Author: Dorian Holden

December hasn’t been a kind month.

A year ago, the Dow Jones Industrial Average (DJIA) plummeted from a high of 25,980 to a low of 22,396 thanks to the trade war.  Nowadays, there’s fear we may see it happen all over again, as the Dow sinks another 600 points in the first two days of the month.

Again, all thanks to trade war intensification.

President Trump also just referred to today’s losses as “peanuts,” and said it won’t force him to make a bad China trade deal.  Wilbur Ross also just said Trump is “serious” when he said trade talks could last beyond the 2020 election, as reported by MarketWatch. Worse, Ross said Trump would impose another round of tariffs on Chinese goods on Dec. 15 unless there was “some real reason to postpone them.”

Some of the safest places to invest in times of absolute chaos are gold trades, such as the SPDR Gold Trust, silver, and even bond investments.  Another hot spot is volatility itself. In fact, when we begin to see higher highs in the Volatility Index (VIX), we also see higher highs in VIX-based opportunities.

ProShares Ultra VIX Short-Term Futures ETF (UVXY)

As volatility ticks higher with the trade war, ETFs such as the UVXY could run even higher.  The ETF was designed to match two times (2x) the daily performance of the S&P 500 VIX Short-Term Futures Index. 

VelocityShares Daily 2x VIX Short-Term ETN (TVIX)

The TVIX is another great way to trade elevated volatility.  This ETF  tracks an index of futures contracts on the S&P 500VIX Short-Term Futures Index.

iPath S&P 500 VIX Short-Term Futures (VXX)

As volatility returns to the markets, one of the best ways to profit from volatility is with the VXX ETN, which provides exposure to the S&P 500 VIX Short-Term Futures Index Total Return.  As volatility shoots higher, so does the VXX.

So much for the trade war deal.  

As we near the December 15 deadline on 15% tariffs on Chinese goods, it seems there’s no deal in sight.  All after President Trump said it may be better to wait until after the 2020 presidential election to strike a trade deal.  “I have no deadline,” he said, as quoted by CNN. “In some ways I think it’s better to wait for after the election, if you want to know the truth.”  

While Trump did say progress was being made on an agreement, he also noted it was up to him to decide whether to make the deal, as noted by the South China Morning Post.  “It’s not if they want to make it, it’s if I want to make it, and we’ll see what happens. I don’t know that I want to make it, but we’re going to find out pretty soon, we’ll surprise everybody.”

This isn’t the Only Trade War Battle

Just yesterday, Trump brought back tariffs on Brazilian and Argentinian steel.  

“Brazil and Argentina have been presiding over a massive devaluation of their currencies. which is not good for our farmers. Therefore, effective immediately, I will restore the Tariffs on all Steel & Aluminum that is shipped into the U.S. from those countries,” quoted by MarketWatch.

This comes just months after the two countries received waivers exempting them from the 25% steel and 10% aluminum tariffs introduced in 2018.  

Trump is also threatening France with 100% tariffs on $2.4 billion worth of goods including cheese, cosmetics, and champagne, in retaliation for a new digital services tax.  Reportedly, a French tax of 3% is being applied to revenues of big tech companies based in the U.S.  

France then threatened that the European Union would be ready to retaliate.

At record highs, markets have had a great year – so far.

Historically, things could get even better.  

“December is the best month of the year. The S&P is up 1.6% on average. It also has the highest frequency of advances, up 76% of the time,” said Sam Stovall, chief investment strategist at CFRA, as quoted by CNBC. “The market tends to go through a mid-December low, which then represents a good buying opportunity, at least through the end of January.”

Lindsey Bell, chief investment strategist at Ally agrees, noting, “December has historically been a strong month for stocks,” as quoted by MarketWatch. “Barring an exogenous shock like a Fed rate hike or trade news, December should repeat this pattern.” 

Unfortunately, that could easily be put at risk.

