Iron Capital Insights

  • Iron Capital Insights
  • November 22, 2019
  • Chuck Osborne

On-Again, Off-Again

Just when we thought we had a deal, it went away. I have talked so much about tariffs in the last year that I am really getting tired of it. We all know, or should know, that tariffs we place on foreign goods hurt us just as much if not more than the foreign country we are trying to penalize. We should all know that we, the consumers, pay for those tariffs. This should be both common sense and common knowledge.

This is why so many in the administration have tried to assure us that all this tariff business is just negotiating. They believe in free trade; they just want it to be fairer, and they believe these tactics will help make that happen. I believe I have made clear my views on this:  I have doubts about this strategy, but I’m pulling for them to work because that would be a better world. I don’t understand people who route against their country.

One fear I have had from the beginning of this China trade negotiation is that the tariffs end up being more than a negotiating ploy. A few weeks ago it seemed from reports that all that was left to be done on a “phase one” deal was to schedule the signing ceremony. The market reacted by sailing onto new highs; all was looking good in the world again.

Then, the Chinese announced that part of the phase one deal was the rolling back of the new tariffs on China. Many took this as a given; after all, the tariffs were supposed to be negotiating tools, right? The president has now clarified that the tariffs will not go away, and Reuters is reporting the deal will now likely be put off until 2020.

The market is down on this news. Of course it could all change with a tweet, as that is the world we now live in. It is disappointing, but unfortunately not surprising. As the saying goes, we hope for the best but plan for the worst. This on-again/off-again phase one deal will continue to drive the market up and down as the news flows.

What is a prudent investor to do? One cannot ignore the environment in which she has to invest. Economies are slowing around the world, and there seem to be trade tensions and political tensions everywhere. However, prudent investors invest from the bottom-up. There are bright spots and opportunities.

Thankfully this is the one time of year when we as Americans tune to gratitude and look for those bright spots. It is Thanksgiving, and we have much for which to be thankful. In keeping with our tradition, here is my list:

I am thankful…

~ That the American consumer is doing very well even in the face of slowing global growth.

~ For record-low unemployment and real wage growth in America.

~ For my children, who are growing faster every day.

~ For my family, immediate and extended, which has both celebrated new arrivals and mourned loss in the last year.

~ For all of my friends, near and far.

~ Of course, I’m thankful for Mama’s pumpkin cheesecake and my loose-fitting pants, which make enjoyment of said cheesecake possible.

~ Finally, I am thankful for you, our clients and friends. Your trust in Iron Capital is our greatest asset and we value it every day of the year.

Happy Thanksgiving!

Chuck Osborne, CFA
Managing Director