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Technology stocks — including FANG — take a serious hit

Trump is a bully.

Bullying doesn’t work against a strong. proud adversary — like China.

It backfires.

Escalating — more bullying — makes things worse, as your opponent digs in, as China is doing.

Yesterday our favorite tech stocks took a horrible hit because Trump threatened more tariffs on China — more escalation. (See below.)

Messing with tariffs is dangerous. Tariffs are a tax on Americans. When we buy the Chinese goods we want, we now pay more. that includes consumers and manufacturers who make things using Chinese products. The Chinese will only suffer if we buy less of their stuff.

Trump wants the Chinese to  change their trading rules and make it easier for us to sell them more. Negotiations don’t seem to be going well.  That makes it difficult for us as investors to figure if anything is likely to happen, when or soon. Stock markets are going to live under the pall of this trade war.

Initially I thought Trump would play his Tariff Game  and, irrespective of the outcome, declare victory shortly before our November elections. Right now I’m not sure.

For now, my investment strategy is to hold all my stocks, tech included. But watch them ever day.

The New York Times has a piece today on “Trump Hits China With Tariffs on $200 Billion in Goods, Escalating Trade War”. It includes:

White House officials said on Monday that China could win relief from the tariffs by acceding to the administration’s trade demands, including allowing American companies greater access to the China market and dropping its requirement that American companies hand over valuable technology to Chinese partners. Officials said the United States would only continue trade negotiations if the Chinese were “serious” about giving ground on those issues.

The tariffs are aimed at hurting China, but they could hamper the American economy and bring pain for consumers. Unlike the first round of tariffs, which were intended to minimize the impact on American consumers, this wave could raise prices on everyday products including electronics, food, tools and housewares.

Retailers, manufacturers and a wide swath of other American businesses have warned that the new tariffs could hurt their profits, hiring and growth.

The administration held six days of public hearings on the proposed $200 billion round of tariffs last month, which were dominated by companies warning that the United States no longer had the capacity to produce replacement products for the Chinese imports that would be hit by tariffs. …

The administration did remove roughly 300 product lines – and some individual products – from the list after companies objected. Among the items dropped are smart watches, Bluetooth devices, bike helmets, plastic gloves, high chairs, play pens and certain chemicals. But, in some cases, partial product lines will be taxed while other parts are not. For example, high tech network routers and smart watches share a product line, but under the United States trade representative plan, the routers would be subject to tariffs while watches are not.

“It will be a lot of money coming into the coffers of the United States of America. A lot of money coming in,” Mr. Trump said during remarks at the White House on Monday. He added that the United States cannot tolerate the trade gap between what it exports to China and what it imports from that country.

Mr. Trump’s decision is a significant escalation of an already serious trade dispute – one with seemingly no end in sight. After months of failed trade talks, top officials from China and the United States were tentatively scheduled to talk later this month in Washington. But it is unclear whether Beijing will agree to come to Washington with the new tariffs set to go into effect.

“We are open to talk if there are serious talks,” Larry Kudlow, the director of the National Economic Council, said in an interview on Monday.

“The Chinese are livid and drafting their own battle plan – they won’t take this sitting down,” said James Zimmerman, a longtime lawyer in Beijing and the former four-time chairman of the American Chamber of Commerce there.

“Washington’s view seems to be that tariffs and threats of more tariffs will soften up the Chinese and make them more amenable to negotiations,” said Eswar Prasad, a Cornell economist who specializes in trade issues. “The evidence that, in response to U.S. bullying tactics, China just stiffens its spine and strikes back with proportionate tariffs against U.S. imports has had no discernible effect on the Trump administration’s take-no-prisoners approach to this rapidly escalating trade war.”

China is expected to further retaliate against the United States, and top officials have warned that could include penalizing American companies that rely on Chinese components for phones, cars, televisions and other products. China’s commerce ministry has said that it is ready to put similar tariffs on $60 billion a year of American goods in response to the threat from the United States. China has matched previous tariff moves dollar for dollar, but the number of American goods to tax is dwindling because, for many years, it has only imported about a quarter as much as it exports to the United States. (My bolding.)

