29 August 2018

With Greece, “Europe” has nothing to be proud of

So Greece has exited the bailout. Wonderful. Great. Fantastic. I guess this means that the Germans have squeezed all the blood they, and their French puppets, can from that stone. The numbers of Greeks that will have died as a direct result of the “austerity” that was imposed on Greece will never be known, but that number will be dwarfed by the numbers of Greeks that have had to flee their country in search of work, only to become the highly educated baristas and shop and factory workers of Europe.

We can argue that Greece should never have taken the loans, and that indeed they should be paid back. That’s what you do with loans. 

A stronger argument is that those who made the loans should also be culpable, knowing as they did that Greece could never repay the loans, and knowing that they would push the default and pain onto others (the Greek people and/or European and international banks and through them to the shareholders of those banks). Equally culpable are the handful of Greece politicians and functionaries who aims to profit by continued electoral victory and control of the government, and by personal wealth from their part in the scamming of the Greek nation.

Just as there were those in the communities persecuted by the Nazis who collaborated for whatever reason, so there were Greek government officials and politicians who collaborated with the German and European banks to take loans that they knew could never be repaid.

Yet it is the behaviour of the various European players once the loans were made that shows the perfidy of the “European”, and their willingness to see other European children and elderly die for profit, and to see an entire generation without work. 

Germany, the ECB, IMF and we cannot forget the French banks (and others) have acted as the loan-sharks of “Europe” happily destroying one of their own “family” for profit. 
Further evidence of the impact on Greece from the austerity programme comes from a Bank of Greece report from 2016.

“The report of the Governor of the Bank of Greece reckons surveys conducted by Greek Statistic Authorities (ELSTAT) and according to which:
  • a significant increase of 24.2% of people aged 15+ suffering from chronic health problem or chronic disease.
  •  increase of more than 15% of people who limited their activities due to health problems in 2014.
  • percentage of low-weight (below 2.5 kg) births increased by 19% in 2008-2010, and that this is associated with long-term negative effects on the health and the development of children.
Citing OECD data of 2013, the BoG underlines that 79% of the population in Greece was not covered with insurance and therefore without medical and medicine due to long-term unemployment, while self-employed could not afford to pay their social contributions.”

A January 1st, 2017 article in the Guardian makes the impact clear. “Figures released by the European Centre for Disease Prevention and Control recently revealed that about 10% of patients in Greece were at risk of developing potentially fatal hospital infections, with an estimated 3,000 deaths attributed to them.”

And so Germany profits from dead Greeks, and the French support their overlords, to ensure the security of their own banks.

Meanwhile, the rest of Europe bumbles along, hoping that one day the Germans will “share” some of the wealth that they continue to accumulate, to the detriment of the rest of Europe. On the German side, one wonders if they worry that one day the rest of Europe will say “enough is enough” and either leave the Eurozone or demand that Germany begin to contribute to the parts of Europe that pay for their current account surplus.

Source Wikipedia
One chart shows clearly the situation in Europe today, and why the Eurozone is in such danger. It is not the debt of Greece, or the bailouts for German and French banks and the ECB, it is the current account surpluses and deficits across Europe.

Without Europe to and the Euro to “level” costs and prices across Europe, the German Deutschmark would be so overvalued as compared with other European currencies. The Euro ensures that Germany is “cheap” while removing the options or ability for European competitors to adjust their costs and pricing via free-floating currencies appropriate to their monetary policies.

Greece stands out in the chart, with the massive drain in the early years of the century, with artificially low prices for imports and easy credit, much of which is reflected in the net Current Account surplus in Germany.

Now that Greece is officially out of the bailout, it is time for Greece to regain control of its currency, and of its future. The New Drachma is needed, and a Grexit a must for the future of Greece. It may also be the only action that can save Europe from Germany, if only by showing Germany just how important it is that they "share the wealth" or risk their own economy.

27 August 2018

Why I think Trump is vile, in 24 bullets

Facebook being what it is, I was recently challenged to give any examples of why I thought Mr. Trump is the most unethical president in history. I simply said “lies” and was told that I was a coward for not providing a “real” answer. So here is my real answer, in a list.

