WASHINGTON. Hooray! The always reliable MSM reports that the U.S. vs. China Trade War is over. More or less. It figures. After posting my Sunday stock market grouse-a-thon, which focused on the utter idiocy of Mr. Market thus far in 2018, just look what happened. From Monday’s opening bell, the stock market took off like a rocket.
The Dow Jones Industrials closed up nearly 300 points (1.21 percent). The S&P 500 and the tech-heavy NASDAQ closed nicely up as well, though not nearly as much as the DJI, which finally traded above the 25,000 mark for the first time since March.
China trade war over? Well, today, anyway.
Basking in a 24-hour Era of Good Feelings, investors apparently decided that for today, at least, all is well with regard to international trade and finance, now that the China trade war is over because Treasury Secretary Steve Mnuchin said so. (Maybe.) At least if you believe the mercurial market mavens of CNBC.
“Treasury Secretary Steven Mnuchin said over the weekend the prospect of a trade war was “on hold” following an agreement to suspend tariff threats.
“On Saturday, negotiators from the world’s two largest economies said they would continue talking about measures under which Beijing would import more energy and agricultural commodities from the U.S. in an effort to bridge the $335 billion annual U.S. goods and services trade deficit with China.”
When it comes to China, color us skeptical. This news is all great news if it’s true. But over the last ten years or so, it’s been China that’s been getting tired of all the winning, not the U.S. So stay tuned. We love good news on the trade front. But we wouldn’t run up our own victory flag just yet. And don’t forget Little Rocket Man, who’s still lurking in the background, ready to spoil anything at a moment’s notice. So let’s not pop the champagne corks yet on the China trade war “victory.” After all, they’re still dumping steel.
Trump goes on offense against the Deep State
For today at least, the financial media seemed willing to ignore the considerable political skullduggery that nears a climax in the nation’s capital. Maybe that’s because President Trump has finally decided to go on offense against the Obama-embedded, Deep State shadow government that’s been incapacitating his presidency since the day of his inauguration. The media doesn’t particularly want you to know.
ZeroHedge weighs in
ZeroHedge provides details surrounding Trump’s move. (Italics, bold italics language and sentence structure courtesy ZH.)
“Update: Just a few hours after President Trump ‘hereby demanded’ that the DoJ investigate whether or not the ‘FBI/DOJ infiltrated or surveilled the Trump campaign for Political Purposes,’ Axios’ Jonathan Swan reports that Justice has confirmed a probe has begun. DoJ’s Sarah Isgur Flores:
“‘The Department has asked the Inspector General to expand the ongoing review of the FISA application process to include determining whether there was any impropriety or political motivation in how the FBI conducted its counterintelligence investigation of persons suspected of involvement with the Russian agents who interfered in the 2016 presidential election.
“‘As always, the Inspector General will consult with the appropriate U.S. Attorney if there is any evidence of potential criminal conduct.’”
“The Deputy Attorney General issued the following statement:
“‘If anyone did infiltrate or surveil participants in a presidential campaign for inappropriate purposes, we need to know about it and take appropriate action.’
All fine and good. But here’s the ZH payoff.
“The liberal media is in full panic, meltdown mode, exclaiming that Trump has ‘interfered’ with the investigation…”
The liberal media has got it precisely wrong, of course. As usual, the real truth is hiding in plain sight just another 180 degrees around the Great Circle of Being. It’s the MSM, a wholly-owned subsidiary of the Deep State, that’s been interfering with the voters’ verdict that was clearly rendered on Novemberr 8, 2018.
Back to Mr. Market
Again, what does this have to do with the stock market? Everything. Remember: Today’s market action is almost entirely driven by headlines, fake or otherwise. As the fake Trump-Russia Beltway plot thickens, the fake, anti-Trump news will tend to over-wash everything good that’s currently going on in the Wonderful Land of American Business, the better to stay on the Trump-Russia message. So we expect a negation of today’s nice rally sometime this week. Sad.
As for us, our large portfolio was actually down a bit today, which was disappointing. As we exit more volatile stocks to hide in select ETFs, our portfolio’s performance tends to improve on the dividend front and dis-improve on the capital gains front.
Allergan: More weeping and gnashing of portfolio teeth
Of course, the worst damage to our latter goal – capital gains – is our outsized investment in Allergan common shares (symbol: AGN). Having inherited these shares via the mandatory termination and redemption of Allergan’s preferred shares, we’re starting out way behind on a cost basis and could use a break here and there from Wall Street as we await this stock’s momentum to build back. This international drug giant, now headquartered in Dublin, Ireland, took a huge, extended hit last fall when the Feds disallowed their attempt to extend their patent for a popular and effective brand of eye-drops (Restasis). The common stock was destroyed by this news, even though it has plenty of viable new drugs in the advance pipeline.
Enter David Tepper
The shares attempted a nice recovery last week, but were set back today, for some reason, by news that “activist” investor David Tepper is upping the ante, having received FTC permission to increase his stake in AGN. This usually means that pressure will be brought to bear on Allergan’s increasingly unimpressive management to spin off and/or divest parts of the company and other fun stuff to “enhance shareholder value.” I.e., to enhance Tepper’s shareholder value. (Although we little guys might be able to hitch a ride.)
The company is likely to fight Tepper’s unwelcome advances, as CEO and Boards of Directors often do. This could end up extended the current period of uncertainty. That prospect gave Allergan’s shares a $4.22 haircut today, whittling the share price back to $154.21 at the close, a nasty 2.66 percent loss on the day. That’s the way it’s been with Allergan lately, but it’s getting a little depressing at this point.
However, we continue to hold, even though our portfolio will be denied bragging rights until and unless these shares decide to break through all the current investor pessimism. We shall see.
Oil patch and elsewhere provide market tonic
Meanwhile, oils and ETFs following health, tech and growth stocks did well, which tends to balance things out for us a bit. The oil patch has been particularly good to us lately, although we wish we’d loaded up a bit more than we did when prices dwelled firmly in the bargain basement.
That’s it for now. A passive day, good for most investors, but needing a bit more confirmation before we breathe easier. And even more confirmation that the China trade war is over. Or at least asleep. (We hope.) #
*Headline cartoon by Branco. Reproduced with permission and by arrangement with Comically Incorrect.