Lou Jiwei, China’s finance minister until his recent retirement and now a senior Communist Party adviser, delivered an unexpectedly strong threat to the United States in a lunch speech at the forum, which is organized by a government agency reporting directly to the cabinet. Mr. Lou said that, if necessary in the trade war, China could halt exports to the United States of components that are crucial to American companies’ supply chains.

Mr. Lou said that it would take years for American companies to find alternatives to China. “To take a step back, the United States can establish an alternative supply chain in a third country, but it takes time – what about the pain of three to five years? This is enough to cross a political cycle,” he said.

You can read the entire article here. 

Joel Ross in his Ross Rant newsletter this morning wrote:

It is impossible to predict where the China situation goes from here. As someone who has had business dealings with, and been in meetings in China, I can tell you, never trust them. They lie and cheat on everything. It is their culture. Even the Chinese do not trust each other. They have broken many of the rules of the WTO, and every western nation has admitted that letting China into the WTO to get them to comply with business norms has failed badly. It is now very likely Japan and the EU will back the Trump play to push China, and the WTO revisions. That will take many months. It goes to the core of the policies of Xi to build 10 industries by 2025 where China is the world leader, and his way to get there, unspoken, is to steal the technology to leap ahead.

Reality is, China continues to slide economically. China continues to cheat a lot on the N Korea sanctions making them virtually ineffective. China continues to burden other Asian nations with crushing debt for the Silk Road infrastructure to make them beholden to China, and to let China be able to pressure them because they cannot repay the loans. Whether Trump should have waited until the meeting set for next week, or  if he did the right thing putting on tariffs now, is an open question, but the Chinese were unlikely to be ready to fold next week, so maybe the added tariffs and pressure was the right move. Their stock market is down badly and going lower. Their economy will slow further now. The next few weeks and months are going to be ugly, so volatility in the markets is highly likely. (My bolding.)

You can subscribe to his newsletter here.

“Foods” not to eat

+ High fructose corn syrup

+ Cereal bars

+ Stuff with huge amounts of added sugar, including yogurt and wheat bread.

+ Preservatives

+ Diet sodas. They actually make you fat.

In short, read the ingredients.

Apple is overwhelmed with Apple Watch orders
You can pre-order one now, for delivery October 15, God willing.

Or you can rush the stores at 8:00 AM this Friday, September 21.

I want to buy this one:

AppleWatch

I get a $175 trade-in on my present one.

Are you using Gmail?

Click on this button on the top right.

SettingsButton

Then scroll down to

largetahoma

Choose Tahoma and Large.

You’ll do all your old friends – like men who can’t see (i.e. me) – a huge favor.

Dumb answer.

If you and your wife (i.e. The Benioffs of Salesforce.com fame) are spending $190 million to buy Time Magazine, why would you tell the Wall Street Journal that you ” will not be involved in Time`s daily operations or editorial decisions.”

Does anyone still read Time?

Don’t see this crazy, stupid movie

crazyrichasians

Yom Kippur begins tonight at sunset

“Hi. This is Sarah Palin. Is Senator Lieberman in?”

“No, governor. He’s out today. This is Yom Kippur.”

“Well, hello, Yom. Can I leave a message?”

The Jewish dog

A man walks into shul with a dog. The shammas comes up to him and says, “Pardon me, this is a house of worship. You can’t bring your dog in here.”

“What do you mean,” says the man, “This is a Jewish dog. Look.”

And the shammas looks carefully and sees that in the same way that a St. Bernard carries a brandy barrel round its neck this dog has a tallis bag round its neck.

“Rover,” says the man, “Kipa!”

“Woof!” says the dog, stands on his hind legs, opens the tallis bag, takes out a kipa and puts it on his head.

“Rover,” says the man, “Tallis!”

“Woof!” says the dog, stands on his hind legs, opens the tallis bag, takes out a tallis and puts it round his neck.

“Rover,” says the man, “Daven!”

“Woof!” says the dog, stands on his hind legs, opens the tallis bag, takes out a siddur and starts to daven.

“That’s fantastic,” says the shammas, “Absolutely amazing, incredible! You should take him to Hollywood, get him on television, get him in the movies; he could make millions of dollars!”

“You speak to him,” says the man, “He wants to be a doctor.”

HarryNewton
Harry Newton, who eats too much.