SD Outlook: Now that War with Iran is on hold, everybody is looking to the best (Phase One) Trade Deal, ever. Here’s what it means for the markets…
We can all temporarily move on from Iran:
National Security Adviser suggested today that sanctions & protests have Iran “choked off”, will force them to negotiate. Actually, I couldn’t care less if they negotiate. Will be totally up to them but, no nuclear weapons and “don’t kill your protesters.”
— Donald J. Trump (@realDonaldTrump) January 12, 2020
I mean, who care’s about negotiating anyway?
President Trump’s words, not mine.
Which is kinda weird for the one man considered the Master of the Negotiating Universe.
But I digress.
And now that the US is back to a policy of regime change in Iran via sanctions and “protests”, we can all turn our attention back to the greatest (Phase One) Trade Deal with China, ever.
Since the end of 2019 and 2020 began with pretty much everybody’s attention focused on the War with Iran, let’s review what has happened on the trade war, China front, during that time.
At the end of the year, President Trump said he will be signing the Phase One Trade Deal on January the 15th:
I will be signing our very large and comprehensive Phase One Trade Deal with China on January 15. The ceremony will take place at the White House. High level representatives of China will be present. At a later date I will be going to Beijing where talks will begin on Phase Two!
— Donald J. Trump (@realDonaldTrump) December 31, 2019
For those keeping score, that’s this Wednesday.
OK, “Hey Half Dollar, why do you talk about President Trump so much in your writing and during your live-streams?”.
The problem is, we’ve let our nation become so, oh, let’s call it fascist, that it’s impossible to write or talk about the markets or the economy without writing or talking about politics, and there is nobody more influential on the markets or economy than President Trump.
For those keeping score, inauguration in 2017 was on January 20th.
And not only did he MAGA, within 19 months, but we almost also had the “greatest economy” ever before he even did that:
I mean, there may have been doubts if we had the greatest economy ever back in June of 2018, but there is no doubt anymore!
And it’s not just in American history, but in all of history:
So yeah, it’s impossible to write and talk about the markets and the economy without writing and talking about President Trump.
Now, back to the Phase One Trade Deal: At the end of 2019, President Trump said he will sign the Phase One Trade Deal this Wednesday, January the 15th.
Recall that last Thursday evening, however, President Trump said that Phase One may be signed after the 15th.
So the suspense is building.
Of course, I never thought of President Trump as an actor who can really nail the suspense roles, but then again, I’ve never seen his celebrity reality show, the one where he would say “you’re fired”, which could have had some suspenseful flare, so I could actually be wrong there in that he may indeed handle the suspense roles every well.
Right now, however, the question is where do things stand this morning, Monday, January 13th?
As of the time of this writing, President Trump hasn’t informed us, so we’ll just have to wait and see.
More importantly, what does the Phase One Trade Deal mean for the markets and the economy?
Let’s keep that question in mind as we go through the charts.
The question everybody should be asking is will the US dollar take a hit:
Even if the dollar doesn’t take a hit, it’s pretty hard to argue the dollar isn’t in a downtrend.
OK, “Hey Half Dollar, what do you mean by the dollar could take a hit?”.
President Trump has been adamant about our “very strong dollar” basically hurting the US economy.
There’s a zillion examples of that, so I just picked one from last month:
Manufacturers are being held back by the strong Dollar, which is being propped up by the ridiculous policies of the Federal Reserve – Which has called interest rates and quantitative tightening wrong from the first days of Jay Powell!
— Donald J. Trump (@realDonaldTrump) December 2, 2019
And not only has President Trump been very, very vocal about our strong dollar, but the US Treasury Department has also labeled China as a currency manipulator.
Taking those two things into consideration, President Trump wanting a weaker dollar and the US labeling China a currency manipulator, it’s not a stretch at all to think there could be some sort of agreement to devalue the US dollar.
The bottom line is we don’t know the terms of this Phase One Trade Deal, and we won’t know the terms until after it’s signed.
Which brings up an interesting question: Are the markets ready for a US dollar devaluation?
I don’t think so.
The stock market could sell-off if we don’t get a trade deal:
The stock market could even sell off if the deal is underwhelming, which it likely will be.
Oh yeah, and I’m sure the bulls out there are just ignoring that bearish engulfing candle from Friday!
