Stock market’s fall good news for this stock

Monday, 26 March 2018
Melbourne, Australia
By Bernd Struben

  • Almost wilfully myopic
  • Gold bull is stirring
  • Bad news…and good news

I think the stock market’s going to be great.’

Donald Trump on US–China trade tensions

Unless you’ve shorted the major stock markets — in which case congratulations — the past few trading days have been less than pretty.

The S&P 500 fell 2.10% on Friday. That puts the index down 9.91% since its 26 January high.

The Dow Jones ‘only’ lost 1.77%. The Dow is now down 11.58% since 26 January.

The ASX 200 closed down 1.96% on Friday as well. And at time of writing the index is again in the red, down 0.50%.

That brings its losses to 5.60% since it peaked on 9 January. And it means the ASX 200 has gained a paltry 0.78% over the past 12 months, excluding dividends.

That’s about a third of what you could have earned with a term deposit, by the way. And it came with a lot more risk.

Readers who’ve followed wealth preservation expert Vern Gowdie’s advice should be well placed following the recent correction. Though the current correction is nothing like the debt fuelled bombshell Vern expects will bring global stock markets — and unwary investors — to their knees.

If you’re thinking about selling some of your stock holdings for more defensive assets, including cash, do yourself a favour. Read this first.

Markets

Over the weekend, the Dow Jones Industrial Average closed down 424.69 points, or 1.77%.

The S&P 500 lost 55.43 points, or 2.10%.

In Europe the Euro Stoxx 50 index finished down 50.12 points, or 1.50%. Meanwhile, the FTSE 100 fell 0.44%, and Germany’s DAX lost 213.77 points, or 1.77%.

In Asian markets, Japan’s Nikkei 225 down 29.23 points, or 0.14%. China’s CSI 300 is down 1.64%.

In Australia, the S&P/ASX 200 is down 29.13 points, or 0.50%.

On the commodities markets, West Texas Intermediate crude oil is US$66.42 per barrel. Brent crude is US$70.93 per barrel.

Gold is trading for US$1,348.93 (AU$1,748.22) per troy ounce. Silver is US$16.63 (AU$21.55) per troy ounce.

One bitcoin is worth US$8,483.91.

The Aussie dollar is worth 77.16 US cents.

Almost wilfully myopic

The reason for the recent global stock market rout is obvious. And in case it wasn’t, it’s belatedly blaring from financial news headlines everywhere.

Uncertainty, largely about the potential impact of a full-blown trade war, has torpedoed investor confidence.

As I’ve pointed out many times before, investors ignore Trump’s bluster at their own peril. He’s made it perfectly clear since day one he intended to renegotiate trade terms with China and the rest of the world. Even during his campaign, he labelled China a currency manipulator.

What we’re seeing right now, is Trump’s…erm…unconventional negotiating style in action.

Now you’ll often hear markets described as ‘forward looking’. Meaning investors calculate future scenarios into the prices they’re willing to pay for a stock today. That could be a company’s expected earnings growth. Or it could be a predicted change in demand for a company’s product, like iron ore or baby formula.

A major trade war could have all sorts of ramifications for company earnings and demand. A few companies working within protected industries may benefit from tariffs that damage their foreign competition. Many others will suffer.

A truly forward looking market should have begun to price in a Trump led trade war the day he took office. Yet in this case the market — and mainstream analysts — have been almost wilfully myopic.

The following caught my eye in The Age over the weekend:

“When we started in January you just could not find any reason for markets to fall, now uncertainty is feeding on itself,” AMP Capital head of dynamic asset allocation Nader Naeimi said…

‘“While the current proposals for tariffs are limited, there is a risk that this might escalate and become more damaging,” Fidelity International chief investment officer for Asia Pacific equities, Tim Orchard, said. “It is this risk that markets have recently started to focus on.”

No offense to Nader Naeimi, but if he couldn’t find any reason for markets to fall in January, he wasn’t looking very hard.

Perhaps he…as so many others…was blinded by the almost daily news of US markets hitting new record highs. Not the mention the New Zealand stock market.

Naeimi, I’m guessing, does not follow along with Port Phillip Insider.

If he did he might have read this, which I penned on 21 September 2017:

The second — and I believe far more likely — crisis unfolding before our eyes is a global trade war. One that will begin between the US and China but will see other nations forced to take sides…

Now, all of this is getting plenty of media coverage. Both from the mainstream, and from those of us who try to provide you with independent and alternate ideas. Yet it seems investors have firmly decided not to see the threats.

And indeed, investors have had their blinkers solidly in place.

This from Bloomberg on 6 March:

Asian stocks were set to rally Tuesday after a rise in U.S. equities and the dollar as concern eased on President Donald Trump’s proposed tariffs…

The S&P 500 Index advanced for a second day after hedge fund billionaire Ray Dalio called the threat of a trade war “political show” and House Speaker Paul Ryan urged the president to reconsider tariffs on steel and aluminum.

To which I cautioned in Port Phillip Insider on the same day:

While investor fears of a trade war eased overnight, you can be almost certain Trump will stoke those fears again. Possibly before the end of this week.

