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The Trade War Escalates. Part 3. Today’s employment numbers are fine. How to scare Canada Geese off.

Trump now proposes tariffs on $100 billion more Chinese imports. This will hurt American consumers with higher prices and cause China to respond with more tariffs, hurting American exporters. And so on. And so on.

No one wins this. Everyone loses.

The Economist concluded:

The list China published on April 4th is even bolder. It makes no effort to comply with World Trade Organisation rules, and aims at pressure points in America’s democracy, including industries with powerful lobbies, such as aircraft and soyabeans, as well as products from politically sensitive states. Wisconsin is home both to Paul Ryan, the Speaker of the House of Representatives, and a sizeable share of America’s cranberry exporters. Mitch McConnell, the Republican leader of the Senate, represents Kentucky, home to America’s bourbon exporters. Both products are included in China’s $50 billion tariff threat.

Such methods have worked before. In 2003, when the European Union threatened to put tariffs on American products, including oranges, in retaliation for George W. Bush’s tariffs on European steel, Mr Bush yielded. (Florida, a crucial swing state, is home to many orange-growers.) Mr Trump’s pronouncements do not suggest he is ready to sue for peace. Nor does he seem aware of the risks of failure.

Paul Krugman, Nobel price winner in Economics, writes yesterday:

The Art of the Flail

If you’ve been watching stock markets, you’re probably feeling seasick. The Dow is crashing! No, it’s bouncing back! Wait, it’s crashing again!

In general, trying to explain stock fluctuations is a mug’s game. But in this case it’s pretty clear what’s going on. Whenever investors suspect that Donald Trump will really go through with his threats of big tariff increases, provoking retaliation abroad, stocks plunge. Every time they decide it’s just theater, stocks recover. Markets really, really don’t like the idea of a trade war.

So is a trade war coming? Nobody knows – even, or perhaps especially, Trump himself. For while trade is one of Trump’s two signature issues – animus toward dark-skinned people being the other – when it comes to making actual demands on other countries, the tweeter in chief and his aides either don’t know what they want or they want things that our trading partners can’t deliver. Not won’t – can’t.

As a result, incoherence rules: The administration lashes out, then tries to calm markets by saying that it might not carry through on its threats, then makes a new round of threats.

Let’s talk in particular about the will-he-or-won’t-he confrontation with China.

In some ways, China really is a bad actor in the global economy. In particular, it has pretty much thumbed its nose at international rules on intellectual property rights, grabbing foreign technology without proper payment. And to be fair, Trump officials do sometimes raise the intellectual property issue as a justification for getting tough.

But if getting China to pay what it owes for technology were the goal, you’d expect the U.S. both to make specific demands on that front and to adopt a strategy aimed at inducing China to meet those demands.

In fact, the U.S. has given little indication of what China should do about intellectual property. Meanwhile, if getting better protection of patent rights and so on were the goal, America should be trying to build a coalition with other advanced countries to pressure the Chinese; instead, we’ve been alienating everyone in sight.

Anyway, what seems to really bother Trump aren’t China’s genuine policy sins, but its trade surplus with the United States, which he has repeatedly said is $500 billion a year. (It’s actually less than $340 billion, but who’s counting?) This trade surplus, he insists, means that China is winning – in effect stealing $500 billion a year from America.

As many people have pointed out, this is junk economics. Except at times of mass unemployment, trade deficits aren’t a subtraction from the economies that run them, nor are trade surpluses an addition to the economies on the other side of the imbalance. Over all, the U.S. trade deficit is just the flip side of the fact that America attracts more inward investment from foreigners than the amount Americans invest abroad. Trade policy has nothing to do with it.

Beyond this conceptual confusion, there’s a raw fact few people – and, as far as I can tell, nobody in the Trump administration – seem to appreciate: China no longer runs big trade surpluses.