  1. Bone spurs – real patriots did not, and do not, do all they can to avoid national service, especially when the nation calls upon them to do so. While this certainly is not unique to Trump (Dark Lord Chaney is another good example) it does speak to character.
  2. Paid off porn stars. Okay, I know, this was before he was president, but it now appears that the act of paying off at least two of them may have been explicit violations of campaign financing laws.  And, how many were paid off? 2, more, 12?
  3. Illegitimate child. Well, okay, so that puts him in good company with monarchs around the world.
  4. 7 surrogates/employees guilty (so far). Either he is really thick and actually did not know that they were committing crimes (or had committed crimes) or he is actively surrounding himself with disreputable people who will do his bidding, legally or not.
  5. EPA gutted (so much for clean water or air, and hey, “clean coal” won’t kill you or miners as fast as the traditional stuff, which we need to use anyway because there is no “clean coal”).
  6. Disrespectful tweets. I would think that being mentioned by name and called out by Trump should by now be a badge of honor.
  7. Played by the North Koreans, and played like a bad fiddle.
  8. The Wall (and Mexico is paying for it). What I especially liked was his ability to bluster and rant while in the US in front of Amerikan audiences, but when he arrived in Mexico – crickets. The man is a coward.
  9. Tax returns (after the election) – don’t worry, we’ll see them soon enough, no matter who wins what in Nov.
  10. Writing his son’s statement about the Russian meeting. Well, I guess he has the same opinion of his son’s intelligence as the rest of us.
  11. Slandering/Defaming people – “dog” anyone? Or am I just repeating #6 above?
  12. Golf – good thing he is too busy as president to play golf. Oh, and some say he cheats.
  13. Insulting international leaders (and shoving the head of state of one country)
  14. Helsinki – private meeting with his handler? Were the first 10 minutes of the private meeting a showing of the pee-pee tape?
  15. Political punishment by removal of security clearances. There is a reason you ensure people keep their security clearances; it is to ensure that there is a deep bench of really talented people who know the history and can provide advice when needed.
  16. Emoluments. Oops, that’s a constitutional thing, and we don’t do that in Amerika anymore.
  17. “Sons of Bitches” (kneeling for the flag). Sorry, I support the right to protest, and the obligation to understand (not to agree, but to understand) what people are protesting and why. Misstating the real reason and smearing people is simply wrong. They are not protesting the Flag, they are protesting dead black people killed by police that then get off scot-free. 
  18. “Blood coming out of her everywhere”. Enough said.
  19. Money laundering (selling condos for cash payments to mobsters). This might go back to #9, but we will see soon enough.
  20. Said he would date his daughter is he was younger. Creepy, just creepy.
  21. “Grab them by the Pussy”
  22. Disrespect for veterans, disrespect for POWs, and disrespect for all those serving.
  23. Paper Towels. Meanwhile forgetting and hoping that Puerto Rico will just go away.
  24. Lies. Never ending lies.

I get shit from people for saying “Amerikan” and “Amerika”. When the United States of America stops being a Russian client state and the President no longer appears to be in the pocket of the KGB/GRU, then I will go back to calling it by the more common name. Consider this my protest.

To see the future of the West, study New Zealand’s and Zimbabwe's crises

How long can the worlds' gluttony for debt continue? Seemingly forever, until it cannot. That was the experience of New Zealand in the 1970s and early 1980s when government subsidies ruled the economy until the country went broke. 

(Summary: New Zealand radically liberalised the economy, suffered through terrible social and economic pain, and emerged as a modern, vibrant and growing economy. Growing debt cannot last forever, and when a country hits the wall, it can go the way of New Zealand through the pain and recovery, or the way of Zimbabwe to more debt and devaluation, inflation and longer pain with not gain. Europe and the US have this in their future, we just cannot guess when, and we cannot guess which choice they will make.)

Through the first half of the twentieth century, New Zealand’s close ties to England ensured a steady flow of lamb and milk products from the former colony to “blighty”, at economic terms that benefited both the UK and New Zealand. This ensured that the New Zealand agrarian and rural economy continued to grow, benefiting the entire country. This also allowed for subsidies on imported goods, and on good assembled in New Zealand from imported parts (such as automobiles).

That could not and did not last forever. 

When the UK joined the European Common Market, they were required to abandon their Commonwealth trading relationships and imposed the common European trading relations, which included protectionism for European economies. New Zealand suffered. But so did Australia.

After Britain had joined the EEC Australian butter exports dropped by more than 90 percent; the Australian apple trade declined from 86,000 tonnes in 1975 to just 27,000 tonnes in 1990. The economic consequences of Britain's European ambitions for Australia were severe.

