China Alternatives…?

7-7 Market Highlights (August 18 – August 24, 2019)

China-US trade war rhetoric escalated, entrenching in suspicion for a long tumulus geopolitical trade warfare… China is lashing out to retaliate with new tariffs on another $75 billion worth of US goods. In returning salvo, Trump encourages American companies to get out of China to come back to the USA or find alternatives. And, FOMC Chairman Jerome Powell states that he will do everything necessary to boost the economic expansion keeping inflation low and Americans fully employed. Many see likely 50 basis points cut next month. Well, not surprisingly Dow dropped 700+ points at one point as the CBOE VIX climbs to 20.96. (BTW, current VIX is not the highest. It’s been up to 30+, meaning that market is not overreacting, some say…)  Regardless, according to FOMC Vice Chairman Clarida American economy is in good place and do not see elevated risk of recession but the global economic condition is dwindling, and the outlook has worsened. Well, China-US trade war and numerous other global trade disputes will cast a dark shadow on people everywhere and threaten global recession. Can American economy be the lone survivor?

Market closed on 8/23/2019:   DOW: 25,629;   S&P500: 2,847; NASDAQ: 7,752; Gold: $1,538.50; Oil: $53.87;  US 10-Year: 1.527% 

Here are the highlights of the 34th week of 2019:   

1.   Find China Alternatives.   From Jackson Hole, WY., FOMC Chairman Jerome Powell noted that he will do anything necessary to help the continuation of American economic expansion, keep inflation low and Americans fully employed. Powell is in the tough spot of being under siege from his own committee as well as an angry president and financial markets that are losing confidence in the Fed’s ability to prevent a recession. Most think 50 basis points cut in September.  President Trump on Friday said he was ordering U.S. companies to “immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA.” And Trump is ratcheting up with more tariffs on all Chinese goods as he travels to G7 Summit. Also Trump voiced question who is the worst enemy Xi and Powell. I am not holding breadth on G7.

2.   China, Russia Warns Latest U.S. Missile Test.       The U.S. tested a new cruise missile in California on Sunday, and Chinese officials warned that it will almost certainly lead to a new arms race on August 18, 2019. The medium-range missile traveled 310 miles (500 km) on Sunday, roughly 60 miles from the mainland coast in Southern California. The missile is not nuclear-equipped, according to the U.S. military, but resembles the nuclear-capable medium-range version of the Tomahawk missile that was pulled out of service in the late 1980s. The new missile would have been banned under the 1987 Intermediate-Range Nuclear Forces (INF) Treaty that was originally signed by the U.S. and the Soviet Union, which banned the development of missiles with a range of 310-3,400 miles (500-5,500 km). The U.S. pulled out of the treaty on August 2 of this year. Russians responded that it will not succumb to provocations, but Russia is clearly engaging in its own development of next-generation weapons that could easily be mistaken for an arms race. In fact, the recent mysterious explosion that killed at least five scientists in Russia is believed to have been caused by a nuclear reactor that was supposed to power new nuclear weapons.

3.   Hong Kong Mass Riot.  Hong Kong mass protests continue with more than a million protestors flooding the streets. Tens of thousands of people formed human chains across Hong Kong Friday night as part of the latest peaceful protest against their embattled government, against Beijing, and to demand democratic reform. Since June 9, Hong Kong has been rocketed by protests, violence and chaos. What started out as public opposition to an extradition bill exploded into anger and calls for the resignation of the city's chief executive. Protesters demanded an investigation into police brutality and advocated for greater democratic reform. The unrest raised questions about whether China would deploy the People's Liberation Army or the People's Armed Police, a paramilitary force, to the city. Well, Police and armed police forces held a joint training in Shenzhen, Guangdong Province, which is adjacent to Hong Kong, on last Saturday. Xi has trade war worries but he may have more impending internal chaos to manage. https://twitter.com/i/status/1162718218525396992

