To listen to the talking heads on CNBC, you would think that tariffs are evil incarnate and an economic disaster. But is it a coincidence that the stock market, and US prosperity topped-out in the year 2000 when free trade with China began?
The USA prospered with high-tariffs for the first 125 years of its existence. The tariff funded the federal government; no income tax was required. The USA grew into a world power as a protectionist nation. Now it is declining as free-trade nation.
The advocates of wide-open, free trade promised such trade would create more jobs than it would destroy. They were obviously wrong, and it is time to rescind their policies.
Read the Wikipedia article on the history of tariffs in the USA here.
Matt
Did your Blog get more hits today? I noticed Barry had a link to you.
String
String,
Google Analytics hasn’t updated yet, but I’m sure there will be a bunch more hits. And Barry is right, the withholding data is appalling. American paychecks are shrinking faster now than at any point in the recession so far. I want to vomit whenever I look at the data. Free trade with China and India is definitely not working out for the average American.
Matt
Matt
Free trade also means us old farts that can’t hear have a major pain in our ass every time we try to get something done. I mean I love everyone, but when your Dish Network, and everything else in the world, routes you to a call center in India, it is a pain in the ass. I can’t hear folks well here in Texas, but throw a high pitched Indian accent in, and I am toast.
String
to those reading String’s comment here is the article
http://www.ritholtz.com/blog/2009/07/withholding-taxes-chart-july-15-2009/
America was also a natural resource rich nation during those 125 years. This allowed us to be self-dependent and maintain high levels of growth. Now, we import over 50% of oil and most metals and minerals from outside our country. To attach tariffs to goods from exporting nations would create a nasty backlash and our cost of importing the resources necessary for manufacture, industry, technology would go up considerably.
wilmer,
What metals and minerals do we import from China and India?
Matt
Much like a tiger in a cage people can’t resist poking or better, a rather large and muscular human that finally defends herself after being mistreated and pestered, the U.S. will finally have to shake a few policies off that have contributed to her decline. Tariffs should be a tool used should the U.S. continue to be denied its fair share of Chinese and other markets.
Good point Matt. But isn’t this how global trade wars get started? Haven’t we learned anything from the epic failure that as Smoot-Hawley?
Stringm,
I saw you post regarding the code. I’m curious as to how that will turn out, but certainly no hurry.
After all, us old farts (hehe) can’t think as quickly as in yesteryear.
Corporations want all U.S. folks to work
at WalMart and run up a big debt buying
their products made in China by slave
labor. We can’t make cars here and sell them
in China…but China can make cars there and sell
them here.
This subject really upsets Grandfather. He
thinks that every person in Congress who
had a hand in the unfair trade deals should
be in prison making our license plates.
Our big trade deal with Mexico….they put
a tariff on all of our goods…we took the
tariff off of all their goods.
Put a tariff on goods based on difference of
labor rates between the two countries.
By the way…Grandfather was around during
the 1930′s and says Smoot-Hawley was not
responsible for the 1929-1945 era.
Wilmer said:
“What metals and minerals do we import from China and India?”
We send raw materials to China and other foreigns that is then smelted and fabricated and sent back as a rough or finished product.
The dye and chemical company I worked for bought all of its products from China and India. All of that used to be made here in the States. We sold tons to Crayola until they got smart and just ordered it from China.
BTW, that company is now out of business as of July 1.
And the beat goes on.
Correction,
that was Matt who said “What metals and minerals do we import from China and India?”
Also, the company that went out of business was not Crayola, but the one I worked for here locally.
Told ya getting older affects the brain.
Okay. I don’t want to seem crass or insensitive, but how do we profit from these trade imbalance situations or the current environment in general? Invest in foreign ETFs, foreign stocks, real estate market, etc.?
Matt,
you are spot on about the problem, tariffs might not be needed to sort out the mess, though. Here’s a chart of the Big Mac Index: http://pragcap.com/chart-of-the-day-updating-the-big-mac-index
See who is down there?
If China were to appreciate the yuan by 50% (which would equal a tariff) a lot of the problems would go away. China has purposely held the yuan to cheap in foreign trade – and no, it is not freely traded. So they managed to accumulate huge trade surpluses. Why did the US enter that game? My favorite explanation is the US financial system (which has captured the govt if someone has not noticed yet) set up the imbalance to export business-cycle prone production jobs and build a relative stable service economy in the US financed by the superior US financial system. Let’s call that a nice try.