New Zealand was hit even harder, with pre-EM exports to the UK accounting for up to 55% of all exports (1958 – 1960), with 90% of milk and butter going to the UK, and over 95% of lamb (and 80% of mutton). This export market had grown New Zealand sheep populations into the 60+ million sheep, or 15 sheep for every Kiwi.

The short story is that with the loss of the UK markets, the New Zealand government and the National Party (the conservative and party of rural and agricultural New Zealand) attempted to hold up farming and rural incomes through subsidies. Up to 40% of the value of a sheep was in subsidies.

The only problem was that the National government (the conservative party) was running deficits like crazy to fund the range of subsidies, and the deficits were doing exactly what should be expected, devaluing the currency and increasing national debt servicing costs. Inflation was high, and a wage and price freeze did nothing to alleviate the problem, and international pressure was undermining the value of the currency.

And they continued to build that debt, and pay the subsidies, until one day the money ran out, or more realistically, until National and the Prime Minister were told by Treasury that the money was going to run out. The crisis had arrived.

So, having kicked the can down the road as long as they could, heaping subsidy on subsidy, hoping that it would all fall apart under the “next” guy’s administration, they ran out of money. It was their problem.

What to do?

Well, Robert Muldoon did what any responsible politician and Prime Minister should do – he got drunk and while drunk, called a snap election, knowing full well that National would lose, and the problem would be Labour’s.

Not surprisingly, National lost, and Labour won. A multi-year devaluation of the currency, ballooning sovereign debt payments, rising unemployment, and a disconnection from urban New Zealand meant it was time for a change.

The only small problem was that the day after Labour won, NZ Treasury went to the new (soon to be installed) government and said “Sorry to tell you this, but there is no money for your programme. In fact, you might not even be able to make the sovereign debt payment that is due soon.”

The can had been kicked as far and as long as possible.

So began years of economic restructuring in New Zealand, with years of associated pain up and down society. With no subsidies, large numbers of farms became financially unsustainable, with bankruptcies and forced sales. There were stories of farmers committing suicide as the auctioneers arrived at the properties.

Automobile assembly plants closed with the loss of jobs. Imports rocketed in price, and taxes increased to nose-bleed levels. I remember 66% income tax over a (fairly low) level.

Labour had the courage to throw away their platform and enact wide-ranging economic reforms. The pain was incredible. 75,000 manufacturing jobs and over 20,000 jobs in the public sector were lost in the five years from 1987 - 1992. With the pain of liberalising the economy, employment began to grow again through the 1990s, and New Zealand became one of the most open economies in the OECD (from a position of being the least open of 24 OECD economies in 1984).

The sale of State Owned Enterprises resulted in both massive pain, exportation of profits from the privatised industries (such as Telecom NZ), but also the modernisation of industries that remained in government hands as businesses (such as NZ Post), most of which became profitable businesses returning an ongoing dividend stream to the Crown (NZ Government).

Unlike New Zealand, when Zimbabwe hit the wall of national debt, they kept printing money and borrowing, resulting in devaluation and inflation, and ultimately a ruined economy (with a little help from property confiscations and destruction of businesses). 


Looking at the chart above, national debt exploded to almost 140% of GDP, dropped, then peaked again at 147% of GDP before dropping again. Why did it drop? Without even minimum fiscal discipline, international lenders simply would not buy Zimbabwean national debt at any price, and maturing debt had to be repaid – with printed money. The cycle repeated, and debt to GDP has stabilised around 80%. 

What stopped the international community? When “the inflation rate reached a peak of 89.7 sextillion (10^21) percent” in 2008.

New Zealand, by contrast, managed to keep inflation, while high for a period, relatively under control, and the economic reforms and fiscal discipline provided the comfort required to manage international expectations of the value of the currency. Inflation peaked before Muldoon was forced out (by his own policies) and was brought under control by the Lange government.

The national debt was also brought under control and paid down, and while spending and borrowing have increased, debt to GSP ratio remains well under 30%; healthy by international standards, and simply low by OECD and “First World” standards. 


Where to the “West”?

Current debt levels in Europe and the United States are simply unsustainable. And yet the borrowing continues, and balanced budgets (forget about paying down debt) so not exist in any of the major European countries or the US. This cannot continue forever, and the real question is equally simple:

Will the “West” chose the New Zealand route of hard choices and “short term” (3 – 5 years) pain, or the Zimbabwean choice of continued printing of money, devaluation, and hyperinflation?

