Why are you asking me? That has been my standard response to the many questions asked of me over the past week in regard to "the markets." This stock market action has been so weird, so funky, that I'd rather not have an opinion. That said, managing money for my clients is my "day job," and I augment that by writing for several financial publications-- including Real Money, of course-- and publishing a newsletter, MicroCap Guru.
So, I guess I need to have an opinion. Ugh. No pressure. Here goes:
- My first reaction to the Trump victory was -- as counter-intuitive as it may seem -- "Buy China."
- If you hold fixed-income securities of companies with strong cash flows your reaction to the bond market selloff should be a big "yawn."
Spending 11 years as a sell-side analyst following autos made me more sensitive to the concept of group rotation than any man should be. At certain parts of the economic cycle, car stocks would go so out of favor with portfolio managers that people would quite literally not return my phone calls. I can't lie, it hurt a little bit.
So, I can only imagine what it feels like to be a tech analyst in the past week. Facebook (FB) , a holding in the Action Alerts PLUS portfolio, and Amazon (AMZN) , and to a lesser extent Action Alerts PLUS holding Alphabet (GOOG) , have all been overvalued by the market and were due for a pullback in my opinion. That said, there is absolutely no fundamental reason that Apple shares should be performing the way they have. AAPL shares closed Nov. 8 at $111.06, and as of this writing have lost 5.3% in the past 3.5 trading days. It actually sounds worse when you calculate that value destruction is about $33 billion.
Why is Apple going down? Fears of a trade war with China??? That's ridiculous, and if there was such an occasion, it would impact commodities such as oil, which we actually produce in this country. In case you haven't checked lately, the back of your smartphone does not say "Made in USA." You can't have a trade war when one side produces nothing with which to retaliate. So, AAPL's pullback is an overreaction, and if it breaks the $100 mark, I will take a long look.
Staying on China, the import figures from that country show an economy that remains robust. According to figures published in its earnings presentation this morning by Navios Maritime Partners (NM) , China's iron ore imports have risen 9% year-to-date and coal imports are up 14%. This despite a slight decline -- 0.3% -- in steel production in China for the first nine months.
China is stockpiling raw materials because those who run the country -- and also control the economy, largely -- are still bullish on growth prospects for 2017 and beyond. The Donald can't change that single-handedly, and frankly, I don't think he wants to.
The best way to play China's thirst for imports remains Navios Maritime, my Real Money Best Idea, whose common shares have risen over 40% since the election. It's been a hell of a ride and I'll have an Navios-specific column tomorrow. It is important to note that post-preferred share exchange Navios shares are now my firm's largest holding, and we have not sold a single share into this rally.
Finally, on corporate bonds and preferreds, the proper reaction to this post-election sell-off is to ignore it. Nearly every security I mentioned in my recent column for Real Money detailing a new client's portfolio was trading at above par when I bought it. They all still are, if somewhat less so, as the Treasury markets have declined. If and when those corporate securities we own fall below par, I'll look to buy them more aggressively, but until that happens, the price movements in corporate fixed income securities are basically meaningless. Our cash flow doesn't change.