Five with Fitz: Questions (and Answers) that Could Drive Big Profits
Good morning from Eastern Washington where I’m on the road doing a little research into the latest scientific advances in agriculture, watering technology, and even fertilizer.
I’ll have more on those things in the weeks ahead, but more immediately, I thought we’d dive into the mailbag.
Q – What’s next with China? Is there really going to be a deal at the G20? You’ve been remarkably spot on with their negotiating tactics! – Harold and Barbara B.
A – Thanks for the kind words! I’ve spent more than 36 years in global markets, including a lot of time in mainland China so I’m happy that knowledge is paying off… at least so far.
The Chinese – believe it or not – don’t actually want a deal. What they want is more “negotiations.” Counterintuitively, the single most important aspect to continued discussion means that they’ve still got room to maneuver. A deal “locks” them in (which Beijing doesn’t want to happen).
I see two scenarios:
- China will extend some sort of olive branch intended to make the world believe that China wants to play fair, to be a good world partner and to be a mature economy. There will be talks about talks, which are really about more talks. I give this outcome a 75% probability of happening.
- China will take a hardline and dismiss President Trump in public. This will represent a shift in Beijing’s calculus and be a very dangerous development for the West because it will signal China’s belief that it can survive a trade war. Ironically, China learned to diversify its oil purchases when we invaded Iraq years ago and my fear is that they could learn to “diversify” their economic partnerships the same way via what’s happening now. I assign this about a 25% probability of happening (up from only 10% six months ago).
Tactically speaking, there’s not a lot you can do about the former; the markets have already baked that into the proverbial cake given the rally we’ve experienced in recent weeks. But the latter is a different story and cause for some very tactical thinking.
Now’s the time to make sure your trailing stops are in place so that neither you nor your money are caught be surprise. If more aggressive and options savvy, consider picking up a few speculative put options on the S&P 500 cash index or its ETF equivalent, the SPDR S&P 500 ETF Trust (NYSEARCA:SPY).
[BREAKING] We are Witnessing the Birth of a New Era
Q – You said recently that the Fed may be trying to get ahead of Q4 – can you elaborate? – Steven L.
A – Happy to. Most investors are looking to the Fed with regard to a rate cut to stave off another recession or market slowdown, which means a look in the past. But I actually think the Fed may be trying to get ahead of a rough patch it sees coming in Q4 of this year. I believe the drop in Consumer Confidence readings Tuesday shocked a lot of folks, and that’s a look into the future.
Normally, I wouldn’t give the Fed this much credit. However, I believe Chairman Powell continues to learn from the markets and, unlike other Fed Chairs in the past, is trying to do proactively do something about it.
Interestingly, I think the rate cut may be double what the markets expects, meaning 50 basis points instead of the 25 basis points presently reflected by Fed Futures.
Q – Do you think gold finally has a shot at higher prices? – Robert and Brenda C.
A – Gold has just hit six year highs and is on pace for the best monthly performance since 2016 with an 8% rise as I type. But, I wouldn’t hold my breath.
Much of the speculative energy that drove gold now drives crypto currencies and cannabis stocks. And that, in turn, makes any rally suspect.
Still, I think gold’s a good buy because of the stability it provides and the freedom that gives investors who own it with the rest of their portfolio. Studies suggest that having between 2%-5% of total investable assets ought to do it.
Q – I want to invest but am scared silly that I’ll lose it all. Am I worried about nothing? – Leonard M.
A – You’re not alone Leonard. In fact, even I feel the angst too when the headlines take over and I’ve been doing this for 36 years at this point.
What’s really bothering you is – I suspect – confidence.
Being part of the Total Wealth Family gives you a huge advantage because you can go behind the headlines and look proactively at the trends, tips, and tactics most folks miss or somehow never discover.
We know, for example, that more billionaires have been created by the six Unstoppable Trends than any other money movement in the history of mankind.
At the same time, we also know that companies making “must-have” products and services are the fastest, most profitable path to investing wealth over time.
And, finally, we know that risk management is how you stay in the game. Buy and hold, for example, is not a money management strategy. But “buy and manage” is.
Q – Tesla seems to be holding its own. Will you ever suggest buying it again? – Fabrice and Angela P.
A – Probably not. The competition is coming on fast and Tesla Inc. (NasdaqGS:TSLA) is going to have a hard time keeping up, pun absolutely intended.
BMW, for example, just announced that it will double electric and hybrid sales by 2021 and offer 25 electrified models by 2023 – a full two years earlier than expected. Even Ferrari N.V. (NYSE:RACE) has a hybrid plug in super car coming!
Tesla is, unfortunately, losing the race it started.
What’s more, there’s a good case to be made that the stock drops to under $100 a share for reasons we’ve talked about many times… legal problems, production issues, ongoing investigations, dubious behavior from Musk himself, etc.
Aggressive investors wanting to profit along the way may want to consider selling bearish put spreads on rallies or buying a combination of long-dated put options, effectively laddering profits that mount as Tesla’s stock falls.
In closing, thanks for being part of the Total Wealth Family.
If you want to make money, you must understand the markets and the stuff that moves ’em.
And you “get it.”
Please keep those comments and questions coming. I love hearing from you so please drop me a line via email by clicking here.
Until next time,