Special Edition: Five (Questions and Answers) with Fitz
It’s been a little while since I’ve been to the mailbag.
So, I thought we’d take a look at some of your most pressing questions at the moment. As always, I’ve got some ideas on where, when, and how to make your money – despite unsettling conditions and headlines.
Is China the end of the road (for our financial markets)?
In short, no. In fact, just the opposite is true. China’s latest stunt – submitting a heavily edited version of a 150-page draft trade agreement in process for months – is par for the course. It’s also a key part of negotiating tactics laid out by Chinese General Sun Tzu in the fifth century BC. Chinese negotiators are hoping our side will be so tired and so frustrated that we’ll simply cave in frustration.
Believe it or not, the President’s tweet ahead of the deadline the Chinese had intended to use as a bargaining chip caught China by surprise. Not only that, but I suspect the Chinese negotiators now have a deeper respect for our position because of it.
See this past Wednesday’s article on What You Should (But Probably Don’t) Know About Chinese Negotiating Tactics for a quick primer.
Looking ahead, I see more posturing from the Chinese side, every part of which is intended to prevent or significantly delay an agreement that doesn’t benefit China. Don’t think for a minute that our side is jamming the deal…this will be entirely of China’s doing. They WILL sign, but only after they’ve run out of maneuvering room and options.
In the meantime, concentrate on companies that we talk about all the time with a) the ability to protect margins and b) grow their business because they make “must-have” products and services the world cannot live without…even if there isn’t a deal.
Lyft missed badly…will that impact other big tech stocks?
I expect the “damage” to be limited. Lyft Inc. (NasdaqGS:LYFT) was a train wreck to begin with – the only question was how bad losses would be. Now we know…B-A-D. Management says this was a “strong start,” but if losing $9.02 a share, or $211.5 million, is “strong,” I’d hate to see what they think stinks. Don’t fall for the smoke and mirrors – Lyft reports other metrics like rides taken and active riders as a means of distracting you from the very serious losses they’re incurring.
Wait six months, then buy if you want, and IF Lyft has proven it can turn a buck.
With regard to other big tech, continue to buy in using dollar-cost averaging or its cousin, value-cost averaging. Every dip is an excuse to put your longer-term capital to work in companies that can change the world with a single line of code and make billions in the process.
Incidentally, I’ll be talking about this in Las Vegas next week at the MoneyShow and hope to see you there! Tickets are free, but space is limited, so sign up today.
How low could the markets go?
Big down days stink because they feel terrible; there’s just no getting around that. However, it’s important to note that even after falling hard early this week, the S&P 500 is still up 15.05% year-to-date.
My guts are telling me we could see another few percentage points lower from here as (misunderstood) Chinese trade tariff posturing continues, but that’s really a function of institutional leverage being burned off.
In contrast to individual investors who trade $1 for $1 and rarely use margin, institutional traders are frequently highly leveraged – $4, $6, even $8 to $1, so every hiccup means they’ve got to sell huge chunks of stock to avoid margin calls. Then, when the danger has passed, they get on the gas and buy…which is why you see such huge volatility lately.
Use that to YOUR advantage every chance you get.
They – the big boys – have to keep money moving because that’s how they generate their bonuses, but you can selectively buy and sell on your terms; it’s an advantage not many individual investors understand outside the Total Wealth Family.
As always, start with the six Unstoppable Trends, focus on the “must-haves” rather than the “nice to haves” – then hold your nose and wade in!
Even if you don’t “want” to and even if the markets could fall from here.
What about Boeing??!!
It all comes down to the whistleblowers.
The Boeing Co. (NYSE:BA) has done an absolutely terrible job of crisis management in recent months, since the 737 MAX 8 model crashed Ethiopian Airlines Flight 302 on March 10, tragically killing 157 passengers.
Now, on April 27, the Federal Aviation Administration (FAA) reported that four Boeing employees called the FAA whistleblower hotline to report safety concerns. Among the complaints was an entirely new, unreported issue involved with damage to the wiring of one of the planes’ critical attack sensors. And, now not surprisingly, an entirely new investigation is underway.
If the whistleblowers prove to be credible, things are gonna get really rough in a real hurry, and I think the stock gets hit hard.
Anecdotally speaking, many of my peers are already going out of their way to avoid routes that will include the 737 MAX when it flies again; I’ve already shifted plans twice myself. A Barclay’s survey also supports this, showing that nearly 50% of all surveyed won’t fly MAX for at least a year on otherwise identical routes and flights.
Still, Boeing is worth a “flyer” based on the value of its defense contracts, especially if you keep it on a short leash. The $340 to $370 range I mentioned earlier this year is still valid to my way of thinking.
Why didn’t gold pop up when the markets fell this past week?
The answer might surprise you, but not for reasons you might think.
Gold used to be the go-to safety trade asset, but that’s no longer true. That’s because much of the speculative energy that used to drive prices during periods of economic chaos has moved into cryptocurrencies and cannabis stocks – where, I might add, well-capitalizes insiders and criminals have already separated them from their money.
Hackers and other criminals made off with more than $1.7 billion of supposedly un-hackable cryptocurrency in 2018 according to the CipherTrace Cryptocurrency Anti-Money Laundering Report, and there’s no sign that’s going to stop any time soon. CNBC reported just this past Wednesday, for example, that hackers have stolen another $40 million from Binance, one of the world’s largest cryptocurrency exchanges.
At the same time, gold is increasingly used as collateral on par with triple-A-rated treasuries so it’s unlikely to move at lot, if at all, even if the you-know-what hits the fan. Not many investors realize this, but an estimated 70% to 80% of all U.S. Treasuries never get sold, so the movement that used to be there simply isn’t.
And, there you have it!
Thank you so much the many calls, emails, and messages I’ve received. And, of course, please keep ’em coming – together, we are all stronger and more profitable!
Speaking of which, I’ll be back tomorrow with a few “lessons from the road” I picked up last week. Profits, as I discovered, are definitely out there.
Let’s grab our share!
Until next time,