 114,000, it will make next month's 120,000 look like 170,000 and all you will remember is that 170,000 is about what you expected and you won't even realize there's a problem.  Don't worry, we all do it – humans are very easy to fool with numbers.  

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We get Consumer Confidence numbers at 10 am but they should be strong because they are fooled by the same BS that everyone else is while, in fact, American's are only maintaining their existing lifestyles by piling up mountains of debt with Non-Housing Debt increasing by 35% in the past 5 years, now actually passing our debt on Housing, led by an incredible increase in Student Loans (now $1.7Tn) and Auto Loans ($1.25Tn).

The debt surge is partly by design, a byproduct of low borrowing costs the Federal Reserve engineered after the financial crisis to get the economy moving. It has reshaped both borrowers and lenders. Consumers increasingly need it, companies increasingly can’t sell their goods without it, and the economy, which counts on consumer spending for more than two-thirds of GDP, would struggle without a plentiful supply of credit.  

To some extent, the growing consumer debt is a vote of confidence in the future. People borrowing money today expect to have the income tomorrow to pay it back. Consumer debt tends to rise when borrowers feel secure in their jobs.  That's why high Consumer Confidence can be a double-edged sword because over-confident consumers borrow more than they should – which is why it's so dangerous for a President to lie to his people and tell them the economy is better than it actually is and why keeping rates artificially low is a ticking time bomb that is almost certain to destroy us down the road.  

And, of course, all this leads to massive increases in inequality as the Top 10% have grown their assets by 70% in the past 30 years and grown their debt by 25% trying to keep up with the Top 1% but the Bottom 90%, trying to keep up with the Top 10%, have grown their debts by 70% while growing their assets just 30%.  This isn't just losing the race – this is running the race to exhaustion and ending up much further behind than where you started:

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What can you do about it?  Well, like Global Warming, this may be a problem that simply can no longer be fixed so my best advice to you is to make sure that you and your children stay out of the Bottom 90% – it sucks to be there now and it's only going to get worse – especially if rates rise on that $7,000,000,000,000 they borrowed a 3% rate increase on that is $200Bn a year in additional interest alone that will have to be paid if rates head back to a normal level – yet another tax on the poor that lines the pockets of the Top 1%.

Have a great weekend, 

  • Phil