A Short Story – America’s Stock Market in the Eye of the Hurricane

Navarro's market rap for the week ending September 15, 2023.

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A Short Story – America’s Stock Market in the Eye of the Hurricane

Hi. Peter Navarro here with our weekly economy and market wrap for the week ending September 15, 2023; and things are getting more interesting every day.

For much of the last week, it looked like a pretty nice bounce back for the bulls after last week’s losses. I watched this action with particular dismay as the bearish financial news of the week simply did not support any bullish sentiment whatsoever.

Of particular note was the latest news on the inflation front indicating not only that inflation was heading back up again after some months of respite but was also likely to lock in for the longer term – something that yours truly has been warning about for some time.

If you play the short side of the market in times like these – I don’t recommend it for most folks because market movements happen far more quickly on the short side and it is far easier to get burned – you have to have steely resolve when you see bullish moves like those in the earlier part of last week to hold onto your convictions.

On Friday, however, the short side got redemption, and now for 4 out of the last five weeks, it’s been a bear’s lunch on Wall Street.

It was indeed a steep little dive on Friday and by the end of the week the NASDAQ fell by 1.56% while the S&P 500 fell by 1.22%. Of course, if you were an investor holding SDXU, the triple short exchange traded fund for the S&P 500 I’ve been talking about, that was a nice little gain.

Again, however, I don’t recommend this kind of play, and I’m not giving stock market advice here. I’m just trying to explain to you how the game on Wall Street is played.

To wit: rather than go on margin to bet big and face a possible margin call and total bankruptcy like in the old days, these leveraged instruments allow investors to satisfy their appetites for higher risk without completely falling on their swords.

As to why the market fell on Friday, it may have been the start of the strike by the United Auto Workers against the auto industry serving as the catalyst. For details of this strike and the role of Bidenomics in precipitating it, please check out my last substack where I reprised what was probably the most fun 48 hours I had during my four years in the White House when I was able to settle the last auto strike on behalf of President Trump.

For me, the strike came as no surprise. As I detailed in my last substack, even though we Deplorables who breathe through her nose are supposed to be dumber than the corporate types on the other side of us, every UAW worker who has to feed a family knows damn well that inflation is been going up faster than wages; and the only way for these workers to insulate themselves from declining real wages is to make sure a cost-of-living adjustment or COLA is in the contract – the UAW members lost the COLA in 2007 and winning it back is going to be a big part of the negotiations.

Yes, the UAW members need a COLA and should get one.  But the bigger picture here is that once COLAs institutionalize themselves in  labor contracts because of today’s tight labor market, that will reinforce the wage-price spiral that the Biden economy is already beginning to suffer from.

Such a wage-price spiral was the bane of the 1970s because it made inflation virtually uncontrollable. Ergo, my bearish posture towards the market; and my gentle warning to each of you is that these are the times where it is critical that you boost your financial market and economic literacy in order to protect your job and preserve your wealth. If I can help you a little bit in that effort with this weekly column, I will have fulfilled my mission.

As for other news that caught my eye last week in the financial press, I would be remiss if I failed to point out the very latest treachery and treason of Elon Musk. The back story here is that Musk has made a very big bet in Communist China by building the biggest electric vehicle plant in the world in Shanghai.

The very clear Devil’s and Dragon’s bargain Musk has made is to repeatedly kiss the derrière of the Chinese dictator Xi Jinping in exchange for access to China’s slave labor, pollution havens, massive government subsidies, and dirty financial capital.

Musk, as a capitalist run amok, kisses said derrière by praising the socialist economic model of China, by turning a blind eye to any human rights violations, and, in the latest outrage, by publicly claiming that Taiwan is a part of Communist China and should be returned to mainland control.  Never mind the 100 million plus Taiwanese living in one of the world’s more vibrant democracies, the geopolitical and strategic importance of Taiwan, or the fact that if America loses Taiwan’s semiconductors to the Communists, we’re screwed – pardon my french.

All I can think here is that God does indeed work in mysterious ways: in this case, he gave a total sociopath with a massive IQ to invent all manner of things but left out the requisite genetic material to make sound moral and ethical choices on behalf of mankind. One way or the other, through artificial intelligence or Chinese communist domination or whatever, Musk may wind up doing us all in.

All right, that’s enough for the soapbox. The key takeaway here is that cash remains king – and such cash is now offering a healthy return in money markets.  Risk remains to the downside in the markets, and the worst is likely to come perhaps for a long time starting with the dreaded market correction.

As I often do, I’m offering a free coupon to my substack subscribers to take my online course in strategic macro economics for businesses investing. Give it a spin if you like – it’s a twenty dollar value -- and I promise it will be a pleasant journey and perhaps a quite profitable one. Just click on this website:

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And if you are listening to this in podcast form, just go to my substack at www.peternavarro.substack.com to get the URL.

Peter Navarro. Thanks for all your support and prayers. Out.