4.   Italy’s Government Collapses, Turning Chaos Into Crisis.          After 14 months of bickering, Italy’s government collapsed on Tuesday, plunging a key European nation already hobbled by financial fragility and political chaos into a renewed period of crisis and uncertainty. During the government’s short tenure, the nationalist-populist coalition struck fear into the heart of the European establishment. It antagonized the European Union, flouted its budgetary laws, demonized migrants and embraced President Vladimir V. Putin’s Russia and his strongman politics. But any relief could be short-lived among critics who have accused the government of isolating and weakening Italy as it drastically reoriented the country’s place in Europe. The government coalition of the hard-right, anti-migrant League party and the anti-establishment Five Star Movement came apart after a mutinous power play by Matteo Salvini, the League leader and the country’s increasingly popular interior minister. Meanwhile, Italy, already struggling financially and seeing its influence decline abroad, finds itself in a mess of its own making. And the crisis is likely to fuel the forces that have made Mr. Salvini the most popular, if no longer powerful, politician in the country. 

5.   Amazon Rainforest Fire Disaster.         For almost three weeks straight now, the Amazon rainforest has been on fire. This isn't an isolated event: According to Brazil's National Institute for Space Research, satellites have detected a staggering 39,194 fires just in 2019, a more than 77% increase over last year. NASA has confirmed that smoke from the fires is clearly visible from space. It's disastrous news, especially since Brazil has already lost a staggering amount of the Amazon to deforestation this year. So, what exactly is causing this? Brazil's environmental minister has claimed on Twitter that the fires are caused by weather—lack of rain, heat, wind, maybe lightning strikes. But according to Reuters, there's nothing unusual about the weather in the Amazon this year compared to last. Christian Poirier, the program director of the non-profit organization Amazon Watch, told, "The vast majority of these fires are human-lit." Meteorologist Haley Brink agreed. the New York Times reported in July, "deforestation of the Amazon is spiking as Mr. Bolsonaro’s government pulls back on enforcement measures like fines, warnings and the seizure or destruction of illegal equipment in protected areas. Many say it’s an international environmental/climatic crisis.  

6.   Disabled Vet Student Loan Forgiveness.            President Trump signed a memorandum on Wednesday to cancel the student loan debt of disabled veterans. More than 25,000 disabled veterans will have their student debt forgiven, the president said. Disabled service members are already entitled to student debt forgiveness under the U.S. Education Department’s total and permanent disability discharge option. However, the recent record revealed the government continues to seek repayment on $1 billion in student loans from more than 40,000 severely disabled veterans who have been deemed unable to work. More than 25,000 of them are in default and just 8,500 of them have applied for forgiveness. Now Trump’s action will automatically erase the debt of these veterans. They’ve said it’s challenging for many disabled veterans, some of whom are paralyzed or have traumatic brain injuries, to go through the burdensome process of applying for relief.

7. Life Essential Financial Documents.           There are four essential documents that could save your financial life according to Sharon Epperson. Many people have no desire to talk about “what if” when it comes to their finances. That’s because they’re often too busy figuring out what to do with their money right now: 1) The last will and testament spell out whom you want to give your assets to after you die. 2) A durable power of attorney. It allows someone (in my situation, it was my husband) to step in and make financial decisions, including making sure bills are paid. 3) A health-care power of attorney or “health-care proxy” identifies the person who will step in and make decisions about your medical needs when you can’t make them for yourself. 4) A living will be not a substitute for a last will and testament. In some states, it’s called an “advanced directive” for medical decisions. It’s a written document that lets you express your wishes for medical treatments you would or would not want to be used to keep you alive, including resuscitation and intubation. You can go online to find the forms to create these documents on your own, or make sure you have an attorney who is in your corner. The best way to find a good lawyer is to ask family, friends, colleagues or your financial advisor. 

These are my researches and analysis of the highlights of the week. Perhaps you should take a closer look at them, do additional research and analysis if these are interesting to you. This “7–7 Market Highlights” is presented for general knowledge, the resource for management, and perhaps as a tool for career development, and building wealth. As always, “Think for Yourself”, you decide on your own final analysis and position. 

Mahalo. I welcome your thoughtful comments, “like” notes, and “share” of this publication. 

 ~ S. Vincent Shin

    www.dhirubhai.net/in/vshin

References and Image credits to Bloomberg News, The Wall Street Journals, Getty image, AP Photo, Reuters, CNBC..., and special thanks to Image & Visual Consultant @U.Y.  All references, news, and images are from open source and public domain.