En route to the White House from Hanoi, Vietnam, Air-Force One stopped in Alaska for refueling. During the stopover President Trump delivered remarks to U.S. troops stationed at Elmendorf AFB.
President Trump was greeted by Alaska Governor Mike Dunleavy who accompanied the president to a base hangar where U.S. troops were gathered.
White House Council of Economic Advisers Chair Kevin Hassett discusses the U.S. economy’s 2.6 percent growth in the fourth quarter, and the outlook for the U.S. economy through the rest of 2019.
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Notice how most of the financial pundits are focusing on what the “global economy” needs; specifically what the EU and China need to do to gain economic growth. From that position, the U.S. trade reset is adverse to their financial interest; those financial interests are driven by Wall Street not Main Street.
Economic nationalists who understand the concept of ‘America First’ focus on what the USA economy needs, and do not accept a position that the U.S. should acquiesce our position to benefit the economic needs of other nations. That’s the primary difference.
Few understand the MAGAnomic reset and what was predicted to happen in the space between disconnecting a Wall Street economic engine (globalism and multinationals) and restarting a Main Street economic engine (nationalism/America-First). In 2016 CTH explained where we would be today.
President Trump’s MAGAnomic trade and foreign policy agenda is jaw-dropping in scale, scope and consequence. There are multiple simultaneous aspects to each policy objective; however, many have been visible for a long time – some even before the election victory in November ’16.
♦ When U.S. banks were allowed to merge their investment divisions with their commercial banking operations (the removal of Glass Stegal) something changed on Wall Street.
Companies who are evaluated based on their financial results, profits and losses, remained in their traditional role as traded stocks on the U.S. Stock Market and were evaluated accordingly. However, over time investment instruments -which are secondary to actual company results- created a sub-set within Wall Street that detached from actual bottom line company results.
The resulting secondary financial market system was essentially ‘investment markets’. Both ordinary company stocks and the investment market stocks operate on the same stock exchanges. But the underlying valuation is tied to entirely different metrics.
Financial products were developed (as investment instruments) that are essentially wagers or bets on the outcomes of actual companies traded on Wall Street. Those bets/wagers form the hedge markets and are [essentially] people trading on expectations of performance. The “derivatives market” is the ‘betting system’.
♦Ford Motor Company (only chosen as a commonly known entity) has a stock valuation based on their actual company performance in the market of manufacturing and consumer purchasing of their product. However, there can be thousands of financial instruments wagering on the actual outcome of their performance.
There are two initial bets on these outcomes that form the basis for Hedge-fund activity. Bet ‘A’ that Ford hits a profit number, or bet ‘B’ that they don’t. There are financial instruments created to place each wager. [The wagers form the derivatives] But it doesn’t stop there.
Additionally, more financial products are created that bet on the outcomes of the A/B bets. A secondary financial product might find two sides betting on both A outcome and B outcome.
Party C bets the “A” bet is accurate, and party D bets against the A bet. Party E bets the “B” bet is accurate, and party F bets against the B. If it stopped there we would only have six total participants. But it doesn’t stop there, it goes on and on and on…
The outcome of the bets forms the basis for the tenuous investment markets. The important part to understand is that the investment funds are not necessarily attached to the original company stock, they are now attached to the outcome of bet(s). Hence an inherent disconnect is created.
Subsequently, if the actual stock doesn’t meet it’s expected P-n-L outcome (if the company actually doesn’t do well), and if the financial investment was betting against the outcome, the value of the investment actually goes up. The company performance and the investment bets on the outcome of that performance are two entirely different aspects of the stock market. [Hence two metrics.]
♦Understanding the disconnect between an actual company on the stock market, and the bets for and against that company stock, helps to understand what can happen when fiscal policy is geared toward the underlying company (Main Street MAGAnomics), and not toward the bets therein (Investment Class).
The U.S. stock markets’ overall value can increase with Main Street policy, and yet the investment class can simultaneously decrease in value even though the company(ies) in the stock market is/are doing better. This detachment is critical to understand because the ‘real economy’ is based on the company, the ‘paper economy’ is based on the financial investment instruments betting on the company.
