iftttwall

Surprise!

Another hour, another anonymously-sourced, strawman of an idea suggesting the end of the US-China trade war is nearer.

This time it is The FT that reports, according to five people briefed on the discussions, the White House is considering whether to roll back levies on $112bn of Chinese imports – including clothing, appliances, and flatscreen monitors – that were introduced at a 15 per cent rate on September 1.

Such a move by the US would meet a core demand from Beijing as negotiators from the world’s two largest economies work out the terms of a ceasefire to be signed in the coming weeks by President Trump and Xi Jinping, his Chinese counterpart.

Washington would likely expect something in return, including beefed up provisions on the protection of intellectual property for US companies (which the Chinese already rejected earlier today), greater certainty on the scale of Chinese purchases of US farm products, and a signing ceremony for the agreement on American soil.

Futures exploded higher…

And Offshore yuan is bid…

Source: Bloomberg

How long before Trump tweets a denial? Or Navarro jawbones it away?

With virtually every other sector of the US economy slowing rapidly, or now outright contracting, we can now add the hotel industry – which in 2019 saw RevPAR decline for the first time since the crisis as the lower-tier class segments and markets outside the top 25 struggled – into the mix.

As HotelNewsNow reports, In September, US hotels recorded the second monthly revenue-per-available-room decline of 2019, declining by 0.3%, as average daily rates increased by 0.6%, but that was not enough to overcome the 0.9% occupancy decline.

Whether due to the impact of AirBnB, or some other reason, average hotel rates growth has now been below 1% for five of the nine months this year, while occupancy has now declined four of nine months.

As HNN’s Jan Freitag writes, while the RevPAR cycle had enjoyed some 112 of the past 115th months – ever since the financial crisis – in positive territory, it may be time to retire the term “upcycle” if RevPAR is declining, as it did in September. The long-run monthly RevPAR growth chart now looks as if it is about to break with a period of record growth as its starts shrinking.

The slight RevPAR decline on the national level implies that there were likely some pockets of positive results, and indeed the upper end of the market did somewhat better than the remainder of the classes. This is the result of the group numbers coming in quite positive as discussed below.

As Freitag notes, a couple of data points stand out:

• Luxury hotels continue to do well, upper-upscale hotels continue to see some pricing power (when group demand is good).
• Upscale and upper-midscale hotels are seeing the impact of almost 4% supply increases in the occupancy results. It’s interesting then that the upscale ADR has not moved, although that could be seen as a positive outlier and not the norm going forward, as occupancy declines will be followed by ADR declines.
• Economy occupancy took a real hit, and that is noteworthy since supply for that class is still down 0.2%. Demand declined 1.3%, the steepest decline of all classes.

So when people look for canaries in the coalmine, is the ongoing deterioration of economy key performances indicators that sign? Is the leisure customer tightening the purse strings as the U.S. economy slows?

That, as the author notes, is the key space to watch.

* * *

Finally, some comments about the state of Q3, 2019: third-quarter U.S. RevPAR grew 0.7%, as occupancy declined 0.1% and ADR barely moved up 0.8%. Here a few things stood out: luxury continued to do better than average, pointing at continued healthy demand growth. Upper-upscale hotels had tiny bit of pricing power. Upper midscale hotels overcame supply increases of 3.6% to still report growth in occupancy. The most worrisome number, however, is “economy”, since the supply continues to decline (-0.2%), but in this quarter demand decreased (-0.5%) as well, the only class with Q3 demand decline.

One last observation: real quarterly ADR, as in ADR less CPI, continued to paint a grim picture for profit growth. Real ADR in Q3 was down 1% – the biggest drop since the financial crisis.

Authored by Michael Krieger via Liberty Blitzkrieg blog,

“Major movers” such as China, Russia and the European Union have a strong “motivation to de-dollarize,” said Korin, co-director at the energy and security think tank, on Wednesday.

“We don’t know what’s going to come next, but what we do know is that the current situation is unsustainable.”

–  Anne Korin, Institute for the Analysis of Global Security.

