A Decade of Dirtnap
By Jared Dillian
I’m typically not one for nostalgia, but doing 10 years of anything (in a row is pretty impressive. I have saved every single issue, in this bookshelf in Christian’s office.
That’s what 9 years of writing looks like.
Anyway, looking ahead to 2018. I hear that we just had a perfect year in the stock market, a year in which the market was up every single month, which apparently has never happened. Hard work being short stocks. What about next year? I wish you all could have been present for my talk at DirtCon, in which I laid out the long term view.
The long term view is: Trump is going to be Trump.
Again, Axios has the best sources in the White House. Mnuchin managed to keep a lid on Trump during Tax reform, successfully I might add, but Trump is a true believer on trade and he wants his tariffs. We are going to get them imminently.
This is the whole reason we are holding letter X. The position is somewhat large, and I am going to make it even larger in 24 hours.
But the tariff issue is much bigger than letter X. Let me go out on a limb and say that...tariffs...could hammer the stock market. Nothing seems to hammer the stock market, so who knows, but historically, unfree trade seems to do the trick. And the thing about opening the tariffs Pandora’s box is that people retaliate, and it gets worse and worse and worse. I hate to make sweeping statements, but this could be the beginning of the end of globalization.
What happened during globalization?
- Prices came down
- Wages game down
- Financial assets went up
- Hard assets went down
- Consumers benefitted
Now send this process in reverse.
Anyway, for people who weren’t there during the conference, I said that Trump was eventually going to be Trump, because cooler heads can only prevail for so long. The volatility that we thought we were going to get from the beginning—we will get. And that is the one thing that I’m more willing to bet on than lower stocks: higher volatility.
The other thing that the Axios guys keep hitting on is that the probability of war is a lot higher than we think it is. Wars can be good for stocks, but in this case, probably not, considering that they are priced for perfection, and considering the risks involved.
So I’m going to say that war is bad for stocks and tariffs are bad for stocks and the chances are good that we are going to get one or both.
I have a gift for oversimplification, so there you have it.
I think we are going to have a bad year, and I think that people making fun of pessimistic people is probably going to hit a wall going full speed. This one snuck in over the Christmas break: Uber just did a massive down round, with Softbank, of course. I wonder. What would Uber’s valuation be in a Softbankfree world? A down round from the biggest unicorn is a huge deal, but nobody was paying attention during the Christmas-New Year’s no-zone. If there’s one position I can play, it’s the goalie.
Corporate Tax Cut Fever
As I write, a Bloomberg story just came up (and disappeared...I hate when it does that) about how “Corporate Tax Cut Fever May Spread Around The Globe.” This should be obvious, but isn’t. We are in competition with other countries. To attract investment, other countries, especially in Continental Europe, are going to have to lower corporate tax rates. Macron was lowering France’s, but he is going to have to lower it faster. The U.K. is in the midst of lowering theirs.
So I just wrote a bearish article up there ↑ but there is going to be a lot of (lagged) global growth coming out of these tax cuts. I don’t care if you like Trump or not, or whether you think he’s an idiot for talking about the stock market all the time, the stock market went up because he promised tax cuts and delivered. If you start seeing this elsewhere in the world, you might see rising stock markets there as well.
Not for nothing, we’re still long a boatload of EWQ, and I said at the time that the French election was a really, really big deal, and that Macron was going to ruthlessly transform/reform the French economy. That’s the whole reason we’re long EWQ. France is going to be ripping for years to come, especially if he gets some giddyup on these corporate tax cuts.
On the one hand, tax cuts...on the other hand, tariffs. Going to be an interesting year. For what it’s worth, I’d say that the tax cuts are mostly priced in and the tariffs are not. Is anyone other than me talking about the implications of unfree trade? I don’t think so.
Going Postal
Actually, it’s about time we retired the “going postal” phrase. Nobody has gone postal in a post office in a long time. The reputation is no longer deserved.
Trump said that the postal service needs to charge Amazon more to deliver packages. Trump is looking a bit lost/befuddled here, but one of these days he is actually going to dream up a legitimate way to go after Amazon, and then it is going to be all over. Is there anyone in the Trump administration who understands antitrust law well enough to make this happen? Are they having conversations with legal scholars and lawyers at the DOJ? If you really dislike Amazon, this is the way to go after them. Trump doesn’t like Amazon, and it’s because Bezos’s paper rips on him 20 times a day.
This is going to happen. It is only a matter of time.
I have to wonder what goes through Bezos’s head. Your newspaper rips on the president every day. Not smart! Yes, you have 100 billdog, making you the richest person in the world, but the richest person in the world is not more powerful than the president of the United States, who has unlimited legal resources at his disposal. Why poke the tiger? Talk about a giant ego.
The trend is your friend. There is resentment building against big tech companies. It has not reached a top! We are not even halfway there. This is a 5-10 year trend; this is only the beginning. 2018 will be the year that we start to see some action. I have no idea what form that will take, but it’s coming. See “BOOLEAN ALGEBRA” from last year.
Darkest Hour
Saw the Winston Churchill movie, was not disappointed.
Americans don’t know a lot about Churchill. They don’t know that it’s actually one of history’s great ironies that he became prime minister so late in life—really, most of his best work had already been done. Churchill was one of the world’s most prolific writers, mostly by dictation. The man was a fountain of words, writing millions over his lifetime. It took a guy like Churchill to make the case that Hitler could not be negotiated with—when everyone was in the mood to negotiate—even the King.
Anyhow, some interesting parallels today with North Korea. North Korea isn’t marching across Asia annexing territory, but you could make the same argument that Kim Jong-Un is not someone you can negotiate with. He is as irrational as Hitler. Trump may understand this intuitively, but he may be the least articulate leader in our history, and if we learned anything from tax reform, it is that salesmanship counts for a lot. A lot of people think their taxes are going up (when in fact they are going down), and by the way, under Trump we’ve pretty much completely defeated ISIS, but nobody is talking about it. Again, inarticulate, a lack of salesmanship—which is all part of leadership.
Saw the movie yesterday at the 1:40 PM showing and the place was packed. Everyone had the same idea.
0 comments:
Publicar un comentario