It’s finally dawning on traders and investors that The Great Trade War of the 21st Century (I should have copyrighted that the first time I used it a year ago) is actually real and the Fog of War casualties that I’ve been warning about are starting to arrive.
I’ve been preaching cautiousness all year and have reduced the number of long positions and have trimmed my longs repeatedly in the last two years to raise cash.
I ran each of our positions through my WiNR Ratio program. The only three that come up with relatively strong annualized potential upside returns adjusted for risk/reward and Revolution Factors and other proprietary inputs are Apple, Snap and Palo Alto. Each of the rest of our stocks come out with quite attractive WiNR Ratios. But none of them come out as the screaming buys that they were when I was actually buying them in years past — before they went up 30%, 100%, 500%, 1000%. I actually backtested those trades and ran our initial buys of our positions through the WiNR Ratio program and the risk/reward adjusted upside on almost all of them was through the roof. Makes sense (and helps to validate the algorithmic program itself).
I’ve also run dozens of other stocks through the system including Goldman Sachs GS, Shopify SHOP, GE, IBM, Xylnx XLNX, Qualcomm QCOM and so on. I’ve found two that look quite attractive but again, are not quite at “screaming buy” status so I’m not moving on them quite yet.
Given my overall cautiousness about the markets and the economic cycle — and the fact I’m about to launch a hedge fund, of course — I’m not in a rush to add them just yet.
Over the years, we continually learn the importance of not forcing trades and not trying to catch the exact bottoms and tops (though we actually have a few times!). After the 1000+ point drop in the DJIA since Monday morning’s silly euphoric “Trump and Xi said the Trade War is over” pop the markets are likely to be down again Thursday. I’m surprised that this headline didn’t cause the futures to drop more frankly: “CFO of Huawei Arrested in Canada At U.S. Request – Canadian authorities arrested Huawei Technologies’ chief financial officer at the request of the U.S. government for alleged violations of Iranian sanctions, the latest move by Washington to crack down on the Chinese cellular-technology giant.”
Uh, did I mention The Great Trade War of the 21st Century?
Don’t be alarmed. Don’t panic. We are quite prepared for this and there are pitches both long and short developing here that we will be ready to take advantage of.
I’m going to kiss the wife and kids goodnight.