Weekend July 1, 2018
Tariffs Tremor the Markets
If the new tariffs continue to drive up the cost of oil and gas production, America’s quest for global energy dominance could be significantly hindered.
Governor Greg Abbott’s letter to President Trump
The Governor goes on to note that there are 225,000 oil and gas jobs in Texas alone but only 140,000 nationally devoted to making steel and aluminum.
This column has warned (as many others have as well) of the unintended consequences of a trade war. As economic history is written, this was the week that the trade talks became a trade war. The latter description now appears in every media story on the issue. A pick up in energy as oil prices double always results in a parabolic demand for steel pipe. Already Texas pipe producers dependent on foreign components are struggling to produce at a market price. That same problem plagues Harley Davidson, now faced with a 30% increase on the same bike for sale in Asia. Now Canada is considering steel import tariffs to protect itself from cheaper steel. This is precisely why one does not ‘win a trade war.’
Maria Bartiromo just commented that the markets are giving Trump’s policies the benefit of the doubt. The hundreds of points, generally down, of market movement this week do not suggest that. Both the Industrials, Transports, and Major Market Index fell below 200 day moving averages Thursday. The QQQ and NASD 100 did record new highs and then pulled back. But stock indexes do not all move in tandem at new highs or lows.
America’s most beloved stock, Berkshire Hathaway B Shares BRKB, fell below support from its February low at $190. It will be imperative for BRKB to vault above $190 to prove Maria correct.
I was incorrect last week in suggesting oil prices would fall. Despite the OPEC expansion of production, prices rose over $70. Apache APA has soared to $46 from $34. Indeed Energy has come alive as the leading sector Transocean RIG, FRAK, XES Energy Service, and Big Oil have all just completed a correction.
Social Mood meanwhile has gone off the rails. From Peter Fonda’s verbal assault on Barron Trump to Robert DeNiro’s Trump expletive to the Red Hen’s ejection of Sarah Huckabee, civility is way past gone on the left. Democrats excoriated a baker for refusing custom order for a gay wedding. How is it okay to boot someone out of a restaurant for political belief.? What’s the difference?
Will a trade war negate the positive effects of the tax bill? Will continued negative mood from the left derail enthusiasm for stock market investing? We shall see.
Comments