Trillions can be lost in investment instruments, and yet the overall stock market -as valued by company operations/profits- can increase.
Here’s the critical part – Conversely, there are now classes of companies on the U.S. stock exchange that never make a dime in profit, yet the value of the company increases.
This dynamic is possible because the financial investment bets are not connected to the bottom line profit. (Examples include Tesla Motors, Amazon and a host of internet stocks like Facebook and Twitter.) It is this investment group of companies that stands to lose the most if/when the underlying system of betting on them stops or slows.
Specifically due to most recent U.S. fiscal policy, modern multinational banks, including all of the investment products therein, are more closely attached to this investment system on Wall Street. It stands to reason they are at greater risk of financial losses overall with a shift in economic policy.
That financial and economic risk is the basic reason behind Trump and Mnuchin putting a protective, secondary and parallel, banking system in place for Main Street.
Big multinational banks can suffer big losses from their investments, and yet the Main Street economy can continue growing, and have access to capital, uninterrupted.
Bottom Line: U.S. companies who have actual connection to a growing U.S. economy can succeed; based on the advantages of the new economic environment and MAGA policy, specifically in the areas of manufacturing, trade and the ancillary benefactors.
Meanwhile U.S. investment assets (multinational investment portfolios) that are disconnected from the actual results of those benefiting U.S. companies, and as a consequence also disconnected from the U.S. economic expansion, can simultaneously drop in value even though the U.S. economy is thriving.
National Economic Council Director Larry Kudlow appears on CNBC to discuss the latest releases of economic stats and the on-going trade talks between the U.S. and China. Kudlow notes the U.S. and China are making progress specifically due to USTR Robert Lighthizer. Interesting interview.
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Nuance and team subtlety are important here. Larry Kudlow is a loyal soldier, no question, but his economic leaning is toward trade outcomes that benefit Wall Street… Robert Lighthizer is a fierce battle-hardened trade expert, with an outlook that is multi-generational toward Main Street.
Listen to Lighthizer talk about the economic future for his grandkids in his congressional testimony yesterday and you’ll see what I mean. NO COMPROMISE with China. Lighthizer is prepared to fight all of Main Street’s enemies, including congress.
Despite several positive and remarkable comments from Kim Jong-un, President Donald Trump and the North Korean Chairman could not come to a substantive agreement after two days of negotiations on the process to denuclearize the Korean peninsula.
During a press conference prior to departing Hanoi, Vietnam, President Trump cited two issues: (1) A North Korean demand for the immediate removal of all multinational economic sanctions; and (2) The unwillingness of North Korea to be fulsome about their missile and nuclear locations. WATCH:
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Additional Thoughts:
In the backdrop of the Hanoi summit, and as U.S-China trade negotiations continue, the Trump administration suspended the implementation of the March 1st tariff increase on Chinese goods. Unfortunately, attaining this goal may have empowered a cunning Chairman Xi Jinping to influence the demands of DPRK Chairman Kim.
A covert influence connection will become clear if President Trump now takes an even more firm trade and tariff position toward China. We’ll keep watching closely.
Chairman Xi may have won this round, but we can expect an angered and strategic President Trump to hit back twice as hard.
In this dance with the dragon President Trump cannot simply reverse the tariff suspension, that approach would be too obvious. Instead my suggestion would be to look for signs of the U.S. reviewing Chinese violations of the North Korea sanctions.
A key indicator will be if over the next several weeks, we see the U.S. Treasury and/or Commerce Department beginning to point out those who are violating the sanctions against North Korea.
It’s an open secret that China is the largest violator; but President Trump has been giving everyone a pass due to progress on both the China trade and DPRK nuclear talks.
With a set-back in the overall process, and with China playing games, we might just see a renewed focus on U.S. sanction enforcement, specifically targeting China.
What we will not see is President Trump acquiescing to China on trade and economics simply to get Kim Jong-un away from Beijing’s clutches. That massive ransom payment falls too heavily, and too exclusively, on the United States – while regional allies gain the benefits of peace on the back of a lessened U.S. economy.
That sh!t deal wouldn’t pass the MAGAnomic ‘America First’ test; not even close.