Irrespective of where you reside in the world, chances are you feel some sense of unease, a nagging concern for the future and a deep instinctual understanding that an era you knew and navigated your entire life is slipping away and won’t be coming back.

We’ve been witnessing widespread protest and unrest across countries with distinct political and economic systems, such as Hong Kong, France, Chile, Spain, Ecuador, Lebanon and Venezuela just to name a few. Those with vested interests and an ideological solution to sell insist it’s all because of socialism, capitalism or some other ism, but the truth is this goes far deeper than that. What’s actually happening is the geopolitical and economic paradigm that’s dominated the planet for decades is failing, and rather than address the failure in any real sense, elites globally are have decided to loot everything they possibly can until the house of cards comes crashing down.

This chart is almost as disturbing as the charts of negative yielding debt.
The entire financial system is a farce and a fraud. It’s all smoke and mirrors, a coverup machine for elitist looting.

Despite people with vested interests reassuring you this is normal, it is not. https://t.co/UWbQjB32Ss

— Michael Krieger (@LibertyBlitz) October 31, 2019

You can’t properly discuss the entrenched global paradigm without addressing the American empire, and you can’t have a conversation about empire without discussing the monetary and financial system that keeps it all in place. The last time I discussed this in any detail was last year in the post, The Road to 2025 (Part 3) – USD Dominated Financial System Will Fall Apart. Today’s post should be seen as an update to that piece, taking stock of where we stand a year and a half later.

Several assumptions were made in last year’s article that must be recognized in order to understand how I see the situation. The first is a view that we’re already transitioning into a multi-polar world, in other words, the U.S. no longer holds a position of total planetary geopolitical dominance similar to what it enjoyed in the mid-to-late 1990s. Despite proclamations to the contrary, history did not in fact end.

U.S. leadership became accustomed to getting virtually whatever it wanted around the world via overt violence, covert intelligence operations or economic coercion, but this is no longer the case in 2019. Although this doesn’t sit well with much of the foreign policy establishment, it’s nevertheless reality. The most recent evidence came just last week with Denmark’s decision to approve the Nord Stream 2 gas pipeline, something the U.S. was adamantly opposed to.

Tom Luongo offered an interesting analysis of why this is so significant:

For the past three years the U.S. has fought the construction of the Nordstream 2 pipeline from Russia to Germany every inch of the way.

The battle came down to the last few miles, literally, as Denmark has been withholding the final environmental permit on Nordstream 2 for months.

The U.S., especially under Trump, have committed themselves to a ‘whole of government approach‘ to stop the 55 bcm natural gas pipeline from making landfall in Germany…

In a sense, this pipeline is Germany’s declaration of independence from seventy-plus years of U.S. policy setting. 

The fact the U.S. foreign policy establishment sees it as our business to determine which country the EU should buy natural gas from and how offers a glimpse into the imperial mindset. It’s the same mindset that maintains Iran shouldn’t be able to sell oil to anyone without U.S. permission. It represents an attachment to total global control, a view that the world consists of little more than the U.S. hegemon and its client states.

Which gets us to the key point surrounding the unsustainable nature of the world’s monetary and financial system.

Specifically, we already live in a world where several powers (namely China and Russia) have very publicly and clearly elucidated they will not function as U.S. client states going forward. They appear to be on the winning side of history because it’s much harder to maintain global empire than to frustrate it at this point, but the U.S. maintains an enormous advantage when making moves on the geopolitical chessboard. It’s not the ubiquitous military bases or advanced technology, but a more esoteric and stealth weapon — the U.S. dollar.

The USD continues to dominate global financial transactions, which means the world can never truly be multi-polar unless this lopsided structural reality is dealt with. None of this is new of course, though there’s now a heightened sense of urgency for those countries unwilling to serve as U.S. client states given the Trump administration’s increasingly aggressive and blunt usage of the financial system as a geopolitical weapon.

The significance of the USD as a weapon was put into plain view a couple of weeks ago during Congressional hearings on Facebook’s Libra project. See the clip below.

Please allow this to be a wakeup call for those who don’t understand.

