LONDON – London is abuzz. Aflame. Doubled up in laughter. Shrieking in outrage.

The U.S. president came. He saw. He went bonkers.


At least, that’s how the UK press puts it. “Trump leaves chaos behind him…” said one report.

And The Sunday Times reported that both Prince Charles and Prince William had refused to meet the American president, leaving Queen Elizabeth to meet him alone.

But first, we give readers a little advice.

Don’t come to London in July or August. The place is far too crowded with tourists and immigrants. The area around Piccadilly seems to have gone down-market; it is noisy and trashy. And you might run into Donald Trump.

We lived in London several times. But we don’t remember it ever being so unpleasant. Or expensive.

We had dinner with another couple at what appeared to be a moderately priced restaurant in Mayfair. The final tab: over $900 (although much of that was for two bottles of Barolo… ahem).


Trump Cause

We know that many dear readers are Donald Trump fans. And many suspect your editor of being a bit cut off from the heartland… indifferent to the stars and stripes… and maybe even a traitor to the Trump cause…

But when the test came, we were ready. We stood up for The Donald.

Here in London, he insulted the prime minister, Theresa May. He suggested that her rival, Boris Johnson, “would make a fine prime minister” in her place.

As for Mr. Johnson, the former mayor of London, Old Etonian, and popular historian has had plenty of thoughts of his own. He said of then-candidate Trump in December 2015:

I think Donald Trump is clearly out of his mind… The only reason I don’t visit some parts of New York [his birthplace] is the very real risk of meeting Donald Trump.

Then… The Donald was late for a meeting with the Queen, keeping her waiting awkwardly.

And when the two set off on a ceremonial walk amid the rows of guards, Mr. Trump walked in front, leaving the poor Queen behind. Social media exploded, clucking and harrumphing.

“I couldn’t believe it,” said one of our hosts, a woman with no previously expressed political opinions. “He was so unchivalrous. Queen or not, she’s a 92-year-old woman.He should have had a little more grace.”

“The man is just not a gentleman,” she went on. Our patriotic glands oozed. We rushed to his defense…

“Of course he’s no gentleman; he’s our president…”

China Blinks

Grace is not what Mr. Trump is known for. But grace is not what the voters wanted from him. They wanted someone who would fight for them, for a change.

One way that The Donald claims to be fighting for the forgotten Americans is through his trade war against the “unfair” practices of the Chinese.

So let’s look at the trade war. Who’s winning?

A couple of prominent gabbers – Jim Cramer, of TV’s Mad Money, and Mohamed El-Erian, chief economic advisor at Allianz – claim that the U.S. is ahead.

Cramer says China has already “blinked” by not immediately countering Trump’s last $200 billion worth of trade taxes.

But Stephen Roach of Yale University, and formerly of Morgan Stanley, disagrees. CNBC:

“Trade wars are not easy to win. They’re easy to lose, and the U.S. is on track to lose this trade war,” Roach, a senior fellow at Yale University and former Morgan Stanley Asia chair, told CNBC’s Squawk Box on Thursday.

“The U.S. is hugely dependent on China as a source of low-cost goods to make ends meet for American consumers. We’re hugely dependent on China to buy our Treasuries to fund our budget deficits, which as you know, are getting larger,” Roach explained.

Who’s right? Cramer or Roach?

Probably neither. Trade deals are win-win. One side has something to sell. The other wants to buy. Stop the deal and both sides lose.

Who suffers the most? You might as well ask who benefits the most when a child can’t find someone to play with… or when a writer can’t find his muse.

There are no winners, only losers.

China’s average trade-weighted tariff is just 3.5%. That’s down from 32% in 1992.

In other words, China’s trade barriers have dropped almost 90% over the last 26 years; today, they pose no real threat to the happiness of the human race.

But a trade war, on the other hand, could have noxious – or even catastrophic – consequences.

The Donald’s trade duties will amount to an additional tax on U.S. consumers of nearly $100 billion. But that’s only a piece of it.

China’s countermeasures will cost U.S. producers, too – especially soybean farmers, who export some $13 billion worth of soybeans to China every year.

Per The New York Times:

Beijing placed a 25 percent tariff on American soybeans last week in retaliation for the Trump administration’s levies on Chinese-made goods. Last year, soy growers in the United States sold nearly one-third of their harvest to China. In dollar terms, only airplanes are a more significant American export to China, the world’s second-largest economy.

More to Lose

El-Erian and Cramer think China will lose the trade war because it has, relatively, more to lose.

It sells more to the U.S. than it buys. But this entirely ignores the other side of the win-win deal.

For every buyer there is a seller, and vice versa. Cut Americans off from Chinese imports, and all of a sudden, Walmart’s “everyday low prices” aren’t quite so low.

