Economic Outlook

Has The Narrative Been All Priced In?

This past week was built for the “bulls” as just about every item on their “wish list.” was fulfilled. From a “trade deal” to more “QE,” what more could you want?

Trade Deal Near?

Concerning the ongoing “trade war,” our prediction that Trump would begin to back peddle on negotiations to get a “deal done” before the election came to pass.

Trump has once again delayed tariffs to allow the Chinese more time to position. China, smartly, is using the opportunity to buy soy and pork products (which they desperately need due to a virus which wiped out 30% of their pig population) to restock before the next meeting.

This is a not so insignificant point.

China is out for “China’s” best interest and will not acquiesce to any deal which derails their long-term plans. In the short-term, they may “play the game” to get what they need as a country, but in the long-run, they will protect their own interests….CLICK for complete article

China Faces Economic Collapse, Decoupling From World Markets, Expert Says

U.S. President Donald Trump announced on Twitter on Aug. 23 a new round of tariffs on $550 billion worth of Chinese goods, and has told U.S. companies to move their operations out of China.

China expert Frank Xie believes that when the trade war has escalated to that level, it will bring devastating consequences to China’s economy, while not having a major impact on the United States.

In an interview with the Chinese-language edition of The Epoch Times, Xie, an associate professor at the University of South Carolina’s School of Business Administration, said that when this latest tariff increase is imposed, the United States and China will become completely decoupled economically.

“The Chinese communist regime has been trying to drag [the trade talks] out to give itself more time, and the Trump administration is fully aware of that. In addition, Beijing has broken its promises several times. They promised to buy agricultural products, but later changed their mind. At a certain point, they even promised to buy large quantities of agricultural products, but they did not make any purchase thereafter. They have certainly irritated the American people,” Xie said.

“President Trump doesn’t trust the Chinese communist regime anymore. That is why he keeps increasing tariffs on Chinese goods.” CLICK for complete article

2020 Will Be The Most Volatile Year In History

The last few weeks marked a turning point in the global economy. It’s more than the trade war. A sense of vulnerability is replacing the previous confidence—and with good reason. We are vulnerable, and we’ll be lucky to get through the 2020s without major damage. Let’s talk about the risks facing us in the next year or so and the economic environment in which we will face those risks.

Supply Shocks Ahead

In a recent Project Syndicate piece, NYU professor and economist Nouriel Roubini outlined three potential shocks, any one of which could trigger a recession:

  • A slower-brewing US-China technology cold war (which could have much larger long-term implications)
  • Tension with Iran that could threaten Middle East oil exports

The first of those seems to be getting worse. The second is getting no better. I consider the third one unlikely. In any case, unlike 2008, which was primarily a demand shock, these threaten the supply of various goods. They would reduce output and thus raise prices for raw materials, intermediate goods, and/or finished consumer products. Roubini thinks the effect would be stagflationary, similar to the 1970s….CLICK for complete article

Here’s What I’m Worried About. And It’s Not a Recession

The locker room at my swim club has become the litmus test. When a complex topic, after years of being absent or ignored, suddenly crops up in conversation, and not just sporadically but all the time, it means that there is some kind of peaking going on. This suddenly hot topic now is a “coming recession.”

Just about everyone is talking about it. This means that fears of a recession or thoughts of a recession have now penetrated into the core of the previously recession-free zone: the swim-club locker room. It means that these recession fears might be peaking.

It makes sense. Recession-fear headlines are popping up everywhere. You cannot escape the drama. It’s not that there is a recession in the United States – far from it. It’s all about a coming recession….CLICK for complete article

Why Silicon Valley Is Moving To Toronto

Silicon Valley has a second address, and it’s becoming much more than a summer cottage these days. Welcome to Toronto, the hottest new venue for the North American tech industry.  For starters, this Silicon Valley cottage residence has lured in Intel Corp, Uber, Microsoft and Silicon Valley Bank, among others.

As reported by the Wall Street Journal, Intel Corp. is planning to build a graphics-chip design lab in Toronto. Uber is opening up an engineering hub. Alphabet, the parent company of Google, is establishing a campus in Toronto for its Lake Ontario “smart city”. Microsoft is working to significantly expand its Toronto labor force, too.

That means that there is also a lineup of startups preparing to go public in Canada, following on the coattails of the successful IPOs of Shopify Inc. and Lightspeed POS Inc earlier this year….CLICK for complete article 

Superforecasting A Bear Market

There’s an ongoing debate about whether or not the U.S. is approaching a recession. As an investor, this question is of utmost importance. It is precisely at these times when fortunes can be made and lost. There’s no shortage of pundits with strong opinions in both the affirmative and negative camps armed with plausible narratives and supporting data sets. How to decide which side to take? Applying some proven forecasting methods to historical data can help bring clarity to this question.

Forecasting is tricky business. It’s really hard to do well consistently, especially in investing.

Fortunately for us, Philip Tetlock has made a study of forecasting. In the book Superforecasting: The Art and Science of Prediction (aka Superforecasting) he and coauthor Dan Gardner share their findings of a multi-year study aimed to discover the best forecasters, uncover their methods, and to determine if forecasting skills could improve. There are many great lessons conveyed in the book. We can thus apply them to our problem at hand: the question of whether or not the U.S. will enter a recession….CLICK for complete article