Congressman admits the U.S. dollar is the most significant tool of imperialism available to the state (it is).
Zuckerberg then admits he gets it and Libra will also be wielded as a weapon of empire. https://t.co/4uqhSUOYw5

— Michael Krieger (@LibertyBlitz) October 23, 2019

As such, nations committed to functioning as sovereign states have a clear choice. Figure out a way to transact smoothly on the world stage without touching the USD, or submit to being a client state. Since the latter is seen as unacceptable for an increasing number of nations, I believe the former will be figured out, and that it’ll happen by 2025 at the latest.

Whenever I say stuff like this people insist there’s nothing ready to replace the USD as a global reserve currency. On this front I agree, but my argument isn’t that another nation-state fiat is going to totally usurp the USD on the world stage in the years ahead (nor should anyone want that). Rather, my view is competing powers will figure out a way to avoid the dollar in an increasing percentage of global transactions simply because they have no other option in a world where the dollar’s been fully weaponized to achieve U.S. geopolitical goals.

I don’t need to know the specifics of how this transitions unfolds, just that it will. This is why it makes sense to own bitcoin and gold, two politically neutral alternative global monetary instruments that’ll likely trade multiples higher from here in the years ahead as people come to recognize the importance of such assets in the historical transition period we’re in.

Ultimately, I hope humanity learns from the experience of recent decades and never again permits one country to control monetary policy for the entire planet. A reserve currency controlled by a single nation is effectively the most potent geopolitical weapon ever invented. No country or institution should ever have such power, now or in the future.

A global reserve currency must be politically neutral otherwise it’s just a weapon.

— Michael Krieger (@LibertyBlitz) October 23, 2019

I hope we can finally learn this lesson.

*  *  *

Liberty Blitzkrieg is now 100% ad free. To make this a successful, sustainable thing consider the following options. You can become a Patron. You can visit the Support Page to donate via PayPal, Bitcoin or send cash/check in the mail.

The California wildfires aren’t just starting to look ugly for PG&E, they’re also starting to look ugly for Governor Gavin Newsom. 

Newsom, overseeing the 5th largest economy in the world, has said publicly that he “owns” the crisis, according to Bloomberg – a public statement that could come back to bite him if he can’t get the problem under control quickly. Most recently, Newsom threatened a state takeover of PG&E unless the company could quickly exit bankruptcy and improve its operations. 

The focus on Newsom is similar to the focus that was put on Governor Gray Davis in 2003, after Enron manipulated the state’s deregulated energy market causing blackouts without warning and resulting in Davis being recalled from office. 

Joel Fox, a Republican consultant who worked for Arnold Schwarzenegger during the Davis recall said:

 “If the situation is not handled, it’s very possible it will blow back on Newsom. There’s jeopardy for him, depending on how it plays out.’’

President Trump said that Newsom “has done a terrible job of forest management” and said California would no longer get Federal aid. “Get your act together Governor,” Trump tweeted.

What Trump may have failed to realize is that federal agencies own and manage 57% of the state’s forests, while industrial timber companies own another 14%.

The pre-planned “safety blackouts” that PG&E has been engineering across the state have resulted in school closures, evacuations and millions of dollars of lost revenue for the state’s businesses. 

At the same time, the Kincade Fire, which originated in Sonoma County, continues to burn. Newsom said on Friday: “This cannot — and will not — be the new normal. California demands better.”

Newsom has been in office since January, winning election with an insanely unreasonable “ambitious” agenda to tackle homelessness and affordable housing. Not long after taking office, he was fully immersed in the crisis surrounding PG&E. He has also gone head to head with President Trump, who continues to use California as an example of “all that he sees as wrong with Democratic politics.”

In response to Trump, Newsom said: “You don’t believe in climate change. You are excused from this conversation.”

Trump has even revoked the state’s authority to set its own auto-emission tailpipe standards, and attacked it for failing to meet federal standards for smog reduction. The state has taken Trump to court to try and fight back.

