iBankCoin
18 years in Wall Street, left after finding out it was all horseshit. Founder/ Master and Commander: iBankCoin, finance news and commentary from the future.
Joined Nov 10, 2007
23,433 Blog Posts

Weekend Gamble: Will Xi Retaliate or Bend the Knee to Father Trump?

This feels like a cross-roads along this long windy narrative.

Will China immediately retaliate and exacerbate the market tumult or wait for cooler heads to prevail and negotiate with Trump?

My bet is for more carnage.

Quant account is 25% GLD/TLT, 20% cash, and the rest long. Downside has been stymied. Active management account is long ERY, FAZ, QID and FXP — with a few longs mixed in.

FULL BEARSHITTER into the weekend panic.

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55 comments

  1. numbersgame

    There’s no way they “bend the knee.” Chinese (particualrly the communsit party) are just like Trump: all about lookign strong, saving face, etc.

    Most likely they will announce $100B in retailitory tarriffs and Kudlow will say, “None of this is real and none of it matters.” The only question is whether China does it early enoough (before Sat evening, EST) to make the weekend news cycle or if they do it Monday morning (Berijing time).

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    • Dr. Fly

      If China goes $100b, that would include ALL US imports into China. This was done on purpose by Trump to demonstrate the vast difference in trade between both nations.

      If China does say $100b, I am almost certain Trump will retort with $500 billion.

      Game.Set.Match.

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      • sarcrilege

        and then China devalues and dumps TSY. Game over.

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        • tonka

          What’s China gonna do with a trillion in interest free US cash? And a further 500 billion in US cash coming in every year?

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          • sarcrilege

            Put it in wheelbarrows and burn it to keep the communist politburo offices toasty.

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          • tonka

            Reduce the supply of dollars…which would make US imports into China more expensive and Chinese exports to the US cheaper.

            At least you’d be warm while shooting yourself in the foot.

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          • sarcrilege

            …but but what about FED’s majik wand, the keyboard with a Print key?

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          • tonka

            Setting USD on fire would lower the Fed’s liabilities and destroy an asset held by China. Why would they do anything to offset such a stupid move?

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          • sarcrilege

            Ordo ab chao, that’s why. This has been in works for a while,
            https://tinyurl.com/yb49yx37

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          • tonka

            Have never and will never click on one of your links.

            So I guess I’ll never know.

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          • sarcrilege

            Good for you. Ignorance is bliss. You dont need to be well informed. That’s only for those with higher intellect and inquisitive minds.

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          • tonka

            Nope. Just trying to avoid getting fired from NSFW links. If you’re capable of explaining someone else’s argument, I’d be happy to listen and debate you.

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          • ferd

            Tonka ..your “NSFW” .. was a smart response …for self-protection.

            Tis a shame though …a shame that we self-censor. The book-burning thought police are powerful indeed.

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        • Cricket

          Not so easy. China bought those Treasurys in order to lower their currency and maintain a strong international export position. If they stop buying (possible), or try to dump (good luck with that) China can kiss exports goodbye. Japan and a soon-to-be reunified Korea will be happy to take their place.

          So they have a choice; play along for a while until things settle down or go live in a cave and eat rats.

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        • Dr. Fly

          Nonsense. Fed is largest owner of TSY. They could easily expand balance sheet to buy Chinese holdings in full.

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      • numbersgame

        Good point, but is that really “Game.Set.Match.” or Mutually Assured Destruction?

        Considering the trade deficit sizes that you brought up, then China’s $30B tariff was actually more significant thatn the US’s. This shows that they aren’t scared. Also, as some have pointed out, the soybean tariff showed that China showed that they were willing to play the same game of chicken as CHina despeartely needs US soybean imports.

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  2. tonka

    meh

    All things considered given the rhetoric, today was not that exciting.

    VIX at 21, down from 50.
    VVIX at 100, down from 200

    I’ll buy any new lows if they come with a sub 30 VIX

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  3. sarcrilege

    I am all for carnage, scorched-earth policy, no health care, no medicine, no social net, extreme poverty, hunger, no housing, famine and massive death toll just to teach the scum like those filthy mongrel degenerates in 69 vids a lesson in good taste and proper etiquette.

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  4. joyous__ending

    Interesting stat:
    Since the introduction of SPY it is rare for it to close negative 3 months in a row:
    When it does the full year does poorly and it general indicates a bear market.
    It happened in 1999, 2000, 2001, 2002, 2003
    and 2007, 2008
    and 2011.
    A negative month of April and we are likely into 1-3 years of bearish/tradable muck.

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    • sarcrilege

      Come on, the usual market riggers can invalidate and turn those patterns on their head if they ever so desire. Confetti oozing from the FED and other CB’s is all it takes to wag the markets.

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      • joyous__ending

        >the usual market riggers
        True, I’m just saying if this month closes down anyone who goes on TV claiming we hit new highs later this year…is blowing smoke.
        Trump needs to get a plunge protection team in place, because I’m not sure the forces that want him to fail outweigh the forces of success.
        Obama has Bernanke QE and more.
        Trump has a lot, lot less.

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    • Lyndon Keltner

      All the occurrences you cited fall within the last secular bear market period. Need a bigger sample size to persuade.

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  5. soupbone

    Trump is making a rod for his own arse.

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    • joyous__ending

      Trump is playing with fire if he thinks the market can give up 15, 20% and the economy just roll along and he gets re-elected. In 2010 unemployment was hitting 10% it helped the R’s win 70 seats. If the market is down 20% in October……even the Senate may be gone.

