Beware War And Popped Bubbles Even As Some Stocks Have Already Bottomed
Russia/Ukraine, the threat of war breaking out in Europe, nuclear war rumblings, energy and food prices soaring…these are rightly dominating the headlines and thoughts of investors and traders right now. I remain cautious but I will nibble some of our longs if they get slammed 10% or more this week. I’ll be patient and disciplined about it as I’m still concerned that new long-term risks around the end of the liberalized globalized economy need to be priced into this market some more.
As I wrote last week:
“This model, this paradigm, this entire globalized economy is changing. I’m not sure yet what that means. It will probably mean yet more inflationary forces for the next few years but longer-term it will probably be amazing for the US economy as we will unleash new robotics, software, app and other technological revolutions that will make our domestic supply chains and distribution chains and retail business models ever more efficient and profitable. But that new secular trend will take at least a year or two to kick in. And it will take another two or five years to start affecting the economy in good ways.
…For years, my entire career in fact, my baseline economic thesis has been that the Internet combined with a globalized economy, for all its many faults, was going to make trillion dollar economies abound as it brought billions of people out of poverty and into the consumer class. The openness of the system, while not as transparent or open as it could be, would allow companies based in the US, which obviously can out innovate anyone, to become trillion dollar businesses. That’s what happened. That’s not the set up any more.”
For most of my investing career, I’ve mostly bought stocks and increased exposure and gotten bullish whenever our stock markets got hit over geopolitical crises, but this is not the average geopolitical crisis. I hope the markets are putting in bottoms right now and that the Russia/Ukraine war somehow ends peacefully and quickly. I don’t think that is the most likely scenario though and the markets, at best, are likely to struggle to get back to their highs — remember that we are also on the other side of a giant SPAC and Crappy Stocks and Crypto/NFT Bubbles that are probably far from finding a bottom too as there are still literally hundreds of stocks and thousands of cryptos and millions of NFTs that are headed to zero in the next year or two. The money spigot to blow these bubbles isn’t going to turn back on like it was, probably for a very long time, like decades.
Some individual stocks are indeed putting in their bottoms right now and/or already have bottomed and our job is to slowly build up positions in great investment opportunities over time, so I’ll keep digging in the rubble and I already have several new names I’m hard at work on.
I’m headed to NYC tonight and I’ll be back very late Thursday night. I’ve got a lot of meetings set up with various executives, hedge funders, celebrities and/or friends on an ankle that I twisted the other day trying to put my golf clubs in my car that’s bothering me a bit. Onward.
We’ll do this week’s Live Q&A Chat on Friday at 11am ET in the TWC Chat Room or just email us your question to support@tradingwithcody.com. I’m not sure I’ll have time to write anything up while I’m gone but if something crazy happens to the markets, I will certainly find the time.
