Random thoughts #71

Random thoughts #71

Breaking news: Fed governor Lisa Cook’s bank documents contradict the charge of mortgage fraud. A good friend sent me an article that said that Cook’s financial form shows that she declared her Atlanta property as a vacation home and not a primary residence. The statement from the Bank-Fund Staff Federal Credit Union in May 2021 reads: “Property Use: Vacation Home”. On a disclosure document for national security purposes required by the federal government that says “Please list all of your interests in real property, including additional homes, vacation homes, rental properties, and interests in trusts that may hold property” Cook wrote “2^nd home.” These disclosures coupled with the ruling by Judge Cobb point to Trump’s attempt to fire Cook “for cause” will likely fail.

Do you think we have seen the last of outdoor political events? Charlie Kirk was assassinated Wednesday and yet President Trump attended the Yankees game to commemorate 9/11. Even though security around the president was undoubtedly beefed up, going to the baseball game may not have been the wisest move. I do not mean that the president and other political figures should go into hiding, but I was awfully uneasy about the president’s exposure because of the Kirk shooting. Recall that the president himself survived an assassination attempt at an outdoor rally in Pennsylvania. Indoor events are much more secure and it is likely that we will see fewer outdoor political events in the future.

The president slapped a 50% tariff on Brazil, not for economic reasons, but for political ones. He was upset over the prosecution of former president Jair Bolsonaro on the charge of plotting a coup to overturn the results of Brazil’s 2022 election. Bolsonaro’s supporters stormed Brazil’s congress on January 8, 2023. I know the irony is obvious. Well Bolsonaro was found guilty. I am awaiting Trump’s reaction. How about a 100% tariff?

The Dow closed over 46000 for the first time in history. The Nasdaq and S&P also closed higher. Why is a good question. I know that the pundits say that it is in anticipation of a rate drop by the Fed. But that cannot be the reason because a rate change had been widely predicted earlier and that should have already been baked into the exchanges. This should mean that if the Fed actually does drop the rate, that there should be no effect on the markets. Thus, I believe that something else is going on, but what I do not know. By the way, the Dow is an outdated antiquated index and should be purged. It tracks only 30 large industrial firms and is a price-weighted average meaning that stocks with higher prices are given a greater impact in the index. Basically the Dow is for public consumption and is largely ignored by professionals. The tech heavy Nasdaq and the S&P 500 – which consistently outperforms the Dow – are more closely watched.

Not surprisingly, the ICE raid on the Hyundai-LG plant in Georgia will cause the construction of the plant to be delayed. A deal was reached with the South Korean government to allow the detained workers to be sent back home without being deported because deportation would prevent them from re-entering the country. It is curious why ICE was so heavy handed in the treatment of the workers, putting them in shackles and handcuffing them as though they were criminals. The South Korean government said that the treatment of the workers would put a dampening on further private investment in this country. No kidding. The workers were on temporary visas so maybe this was all a misunderstanding? Hyundai’s executive chairman said “visa regulations are very complicated.”

Mortgage rates are falling. I thought all the learned pundits were saying that the Fed funds rate had to fall in order for mortgage rates to fall? The reason is a fall in the demand for housing. Will the lower rates cause an uptick in the demand for housing? Maybe. If unemployment keeps rising and consumer sentiment keeps falling the answer is no. Again it’s the old” you can take a horse to water” thing.

With all this tariff business, one question that should be answered is “what products do we export?” The answer is petroleum products, aircraft parts and agriculture products. Well China is the biggest customer for our agriculture products and they are not buying any. They are now going to buy their soybeans from Brazil rather than the US. The Chinese are insisting that Washington drop their tariffs on Chinese goods or else no buying of soybeans. Earlier the Chinese embargoed their rare earth minerals until they received a concession from Washington to lift the tariffs on certain items. The impact on US soybean farmers has been called “devastating” and many may face bankruptcy. I guess that the administration will have a farm bailout plan like they did in the first administration where the Department of Agriculture distributed $12 billion to farmers when China stopped buying US agriculture when China retaliated against Trump’s tariffs.