Will your portfolio withstand this?

Friday, 25 October 2019
Adelaide, Australia
By Bernd Struben

  • Playing with fire
  • WiseTech: ‘Sell on any strength’
  • In the mailbag…Who makes the laws?

I just want to say, can we all get along? Can we stop making it horrible for the older people and the kids?

Rodney King, May 1992

 ‘I think that the people would revolt if that happened.

Donald Trump, on the prospect of his impeachment

The coming crisis is emerging market triggered, but America-based.’

Economic futurist, Harry S Dent

In March 1991, your editor was weeks away from earning his economics degree at the University of Michigan. Stuck in the books, I had no clue that 3,500 kilometres to the west the seeds were being planted for an American crisis.

That crisis began when four white Los Angeles police officers pulled over black motorist Rodney King. King had tried to outrun the cops…and failed.

Believing themselves unobserved, at least by anyone who mattered, the four officers savagely beat King on the side of the road. And every swing of their batons — all 56 — was caught on film by local resident, George Holliday.

The footage quickly went viral. This was before the internet. But within days, news stations around the globe were rebroadcasting the scene.

You likely recall the Los Angeles riots that followed.

But they didn’t erupt because of the beating. The rioting didn’t start until a year later, on 29 April 1992. That’s when a jury acquitted all four policemen of wrongdoing.

As a refresher of what followed, you can see a screen shot of the Los Angeles Times below:



chart image
Source: LA Times/blackthen.com
Click to enlarge

By the time the five days of rioting was over, more than 50 people were dead. Another 2,000 were injured.

Atop of the local police forces, it took 1,100 Marines, 600 Army soldiers, and 6,500 National Guard troops to finally restore some order.

I bring this up today for a reason.

We’ll get back to that, after a look at the markets…

Markets

Overnight, the Dow Jones Industrial Average closed down 28.42 points, or 0.11%.

The S&P 500 closed up 5.77 points, or 0.19%.

In Europe the Euro Stoxx 50 index closed up 14.48 points, or 0.40%. Meanwhile, the FTSE 100 gained 0.93% and Germany’s DAX closed up 73.91 points, or 0.58%.

In Asian markets Japan’s Nikkei 225 is down 1.81 points, or 0.01%. China’s CSI 300 is up 0.08%.

In Australia, the S&P/ASX 200 is up 43.85 points, or 0.66%.

West Texas Intermediate crude oil is US$56.12 per barrel. Brent crude is US$61.67 per barrel.

And gold’s cracked back above the US$1,500 mark. The yellow metal is trading for US$1,502.75 (AU$2,205.06) per troy ounce. Silver is US$17.80 (AU$26.12) per troy ounce.

One bitcoin is worth US$7,461.70.

The Aussie dollar is worth 68.15 US cents.

Playing with fire

Citizens in generally peaceful nations are erupting in violent protests. Hong Kong, Bolivia, Chile, Spain…it’s a long list. And growing.

Now few people want to believe that these protests could turn into civil war.

And even fewer people want to believe that the same thing could happen in the world’s last remaining superpower. The result, after all, would be devastating.

But the reality is that the US is more divided today than it’s been since the 1850s, in the lead up to the American Civil War.

You can blame Donald Trump for that. Or you can blame the cadre of avowed Trump haters. Either way, the graphic below gives you an idea of the dangerously growing schism between right and left:



chart image
Source: Pew Research
Click to enlarge

This chart reveals that 55% of American liberals hate Trump so badly that if one of their friends voted for Trump it would ‘strain’ their friendship.

Those strains could be pushed to the breaking point as US Democrats press on with their controversial impeachment hearings.

Trump has already urged Republicans to do more to defend him from the impeachment probe.

And on Thursday, US time, 30 Republican lawmakers did just that. They marched into the secure hearing room on Capitol Hill where the Democrat’s secretive impeachment hearings are taking place.

From The Australian:

Republican Steve Scales, who led the group, said “my colleagues and I went to confront (house ­intelligence committee chairman Adam) Schiff in his locked room in the Capitol basement to see what he’s been hiding”.

“When we got there he immediately shut down the hearing and fled with the witness. Republicans won’t back down. We demand transparency.”