That could mean more bad news for most commodities and the broader stock markets. Gold, on the other hand, should benefit.

I’ve spilled a lot of digital ink on this in the past. And I won’t rehash any more of it today.

The point is you should get used to all this uncertainty. Trump’s not shy about pulling all sorts of levers more diplomatic and cautious presidents wouldn’t touch. And the results are…well…uncertain.

The US$60 billion in new US tariffs aimed at China are still at least 60 days from reality.

Trump is playing hardball. Yet China’s muted reaction so far is revealing. While it may be true that no one wins a trade war, it’s also true that some will lose more than others.

Knowing this, I believe there’s a very good chance China will reach new agreements with the US before the 60 days is up. Or that they’ll simply accept the tariffs with minimal reprisals of their own.

Trump, in either case, appears confident of the outcome, stating:

China is going to end up treating us fairly. For many years they had free rein. They don’t have free rein anymore.’

And if that coincides with Trump and Kim Jong-un announcing a peace treaty on the Korean peninsula in May, stock markets should soar to new highs all over again.

Of course, if the Chinese don’t cooperate and it turns out Jong-un is just playing for time, it will be game on. Tariffs, sanctions, naval blockades…

This will be bad news for most stocks and most commodities.

But not all…

Gold bull is stirring

In times of uncertainty, it’s hard to beat gold.

And last week’s market ructions once more saw investors flocking for the classic haven asset.

This headline comes from Bloomberg, ‘Gold’s “Good Week” Gets Better as Trade War Ignites Haven Demand’. The article continues:

Gold futures posted the biggest weekly advance in almost two years, extending gains Friday and pushing up producer stocks, as mounting economic and geopolitical tensions fueled demand for the metal as a haven…

There are other signs that bullion is winning favor with investors again. Global holdings in exchange-traded funds have risen to the highest level since 2013, while traders and analysts in a Bloomberg survey are the most bullish on the metal’s outlook in almost two months.’

You can see the big leap in gold futures on the graph below:



chart image

Source: Bloomberg
Click to enlarge

Gold’s rally has surprised many. But not Port Phillip Publishing’s head of research, Greg Canavan.

In fact, just last Wednesday he released a brand new gold report, ‘The Great Bullion Breakout’. In it he details five factors at play that should drive gold to new highs.

One of those, unsurprisingly, is investor uncertainty.

Beyond an in-depth analysis of gold’s outlook, Greg also recommends his favourite play in a rising gold market. And on Friday, as the broader market plummeted, Greg’s recommendation gained 7%.

That’s short of the 100% gains Greg predicts for this stock by October, but it’s certainly off to a cracking start. And as Greg wrote about that stock this morning, ‘I think it’s got a long way to go, but you need to move quickly.’

You can get the full details in Greg’s ‘The Great Bullion Breakout’ here.

Bad news…and good news

The bad news first.

The release of Ryan Dinse’s ground breaking Whitepaper, ‘How to Land Mega-Baggers from “Silent Crossovers”’ has been delayed.

Don’t worry though. Only by one day.

Last week I told you to expect Ryan’s new report to hit your inbox today. So long as you registered your interest by signing up, that is. That proved a bit optimistic.

But this morning I was assured Ryan’s Whitepaper will be sent out to everyone who signed up for it tomorrow, Tuesday.

The report, as you may know, looks at the methods Ryan uses to identify likely trigger points. Something he calls the ‘silent crossover’. It’s silent because these points certainly aren’t published in the mainstream financial media. And the institutional investors prefer to keep it that way.

The thing is, once these points are hit with select small-cap companies, they often see a wall of institutional money flow into the stock. And you know what happens to the share price when there’s a surge of buying.

Ryan’s goal is to show you how to get in just before ‘the smart money’ arrives. And then ride the stock to new highs.

If you signed up already, you’ll find out exactly how Ryan aims to do this tomorrow.

Now here’s the good news.

If you haven’t signed up yet, you have one more chance to do so.

As a reminder, the report is being made available at no charge to any paid-up subscriber to Port Phillip Publishing’s advisory services. So it won’t cost you anything…except two minutes of your time to register.

But if you don’t register your interest, you won’t receive it.

You can sign up to get Ryan’s brand new Whitepaper, at no cost, here.

Keep an eye out for that tomorrow.

And before you log off, have a look at this from The Australian Tribune:

Why Kim Jong-un Is Losing Sleep Over Trump’s New Adviser

Kim Jong-un will surely have taken note of US President Donald Trump’s latest cabinet reshuffle.

Trump has forced Jong-un to the negotiating table with a combination of trade sanctions backed by the very credible threat of military force.

And in case North Korea remained in doubt about the credibility of that threat, Trump…

If you’re fed up with sanitised, politically correct dogma cut and pasted from one mainstream source to another then The Australian Tribune is for you.

And it’s absolutely free.

Sign up here to get The Australian Tribune delivered free to your inbox five days per week.

You can visit our website at https://www.theaustraliantribune.com.au/ to read the complete article above now.

Cheers,
Bernd