The Market Radar

We anticipate, monitor, and comment on market moving global economic and geopolitical issues.  No dark side brooding, no wanting the world to end, no political rants.  Traders, investors, policymakers, or market observers can’t  afford to ignore us.

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Boeing 787 Dreamliner = Globalization

Interesting graphic below illustrating the outsourcing of Boeing’s 787 Dreamliner as President Trump touted his “buy American” mantra today as he stood in front of the airplane at the Boeing’s South Carolina plant.

trump-at-boeing

“We want products made by our workers in our factories stamped with those four magnificent words — made in the USA,” Trump said. – CNBC

Assembly is just a small part of the Dreamliner’s  manufacturing value chain.   The International Monetary Fund (IMF) noted in a recent working paper,

More than 70 percent of the plane’s value is not generated by Boeing.  – IMF
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The Post and Courier wrote yesterday the jetliner is
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…comprised of more than 2.3 million parts made around the world
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A few years back we were surprised that assembly of the iPhone 4 at Foxconn in China was only a small fraction of the $185 cost to make the phone.
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  • The average sale price of Apple’s iPhone 4 is $560. Of that, $7 covers the cost of manufacturing, $178 goes to components, $7 is taken by Foxconn, and Apple walks away with the rest, or $368.
  • As Nokia and RIM’s share of the global smartphone market shrunk between the second quarter of 2010 and the second quarter of 2011, that of Apple grew by more than six percent. Samsung’s share also grew over that period.
  • Samsung contributes the flash memory, DRAM memory, and applications processors for Apple’s iPhone 4. Those three components cost about $45.68 per unit.
  • Other components of the iPhone 4 and their cost: Battery, $6; accessories, $5.67; mechanicals and electro-mechanicals, $19.97; audio, $0.98; touchscreen control, $0.90; display and touchscreen, $38.50; power management, $1.51; bluetooth and Wi-Fi, $8.  – Global Macro Monitor

So,  we ask you, folks,  do you think the President realizes that his trade policies if implemented could actually end up losing jobs at the very manufacturing plant that he touted “buy American” today?   More, important, do you think voters understand this?

It is because of free trade that a Boeing plant exists in South Carolina today.  Free trade, fair trade, whatever.

The world is becoming increasingly complex and it is going to take strong leadership to guide us through the rough waters ahead without the global economy fully imploding, which will almost certainly morph into a world war.

boeing_787_feb17

 

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Why pension funds invest in EM debt – FT

 
Published on Feb 15, 2017
Mark Fawcett, chief investment officer of the UK’s National Employment Savings Trust, discusses the outlook for emerging market debt with Owen Walker.
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Inflation Runs Hot, Hot, Hot

CPI out this morning,  up 0.6 percent for January, more than double the 0.3 percent that was expected.  The hottest number since February 2013.  The main culprit was the rise in the cost of gasoline, which accounted for half the increase.   The year-on-year increase for all items in the CPI basket is 2.5 percent.  CPI inflation ex/ food and energy up 0.3 percent, up 2.3 percent year-on-year.

cpi_feb15

Note our post from a few weeks ago,  Inflation Cometh.   The stimulus of the coming tax cuts and infrastructure spend will most likely start to kick in mid-2018.   So, we repeat,  inflation cometh!.   As they used to say on the north side of Chicago,  “wait until next year.”

What’s so good about inflation?
Never could understand why inflation was thought as a good thing.  Check out the release on real wages today.

real-earnings_feb15

 

We like falling prices and paying less for goods and services.  Increases our real income.

The markets, and maybe even the Fed,  seem not to be able to distinguish between goods and services inflation/deflation with asset inflation/deflation.  Could be because the Fed has become increasingly reliant on asset inflation as a transmission mechanism of effecting monetary policy.  That is, stimulating domestic demand through the wealth effect.

The border-adjustment tax will be a disaster for lower income groups.  Reverse Robin Hood tax reform, in our opinion. Bad for Trump voters.

 

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COTD: Size of U.S. Economy v Europe

european-economies-vs-us_feb15Source:  Independent

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Oil and gas discoveries, China capital controls – FT

Seb Morton-Clark has Monday’s top stories from around the world, including oil and gas discoveries at a 60-year low, China reassuring on capital controls and Canadian PM Justin Trudeau meeting US president Donald Trump.

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QOTD: Ambiguous China Policy

It used to be said that Ronald Reagan’s “Red China” policy was driven by Nancy:  “don’t serve it on a green table cloth.”    President Trump’s policy?  Yet to be determined.

…U.S.-China relations remain in the Schrodinger’s cat-like state they assumed shortly after Donald Trump won the U.S. election. His words and actions often inhabit distinct realities; observers cannot assume that he means what he says, or will hold himself to it in the future. Beijing was smart not to panic in early December. It would be equally naive for it to breathe a sigh of relief now. – Foreign Policy

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French Oat-German Bund 10-year Spread

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franace_election_predictit

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oat_bund_spread_feb10

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US Sector ETF Performance – Feb 10

etf_dayetf_weeketf_monthetf_ytd

 

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Global Risk Monitor – February 10

Click on table to enlarge and for better resolution

risk_mon1risk_mon2risk_mon3

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POTD: KD N OKC

kd_feb11

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