You Know Things are Falling When…
You Know Things are Falling When… by David Haggith for The Great Recession
…when the stock market’s decade-long bottom trend becomes its new top trend and then it can’t even make it back up to that line as a top trend.
We’re sloughing away now, and it can be a long slide to the bottom or endless side-winding of big ups and downs that go nowhere, just as the market has now gone nowhere for fifteen months.
Yes, if you bought in January, 2018, (when I said the market would fall) and held, you have made nothing (unless you did well on dividends)! If you continue to hold, the odds are you will do worse than nothing; but, hey, you did get to enjoy a heck of a roller-coaster ride. If, on the other hand, you sold in January of 2018 and put your money in cash, you made 2% a year with worry-free smooth sailing every day of the year. Here’s the proof on stocks:
Those who held in January, 2018, are right back to where they started. Of course, if you sold at every peak, including the January 2018 peak, and bought at the bottom of every trough, you made a lot of money; but that is easily figured out in hindsight. Hats off to you if you did! I hope my predictions fir last year on when the selling points would hit helped you. For me, I just got out and avoided the turbulent ride to nowhere, because I’m not as good at knowing the bottoms as I am the tops, and I’ll let the dust settle one more time.
The cost of getting high on nothing but hopium (a term I borrowed from David Stockman), as I described in two recent articles, is that, when the false hope clears the air and sober minds prevail, the return to normal can be violent, so get ready:
“It’s tin hats on and battening down the hatches for a fair bit of volatility for the next few months,” said Tony Cousins, chief executive of Pyrford International, the global equities arm of BMO Global Asset Management.
The China syndrome is a meltdown
Trade talks now dominate the market in daily surges and tumbles that are increasingly more down than up as the reality that China is not in the least bit ready to cave in begins to chip its way through the denial that I’ve been writing about, as I said reality was likely soon to do.
The recent Huawei stock dive was a prime example. I’m sure the Trump administration wanted to look tough, but they wound up retracting most of their Huawei ban in less than three business days to postpone the full ban for 90 days because the stock market’s micro-chip, micro-panic was more than Trump was willing to risk. Oops. The market sighed relief Tuesday when the ban was lifted, but then went right back to settling again on Wednesday and fell off a little bluff on Thursday. Upward momentum is GONE!
Do you think Wilbur Ross’s partial withdrawal of the Huawei ban is going to put the market at ease long term, or is the gravity of the trade war going to keep sinking in? I think investors are just starting to fear the truth: this is a long-term war of attrition. China has no intention of fading. In fact, President Xi Jinping gave his people a pep talk this week to remember “the long march” that the Red Army made because they are about to be called to another long march for the good of their nation.
Moreover, on Thursday,
China’s Ministry of Commerce said that the U.S. had to reverse its “wrong actions” before negotiations could continue.
“Both the U.S. and China appear to be preparing for a prolonged period of trade conflict,” wrote analysts at Nomura in a note on the standoff. “We think domestic pressures and constraints will drive both sides towards further escalation,” they warned. “Without a clear way forward during an intensifying 2020 U.S. presidential election, we see a rising risk that tariffs will remain in effect through end 2020.”
Remember, China carried the global economy for years when the US couldn’t. China’s economy was already a concern before the trade war hit because it has built too many uninhabited cities and roads to nowhere. China’s recent 200-billion boost to its economy barely evoked a sneeze. So, the world economy will get no help from China.