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China, crude oil price dominate Monday’s Wall Street action

Written By | Feb 25, 2019
Google Android, Android OS, US tech, Huawei

Cartoon by Branco. Reproduced with permission and by arrangement with Comically Incorrect. (See article caption for link)*

WASHINGTON. Word over the weekend that President Trump decided to delay “indefinitely” his threatened March 1 tariff escalation against China and its still absurdly unfair trade practices kicked the bulls into high gear. Chinese stocks like Alibaba (trading symbol: BABA) instantly got a nifty boost upward. But balancing the optimism was the President’s tweet urging OPEC ought to reconsider its current efforts to cut production and raise the price of crude oil.

Crude oil price jawboning

ZeroHedge has a bit more on the crude oil issue.

“After months of radio silence, Trump the oil analyst has returned to complain about prices being too damn high.

“For the first time since OPEC+ agreed to cut production at its December meeting, Trump has chimed in on Twitter to tell the cartel to “relax and take it easy” because oil prices are “getting too high.”

“OPEC and members of an ancillary group led by Russia have been cutting production since the start of the year after striking an agreement during OPEC’s December meeting in Vienna to lower output by an aggregate by 1.2 million b/d during the first six months of 2019.

“Of those cuts, 800,000 bpd will come from OPEC members, while Russia and its allied producers will cut 400,000 bpd.”

More oil jawboning from President Trump

Trump is likely worried, if only a bit, that his drive to keep America in the crude oil driver’s seat could end up stymied if OPEC’s actions drive prices up further from the near $60 West Texas Intermediate (WTI) price tag the per barrel price nearly tagged last week. ZeroHedge indirectly backs up this observation.

“More recently, when Trump has tweeted about oil, he has been cheering the advances in US shale production that led the US to become a net exporter for the first time….

“Oil prices tumbled after the tweet, notching one of their biggest daily retreats since the beginning of 2019, virtually ensuring that this won’t be the last we hear from Trump on this subject.”

Rejoicing on the China trade front. At least for today.

Elsewhere, ZH also chimes in on Monday’s big, fat rally in American stocks and previously moribund Chinese stock issues. The move was clearly due to the currently suspended Trump tariff threat.

“While bonds fell and the dollar retreated, it was the S&P that finally broke above the key 2,800 resistance level that had proven too much for market for the past four months…”

The China trade negotiation news, which really amounts to nothing more than a factoid in an over all complex topic, proved sufficient enough to overcome the somewhat unnerving news on the crude oil price front, powering the three major averages to nice gains Monday morning.

Wall Street averages continue their upward glide. So far.

As of 1:30 p.m ET, the modestly irrational exuberance tapered off just a bit. The Dow is up approximately 130 points for a 0.50 percent gain thus far. The S&P 500 is up 10.23 for a slightly more modest 0.37 percent gain. And the tech-heavy NASDAQ is in line with the Dow, up nearly 40 points for a 0.53 percent gain.

None of this is earth shattering in and of itself, though it feels good. However, nearly everyone is watching the continuing Q1 2019 advance to see if it can finally overcome Q4 2018’s vicious extermination of nearly everyone’s gains for that year.

Market Maven portfolio action

We continue to put our cash to work. That happened after the market convinced us early in this new year that holding onto and increasing our stock holdings would be the best way to catch the early 2019 wave. And in so doing, at least get back to break-even after we, like most investors and even most professionals saw our 2018 stock market gains obliterated by Mr. Market’s absolutely vicious Q4 collapse.

Happily, we caught a whiff of a bit of China trade optimism a couple of weeks ago and made a modest initial purchase of Alibaba (BABA) shares. They’re already up for us over 7 percent. And that’s very nice, considering our foray into the same company in 2018 ended up costing us a chunk of coin when the trade talks looked like they’d reached a dead end. We are, frankly, ready to bail out of BABA this time around if we catch even a hint that the trade talks have hit a snag.

Buy Chinese stocks now? Maybe. But it’s a crapshoot.

Investing in Chinese stocks, as we’ve learned the hard way, is still a crapshoot. That’s even true for a monster company like Alibaba. Quarterly earnings figures from Chinese companies are always suspect, even though Alibaba appears quite monopolistically successful at what they do. But even if optimistic figures hold true, political and trade news can kill off a massive rally in a given stock – even BABA – in less than a second.

So these stocks are still best regarded as either medium term options trades or simply trades. Buying and holding Chinese stocks for any period of time tends to lead to investing tragedy. At least for us. Well-timed, short-term trades are another story, however. We hope our current Alibaba story has a much happier ending than the last one.

Wrapping things up.

With the exception of our cursed major investment in Allergan (AGN) and a preferred stock holding (Medley’s MDLX) that took a big turn southward both Friday and again today, the rest of our portfolios are doing quite well right now. But things have been so good since the turn of the year that we’re starting to get slightly nervous. Markets remain quite volatile. So, as with any cancer-like threat, we’re currently engaged in “watchful waiting.” And we’ll pull the plug in a New York minute if things start looking ugly.

— Headline image: Cartoon by Branco. Reproduced with permission and by arrangement with Comically Incorrect.


Terry Ponick

Biographical Note: Dateline Award-winning music and theater critic for The Connection Newspapers and the Reston-Fairfax Times, Terry was the music critic for the Washington Times print edition (1994-2010) and online Communities (2010-2014). Since 2014, he has been the Senior Business and Entertainment Editor for Communities Digital News (CDN). A former stockbroker and a writer and editor with many interests, he served as editor under contract from the White House Office of Science and Technology Policy (OSTP) and continues to write on science and business topics. He is a graduate of Georgetown University (BA, MA) and the University of South Carolina where he was awarded a Ph.D. in English and American Literature and co-founded one of the earliest Writing Labs in the country. Twitter: @terryp17