Meanwhile, Republicans have been sharply critical of the job Newsom has done. John Cox, the Republican San Diego businessman who ran against Newsom in 2018 said:

 “Mr. Newsom knows this is as dangerous for him politically as it is, life safety-wise, for the people who are facing fires. It’s not lost on him that the outages we’re experiencing are hurting people. The people of this state have a way of reacting negatively when they turn on the light switch and there’s nothing there.’’

Republican Assemblyman James Gallagher commented: “They’ve been saying they understand the terrible impacts, but the next step is to say, ‘Here’s what we’re going to do to change it.’ And I don’t think there’s been enough of that yet. There needs to be more urgency on the issue, either through a special session or other means of changing policy in a timely fashion.’’

Gallagher has suggested that Newsom and Democratic leaders consider additional programs to reduce wildfire fuel through forest management and funding for utility equipment upgrades. 

Former Governor Davis concluded with some heavy hitting words of wisdom: “Nobody knows better than me that blackouts are bad and electricity is good. But we all have to understand that until these measures the governor has taken take hold, we’re going to have to live with an imperfect solution.’’

With razor sharp thinking like that, it’s tough to see how David lost his job in 2003, isn’t it?

Authored by John Solomon via John Solomon Reports

(emphasis ours)

Hunter Biden and his Ukrainian gas firm colleagues had multiple contacts with the Obama State Department during the 2016 election cycle, including one just a month before Vice President Joe Biden forced Ukraine to fire the prosecutor investigating his son’s company for corruption, newly released memos show.

During that February 2016 contact, a U.S. representative for Burisma Holdings sought a meeting with Undersecretary of State Catherine A. Novelli to discuss ending the corruption allegations against the Ukrainian firm where Hunter Biden worked as a board member, according to memos obtained under a Freedom of Information Act lawsuit. (I filed that suit this summer with the help of the public interest law firm the Southeastern Legal Foundation.)

Just three weeks before Burisma’s overture to State, Ukrainian authorities raided the home of the oligarch who owned the gas firm and employed Hunter Biden, a signal the long-running corruption probe was escalating in the middle of the U.S. presidential election.

Hunter Biden’s name, in fact, was specifically invoked by the Burisma representative as a reason the State Department should help, according to a series of email exchanges among U.S. officials trying to arrange the meeting. The subject line for the email exchanges read simply “Burisma.”

“Per our conversation, Karen Tramontano of Blue Star Strategies requested a meeting to discuss with U/S Novelli USG remarks alleging Burisma (Ukrainian energy company) of corruption,” a Feb. 24, 2016, email between State officials read. “She noted that two high profile U.S. citizens are affiliated with the company (including Hunter Biden as a board member).

“Tramontano would like to talk with U/S Novelli about getting a better understanding of how the U.S. came to the determination that the company is corrupt,” the email added. “According to Tramontano there is no evidence of corruption, has been no hearing or process, and evidence to the contrary has not been considered.”

At the time, Novelli was the most senior official overseeing international energy issues for State. The undersecretary position, of which there are several, is the third-highest-ranking job at State, behind the secretary and deputy secretary. And Tramontano was a lawyer working for Blue Star Strategies, a Washington firm that was hired by Burisma to help end a long-running corruption investigation against the gas firm in Ukraine.

Tramontano and another Blue Star official, Sally Painter, both alumni of Bill Clinton’s administration, worked with New York-based criminal defense attorney John Buretta to settle the Ukraine cases in late 2016 and 2017. I wrote about their efforts previously here. 

Burisma Holdings records obtained by Ukrainian prosecutors state the gas firm made a $60,000 payment to Blue Star in November 2015.

The emails show Tramontano was scheduled to meet Novelli on March 1, 2016, and that State Department officials were scrambling to get answers ahead of time from the U.S. embassy in Kiev.

The records don’t show whether the meeting actually took place. The FOIA lawsuit is ongoing and State officials are slated to produce additional records in the months ahead.

But the records do indicate that Hunter Biden’s fellow American board member at Burisma,  Devon Archer, secured a meeting on March 2, 2016 with Secretary of State John Kerry. In addition to serving on the Burisma board, Archer and Hunter Biden were partners at an American firm known as Rosemont Seneca.

