P&L AI

It's hard to reconcile stability in US stock markets given gathering sings of a storm. The S&P 500 is still up 13% on the year, NDX 15.8% and China A-shares 16.7%. At the same time the Fed-funds futures are pricing in almost a certainty of a Fed rate cut  by December, and a good chance of more. This tranquility comes amid material changes in global  political landscape. One can dismiss the EU parliamentary elections last week as a  protest vote with the results "less bad" than expected.  But the losses of centrist statist parties to the fringes, be it on the right or left, are impressive. The British two-party system took a mortal blow with Conservatives taking 9% of the vote and Labor 14%. The political continuity in Germany looks shaky, Macron's party  lost to Le Pen, and Italy looks set to get a Lega  government this year.  The impact of the elections will entrench the sense of unease, prolong the Brexit uncertainty and remove any possibility if European ec

US Commerce department just issued a  proposal  to slap tariffs on exporters to the US based on how cheap their home currency is. It’s not surprising that the examples in the proposals were focused squarely on China. The degree of currency cheapness will come from the International Monetary Fund (IMF), which allegedly indicates that the yuan was undervalued by 3%. The amount of tariffs spread around all Chinese companies would be equal to the total US trade deficit with China of $500bn times 3% = $15bn, give or take. The IMF  report  in question was published in July of last year, and is due for an update this July. In a nutshell, the IMF converts total trade imbalance of a country (e.g. China) into the degree of currency undervaluation using cutting edge econometric machinery. With the US and China being the two most important members of the IMF, it will be interesting what the report will show this year. My guess, US will be in for an unpleasant surprise. China current account s

With all the latest news about the trade war, some obvious issues that could affect the market and all of us who are still in the market are not being noticed. For example, take those two facts widely reported in the  news , but made no splash: US has fallen hopelessly behind China in development of viable 5G technology because of inability to resolve legacy bandwidth use. Losing 5G edge is not acceptable as it will be the base of the next generation of internet consumer products such as IoT, driverless cars and everything else. Get ready for this issue to become central for tech stocks.  Department of Defense issued a paper of 5G on 3 April . In a nutshell, US and China have two competing standards (mmWave for US, sub-6 for China). The conclusion of the DoD is that US system is not viable, and US will have to start from scratch. The conclusion is unambiguous: “ The Defense Innovation Board bases its recommendations on the assumption that mmWave fundamentally cannot be