Buying puts before 10 am tomorrow?

[Cigarbutt]

This situation may be better approached more from a resiliency than a power point of view, in order to prevent outsized short-term disruptive unintended consequences. But the long term starts now.

 

An interesting blueprint to navigate between war and appeasement is the containment strategy.

https://www.amazon.com/George-F-Kennan-American-Life/dp/0143122150/ref=sr_1_1?keywords=George+F.+Kennan%3A+An+American+Life&qid=1566825726&s=gateway&sr=8-1

Interestingly, Mr. Kennan came up with an evolving strategy based on an intimate knowledge of opposing forces. He was also a critical force behind the Marshall Plan in order to build effective alliances and understood the importance of potential internal disunities.

The containment strategy came with some costs but we did very well overall. It did not rest on the primacy of the leader's power but more on its resilience and its enduring capacity while internal weaknesses and contradictions become manifest.

[DooDiligence]

This is how I'm looking at it now, perhaps more practical:

 

This is a market disruption, in the sense that Amazon disrupted retail.

 

It's not a trade war, it's the inevitable decoupling which will outlive Trump.

 

The US has a local market, it has Mexico and Canada, and Brazil and India if it wanted to. Big enough. More than enough.

 

American people will be better off. 

 

The only issue is the disruption process, some industries would have to pay.

 

I think this is an oversimplification.

 

It's a concept.

 

You want something more, go read a book.

 

Thanks for another oversimplification.

[HJ]

The economists deal with efficiency, the politicians deal with the consequence of that efficiency.  I watched "American Factory" on Netflix over the weekend.  The pain of the Midwest manufacturing base is palpable.  At some point, the question becomes whether the incremental efficiency achieved is worth the pain that it induces, whether in the form of income inequality or social cohesion of a community.

 

And the election of Trump is a statement that we are at that point.  It's one thing to be the beneficiary of lower costs of consumer product, and comment how low skilled labor need to upgrade their skill set.  It's another to be fired and told to upgrade your own skillset, especially for those over the age of 45.

 

 

[Jurgis]

China tariffs won't rebuild Midwest manufacturing. Manufacturing will just move to other cheap countries. The only effect is going to be price increases for US customers that will mostly hit the same low income households.

 

It's interesting to see how propaganda works. Majority of people (even on CoBF) had no issue with China 3-4 years ago. Now everyone's anti-China with very good arguments for it.

[abitofvalue]

China tariffs won't rebuild Midwest manufacturing. Manufacturing will just move to other cheap countries. The only effect is going to be price increases for US customers that will mostly hit the same low income households.

 

It's interesting to see how propaganda works. Majority of people (even on CoBF) had no issue with China 3-4 years ago. Now everyone's anti-China with very good arguments for it.

 

+1

[HJ]

China tariffs won't rebuild Midwest manufacturing. Manufacturing will just move to other cheap countries. The only effect is going to be price increases for US customers that will mostly hit the same low income households.

 

It's interesting to see how propaganda works. Majority of people (even on CoBF) had no issue with China 3-4 years ago. Now everyone's anti-China with very good arguments for it.

 

The argument for some form of trade tariff isn't specific to China, which just happen to be the biggest trading counterpart with the most impact.  So sure, it will go somewhere else, but should be taxed too.  The argument is to slow down the structural changes that deeply impact people's livelihood, so they will have time to adjust.  Years ago, Buffett proposed some form of import voucher to lessen the U.S. trade deficit at that time, which would have much more draconian impact than just a tax.  And critics have long complained about the lack of a coherent U.S. industrial policy.  So this argument isn't made simply because of Trump.  He's an ass, but as Munger would say, he's not wrong on everything.

 

It's also not true that the same low income people are impacted.  Different people are impacted differently.  How else do you explain the coast / inland political divide!  The argument was always there, and regardless of who the next administration is, it will no longer be easily dismissed, as it shouldn't be. 

 

 

 

[Jurgis]

China tariffs won't rebuild Midwest manufacturing. Manufacturing will just move to other cheap countries. The only effect is going to be price increases for US customers that will mostly hit the same low income households.

 

It's interesting to see how propaganda works. Majority of people (even on CoBF) had no issue with China 3-4 years ago. Now everyone's anti-China with very good arguments for it.

