Wednesday, July 25, 2018

Expect a frantic dance of musical chairs in the stock markets.

When I buy shares through my discount brokerage, I am trying to get them as cheap as possible.  Thus, I start bidding low, sometimes even making a stink bid. Then, after a short time if the trade doesn’t go through, I raise my bid – or not depending how badly I want to buy. Sometimes the asking price runs away from me.  I can walk away or… pay the ask and hope the trend continues.

I think the same is true for any businessman trying to buy or negotiate a deal. This includes Trump and NAFTA and his trade wars.  Trump’s time horizon is still relatively early. At his inauguration he stated that he was not sure he’d go for a second term – after all we know his personality by now and he is an old geezer of around 70 by then nearly 75 years in age. Would you live his hectic lifestyle when you are that age?  So, I suggest he never intends to stay around for a second term and he wants to do a lot. With the November elections coming up, his window of opportunity is getting shorter by the day.

My guess: He will increase his bid towards better terms for his sellers after November. But in the end, he wants to ‘buy’, i.e. deal with China, Mexico, Canada and Europe.  If the trade tensions decrease after November, you may see a short but fast rising bull market for stocks. At the same time a recession (based on the spread between short and long term interest rates) is getting closer and closer. This will become a frantic dance of musical chairs!

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