Already, prices are rising in the U.S. June numbers showed consumer prices going up at a 2.9% rate year-to-year, while wholesale prices rose 3.4%.

Typically, wholesale prices lead consumer prices… so this gives us an idea of where we are headed.

Putting this Consumer Price Index number in perspective, it is higher than current GDP growth, the Fed funds rate, and wage growth.

All of which is bad news for the man in the heartland. Now, he’s a loser… thanks, at least in part, to the trade war.

And he’s likely to be a much bigger loser if the U.S. makes China lose in a big way.

As we’ve pointed out many times, the U.S. and China are symbiotic – both playing a cockamamie game, where one buys with money it doesn’t have and the other sells to people who can’t afford to pay.

Of the two, the Chinese economy is probably at greater risk of collapse.

But since it is also the biggest buyer of raw materials in the world, the risk is shared by all her trade parties, including the U.S.

If China were to go into a depression, in other words, the U.S. might not be far behind.

Win-lose is fine for the World Cup, politics, and the UFC… but not for world trade.





By Joe Withrow, Head of Research, Bonner & Partners

After hovering near zero last year, credit growth within the financial system has picked up in 2018…

That’s the story of today’s chart, which maps the growth of bank loans from all U.S. commercial banks from 2010 through today.


As you can see, bank loan growth steadily contracted from 2014 to 2017… and it went negative during the first quarter of 2017.

But the most recent data shows that banks are now issuing more loans. Loan growth was up 8% in Q2 of this year.

Bank loan growth is a financial indicator we carefully monitor here at Bonner & Partners.

Bill’s friend, and editor of Macro Watch, Richard Duncan, showed that whenever credit growth falls below 2% per year, a recession is likely to follow.

But heartier credit growth so far in 2018 suggests the economy is not yet in danger of a recession.

– Joe Withrow


Foreign Investors: Out of Love With the U.S.?
Foreign investors aren’t expanding into the U.S. like they used to. According to new data from the Bureau of Economic Analysis, foreign investment in the U.S. was down 32% last year.

Why Trump Blocked the Biggest Tech Merger in History
In March, President Trump blocked what would have been the largest tech merger in history. The official reasons are classified. But Jeff Brown, Bill’s top technology analyst, think he knows why POTUS took this unprecedented step…

China’s Economic Slowdown Is the World’s Problem
As Bill reported, a collapse in the Chinese economy would have far-reaching effects in the U.S. Already, China’s economy is cooling, and it’s having a noticeable impact on global growth…


In the mailbag, dear readers’ two favorite topics: Trump and trade

Your constant berating of Donald Trump will one day soon bite you in the butt. In the past 150 years, there have been many who doubted the might of America. But they have seen nothing yet, even though we have vanquished everyone who has come against us or just looked cross-eyed at us – with the exception of when the charlatan Obama was in charge.

It will be a miracle from God if we survive; but then, I doubt that you even know him. I have about as much disenchantment with the USA Corp. as you, but Trump is not one of them; oddly, he is more like us.

– Edgar H.

Bill, please explain why auto prices should go up as a result of tariffs… General Motors cars and other American-made cars that include most popular imports have no cause to raise prices. This is aside from the fact that tariffs won’t go into effect if trading partners reciprocate by lowering theirs to level the playing field. Ditto for other products that can be replaced with domestic production or alternative sources. Why are you only reporting half of the story?

Trump’s visit to Europe: NATO is 70% American. In light of this, critics claiming Trump is undermining the alliance is laughable. What alliance? Germany is doing more by selling out to Russia with the gas pipeline. I am German, and I think this is unconscionable, as do many NATO allies – not to mention their worst record of contributing to their own and Europe’s defense.

– Erich K.

I read your writings looking for some practical advice. Your article about Donald Trump’s trade war failed to offer anything substantial. While the effects of, and reactions to, these trade wars clearly entertain you (and the market gods), I wonder if you could do your readers a service by suggesting practical things we could do to avoid loss and maybe to make gains.

– Jerry W.

You have let your riches pollute your thinking. Dissing our president will, in the long run, be detrimental to your business. Just a point you can take or reject: Make your financial points succinct. Your continual demeaning of our president is horrible.

– Mitch H.

Meanwhile, a dear reader takes a liking to Bill’s “win-win” philosophy…

I love your writing approach. I was very happy to see you latching on to the win-win approach, as I have understood for many decades now (I’m 80). But please give some thought to applying this to more aspects of human activity – particularly in sports – especially in today’s atmosphere, where winning is everything and losing is highly negative… rather than “how you played the game,” as in past years, always making the result positive for all parties. Parents are especially to blame here, for clearly showing great disappointment if their child does not win over (i.e., beat) the opponent.

– Paul W.


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