 

The argument for some form of trade tariff isn't specific to China, which just happen to be the biggest trading counterpart with the most impact.  So sure, it will go somewhere else, but should be taxed too.  The argument is to slow down the structural changes that deeply impact people's livelihood, so they will have time to adjust.  Years ago, Buffett proposed some form of import voucher to lessen the U.S. trade deficit at that time, which would have much more draconian impact than just a tax.  And critics have long complained about the lack of a coherent U.S. industrial policy.  So this argument isn't made simply because of Trump.  He's an ass, but as Munger would say, he's not wrong on everything.

 

It's also not true that the same low income people are impacted.  Different people are impacted differently.  How else do you explain the coast / inland political divide!  The argument was always there, and regardless of who the next administration is, it will no longer be easily dismissed, as it shouldn't be.

 

You probably have the heart in the right place, but I don't think the Trump gang does.

 

The argument for some form of trade tariff isn't specific to China

 

But it is applied specifically to China. And likely won't be applied to (m)any other countries unless they get in fight with Trump for whatever reason.

 

Furthermore, if the goal was Midwest industrial revival and if the method to achieve this goal was tariffs (I still think the method would not work, but hey), surgically aimed tariffs that are aimed to specific products across the globe and not to wide variety of products from single country would have a better chance to work.

 

I also think that the situation with manufacturing in US is way more complicated than the simple China-screwed-us narrative proclaims. You should look into the manufacturing statistics in US rather than just watching Netflix documentaries.

 

Even if after looking at statistics you still think that manufacturing in US is in trouble and should be supported, you'd probably should ask yourself what happens when that supported manufacturing all goes automatic and still does not employ the 45 year olds who were fired. And how much of the Midwest trouble and income inequality was caused by automatization and industry shifts vs. China.

 

In other words, you and the populace are being mind f**ked by Trump and co.

 

* This thread belongs in politics section long time ago.

** How nice I'm probably the only free trade person left. Gonna get hit both from the newly nationalist right and from the left.

*** That being said, yeah "Screw China!". But because of Hong Kong. Not because of Trump's p371s.

[SHDL]

I’m not interested in getting into a political debate, but one observation is that these arguments for protectionism have a lot in common with how various regulations — particularly around labor issues that make it very difficult to let go of employees — are usually justified in places like Western Europe and Japan.  I personally think those regulations have been serious drags on economic growth and business profitability in those regions and that if the current political climate persists in the US we may well be heading in that direction. 

[Spekulatius]

China tariffs won't rebuild Midwest manufacturing. Manufacturing will just move to other cheap countries. The only effect is going to be price increases for US customers that will mostly hit the same low income households.

 

It's interesting to see how propaganda works. Majority of people (even on CoBF) had no issue with China 3-4 years ago. Now everyone's anti-China with very good arguments for it.

 

I agree they the manufacturing they went to China won’t come back. Vietnam is a joke, because their economy is running hot already and it’s basically a Chinese colony economically. I do think that Mexico could be a major beneficiary, since it is a friendly state.

 

The biggest thing about China is theft of IP, by means of forced Jv’s which are basically forced IP transfer. Just concentrating on the IP issue, getting Europe, Canada and Japan behind it would have been a way smarter way to conduct, with much less risk, imo.

 

Interesting side note - Trump talks about “fair trade” now, not “free trade”. He is a neo mercantilist.

[HJ]

 

Even if after looking at statistics you still think that manufacturing in US is in trouble and should be supported, you'd probably should ask yourself what happens when that supported manufacturing all goes automatic and still does not employ the 45 year olds who were fired. And how much of the Midwest trouble and income inequality was caused by automatization and industry shifts vs. China.

 

In other words, you and the populace are being mind f**ked by Trump and co.

 

* This thread belongs in politics section long time ago.

** How nice I'm probably the only free trade person left. Gonna get hit both from the newly nationalist right and from the left.

*** That being said, yeah "Screw China!". But because of Hong Kong. Not because of Trump's p371s.

 

You should watch American Factory which is produced by the production company of the Obama's.  It has very little to do with Trump, but simply lay out the experience of a Chinese glass maker trying to build an American factory making glasses fo cars.  It highlights the differences, and concludes with the implications of automation.  If the argument is simply that this is technological progress, let it run its course, and maybe even use government incentive to bring it about sooner, there will be consequences, quite a lot of it unintended.  The communism ideology was born very much as a reaction to an earlier period of rapid technologically driven social changes, and as history shows, it easily gets high jacked by political opportunists.

 

I understand the desire not to be political.  But the 2 simply can't be divorced. We are suffering precisely from the political consequence of free trade.  In a sense, through free trade, China was able to export a large part of its own political problems, and the US imported it. 

