Thread by @Darky999

China data: Inflation Rate +3.8% YoY (3% last month), a material part a DOUBLING of pork 🐽 prices in October.

Yet Chinese PPI (i.e. prices from producers, e.g. factories etc) was -1.6% (-1.2% last month).

So inflation for consumers, deflation for producers

1/N

So China really needs to get pork prices down, it's by far the most popular meat there (China eats HALF the world's pork!).

And half their pig population has been decimated by swine flu (450 million pigs when at capacity, so half of these lost).

And pigs eat SOY BEANS...

2/N

China has been sorting soy bean deals with Russia, Argentina (some folk tracking shipments from S. America which are up a lot), although the MSM just talk about the #beandeal and nothing else...

China could do with more soy beans sure, but it doesn't HAVE to buy from US

3/N

Logically, China must be planting a lot of soy beans too locally (this is speculation, but it must be). All countries want to be self-sufficient if possible.

So each month that ticks by means the US' soy beans are less important to China 👈 less US leverage in negotiations

4/N

Couple with the blindingly obvious election situation (1 year in US, a lot longer than this in China). So whilst Trump COULD give in to China's demands to remove all new tariffs (since trade war began), can he REALLY do this as his base will absolutely hate it...?

5/N

#beandeal has been almost done so many times you need >2 hands to count... Perhaps this is the strategy of Trump - keep kicking the can (a la EU style), it's currently to be signed in Dec, before you know it it will be new year, then post Chinese new year etc etc

6/N

Can he kick the can to Nov 2020? And crucially without the markets working it out (the boy who cried wolf = the story to read).

This feels to be a stretch, but it's possible. Anything is possible 😬

7/N

Optimum strategy may well be for Trump to hold firm, keep base happy, stock markets will go down (no one knows how much), pressure Fed to reduce rates (we know Trump wants this), and the 'strong consumer' may start to crack too (CEO's not too confident atm 👈 lay offs...)

8/N

If done now, perhaps even a 1-2 quarter slowdown/recession comes, then Trump has 5-6 months to 'reflate' the #beandeal (maybe even make it a real substantive deal), get the market back to highs. If the recovery can be a 'v-shape' then this will play well into election

9/N

What strategy does Trump have?

He is for sure thinking about this, he is a good election tactician - whether u like him or hate him, he won in '16 against all odds

Maybe he does give in to China, however this just goes against all the hawkish tones of last several years.

10/N

World dollar liquidity is down YoY (best proxy = St Louis Fed data), despite the (non-) QE and bill buying (and bonds too as MBS mature), so world is not reflating yet. So econ data likely to get worse still.

11/N

So should Trump double down on #tradewar in order to force Fed to cut (as econ in US, and globally will continue to slow), assume a 'v-shape' recovery, or should he give in to China and anger his base.

Would love to hear your thoughts!

FIN.

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