“Devon Archer coming to see S today at 3pm – need someone to meet/greet him at C Street,” an email from Kerry’s office manager reads. “S” is a shorthand frequently used in State emails to describe the Secretary of State. The memos don’t state the reason for the meeting.

Tramontano, a lawyer for Hunter Biden, Archer and Joe Biden’s campaign did not return messages seeking comment on Monday.

In an interview with ABC News last month, Hunter Biden said he believed he had done “nothing wrong at all” while working with Burisma but “was it poor judgment to be in the middle of something that is…a swamp in — in — in many ways? Yeah.”

Whatever the subject of the Archer-Kerry meeting, its existence is certain to spark interest. That’s because Secretary Kerry’s stepson, Christopher Heinz, had been a business partner with both Archer and Hunter Biden at the Rosemont Seneca investment firm in the United States.

Heinz, however, chose not to participate in the Burisma dealings. In fact, he wrote an email to his stepfather’s top aides in May 2014, pointedly distancing himself from the decision by Hunter Biden and Devon Archer to join Burisma’s board.

Heinz’s spokesman recently told The Washington Post that Heinz ended his relationship with Archer and Hunter Biden partly over the Burisma matter. “The lack of judgment in this matter was a major catalyst for Mr. Heinz ending his business relationships with Mr. Archer and Mr. Biden,” Heinz spokesman Chris Bastardi told the newspaper

A person who assisted Blue Star and Buretta in settling the Burisma matters in Ukraine told me in an interview that the late February 2016 overture to State was prompted by a dramatic series of events in Ukraine that included when that country’s top prosecutor escalated a two-year probe into Burisma and its founder, the oligarch Mykola Zlochevsky.

Zlochevsky’s gas firm hired Hunter Biden and Archer as board members for Burisma Holdings in spring 2014, around the time that British officials opened corruption investigations into Zlochevsky’s gas firm for actions dating to 2010 before Hunter Biden and Archer joined the firm. Ukraine officials opened their own corruption probe in August 2014.

A firm called Rosemont Seneca Bohai began receiving monthly payments totaling more than $166,000 from Burisma Holdings in May 2014, bank records show. The records show Devon Archer was listed as a custodian for the Rosemont Seneca Bohai firm and that Hunter Biden received payments from it. You can read those bank records here.

In September 2015, then-U.S. Ambassador to Ukraine Geoffrey Pyatt gave a speech imploring Ukrainian prosecutors to do more to bring Zlochevsky to justice, according to published reports at the time.

By early 2016 the Ukrainian investigation had advanced enough that then-Prosecutor General Viktor Shokin authorized a court-ordered seizure of Zlochevsky’s home and other valuables, including a luxury car. That seizure occurred on Feb. 2, 2016, according to published reports in Ukraine.

The same day that the Zlochevsky seizure was announced in Ukraine, Hunter Biden used his Twitter account to start following Deputy Secretary of State Tony Blinken, a longtime national security adviser to Vice President Joe Biden who was promoted to the No. 2 job at State under Secretary John Kerry.

The Feb. 4, 2016 Twitter notification from Hunter Biden to Blinken was captured by State email servers and turned over to me as part of the FOIA release.

Within a few weeks of Tramontano’s overture to Novelli and of Archer’s overture to Kerry, Vice President Joe Biden took a stunning action, one that has enveloped his 2020 campaign for president in controversy.

By his own admission in a 2018 speech, Joe Biden used the threat of withholding $1 billion in U.S. aid to strong-arm Ukraine into firing Shokin, a prosecutor that he and his office knew was investigating Burisma.

Biden has said he forced Shokin’s firing because he and Western allies believed the prosecutor wasn’t aggressive enough in fighting corruption.

Shokin disputes that account, telling both me and ABC News that he was fired specifically because he would not stand down from investigating Burisma. In fact, Shokin alleges, he was making plans to interview Hunter Biden about his Burisma work and payments when he got the axe.