 

 

[orthopa]

Fair trade is the issue here. Not global trade. Once tariffs are maxed out next should be more limiting of companies able to do business ie Huawei. On top of that is reciprocal forced transfer of technology, mandatory partnerships or joint ventures etc, cyber theft etc.  What is good for the goose...

 

Anyone have any examples of fair trade with China where Trump is going wrong?

 

China has given the WTO and the world and big middle finger, everyone ok with that?

[RuleNumberOne]

There is never going to be a trade deal. Jim Cramer gets it. El-Erian gets it. Trump and Kudlow sense it.

 

China's clear message has been: if you don't like the current trade setup, we don't need your trade.

 

Trump needs to stop squealing and begging for a trade deal. Every time he has a trade tantrum, he is seen as weak, very weak. When he attacks the Fed, and gets angry at China, he reveals extreme weakness and desperation.

 

China has shown a lot of strength, unflinching, not a flicker of pain. If they have to do with less farm produce, so be it. They are a superpower and have the rest of the world to export to. Their population is 4 times larger than the US.

 

When China's #2 said the Tiananmen response was too harsh, he was put under house arrest for the rest of his life.

[DooDiligence]

There is never going to be a trade deal. Jim Cramer gets it. El-Erian gets it. Trump and Kudlow sense it.

 

China's clear message has been: if you don't like the current trade setup, we don't need your trade.

 

Trump needs to stop squealing and begging for a trade deal. Every time he has a trade tantrum, he is seen as weak, very weak. When he attacks the Fed, and gets angry at China, he reveals extreme weakness and desperation.

 

China has shown a lot of strength, unflinching, not a flicker of pain. If they have to do with less farm produce, so be it. They are a superpower and have the rest of the world to export to. Their population is 4 times larger than the US.

 

When China's #2 said the Tiananmen response was too harsh, he was put under house arrest for the rest of his life.

 

Our Cheeto in chief only wishes he had that kind of power.

[Cigarbutt]

Fair trade is the issue here. Not global trade. Once tariffs are maxed out next should be more limiting of companies able to do business ie Huawei. On top of that is reciprocal forced transfer of technology, mandatory partnerships or joint ventures etc, cyber theft etc.  What is good for the goose...

 

Anyone have any examples of fair trade with China where Trump is going wrong?

 

China has given the WTO and the world and big middle finger, everyone ok with that?

-Unidirectional 'unfair' trade policies are clearly part of the picture, but isn't most of the trade deficit due to economies of scale and cheaper labor?

-China response to WTO complaints has a relatively mixed record but it has overall followed the guidelines setup around their access to the WTO in 2001 so why not build alliances and negotiate to improve what is felt to be an insufficient market transition, why abandon that line of progress and even withdraw from the Trans-Pacific Agreement and lose valuable credibility and presence in Asia?

-Let's say that Apple redistributes its supply chain in the Pacific Rim (you don't expect to repatriate that part to the US, do you?), how is that going to change the net trade deficit?

-Do you realize that the most important component behind the drive to outsource manufacturing has come from multi-nationals, often based in the US?

[Cardboard]

"* This thread belongs in politics section long time ago."

 

When I read statements like these, I have to LMAO.

 

Seriously any smart investor has to know how politics could impact its investments. It could be regulation, trade, taxation, interest rates but, in any case the impacts could be tremendous.

 

So to ignore this altogether and saying this belong in the politics section so it could be hidden is absurd.

 

Cardboard

[SHDL]

This is probably a good thread for this opinion piece by the former head of the NY Fed:

 

https://www.bloomberg.com/opinion/articles/2019-08-27/the-fed-shouldn-t-enable-donald-trump?srnd=premium

 

Crazy stuff.  I think he's trying to help but my sense is that this will only make matters worse.

[Cardboard]

I continue to believe that the tarrifs approach is a huge failure. It is imposing higher costs to your citizenry and especially the poor. Punishing yourself to try to hurt your opponent is dumb.

 

My view remains that China or its regime does not care that much about its people during a period of duress and will sacrifice them if need be. That is what history has showed us multiple times and we may see another repeat soon in Hong Kong. Latest propaganda out of there that they have not talked with Trump and will not bend over, etc. is just another indication that we can't really do honest deals or business with them.

 

IMO, there are key buttons to push to try to get them to move to where you want to be without imposing a duty/tax on your citizens and slowing the global economy but, there is no certainty and still risk: South China Sea, East China Sea, Taiwan, Hong Kong, North Korea, arming Japan, India border, etc.