This wasn’t always true. A decade ago, China’s current account surplus – a broad measure that includes trade in services and income from investments abroad – was more than 9 percent of G.D.P., a very big number. In 2017, however, its surplus was only 1.4 percent of G.D.P., which isn’t much. Meanwhile, the U.S. ran a current account deficit of 2.4 percent of G.D.P., a bit bigger, but also much smaller than the imbalances of the mid-2000s.

But in that case, why is “bilateral” trade between the U.S. and China so unbalanced? The answer is that it’s largely a kind of statistical illusion. China is the Great Assembler: it’s where components from other countries, like Japan and South Korea, are put together into consumer products for the U.S. market. So a lot of what we import from China is really produced elsewhere.

It’s not clear why we should demand that China stop playing that role. Indeed, it’s not clear that China could even do much to reduce its bilateral surplus with the U.S.: To do so, it would basically have to have a completely different economy. And this just isn’t going to happen unless we have a full-blown trade war that shuts down much of the global economy as we know it.

Now, Trump himself might be O.K. with large-scale deglobalization. But as we’ve seen, his beloved stock market hates the idea, and with good reason: Businesses have invested heavily on the assumption that a closely integrated global economy is here to stay, and a trade war would leave many of those investments stranded.

Oh, and a trade war would also devastate much of pro-Trump rural America, since a large share of our agricultural production – including almost two-thirds of food grains – is exported.

And that’s why things seem so incoherent. One day Trump talks tough on trade; then stocks fall, and his advisers scramble to say that the trade war won’t really happen; then he worries that he’s looking weak, and tweets out more threats; and so on. Call it the art of the flail.

Some of my friends can’t take the daily gyrations They are out of the market. They tell me they’ll only return when we have a new President.

Some are day-trading the inter-day gyrations. Some are making a handsome living. Volatility is good for day trading.

I’m sitting pat, watching and waiting. Hoping that saner heads will prevail in Washington. Hope is a bad strategy. But so is panic.

Lessons from Facebook’s gigantic hacking.

+ The Internet is a seriously a dangerous place.

+ Whatever you post, write about, discuss — on Facebook or LinkedIn or a blog like mine or anywhere — stays on the Internet. Whether you “delete” it or not.

+ Whatever gets written about you on the Internet is always findable by Google — even if you delete it.

+ Whatever you post on your corporate site is always findable by Google — even if you delete it.

+ Your reputation can be sullied by “innocent” stuff you wrote or was written about you years ago. That includes this blog.

+ “Delete” means nothing. You can never delete what appeared about you on the Internet. I can explain. But the technical explanation would be too boring. Trust me.

+ In sum you can be compromised, taken advantage of, or hurt.

+ What you read on Facebook or any other social media should be viewed with great skepticism. Maybe it’s true. Maybe it isn’t. Maybe it’s there to influence you to do something — like vote for someone or buy a new product. Skepticism is your only strategy.

+ You can live without Facebook. Personally I prefer Instagram. It has great travel and animal pictures.

To my brain, Facebook has become everybody’s favorite whipping boy — the classic cockroach stock.

All about my new ReSound hearing aids

+ You need hearing aids when your family says you need them.

+ There is no perfect hearing aid. They all amplify everything. Noise and speech. What you don’t want to hear. And what you want to hear.

+ They can be annoying.

+ I bought my ReSound hearing aids from Costco for $2,800. I have no idea if my hearing aids are better or worse than ones half the price or twice the price.

+ There are no technical reviews of hearing aids — like there are of laptops, cell phones, TVs, and all the other technical stuff we buy each day. The industry is 100% snake oil.

I have been writing technical reviews for over 50 years. I even ran a testing lab. We’d compare performance based on standard metrics — technologies, microprocessors, memory, software, speed of communications. Hearing aids are a total mystery. I have no idea what technology  is inside my ReSound hearing aids. A modern iPhone has substantially more technology inside it than my hearing aids. Why my hearing aids should cost several times than iPhone is a total mystery.

