We’ve all heard and read the supposed pros and cons of Trump’s threatened steel and aluminum tariffs for the past few days. The positives of tariffs on steel and aluminum pretty much belong to steel and aluminum companies and to Trump’s cronies like Wilbur Ross, who has made billions in the steel industry over the years and has billions in investments stretching across his portfolio that will be affected by these tariffs. (Also, I wonder if it is coincidence that Carl Icahn sold his shares in a stock that he’d owned for years just days before Trump announced his big tariff plans).
The cons? Tarriffs start trading wars and trading wars by definition impact trade negatively and when global economic trading starts to grow less than people are used to (or if it were to actually shrink which would mean we’d be back in official recession territory) then stock prices will likely head lower.
Perhaps more important is the increasing trend of restricting capital flow in the name of national defense. We all know the Chinese are serious about stopping capital outflow. The EU claims it’s not protectionist, but Brexit and other trends in the union say otherwise.
Speaking of the EU, remember the last few times the markets freaked out over Italy and/or a right-wing candidate winning? Just about every time the markets tanked on those headlines, I sent out Trade Alerts about why I was buying more stocks and/or even call options on stocks. Did you notice the markets are shrugging off Italy’s strong anti-immigration/extreme right-wing election results?
So I don’t know, it’s not like these things are tangibly affecting the economy or the stock market right now. And as I’ve said for the last eight years, the strong Bubble-Blowing Bull Market forces resulting from the corporatist focus by the governments and central banks of the developed economies around the world and here in the US (at the Federal Reserve and in the Republican Democrat Regime) have been worth betting big on. And I’ve talked repeatedly about why we should just keep riding the Bubble-Blowing Bull Market.
But stocks and stock multiples are at much higher levels. As is complacency and greed.
Here’s the upshot. I think there is some higher risk to the steadily growing corporate earnings and Bubble-Blowing Bull Market than there has been in a long time. I also think there’s a good chance even if these burgeoning Trading Wars blow over and the steadily growing corporate earnings cycle continues apace that the stock market trades in a range and/or downward in the near-term.
So I’m going to nibble a few more puts here. I’m buying some DIA puts with strike prices around $243 or so that expire in May. And I’m buying some QQQ puts with strike prices around $164 or so that expire in May. I’m not trying to make a bunch of money on these puts, I’m just hedging my portfolio with small purchase of these puts here. We could also consider just outright shorting some DIA and QQQ instead of buying puts of course. And if you’re not comfortable trading options or selling short, then just maybe trim another 5-10% (or so) of your portfolio to raise a little more cash.
Meanwhile, I’ve been deep researching blockchain and cryptocurrencies as I do think there are some new investment opportunities developing there, some of which are starting to look like they could indeed become “The Amazons of blockchain/cryptocurrencies” that I’d written about in The Great Cryptocurrency Crash book. I think the Great Cryptocurrency Crash is just getting started but I’m going to start nibbling some of the ones that I think look like big potential winners in case I’m wrong. It’s not even two outs in the top of the first inning of blockchain/cryptos, so there’s lots of time to learn this stuff.
Don’t stress. Don’t try to catch the top and don’t conclude that this is THE top either. Don’t sell everything. Don’t worry if you don’t understand what blockchain or cryptocurrencies are. Don’t be greedy. Don’t be shortsighted. Don’t follow the crowd.
Do rock on.