Should tensions with China boil over, and new 15% tariffs are implemented on $160 billion in Chinese imports, all bets are off for higher market highs.

In fact, without a “phase one” deal in place, the December 15 deadline on 15% tariffs is quickly approaching.  Worse, Trump has noted that if “we don’t make a deal with China, I’ll just raise the tariffs even higher,” as noted by Markets Insider.  

At the same time, Trump is now bringing back tariffs on Brazilian and Argentinian steel.  

“Brazil and Argentina have been presiding over a massive devaluation of their currencies. which is not good for our farmers. Therefore, effective immediately, I will restore the Tariffs on all Steel & Aluminum that is shipped into the U.S. from those countries,” quoted by MarketWatch.

Global markets still aren’t sure what to make of the trade war.

Without a “phase one” deal in place, the December 15 deadline on 15% tariffs is quickly approaching.  Worse, Trump has noted that if “we don’t make a deal with China, I’ll just raise the tariffs even higher,” as noted by Markets Insider.  

At the same time, Trump is now bringing back tariffs on Brazilian and Argentinian steel.  

“Brazil and Argentina have been presiding over a massive devaluation of their currencies. which is not good for our farmers. Therefore, effective immediately, I will restore the Tariffs on all Steel & Aluminum that is shipped into the U.S. from those countries,” quoted by MarketWatch.

This comes just months after the two countries received waivers exempting them from the 25% steel and 10% aluminum tariffs introduced in 2018.  

Trump also tweeted, “the stock market is up “as much as 21% since the announcement of Tariffs on 3/1/2018 – and the U.S. is taking in massive amounts of money (and giving some to our farmers, who have been targeted by China),” as quoted by NBC News.

Stay tuned for more on this developing story.

As we near the end of 2019, many of us will make a resolution to lose weight.

After months of rummaging through our kids’ Halloween candy, stuffing ourselves silly with turkey, we’ll attend office parties, and holiday parties.  Then once we’re finished eating everything in sight, we realize we can’t see our own feet over our gut.

That’s when we make that year-end promise that next year will be different.

We make plans to diet and exercise.  We join gyms, and weight loss clinics.  We get fired up, hoping to be slimmer in months.  For some of us, we get serious. For others, we pay for gym membership monthly, and attend maybe twice in a year.  

The best part – that resolution creates investing opportunities.  

Look at Weight Watchers, or WW for example. 

In most years – with the exception of 2018– WW tends to run higher at the start of the year.  We can see that in 2017 and in 2018. In addition to year-end resolutions, the Oprah Effect may boost the stock in 2020, as well.  Next year, she’ll kick off Oprah’s 2020 Vision: Your Life in Focus.

“She will tour the country to discuss her health journey and dialogue with experts on how to live healthier lifestyles. Oprah will also sit down for one-on-one interviews with currently unnamed celebrities to chat about health,” reports Yahoo Finance.

We can also see it in shares of Planet Fitness (PLNT), which has exploded in recent years.  Since 2017, shares of PLNT have pushed higher at the start of every year. 

Aside from the resolution catalyst, PLNT is posting strong numbers, as well. In recent weeks, the company reported net income of $25.8 million, or 31 cents per share, up from $17.5 million, or 20 cents per share last year. Adjusted EPS of 36 cents was in line.  Revenue of $166.8 million was up from $136.7 million.

Another day, another record high.

Markets pushed higher on the day after third quarter GDP grew by a faster than expected 2.1%, beating analyst estimates of just 1.9%. 

However, some fear the party won’t last much longer, including the nation’s top CEOs.

At the moment, many are concerned about delivering earnings growth thanks to economic uncertainty, slowing global growth, that pesky trade war, and presidential election uncertainty, according to JP Morgan Chase, as noted by CNBC.  “Everybody looks at the stock market and sees share prices going through the roof right now, but few of the CEOs I talk to feel good about that,” analyst JP Morgan John Richert said. 

