Monday, October 19, 2015

Is the Trans-Pacific Partnership Really a Free-Trade Deal?

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Editor's Picks
Clinton, Sanders, and Hutchinson: Sitting in a Tree
by David Dittman, Executive Editor
Editors' Note: Welcome to the new Wall Street Daily Weekend Edition.

In addition to our regular roundup of top content featured at during the week that was, we're now including extended commentary from Editorial Director David Dittman.

And highlighting this new digest is the video-based Saturday Spotlight, which will "shine" on one member of our talented and hard-working team of market analysts each week.

Enjoy! And please let us know what you think of the new format by contacting us here.

Hillary Clinton's decision to come out against the Trans-Pacific Partnership (TPP) deal recently negotiated by the Obama administration reflects the complex interaction of politics and economics.

You see, the erstwhile Secretary of State and aspiring Democratic presidential nominee was actually once a party to the talks that eventuated in this latest international trade agreement.

But she's now feeling pressure from the left in the form of Bernie Sanders, the Senator from Vermont and self-described "democratic socialist."

During a recent appearance on NBC's Meet the Press, Mr. Sanders responded, "That's correct," to host Chuck Todd's statement that "there's never been a trade agreement this country has negotiated that you've been comfortable with?"

The political calculation that has Mrs. Clinton now genuflecting leftward where once she contributed to a trade agreement that, according to Mr. Sanders, "was written by corporate America and the pharmaceutical industry and Wall Street" is a simple one.

Mrs. Clinton needs the votes in a Democratic primary process dominated, like the Republican one, by ideological purists.

Nevertheless, we must take special note if we find Mrs. Clinton, Mr. Sanders, and Wall Street Daily's Martin Hutchinson on the same side, no matter how they arrived at their position.

Find out how that rare alignment came about in today's Saturday Spotlight.

Terms of Trade

It is, as Martin notes, much more interesting to talk about the treaty itself and whether it's a good thing from an economic standpoint - the main consideration being its benefits for consumers in America and abroad - than it is to dwell in the much of U.S. domestic politics.

That starts with the question, "Is the TPP really a free-trade agreement?"

It does open trade "a bit" with Japan.

And with regard to Vietnam - "a very poor country with significant barriers" - it's "clearly a free-trade agreement." That Southeast Asian hotbed continues to emerge from its fraught 20th century history.

In general, however, the Trans-Pacific Partnership "is not quite what it seems to be." In short, there's very little impact for American businesses.

Although Mrs. Clinton's path is political rather than economic, she does arrive at the right conclusion for the TPP: It should be defeated in Congress.

Notably, according to the Congressional Research Service there is zero benefit in dollar terms for the U.S. agricultural industry - and that's a big disappointment.

And the terms of agreement perpetuate a continuing transfer of wealth from manufacturing to service sectors. That's another negative for America's blue-collar middle class.

Most benefits for American service industries come in the form of extending U.S. copyright, trademark, and patent protections to include all 12 parties to the TPP. American companies will therefore get more for their intellectual property.

In the long run, as Martin explains, free-trade agreements should benefit consumers. And it's questionable whether the terms of the TPP accomplish that goal.

Martin's synthesis of the TPP includes a pretty cool reference to The Earl of Clarendon's The History of the Rebellion and Civil Wars in England, copyrighted in 1703.

It took a special act of Parliament to get a copyright of 15 years for this title.

"Now, if 15 years is enough for the Earl of Clarendon - and that's one of the great works of scholarship of the 17th century - why do we need 99 years for Mickey Mouse?"

The GeoMacro Moment

You don't need me to tell you that the world, including its politics and its markets, is a complex system. You need me to cultivate content that helps you profitably navigate this system.

To this end, Wall Street Daily will soon launch Martin Hutchinson's Currency & Capital, which will help individual investors profit from currency movements without venturing into fast-moving foreign-exchange markets.

Martin's analysis of macroeconomics and geopolitics will help determine where a currency "should" trade, what makes it move from this "equilibrium" level, and whether it's a short-term phenomenon or a long-term, structural adjustment.

Based on knowledge and experience accrued over a 30-year career as a global merchant banker, Martin will take medium-term, strategic positions in currencies (including gold), mainly through equities but occasionally via bonds, options, and exchange-traded funds.

Stay tuned for more about Currency & Capital.

A Buy-Low, Sell-High How-To Guide

I recently sat down with Wall Street Daily Founder and Publisher Robert Williams to talk about a fascinating mathematical concept that should be a part of any investor's toolbox.

I'm talking about a concept that will help identify ideal entry and exit points for short-term, risk-hungry traders as well as value-based buy targets for long-term, buy-and-hold income-and-capital-preservation seekers.

This mathematical concept is the foundation of Robert's Trigger Point Pro service. Robert and I talk about the concept and how you can learn more about it here.

Good investing,

David Dittman

Editor's Picks
It's hard to imagine now, with the memories of the 2008-09 Great Financial Crisis still so fresh, but, as Chief Income Analyst Alan Gula notes in his October 12 article, "U.S. banks are in great shape."

Indeed, following their recapitalization during the heat of the GFC, U.S. banks were recapitalized. And since then "they've worked to reduce leverage and fortify their balance sheets."

Even with stability returned to the U.S., questions about global financial conditions have the world's central bankers sticking with highly accommodative monetary policy.

A resulting "wall of money," as Global Markets Analyst Martin Hutchinson observes, should provide support for high-quality bonds. And for those who see the recent flight to quality by institutional investors as irrational, opportunity may lie in Asia.

Speaking of buying low and selling high, Senior Analyst Jonathan Rodriguez identifies another technical tool useful to both short-term traders and long-term investors.

"In order to buy the dips and sell the rallies," notes Jonathan, "I use one of my favorite technical indicators: Bollinger Bands."

Senior Technology Analyst Greg Miller takes stock of recent security breaches for a couple major publicly traded companies and questions whether anyone who transacts online can every truly be safe from ever-pervasive cyber crime.

Indeed, the only way to keep your personal information completely safe may be to stay off the internet entirely.

Finally, Senior Correspondent Shelley Goldberg takes a look at recent initiatives to combat climate change coming from the Obama administration, focusing on wind power as a particularly compelling story in renewable energy.

This is a global trend: Bloomberg New Energy Finance recently reported that wind power is the most cost-efficient energy source in both the U.K. and Germany, even with prices for fossil fuels at their lowest levels in years. And this is happening without government subsidies for wind power.

Wind represents only about 5% of U.S. energy output, but that's still more than solar. And to achieve the goals of Obama's Clean Power Plan, wind power will have to grow.

Thanks for taking time out of your Saturday to spend with Wall Street Daily. Enjoy.

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