Strikingly fascinating. What is the underlying logic for the longer term pattern of bidding increasing after hours? A statistic that’s this consistent, with all gains attributed to after hours (at least for a lot of the history) must have a clear explanation. It’s as if the trading hours are the “short term” traders, who only trade during the day, while holding beyond that bracket is “long term”.

Interesting ideas in this article. I have 2 questions:

1) there is currently a major trade deficit in the US, such that a large amount of trade is not true trade, but just excess imports in exchange for cash toward later exports. You’re saying that import tariffs are automatically mirrored by export tariffs (tariffs of other countries against USA- which does seem to be the actual situation, and also logically makes sense). Is there a need to correct this trade deficit in some way, according to your view, even if tariffs are not necessarily that effective way?

2) the equivalence of import and export tariffs you describe seems true in a general sense, for the country as a whole. When the government places export tariffs, it is true, assuming there is a trade balance, that imports will be accordingly reduced. But, that doesn’t necessarily mean that those particular parties burdened by the export tariff will directly suffer from the decrease in imports. That burden may fall on different parties in the general economy. (It’s true that through the interdependency of an economy, everything ultimately affects everyone in some way, but those effects are more macro, less detectable, and less interesting to the public, for better or for worse.) As a result, tariffs are used as attempts to address imbalances in the burdens of trade issues, to try to spread the impact beyond individual parties. The relevant application here is, for example, the steel industry in USA. China’s dumping tactics have caused that industry to bear much of the burden of trade imbalances. Therefore, while Trump’s tariffs will lead to retaliatory tariffs, seemingly neutralizing his actions, it only neutralizes them in a general sense, relative to the total economy. It will probably improve the steel industry conditions, however, in the shorter term, bringing their margins more in harmony with true economics, unaffected by China’s warped policies.

Is this largely correct, or am I off somewhere?

I liked the article. Marks is a great voice of reason and clarity in a frothy market like today’s. Of course, this type of thought process is really tricky for the average market participant, since many lack rigorous valuation skills, and invest by “feel”, backed with some basic math (PE ratios, and similar). The psychological pressure is also significant, since the next decline could still be many years away (as opposed to the example of someone who sold in 1997, when it was “only” three years).

I also wanted to point out that the current market seems different from the 1999 and 2006 markets. Both of those markets were marked by wild exuberance and rapacious pressure (tech and the mortgage push, respectively). Today’s market is definitely upbeat, but not wildly so. I’ve been waiting for the next decline, and holding cash (like many value investors), but it’s really unclear that there’s much fragility to this market. We’ll have to wait and see.

Any thoughts are welcome:).

Thanks for the article!

Solid article, really captures AMC's success in turning around. They still have a very heavy debt load on their balance sheet, because of all the Capex necessary to restore their edge. Hopefully that won't weigh them down too much. Thanks for the clear picture!

Insightful article. The big question we all are wondering is, how explosive will it be when the asset bubble actually does pop? The excesses of 2007 in the credit sector aren't really being repeated in a visible way. The major excess we're seeing is the exceedingly low interest rate environment, and the subsequent inflated asset prices. These dynamics are more reminiscent of other market declines and swings in the economy, like 2000-2001, and earlier swings in the 1970's. The distinction means that instead of another recession, we'll just experience a 2-3 year downswing in the economy cycle.

Thanks for the interesting article!

But that’s a fake market. The manufacturer overhead is artificially reduced because of malicious economics. Those businesses are used to inflated profits and cushioning that result from damaging actions. It’s true that it’s not great for them, but that’s how free markets work. Now those manufacturers have to cut overhead and expenses, to get leaner and meaner. Business cycles always move like this.

What I mean by negative tariff is that China is making the steel markets non competitive, by subsidizing their companies. When USA raises import prices (a positive tariff), China’s products sell in the USA for raised prices. When China subsidizes their steel companies, that allows Chinese steel companies to undercut USA prices, due to government support. This means Chinese steel is cheaper (a negative tariff, meaning a negative tariff by China is the equivalent of a positive tariff by the USA), and that USA steel isn’t bought. This is a violation of free trade, because of the Chinese government intervention. China has been effectively putting tariffs on steel for a decade by doing this. The USA is finally reacting.

When another country subsidizes their domestic steel businesses to create a situation where the domestic companies can “dump” steel into the global market at depressed prices, but still be profitable because of government subsidies, that is a negative tariff. In other words, China created a tariff by doing that. It is also a violation of free trade. If the international community refuses to stop them, individual leaders will be elected that will try. We are seeing that now. This doesn’t mean everything Trump does is smart. But this is a reaction that was easy to foresee in the steel marketplace. It’s been going on for a decade.

I think you are correct that tariffs cause trade attacks. What is your opinion about unfriendly trade practices of other countries toward the US (the most visible and obvious being the Chinese government subsidizing steel exports in China, glutting the market)? Even if Trump is a damaging presence (which is a separate discussion), these issues require some kind of attention. Trump's solution is getting blasted from many angles, but I haven't heard too many alternatives. Additionally, even if someone has an alternative, lots of leaders in the EU and USA don't have the obnoxiousness required to stand up against rapacious countries like China.

Any thoughts?

Right, that makes sense. The contrast between public and private ownership seems very valid. Thanks for your answer!