That exact conversation is what President Trump likely will be explaining to South Korean President Moon Jae-in (the Asian Obama), and Japanese Prime Minister Shinzo Abe on the flight home. THAT EXACT CONVERSATION!
Statement from the Press Secretary Regarding the Hanoi Summit:
“President Donald J. Trump of the United States and Chairman Kim Jong Un of the State Affairs Commission of the Democratic People’s Republic of Korea had very good and constructive meetings in Hanoi, Vietnam, on February 27-28, 2019. The two leaders discussed various ways to advance denuclearization and economic driven concepts. No agreement was reached at this time, but their respective teams look forward to meeting in the future.”
As the Summit concludes with no agreement, President Trump will be holding a press conference shortly.
WH Livestream Link – Alternate Livestream Link – Alternate Livestream Link
President Donald Trump and Chairman Kim Jong-un held extended one-on-one and small group meetings on day two of their Hanoi summit. The schedule below may no longer be accurate (but the sequence should be roughly correct, maybe).
Vietnam is 12 hours ahead of U.S. Eastern Time. Most of the substantive public activities, including a joint signing ceremony and POTUS Trump press conference, will take place early Thursday morning U.S. time. Again, due to extended substantive Trump-Kim discussions, the schedule is now fluid… adjust expectations accordingly.
ABC Livestream Link – ARIRANG News Livestream
Sarah Sanders informs media the negotiations are ongoing but will wrap up at Metropole in next 30 to 45 minutes and Potus will return to Marriott. Press conference moved up from 4 p.m. to start at 2 p.m. She declined to say whether there would still be a joint signing ceremony but appears unlikely.
Livestream:
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We can somewhat throw out the schedule; President Trump and Chairman Kim held a much longer one-on-one, and informal small group discussion….. Culminating in this historic moment with the media present and the formal bilat about to begin.
First, watch Chairman Kim Jong-un take questions from U.S. media. That’s historic. Second, and more importantly, listen carefully to the answers: MUST WATCH
U.S. Journalist: “Chairman Kim are you willing to denuclearize?”
Chairman Kim Jong-un: “If I’m not willing to do that, I won’t be here right now.”
POTUS Trump injected: “That might be the best answer you’ve ever heard.”
Rough translations of exchanges:
Another U.S. reporter asked if Chairman Kim was willing to take concrete steps to denuclearize? Chairman Kim replied: “That’s what we are discussing right now.”
President Trump was asked if there would be a political statement to end the war?
Trump response: “No matter what happens we’ll ultimately have a deal that’s really good for Chairman Kim and his country. That’s where it’s all leading. It doesn’t mean we’re doing it in one day, in one meeting. I really believe with this great leadership North Korea, I really believe it’s going to be very successful.”
Chairman Kim was asked if he was ready for the US to have a liaison office in Pyongyang. A north Korean aide appeared to attempt to cut off questions but POTUS Trump interjected: “that’s actually an interesting question. I would like to actually like to hear that answer. “
Chairman Kim replied: “That is something that is welcomeable.”
President Trump said the idea was a “great thing.”
Chairman Kim then seemed to be done with questions: “If you’ll kindly give us more time, one minute.”
Senator Lindsey Graham discusses his recent conversation with President Trump surrounding the Hanoi summit with DPRK Chairman Kim Jong-un; and the political schemes of Democrats to undercut the peace objectives of the administration.
President Trump and Chairman Kim initial one-on-one meeting to begin day two. Both leaders appear engaged and cautiously optimistic. Again, President Trump focuses on the economic potential for a denuclearized North Korea. [Transcript will follow]
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[Transcript] President Trump: “Well, thank you very much Chairman Kim, and it’s great to be with you again. And, I’m sure over the years we’ll be together a lot, and I think we’ll also be together after the fact, meaning after the deal is made. We had very good discussions last night at dinner, and the pre-dinner was very good. And, there were a lot of great ideas being thrown about. I think very importantly, the relationship is, you know, just very strong, and when you have a good relationship, a lot of good things happen. So, I can’t speak necessarily for today, but I can say that this, a little bit longer term, and over a period of time, I know we’re going to have a fantastic success with respect to Chairman Kim and North Korea. They’re going to have an economic powerhouse. I’ve been writing about it, I’ve been talking about it. I think it’s going to be an economic powerhouse. And it’s something I very much look forward to helping with because with a little bit of help in the right location and the right place, I think it’s going to be something very special.”