Ukraine prosecutors have said they do not believe the Bidens did anything wrong under Ukraine law. But some of the country’s prosecutors made an effort in 2018 to get information about Burisma to the U.S. Justice Department because they believed American prosecutors might be interested in some activities under U.S. law. You can read about that effort here.

Some experts and officials have been quoted in reports saying Joe Biden’s actions created the appearance of a conflict of interest, something all U.S. government officials are supposed to avoid. The questions about conflicts were previously raised in a 2015 article by the New York Times and the 2018 book Secret Empires by author Peter Schweizer.

The new evidence of contacts between Burisma, Hunter Biden and Archer at State are certain to add a new layer of intrigue to the debate. Those contacts span back to at least spring 2015, the new memos show.

On May 22, 2015, Hunter Biden emailed his father’s longtime trusted aide, Blinken, with the following message: “Have a few minutes next week to grab a cup of coffee? I know you are impossibly busy, but would like to get your advice on a couple of things, Best, Hunter.”

Blinken responded the same day with an “absolutely” and added, “Look forward to seeing you.”

The records indicate the two men were scheduled to meet the afternoon of May 27, 2015.

The State Department records also indicate Hunter Biden met Blinken in person for lunch on July 22, 2015, when State officials gave the name of a person to meet to help him enter the building. “He has the VIP pin and can escort you upstairs for your lunch with Tony,” the email said.

The emails don’t indicate whether the meeting had to do with Burisma or one of Hunter Biden’s other interests.

But they clearly show that Hunter Biden, his business partner and Burisma’s legal team were able to secure contacts inside the State Department, including to one of his father’s most trusted aides, to Secretary Kerry and to the agency’s top energy official.

The question now is: Did any of those contacts prompt further action or have anything to do with Joe Biden’s conduct in Ukraine in March 2016 when he forced Shokin’s firing?

After a disastrous 2016 polling season in which virtually every major survey had Hillary Clinton beating President Trump by a landslid, a Fox News poll released Sunday has every single top-tier Democratic candidate is ahead of President Trump, along with Hillary Clinton, who isn’t even running.

The poll, conducted Oct. 27-30, shows former Vice President Joe Biden beating Trump 51% to 39%, Sen. Elizabeth Warren at 46% to 41%, and Sen. Bernie Sanders at 49% to 41%. Clinton comes in at 43% to 41%.

The ‘amazing’ results come as NBC News offers suggestions for how people should analyze political polls.

Did it predict Hillary Clinton would be president with 99% certainty https://t.co/a5kHLDIYV4

— zerohedge (@zerohedge) November 3, 2019

Meanwhile, more and more people are turning to alternative prediction mediums such as online betting site PredictIt – which currently has Sen. Elizabeth Warren in the lead, followed by a distant Joe Biden, Pete Buttigieg and Bernie Sanders.

National polling suggests a Biden primary win, while PredictIt (taken on a different day from above) has him going down in flames vs. Warren.

Submitted by Joseph Carson, Former Director of Global Economic Research, Alliance Bernstein.

Preemptive policy moves have been a defining feature of monetary policy. In the past policymakers have made preemptive rate adjustments in response to potential inflation pressures, financial market turmoil, and now perceived risks from trade disputes. The paradox in this approach is that taking out “insurance” against a perceived risk shifts monetary policy in a new direction creating the potential for other risks to develop. In the end, it’s hard to prove that the economic outcomes are any different following a series of preemptive policy moves, but what are different are the timing and the imbalances that eventually ends the business cycle.

Fed’s Insurance Cuts of 2019 & 1998

Although there is more than 20 years that separate the “insurance” cuts of 2019 and 1998 there are a lot of similarities.

For example, in 1998 policymakers was facing an economy that was not in any apparent need of monetary stimulus. The US economy was on a solid growth path, marked with the jobless rate of mid-4% at its the lowest since the late 1960s, core consumer price inflation in the mid-2% range and all of the broad equity markets at or near record highs. Based on domestic factors a number of policymakers thought official rates should be raised over the course of 1998.

