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Wednesday, September 11, 2019

Media got the economy wrong, too



This summer, Matt Drudge and the rest of the media tried to talk America into a recession, believing a recession will make the Orange Man a one-term president.

But after Labor Day, businessmen returned from the Hamptons and other trendy vacation spots, rolled up their sleeves 1 1/2 turns, and went back to work. They are too busy making money to be bothered with a politically convenient recession.

The trade war with Red China goes well.

President Donald John Trump tweeted today, "China suspends Tariffs on some U.S. products. Being hit very hard, supply chains breaking up as many companies move, or look to move, to other countries. Much more expensive to China than originally thought."

The communists will lift tariffs on 16 categories of U.S. goods including food for livestock, cancer drugs and lubricants. I sense panic.

And they should panic. The president is most correct about supply chains. Last month, the president ordered companies to seek new suppliers. They are.

The Financial Times reported, "U.S. retailers are ditching Chinese suppliers at an accelerating rate in response to President Donald Trump’s trade tariffs, switching sourcing of thousands of goods from furniture to bicycles to countries such as Vietnam, Cambodia and Thailand. Top executives at several household names have disclosed fresh details of their tariff response plans since the latest tranche — 15% levies on $112 billion worth of Chinese imports — took effect on September 1."

Tariffs and President Trump are doing permanent damage to Red China as factory orders move away from the communists.

Chairman Xi should have cut a deal last year. Betting on a Democrat win was foolish, not because a Democrat will not win -- never say never -- but because in the interim Red China is bleeding permanent customers.

A savvy dictator would have cut a deal knowing that once Americans elect a Democrat president, Red China can go back to robbing America.

Instead, the trade war continued. President Donald John Trump is causing a recession: in Red China, not here.

But don't take my word for it. Follow the money men. They are betting against a recession.

CNBC reported, "There’s a shift underway in the stock market that may be signalling that some investors believe there was way too much pessimism on Wall Street this summer, and the stocks that do better in an improving economy are the ones to buy for now.

"Big banks such as JP Morgan and Bank of America were higher Tuesday, as were cyclical names like Caterpillar and Deere, while growth names like Microsoft, Intuit, Adobe, Pay Pal and Visa were lower.

"The cheapest stocks, those with the lowest price-to-earnings ratios were snapped up, while many of the most expensive companies, or those with the highest price to earnings ratios, were being sold.

"Sentiment has shifted in part because of signs of improvement in the trade talks between the U.S. and China. Interest rates have been rising for the same reason, and some investors are betting that Treasury yields may have bottomed for now."

The story also said, "According to a study by CNBC’s Chris Hayes, the 50 stocks in the S&P 500 with the highest forward P/Es, meaning the most expensive, were down an average 0.8% Tuesday afternoon, with 64% trading lower. The 50 stocks in the index with the lowest P/Es, or the relatively cheapest, rose an average 2.3%, and 90% were trading higher Tuesday."

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So the big money is eschewing low risk, low return stocks in favor of high risk, high return stocks. That shows confidence in the economy.

That does not mean there will not be a recession. Indeed, the media blitz this summer worked, according to an ABC News/Washington Post poll, which showed 6 out of every 10 Americans believe unhappy days are just around the corner.

But as much as big money investors and CEOs like to hang out with Democrats at the beach and at the dock in the summer, the money men like making money more. They will do anything for Democrats except tank the economy.

President Trump is a rainmaker for America's money men.

His capital gains tax cut was brilliant. It got companies to stop moving their headquarters overseas (or overlakes to Canada). It also made investing in American companies more attractive as they now get to keep 79 cents from every buck they earn instead of 65.

And his trade war with Red China is really helping the stock market. Red China's rich are looking for a place to park their ill-gotten gains.

I continue to stay in the market. Someday, we will have a recession. But that day does not look to be today.