No fear in the markets is a signal that “market participants” feel a deal is coming on Wednesday:
If we don’t get a deal, we could see some increased volatility in the VIX, possibly even spiking due to the uncertainty of President Trump being able to get any trade deal done, Phase One or Phase Anything.
Interestingly, yield on the 10-Year Note has basically been range-bound since last October:
Call it a sideways channel between 1.75% and 1.95%, albeit an ugly sideways channel, but if the stock market starts selling off because of either “no deal” or because of a “buy the rumor, sell the news” result from the deal, then the likely scenario would be a move into the bond market as traders and investors look for “safety”, and bidding up the price of bonds pushes yields lower as yields move the inverse of the bond price.
That is to say, when there are more buyers than sellers, bonds become more expensive and the yield goes down.
Alternately, when there are more sellers than buyers, bonds become cheaper and the yield goes up.
If there is a de-valuation of the dollar, look for oil, priced in dollars, to go up in price:
We’ve seen some pretty interesting sell-offs over the past year in the price of crude oil, and while right now all of the “analysts”, “experts”, and “pundits” claim there’s no more fear premium that’s needed in the price of oil since tensions in the Middle East have cooled-off, nobody is talking about a dollar devaluation right now, which would cause the price of oil to start moving higher, faster.
Personally, I think we live in a world where these “markets” are so hypersensitive, looking for the profit-of-the-minute, with all of the HFT Algos, market riggers and those with access to money first, that there’s probably a pretty big short position building up in crude oil right now, though I haven’t looked into it, with the logic being that since we’re all of the sudden singing Kumbaya in the Middle East, the price of oil’s headed back down to $40.
What’s my point in saying that?
Add in a short squeeze to other reasons for a rising price of oil, and we could be talking about $70 oil before too long.
And I think we will.
Copper continues to confirm the risk of deflation is pretty much over:
Copper’s carving out a beautiful bottom there.
And to re-iterate, because I think it’s important, I think the risk of deflation, that is, where we currently are at this point in the cycle, ended at the end of 2015 and the beginning of 2016:
It is important because if the commodities cycle has indeed bottomed, which think it has, then everything about to get more expensive.
Palladium is on fire:
Sheeple who get their news from the MSM propagandists, however, have no clue what is taking place in palladium.
I’m not even sure they know what palladium is?
Platinum looks ready to take-out $1,000:
If there is no trade deal, or if it’s a “sell the news” event, or if the trade deal is simply underwhelming, I think we could take out $1000 this week, and, more importantly, close above it.
That would be bullish.
The cartel continues to give the gift of free gold:
All that’s required is selling one ounce of gold for over 80 ounces of silver right now, and then waiting until the ratio drops to 40, at which time all that’s required is selling 80 ounces of silver for two ounces of gold.
The unknown variable?
But I don’t think it takes that long at all.
All that is required is gold moving to $2,000 and silver moving to $50 for those taking advantage of of the gold-to-silver ratio arbitrage, right now, to get a free ounce of gold, assuming prices go to $2,000 and $50.
Of course, I think gold is going much higher than that, silver too, and I ultimately think silver will reach parity with gold, or even become more valuable than gold.
Speaking of gold, it’s holding its own above $1550 as I type before 8:00 a.m. EST on Monday:
It is safe to say we’ve filled the gap.
And what if there’s no trade deal, or if the deal is underwhelming?
Then gold could catch a bid this week.
Silver is struggling to hold at $18 here in early 2020, including this morning:
Let me repeat that because it’s almost surreal to say: Silver is struggling to hold $18 here in early 2020.
It’s surreal to think, taking out the run to nearly $50, that silver was also attempting to break-out above $18 in early February, of 2008:
Silver bugs, stackers and other smart investors do not have to wait much longer now!
Bottom line as we find ourselves here this beautiful Monday in mid-January?
The Deep State & Globalists are shifting our attention back to trade.
Will there be a trade deal, or will there not be a trade deal?
In the end, it does not really matter one single bit.
Because whatever deal we eventually get.
Will not be “good” for US citizens.
Or is the government, like?
All of the sudden, now?
Doing good things?
For the people?
I think not.
– Half Dollar
About the Author
U.S. Army Iraq War Combat Veteran Paul “Half Dollar” Eberhart has an AS in Information Systems and Security from Western Technical College and a BA in Spanish from The University of North Carolina at Chapel Hill. Paul dived into gold & silver in 2009 as a natural progression from the prepper community. He is self-studied in the field of economics, an active amateur trader, and a Silver Bug at heart.