Nonetheless, the double whammy of the Russian debt default and the follow-on default of a major hedge fund created the potential for major turmoil in the domestic and global financial markets. Even though the Fed thought there was a low-probability of these events derailing the US economy—and there was zero evidence of any impact in the hard data—policymakers cut official rates three times over the short span of six weeks from late September to mid-November.

It is hard to say what would have happened to the economy had policymakers had not decided to lower official rates, but given the economy’s strong performance—expanding nearly 6% annualized in the second half of 1998 – suggests strongly that the economy would have been fine without any policy adjustment. Nonetheless, most financial market participants are in agreement that adding monetary stimulus and not removing it until a year later helped fuel speculation in the financial markets, lifting the market valuation of domestic companies relative to nominal GDP to record levels only to end with a crash in equity prices and the economy in 2000 when profits failed to meet lofty expectations.

In 2019, policymakers started the year with the expectation that official rates should be raised. Yet the double whammy of a sharp sell-off in the financial markets and the potential hit to the economy from the trade dispute between China and US forced policymakers to hit the “pause” button on rate decisions.

Since mid-year, even though many viewed it to be a low-probability that the trade dispute would derail the US economy policymakers cut official rates three times. It’s worth noting that today’s economic and financial backdrop—the jobless rate of mid-3% at its lowest rate since the late 1960s, core consumer price inflation in the mid-2% range and all of the broad equity markets at or near all time highs—is very similar to that of 1998.

Policymakers are well aware of the fact that no level of official rates can help businesses overcome the uncertainty and the potential lost of markets from trade disputes. Yet, by easing policymakers are hoping other parts of the economy that are sensitive to interest rates—like segments of consumer spending and housing – can be stimulated enough to offset the drag from business spending. This policy decision comes with the “big” risk, as its adding monetary stimulus to a domestic economy that is not in apparent need of any, possibly fueling more speculation to already “hot” asset markets.

Is 2019 another 1998? There is one more similarity that should not be overlooked—the trend in company profits. Operating profits peaked in 1997 and continued to move lower over the course of the next three years, even though the economy and the equity markets did not peak until 2000. Operating profits peaked 5 years ago and despite the weakness in company profitability equity markets have continued to move higher, hitting new record highs in the process.

Will history repeat itself?

By lowering official rates policymakers have extended the lifespan of the business cycle, similar to that of 1998’s decision, but in doing so they probably also wrote the script for its ending. Once again, equity market gains—which have lifted the market valuation of domestic companies relative to nominal GDP to levels last seen in 1999/2000 – are linked to easy money and not stronger corporate profits.

History sometimes repeats itself in the world of finance and in the economy – and odds are high it will again.

Just minutes after the Dow closed at a fresh ATH (Trump tweet incoming), a headline that appears to cast doubt on the viability of the “Phase 1” deal after senior government officials and media in both China and the US spent the whole day talking it up.

On the surface, it doesn’t look like much: As the two sides continue tying up loose ends, Beijing is looking for the removal of the 15% tariffs imposed in September.

BEIJING IS ALSO PUSHING U.S. TO REMOVE A 15% TARIFF THAT WAS IMPOSED ON ROUGHLY $112 BLN WORTH OF CHINESE GOODS ON SEPT. 1 – POLITICO CITING SOURCES

Follow the story live: https://t.co/m2JBwOmVug

— First Squawk (@FirstSquawk) November 4, 2019

While algos apparently didn’t make the connection (there was only a modest reaction in Dow futures), anybody who has been closely following the talks should know that Washington has only promised to consider removing the upcoming December round as part of the deal: Earlier tariffs haven’t been discussed. And there’s probably a good reason for that: Washington has so far been extremely reluctant to offer any tariff relief (part of Trump’s insistence that the Chinese must prove adherence to the deal before the trade barriers come down).

Dow futures were knocked down a peg:

But if the market’s recent performance is any guide, there will be more losses to come as the week wears on.

To sum up, it looks like the Chinese are returning to their old ways of making big demands at the last minute – demands that ultimately scupper any kind of deal (the US has repeatedly accused Beijing of negotiating in bad faith). Which means that the White House could probably back away now and save the West Wing staff the trouble of planning another high-profile meeting.