Market Meltdown III Update
I Hereby Command You To ...
Apologize for not getting updates out every time the POTUS decides to tweet another threat to China or others--all you have to do is look at the chip stocks to understand if it's a good tweetstorm day or a bad tweet day. Anyone who is exposed to the global supply chain out of China has a very real risk factor added to their business, their margins, and most important their capital investment plans.
This shit is gotten really friggin old. Until the 2020 election race gets going after the primaries, we are of course at the mercy of ONE TWEETSTORM which adds or subtracts $5-$10 trillion of market value in ten minutes. America has weaponized tariffs and China has weaponized its currency and now added $75 billion of import tariffs on American goods. At the same time, a negative feedback loop has kicked into very real declining capital investment spiral. Europe's export GDP has completely rolled over, Emerging markets have rolled over. Almost every S&P index except Utilities and Consumer Staples has rolled over or is rolling over.
News Flash: As I type this, POTUS Trump just announced that he has proclaimed that the $250 billion of goods at 20% tariffs goes to 25% on Oct 1. The other $300 billion goes from 10% to 15% and the date on September 1 except for the "Christmas gift exemption". So the negative feedback loop impact gets stronger.
The Fed could cut rates to ZERO on Monday and the market would, in my opinion, see that move as validation that recession IS coming and cutting rates is now a diminishing return and the old yarn "The Fed is pushing on a string" is in fact reality.
Like I said earlier this month, the bad news is all chips stocks will get hit here to try to price in lower volumes of semiconductors sold to China to build iPhones and laptops etc. We own chipmakers AMD, Nvidia, and Xilinx. AGAIN--if you want to protect your profits and sell them here I guarantee you will be able to sell them in the short term and buy them back cheaper if you are a trader.
For our portfolio, I posted in the Aug 15 update that I protected our prodigious chip profits with September put options 10% below the closing prices on August 15th and selling call options 10% above to pay for the premiums. So far that trade has worked perfectly. You can still do that trade--same deal: SELL a call September call option 5-10% above the opening prices on Monday and buy a put option 10% under. If you are a nimble trader, take your profits and bet you can buy when this trade war correction hits 30+ VIX and under 30 RSI blow out.
Remember this is August--20% of Wall Street is on vacation. Moves up and down will be exaggerated.
The best advice I can give you right now is the same I gave you August 5 and 15th: BUILD SOME CASH in our Infracap's PFFA ETF that is yielding 9% and been increasing in value every month!
Bloom Energy Update
I have been a newsletter editor for 20 years--I have never had a stock blow up like Bloom--that's a first. I am talking with CEO on Tuesday--I will report.
Obstensively, the fear is CA and NY are passing laws restricting natural gas deployments. I will get the skinny on this and report.
They sell very little into China. They sell into Korea in a big way.
PS--what was amazing today is ALL the Cloud SaaS companies (who have very little or no China exposure) were only down $1 or so. Amazing. We are tracking a number of other secular growth micro-sectors that are China-proof.
If you feel uneasy, raise some cash. The trade war is NOT going in the right direction. This is going to get worse until we get the tweet that says "WE HAVE A TRADE DEAL." The American consumer is holding up the American economy at 68-72% of GDP. Government spending is growing too. The digital transformation of business is not slowing and it has a very high ROI on capital invested.
If I did not make myself clear--I HATE this BS. It's the biggest self-inflicted economic disaster I can remember and has the chance of metastasizing into a real global financial quake where geopolitical economic warfare turns into a global recession.