Protectionism in a World of Globalism/Opportunities
Trader Scott’s Market Blog
January 23, 2017
There is much consternation about President Trump’s “anti-free trade” views and rightfully so. The “free trade agreements” like NAFTA and GATT are anything but free trade. However they are what the world order is today, the “New World Order” so to speak. If you’re a libertian economically, like myself, you will be for true free trade. But there is no such thing now, and there hasn’t been for a long time, it’s all managed trade. So anyone coming inwanting to shake things up and hurt the status quo, is going to cause serious side effects. I have no problem dumping all these stupid agreements, but we can’t have rose-colored glasses about the short-intermediate term consequences. These consequences are not being considered seriously enough, as to all of the unexpected effects of upending the 8o+ year old plans/desires of the globalists to push “free trade” on every man, woman, and child on this Planet. Globalism at this point is a very intricate, integrated system, and it’s purely about control. Globalists do not want each nation, and its’ citizens, to be in control of their/our destinies. They want to control everything we do, see, hear, eat, drink, listen to, think about, purchase, etc. So Donald Trump coming in has freaked the globalists out. But President Trump has his own agenda about trade, and once again it’s not about freedom. He’s seriously fudging the numbers about how many jobs are coming back to the US. Many of the announced jobs coming back have been planned for years. And many of the announced jobs are just that – announced – they may never actually show up. While some of his rhetoric has claimed Ford will not proceed with plans to build a plant in Mexico after all. That’s false, and hopefully it’s not an outright lie – Ford just switched plans within Mexico itself. So the President wants to be in control of how trade in goods and services flows/operates. Maybe it’s better (or not), but it certainly isn’t about freedom. However it is what it is, and we’ve lost so many freedoms at this point, who’s counting anymore.
There’s a CNBC article from last week, and if you ignore the stupid comments fromLarry Summers (recent post), it’s a good read. The US is the world’s biggest importing country and the second biggest exporter. There are going to be all kinds of unintended consequences with shaking up the “free trade” agenda. Even south of the border, as theMexican Pesocontinues its’ decades long fall against the $US, this is having unintended consequences. Companies are looking at Mexico more favorably than the US as far as where to build a new production facility. And they may even be willing to pay the Trump “border tax” (tariff) in lieu of moving production here to the US. But then there’s the other part of Mexico specifically, regarding the bearishness. We’ve all heard by now Donald Trump claiming he’s the master negotiator, so from here forward, I’ll view him in terms of everything is a negotiation. It does seem like he loves his country, and will be kindly disposed towards both Canada and Mexico. (Although many Spanish speaking people won’t be too happy about this.) Why would he want to purposely harm our two closest neighbors, with whom we have great relationships? Mexico is part of the other side of the “Trump trade”, meaning the side which has been hit with a unanimity of bearishness. The list includes goldand Treasuries. And in the comments section from 1/19 in this post, the list also includes:
“There are other things bigger picture to focus on – ags, solar, biotech when it shakes out some more people, and from a subscriber, Mexico is interesting. I have no position there yet, and may not, but it’s quite interesting – the setup.”
This trade idea from a subscriber was well planned, both entry and exit, and he has a good trade going. There has been alot of assumptions being made about President Trump’s policies, which have been reflected in markets. The US$ and the stock market have been sure bets according to the analysts, while these other markets need to be avoided. There’s a post here about Inaugurations and the stock market. As for the $, it is doing a good job of wringing out the ridiculous newfound bullishness, supposedly because of Trump, right into the big resistance zone into the highs. And the currency situation is part of the problem with investing in Mexico. The Peso has been a big drag on the Mexican ETFs and closed end funds relative to theMexican Bolsaitself. You can see the great performance of the Bolsa in Peso terms. The Mexico Fund (MXF) has been around a long time, and it has been a lousy performer for a long time, much of it due to the currency. And as a closed end fund it usually trades at a premium or a discount to NAV. It is currently at about an 11% discount, which sounds like a bargain, but it has been trading at a big discount for a long time. The average discount over the last 3 years is about 6%. But these are the things which make Mexico interesting – the bearishness about the currency and the assumption that Trump is bad for Mexico. It is not a reason in itself to buy, but it is a reason to investigate the situation for an opportunity to go against the consensus. And the currency drag could become a currency boost. There is a currency hedged ETF for Mexico (HEWW), but it’s very illiquid.
