China’s Pain Is Your Gain — Profit From Trump’s Tariff Increase
I don’t know about you, but when Trump tweets, I do my homework.
And what I found, hidden among the media’s scare stories this weekend, was that the trade war has had very little impact on most of the market.
In fact, the market is rising and the U.S. economy is booming.
In today’s Market Talk, Amber Lancaster, Hudson Cashdan and I discuss:
- How the trade war with China is still dominating headlines, but the U.S. markets are on the rise. China’s recent move is a last-ditch desperation effort. Here’s how you can profit as the trade war loses steam.
- Why so many companies are filing for initial public offerings (IPOs) this month and will go public later this fall — creating massive wealth opportunities for savvy investors.
- The 2019 World Smart City Expo is about to kick off in South Korea, where over 350 companies from around the world share the latest and greatest innovations in alternative energy, home tech and more!
Check out this week’s Market Talk below:
August 26, 2019
Amber Lancaster: Welcome to this week’s Market Talk. I’m Amber Lancaster, joined by Paul Mampilly and Hudson Cashdan. Each week we look forward to sharing our viewpoints and giving insight into what’s on our radar. Today’s outlook is for the week of August 26, 2019. I’ll begin by sharing with you what I’m watching and then we’ll hear from Hudson and Paul.
Today I’ll cover three major topics. The first will be my take on recent and upcoming U.S. economic releases. Then I’ll highlight my innovation story of the week with our Good News Roundup and end with the latest performance numbers of our Disruptification Index. Let’s begin.
Last week we saw U.S. sales of previously owned homes hit a five-month high in July reaching a 5.42 million annual rate as seen on this chart. Bloomberg reports that this increase underscores stability in the residential real estate market and, in all, lower unemployment, decreasing mortgage rates and smaller yearly home price gains are boding well for home sales for the remainder of this year.
Also last week, the U.S. leading economic indicator rose 0.5% in July. This move in the index shows the U.S. economy should continue to grow for the rest of 2019.
Following Fed Chairman Jerome Powell’s speech in Wyoming last week, surveyed economists are anticipating further rate cuts at the remaining Fed policy meetings for this year. There will be three meetings in total. Bloomberg is forecasting a 25 basis point rate cut per meeting.
In the meantime, as of right now it appears U.S.-China trade talks are back on following tariff hikes both countries announced this past Friday.
Moving on to economic releases, this week there will be seven major releases as you can see in this graphic. On Tuesday, Conference Board Consumer Confidence numbers for August will post at 10 a.m. On Thursday, both second quarter GDP annualized quarter-over-quarter and July preliminary wholesale inventories month-over-month will post at 8:30 a.m.
On Friday, July’s personal income, personal spending and August Chicago PMI and University of Michigan Sentiment numbers will start posting at 8:30 a.m. ending at 10 a.m.
My innovation story of the week highlights the kickoff of the 2019 World Smart City Expo. This expo is the largest international event in the Asia Pacific region and will be hosted in South Korea. The theme of this year’s expo is “Smart City, Connecting Tomorrow.” More than 20,000 people from 200 cities and 60 countries around the world are expected to attend.
350 companies with 750 exhibit booths will be in attendance. The latest innovations in smart energy like renewable solar, smart mobility and smart infrastructure will be explored. As seen in this column chart, it’s important to note that the growth of the Smart City global market is expected to continue and is projected to reach more than $2 trillion by 2025.
Next, here are our three good news headlines to carry with you this week. Good News Roundup story number one: Mortgage rates are back to 2016 territory. Per Realtor magazine, U.S. 30-year rate mortgages are now averaging 3.55%, the lowest average since November 2016. These lower rates bode well for the housing market.
Freddie Mac’s Chief Economist, Sam Khater, is quoted as saying, “The drop in mortgage rates continues to stimulate the real estate market and the economy. Home purchase demand is up 5% from a year ago and has noticeably strengthened since the earlier summer months while refinances surged to their highest share in three and a half years. The benefit of lower mortgage rates is not only shoring up home sales, but also providing support to homeowner balance sheets via higher monthly cash flow and steadily rising home equity.”