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  6. Lyndon Keltner

    China has been boosting domestic consumption and exploring new markets (e.g., the shithole countries in Africa) all these years knowing too well that America has been a deadbeat country for decades (from less than $1 trillion debt during the Jimmy Carter days to $20+ trillion right now).

    Combined that with the fact that the US economy isn’t nearly as big as it used to be as in terms of its size to the world economy, you can expect more and more defiance to come.

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    • numbersgame

      Why would China look to Africa for it’s products? If they want to shill to a billion low-income consumers, then they already ahve their home market for that.

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  7. Cricket

    This is a game that both Xi and Trump enjoy playing.

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    • joyous__ending

      Xi is president for life. Trump has to face the voters in 5 months and the Iowa primary is a year away from this January.

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  8. ferd

    Did the Chicoms want to make our toys in exchange for funny money forever? I doubt it.

    Xi stepped-up censorship, made himself king for life, set-up petroyuan infrastructure, stockpiled copper, etc… …maybe they’re ready to convert what TSY they can to gold/silver (like proper mercantilists) and blow the current system apart.

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  9. Lyndon Keltner

    Drudge actually linked an informative article. Wearer going back to the Nokia brick cell phones and fridge-size TVs when China goes nuclear on the trade war and sets an embargo on earth metals to the US.

    http://theweek.com/articles/765276/how-china-win-trade-war-1-move

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    • The Maven

      Drudge is an aggregator. If their articles are not legit, the entire news industry is fake news.

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      • Lyndon Keltner

        You conditional statement is a good example of a common logical fallacy.

        Nonetheless, we can agree that Drudge is an aggregator (with an emphasis of his own “conservative” bias).

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  10. sarcrilege

    Well put. Nonetheless, there’s no recorded historical example of totalitarian communism/socialism surviving for any meaningful period of time. Perhaps Xi hopes he can be the first one. I doubt it. I expect them to turn coats, adopt 100% mercantile policy and shackle China and the world with golden handcuffs, the ultimate austerity and disciplinary program.

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    • The Maven

      They have been doing pretty well since the late 1940’s.

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  11. ericbakerbruce

    The chink will blink

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  12. heaterman

    I’d be willing to bet the Chinese are prone to travel an incredibly long distance down the stupid road for the sake of “saving face”. Maybe even past the point of no return for their economy. Which of course would mean the only means left to save face would be war with the aggressor.

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    • one-eighty

      Sort of like D. Trump, especially as he is not hurting himself.

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    • moonshot

      I’m just waiting for both sides to go “all in”. Unfortunately for China, unlike poker, that means they lose much more bigly, and might be better off negotiating something better for both sides.

      And to think millions of people think Trump is too stupid to have thought of this.

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  13. MSGT HARTMAN

    The average Chinese woman makes $1.25/hr.

    That’s all the leverage the Chinese have, cheap labor.

    The US has a much larger kit bag with all kinds of neat stuff in it.

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  14. dae42

    BTFD and sell the rips. Aka inverse Fly strategy.

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  15. one-eighty

    A lot of the stuff that Trump is putting tariffs on are products made by American companies in China for the US market.
    I can see India doing well by all this as the US companies open factories there instead.
    Or shipping Chinese Iphones to India, putting in a few screws here and there, and then sending them to the States as Made in India.

    I wonder if the average Trump voter will connect the dots when he wanders into Walmart to look for a 5 dollar mop, and sees a higher price tag on it.

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    • moonshot

      Screw Wal-Mart. I have blacklisted them and the horse they rode in on. Let’s ban all Chinese crap and see if maybe they might wake up to taking care of the North Korea problem.

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  16. 99 lead balloons
    99 lead balloons

    China is a cinder box. States could set off Mass protests throughout the country.

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  17. zephler

    pro tip: the prediction of the end has been around since the beginning – not gonna happen – the rouse still works I suppose

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  18. zephler

    curious, being a leaf (not proud of it), but how does merica balance between pissed off 16 year old’s hating on guns while simultaneously lining up to subscribe to whatever a degenerate like six nine dictates to them is cool? WTF

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    • moonshot

      The 16 year olds will learn the hard lessons of every generation before them, that they will have to learn how to ”adult” and leave mom’s basement. Their entitlement will hobble them, but the best as always will rise to the top and take their places as productive members of society.

      Millions of others will have their dreams of easy riches crushed and not understand why their superior YouTube-watching skills don’t make them employable, but these kinds of people have always existed, and it will be a while before robots have replaced their minimum wage opportunities completely.

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    • moonshot

      As far as gun control goes, it will follow the natural course of history. Those who take security for granted and become fat, weak, lazy, and “give peace a chance” will be conquered by the aggressive, strong, industrious, and “take what is mine”.

      The strong will then create a safe secure environment for their children, who over time will forget these lessons and take their peace and security for granted, and the cycle repeats.

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      • ferd

        That’s been true. But the cycle is obsolete; the tools for destruction that we now possess make it so.

        Will we break the cycle before we destroy the biosphere? I’d hoped that the US, as the lone superpower, might be able to keep the crazies from taking over. But the people who have no morals and are willing to do anything, still eat sheep. And sheep continue to project their wholesome motivations onto sociopaths.

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  19. dragun

    Developed nations and their corps bent the knee to China for access to their mkt.

    This translated into cheaper goods and higher profits for the developed economies.

    Chinese plan on long term time horizon not quarter to quarter or year to year. I would be very surprised if China broke their resolve. They will control their citizenry with an iron fist.

    Russians and Chinese have experienced hardship in the past and are not soft. Thos could take some time to work out.

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  20. fryguy15

    We are going, the fuck, higher!

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