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Geopolitical Risk Is So Hot Investors Can Now Feel It: Market Recon

"Take calculated risks. That is quite different from being rash." -- George S. Patton Jr.

The Fire and The Fury I would not call this a fire sale. The fact is that the selling really is not all that furious. That said, it is not likely lost on the trading community that U.S. stocks peaked around mid-day on Tuesday, and then proceeded to close near the lows of the session. Even allowing for that nine-day streak of record-breaking performances that begged for a catalyst to the downside, most seasoned pros will cringe when they see a close like that. Even more important than the way equities shut it down for the day was the reason why they sold off if the first place. With uncertain forward looking monetary policy, uncertain legislative signals from Washington, and growing concerns over valuations, it took old-fashioned saber rattling to spook the marketplace.

Just in case you spend all of your time watching sports or cartoons, President Donald Trump responded to threats from North Korea by telling reporters that such threats would be met with "fire and fury like the world has never seen". Say that again. "Like the world has never seen". There had already been reports thought the day that North Korea had successfully miniaturized a nuclear warhead so that it could fit inside an already produced missile. Poof! The record run for equities evaporates. Poof! Ten of 11 sectors headed lower, leaving only the Utility sector clinging to an eerie shade of green. Performance that you might have expected from a sector known as a proxy for the bond market. This morning? Equity index futures are indeed soft, as are global equities. There is some safe-haven buying being seen across the sovereign debt space (btw, Treasury auctions $23 billion worth of 10-year notes this afternoon), as well as for the barbarous relic, gold. Store of wealth? Medium of exchange?

Is this the big one? I'd like to think that the answer to that question is a resounding "no". That's not so much out of concern for my portfolio as it is the threat of global thermonuclear warfare that I dislike. Remember the August Trading Strategies roundtable here at The Street? Remember my answer to what was the greatest threat facing the financial markets was at this time? I said North Korea. You can go back to April, where I interviewed best-selling author and economist Jim Rickards right here in this space. Rickards was way ahead of the crowd on this trend of thought. Overnight, North Korea took it one step further, and threatened the U.S. territory of Guam. Hmmm.

Does this whole situation all blow over? I sure hope so. That said, it sure would have been nice to have already had some gold in the portfolio, now, wouldn't it? If the situation should intensify, just what direction do you think that the value of that yellow metal will head, as opposed to your other investments? I'll bet more than one kid (or old man) searched the internet for recruitment information last night.

Jobs, Jobs, Jobs

Geopolitical concerns aside (not easy to do), the...


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