 

The less confrontational approach would be to implement a revised TPP agreement to trade more with friendly countries or introduce more alternatives to China. I believe that Japan gets it and that is why we see a warm relation. Unfortunately, Japan is high cost and not producing cheap items anymore. So we need other countries with large populace and low labour cost such as Malaysia, Indonesia and yes India.

 

Looking around the house, I am hard pressed to see anything: "made in India". How can that be? This is a huge population looking to develop itself with a lot of English speaking folks and democratic.

 

I mean, there is no need to impose tarrifs. Just tell companies to move out of China and into India and other places and implement solid trade agreements with them.

 

Cardboard

[Gregmal]

I continue to believe that the tarrifs approach is a huge failure. It is imposing higher costs to your citizenry and especially the poor. Punishing yourself to try to hurt your opponent is dumb.

 

My view remains that China or its regime does not care that much about its people during a period of duress and will sacrifice them if need be. That is what history has showed us multiple times and we may see another repeat soon in Hong Kong. Latest propaganda out of there that they have not talked with Trump and will not bend over, etc. is just another indication that we can't really do honest deals or business with them.

 

IMO, there are key buttons to push to try to get them to move to where you want to be without imposing a duty/tax on your citizens and slowing the global economy but, there is no certainty and still risk: South China Sea, East China Sea, Taiwan, Hong Kong, North Korea, arming Japan, India border, etc.

 

The less confrontational approach would be to implement a revised TPP agreement to trade more with friendly countries or introduce more alternatives to China. I believe that Japan gets it and that is why we see a warm relation. Unfortunately, Japan is high cost and not producing cheap items anymore. So we need other countries with large populace and low labour cost such as Malaysia, Indonesia and yes India.

 

Looking around the house, I am hard pressed to see anything: "made in India". How can that be? This is a huge population looking to develop itself with a lot of English speaking folks and democratic.

 

I mean, there is no need to impose tarrifs. Just tell companies to move out of China and into India and other places and implement solid trade agreements with them.

 

Cardboard

 

The failure here is in judgment. Yes this war is punitive on the people. But China and America are very different culturally. Americans have ZERO pride in their country compared to China. Chinese are also quite used to a much lower standard of living(and higher degree of "suffering"). So lets rework this.... Who do you think is better prepared to hold out in the name of patriotism? The average Joe from China, or the average Joe from America, who cries foul and has temper tantrums because they cant pee with the opposite sex or take a selfie when they want to?

 

And in terms of America, and the pain that must be endured to prevail here... does anyone really think it will be Trump himself who has to deal with any of this? Of course not. Other people will pay for his egotistic pissing match.

[SHDL]

This is probably a good thread for this opinion piece by the former head of the NY Fed:

 

https://www.bloomberg.com/opinion/articles/2019-08-27/the-fed-shouldn-t-enable-donald-trump?srnd=premium

 

Crazy stuff.  I think he's trying to help but my sense is that this will only make matters worse.

 

Well, thank goodness the Fed isn’t on board.

 

https://www.wsj.com/articles/former-fed-official-says-central-bank-should-act-to-thwart-trumps-re-election-11566926950?mod=hp_listb_pos3

[SHDL]

One key point re: this trade war is that China has something like a dictatorship while we do not.  That gives their political leaders an upper hand in this game of chicken because they can in principle keep fighting (and let their people suffer) without worrying about being voted out of office. 

 

This is just ill conceived at so many levels. 

[RuleNumberOne]

How exactly do their people suffer? The rest of the world wants to continue buying from China.

 

The rest of the world are the continents of Asia, Europe, Australia, South America, countries of Canada, Mexico...

 

Just read in Forbes that even a 25% tariff is not enough to cause companies to move because China's infrastructure (rails, roads, power, ports) is so good.

 

China's position is much stronger than the US. Why should they listen to a guy who alternately insults China and begs China for a trade deal?

 

Friday Trump calls Xi an enemy, the very next day he calls him a brilliant man and a friend.

 

Friday he tweets the US would be better off without China, the very next day he grovels for a trade deal by making up stuff about phone calls and "losing three million Chinese jobs". China's workforce is 5 times larger than the US, they don't need Trump, they have the rest of the world.

 

Trump has three problems:

  - uncontrollable temper

  - uncontrollable stupidity causing miscalculations described above

  - uncontrollable need to tweet and broadcast his feelings all the time

 

 

One key point re: this trade war is that China has something like a dictatorship while we do not.  That gives their political leaders an upper hand in this game of chicken because they can in principle keep fighting (and let their people suffer) without worrying about being voted out of office. 

