The Trade War Cycle: You Are Here

Trade War Cycle: You Are Here

Today marks the end of the third quarter of 2019.

How are you all holding up? I hope it’s better than the major market indexes.

For the quarter, the Dow is up about 0.7%, the S&P 500 is up a mere 0.3% and the Nasdaq Composite is down 1.5%.

That’s clearly nothing to write home about, but it’s not surprising.

Wall Street has been on an endless merry-go-round for the past year. I’ve dubbed this monotonous ride the “Trade War Cycle.”

While it’s not as bad as being stuck on Disney’s “It’s a Small World” ride — seriously, it’s been 10 years, and I still have nightmares about that (*shudder*) — it has been a major thorn in Wall Street’s side … and yours.

As you can see, right now we are in the “Market rallies temporarily on news” phase of the cycle. We can thank the Treasury for bumping us into this phase over the weekend.

On Friday, Bloomberg reported that the White House was considering limiting U.S. investment in Chinese stocks, even going as far as potentially delisting big names such as Alibaba Group Holding Ltd. (NYSE: BABA) and Baidu Inc. (Nasdaq: BIDU).

On Saturday, however, Treasury spokeswoman Monica Crowley said that the Trump administration doesn’t plan on blocking Chinese listings “at this time.”

The Takeaway:

As you can see, the trade war cycle moves pretty fast. If you don’t stop and look around once in a while, you could miss it.

But one industrious and brave Great Stuff reader has designed a trading strategy around this cycle. Tom P. wrote:

I think you’ve hit upon a great investment strategy while we have “The Donald” in the White House. Using “The Trade War Cycle” diagram you published on September 3 and September 12 has proven to be a money maker for me. 

Selling when we’re at the 10:00 position (market rallies) and buying back in at 4:00 position (market sells off) has been worth a couple percent every time we make a lap. 

Last Friday (Sep. 27) was a buy day for me. I’m now waiting for some encouraging news from the White House to spark a market rally, so I can cash in my chips and wait for the next trade war shocker to hit the markets.

I hope the Nobel Economics Committee recognizes your brilliance!

Now, that would be a great selling point. Nobel Prize-winning Great Stuff. That would clearly go right to my head. I don’t need a bigger ego — I’d be unbearable. Maybe it’s better if we just move on for now…

Thanks, Tom! It looks like you got your encouraging news over the weekend. Congratulations on your winning strategy!

I would like to point out, however, that the rallies on good news are becoming increasingly shallow. In other words, the market appears to be growing immune to the promises of good news on the trade war front.

So, ride this cycle while you can. We may need some actual good news before things really begin to take off.

Great Stuff, The Good, The Bad and The Ugly

The Good: A Winnebago With Wings

Thor Industry earnings send THO stock plaid.

Unless you are a Spaceballs fan, you probably don’t think about recreational vehicles (RVs) all that often.

Today, however, RV maker Thor Industries Inc. (NYSE: THO) is going to plaid. The company posted fourth-quarter earnings of $1.67 per share, topping the consensus by a whopping $0.20 per share.

Sales failed to live up to expectations, though, whiffing Wall Street’s target by about $20 million. Still, part of Thor’s detractors on the quarter included the acquisition of Erwin Hymer Group, so investors appear to be giving Thor a pass here.

As for 2020, Thor anticipates strong top-line growth, but issued flat guidance for the year “barring a significant macroeconomic change.” I’m guessing this is code for “U.S.-China tariffs,” which have heavily impacted steel and raw materials prices.

The Bad: Are You Threatening Me?

Judge rules Tesla CEO Elon Musk intimidated workers from forming a union.

Tesla Inc.’s (Nasdaq: TSLA) biggest problem has always been the fact that it can’t get out of its own way.

Over the weekend, the company was hit with a pair of negative stories. The biggest was a report by Electrek that Tesla is likely to miss its 100,000-unit delivery target this quarter.

Not hitting this self-proclaimed goal could be a big sentiment hit to TSLA shares — especially after a leaked email from CEO Elon Musk proclaimed that hitting the goal would be “an incredibly exciting milestone for our company.”

While the company never sets an official date, Tesla is expected to release delivery figures sometime this week.

Next, a California judge ruled that one of Musk’s 2018 tweets threatened employees attempting to unionize. According to the judge in the case: “Musk threatened to take away a benefit enjoyed by the employees consequently for voting to unionize.”

Labor and delivery issues are the last thing Tesla needs right now, as the stock languishes at levels not seen since early 2017.

The Ugly: Hack My Ride

Peloton leaderboard hacking.

I’ve played video games nearly my entire life, and if there’s one thing I know for certain, it’s that there will be cheaters.

Peloton Interactive Inc. (Nasdaq: PTON) is learning this the hard way. The company promotes its stationary bikes with streamable content designed to motivate consumers to work harder to get healthier. It also keeps track of leaderboards for certain workout routines, which are designed to create healthy competition.

Some Peloton users, however, have found ways to cheat the system. By jailbreaking their Peloton display screens — the things run on Android, so it’s not that difficult — some users have logged scores that would be two to three times those posted by Tour de France cyclists.

How’s that for demotivational?

These same hacks also allowed users to run Netflix on their Peloton screens. And while this may seem harmless to most users, Peloton’s biggest source of income is its $39-per-month subscription service. Running Netflix, which has a slew of streamable workout content, directly undermines this service.

Fake leaderboards, workout cheating and hacked Netflix … welcome to the real world, Peloton.

Great Stuff Chart of the Week

How Often do you use Google services and products?

With Alphabet Inc. (Nasdaq: GOOG) facing yet another round of antitrust scrutiny — this time for increasing security, something I find pretty ludicrous — I thought it worth a look at just how many of you use Google products. Turns out, it’s a ridiculously large number of you.

According to an online survey by Statista, 69% of Americans use a Google service or product daily. Gmail was at the top of the list, followed by Google Maps and YouTube.

I’ve discussed this before, but it bears repeating: Nothing is ever free. Google is selling your information, and your Gmail account is a cash cow. Want a few alternatives? Check out this edition of Great Stuff from last week. You’ll thank me for it.

Great Stuff: The Cannabis Vaping Crisis

I have a confession to make. I vape.

It started as a way to stop smoking — something I started at about age 15 in rural Kentucky.

It’s not something I’m proud of. It is what it is. At least I don’t smoke anymore and smell like the floor of a dive bar at 2 a.m.

Needless to say, I’ve followed the recent vaping crisis pretty closely. That mysterious illness affecting vapers has me a bit concerned. Maybe I’ll finally quit. Who knows?

But you’re not here for my sob stories. You’re here for investment advice and information. This vaping crisis has smacked the cannabis sector hard in the past month. About a third of legal cannabis users vape … so you can see why there’s been a major sell-off.

Today, I’m going to try to ease your nerves a bit on this crisis. Well, I’m not — The Pot Stock Guru and Banyan Hill expert Anthony Planas is.

In his latest article, Anthony explains vaping, its relation to the cannabis market and the one move that lawmakers could make that would be a huge win for legal cannabis.

Click here to read it now, or watch the video below.

Until next time, good trading!


Joseph Hargett

Great Stuff Managing Editor, Banyan Hill Publishing