stone theft has brought the acid rain of trade warring. Correcting the outrage of “Forced Technology Transfer” is turning out to be outrageously expensive. Follow the bouncing tariffs, as the process takes now bumbling share prices down the basement stairs into chaos. No predictable end exists to a war that looks likely to produce a prolonged market decline.
If you’re not defensively positioned now, it’s too late. The remainder of the market seems set for lower prices. We see China-free secular momentum stocks as a refuge, even in a slower economy. Yet even those are targeted now. A descending market takes everyone down. Stay and ride it out? Or return when prices are lower?
Should you be invested in this trade war market?
in 1990 the University of Nevada Las Vegas were crowned Men’s NCAA National Champions. The UNLV Runnin’ Rebels absolutely dominated on their way to the top, all the way led by long-time coach Jerry Tarkanian, “The Shark.” The Shark understood stress, and had his own way of dealing with it. The Shark relentlessly chewed up white towels from the sideline. We feel like that now, and increasingly are eyeing the sideline.
Stone fact. Our equity markets are in turmoil. Fact. What we are hearing from high profile professionals forms a Galaxy of Guesses. No crystal ball exists. No Gnostic future telling truth has ever descended to Earth tucked in a Glad Bag.
Should you be invested in this trade war? Stone fact. Absolutely everyone invested in the stock market is there for the exact same reason. Money, and more, not less. However, some are also present to sell. You are the target and they will bend, spindle, and mutilate the truth, in their quest to sell their firm and it’s products. You can’t be sued for “opinion.” Exactly none of these people will be there in the end when you are sitting on a worthless bag of sand they sold you on as a “Strong Buy.”
are fees and fees are nonrefundable. No do-overs exist in investing. But steep losses do. Nor does the market have any instant replay leading to a new call. All calls are final. Fact. No one’s got your back. It doesn’t matter what anyone has said or promised. HST was correct; “Buy the ticket. Take the ride.”
The investing model has never changed. Buy low sell higher. What does change are market conditions. Conditions have changed, for the worse. The risk now lies on the downside. “Out-performing to the downside,” more analyst garbage speak, only means shareholders are losing money.
Investing comes in only two basic forms; long term investing and trading. Traders are backing away from buying stock. Those playing now are predominately utilizing derivatives. Puts, calls, and every bizarre complexity created using said, are all designed to do one thing; reduce risk. No mystery exists here concerning complexity. The greater the complexity, the more possibility for failure. This is what’s known as a direct unbreakable correlation.
Making money means not losing money. That’s why Warren Buffet’s rule Number One is “Don’t lose money.” Warren is a long term investor focused on buying quality at bargain prices, based on a long term time horizon. Buffet created his name, his success, and his wealth, in part by using times exactly like this to buy quality, at distressed prices. This market increasingly promises to create precisely that opportunity across the majority of sectors. But not yet. Prices are yet too high.
Our market appears to be headed down. That’s called a “guess.” However, with each passing day the trade war defies resolution, and the regional federal reserve heads speak in different directions. Trade wars are acid rain to bull markets.
No individual investor was ever paid by losing money. However, swaths of so-called professionals are paid everyday while losing tanker loads, for the country, a company, and the individuals who invest in them.
Economic growth is slowing for the United States. This was displayed in the earnings reports just delivered. Full year 2019 earnings projections for individual companies and the U.S. GDP are both declining. European economic growth is already slow, whit central banks in on-going easing mode. China’s economy is staggering, increasingly crippled by the effect of tariff’s on their individual companies.
Cash is King. Traditional “defensive” dividend plays like staples, utilities, and telecoms are now very expensive. Buying high provides no opportunity to sell high. Even high dividend payouts are no protection against declining share prices. And when the inevitable sector rotation back out of defensive plays comes, those prices will come down like blazing space junk. Think cash and CDs.
Meanwhile tariffs are forcing U.S. companies to restructure supply chains, if they can, from China to sources outside of the tariff blast zone. Such actions create serious disruption and delay. These additional costs, along with those created by the tariffs themselves will create higher costs through the entire system. In addition, a far heavier tariff bomb awaits.
Taken together, these macroscopic troubles are dragging the majority of our companies to lower levels, of both earnings and share price value. Unavoidably, lower earnings create less shareholder value, and thus lower share prices, particularly if such conditions persist.
trade war shows no sign of resolution. In fact, it appears to be digging in. The gently-slowing elderly bull we’ve enjoyed for nearly two years has transfigured into volatile chaos. It threatens systemic decline. The fundamentals of individual companies are no longer driving. The macros are driving this bus, and it’s going further down.
Fact. STOCKjAW now holds only four positions; ETSY, NBEV, TREX, and CDs. We are 66% cash–including CDs. Our three equity positions cover a Consumer Staple, NBEV, a Consumer Discretionary, ETSY, and TREX, an Industrial. All three are secular momentum stocks, none of which require a strong economy in order to thrive. In varying degrees all are subject to the downward pull of the market as a whole, and the economy, in the event it slips below a normal slowing. We reevaluate these vulnerabilities daily. And we wait, for the resolutions of the trade battles, fed confusion, and lower prices on the best and brightest. Best wishes, and best of luck.
When you feel good, it shows.
Thanks for Reading.