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It's Sunday, and Sunday is blues day! This week we're going all the way back to the early days of the delta blues. Tommy Johnson was born in the small town of Terry, Mississippi in 1896. He later moved to Crystal Springs and then, after getting married at the age of 20, to a plantation near Drew, Mississippi. That plantation was very close to the famous Dockery Plantation, which is widely regarded as the birthplace of the delta blues due to the number of blues musicians who lived and worked there. It was there that Tommy Johnson met fellow musicians, including the great Charlie Patton and Willie Brown. (Other residents of the Dockery Plantation were Robert Johnson and Howlin' Wolf.)
An alcoholic for most of his life, Tommy Johnson adopted a sinister persona -- not just through his blues songs but also through the creation of a legend: Johnson, so the legend goes, sold his soul to the devil at a crossroads in exchange for his skillful guitar playing. This same legend was later picked up by Robert Johnson and is mostly attributed to him these days, although Tommy Johnson appears to be the original source for it. The two musicians were not related, by the way.
Here's Tommy Johnson's Canned Heat Blues, recorded for Victor Records in 1928. The song's about Johnson drinking methanol from a cooking fuel:
Cryin', mama, mama, mama
Cryin', canned heat killin' me
Plead to my soul, Lord
They gon' kill me dead.
Germany in the Age of Trump -- Project Syndicate -- Commentary by former German foreign minister and vice chancellor Joschka Fischer on the United States' turn inward, towards nationalism and perhaps even isolationism. Focusing on Germany, Fischer outlines how the resulting change in the world order would affect other countries that have relied on America's military might for protection. Germany has been among the chief beneficiaries, enabling it to concentrate on becoming an economic powerhouse rather than a military force that can defend itself in case of a conflict.
Forget Dow 20,000 — the Boom Times Are Over. Is Democracy Next? -- Foreign Policy -- Slightly polemic argument that democracy and liberalism may be in for tough times. Raising interesting questions: Is capitalism paired with democratic values the best model to generate prosperity and security, as has been believed throughout the 20th century, or could China's model of capitalism without democracy prove more successful? Has the past century's economic growth in Western countries really been the result of a good political system or has it merely been a byproduct of population growth? Must the Western world expect declining economic growth and dwindling prosperity now that the growth of its population is slowing down?
What defines a nation’s identity -- The Economist -- From the magazine's "Daily Chart" blog comes this illustration of how much weight the citizens of different countries give to certain factors that determine whether a person is accepted as somebody sharing the same nationality. For instance, being able to speak the national language seems to be the most important aspect for all countries that were part of the poll. Germans and Swedes don't seem to care much about another person's religion. For Greeks sharing national customs and being Christian is apparently a big deal.
Is Steve Bannon the Second Most Powerful Man in the World? -- Time -- Portrait of the man who, in his new role as Chief White House Strategist, has not only helped Donald Trump get elected by shaping the president's narrative of a movement towards a new political order in America, but who might also become one of the most powerful people behind the scenes in Washington. Whether Trump likes Bannon getting this much attention remains to be seen. If Trump really is a puppet, like many of his critics and now Time magazine opine, the question to ask would be: Whose hand is up Trump's ass? Bannon's? Putin's? (Excuse the groaner. That one was irresistable.) Personally, I believe the president is perfectly capable of forming his own ideas though... for better or worse.
Isn't it interesting how pithy comments by Donald Trump set so many wheels in motion so quickly? Apparently, this is even true for countries that are potential targets for criticism by the U.S. administration for being alleged currency manipulators or unfair trading partners. Unbalanced trade is a major issue for Team Trump. China is the prime foe, but countries such as Canada, Mexico, Germany and South Korea, who feature trade surpluses with the United States and some of whose currencies are undervalued relative to the USD as measured by PPP, are in Trump's crosshairs, too.
Perhaps the jawboning is a tactic by Donald Trump, the dealmaker, his opening move in lengthy negotiations that will ultimately lead to more jobs in the U.S. and an increase in exports by American companies. The president's tough stance on trade has borne fruit already: Several American corporations have committed to building factories in the United States instead of Mexico. Now even foreign entities seem to be succumbing freely to Trump's demands: Japan's Government Pension Investment Fund (GPIF), which controls more than $1.1 trillion in assets, is reportedly planning to make substantial U.S. infrastructure investments, and technology giant Samsung Electronics may build a new U.S. factory for home appliances. Trump is selling these headlines as early success stories on his way to fulfilling his "Make America Great Again" campaign pledges. Looking at it more objectively, one must ascertain that these "successes" have been achieved without any resistance whatsoever. Let's see how his tactics hold up once he actually has to negotiate with another country. Trump hasn't really been tested so far, but we already know how badly he reacts under pressure.
Finally, a quick afterthought relating to Peter Navarro's criticism of Germany: While it is true that German exporters benefit from a weak euro, it has been the ECB that weakened the common currency (indirectly, mind you, because it's not really within its mandate to do so). German politicians as well as Jens Weidmann, president of the Bundesbank, have openly opposed the ECB's lax monetary policy. Hence Navarro's statement that Germany manipulated "its currency" to gain an unfair competitive advantage is hardly justified - you might even go as far as saying it's utter nonsense. My original commentary here.
Open positions as of 03/02/2017 12:38pm CET:
EURTRY short from 4.0524, unrealized return: +1.27%
EURUSD short from 1.0795, unrealized return: +0.55%
Realized YTD return: +0.7% from 2 trades
Total YTD return: +2.52% from 4 trades
The US dollar index is struggling not to fall considerably below the 100 handle. It's currently testing its support at 99.43. Looks heavy short-term, but I stand by my USD long call m/t. Verbal interventions from politicians only have short life spans, causing plenty of interim volatility without leading to any permanent changes in market positioning. All things considered, Trump's promised stimulus package is USD positive, thus challenging the president's conviction that the dollar is too strong relative to the currencies of America's trading partners. The only serious challenge for USD longs would be 1) an undermining of the Fed's independence, or 2) a possible G20 accord to weaken the US dollar (G20 meeting in Hamburg in July), but either scenario is unlikely.
Different battleground: I'm still confident in my EURTRY short position. As the Turkish lira is finally gaining a bit of momentum I'm looking for a test of 4.0. Merkel meeting Erdogan today. Nothing market-moving will come out of that meeting, but the outcome will be interesting nonetheless.
Open positions as of 02/02/2017 9:42am CET:
EURTRY short from 4.0524, unrealized return: +0.83%
EURUSD short from 1.0795, unrealized return: -0.06%
Realized YTD return: +0.7% from 2 trades
Total YTD return: +1.47% from 4 trades
I have nothing new to add to my commentary on Navarro and the US dollar's strength from yesterday evening, but I'm putting my money where my mouth is: Sold EURUSD at 1.0795. This is not a near-term trade as I can see the pair going up to 1.0875 or even higher during the next couple of sessions (depending on Fed today & any Trump comments we might get), but in the medium- to long-term I believe the EUR short story will play out well. Read yesterday's post for details.
Open positions as of 01/02/2017 9:38am CET:
EURTRY short from 4.0524, unrealized return: -0.56%
EURUSD short from 1.0795, unrealized return: flat
Realized YTD return: +0.7% from 2 trades
Total YTD return: +0.14% from 4 trades