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Tricks of the trade

The war for global economic power is set to take another turn this week as the U.S. looks to shield domestic industries and workers from foreign competition. It's a notable development for President Biden, who has kept in place all of the Trump administration's steep levies on about $370B of annual imports from China. Not only will those continue to remain following a years-long policy review, but further protectionist measures will likely be unveiled at a White House event tomorrow.

What's in store? Reports suggest that tariffs will quadruple on Chinese electric vehicles to 102.5% from 27.5%. Duties will also be hiked on the solar industry, while other sectors that may see tariffs double or triple could include steel and aluminum, batteries, or other clean-energy goods. Some see the tariffs as merely symbolic, as existing tariffs have already locked Chinese cars out of the American market, while many Chinese solar companies circumvent the duties by exporting to the U.S. via transit locations in southeast Asia.

There has been a big debate in recent years about whether additional tariffs would harm the fight against inflation. That debate is likely irrelevant now as the worst of the price pressures have come down and the U.S. gears up for a contentious election cycle. Protecting industries in key battleground states, like autos in Michigan and steel in Pennsylvania, are at the forefront of some of the races, and both sides are eager to address national security concerns, the loss of manufacturing jobs, and risks associated with the supply chain. Meanwhile, billions of dollars in subsidies have been doled out to key American sectors through mega-spending measures, including the Inflation Reduction Act and CHIPS and Science Act.

What to watch: The U.S. has also warned that China is flooding the market with subsidized goods, with Treasury Secretary Janet Yellen recently flying to Beijing to discuss "unfair trade" and "industrial overcapacity." The bigger fear here is that protectionist policy could eventually become indistinguishable from industrial policy, and China Foreign Ministry spokesman Lin Jian has promised that Beijing would "take all necessary measures to defend its rights and interests." If China would retaliate, it could target American agricultural exports, or impose limits on critical components the U.S. still doesn't have in its domestic supply chain, like rare earths. Take the WSB survey.

Goodbye, Siri?

Apple (AAPL) and OpenAI are reportedly in the final stages of discussions to bring ChatGPT to the next iPhone. If a deal is finalized, the popular chatbot will headline the new AI features that Apple is set to unveil next month at its annual Worldwide Developers Conference. Meanwhile, discussions with Alphabet's (GOOGGOOGL) Google for licensing its AI model Gemini for the iPhone are still ongoing.
Apple may reach an agreement with both OpenAI and Google, or prefer one over another. (29 comments)

More unionization

The United Auto Workers is seeking a key victory this week in an effort to unionize workers at Mercedes-Benz (OTCPK:MBGYY) factories in Alabama. A victory would be significant for the UAW, which has worked to overcome resistance to unionization in the Deep South. This week’s vote also comes after the UAW recently succeeded in unionizing a Volkswagen (OTCPK:VWAGY) facility in Tennessee. Elsewhere on the organized labor front, workers at Apple's (AAPL) first unionized store in the U.S. voted in favor of a strike over unresolved workplace issues. (6 comments)

Strong dollar

Dollar strength makes Americans' travels abroad relatively cheap, but that comes at some cost, according to Wells Fargo. When money is spent abroad, the expenditure is counted as an import in the GDP accounts, because it is consumption that doesn't contribute to the value-added of the U.S. economy. The U.S. Dollar Index (DXY), a measure of the dollar’s value against six currencies, is up ~4% in 2024. Currency analysts have widely said support comes in part from the Fed’s higher-for-longer stance on interest rates. (2 comments)

Today's Markets

In Asia, Japan -0.1%. Hong Kong +0.8%. China -0.2%. India +0.2%.
In Europe, at midday, London +0.1%. Paris -0.2%. Frankfurt -0.1%.
Futures at 7:00, Dow +0.1%. S&P +0.1%. Nasdaq +0.2%. Crude +0.6% to $78.70. Gold -1.1% to $2,348.50. Bitcoin +2.5% to $62,633.
Ten-year Treasury Yield unchanged at 4.49%.

Today's Economic Calendar

9:00 Fed's Mester Speech

Companies reporting earnings today »

What else is happening...

Memes are back: GameStop (GME) surge continues premarket.

Schumer tells FTC to pump the brakes on Chevron-Hess deal.

Trump asks oil industry for $1B, vows to scrap Biden policies.

McDonald's (MCD) franchisees balk at $5 Meal Deal revival.

‘Kingdom of the Planet of the Apes’ rules the weekend box office.

Marc Benioff takes over for Warren Buffett at charity lunch auction.

SoftBank bets big: Arm (ARM) planning AI chip launch next year.

Magnificent 7 are predicted to reinvest close to $350B in 2024.

What's next for Disney (DIS)? SA analysts weigh in after results.

Elon Musk: SpaceX's Starlink under pressure from solar storm.

BofA strategist recommends pain trades for bulls and bears.


Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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