The following graphic shows the results of the choice made by New Zealand, and the choice made by Zimbabwe. The grey is 1994, blue is 2004, and green is 2014. Zimbabwe’s choice effectively destroyed their economy and they have lost more than a decade. New Zealand’s choice has, after a difficult period in the 1980s and early 1990s, resulted in a consistent and solid growth.

 'C' = Household consumption expenditure, 'G' = General government final consumption expenditure, 'I' = Gross capital formation, 'X' = Exports of goods and services, 'M' = Imports of goods and services

What New Zealand in the 1970s and early 1980s also shows us is that politicians will continue with their profligacy until they cannot. They will keep kicking the can down the road until they cannot. They will keep hoping that their policies can continue until the “next guy” has to deal with it.

We know this because it already happened, in New Zealand and then, to a lesser extent, in 2008, resulting in TARP and bailouts of industries that lasted for years in the US and across Europe. 

Unfortunately, the ammunition to replicate that kind of stimulus probably no longer exists, and as with Zimbabwe, the first period of money printing did not teach politicians that this was a major danger, but seems to have taught them that they can do it again, and again. Now the Fed (in the US) and the ECB (in Europe) face the problem of QT - Quantitative Tightening, a process as fraught with risk as the original QE. Growing economies do not like restrictions on the money supply.

So what choices will the politicians make next time? Whatever the answer, I suspect we will see the results before long.

12 August 2018

Risk Geography and Waterfalls

“Row, row, row your boat, gently down the stream”. Gently is pleasant and enjoyable, if you know where the rocks are, if you have an idea of the flow of water, and if there are no waterfalls. Knowing where the hazards are at each point along the river, where the bank is too wide, or where the fallen trees are, and then deciding the path, is all part of Risk Management. Most important are knowing where and how to navigate the rapids, and not being thrown over the waterfall.

Not seeing all the swirling currents, the rocks, and the potential drops is akin to missing material risks.

Have you ever been faced with the occurrence of an event that was both material to the business, and yet was not on your radar (or risk register)? That rock in the river and that thumping, scraping feeling and sound when the boat hits that rock. It happens, and it is personally painful when it does. It is difficult to look an executive team in the eyes and say “we, I mean, I missed that one”. Once you’ve done that, the question is “what else are we missing?”

Faced with that situation, and after being assured “we ALL missed it”, I asked myself what process I could put in place to reduce the likelihood of such a mistake in future.

This has led me to thinking about systemic risks and Black Swans as much as thinking about “internal” risks that might have been missed. This post provides an outline of my methodology change to improve completeness of risk consideration, with a focus on material risks.

Exploring the Black Swan world

Over the past few weeks, I’ve published a number of posts on both Risk Management (operational level) and Global Economic conditions and Black Swans. What can, and should, Risk Managers be doing concretely to address these risks?

The first step, of course, is to acknowledge that there are potential systemic risks, and that the enterprise needs to be considering these, macro and micro. Internal resilience is as important as is a level of prudential preparation to weather external shocks.

For example, would the entities investment portfolio as managed by the treasury function, stand up to a “Mark-to-Market” post an event that resulted in bonds demanding a 5% additional return? Are banking agreements sufficient to ensure continuity of payments in the event of the failure of a key financial intermediary?

Risk Appetite and Acceptance

Risk Management cannot identify all risks, internal and external, and cannot prioritise those risks in a vacuum. Senior management (and the Board for validation) should be confirming the risk universe, the risk hierarchy, and should be determining the level of acceptable risk. This is the Risk Appetite, and provides a foundation for acceptance of the residual risk position acceptable to management and the Board.

Of course, understanding the Risk Appetite for anyparticular risk requires understanding of the risks, the identification of the gross potential impact, an assessment of likelihood of occurrence, the current situation in relation to the control environment, and more importantly, the acceptable final risk position (“target” risk score).

The “Target” risk score, or the Risk Appetite for a particular risk, should only be set and accepted by someone with the authority to accept that final risk position. Anyone else “accepting” that risk is doing so on behalf of the shareholders, and  very probably is doing so significantly outside the level of authority that the shareholders have vested in that person. Thus the need for a Delegation of RiskAuthority.

Seeing the “Same Thing”

One of the most difficult activities is the identification of all material risks, internal and external. Lists and brainstorming seem to be the most common ways that these sets of risks are identified. And of course generic lists by industry are readily available online, modifiable to your business. These lists reflect a range of risks at a period in time, from the perspective of the list compiler. The next step to get past the list and identify the hidden or out-of-mind risks.

