China adviser: Trump reportedly ready to escalate trade war if no deal soon


CHARLES: GENTLEMEN THANK YOU VERY MUCH.>>THANK YOU, CHARLES. CHARLES: THAT KIND OF PUT A BID IN THE MARKET HERE. IN FACT WE’RE ABOUT LESS HALF A PERCENT AWAY FROM ALL-TIME HIGHS WITH THE DOW AND S&P. PHILADELPHIA REPORT OF FED MANUFACTURING. CAME IN WAY BETTER THAN EXPECTED. IT WAS KEY TWO ITEMS ON THE BOTTOM. NUMBER OF EMPLOYEES IN THE WORK WEEK SOARED FROM THE LAST MONTH. TO BREAK IT ALL DOWN, WHY THE MARKET IS REACTING THIS WAY TO ALL OF THIS NEWS, DAVID DIETZE, AND MONEY NAP STRATEGIST KEITH FITZ-GERALD. KEITH, LET ME START WITH YOU. UNDER PRESSURE THIS MORNING, NOTHING DRAMATICALLY BUT GRAPPLING WITH WHAT JAY POWELL DID SAY, DID NOT SAY. WE SAW THE MANUFACTURING NUMBER COME IN REALLY NICELY PARTICULARLY THE EMPLOYMENT PART OF IT. WE SAW THE FED INTERVENE IN THE REPO MARKET. SEEMS LIKE WALL STREET WAS HAPPY THEY WORKED IT OUT.>>CHARLES, REAL GROWTH PRODUCES REAL PROFITS. THE MARKET IS LOOKING PAST THE FACT THAT POWELL PROVIDED NON-ANSWER ANSWERS AND CONCENTRATE WHAT THEY DO BEST IS MAKE MONEY. CHARLES: DAVID, MANUFACTURING, EVERYONE KEEPS TALKING ABOUT THAT BEING SORT OF THE THING, EVEN THE FEDERAL LEWDS TO IT. THE BIGGEST HIT, TRADE, IT’S A WEAK AREA. BUSINESS INVESTMENT, THOSE KIND OF THINGS BUT WE HAD A GOOD MANUFACTURING REPORT TODAY. INDUSTRIAL PRODUCTION WAS UP PRETTY GOOD. CAPACITY UTILIZATION IS UP. BUSINESS EQUIPMENT FROM THAT SIDE WAS SOARING. I WON’T SAY MUCH ADO ABOUT NOTHING BUT THE DEMISE HASN’T OCCURRED YET?>>I THINK THAT’S RIGHT. THIS REALLY BODES WELL. THE PROBLEM REALLY IN MY VIEW HAS NOT BEEN THE U.S. ECONOMY. YEAH THERE HAS BEEN SOME WEAKNESS IN MANUFACTURING. THAT HAS BEEN ADDRESSED NICELY WITH SOME OF THESE METRICS. THERE IS SOME WEAKNESS IN REAL ESTATE. IT RESPONDED GREAT TO A REDUCTION OF INTEREST RATES IN JULY. REFINANCING PICK UP WITH REAL ESTATE ACTIVITY. THE REAL PROBLEM IS TWOFOLD. ONE, WHAT WILL HAPPEN WITH THE TRADE TALKS. HOW WILL THAT HURT OR IMPAIR CONFIDENCE? WE KNOW THERE ARE ISSUES IN EUROPE. THEY’RE KEEPING INTEREST RATES DOWN. THAT MONEY IS COMING OVER HERE. WHAT IS THAT DOING. IT IS DOING TWO THINGS. RAISING VALUE OF THE DOLLAR. THAT IS EFFECT OF A TIGHTENING. THAT WAS ENOUGH IT WARRANT WHAT POWELL DID. CHARLES: RIGHT.>>THE SECOND THING IT INVERTS THAT YIELD CURVE. AS THEY GO INTO THE 10-YEAR, THEY’RE PINNING THAT SHORT TERM UP BECAUSE OF THE HIGH FEDERAL FUND RATES, I THINK FEDERAL RESERVE — CHARLES: LOST ME A LITTLE BIT ON THAT ONE BUT I DO WANT TO BRING KEITH BACK. OF COURSE DAVID BROUGHT UP THE TRADE SITUATION. TWO HOURS AGO THE SOUTH CHINA MORNING POST PUT OUT AN ARTICLE, DONALD TRUMP’S ADVISOR IN CHINA, MICHAEL PILLSBURY, PRESIDENT IS READY TO ESCALATE THE TRADE WAR IF DEAL NOT AGREED TO AS MUCH AS 50 TO 100% ON TARIFFS. THE DOW WAS UP 100 POINT BEFORE THE HEADLINE HIT. WE SEE HOW SENSITIVE THE MARKET IS TO THESE HEADLINES. KEITH?>>THIS IS IMPORTANT. A LOT OF THE FACT, LOOK WHO SAID IT, WHAT DID THEY ACTUALLY SAY. THAT IS A MOUTHPIECE FOR THE CHINESE GOVERNMENT. THEY’RE POSITIONING THEIR PEOPLE FOR A RESPONSE TO WHAT THEY ANTICIPATE THE PRESIDENT IS GOING TO DO. IF HE ACTUALLY DOESN’T DO THAT, THEY’RE IN A PICKLE. THAT MEANS THEIR STRATEGIC DECEPTION DIDN’T WORK. THAT IS HOW THEY TEND TO THINK. WE WANT RESULTS. THEY WANT DECEPTION. WE WANT A CONCLUSION TO THIS. THEY DON’T. I THINK ULTIMATELY TIME TO PLAY NICE-NICE. WE WILL SEE SUBSTANTIAL DISCUSSIONS IN NEXT COUPLE WEEKS THAT WILL BE GOOD, PUT A BID UNDER MARKET. SOMEONE WILL THROW A MONKEY WRENCH WE’LL BE BACK TO SQUARE ONE. CHARLES: THIS ANXIETY WE’RE SEEING. THIS IS COMMON. NO MATTER WHAT THE BACKDROP IS. WHENEVER YOU GET TO NEW ALL-TIME HIGHS THE MARKET WAFFLES, SOMETIMES WHEN IT DOESN’T BREAK OUT IT PULLS BACK. WHAT CATAPULTS THE MARKET TO NEW ALL-TIME HIGHS?>>ONE IS CONTINUED LOW INTEREST RATES. INTEREST RATES ARE STILL BELOW WHAT THE YIELD IS ON THE S&P 500. THAT IS A GREAT TAILWIND. WE’RE TALKING ABOUT GETTING KEY, STRONGER METRICS ON THE ECONOMY, THAT WILL ULTIMATELY FEED INTO EARNINGS. HIGHER EARNINGS FEED INTO LOW INTEREST RATES.

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