Money trumps everything: Foreign investments in the U.S.

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.

DXY Dollar Index 03/02/2017Finally, 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

Saturday Links: 16-20 January 2017

This week I liked three articles/blog posts in particular.

How Deutsche Bank Made a $462 Million Loss Disappear -- Bloomberg Businessweek -- Excellent investigative article shedding light on a dubious 2008 deal between Deutsche Bank and Monte Dei Paschi that threw the Italian private bank into jeopardy and Deutsche into a sustained legal battle.

Taming the Chaebols -- Project Syndicate -- Insightful commentary by Korea University professor Lee Jong-Wha on the power of chaebols, South Korea's large and mostly still family-owned conglomerates. With the impeachment of South Korea's president Park Geun-hye and her government trapped in a web of corruption, this is a timely and interesting read about the connections between the chaebols, including Samsung Electronics (which makes up 20% of the country's GDP), and South Korean politics.

Fundamental Principles of Statistics -- Frank Harrell: Statistical Thinking -- Short blog post by Mr. Harrell listing principles that he follows in his practice of statistics, and which I fully share. If your work entails statistical analysis (and how to communicate the results), you'll most likely agree, too.