I’ll tell you exactly why the Federal Reserve will do whatever it takes to manipulate the markets.
They’d rather see stocks digest their newest rate cut, see how earnings pan out, and then cheerlead at the end of the year with talk of yet another potential rate cut if the economy isn’t growing above 2% and stocks are drifting lower on less robust earnings.
That’s their plan.
You see, they’re working towards that because they’re watching other central banks easing, and they want to follow with their own easing, not to panic anybody that we’re in dire straits and need rate cuts, but to keep up with the Joneses.
Because if we don’t keep lowering rates as other countries lower, the dollar will strengthen on our relatively higher rates and that isn’t what the President wants right now.
Remember, we’re in a trade war.
As other countries’ currencies are manipulated lower, their exports become cheaper, and the U.S. buys more foreign goods and services.
That means factories aren’t being built here, production is still elsewhere, jobs are being lost to overseas competitors, like China.
So, yeah, the Fed’s saying they’re insuring against domestic slowing as global growth slows and fears that the trade war with China isn’t resolved, but what they’re really doing is managing the dollar in relative terms and supporting markets without overinflating them.
History Reveals the Truth
But, of course, China is a currency manipulator. It has been a known manipulator since entering the World Trade Organization in 2001.
Of course, China is a protectionist state operator and encourages forced technology transfers and outright theft of technology and trade secrets.
How else can China’s incredible, unimaginable, and otherwise impossible rise from a poor third world country to the fastest growing, most technologically advanced manufacturing first order country in the world, with the second biggest economy on the planet have happened in only 18 years?
The answer’s simple.
By manipulating its currency, keeping it cheap against other countries’ currencies, including its Pacific Rim trading partners, China’s exports flooded international markets and gave China the foreign currency reserves it needed to keep manipulating its currency and at the same time allowed it to buy hundreds of billions of dollars of U.S. Treasuries to placate the U.S. government and politicians who were hearing from constituents that China was stealing their technology.
It took a strong-willed, “America First” president to call out China and go to war with the colossus that the United States directly aided and abetted.
What equity markets are reacting to now, just like the companies who sold yuan in the forward markets is that this so-called trade war is actually a real war.
The Chinese aren’t going to rollover. The President isn’t going to kowtow to U. S. business interests that haven’t been harmed by China’s manipulation and theft and want to get back to business as usual.
Markets are going to be volatile and hang on every news item about trade talks with China.
But they aren’t going to see a resolution any time soon.
That’s because China will never admit it stole technology and will never agree to future punishment if it breaks any agreement it must sign to save its economy from where its headed, into a recession.
So, buy VIX calls every time the market rallies and the VIX falls below 15.
And hedge your long bets against market selloffs that are with us now no matter how high up benchmarks can crawl.
Chinese Aggression is Concerning…
Trade and currency wars are of concern, but that’s not the only front in which China has become a threat.
My associate Dr. Kent Moors, a former high ranking intelligence officer and advisor to the highest levels of the U.S. government has informed me of China’s increased militarization of the South China Sea putting not only their neighbors on alert, but U.S. soldiers stationed there.
For the past several years, China have been occupying a chain of the Paracel Islands and from there Beijing has been upgrading facilities in the region… deploying surface-to-air missiles, building 20 hangars at the airfield, upgrading two harbors and performing substantial land reclamation.
Escalating aggression from the Eastern Superpower has everyone in the intelligence community on guard. Especially when it comes to the country’s newest armament.
A weapon that can bypass every defensive measure of US Aircraft Carriers in the vicinity, taking them off the board entirely… Read more.