WASHINGTON. If ever there was a day to resurrect our bungee-jumping 3-D image of one of Warner Bros.’ cartoonists most beloved and beleaguered character, Friday was the day to do it. That’s because we’ve endured more than a week now of a wildly bungee-jumping stock market. Stocks, quite simply are currently the shared hostages of an aggressive but desperate Chinese government and, of course, those villainous high-speed traders and assorted algos who trade on headlines. The favored direction: down.
What’s with the current bungee jumping stock market in the US and elsewhere this week?
It seems that we crash when China ratchets up the US-China trade war temperature. Or rather, puts its temperature in the deep-freeze in what’s turning into a new Trade Cold War. The Chinese government’s moves actually smack of fear and desperation, particularly given their increasingly touchy situation in Hong Kong. Fear today, elation tomorrow, fear the day after. It’s a classic recipe for the bungee jumping stock market we’ve witnessed off and on all year. And, every other exhausting day over roughly the last two weeks.
However, given the expertise of the Chi-coms in disseminating pro-regime, anti-US propaganda, along with their divine right to exterminate any of their domestic opponents at will, their outward position remains one of apparent strength. They’re helped out as well by the out-and-out anti-US media both via broadcast, cable and streaming video. Which is why this week’s bungee jumping stock market flavor was mostly colored red. For panic, loss, and Chi-com shenanigans.
Preparing the Election 2020 Battlefield to defeat Trump?
Both the Chi-coms and the media are working to destroy Trump’s persona in advance of Election 2020. With Trump disposed of – since the days of Vietnam, anti-US agitprop, often funded by outsiders, always works – a Democratic-Socialist will take over the reins in 2021 and get the US back to its Obama Era wimpy self. The Chi-coms will win, Amerikkka’s socialistas will win, and we’ll all get ready to become Venezuela.
But back to the present… the other villains in this latest market-bashing are the machines and those who love them. They’ve already declared for a 2020 recession, something the Deep Staters also want for the aforementioned reason. And now they’re helping the bond market and the stock market to create the prequel for that crash, aided and abetted by a Federal Reserve Bank that just doesn’t get what’s at stake here.
It’s enough to make a little investor cry. And I’ve wanted to. Really. But it’s not in my anti-snowflake nature. Which is good, since the market is not a “safe space” these days.
Friday’s bizarre trading action
As for Friday’s action, after a really swell comeback rally on Thursday – the second one this week – this bungee-jumping market reverted back to swan-dive mode. All three major averages closed down, though not on their lows. China still seems intent on screwing around with its exchange rate, which scares a lot of investors. And rightly so.
CNBC sums up why we’re enduring the current bungee jumping stock market
A Friday morning CNBC report nicely sums this up, starting with this nifty tech tidbit.
“Overnight, Bloomberg reported that the U.S. is holding off on giving permission to U.S. companies to use Huawei products, citing people familiar with the matter.
“Chip stocks fell on the news. Micron Technology and Skyworks Solutions both traded more than 1% lower while Advanced Micro Devices slipped 0.9%.
“This comes after China decided to stop buying American crops and after the U.S. officially declared China a currency manipulator earlier this week. The U.S. designation came after China let its currency, the yuan, fall to its lowest level in a decade relative to the dollar, sparking the biggest of 2019 for stocks.
“‘If there was any doubt, President Trump has clearly moved from trade wars to currency wars,’ said Harvinder Kalirai, chief fixed income and FX strategist at Alpine Macro, in a note. He said the Federal Reserve will be pushed towards aggressive easing measures if President Donald Trump keeps pressuring China. ‘Investors should incorporate intrinsic hedges to ride out market volatility and protect themselves from policy errors.’”
Media on the trade impasse: It’s Trump’s fault. But wait. Who reneged on the negotiated agreement this past spring?