He also notes that households that do refinance and have refinanced in the second quarter of 2019 will save an average of $1,700 a year or about $140 each month.
Good News Roundup story number two focuses on high-impact construction and how it’s ramping up. We all know the construction industry is a vital part of the U.S. economy. Construction Dive is doing its part by tracking high-impact construction projects across the U.S.
These are major projects valued at $1 billion or more. As you can see in this map, a mumber of these high-impact projects are in the works, including a $2 billion Facebook data center investment in Oregon, a $1.5 billion Amazon air hub in the Cincinnati/Northern Kentucky International Airport.
Amazon said the new facility will help it deliver its Prime service’s commitment of fast, free shipping for customers and create 2,000 jobs.
Good News Roundup story number three: Science Daily is reporting that scientists in Switzerland and Italy are developing technology for the blind that bypasses the eyeball. It sends messages just to the brain. They stimulate the optic nerve with a new type of intraneural electrode called OpticSELINE.
Blindness affects an estimated 39 million people around the world. It can be induced be genetics, retinal detachment, trauma, stroke, glaucoma, cataracts, inflammation or infection. This is an important good news science discovery for us to monitor going forward.
Turning to our Disruptification Index, as this chart shows, the index continues to hold up nicely and is outperforming major indices year to date. It’s up 26.2% versus 16.8% on the Nasdaq and 9.9% on the Dow.
Keeping with our housing focus, I wrote an article last Wednesday in Bold Profits Daily and it focuses on how millennials are truly going to be the drivers in the housing industry going forward in the next 10 years.
Up to 45 million millennials will be buying their very first homes. Seeing this, builders are changing tactics and are starting to build smaller homes to accommodate a smaller budget. We do forecast a housing boom. Check out that article when you have some time.
That’s it for me. Hudson, thank you for listening. What are you watching today?
Hudson Cashdan: Thanks, Amber. Today in the IPO world we have a long list of filed IPOs but a very short list of scheduled IPOs. When companies go IPO they file all their necessary financial documents, disclosures and a description of the business. Then later they fill in some of the details on the pricing and the date.
A lot of companies see it’s August and a lot of people are away on vacation and there’s not as much interest in the markets now as there will be in the fall. I think, come fall, that long list of IPOs are going to be in the market and we’re going to have a lot more to talk about in that part of the financial world.
The other stuff I’m seeing relates to the theme we’ve been talking about for the last month or two: the trade war and currency war with China. This chart shows the Chinese yuan offshore currency. Basically, the Chinese currency trading in Hong Kong is weakening versus the dollar.
I think there’s some distress there. There was an article in Bloomberg over the weekend that they have 33% more debt than was previously disclosed in the Chinese financial system. I think China is finally starting to feel some pain from what’s going on.
Hopefully that could lead to a resolution of the trade dispute. That would be good for markets. I think markets see that today and are pretty optimistic about what they’re seeing. Paul, what are you seeing over there?
Paul Mampilly: I’m going to take off from where you left off, Hudson. The Chinese economy, from what I’m seeing, is actually in deep trouble. Their fixed-asset investment, which is a critical part of how that economy grows, was down 8-10% in terms of reported numbers. Probably the reality is 15-20%.
Over the weekend I looked up some things. There’s a lot of scare stories in the media about trade wars, everything going to zero. Here’s the reality. Our direct exposure to China is fairly small. Just bear with me. These are some numbers. Last year in 2018, we sent China $120 billion worth of stuff. This year we will send them $52 billion worth of stuff.
Within the context of a $1.7 trillion economy, yea for the folks exposed to China it’s painful. I don’t want to minimize what those folks are going through. However, on an economy-wide scale or a market-wide scale, this is not that big of a deal. There is a lot of fear mongering and glooming going on in the financial media.