“There is an increased worry about their ability to deliver results amid prolonged periods of uncertainty next year,” he added.

While CEO confidence is slipping, consumers are still optimistic at the moment.  

In fact, spending has been mostly resilient with October 2019 retail sales rebounding.  Better, many analysts remain confident that consumers will continue to support the economy, coupled with a strong job market.

Unfortunately, CEOs aren’t convinced the good times will last.

Consumer confidence, for example, just fell for the fourth straight month in November on concerns over business conditions and employment issues, as highlighted by Reuters.  “The economy is growing, but it would take a politician to say it is in good, let alone great shape,” said Joel Naroff, chief economist at Naroff Economic Advisors.

As a result of all of this, many of the companies that JP Morgan has spoken with are pulling back capital spending for 2020, and “modeling how a possible recession will impact their business,” as also highlighted by CNBC.

It’ll be interesting to see what develops next for the economy.

Stay tuned for more on this developing story.  We’ll be sure to keep you up to date.

For weeks, shares of Chinese electric vehicle (EV) stock, NIO have been trending higher.

In fact, since the start of November 2019, it’s run from $1.40 to $2.24. All even as the Chinese EV industry is bombarded with lower than expected delivery volume, earnings losses, and far too many competitors.  Yet, it continues to push higher, as the company ramps up delivery volumes behind stronger than expected ES6 demand.

In addition, should the pesky trade war end, we may see further upside.  

“Spring for electric vehicles is near” as more manufacturers are “educating the market” and delivering vehicles in China, the CEO said, as quoted by Benzinga.

Disney Rises as Frozen 2 Breaks Records

Shares of DIS have exploded higher after Frozen 2 hauled in more than $350 million in its opening weekend.  That pegs it as one of the highest grossing films of all time. Things may get even better for DIS with the December 2019 release of Star Wars: The Rise of Skywalker, too.

Consumer Edge Research also initiated coverage on DIS with an overweight rating.

“We believe DIS is now clearly under-earning with big strategic shifts ongoing. We see early signs of traction & the flywheel is working. DIS has unique competitive advantages around brands & content that drive franchise-level unit economics across a wide variety of products and forms of monetization. We also see unique advantages around distribution given the importance of sports rights in the current pay TV bundle, a more portal-oriented approach to ESPN and sports distribution (see the mobile app), and given their strategic positioning with Hulu’s MVPD offering,” as quoted by CNBC.

Dick’s Sporting Goods Inc. (DKS)

Shares of DKS are up 19%, or $7.75 on the day after the retailer raised its full-year earnings expectations for the third time this year. 

According to Bloomberg, “The company expects adjusted full-year earnings of $3.50 to $3.60 a share, excluding some items. It had forecast $3.30 to $3.45 a share in August. Third-quarter earnings of 52 cents a share outpaced analysts’ expectation of 38 cents.”

Barron’s once noted the Dogs of the Dow strategy “no longer works.”

That’s because “Companies have changed how they return cash to stockholders. Even if the strategy does retain a trickle of predictive power, a look at the stocks it’s likely to select for next year suggests they’re not especially dog-like, or cheap,” they noted.

However, since that article was published in 2013, the Dogs of the Dow has managed to produce respectable returns.  In 2013, for example, the Dogs of the Dow returned just under 35% average returns. In 2014, nearly 11%.  

In 2015, they did okay with an average of 2.5%. By 2016, 16%. In 2017, 19%.  In 2018, they eked out a 1% win, as the Dow lost nearly 6%.

For 2019, the Dogs of the Dow are off to the races.

