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Saturday, April 20, 2024

Faltering Thursday – GOP Losses and Trump’s Lack of China Deal Spook Markets

China Donald Trump & Xi Jinping (Reuters/D. Sagolj)Mr. Trump went to China.  

That's it, nothing happened.  The deal-maker in chief made no deals, though he did take credit for $250Bn in business deals, which were actually the course of our normal trade with China, like $36Bn worth of Boeing (BA) planes, most of which were already part of their existing backlog.  While these transparent attempts to puff himself up may work with the gullible US voters, Trump faced mockery in the Chinese press – even the "official" press which said: "Emotional venting cannot become a guiding policy for solving the nuclear issue on the peninsula."

There was no trade deal, no pushback on exports, no movement on China's currency manipulation, NOTHING which Trump promised during the campaign and nothing is coming from Trump's "great friendship" with China's President Xi.  Trump went so far, in fact, to absolve China for unfair trade practices saying they were only doing what's best for their country and it was the fault of past US Presidents for making bad deals – like the one he is sticking to by leaving China empty-handed.  

"After all, who can blame a country for being able to take advantage of another country for the benefit of its citizens. I give China great credit, but in actuality I do blame past administrations for allowing this out-of-control trade deficit to take place." 

Japan's Nikkei went on a wild ride last night and is currently off 1.666% at 22,580 after bottoming out at 22,500 and we noted this action in Tuesday's morning Report and shorted the Dow Futures at 23,500 in our Live Trading Webinar yesterday along with Oil (/CL at $57.50) and, yesterday, in our Live Member Chat Room, my comment to our Members into the close (3:58) was:

Indexes curling over, Good time to short /ES at 2,590 (tight stops above).  Lined up with 23,500, 6,340 and 1,480.

Those last 3 were, of coure, the Futures for the Dow (/YM), Nasdaq (/NQ) and Russell (/TF) and the Dow has already gone below 23,400 for a nice $500 per contract win while the S&P (/ES) just hit 2,575, which is good for gains of $750 per contract overnight.  Oil already hit our goal at $56.50 and that was good for $1,000 per contract gains as well and we even FINALLY sqeezed a small profit out of Gasoline (/RB) as it came back to the $1.80 line.

We're taking quick profits here because no sell-off has lasted more than a few hours recently but it's fun to pick up a little side cash once in a while – so we don't feel like we're totally wasting our time on our hedges.  By the way, we discussed a good TZA hedging strategy yesterday – that's still in play for the moment.  

Meanwhile, we continue to make stupid money in our portfolios.  For example, back on Sept 6th I appeared on BNN's Money Talk, where we initiated a new $50,000 Portfolio to track our picks and already, just two month's later, our 4 positions have rocketed up 61.2%, driving the net up to $80,587 for a quick $30,587 gain:

If the market is going to just keep printing money like this, far be it for us to not play the game but this is RIDICULOUS, returns like this are simply not sustainable over the long run – where is all the money supposed to come from?  On the show, I noted we liked Limited Brands (LB) enough to make it our Stock of the Year for 2018 and that spread required just a net $3,400 cash outlay (the short puts require margin too) and already the net of the spread is up to $14,850 for a gain of $11,450 (336%) and, again, this is just 62 days later!  

Just to be clear though, it is RIDICULOUS that we have a market where I can go on live TV and tell Millions of people how to make 336% returns on their cash in 62 days.  I may be good but this is a broken market with RIDICULOUS price mis-matches that, in theory, shouldn't last but, in practice, they just keep going on and on as the Fed's insane monetary policy continues to feed the bubble.  

This is why we hedge.  This is also why we have so much CASH!!! on the sidelines (have I mentioned how much I love CASH!!! lately?).  For one thing, we can make PLENTY of profits with small trades like the ones above – we don't need to over-commit and, for antoher thing, we want to stay very liquid to take advantage of the correction – if it ever comes.  As I mentioned last month, I could not hedge my children's 529 college plans effectively so I CASHED!!! them in.  I'll put the money back to work in January, if we survive those earnings but I couldn't imagine leaving unhedged money in play as we head into the end of 2017.

Please, be careful out there!  



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