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in the run-up to the presidential election in about a year and a half. How much will this really contribute to the American worker in the steel, aluminum and automotive industries? It is not clear.

Unexpected Trump, Xi Jinping tooThe tactic Trump is using is also no accident. She is part of a whole worldview and doctrine he has absorbed from his mentor, Steve Bannon, who, even after being removed from the White House, continues to be a source of inspiration for Trump. It is a tactic aimed at causing confusion and embarrassment to create an opponent’s uncertainty about his true intentions. This is part of the chaos theory that talks about the existing destruction and the new creation that will be better for the US. In his view, the US should not shy away from a major (and not necessarily military) conflict between the West and the East, whether it is Eastern Europe – Russia, Middle East – Iran, or Far East – China. So, one should not be surprised that after a flattering and flattering tweet to the Chinese president comes criticism and disappointment, and after a tweet that the TOO comes to an agreement, Trump increases the volume of Chinese produce on which customs duties are imposed and also increases the tariff rateThis tactic is also very much in line with the character of Trump who holds himself as the negotiating artist. Along with the aforementioned approach that has thinking and planning behind it, Trump at its core is an unexpected personality, but he is not the only one. Chinese President Xi Jinping, too, is not exactly a predictable leader, certainly not for Western politicians.These two leaders have another common trait. They are both authoritative leaders. Xi Jinping, under the Chinese regime and his personal ambition that succeeded in securing him for many more years, and Trump, who would be happy if there was an amendment to the constitution that would allow him to be elected for more than two terms. Which means that each of them has an ego that is not easy to contain, and those who have a big ego also expect great dignity, and woe to those who try to hurt their dignity, not to say – humiliate.

In the case of the Chinese at least, it is not just a matter of respect for their presidents, but of respect for their people and their country. As a country that suffered from Western (non-American) colonialism, China is very sensitive to its national dignity, certainly today when it is itself.It is worth mentioning that quite a few wars in history have erupted on the grounds of respect, the personal dignity of a leader, or the dignity of a nation, and when it comes to two cultures so different that one does not understand the other’s language, this danger increases, even when it comes to In a trade war and not a real war. The Chinese market has weakened, and Trump is taking advantage of thatIn this trade war, the US should be supreme. Because of the current balance of trade structure, China has more to lose, simply because it exports to the US far more than the US exports to it. Moreover, China’s exports , The export-led, to the US accounts for close to 20% of its exports, while for the US, which is a local economy-driven economy, exports to China account for less than half of that. It’s enough to look at what’s happening on the Chinese stock exchange when the trade war is getting worse compared to what’s happening on the US stock exchange Right in those days: first sharp declines versus very moderate declines in the second.And, in general, Trump is catching China at a sensitive and under-the-waiter spot, as the Chinese economy has weakened and is suffering from a few structural problems, including a real estate bubble, a credit bubble, huge corporate sector debt, and an uncertain state of the Chinese banking system.

China can harass: from Taiwan to TehranHowever, it would be a mistake to think that China is going to surrender, since beyond the question of personal and national dignity, China has tools to deal with.The US needs cooperation from China, or at least non-disruption on its part, on two major issues that the US considers. One – North Korea, and the other – Iran. China is also a member of the United Nations Security Council and has a veto right, which can make it difficult and also prevent decisions that are wanted in the US.China can harass the United States not only in North Korea and Iran, but more than in the case of Taiwan, which is an unresolved issue, and in the South China Sea, where China bases its military grip. China, as we know, claims sovereignty in these places.China also has some options for responding to American moves in a way that will hurt the United States, American companies and / or American citizens.One way is to sell a U.S. government bond with China being the foreign country with their highest rate, at $ 1.1 trillion (about 8% of their total market value). This could be intentional voluntary activity, and it could also be the result of China’s necessary response to a foreign currency escape from the country that could cause a devaluation too quickly to the yuan’s taste. While China has an interest in the devaluation of the yuan, which will offset some of the landings that Trump is trying to produce for its products through the tariffs, it has no interest in the rapid devaluation that comes from panic.

An alternative, or complementary, depreciation way is to provide subsidies to the Chinese industry to facilitate exports. China has large foreign exchange reserves, most of them in dollars, one-third of which is invested in US government bonds. However, selling them by them may turn out to be a double-edged sword, and its impact in the direction of US government debt declines could turn out As a temporary. Meanwhile, China is apparently pursuing a policy of failing to buy US bonds instead of maturing ones, thus reducing its holdings. By the way, Trump has much blamed China for its currency manipulation, and the Chinese have not remained indebted and accused the US of being my father Fathers manipulated by pouring trillions of dollars into markets for years.A second way is to boycott American produce beyond the customs context. The Chinese people have been educated to be a very disciplined public and the message from the President to the last of the citizens is permeating the hierarchy of Chinese very quickly, top to bottom. Companies like Apple can discover very quickly that there is no demand for their produce, and not because of the customs that will shred their produce. No boycott should be declared. It will “be created by itself.” Trump can tell his people Buy American, and nothing will happen. China doesn’t have to say much. The power of every junior party politician in China is big on this matter by the power of Trump.China looking for alternative markets?