(translator for President Trump): “I’ve been saying very much from the beginning that speed is not that important to me. I very much appreciate no testing of nuclear rockets, missiles, any of it. Very much appreciate it. And, Chairman Kim and I had a great talk about that last night. I’ll let him say what he said if he’d like to and if he doesn’t, he doesn’t have to. But, we had a very good talk about that last night. And again, I am in no rush. We don’t want the testing, and we’ve developed something very special with respect to that. But, I just want to say I have great respect for Chairman Kim, and I have great respect for his country, and I believe that it will be something economically that will be almost hard to compete with for many countries. It has such potential.”
Chairman Kim (translated): “Well, it’s too early to tell, but I wouldn’t say that I’m pessimistic. From what I feel right now, I do have a feeling that good results will come out.”
President Donald Trump and Chairman Kim Jong-un begin meetings tonight on day two of their Hanoi summit. Vietnam is 12 hours ahead of U.S. Eastern Time. Most of the substantive action, including a joint signing and Trump press conference, will take place overnight Wednesday and early Thursday morning.
ABC Livestream Link – ARIRANG News Livestream
Livestream:
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You might want to bookmark this congressional testimony from U.S. Trade Representative Robert Lighthizer to the House Ways and Means Committee for specific purposes…
There are many people who are understandably worried that any U.S. trade agreement between the U.S. and China might not have the most ferocious teeth behind a binding enforcement provision. If you listen to Ambassador Lighthizer he makes clear that President Donald Trump, and the negotiating team, will not accept any agreement that does not have the strongest enforcement mechanisms at every level.
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In his testimony Lighthizer walks through the basic outline of what a U.S. successful agreement would look like. While increased Chinese purchases to lower the deficit are a part of the goal, they are a VERY SMALL part of the goal.
The protection of U.S. intellectual property; the removal of non-tariff trade barriers; the confrontation of currency manipulation and the sector by sector enforcement provisions are the primary objective.
The Section 301 review, and the subsequent tariffs on Chinese products, is the issue that pried open the Chinese fist and allowed Lighthizer, Ross and Mnuchin to begin negotiating a trade deal. Everything is happening as a consequence of those initial 301 tariffs; and the tariff increase is only being suspended, not removed.
Secondly, within the hearing Lighthizer is facing committee membership who have been purchased by The United States Chamber of Commerce and CoC President Tom Donohue. Those thoroughly corrupt, Wall Street purchased, globalist democrat and republican CoC politicians only care about removing the tariffs and getting back to the multinational exploitation of trade.
These corrupt political voices also do not want the USMCA. So part of Lighthizer and Trump’s pressure on congress to get the USMCA passed, it to keep the threat of the Chinese tariffs for use against the Chamber of Commerce politicians (Dems and Republicans; the UniParty Big Club).
Lighthizer and Trump are not only fighting China, they are fighting U.S. politicians who are beneficiaries of China. They are also fighting against the U.S. CoC, the multinational corporations, Wall Street and members of both political parties who desperately want to stop any trade balance reset.
Almost half, perhaps more than half, of congress has a better financial self-interest if China can gain economic superiority over the United States. This congressional hearing, and the severity of Lighthizer toward those purchased politicians, highlights this very tenuous internal challenge.
Stop and think about this again.
The U.S. economic, trade and manufacturing system is so structurally broken, after three decades of severe corruption by corporate financial interests: Almost half, perhaps more than half, of congress has a better financial self-interest if China can gain economic superiority over the United States.
One of those key congressional members who benefits ONLY if the USMCA is destroyed, and China rises to be the world’s primary economic power, is Mitch McConnell. Others include Nancy Pelosi, Chuck Schumer and most senior members of both wings of the UniParty. It is in their personal financial interest to remove Donald Trump.
There are trillions at stake.
Remember this.
Watch it as time permits, and bookmark his testimony.
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