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Disappointing Data
The Market Bull 2019

00:00 / 3:16

The Market Bull – May 21, 2019

Despite some fairly significant and disappointing economic data along with a dramatic escalation of the trade war after China threatened to cut off rare earth exports, something that would cripple the technology sector, the major averages closed with large gains.

E-Commerce or internet sales continue their relentless march higher, crossing 10% of total sales for the first time ever in the 1st quarter. With a 3.6% advance to 137.7 billion dollars, 10.2% of total retail sales. This against a brick and mortar retail apocalypse that I touched on yesterday that has seen another record in store closings for 2019 already, with 12,000 stores expected to be lost this year in total.

Existing home sales missed expectations substantially in April falling .4% to 5.19 million units annualized. A 5th decline in the last 6-months. Month’s supply jumped to 4.2, a 6-month high. The median price increased for a 3rd consecutive month gaining 2.9% to $267,300. Investor and all cash sales continue to fall.

Trump is about to get his first harsh lesson on how easy it is to win a trade war, or not as the case may be. Countries have a number of tried and tested strategies when it comes to responding to trade tariffs beyond the obvious, impose tariffs of your own. Currency devaluation has proven very popular in the past. In China’s case they hold the so called nuclear option, dump the 1.1 trillion in Treasury holdings, though this would likely hurt them just as much, if not more. Another is to embargo critical exports, or in this case rare earth metals used in the production of electronics, hybrid cars and weapons. It would appear that this is China’s next step. As we rely on China, the dominant global supplier, for about 80% of our rare earth imports, this will not go unnoticed, nor will it be easy to find a substitute source, or develop our own. Last year, the U.S. Geological Survey designated 35 minerals as critical to the economy and national defense, of these 35 more than half of them have to be imported, there called rare earths for a reason, and China accounts for more than 90% of the world’s supply. It’s hard to view this situation as anything other than unbelievably short sighted and demonstrating a real lack of strategic thinking. Will see who blinks first, and just how much collateral economic damage is produced as a result.

Standard and Poors 500 Index closed at: 2,864.36 up 24.13
NASDAQ finished the day: 7,785.72 up 83.35
Gold ended trading at: $1,274.40 down $2.90


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