What we’re reading (4/14)
“Put The P/E Ratio In Timeout For Now” (TKer). “The forward price-earnings (P/E) multiple has limited value during normal times. And the metric arguably has even less value during periods of elevated uncertainty. That’s because the E is based on analysts’ estimates for the near future. And when the outlook for business is increasingly uncertain and rapidly changing, it can take time for many analysts to adjust that E. This is especially the case right now as many companies have not yet factored the impact of tariffs into their guidance, which analysts lean on when they establish their earnings forecasts.”
“Tim Cook’s ‘Long Arc Of Time’ Prepared Apple For The Trade War” (Wall Street Journal). “Tim Cook and his adherence to the “long arc of time” won—again. The iPhone is exempt from the White House’s latest escalation of the trade war with China, the Trump administration quietly announced late Friday. The disclosure came after more than a week of existential dread. At one point, Apple had lost almost $800 billion of market value after Trump officials claimed imposing sky-high tariffs on Chinese-made goods would shift iPhone assembly to American factories.”
“China Suspends Rare Earth Exports, Kneecapping US Industry Reliant On Beijing’s ‘Monopoly’” (New York Post). “China has stopped shipping some heavy rare earth metals and magnets critical to US production of everything from cell phones to fighter jets as Beijing’s trade war with Washington simmers, leaving American industry in a bind. Effective April 3, China is no longer exporting seven heavy rare earth metals processed exclusively in the Asian power, as well as heavy rare earth magnets — of which about 90% of the world’s supply are also synthesized on Beijing’s territory.”
“China Can’t Spend Its Way Out Of Trouble” (Project Syndicate). “China’s prolonged reliance on fiscal stimulus has distorted economic incentives, fueling a housing glut, a collapse in prices, and spiraling public debt. With further stimulus off the table, the only sustainable path is for the central government to relinquish more economic power to local governments and the private sector.”
“Tariffs, Saving, And Investment” (John Cochrane). “I haven’t written much about tariffs, because so many other economists are doing such a great job. Tariffs are easy: The right answer is unilateral free trade. Tariffs are hard: The rest is explaining why 100 objections are wrong. I’ll get there. One aspect is less clear than the others: the whole business about saving, investment, “reserve currency” and so forth. Most economists reacted in horror at CEA chair Stephen Miran’s essay claiming that US reserve currency status — that we can print money, send it abroad and other countries work hard and send us stuff in return — is a burden for the US. Actually there is a kernel of logic here, and a great danger, though tariffs will do absolutely nothing to rectify the situation at least without huge economic cost.”
