FOH Cigar Index: Global Economy

[El Presidente]

What a week!  For better or worse, We have just witnessed the largest shake-up in the global economic system since WWII. 

Keep the politics out of it. Challenging I know. Consider this a test of your better self. 

Still for economic geeks like myself, this is historic and of immense interest. 

Let's take the forums pulse. Poll is up! 

[mikejh]

Buy the dip.

[treberty]

1 hour ago, El Presidente said:

Keep the politics out of it. Challenging I know. Consider this a test of your better self. 

Very challenging indeed right now, especially for Canadians. I’d like to think that I can control myself better now that I am older/wiser.

I cannot see how a recession can be avoided in most countries. Stagflation very likely in others. Finally, some (minority) countries might turn lemons into lemonade and become “almost” free zones for some commodities, consumer staples, etc. Canada, for instance, could become a fashion hub by importing goods from Southeast Asia at 0% and sell/distribute to the US at 10% tariffs.

Supply chains will change and reduce the impact of the tariffs but inflation will be inevitable as the tariffs will increase inefficiencies in the short/mid term and drive prices up. Everywhere. Will stop here to avoid getting banned. 🙂

[El Presidente]

1 hour ago, treberty said:

I cannot see how a recession can be avoided in most countries.

Not sure. 

Business is resilient. Mind you, governments are less so. 

Diversification of markets is not a bad thing. Glass half full. 

Of course, EU/UK/Canada/ and Oz should join BRICS tomorrow. 

[chasy]

So early, hard to say. Public markets are brutal because you mark out every day. Yes the last two days have been rough. That said, market was probably overly hot to begin with. I certainly sympathize with people, especially at varying ages. My parents, this is not a kind market. Me, let it slide, I have more to make than to lose, I’d love a better level to buy in to.

I think / hope this ends up in a more stable place. That said, US leadership wants to make some big changes. I’m sure we’ll all ok in the long run, but I’m an optimist.

[Kaptain Karl]

Bottom line is this is happening, complaining or arguing about it isn’t going to change it. Not sure how much it’s been thought through how inflammatory this will be and how long it will take. 10-15 years until most of it has happened. I just wish we were treating Australia, Japan, SK and MX/CA far better. 

On the flip side I’m anticipating mortgage rates to be down 1% or so by the end of the year and down for a few years before heavy pressure on capital for industrial plant construction and infrastructure pushes them back up. 
 

[El Presidente]

46 minutes ago, Kaptain Karl said:

I just wish we were treating Australia, Japan, SK and MX/CA far better. 

Huge wake up call for the rest of us. Lesson learnt. 

It will be interesting to see how "Law of Unintended consequences" plays out. 

I wouldn't worry about it. I think most sane folk separate people from their govt no matter where or what colour that govt is. 

[Kaptain Karl]

28 minutes ago, El Presidente said:

Huge wake up call for the rest of us. Lesson learnt. 

It will be interesting to see how "Law of Unintended consequences" plays out. 

I wouldn't worry about it. I think most sane folk separate people from their govt no matter where or what colour that govt is. 

Couldn’t agree more. Lessons will be learned that could have been learned by reading history books. The onshoring transition could have been made in multiple ways, this surely is the most…kinetic. 

[LaoFan]

Bulls make money, bears make money, but pigs get slaughtered.

 

[JohnS]

When I was a kid, I used to play with the other kids in the neighbourhood all the time. Every now and then, someone would "spit their dummy" and act selfishly and become divisive. The rest of us would ignore this individual until they calmed down, came to their senses and the status quo was restored. This whole thing is big now but it will all pass.

[Namisgr11]

Historically, it's my understanding that recessions in the US are accompanied by significant dips in stocks, but the bottom of the market is most commonly reached well after a recession has begun.  So while it's quite possible that we might find today was a short-term bottom for US equities, it remains likely over the next year that if the economy goes into full blown recession, an even deeper stock bottom will be still to come.

[sudoslash]

I think this is an egregious unforced error. It’s the Luka Doncic trade but $9T worse. Tariffs are the opening salvo, but I think the next phase will be competitive devaluations and currency conflict. The U.S. wants to devalue the dollar, and that’s going to have profound second-order effects on capital flows, inflation, and global financial stability. It’s hard to predict since policy has been so sporadic and brittle, but on the current path I think we’re heading into a 1970s-redux. If things don’t change, the U.S. may need a Volcker-style rate shock to reset expectations. 

All that being said, anecdotally these tariffs are deeply unpopular in America. It’s abhorrent how we’re treating our allies (people from countries who I served down range with, unlike the people who are treating these countries as foes 🙄) and in general how we’re treating the world. America as a bully is not a good look. I am hopeful things will change. 