China has many more ways in the arsenal to deal with the situation that is being forced upon it. It can make indirect exports through neighboring countries, such as Vietnam, Cambodia or others not under the watchful eye of Trump and its protective tariffs on China, and / or setting up Chinese-owned enterprises in neighboring countries.China can, of course, also find new markets that will replace the US market, a move that will take its time.China should not make statements. She can do the job quietly. The Chinese bureaucracy does not have to exert too much effort to drive American companies operating in China or trade with them.And, of course, China could hurt Trump’s political base, his soft stomach – the farmers, the soybean growers, in key election countries, of which China is the biggest buyer, and could replace the US with Brazil, for example.So who will win the trade war?The US’s hand is supposed to be supreme. As China has possible answers, it is more vulnerable. Obviously, even if there is an agreement, and if not, each will claim victory or achievement. Trump needs a semblance of victory, and so does Xi Jingping.But, in the event of failure to reach a trade agreement, winners Why are the markets excited, but not really shocked?First of all, it should be said that financial markets so far have not been shocked by developments in the abandoned US-China trade war. Excited but not shocked.Even after Trump first imposed tariffs on China, markets did fall sharply, but the declines were due not least to concerns about some interest rate hikes. The first trimester of 2019 was the opening of a dreamable year. Part of that can be explained by the Fed’s messages becoming Ionian – fears of a series of interest rate hikes have evaporated and their place has caught hopes of interest rate cuts. Another part of the gains in the markets was due to the strength of the US economy and the published financial statements, and finally – the markets estimated that Trump would not break the tools, whose enthusiasm was only a tactic, and eventually an agreement would be reached, as Trump could not afford the five-year US election The slowdown and unemployment rate is starting to climb.

And having said all that, we should not relieve ourselves of the possible significance of failing to reach an agreement, first of all in terms of the global economy, and then in terms of financial markets.The implication of failing to reach an agreement is the danger of imposing one-party sweeping tariffs on one another, including boycotts on leading technology companies in the US and China. These can severely damage the “technological food chain” that is the basis for the amazing innovation of recent years. You can see the US-made exacerbations of US technology companies’ acquisitions by Chinese officials, and most notably the boycott of leading Chinese company Wawi.Failure to reach an agreement means violating the principle of free trade, which is one of the foundations of globalization’s success, even though it is not free of its limitations and disadvantages.Failure to reach an agreement will hurt the pace of growth, both in the US and China, and will affect world trade as a whole, so that other countries will also be harmed.And finally, when a trade war for goods and services between two such powers begins, you can’t tell where it will be stopped / not in their relationship, and not in the entire world where populist leaders are most likely to discover that protectionist policies of local industry and agriculture are protected by customs, Speaks to the heart of their public and serves their political interests. Will the trade war continue to shake the markets this week? “US lost in first stage”Markets follow reports of anticipated meeting between Chinese and US presidents • Britain will deal with chaos over Theresa May’s resignation Interrupting them: The tremendous manipulation that drives Wall Street

A collection of financial and real data reflects a growing slowdown in the US economy, so why is the stock market still rising, who are the buyers, and what will happen when reality hits them and they have to stop? At the end of December 2018, the US stock market completed a sharp, rapid decline of about 20% from its October highs. But since then, and consistently, the market has corrected and rebounded until early May 2019, even the 500 S&P index crossed October prices. Recently, in light of developments in the US-China trade war, the market is a bit stagnant, and yet the consistent upward trend has prompted some readers to ask: Why do stocks continue to rise?hat’s a good question, since for a long time many economic indicators are flashing red.For example, each month the New York Federal Reserve publishes an index called “likelihood of recession in the next 12 months.” The index is based on spreads of government bonds. The spread is the interest rate gap that the market “gives” to long-term bonds versus the interest rate on short-term bonds. Generally, the long-term interest rate should be significantly higher than the short-term interest rate, and for obvious reasons. Long-term bonds represent higher risk (if interest rates rise or inflation occurs) and lower liquidity (at a fixed rate of maturity that does not depend on the market). When anomaly occurs and long-term bonds carry lower interest rates than the short-term bonds, the market Assume that in the future interest rates and inflation will actually fall – two intersecting phenomena linked to the recession – and therefore priced in the long-term bond.

