Economic, taxes, and tariffs discussion

[revo]

As chancellor says, it's a short-term thing. Generally, lower prices in the bond market suck the money out of the stock market. However, continually rising interest rates make that a bad short-term play. You put your money into equities until interest rates stabilize.

J

This is not correct.

Lower prices in bonds don't "suck the money out of the stock market" -- the higher yields of treasuries do. When you buy bonds with lower prices, you're getting the bonds with lower yields. When the 10-year treasury yield hits 3%, many institutions move money into the less risky world of bonds.

Furthermore, a rising interest rate environment, as I said before, is usually a bad environment for stocks because companies now face higher borrowing costs, as do consumers, and therefore spending drops.

[Hornsby]

Trade wars are easy to win!

Some U.S. farmers are reportedly letting their crops rot as storage costs rise amid the escalating trade war with China, according to Reuters.

The farmers say they are unable to sell their grain to China due to Beijing's 25 percent tariff on U.S. soybeans. That punitive measure came in retaliation for duties imposed by Washington. It is now too costly to store the grain in elevators, or silos that store grain, Reuters reported.

The cost of storing grain in elevators is reportedly two to three times more than it cost at this time last year.

“I’ve never seen things this bad,” soybean farmer Russell Altom, who is senior vice president of agricultural lending at an Arkansas bank, told Reuters. “I know several farmers who hired lawyers, to see if they can sue over the pricing and fees issues.”

Grain farmers have begun plowing under crops or leaving them to rot, hoping that prices will decrease soon, Reuters reported, citing interviews with more than 20 farmers, academic researchers and farm lenders.

Farmer Richard Fontenot said "no one wants" the grains.

“I don’t know what else to do," he said.

U.S. farmers planted 89.1 million acres of soybeans this year before China, one of the country's top soybean consumers, imposed the steep tariff, according to Reuters.

https://thehill.com/policy/finance/417803-us-farmers-letting-crops-rot-as-storage-costs-rise-due-to-china-trade-war

[onejayhawk]

This is not correct.

Lower prices in bonds don't "suck the money out of the stock market" -- the higher yields of treasuries do. When you buy bonds with lower prices, you're getting the bonds with lower yields. When the 10-year treasury yield hits 3%, many institutions move money into the less risky world of bonds.

Furthermore, a rising interest rate environment, as I said before, is usually a bad environment for stocks because companies now face higher borrowing costs, as do consumers, and therefore spending drops.

How is that not sucking the money out of the equity markets?

Your second point is more valid. Interest rate issues are complex.

J

[revo]

How is that not sucking the money out of the equity markets?

Your second point is more valid. Interest rate issues are complex.

J

Cmon J. You said “lower prices” suck the money out. That is an incorrect statement. Higher yields do. Again, the higher yields are not on the bonds whose price has been lowered — the higher yields are on NEWLY issued bonds.

Trust me. I spent 10 years marketing bond funds for three of Wall Street’s premier bond managers.

[onejayhawk]

Cmon J. You said “lower prices” suck the money out. That is an incorrect statement. Higher yields do. Again, the higher yields are not on the bonds whose price has been lowered — the higher yields are on NEWLY issued bonds.

Trust me. I spent 10 years marketing bond funds for three of Wall Street’s premier bond managers.

Now you are just quibbling because the statement is not incorrect so much as imprecise. You and I know that lower prices mean higher yield, but we were both in the business. Not everyone was.

J

[chancellor]

Good article by Deutschland Welle: https://www.dw.com/en/no-winners-in-...Irnl1xNl2NKyH0

Key points relative to Chinese tariffs:

- The EconPol Europe study calculates that Chinese exporters are bearing approximately 75 percent of the costs, meaning that eventually a net gain of $18.4 billion will be added to the US economy.
- Chinese exports to the US are bound to decrease by 37 percent because of higher duties, the study says, and this will eventually lead to 17 percent drop in China's trade surplus with the United States. "Let's be clear that tariffs are nothing else but duties that have to be shouldered by foreign producers and domestic consumers," co-author Gabriel Felbermayr said in a statement.
He points out that US consumer prices for affected Chinese imports will most likely rise by 4.5 percent, but confirms that the US economy as a whole will profit from the protracted trade spat.

