It's Becoming Harder To Be A Position Trader These Days
Over the ten or so years that i've been trading Forex, position trading has been one of my favorite styles and best money makers. Position trading, for me at least, involves forming a world view based on the economic data releases like GDP, trade balance, CPI and PPI, followed by looking for confirming technical levels, and then buying or selling when we hit Support / Resistance.
Of course the underlying assumption is that every country is acting in it's own self interests. That means they want a higher GDP, more exports than imports and a comfortable level of inflation. Which is why Trump is so frustrating. His policies are out of Bizarro land - potentially leading to higher deficits, runaway inflation and a questionable effect on the trade balance.
The talk of steel sanctions
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Let's just look at the latest example of his tweets on potential tariffs on steel and aluminum. The USD had been recovering somewhat from the crappy tax plan announced in November/December when Trump decided to go unhinged again and talk about putting a 25% tariff on imported steel. What happens? USD and CAD take another tumble again. The CAD is close to all-time lows against the EUR, CHF and AUD.
And then he tops it off with a tweet about how easy trade wars are to win. Maybe he should look into what happened the USA tried to pull a stunt like this, back in 2002. Bush's steel tariffs were met with retaliatory tariffs on products in key swing states like Florida oranges and Detroit made cars. Within a year, USA's steel tariffs came back down.
The tariffs also make no sense
Don't just take my word for it. According to economist Adam Posen, the tariffs mess up the entire trading system for many industries just to protect the steel industry, which has about 140,000 jobs (at 2015) and contributes only $36 billion to the US economy. On the other hand, the steel consuming industries which will be affected by these tariff employ 6.5 million people and contribute $1 trillion dollars to the US economy. Sounds like a good trade, eh?
The only winners are the insiders
Ordinary folks are going to lose. Cars become more expensive, beer becomes more expensive because of the cans, your Kentucky bourbon becomes more expensive. Who wins? The ones who are able to take advantage of the fact that they know Trump's about to tweet something crazy. Like this former Trump adviser. So much for draining the swamp.
So true, I used to trade fx as well and I found it so hard to compete in the shorter time frames. For me it is much easier, to call a multi year dollar fall for example and just ride that.
Trying to decipher the day to day "reasons" for things was a full time job! So I dont miss that. Trying to make sense of Trump's erratic behavior, with the tweets good Lord!
And I totally agree with you, trade wars never work. Jim Rickards totally called this several years ago.
It seems the more thing change, the more they stay the same
Going to be interesting now that he's threatening the European automakers with tariffs. AFAIK, most of the mercs and BMWs for the US are manufactured in the US itself.
It's hard to predict a crash but between rising interest rates and a trade war, i think we have some pretty strong catalysts.
Oh wow, I hadn't heard that bit ab European automakers. This guy is a raging dumpster fire; doing PR for him must be a nightmare.
All things being equal, protectionism should cause an uptick in US wages, which should cause prices/ consumer prices (cpi) to rise.
Thoughts?
Haha working for him has its perks. I hear Hope Hicks has a $10M book deal lined up. Not bad for a year's work lol.
I think we'll definitely see prices rise but wages not as much. Worse for the ordinary citizen overall - higher prices, higher interest rates, wages that don't keep up.
Ha, good point!
Even Gregory Mannarino took all his positions off :) Something is in the air...
fantastic blog man...👍
Thanks for reading
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