This follows from the assumption that a reversal in yields reflects an expectation of recession. Past experience shows that such a reversal did predict quite accurately recessionary periods over many decades.And now, in May, the Fed’s index reached a new high of 27.5%, the highest figure since 2007. The previous two times that indicator remained at that level were August 2006 and July 2000, and we all know what happened in about a year. And there are other signs. About a month ago, the Federal Reserve’s report on credit conditions was published in the US, indicating that banks were beginning to tighten standards and raise interest rates on various types of credit, notably on consumer credit for vehicles and credit cards, as well as commercial real estate credit. It is estimated that in 2019, the tightening of the credit standards they provide will continue.A similar phenomenon was also observed in credit through bonds. The negative ratio between bonds whose credit rating was reduced and bonds whose credit ratings were upgraded rose to a peak, which has not been since the second quarter of 2009. The rating of 297 corporate bonds was reduced compared to 139 bonds. The upgrade rating was upgraded.But not only are the financial indicators flashing, but the real ones as well. For example, the economic activity in the manufacturing sector, ISM, showed a decline of 2.5% in April compared to the previous month, and the new PMI fell 5.7% from the previous month. In June 2018, the index stood at 60.2%, and its current level, 52.8%, thus completing a cumulative decline of 12.5% ​​in the Manufacturing Activity Index over the past nine months.How much did GDP grow?

And what about the US economy’s state-of-the-economy growth index? Wall Street admittedly jumped 3.2% year-over-year in Q1, but that didn’t change the facts. On the contrary, a close look at data reveals that about two-thirds of growth, 2.1% were due to an increase in government spending as well as an increase in inventories, which indicates a slowdown in sales, and in any case this is not a phenomenon that can continue over time. Excluding government spending and an increase in inventories, economic activity in the US economy, consumer spending and business investment increased by 1.1%. only.he majority of the public also believes that a slowdown is happening. In a Gallup Institute survey of February 2019, about 56% of respondents said the economy was slowing, if not worse. Even President Trump’s calls for the central bank to immediately cut interest rates by 1% indicate that he also understands that clouds are on the horizon and that he must now and first vote in the upcoming elections to blame for the slowdown and future declines in capital markets, which is Jerome Powell, Hugh. R. Fed.If so, the economy is cooling and barely growing, but the stock market is ripe. According to data from the Federal Reserve research body, in the first quarter of 2012, total U.S. pre-tax earnings were $ 2.2 trillion in annualized earnings. In the last quarter of 2018, earnings were $ 2.18 trillion. This is a small decrease in profitability over the seven years. In 2014, the decline was even greater, almost 6%, as corporate earnings were $ 2.32 trillion in the third quarter of 2014. Share prices on the 500 S&P index, however, doubled during this period, and the index climbed from about 1,400 points in 2012 to about $ 2 billion. 2,900 points today.

All of this therefore raises the question: Who are the buyers? After all, anyone who pushes stock prices up is a surplus of buyers over sellers.The great source of stock demandA recent study by Goldman Sachs Investment Bank gave a surprising answer to this question. In a comprehensive April 2019 document, the following stunning image is presented: “Repurchase of shares (with the companies buying their own shares, Buyback, HSE) was the largest source of stock demand each year since 2010, averaging $ 421 billion a year. Comparison, total demand for shares of households, various funds and foreign investors was less than 10 billion each year. “This is an amazing statistic for all opinions. The ratio of repurchases by the companies to ordinary investors purchasing the shares of the companies has averaged 421 to 10 over the past five years, or about 98% of all demand was due to repurchases. No wonder the document concludes thus: “As a result, in a world without repurchases, a very significant change in the supply-demand structure of stocks will occur.” How surprising. The totals look like this: Between 2014 and 2018, the 500 S&P companies invested $ 2.1 trillion in repurchases, according to Goldman Sachs. Of that, $ 600 billion was financed by debt, according to JP Morgan. This compares with acquisitions of private investors, mutual funds, and international investments totaling approximately $ 50 billion. If so, the ratio of debt-financed purchases to those made by real investors was 1 to 12. These are repurchases by companies only, private leverage has not been included in this account.The reason for the repurchases is known and simple. This is an exercise that increases earnings per share even without necessarily increasing the company’s income, because when there are fewer shares in circulation there is no need to increase profits to increase the earnings per share, and with it the senior management’s rewards.Bank of America summarized the entire issue in a April 2019 document: “For the past five years, US companies have repurchased their shares for $ 2.7 trillion, but at the same time they have taken on $ 2.5 trillion of new debt. The method worked,” the document continues

, ” “30% of the average increase in earnings per share was due to the repurchases. The repurchases were therefore the lifeline of the earnings season.”The trick that was outlawed and repeated After the Great Credit Crisis of 1929, the repurchases were outlawed, because they were considered a form of stock price manipulation. A U.S. Securities and Exchange Commission (SEC) decision in 1982, according to which companies acquiring their shares as “shelters” from legal proceedings for stock price manipulation, returned the repurchases to the trading arenas

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