Now the Republican invaders eventually left, after ordering in pizzas.

But this won’t be the end of it. As their leader, Steve Scales said, ‘Republicans won’t back down.’

And neither will the Democrats.

Therein lies the real danger.

Now while things are regrettably heating up, this has been brewing for some time. In fact, here’s an excerpt of what I wrote in your 17 December Port Phillip Insider:

Unlike Richard Nixon (who bowed out before being impeached) or Bill Clinton (who would have gone meekly) I just can’t see Donald Trump handing over the keys to the White House without a fight.

You can almost hear his call to arms now. And the torrent of Twitter outrage pouring into his supporters’ feeds.

Don’t forget, if Trump is impeached it will all based on ‘fake news’ derived from a ‘witch hunt’.

‘“I think that the people would revolt,” could all too quickly become, “I think that the people should revolt.”

As divided as US politics has become — fuelled by left-wing and right-wing media alike — it’s far too easy to envision ‘Trump militias’ coming to the rescue. Perhaps patrolling the White House grounds to keep the ‘lefty Feds’ from dethroning their chosen leader.

Once the first shots ring out, it could all spiral towards a second US civil war. One that would upend global trade and stock markets in a way that no one living has ever experienced before.

It  sounds sensational, I know.

Something so terrible that we can’t bring ourselves to imagine that it could really happen.

But unfortunately it could.

It’s an alarm I first heard raised by renowned US futurist Harry S Dent.

Harry forecasts sweeping global political and financial upheavals to pick up pace in 2020.

He sees a massive meltdown that, on a local level here in Oz, will devastate the ASX and Aussie housing markets.

In his bestselling book Zero Hour, Harry explains that it’s not the trade war that will bring the global financial system to its knees. Nor is it the trillions of dollars in bad debt in the junk bond market many pundits are pointing to.

Instead, he says, emerging markets will trigger the crisis. Yet it will be US-based.

Why?

As Harry writes:

We Americans were taught in school that the Civil War ended with Confederate General Robert Lee’s surrender at Appomattox in 1865.

The reality is…

The second phase of the “War Between the States” has already begun.

Zero Hour is packed with unique, useful insights you won’t read anywhere else. Along with actionable advice outlining the sequence of events he expects to occur once the crisis gets well and truly out of control.

The idea is to give you time to devise your own worst case investing plans today…before it’s too late. That includes Harry’s top trade recommendation outside the stock markets that could rule the 2020s.

You can find out more about Zero Hour, and how to get your own discounted copy, here.

WiseTech: ‘Sell on any strength’

In Wednesday’s Insider, we looked at the drubbing WiseTech Global Ltd [ASX:WTC] took following the release of two scathing short seller reports from J Capital Research.

The release of each report saw the stock sell off heavily before entering a trading halt. The first trading halt came a week ago Thursday. The second this past Monday.

On Wednesday, WiseTech CEO Richard White refuted all the negative claims about his company. And the share price rocketed 15.3% on the day.

But not everyone was buying it.

Here’s Greg Canavan’s take in yesterday’s Crisis & Opportunity Trader;

WTC may have rallied yesterday, but the report certainly inflicted some damage. I’d be a seller on any strength here.

Sound advice.

From market open on Thursday to the time of writing today, WTC’s share price is down 11.1%.

In the mailbag…Who makes the laws?

We’re still receiving letters on the question of whether the territories and states should be allowed to determine the legality of personal cannabis use. Or if that’s strictly up to the federal government.

Reader Bruce wrote in to note:

In relation to State governments, they can do as they like as they are sovereign entities, witness the state dying legislation passing through various legislatures..

The territories (ACT included) are another matter, they are not sovereign entities and therefore cannot do as they like, again, witness the NT state approved dying legislation was overruled by the commonwealth as the territory only had limited self government.

You are correct, Bruce. Indeed, Washington DC voters ran into similar issues when residents first voted to legalise marijuana there.

Time, perhaps, for greater local and less centralised decision making in matters not critical to the national interest?

We’ll leave it there for today…and the week.

Have a great weekend.

Cheers,
Bernd