Well, yeah, Harvinder, we’ve moved from trade wars to currency wars. But it’s the Chi-coms, not Trump, who started this by completely ignoring the trade agreement they were supposed to sign last spring. Trump rightly told them to take a hike, and it’s been game on ever since. The Chi-coms figured Trump would cave like all US presidents do. But they miscalculated, and now, it’s game on.
Trump, himself caused problems. At one point, he indicated Huawei was totally out in the US. Then his aides clarified, stating that the President was only referring to Federal purchases of Huawei gear. At every statement, the market jumped or tanked, and not just tech. It was just a hell of a day. And it was a hell of a week. But remember who started all the commotion, first by stealing our tech, next by reneging on an already agreed upon trade deal, and now by interfering with our election process. It’s a mess and it’s seriously affecting the stock market.
What to hold and what to fold
At this point, my advice to myself – and to anyone who’s interested – at the risk of missing the usual eye-popping returns, it’s best to steer clear of tech for the moment, except maybe for Microsoft (trading symbol: MSFT). That’s because Microsoft is not nearly as dependent on Chinese business in either direction than, say, Apple (AAPL) or Micron (MU). Every negative word with regard to the US-China non-trade deal will auto-whack these stocks and stocks like them. So why stay in them at this point?
Ditto large cap US companies that do a lot of international business. In addition to China, international currencies are in flux due not only to aggressive Chinese devaluations of the yuan, but also to reflexive negative activity in the Euro due to Brexit fears. The latter will become even more important as we near this fall’s alleged Hard Brexit date.
And don’t forget: Hard Brexit likely incoming this fall
On the Hard Brexit issue, at the moment at least, I think we’re more likely to see an Israeli-Palestinian peace deal than a gracious, non-restrictive soft Brexit. The Eurozone’s controlling elites are pissed. They’d been using the UK as a cash cow for years, just like these same clowns have used US $$ for years not to bolster their own defense forces but to maintain or increase their asinine socialist policies.
Just like our own lefties, the Euro-elite lefties love to give away free stuff to buy votes. But as that free money from the US and the UK disappears, it’s gonna be tough to appease the peasants, as France’s Macron has already discovered.
At any rate, we’ll be seeing more currency chaos, trade imbalances and Euro-instability as the Hard Brexit nears, and this will create havoc for the balance sheets of those international conglomerates HQ’d right here in the USA. Which, in turn, will jeopardize the accuracy of their quarterly projections. Which leads to mass dumping of their shares when income numbers disappoint.
Best to stay in domestic stocks right now, I think, divest ourselves of international holdings. (My last remaining one is Swiss pharma giant Roche [RHHBY].)
Cash could be king right now
Otherwise, I’m going more “cash-y,” hanging onto high-yielding but stable preferred stocks and hanging on to high-rated ETFs in a number of more conservative business sectors. Although I continue to hold onto a fair number of shares in Invesco’s equal weight tech ETF (RYT).
Otherwise, main ETF holdings are mostly in Schwab’s regular or fundamental index ETFs, and they’re holding their own. Plus, for Schwab customers like moi, no commish on the trades. E-Trade, Fidelity, TD Ameritrade and others offer similar deals on broader-based ETFs.
Market stability is out for now, so we’ll need to act accordingly
But until things settle down a bit, unless you can spot a quick day-trade, this market is toppy and dangerous. I still think we’ll eventually be okay. But there’s just too much crosstalk right now. And too many companies and individuals with too much money are way too interested in talking this market down, less for fun and profit and more for creating an atmosphere that will create Recession 2020.
Why? The better to bring down President Trump and restore the Deep State to the permanent power position it clearly thinks it still deserves, that’s why.
Ask Jeffrey Epstein’s corpse if you don’t believe me.
That’s a hell of a note to launch our weekend. But it’s the truth. Not just MY truth. It’s the truth, pure and simple. Treacherous times, friends. But we’ll still figure out ways to make some money out of them. Stay tuned.
— Headline image: Wile E. Coyote swinging on a bungee cord, just like the stock market.
(Screen grab of © Warner Bros. cartoon, via YouTube. Fair use to illustrate economic point.)