ENTRY:
Bar[Close,1,1] > MovingAverage[MA,Close,36,0,1,1] AND
Bar[Close,1,2] < MovingAverage[MA,Close,36,0,1,2] AND
Bar[Close,5] > MovingAverage[MA,Close,9,0,5] AND
Bar[Close,5,1] < MovingAverage[MA,Close,9,0,5,1] AND
Bar[Close,15] > MovingAverage[MA,Close,9,0,15] AND
Bar[Close,15,1] < MovingAverage[MA,Close,9,0,15,1] AND
MovingAverage[MA,Close,2,0,D] > MovingAverage[MA,Close,3,3,D]
EXIT:
MACD[Diff,Close,12,26,9,15] < 0 AND
MACD[Diff,Close,12,26,9,15,1] > 0
George
The above code is a test. Click on the backtest ICON on the left. It will bring up a spreadsheet. Click backtest menu at the top, then strategy set up. Put SSO in the as the symbol. Change the date to JAN 1 2009. Change the interval to 1 minute and uncheck the override interval. Name the Strategy anything(I used the George 1/5/15 Cross). Click on the Formula wizard for the entry and put in the code. Do the same for exit. Click add and the strategy shows up in the bottom window. Click on it and hit backtest. Then click on the backtest menu at the top and chnage to summary view and tell me your results numbers. Don’t try to BS me I know answer. Then do the same test on BUCY. BIG NUMBERS!!!!!!!
String
string for me using no commission comes up to a juicy # with $1k invested at a time. nos if i add commission might be diff story
K
What # of wins and losses did you have on BUCY? What was the profit% compared to the buy and hold %?
String
Symbol: BUCY
wins = 40
losses = 12
profit % = 138.49
buy & hold = 54.87
what i meant was when i tested SSO lol
K
Not bad numbers hunh? Don’t say your SSO numbers, george is being tested!!!!
String
Symbol: BUCY
Strategy: SuperK
wins = 5
losses = 1
profit % = 124.68
buy & hold = 54.87
;] less commission for K Man hehe
WOW
“Red Hat has made it onto the S&P 500, an important measure of the stock market. It is replacing CIT, which is expected to go bankrupt after the government refused to bail them out. Red Hat is the first Linux company to make it on to the S&P 500. While this means little directly for the company, it is an indication of the importance Linux is taking on in the world.”
looks like July 13 was the great recovery time then 14 and 15 reconfirmed it.
http://tinyurl.com/ms3u33
I finally had time to update my current picks.
K
Unless you post the code for SuperK it is not verified to be true, hehehe!
String
let’s just say the current picks are from that too.
would you rather Goldman have the code and work against it or would you rather get picks from K for a while?
String:
The latest code you posted is that the latest from George where the candle should be above the 9ma & 36ma on the 1; above the 9ma on the 5; above the 9ma on the 15? I may have saved that post but if I’m wrong can you throw it back up? Does your code include an alert on the latest scheme?
K
I doubt very seriously that you and GS are in competition, and I don’t need your picks!
String
lmao let’s not get into a fight. i will share sometime don’t worry
Mitch
Yes, sort of. That code has the 1 crossing the 36MA one bar ago, assuming it has to also be above the 9MA. The current 5 and 15 crossing the 9MA. I also added added the part about the daily MA 2 being above the 3,3 to George’s input. To be quite frank I don’t know why the results work so well. If you look at the trades there are BIG downside moves in some, before the profit move. It worked though so I threw it up there. Are you on SD?
String
K
LMAO too!! This is twice you have pissed me off, and there will not be a third. I said I don’t need you to share.
String
Thanks String. I’m not on SD, however, I can appreciate the entry and the code you have put together for George, and I may give it a whirl manually. By the way, the day before BBT reported earnings I thought BBT met George’s new scheme about 30 minutes before the bell but it may have been stale- can you check? That’d be a good test of how a trading method takes a hard earnings blow!
Mitch
I backtested BBT on the info from my last post. I tested 7/16 and 7/17 only. I have a buy on 7/17 @ 9:58 am for 22.19, sell @ 10:01 for 22.36. Buy on 7/17 @ 15:25 for 20.89 and you are still in the trade. I doubt that you can pull the first one off unless you ARE GS.
String
Mitch
Look at this entry and you figure the exit. The 10 minute chart. The price 2 bars ago crossed the 9MA. The price 1 bar ago, the high and low were both above the 9MA.
