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Monday Market Mayhem – Hong Kong Protests Shut Airport, Spooks Investors

China is boiling over.

The Hong Kong Airport was shut down today, culminating 10 weeks of unrest as the protests grow stronger and stronger over China's attempts to exert more authority over the former British territory.  Oddly enough, this is something we thought would happen over 20 years ago, when Hong Kong was first handed over but the Chinese Government is very good at being patient before applying pressure – a lesson Trump is only just now beginning to learn.

Beijing cranked up the warning rhetoric on Friday aiming to put a halt to protests ahead of the weekend but it only intensified the situation and protests turned violent on Sunday with dozens of arrests in numerous clashes with the police.  Late Sunday afternoon, thousands of protesters descended on tourist destinations and residential neighborhoods alike, building metal barricades and some throwing bricks and what police identified as smoke bombs.   

Hong Kong Airport is one of the World's busiest, with hundreds of flights each day, it's closure disrupts a lot of business in Asia and, long-term, if people begin to feel they can't rely on it, there could be major economic repercussions.  

We are outraged by the violent protesters’ behaviors, which showed a total disregard of the law, posing a serious threat to the safety of police officers and other members of the public. We severely condemn the acts,” the government said early Monday. In recent public appearances, Hong Kong’s leader, Carrie Lam, has said the government can’t accede to the protesters’ demands.

Meanwhile, over the weekend, Trump indicated he is "not ready" to talk to China in September, likely pushing off any possible progress in the trade dispute into next year.  As I keep saying, Trump loves his tariff slush fund and is very unlikely to give it up and he feels the Hong Kong situation is weakening China, so Trump is more likely to increase the tariffs than call them off next month.

We took a neutral stance into the weekend as our portfolios are well-balanced and we didn't want to make any predictions as we're still in a heavy period for earnings (last big week) as well as options expirations and there's a good amount of data ahead this week as well but, oddly, no Fed speak though the next meeting isn't for a month (Sept 18th).  

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Well, it's actually nice to have a Fed-free week as it will give us more of an idea of which way the market is naturally heading.  We're still watching the same bounce lines we were keeping our eye on last week and, as of 8:45, we're back in the red on the S&P 500 and, if our strong bounce lines can't hold – then it's very likely we're going to make another leg down.

  • Dow 25,000 is the mid-point and bounce lines are 25,550 (weak) and 26,100 (strong)
  • S&P 2,850 is the mid-point and bounce lines are 2,880 (weak) and 2,910 (strong)
  • Nasdaq 7,200 is the mid-point and bounce lines are 7,360 (weak) and 7,520 (strong)
  • Russell 1,440 is the mid-point and bounce lines are 1,472 (weak) and 1,504 (strong) 

They S&P is the only thing that's changed since Friday afternoon, when we reviewed the hedges in our Short-Term Portfolio, but the Dow and Russell are on the cusp – so watch them very closely today.  Also, let's watch that 10% line on the Dow at 26,400 – it's not a rally if we can't take that back and, of course the Must Hold line on the NYSE must hold!  

 


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  1. What is really so amazing about Trump is that each time you think that he can't go any lower, he finds ways to dig deeper and display even more disgusting behavior.


  2. China / Phil – Under the radar at the moment, but protests in Russia are also growing, the results of opposition candidates being stopped from running for election (can't have that). Putin's approval is slipping and we can't be too far from something to remedy that. Last time, he invaded Crimea. But hey, everything else is awesome…


  3. Some Zillow numbers:

    https://thebasispoint.com/how-zillow-makes-billions-reinventing-how-we-buy-sell-homes/

    The evolution is quite interesting.


  4. There is no competition for Google on the Internet – Facebook a distant second:

    https://www.visualcapitalist.com/wp-content/uploads/2019/08/top-100-websites-ranking.html

    Ranking the Top 100 Websites in the World


  5. Good morning! 

    I'm heading back from Key West today so I'm officially not here.  Key West is a very nice place, not fancy, just a relaxing island-type place you can drive to.  The hotels are expensive but the restaurants aren't so I guess Air B&B would be smarter.  

    Russia/StJ – I think it's a growing global thing.   There's going to be civil unrest as a generation of kids who are growing up in what their leaders claim is a "great" economy come of age in a world where they can't afford to move out of their parents house.  I love my parents but moving back in with them after college would have had me out protesting at the drop of a hat! 

    Zillow/StJ – Great opportunities there.

    I like that chart, funny how we use Google so much we don't think of it as a website.  Amazon is amazing as they are by far the biggest guys selling you something.  

    Dollar dive is saving us from worse indexes:

    Saudis back to pushing Aramco deal so they NEED $70 Brent.  Will be interesting to see what they do to get there. 


  6. Good Morning!


  7. GOLD – New yearly high.


  8. Phil: Any comment on SIG?  It is a falling knife, and has been dropping far more than the market day after day.


  9. John – SIG isn't the only retail name getting hit.  M & BBBY at new yearly lows.  Both of these have dividend yields of almost 8 % while SIG's dividend yield is  over 11 %.  Unreal.    All of these dividends would appear to be adequately covered, but the market obviously has its doubts.

    FWIW.  I sold 6 SIG Jan $13 puts.  Huge premiums, but maybe for good reasons.  Only willing to risk a small amount.


  10. You can add LB to that list of retailers


  11. ETM cut the dividend – not sure if that was discussed here.


  12. Albo – speaking of huge premium, I some puts with in VRAY on Friday. ATM Dec 3 puts were selling for $0.85 at one point. It's great to have that much room in a trade, and it's great being the house, but sometimes it really comes back to bite.


  13. Atitlan – Yes, the huge premium is there for a reason, as I've learned on many occasions. 8-)


  14. VIX over 20 a good time for selling index strangles. Started with Sept 2450's for 6.20. Will sell the calls on a bounce. 

    SIG- I am in 200 shares from a busted covered call trade and worked my cost down to around 20 from 26 in Feb. They are closing stores and cutting costs and still making a profit and stock is 1X tangible BV. Best of all- LOW DEBT!

    Sold 2021 $13 straddle for $8.27 which along with the dividends will get me a small profit as long as it does not get much worse. 


  15. VIX / pstas – VIX over 20 is also a good time to sell more VXX calls (I did this morning). 


  16. Ugly day I see.  Will catch up tomorrow.  


  17. Trump overhauls endangered species protections





  18. Any members here do any direct real estate investing (rental properties etc???)

    I was recently considering picking up my first rental property (looking for something at least slightly cash flow positive to sustain itself after mortgage expenses etc…) However I'm starting to look around my ares (Toronto and some nearby areas; burlington, Hamilton etc…) and it seems opportunities to get into a cash flow positive rental property at this time are pretty scarce, perhaps due to the hot run we've had recently in real estate all around the area. 

    Would love to hear from anyone who is experienced in the space. Maybe the timing just isn't right at the moment and I should wait for rents to catch up to or market prices to cool off??>

    thanks!






  19. The US labor shortage, explained


  20. Crs101010. Hello from sunny Naples Florida. The Naples real estate market is very strong including the rental market. I have been considering getting my second rental property. My first rental property has been rented consistently for almost five years now. If you are interested in hearing more, let me know and we could exchange information and I can tell you more. Just let me know. Have a great night.