Trader Scott has been involved with markets for over twenty years. Initially he was an individual floor trader and member of the Midwest Stock Exchange, which then led to a much better opportunity at the Chicago Board Options Exchange. By his early 30’s, he had become very successful in markets, but a health situation caused him to back away from the grind of being a full time floor trader. During this time away from markets, Scott was completely focused on educating himself about true overall health and natural healing which remains a passion to this day.Scott returned to markets over fifteen years ago where he continues as an independent trader.
January 23, 2017 @ 2:45 pm Roger
So, Larry Summers may be from the Art VandeLay monetary mindset?
January 23, 2017 @ 3:00 pm traderscott
Thanks for the chuckle Roger. Yes, he works for VandeLay Industries with George.
January 23, 2017 @ 6:04 pm Jon
Globalism turns populist -just posted on ZH.
January 24, 2017 @ 2:59 pm traderscott
This post had a comment from 1/19 updating my position in the ag stocks, about adding on to the position into the weakness. Since then they have rallied quite strongly like the MOS chart here . The other stocks are POT, CF, SOIL, and IPI has been lagging. There is a big rotation going into the commodity stocks now, like FCX, AA, etc. I believe the rush into these stocks is because people are becoming “convinced” the major top is in for the US$. I disagree about the top in the $, but not anbout being bullish on the commodity stocks. It’s just the timing of the purchases at new highs that is the problem. The quick spike in the euro to new highs this morning is not at all bullish. “Breaking below” 100 on the $ convinced more people of a $ bear market. There will be more rally attempts by the Euro/selling waves in the $, but they continue to be opportunities to take the other side. This still has to play out. We can have an outlook on markets, but they need to be adjusted/honed, as the day to day weirdness in markets unfolds. This isn’t science, it’s art, so to speak. Hard work every day and a great plan is the only way to deal with markets. As far as PMs, bigger pullbacks are still for buying, so having positions already on for a much more bullish second half. It’s been a tough 5+ years for PM investors, almost 6 for silver. We’re getting close, but there’s more work to do. The major gap in GDX around 32 is a very important transition area. It will eventually blast thru there, and it will bring alot of people back into the miners. Some of the stronger miners will probably go to new multi-year highs before the transition. That will almost be like a pre-confirmation overall.
January 24, 2017 @ 5:40 pm David V
With expiry day this Thursday and the Chinese Lunar New Year starting on Friday,…would normally put one on the watch for a stop run.
January 24, 2017 @ 6:35 pm traderscott
There’s still a gap in GDX at around 20.45 and 20.10 would be for the head and shoulders crowd. And 29 on the upside. Stops/resistance 25.90, stops/support 21.90. And there’s a mess above us now. Just putting it out there. We’re still under accumulation – wrote about it a couple of times – so there’s still the tug of war. Some miners like MUX already back to the September mess.
January 25, 2017 @ 12:58 am traderscott
I like it Dmitrii – look at the signs of strength showing up. This appears to be a retest of the rocketship on the chart low a year ago, with the arrows. I would, as per usual, try to use weakness to buy. Yes, I’m bullish on all three PMs. And your (and now mine also) IPI stock finally started moving a bit today. The others have really moved, I did a basket of these stocks, and IPI is the laggard so far, so we’ll see. You’re doing some interesting work Dmitrii.
January 25, 2017 @ 2:08 am Dmitrii
Yes, I have noticed these SOSes. That’s why I have bought some PLG shares yesterday, lucky just before they jumped up.
PLG have some difficulties in financing their project, that’s why shares looks cheap.
January 25, 2017 @ 11:37 am Easy Al
PLG has good mine properties. But its execution has been poor, primarily due to a not-so-capable management and board, and partially due to local (South Africa) corruption. The consequence is that it keeps asking for more money, which results in serial dilution for early investors. It has been a painful experience for me. But PLG does have two good properties and I am hopeful the board will have some courage to replace management if the operation can not be turned around soon.
The short article linked below describes the problem and potential of PLG well. It was written a few days before the 17.1 million share offer at $1.46 per share (with a likely another 2.6 M share for over-allotment)
January 25, 2017 @ 11:58 pm Dmitrii
Thank you, Easy Al!
Intreresting. That’s why PLG is high leveraged bet on price of Platinum. Lottery ticket.