As for the stock market, be fearful when people are greedy and be greedy when people are fearful  

[riderpride]

This early into the game - any jobs 'added' are people having to re-enter the workforce due to inflationary reasons or were planned before any tarrifs were announced. Some adds may be legit, but the middle class is having difficulties keeping food on the table, and increasing costs to the farmers and ranchers isn't helping anyone. 

I see a global recession, but cooler heads will prevail.

Cheers

[yossie]

We'll be all losers even not if the trade war happens. I don't know what The president actually thinks though, Most of his wants will not be seemed to come true.

As a my personal resistance, I won't never buy snickers until putting the tariff out. I like it but too bad for health.😆

[Chas.Alpha]

I got an implied warning for this last night, but it’s still worth mentioning on the global stage.🤔

[El Presidente]

21 hours ago, sudoslash said:

I, but I think the next phase will be competitive devaluations and currency conflict. The U.S. wants to devalue the dollar, and that’s going to have profound second-order effects on capital flows

As a manufacturer, exporter and importer, that is one of my major concerns.

I spent the last two days on the phone to mentors...picking their brains. They are far brighter economic minds than I and have been through cycles since the late 70's in some cases.

Consensus was to keep your powder dry, put spending on hold, trim expenses, eliminate/minimise debt now and hold as big a cash reserve as you can. Watch calmly. Opportunities will present themselves. Banks will likely cut back lines of credit and pull in their corporate umbrellas. 

Consensus was there were three scenarios that could play out. Plan for the worst one but do so in a timely fashion. 

[El Presidente]

20 hours ago, Chas.Alpha said:

I got an implied warning for this last night, but it’s still worth mentioning on the global stage.

I suspect that is how online prices will now  be displayed by international shippers of most goods. It will be up to the courier service to collect (and then pay) the new US tariffs. 

 

[Fugu]

Nothing will happen.

 

 

 

This is going to last three weeks.... at max.

[Gubbins]

Whole system has been artificially propped up for years. This has to have been expected for a while now, and a catalyst has kicked it off. I've been waiting for a buying opportunity for some time, but expect there could be more blood before doing so. Regardless; timing market bottoms rarely ends well, but buying confirmation and leaving a small % on the table may prevent you from getting burned.

[joeypots]

The worst scenario, I think, is that the intentional creation of chaos precedes a coup d’é·tat. The tariffs will probably be less sever than as first presented but the end game is unknown and there may not be one. Trying to predict what will happen, short tern, like 2 years, is impossible. It’s too soon to tell. The US equity markets are telling us that these tariff policies are bad. Kinda bad or wicked bad is anybody’s guess. One thing is for sure, imho, chaos creates opportunity and hardship. There are going to be real economic opportunities and real people are going to be badly hurt. 

My old man was a bit of a historian. Born in 1921 he lived to 2010, I remember him saying that he witnessed the decline of the British empire in his life time. Just sayin’.

[JohnS]

23 hours ago, Kaptain Karl said:

Bottom line is this is happening, complaining or arguing about it isn’t going to change it.

Turn on the news today. Mass protests in major cities in first world countries and companies such as Range Rover ceasing exportation of their vehicles to the US. Bills being prepared on both sides to counter this.

Historically speaking, there is a strong link with enacting big changes and assassination attempts. To me, it reminds me of the final chapter of Julius Caesar's political career. We all know how that turned out.

P.S. This may be the most inflammatory I've been in a post on FoH in a long, long time. Yet, I'm comforted by the thought that even Jesus took a whip against corruption in the temple markets.

[chasy]

It’s crazy to see well known US democratic politicians from 5, 10, 15 years ago calling for cutting government waste, tariffs, reshoring of jobs. I have my own biases, but I think it’s too early to tell. Like getting chemo and being mad the cancer isn’t gone the next morning.

[El Presidente]

3 minutes ago, chasy said:

It’s crazy to see well known US democratic politicians from 5, 10, 15 years ago calling for cutting government waste, tariffs, reshoring of jobs. I have my own biases, but I think it’s too early to tell. Like getting chemo and being mad the cancer isn’t gone the next morning.

The tragedy (in this part of the world) is that 80 years of Asia Pacific goodwill/aliances have been torched. There is no getting back to where the US Japan/Singapore/Phillipine/Australia etc relationship was. It is a new dawn and all have been made very aware of the new realities. 

[sudoslash]

22 hours ago, JohnS said:

To me, it reminds me of the final chapter of Julius Caesar's political career.

A good friend and I discussed this for a solid hour last night (over some RASS ROTTs from my first FoH haul). I don't want to cross the political line in drawing the specific comparisons, but there are many. Hopefully the U.S. doesn't meet the same fate as the Roman Republic did...

[El Presidente]

I regard Singapore as the best economically run country in the world. 

Here is there PM's address to the Singaporean People. I have an issue with some of his commentary, but overall, as a leader ...10/10