Some of its purpose is political. It’s becoming fairly clear no one is reporting on the distress China is feeling, but any small distress that’s being experienced here is being pushed to the top. I believe what you are seeing today in the markets is people over the weekend did what I have done.
I saw what President Trump was tweeting and I went and did my work. I can tell you from having done the work that China in 2018 sent us $540 billion worth of stuff. It is a way bigger deal for them for us to cut them off than anything they can do to us. I believe they have actually shot their biggest, best bullet — soybeans.
They kept it for last. The moment last week when it was released that China was aiming their tariff I thought this was their shot at trying to get Trump to come and give them a good deal. I believe they thought he would go to the G-7 meeting and fold under pressure there.
Hudson: I don’t know if you saw over the weekend, but soybeans are a commodity. Soybeans will be absorbed by the world market somewhere else if China doesn’t buy them. China will have to get them from somewhere else, it will just be a different flow of goods.
I don’t know if you at the G-7 it was very big news that the U.S. and Japan announced a big trade deal. Japan is a big buyer and they agreed to take all our excess corn, which is huge for the farmers in the Midwest — a key constituency for any politician. That helped shore up some support for the White House with this negotiation.
Paul: That’s absolutely right.
The other category was aircraft. I am going to use Hudson’s point to say this is my shameless plug moment. We are promoting this week IPO Speculator which is Hudson and I looking through all the companies coming public. From following us you know what our thesis is.
We believe the old world is slowly and surely going away. A lot of it is going to zero. In the meantime, there is a world of incredible companies that are going to be the next Googles, Amazons, Facebooks, Teslas. They are coming public, setting up to come public and some of them have come public already.
If you want to stay abreast of the best companies, the ones Hudson and I are looking at, IPO Speculator is our publication where we look at that and cover it week in and week out. You get our specialized focus on it. I believe we’re going to have some tremendous winners in there. If you are interested in these kinds of companies, please click right.
I want to circle back to a couple things Amber said. Housing is a huge thing for our economy because it drives household formation. Amber’s article is incredible, please go check it out. The whole thing around trade tariffs is going to pass and we are going to see new highs. Our Disruptification Index is telling us so.
Please stay positive. Stay in our stocks. If you’re interested in any of our services, especially IPO Speculator, click on the card. Back to you, Amber.
Amber: Thank you so much, Paul. Great insights as always. Thank you, Hudson, for your information. It was great, as always. Thank you to our viewers for tuning in this week. If you like what you see on the Paul Mampilly YouTube channel, please share, subscribe and comment. We love to hear your comments and get back to you with our responses. We appreciate you so much. Until next time, take care.
On a wide scale, the impact of the trade war on the U.S. economy will be far less damaging than the media let on.
The reality is our direct exposure to China is pretty small.
This year, the U.S. will send China $52 billion worth of goods. In the context of our $1.7 TRILLION economy, this is a small portion.
China, on the other hand, relies on us. Last year, it sent the U.S. $540 billion worth of goods! This tells me that the trade war is taking a much larger toll on China than on the U.S.
Even now, during these trade war tantrums, stocks are making a big move up.
One example is one of our most popular exchange-traded funds that we’ve recommended at Bold Profits Daily, the Renaissance IPO ETF (NYSE: IPO). It’s been steady throughout the recent trade war developments. Year to date, it’s up almost 30%.
But that’s only a taste.
An IPO can take off in just a single day. Hudson and I are constantly looking through all the unbelievable private companies looking to come to the market. If you want to take advantage of the best up-and-comers this fall, click here for a peek at our IPO Speculator strategy.
Also, this week, we discuss:
- Scientists in Switzerland and Italy have recently made a breakthrough discovery in combating blindness. With tech that can bypass the eye and interact directly with the brain, the ability to bring sight back to the blind is an incredibly important discovery.
- The housing and real estate markets are making a huge comeback. Mortgage rates are back down to 2016 levels, real estate sales have strengthened over the past few months and millennial homebuying is impacting the market in a positive way. To find out more about the housing trend, click here.
Editor, Profits Unlimited