[revo]

According to a Deutsche Bank study, a record 90% of asset classes are negative for 2018. Previous high was 82% in 1929. #thanksdonald

[Teenwolf]

I'm sure one of you right wingers can explain to me how giving GM millions (billions?) in tax breaks, then watching them pour all that money into stock buybacks... now they're closing 5 plants, including one in Canada.... is all a good thing, right? What a heist!

Brilliant strategy. It's a good thing the economy has boomed to offset the deficit... oh, wait, deficit is doubled. "fiscal conservatism" is a myth, dead and buried.

[DMT]

"Fiscal conservatism" equals shrinking benefits for non-rich people.

[Sour Masher]

"Fiscal conservatism" equals shrinking benefits for non-rich people.

Yeah, austerity measures on the right always seem to start at the bottom of the economic scale, where people use most of their income to feed, cloth, and house themselves, rather than the top, where folks use extra income to do the same thing, but with $100 bottles of fancy water, $10,000 purses, and $10,000,000 homes. And the justification is always--job creators, trickle down economics, etc, which has been proven to be a farce, and doesn't account for the fact that a lot of the tax breaks go directly to increasing the personal wealth of rich people.

As we've said before, it is a damn shame we can't start the belt tightening with things most of us agree on, like defense spending cuts. But too many palms are greased by the MIC.

[revo]

One day after GM announces that it too will layoff 15,000 and close 5 plants -- because of "changing consumer demands and challenging headwinds" wink wink, nod nod -- Dopey rages at CEO Mary Barra and claims that they will "end all subsidies to GM."

Except, uhhh hey Dopey, we don't provide any subsidies to GM. There's only a $7,500 tax credit to any consumer that buys an electric car (for the first 200,000 electric cars a company sells), but that's an industry-wide thing, not anything special to GM. The tax credit for GM will likely have disappeared anyway as they're close to selling 200,000 electric cars. And yo, Dopey? Congress has to approve it since it was written into your new tax bill.

But hey, punishing the consumer is nothing new in Trump World, and I'm sure his base will just eat it right up!


If you're scoring at home, "challenging headwinds" (i.e. tariffs) have now cost 30,000 US jobs at Ford & GM, and thousands more at Harley Davidson. #thanksdonald

Also, DOUBLE the farms have declared bankruptcy since just 2013-2014. #thanksdonald

And BTW, there is current thinking that Doofy Donnie, in all of his stable geniusness, in order to combat these layoffs, will move forward with a potentially devastating tariff against imported cars, that economists -- so far proven 100% correct -- believe could cost another 150,000 jobs in the auto industry.

[chancellor]

USMCA officially signed yesterday to replace NAFTA:

https://www.npr.org/2018/11/30/672150010/usmca-trump-signs-new-trade-agreement-with-mexico-and-canada

[chancellor]

One day after GM announces that it too will layoff 15,000 and close 5 plants -- because of "changing consumer demands and challenging headwinds" wink wink, nod nod.

I'm not sure what the "wink wink nod nod" is about. The plants that are closing are all plants that manufacture cars, and the bulk of them sedans. GM's outright eliminating a number of sedan models. Light trucks, SUVs, and crossover model sales are significantly up. Reference:

http://www.wsj.com/mdc/public/page/2_3022-autosales.html

In fact, GM shows a net increase of 40,000 vehicles sold - except the issue is there's an increase of 48,000 in the light truck/SUV segment and a decrease of 8,000 in the car/sedan segment. And light trucks are more than 75% of the total GM vehicles sold now (about 569,000 out of about 715,000).

The data sure tells me this is a market correction for GM, not a tariff issue. Otherwise, I'd expect at least a net decrease in vehicle sales, not an increase. And I'd certainly not expect the overwhelming increase to be in the segment that's most heavily impacted by the tariffs (i.e, greater weights of steel per truck than car on average, and so on)

[Bernie Brewer]

I'm not sure what the "wink wink nod nod" is about. The plants that are closing are all plants that manufacture cars, and the bulk of them sedans. GM's outright eliminating a number of sedan models. Light trucks, SUVs, and crossover model sales are significantly up. Reference:

http://www.wsj.com/mdc/public/page/2_3022-autosales.html

In fact, GM shows a net increase of 40,000 vehicles sold - except the issue is there's an increase of 48,000 in the light truck/SUV segment and a decrease of 8,000 in the car/sedan segment. And light trucks are more than 75% of the total GM vehicles sold now (about 569,000 out of about 715,000).