January 24, 2017 @ 6:10 pm Jon
Thanks Scott. Noticed the $ tested down to 91.94 (UUP to strong support above the gap at 25.82) today. PM’s probably on hold till after jobs report Feb 3 but GDX is looking “frisky”. Viya con dios…
January 24, 2017 @ 6:50 pm traderscott
And the first “Trump Era Jobs Report”, so there will be alot of stupid emotions around it – since the Obama Jobs Reports were so spectacular. It’s going to be fun watching Mrs. Chairwoman Janet Yellen squirm around between a crappy economy and inflation, so “four rate increases this year” has set us up again for more unwinding. There is alot of hopium around. And what happened to the “Trump USS Cruise Ship $ Bull”. It hit an iceberg. You see the Trump supporters who were chanting that now look a bit silly – alot of these people were the a) US$ is going to crash, as it rallied for 7 years, then b) Trump is elected, so now change the old mind and the $ to the moon, right into a massive resistance area, then c) Trump doesn’t want a strong $, so back to step (a). They are 3 for 3 on the wrong side.
January 24, 2017 @ 6:55 pm Jon
Recency bias? As you have noted, the Euro is toast and time is winding down..
January 24, 2017 @ 7:01 pm traderscott
Recency bias, extrapolation, predicting, and not being prepared every single day = kiss your account goodbye.
January 24, 2017 @ 7:04 pm traderscott
And for the $ crash folks, someone explain to me how the Euro survives in its’ PRESENT form. Currencies are relative. The $ blows, but just less than the others.
January 24, 2017 @ 8:15 pm David V
Europa survived the Roman occupation, it will dissolve itself from the international financiers, division of nations is the “finger of God” or blood is thicker than water.
January 24, 2017 @ 7:41 pm Jon
This guy lays out the strong dollar strong gold scenario no one is looking at. Well, almost no one…
January 25, 2017 @ 3:27 pm traderscott
The stock IPI which I own and Dmitrii brought to our attention has finally caught up to the other ag stocks in my basket – MOS, POT, CF, and SOIL. IPI is getting a bit messy up here, after rallying 30% in a few days. Any purchases should wait for a good backup. I do have a limit offer at $3 if it shoots straight up – to take some profits. And I bought UGLD this morning on the gold break, and also covered a short in NUGT, but did not add on to any miners. I’m going to attempt to do a video screen capture showing these trades with the entries and exits marked by the trading software. I did one late last night for the US$, but the video was goofed up somehow.
January 26, 2017 @ 7:55 am David V
Shills right on cue
Physical gold demand slides to 7-year low in 2016 -GFMS
Gold market surplus biggest this century * GFMS forecasts gold at $1,259/oz in 2017
January 26, 2017 @ 8:44 am traderscott
Right, I pay zero attention to all of the weird claims of supposed supply and demand. And on the other side is Eric Sprott with his ridiculous claims, along with almost everyone at King World. The only true way of getting to supply and demand is with price and volume work.
January 26, 2017 @ 2:19 am traderscott
I did a screen capture video detailing my last three short term trades in the US$, UGLD, and NUGT – exited all three on Wednesday, so I have no short term trades, but quite a few position trades certainly. The tech guy is trying to fix some syncing problems with the video. I’ll post it if he can fix the sync deal.
January 26, 2017 @ 12:56 pm traderscott
The $ has had a good rally since the “confirmation” of a top being in when it “broke support” – going below 100.00 and 99.90. But now it’s back into that gap resistance area. We need to make this as simple and unemotional as possible – “Just the facts Ma’am.”
January 26, 2017 @ 1:18 pm traderscott
So we had the huge rise in bond yields/fall in price into mid-December, when people were weirdly hysterical about a bond market crash. I turned very bullish on bonds last month (archived). Then we had the big drop in yields/price rally. And then of course, right into the recent top in prices, then the crowd decides, “well maybe bonds are now bullish”. Then we have a big backup in yields/falling prices, and now once again I’m hearing the “that’s it, the bond bubble has burst, prices are going to crash”. Maybe they’re right, but to me this is just a big backup in yields within the process. Second half of 2017 will be another story. This whole approach to markets of wildly swinging from bearish when prices are falling, and possibly right at the lows, and missing the bottom by a mile. Then getting bullish after a big rally, and not taking some profits into strength – this stuff kills a trading account – kills it! I warned at the recent highs in bond prices about taking some profits, it was getting exuberant again.