·      IBM ran from $108 to $136 with a dividend yield of 4.77%

·      Exxon Mobil ran from nearly $65 to $69 with a yield of 5.05%

·      Verizon ran from $53 to nearly $60 with a yield of 4.14%

·      Chevron ran from $107 to $121 with a yield of 4.03%

·      Pfizer didn’t do too well so far, falling from $41 to $38.  PFE has a yield of 3.76%

·      Coca-Cola ran from $46 to $53 with a dividend yield of nearly 3%

·      JP Morgan Chase ran from $93 to $131 with a yield of 2.75%

·      Procter & Gamble ran from $87 to $121 with a yield of 2.46%

·      Cisco ran from $41 to $45 so far with a yield of 3.08%

·      Merck ran from $73 a share to $86 with a yield of 2.82%

While the 2020 Dogs haven’t been released to the hounds just yet, the strategy is simple.  You’re buying toe 10 top Dow dividend-paying stocks that fell out of favor at the start of the year.  You then cash out by the end of the year, and repeat.

Charles Schwab will buy TD Ameritrade in a $26 billion all-stock deal.

“This would create a Goliath in Wealth Management,” Wells Fargo senior analyst Mike Mayo said, as quoted by CNBC.  In fact, it will now create an incredible financial beast with more than $5 trillion in client assets.

As part of the deal, AMTD shareholders will receive 1.0837 Schwab shares for every share held.  The deal is expected to close in the second half of 2020.

This wasn’t the only big deal of the day.

LVMH Just Agreed to Acquire Tiffany for $16.2 Billion

LVMH will buy Tiffany & Co. for $135 a share in cash, or $16.2 billion.  “The acquisition of Tiffany will strengthen LVMH’s position in jewelry and further increase its presence in the United States,” says LVMH, as quoted by CNBC.

Alessandro Bogliolo, CEO of Tiffany, said: “Tiffany has been focused on executing on our key strategic priorities to drive sustainable long-term growth. This transaction, which occurs at a time of internal transformation for our legendary brand, will provide further support, resources and momentum for those priorities as we evolve towards becoming The Next Generation Luxury Jeweler. As part of the LVMH group, Tiffany will reach new heights, capitalizing on its remarkable internal expertise, unparalleled craftsmanship and strong cultural values,” as quoted in an LVMH press release.

Novartis Buying Drug Maker The Medicines Co. for $9.7 Billion

Novartis just struck a deal to buy The Medicines Co. for $9.7 billion, or $85 a share.

All as Novartis continues to acquire companies to expand its drug portfolio.  “We’re hoping to reimagine treatment of the leading global cause of death. This could be a strong step forward in Novartis’ transformation into a focused medicines company,” Novartis CEO Vas Narasimhan tweeted, as quoted by MarketWatch.

As the race for the White House heats up, Michael Bloomberg just went all in.

While he has an uphill battle this late to the game, he says, “We cannot afford four more years of President Trump’s reckless and unethical actions,” he said on his site. “He represents an existential threat to our country and our values. If he wins another term in office, we may never recover from the damage.”

Touting his experience as the Mayor of New York, he’s promising “to rebuild the country and restore faith in the dream that defines us,” while vowing to raise taxes on the wealthy, expand health insurance coverage, and take action on guns and climate change, as highlighted by CNBC.

President Trump doesn’t seem too concerned, though. 

“There’s nobody I would rather run against than Little Michael,” Trump has said, adding Bloomberg doesn’t have the “magic” to run a successful campaign, as highlighted by CNBC. 

In addition, according to the Associated Press, “Bloomberg has declined to embrace Medicare for All as a health care prescription or the ‘Green New Deal’ to combat climate change, favoring a more pragmatic approach.”

And, apparently, he has some heavyweight investor support.

Billionaire Leon Cooperman says he’s a “huge fan” of Bloomberg. “Unless he changes his stripes, he will have my unequivocal support,” as quoted by Business Insider.  

Even Warren Buffett has noted, “”He and I disagree on some things, but I think that he knows how to run things. I think that he’s got the right goals for America, he understands people, he understands the market system, and he understands the problems of people that don’t fit well into the market system.”

From here, it’ll be interesting to see what happens next.

Among the candidates, who do you believe has the best chance of winning the White House?