Reading about hearing aids on the Internet I did find this delicious quote which seems to sum it all:

…I must say the hearing aid industry ranks right up there with used car dealers, snake oil salesmen and other unethical businesses that prey on the elderly and other disadvantaged people. I paid over $5,000 for these hearing aids, and it looks like I am going to have to buy new ones because the industry is full of greedy charlatans.

I’ve learned to carry spare batteries. My hearing aids die at the most inconvenient moments. I’ve learned that I don’t need to wear them all the time. I think re-chargeables are the way to go.

It’s Canada Geese season

They are gorgeous animals.


They are also very generous, leaving large slimy green presents everywhere, which are hard to clean up.

Hence there is a thriving business in scaring them off. The Bird-X Coyote 3-D Predator  has a tail that flaps in the wind and scares geese away. It sells on Amazon for $35. Click here.


Scary! How well does it work? Here’s the corporate campus this week of a Fortune 500 company in the Pacific Northwest. The coyote decoy is circled.


The decoy got three stars on Amazon. threestars

We also have a geese problem at our house in California. Hence our interest in decoys.

So far, our best “decoy” is our 15lb Rosie, who can bark up a storm when we let her loose on the geese.


But they also will threaten Rosie. Nasty animals.

Don’t leave valuables in your “locked” car

Much too easy to steal. All you need is a can of WD40 and a toilet plunger. Here’s how:

Be careful with ATM machines. 

Many now sport a card skimmer which steals your debit card vitals. Here’s what you should watch for:

Harry Newton, who notes a declining stockmarket this morning, following a weak jobs report. The New York Times story headlined:

The March Jobs Numbers Show the Economy Is Sound, but Far From Invincible

The basic story of a strong labor market remains intact, but a disappointing report is a sign that the U.S. is not in some extraordinary boom.

You can read the entire report on the employment numbers here. 

Joel Ross reports in positively this morning

To understand the March jobs report,

The BLS does seasonal adjustments and takes account t of temporary weather related events. The ADP report done by Moodys is not adjusted the same ways and does not make temporary weather related adjustments so it is possibly more accurate. The BLS number of 103,000 is more noise than real. Jobs growth will return in April. It will be back to the over 200,000 number and unemployment will drop below 4% as the months go on.

U6 is at 8% which is very good by historic standards. The economy is booming and anyone who wants a job, assuming they are breathing and not strung out on drugs can find one. Do not react to the jobs report today. The Fed will likely overlook it as not part of the trend. Retail sales have slowed from end of the year, but I believe it is due to consumers deciding to pay off debt, save and get their balance sheets in better order. They will be spending more as the year goes on and as more raises are granted, and the confidence that jobs are plentiful settles in.

The tax deductions are only in place for 3 months so for the average worker it is just starting to matter. Capital expenditure by companies is really ramping up now, and that means better productivity and more jobs. In short, nothing has changed and the economy is very strong. Stocks are now selling at 16.5X so they are a good buy again. Earnings season begins next week and that is more important than the March jobs number by far.

  • Dman

    Harry—Do you remember me mentioning TruNiagen by ChromaDex (CDXC)?

    The stock sucks but TruNiagen is something all of your friends will be taking in a few years.

    • harrynewton

      I went to the site. TruNiagen is a dietary supplement. The site says “Tru Niagen consists of a newly discovered, highly bioavailable form of vitamin B3 called nicotinamide riboside (NR). NIAGEN-branded NR and Tru NIAGEN are the only NR supplements that have notifications from the US Food and Drug Administration as a new dietary ingredient and as generally regarded as safe.” Generally I don’t like dietary supplements. Maybe this one works? I have no knowledge. Right now, exercise, sun, rest and limited stress seem to work for me.

  • Jerry

    Harry, I like the new look of the site. Who designed this? Was it done on Word Press?

  • Dman

    Or as he is otherwise know on Wall St as Paul “Fucking” Krugman…..LOL!!!

    Harry, is Trump Derangement Syndrome effecting your health yet?

    Harry, is today Trump/Russia Day?…..LOL!!!