All risk identification must start with the objectives of the business, even before the structure of the business. From there, a common model is needed, that all participants in the risk identification process are either familiar with, or can easily map to their experience and knowledge of the business.

While it cannot be said that all participants in the risk identification process will be familiar with all aspects of the Balance Sheet or Cash Flow statement, there is a very good probability that they will be very familiar with their areas, and how those areas impact discrete elements of the Balance Sheet of Cash Flow.

Victoria, Iguazu or Angel

A remarkable thing about waterfalls is that if you carefully measure all the water that comes in at the top, minus mist and vapour, the amount of water that comes out the bottom end is the same. So with Balance Sheets and Cash Flow statements. The totals in, minus items and added items, equals the amounts “going out”.

A tool that I have found useful for the identification of risks, and to ensure a conversation about risk with senior management is the use of the waterfall diagram. Each element can be de-constructed to whatever level of detail is required, but the inputs, minus and plus interesting other “stuff”, equal the outcomes or outputs. 

The example above provides a very basic (and imaginary) Cash Flow statement for a commercial and industrial company. It would look fundamentally different for a financial institution or insurance business. But in all companies, regardless of industry, after revenues and various costs, we have the output: Net Income.

Every element along the way, to a greater or lesser extent, inputs and outputs, contribute to the eventual result. More important, if each element represents a set of definable business objectives, then each element provides us with a specific area of potential risk. For example, a business objective like “complaints per X-thousand customers” relates to specific elements such as SGA (Sales, General and Administration Expenses), or in Insurance and Financial Services entities, in their Compliance costs as well as SGA.

Let’s add some geography

A waterfall itself is influenced by factors well beyond the flows of water. The height of the drop, the width of the flow, the internal structure of the river and terrain around it all contribute. So we need to be considering all these facets when looking at our waterfall. Certainly, we have experts internally on the type, flow and quantity of water (internal factors), but how about our understanding of the shoreline and associated geography (external factors).

Risk Identification and associated Risk Assessment need to consider all these factors, or critical risks (I must keep remembering to say “risks and opportunities”) will be missed - critical risks that have a fundamental baring on the likelihood of the business achieving its objectives.

While the metaphor may be imperfect, it does provide a framework.

If we want to ensure that we have identified as many of the material risks as possible, then we need to look at each element of the Waterfall, and consider both the external and internal contributors to that element. In so doing, we identify the potential risks to the achievement of each of those elements.

For a manufacturing and distribution company, the cost of distribution is a material component of the Cost of Goods Sold, and therefore any risks impacting distribution should be included. Consideration of the impact of the sub elements of distribution can be used to determine what specific risk mitigations should be put in place.

In the 2000s, a major FMCG (Fast Moving Consumer Goods) company did not adequately consider distribution costs, or more importantly, the impact of changes in fuel costs as an element of their distribution costs. When fuel costs rose, so did their distribution costs, significantly. Net Income suffered badly.

The inclusion of the potential for an external risk (increased fuel costs) occurring may have suggested the need for mitigation in the form of forward hedging of fuel costs, or hedging of transportation costs for rail costs.

Flipping the Waterfall diagram on its side, and we have an excellent tool to help us identify “missed” risks. While we did not use this exact presentation, we did use the waterfall diagram a year ago, and it helps us focus on, and in some cases identify, material risks.

It also enables the people with the most knowledge of each waterfall element the opportunity to discuss their elements, the make-up and breakdown of the elements, and to confirm the associated key risks. In addition, it supports challenge and common agreement of the material risks.

In the example above, Internal and External components of the waterfall element are listed, and discussed to confirm that associated risks have been identified. Quantification of the materiality of the risks was a secondary task, but by using this methodology, it was easy for the participants to understand quickly how any change in the one of the waterfall elements impacts the overall performance of the business.

Of course, at the core of a successful risk identification (and confirmation - this should be done annually at least) is ensuring the widest range of people are involved. This most especially includes subject matter experts on each of the element of the waterfall, and representation from Internal Audit to ensure a common risk universe is agreed.

The result is likely to be a much better aligned assessment of risk against business objectives.