String
String:
yep, it’s that 15:25 I saw and I thought you’d still have to be in there. Thanks for checking that out!
String:
I thought a buy was given late Thurs too. Maybe not.
Mitch
Not according to the SD backtest. That doesn’t mean what your feed shows doesn’t match. On a 1 minute chart I am sure it depends on the data provider. We are not GS and competing with them would be brutal.
String
Thanks String.
It will take at least 50 years for Asian manufacturing salaries to catch up with the West.
The market has a way of solving these imbalances. Both the U.S and China (and rest of world) are pursuing large inflationary policies. The West can survive shortages or extreme price hikes of rice and oil. Asia can not.
Do not underestimate the impact rice queues in Manila in April ’08 had in CB’s (unintentionally) popping the bubble.
Asia must let currencies appreciate. Or they will face revolt in the streets.
They did not understand it in ’07 and ’08 and got served an inflationary scare. They will not get it this time either. Maybe next time. But Keynesians make policy so don’t get your hopes up.
As for tarrifs, slap it on. It’s nothing compared to the inflation tax slowly destroying the lower income classes.
Larry, the link between civil unrest and popping the bubble – hah, I missed that one!
I’m looking for an update on the dollar exposure of European banks… From what I remember this was so out of whack, his last paragraph describes the reason for the dollar to reverse course as soon as things are moving out of control again. Short-term 500 billion swings dwarf the lending of the US govt. http://zerohedge.blogspot.com/2009/07/relative-central-bank-balance-sheets.html
All of this is amplified by the liquidity issues (dark swamps etc) and so far no real regulatory push as the powers try to evolve with the oncoming mess.
Yerk,
While trying to contact Julia I read trading
BLOGS. Some still have the SPX H&S alive
and well. But I think Anthony Cherniawski
has it right. The SPX is now in a megaphone
pattern. This is usually a topping pattern…
and unstable.
We still get inputs from Grandfather’s friends
across govt.. And it’s clear to us that corporations
run the U.S. Govt. What about the EU?
By the way do you agree with John Mauldin…
Europe banking system on the brink of collapse?
Hope you’re having a fantastic weekend.
Paula, I have a hunch it was a mistake to gap the market up Wednesday. Now the move has become so obvious… Everyone is bullish – one week ago everyone was bearish. The bulls need to take the market higher before Friday or the momentum is lost – so far I suspect the retracement to be shallow.
The US is more clearcut, that is often an advantage, sometimes not.
I don’t know if the EU is running at all
Re Mauldin, I’ve argued to that effect since ages (err, since I was involved in a project to manage credit risk in CEE). There is this one US historian who says we are now in April 31, eg the real systemic crisis will hit in the next months. I would not be surprised if it takes longer as this time the govt guarantees have to be taken out as well. So far the system seems to stabilize on the surface, the day of reckoning is pushed back. The stock market is acting more like ’30, as if cost cutting was equal to sustained profitability.
But maybe things will get moving faster:
) Then it took until August 13th…
http://www.newyorkfed.org/newsevents/news/research/2009/rp090615.html
see the publishing date?
Walter Ulbricht: “Niemand hat die Absicht, eine Mauer zu errichten” 15. June 1961
Enjoy the weekend – the weather at your place can only be better than here…
Stringm,
SORRY, no response from me ’cause my Internet has been out since yesterday AM. Turns out we were TERMINATED by accident by Time Warner when they were supposed to shut someone else off – at the pole, a physical termination.
I’ll catch up on the posts.
Donka
Paula,
I agree with your grandfather. The idea for our current free-trade agreements did not originate from the American people, but from the corporate elite, which then rammed them through Congress with presidential “fast track authority”. Remember that? The word “authority” in that phrase was not a coincidence, and it was clearly unconstitutional.
Now, if the corporate elites “knew better” than the American people, that would be one thing. But this recession has wiped out every job created in the last nine years. Since free-trade with China began, the US economy has lost the ability to create jobs.
And there is certainly dispute over the legend that Smoot-Hawley created the Great Depression. According to the Wikipedia article, it was a mild tariff by U.S. historical standards, and “imports during 1929 were only 4.2% of the United States’ GNP and exports were only 5.0%. Smoot-Hawley’s effect on the entire U.S. economy may have been small, compared to the monetary policy of the Federal Reserve System.”
It’s the small and mid-sized companies that create all the jobs in the USA. Large corporations don’t create jobs for Americans, so why do we let them dictate economic policy?
