I’m not going to lie… working in the financial industry these past five years has been exhausting.
And frankly, the last five months have been doubly so.
Don’t get me wrong, I have a well-calibrated process in place for that. It’s just that I wish I didn’t have to use it so often.
Things have gotten to the point that from time to time, I find myself daydreaming about how reliable journalism – particularly broadcast journalism – used to be like when I was a kid.
It didn’t matter whether I was at home, at my grandmother’s, at a relative’s or a friend’s, the routine always seemed to be the same.
Eat dinner… retire to the living room… and turn on Walter Cronkite.
While it was perhaps a little dubious to call him “the most trusted man in America” – the Quayle poll in question didn’t exactly pit him up against the most honest people – few doubted that he generally stuck to the five W’s and aimed for objectivity.
And for that matter, even in the early days of cable news, that commitment to objectivity wasn’t questioned.
In fact, I can remember watching live as fledgling network CNN gave birth to the 24/7 news cycle during the outbreak of the First Gulf War, with John Holliman, Bernard Shaw, and Peter Arnett (whom I would have the pleasure of meeting many years later) turning a suite in the Al-Rashid hotel into a makeshift broadcast newsroom.
Just three terrified adult men on a phone to Atlanta cowering under a bed as bombs go off nearby.
You Gotta Read the Article
The headline that got me going this morning was one about how China’s exports “beat expectations, jumping 9.5% from a year ago.”
That headline is clearly slanted toward the positive, using words like “beat” and “jumping.”
But if you actually read the article – and let’s be honest, most people don’t – you would see that while exports were way up, imports were actually down.
Source: China Customs, Refinitiv
Now, let’s think about what that means.
Most of what China exports are finished goods, with the top four categories being electronic equipment, machinery, furniture, and plastics.
So, if China is importing less in terms of raw materials now, they’re going to export less in terms of finished goods in the future.
In other words, imports are a leading indicator of exports.
We saw this same dynamic happen back in the 2014-2016 time period, where imports (white line) began to decline, systematically followed by exports (orange line.)
Source: China Customs, Bloomberg
That tells me that China sees how global trade dynamics are shifting, and they’re looking to dump products out on the market before things get worse.
Also, I should draw attention to what those exports are being exchanged for…
It’s Good to be the King
The other piece of news that recently came out was that China was going to reduce its holdings in US treasuries as geopolitical tensions heat up.
Now, this is another purposefully crafted headline, but slanted toward the negative, using words like “reduce” and “tensions”.
It’s meant to sound that way because China wants to try and make the US look weak… understandable, given that they’re short on food and embroiled in a trade war.
Although that headline might sound scary, the amount that China may sell (US$200B) isn’t much more than they’ve already sold to date ($106B). And during that time, bond prices didn’t go down… they went up.
So the question we must ask ourselves here is simple… when China sells those treasuries, what does it get in return?
If you guessed US Dollars, pat yourself on the back.
When King Dollar catches a bid, it generally means other things are selling off.
Oh, and Tesla.
And crude oil.
We’ve been preparing for this, though, with stakes in Invesco DB US Dollar Index Bullish Fund (NYSEArca: UUP) and Proshares Ultra Gold (NYSEArca: UGL), as well as short positions in oil and emerging markets.
So there’s not much left to do right now but sit back and let them work while these events unfold.
Because as Walter Cronkite used to say… “that’s the way it is.”
All the best,