The data sure tells me this is a market correction for GM, not a tariff issue. Otherwise, I'd expect at least a net decrease in vehicle sales, not an increase. And I'd certainly not expect the overwhelming increase to be in the segment that's most heavily impacted by the tariffs (i.e, greater weights of steel per truck than car on average, and so on)

And, didn’t Ford just do the same thing.

[revo]

And, didn’t Ford just do the same thing.

They did....and they said very specifically said tariffs have already cost them $1BN. As did GM.

At this point, you have to be willfully blind to see that tariffs are not playing a role in these layoffs, whether they announce them specifically or not. And it's clear they didn't specifically say "tariffs" because, as I posted, they wanted to avoid confrontation with the Confronter-in-Chief. Sorry Chance.

Since GM did not specifically say that tariffs were to blame, we can only see informed opinions as to if they played a factor:

Opinion 1
"It's hardly the whole story, but Trumpian tariffs were a factor in the GM decision that will leave some families, communities and unions in despair. By raising taxes on imports, Trump raised prices GM had to pay for steel and a wide variety of other products needed to manufacture cars.

The timing was especially bad. The public had lately grown less interested in buying some of those cars, the small ones. When costs go up and income goes down, something has to give."

https://journalstar.com/opinion/columnists/jay-ambrose-gm-layoffs-show-folly-of-tariffs/article_2b309f2a-4c9f-5629-a4b3-b0ef411ae29b.html

Opinion 2, from Fox Business News:
"General Motors announced on Monday it will be laying off 14,700 workers, closing five factories, and discontinuing several car models. This has caused some soul-searching in the midst of a boom economy. There are three main lessons for policymakers and the public.

One, GM is being too shy about the reasons for the layoffs. President Trump’s tariffs have already cost the company a billion dollars. GM is skirting the topic, possibly to avoid political blowback—a strategy that is already not working."

https://www.foxbusiness.com/markets/lessons-from-the-gm-layoffs-end-the-tariffs-and-the-subsidies

Opinion 3
"Though GM did not cite Trump’s tariffs in its announcement Monday, the president’s continued insistence that everything will be fine and that those affected just need to be patient was a theme of the backlash to the company’s plans to restructure. “I implore [sic] President Trump to keep his word when he came to the Mahoning Valley last year and promised jobs were ‘all coming back. They’re all coming back. Don’t move. Don’t sell your house,'” said Rep. Tim Ryan (D-OH) in response to the layoffs in Lordstown. Ryan added that Trump has “been asleep at the switch and owes this community an explanation.”

https://www.rollingstone.com/politics/politics-news/gm-layoffs-trump-tariffs-760003/

Opinion 4
"Although neither party is blaming tariffs, some free-market advocates have suggested that they likely had an impact.

“While officials with General Motors did not reference tariffs in their restructuring announcement, it cannot be far from their minds nor the company’s bottom line,” Michael LaFaive, senior director of fiscal policy at the Michigan-based, free-market Mackinac Center told Watchdog.org. “Indeed, in past work officials have referenced the cost of new tariffs on the firm and the possible negative impact on jobs in the U.S. and elsewhere.”

The company announced earlier this year that it lost $1 billion due to tariffs."

https://www.watchdog.org/michigan/gm-says-massive-layoffs-not-caused-by-tariffs-others-skeptical/article_02a46224-f2a0-11e8-9fc0-a3ea7074b9cb.html

Opinion 5
"In June, Barra warned that new tariffs could hurt business and lead to mass layoffs. In comments submitted to the Commerce Department, GM said that another round of tariffs would cost the company $1 billion and hurt car prices. On a Monday call, Barra did not blame tariffs directly but said they were one of the headwinds that drove the company to downsize and refocus on electric and autonomous vehicles."

https://www.newsweek.com/donald-trump-general-motors-tariffs-jobs-1232267

You're not going to win this argument, Chance.