What a busy week in politics!

  • A conservative British politician suggested that if the Spanish continue to be difficult about Gibraltar, they might need the kind of “correction” that PM Thatcher gave Argentina a few years ago.
  • Stephen Bannon lost his position on the National Security Council, perhaps suggesting a more professional (i.e., military), traditional approach to national security.
  • President Trump took a page out of William Jefferson Clinton’s playbook and lobbed some cruise missiles at a Syrian airbase from which a sarin gas attack was launched by Assad’s forces. Apparently Assad decided some elementary school students and their families deserved a torturous death for living in Idlib.
  • Judge Gorsuch looks to be confirmed as the ninth Supreme Court justice after Mich McConnell “went nuclear.”
  • Xi and Trump are enjoying their discussions in Florida; hopefully, Kim Jong Un’s pre-meeting fireworks will provide them something to talk about more substantial than golf and Florida’s spring climate.

Political uncertainty abounds, but it has yet to make much impact on Anglo-American markets. I’ll leave the reasons why this might be to the super-geniuses at Pimco and Bridgewater. Here’s what I’ve been reading.

Mexico Ready to Play the Corn Card in Trade Talks (NY Times). In our members-only research on Trump-era Investing and in our recent members-only ChartBook on Union Pacific, we brought up the possibility of Mexico playing hard ball in NAFTA re-negotiations with the issue of agricultural products. Mexico’s domestic corn farmers were hard hit by NAFTA (the loss of low-skill agricultural jobs has been mentioned as one of the root causes of the increase in the importance of the illegal drug trade), as industrial-grown corn and soybeans flooded the Mexican market. This article reveals that Mexico started speaking with Argentina and Brazil about importing corn from those countries as President Trump began his bellicose rantings about walls and import tariffs.

Stores Take Flight From Fifth Avenue in Manhattan (NY Times). Especially with the recent news that Sears Holdings’ (SHLD) management questions the firm’s status as a going concern, our members’ only research published this week on Realty Income (O), and some initial reading I have been doing on real estate developer, Howard Hughes Company (HHC), my eye has been drawn to stories related to real estate and retail. Long story short is that more and more high-end retailers are beginning to question the efficacy of maintaining a store front on one of the premier shopping streets in the world. According to this article, the “availability rate” of leases on Fifth Avenue between 49th Street and 60th Street have jumped from 6.1% five years ago to 15.9% recently.

Amazon’s China logistics push to pile pressure on rival shippers (The Financial Times). One big reason that high-end retailers are starting to question the kind of extravagant Fifth Avenue stores mentioned in the story above is Amazon. According to this article, Amazon is beginning to shake up another industry – shippers like FedEx. By my count, this is the third industry Amazon is radically changing through its one-step-ahead business model: retail (of course), technology services (“Amazon Web Services”), and shipping.

Falling Tokyo shares a barometer of souring Trump trade (The Financial Times). Six months ago, members of the pundit class were providing impressive explanations why the world was to be in a perpetual low-growth mode. Since November 9th, however, the pendulum has swung the other way and now everyone assumes that the world economy is “reflating.” Indeed, China has managed to engineer what looks, so far like a soft landing and seems again to be growing. US investors are excited about the possibility of a $1 trillion infrastructure projects and corporate tax reform. Could it be that, for some reason – perhaps demographic – the reflation trade is structurally impossible? I’ve started to think so recently.

India dents UK trade hopes with lapsed deal (The Financial Times). With Brexit negotiations ahead, Britain was looking for opportunities to breathe life back into the old Commonwealth framework (“Empire 2.0”). The Indians, whose experience with enlightened Anglo rule was not an unqualified pleasant one, was not interested in maintaining a bilateral trade arrangement. Is it too much to read this news and extrapolate difficulties with 1) Britain’s negotiations with the EU and 2) Trump’s plan to forgo regional free trade agreements (like NAFTA or TPP) for bilateral ons?

How Chávez and Maduro have impoverished Venezuela (The Economist). I spoke with a CIA officer a few years ago who told me about what a beautiful, elegant city Harare, Zimbabwe had been before Mugabe. Looking through an article a few weeks ago, I found before and after photos of the central square of Mogadishu, Somalia and the contrast was startling. According to this Economist article, Caracas looks as though it may wind up following in the footsteps of those cities. The human toll is breathtaking. According to this article, 74% of all Venezuelans have lost about 20 pounds due to food shortages, and if Maduro is not a dictator now, he’s very close to being one. Just another day in a populist paradise.