06 August 2018

Flocking Black Swans

Thinking and talking about "Black Swans" as unexpected or unforeseen market or economic events has become almost blase, yet the use of the term in this context is quite new, dating to Taleb's analysis of the 2008 financial crisis. Now almost anything that we don't (or didn't) see coming is a "Black Swan".

How many of these Black Swans are actually unforeseen? How many are simply emerging risks that have come to fruition? Should we really be unprepared for these events?

Right now, without even adding meteors or pandemics, I can list a series of potential Black Swans, any of which could have a serious impact on the global economy. These range from Tariffs/Trade War to Brexit induced recessions in the UK and Europe, to Emerging Market credit crises or Chinese economic woes. It reminds me, again, of one of my favourite phrases: "It is easy to predict the future; getting the dates right it the difficult part".

And so the question; When? Some of these Black Swans could be brewing now, and may already have caused the underlying damage that will only be apparent with hindsight. Others may eventuate at any time. 


When considering Black Swans, the most important difference between "reality" and the concept is that Black Swans, the birds, stand out because they tend to be a solitary, and are not intermingled in flocks of White Swans. 

Swans, while solitary, do pair and can be seen in bevies, eyrars, or even gargles or herds, especially on the River Thames, where all "mute" or unmarked swans are property of the Queen (Act of Swans, 1482). Each year the Upping of the Swans takes place in the third week of July, when over a section of the Themes, all swans are caught, inspected, given a health check, and then released. 

All this to say that we think of Black Swans (back to the the economic events) as singular events, when in reality they cluster, or to use some of the collective nouns for swans, there could be a "bank of (black) swans", or even a "whiteness of (black) swans". The initiating event may not even be readily apparent during the period of crisis. 


So which was the primary cause of the Global Financial Crisis: the collapse in values due to the MBS/CDO sub-prime collapse, or the resulting impact of Mark-to-Market and resulting impact on the capital value of financial institutions? It could be argued, and was, that as financial institutions typically match their assets to their liabilities from a duration perspective, they were holding securities that were to be held to maturity, and therefore there was not financial impact unless they were required to sell their bond holdings.

The point is that any of a number of Black Swans may arrive concurrently or with only a few months between. Some will create the conditions that bring about additional crisis.

So to timing

As mentioned above, it is quite possible that some of our Black Swans have already inflicted the damage, and we are simply waiting for the evidence to come through - the evidence that may push some other situations over the edge.

The Trade War, Emerging Market debt, and the Chinese Economy are good examples of potential contagion. 

The recent +4.1% GDP change print for the US is being presented as a great result, but is it a reflection of underlying economic strength, or a reaction to threats of higher costs from tariffs? I do not know the answer, and we will only know with certainly at the next GDP print in October, just in time for the mid-terms.

One thing we do know is that the tariffs and global uncertainty aremdriving the value of the US$ higher, imposing additional costs on Emerging Markets while also suppressing US exports. This is supporting an expansion of the US trade deficit, and is hitting Emerging Market bonds with significantly higher costs.

So if, and it remains a big "if", the GDP print this past quarter is a reflection of anticipation of the impact of tariff and a Trade War, then we will know for certain in three months. But the damage will already be done, and the US economy may well have flipped into recession by then.

Equally, the Trade War may drive another potential Black Swan; an Emerging Markets financial crisis. Certainly that crisis may arrive all by itself, with an end-of-credit-cycle unwinding of EM opportunities as US, UK and EU treasuries are forced to pay higher yields, and a consequent "flight to safety".

Mixed in with all of this, there is the potential Black Swan of a serious credit squeeze in China, resulting in another huge stimulus program, and a potential draw-down of US treasuries to pay for the stimulus. When Russia sold almost $50 billion in US treasuries earlier in 2018, US 10-year rates jumped to 3.1% from a around 2.9%. What would be the impact of a $100 or $200 sale of US treasuries by China as part of a stimulus programme?

Let's guess at timing

We need to keep watching  indicators from around the world, and look for specific activities. The Baltic Dry Index provides a good indicator for us to watch. In the past moths, the Index has risen from $1250 to over $1700 now. The Baltic Dry Index provides a reliable surrogate for global trade volatility, with higher trade volumes increasing the cost of freight, and falling freight volumes driving down the BDI. 

It is also is a close to real-time indicator, with pricing of freight being highly sensitive to the actual trade volumes and projected volumes. 

I will be watching that over the next three months, looking to see if the Index remains high, or if as I suspect, pre-tariff activity will taper off, and we will see the Index fall.