The economy is continuing to do very well with low unemployment, record corporate earnings., and a continued slow rise in hourly wages (https://data.bls.gov/timeseries/CES0500000008). There is concern, however, about the effects of our tariff war.
STEEL
I heard that the price of steel had risen by30%, but when you look at the figure for steel prices over time you see there was a dip in late March of the year. When you look at 2017, however, there was also a dip in early April.
Overall the trend for steel in 2017 was an irregular increase in prices before any tariff war (see figure below).* Actually, the price of steel in June of 2018 is actually somewhat lower than it was at the beginning of the year. A sharp peak occurred in price in January with an overall decline thereafter.
In contrast to steel, the price of soybeans has dropped alarmingly (see 2nd figure below) in reaction to the imposition of a steep tariff by China and may cost U.S. farmers $624 million.** The huge Chinese market may be lost forever if China can replace the American crop with those in Brazil and elsewhere.
STOCK MARKETS
I worry about the stock market and have been lightening up my holdings. I've sold some things that were running a nice paper profit (Netflix, for example, that had more than doubled).
Things that bother me:
(A) The yield on the 10 yr treasury has been falling, even as the Fed is increasing short-term rates, that makes it look as if people are shifting money into Treasuries. In other words "They" are scared.
(A) The yield on the 10 yr treasury has been falling, even as the Fed is increasing short-term rates, that makes it look as if people are shifting money into Treasuries. In other words "They" are scared.
(B) One thing helping the stock market is companies buying back a LOT of stock with their proceeds from the tax cut and bringing money home from overseas.
Companies repurchased $178 billion of shares during the first quarter, up more than 42 percent from the same period in 2017, according to S.&P. Dow Jones Indices. That was the largest amount ever repurchased, topping the previous record from the third quarter of 2007.***
(click on figure to enlarge)
Apparently Mergers and Acquisitions (M&A) are also increasing:
M&A volumes doubled in Europe in the first quarter, while the United States was up 67 percent and Asia was up 11 percent.**** (Underlining added for emphasis.)
When CEOs get too much money they tend to expand their company into new areas through MandA. Usually some years later, the companies find they want to "return to their core business" and spin off the acquired companies, usually at a considerable loss. So expect many of the mergers and acquisitions being done these years to eventually be spun off with a lot of money wasted.
Incidentally, the tax cut is being done on the cuff (something "they" are careful not to tell us), In other words, the government is borrowing money so companies and taxpayers can have a tax cut. This Is Republican? Actually, Republicans are only for balanced budgets when Democrats are in power.
M&A volumes doubled in Europe in the first quarter, while the United States was up 67 percent and Asia was up 11 percent.**** (Underlining added for emphasis.)
When CEOs get too much money they tend to expand their company into new areas through MandA. Usually some years later, the companies find they want to "return to their core business" and spin off the acquired companies, usually at a considerable loss. So expect many of the mergers and acquisitions being done these years to eventually be spun off with a lot of money wasted.
Incidentally, the tax cut is being done on the cuff (something "they" are careful not to tell us), In other words, the government is borrowing money so companies and taxpayers can have a tax cut. This Is Republican? Actually, Republicans are only for balanced budgets when Democrats are in power.
My opinion is we can't go into a recession this year because there is just too much money sloshing around, but in spite of that the DJIA is down for the year (other main indices are positive, however, for example, the SandP 500, Russell 2000, and the NASDAQ Composite.
* https://tradingeconomics.com/commodity/steel
** https://www.usatoday.com/story/money/business/2018/06/17/china-tariffs-u-s-soybeans-could-cost-iowa-farmers-up-624-million/708477002/?utm_source=feedblitz&utm_medium=FeedBlitzRss&utm_campaign=usatodaycommoney-topstorieshttp://markets.businessinsider.com/commodities/soybeans-price
*** https://www.nytimes.com/2018/05/18/business/tax-cut-stock-buybacks.html
8888 V
****
https://www.reuters.com/article/us-deals-review/global-mergers-and-acquisitions-reach-record-high-in-first-quarter-idUSKBN1H60EC
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