 

This is just ill conceived at so many levels. 

[DooDiligence]

How exactly do their people suffer? The rest of the world wants to continue buying from China.

 

The rest of the world are the continents of Asia, Europe, Australia, South America, countries of Canada, Mexico...

 

Just read in Forbes that even a 25% tariff is not enough to cause companies to move because China's infrastructure (rails, roads, power, ports) is so good.

 

China's position is much stronger than the US. Why should they listen to a guy who alternately insults China and begs China for a trade deal?

 

Friday Trump calls Xi an enemy, the very next day he calls him a brilliant man and a friend.

 

Friday he tweets the US would be better off without China, the very next day he grovels for a trade deal by making up stuff about phone calls and "losing three million Chinese jobs". China's workforce is 5 times larger than the US, they don't need Trump, they have the rest of the world.

 

Trump has three problems:

  - uncontrollable temper

  - uncontrollable stupidity causing miscalculations described above

  - uncontrollable need to tweet and broadcast his feelings all the time

 

 

One key point re: this trade war is that China has something like a dictatorship while we do not.  That gives their political leaders an upper hand in this game of chicken because they can in principle keep fighting (and let their people suffer) without worrying about being voted out of office. 

 

This is just ill conceived at so many levels. 

 

Need to add:

 

  - uncontrollable compulsion to lie about literally anything

[Spekulatius]

I continue to believe that the tarrifs approach is a huge failure. It is imposing higher costs to your citizenry and especially the poor. Punishing yourself to try to hurt your opponent is dumb.

 

My view remains that China or its regime does not care that much about its people during a period of duress and will sacrifice them if need be. That is what history has showed us multiple times and we may see another repeat soon in Hong Kong. Latest propaganda out of there that they have not talked with Trump and will not bend over, etc. is just another indication that we can't really do honest deals or business with them.

 

IMO, there are key buttons to push to try to get them to move to where you want to be without imposing a duty/tax on your citizens and slowing the global economy but, there is no certainty and still risk: South China Sea, East China Sea, Taiwan, Hong Kong, North Korea, arming Japan, India border, etc.

 

The less confrontational approach would be to implement a revised TPP agreement to trade more with friendly countries or introduce more alternatives to China. I believe that Japan gets it and that is why we see a warm relation. Unfortunately, Japan is high cost and not producing cheap items anymore. So we need other countries with large populace and low labour cost such as Malaysia, Indonesia and yes India.

 

Looking around the house, I am hard pressed to see anything: "made in India". How can that be? This is a huge population looking to develop itself with a lot of English speaking folks and democratic.

 

I mean, there is no need to impose tarrifs. Just tell companies to move out of China and into India and other places and implement solid trade agreements with them.

 

Cardboard

 

I believe they most Chinese believe that their government has done a good job. For once, the for average workers have increased tremendously, it’s not just the super rich, average Joe have seen double digit increases in buying power. They have slowed down, but they still far exceed what US or European worker bees get.

https://images.app.goo.gl/k4Ej4ZLE4U83uECt7

 

I think it gives them goodwill to fight for a while.

[meiroy]

This is how I'm looking at it now, perhaps more practical:

 

This is a market disruption, in the sense that Amazon disrupted retail.

 

It's not a trade war, it's the inevitable decoupling which will outlive Trump.

 

The US has a local market, it has Mexico and Canada, and Brazil and India if it wanted to. Big enough. More than enough.

 

American people will be better off. 

 

The only issue is the disruption process, some industries would have to pay.

 

I think this is an oversimplification.

 

It's a concept.

 

You want something more, go read a book.

 

Thanks for another oversimplification.

 

Here's another one for you:

 

The American economy is growing bigger and bigger, however as the global economy grows as well, the American slice in the pie is becoming smaller and smaller and will probably continue to shrink.  This means that the US is not willing to continue and bear most of the cost because the corresponding benefit is reduced as its share of the global economy shrinks.

 

Alas, there is no other country who can or is willing to take over.  It would take a global org to achieve that. These days, it seems highly unlikely to happen.

 

So, we will see the rise of nationalism, the breakdown of post-WWII order and the eventual endgame nuclear war.

 

The end.

 

You are welcome! xoxoxo

 

 

[SHDL]

How exactly do their people suffer? The rest of the world wants to continue buying from China.

 

I think that losing a big customer is bad for business even if you have other customers. 

 

Also, the tariffs they impose as “retaliation” increases their cost of living.