Matt
George,
One way to profit is to own companies like IBM, which have large numbers of American employees that can be fired and replaced by Asians. And when they run out of employees, imagine IBM rolling across America, buying up smaller software companies, firing all the American programmers and shipping the jobs to India. Imagine the profits!
IBM corporate motto: “Evil = $$$!!!”
Matt
Yerk,
Your theory about the elite wanting to move cyclical industries out of the USA to smooth out the economic waves is far too benign. Free trade with Asia is management’s trump card over labor. IBM thinks that computer programming should be a minimum-wage job like hamburger-flipping. IBM’s employees disagree. IBM works behind the scenes to achieve free trade with Asia, and exports the jobs. IBM wins. It’s former programmers are now making less than minimum wage. They are making zero.
I am not a fan of labor unions, but I’m even less of a fan of perpetual double-digit unemployment and Third World incomes for Americans.
Matt
The USA does not have a moral obligation to see to the prosperity of Asia. A nation that puts the interests of other nations ahead of its own will not survive long. That’s just the way the world works. After World War Two, the USA deliberately moved a large chunk of its economy, through free trade, to Europe and Japan to build up those regions so that they could better withstand the Soviets. That was a strategic policy that at least had a chance of being in the national interest.
China and India are not even political allies of the USA.
It is also now a question if Germany is still a US ally due to its energy dependence on Russia. George Friedman explains the geopolitics here.
George,
Try…clickcharts.com/…you can set up the
chart the way you want to for stocks and
indexes. At the very bottom left side click
on Stock Trading System. They give free
swing trade info for the DOW stocks….hold
period is 3 to 7 days.
Matt – great post @ 11:08.
paula,
Very cool, indeed that clickcharts. Longer-term trades is my next objective after options.
Thanks
Stringm,
I still haven’t had time to run the code. I am having relatives over tonight and tomorrow I’m moving my brother from a nursing home to the VA nursing home in Columbia, S.C.
Hopefully, tomorrow night I’ll be able to give it a shot.
Appreciate all you’ve done.
Matt, this George Friedman article offers a strangely distorted view – it projects US perceptions on Germany but stays within the US frame of reference. It would be interesting if he were to reflect upon the real concerns and not on his opinions about what others are supposed to be thinking. A bewildering article, not helpful at all. I doubt the author has ever visited Germany or used first-hand sources to substantiate his claims.
Paula, I’m not convinced Mauldin normalized the figures for accounting differences of hedged positions between Europe and the US. If he were to, the problem would not go away but the numbers would not be that startling. http://www.aleablog.com/ifrs-vs-us-gaap-european-banks-leverage-overstated-picture/ shows a 50% difference between ifrs and gaap for Deutsche Bank. 12:1 was never repealed in Europe.
George
No big thing, all of this will keep. Like I told Mitch, I really didn’t understand why the trade worked so well. I was just trying to help you along on backtesting. I figure if you get up to speed on coding, and testing you will spit something out that will be MAAAARVELOUS!!!!
String
Matt,
Your point is well-taken about IBM’s methods. There’s a catch-22 to their scheme: Once most jobs are lost, who’s going to buy their products?
George, the Indians… Oh the logic of the multinationals…
From the WSJ: CIT cuts deal with key bondholders for $3 billion in financing. CIT will avoid bankruptcy, restructure outside court.
oh the greenshoots that will come from this! S&P 1000!!!!!!!!!!!!!!!!!!!!
Stringm,
If I have to stay up until wee hours, I’m going to run the code. You’ve gotten me pumped!
http://whatstrading.com/week-ahead/
Just did some chart work from 1980 onward, and more particularly the 2000-2003 action. Liking ABCs better. If we take out 956, I believe we have a strong shot at the area of the election highs.
Looking for a small dip at least coming up. Then we’ll see where she goes.
is your SGA almost fully charged though JG?
XEU (Euro, which has been positively correlated with the SPX off the March lows) looks to be in a wave 4 triangle, with the E wave down about to come. Then would come more upside. This would correlate with a mild SPX pullback then more upside action.
K, yes, the SGA has been cooking in the summer sun on a daily basis. I’m afraid it’s been accumulating so much solar energy that when it starts to discharge, the market will be very, very treacherous for bulls. BTW… thanks for asking!
I was concerned
I am now long USD/JPY with a fairly tight stop in case the futures head way higher and dollar depreciates.