That is the pronunciation on market participants lips Thursday as President Trump's tweets have reversed the extraordinarily bullish action in the S&P 500 that kicked off 2019.
Are fears of a U.S.-China trade war overblown?
Yes, probably. But I do not believe this selloff is unwarranted. These are the two biggest economies in the world going toe-to-toe, so let us not minimize its impact.
As stock market participants shift paradigms in minutes, not even hours or days, it is comforting to have a rock upon which to base any judgment. Mine is the U.S Treasury market, and today it looks, frankly, horrible.
Horrible if you are long U.S. stocks, anyway.The spread between the yield on the 3-month U.S Treasury bill and the 10-year U.S. Treasury note went negative earlier Thursday.
Yes, the yield curve inverted again, though the spread has returned to a positive figure as of this writing--2.42% yield on the 3-month versus a 2.45% yield on the 10-year.
Please do not get caught in the trap of analyzing a massive market based on single basis points.
It is the flatness of the yield curve that should be scaring stock market investors, and today, anyway, sanity has returned to these go-go markets. Fear is sometimes the proper response to external stimuli.
As a value investor -- yes, there are still a few of us left out there -- I take these pullbacks as a chance to update my buy list of stocks.
I wait for a big flush -- like December's -- to selectively add to positions in my favorite names such us JPMorgan Chase & Co. (JPM) and Exxon Mobil Corp. (XOM) as I did a few months ago. Those trades have worked, but the next play is always the most important one, and I would love to see a real implosion in the Shanghai market caused by trade tremors.
Why? Because I don't own any Chinese equities and yet still believe in the country's long-term growth stories -- and growth champion companies.
The Shanghai Composite is trading at 2,850 today and broke through the 2,500 level in December's trading.
If it crashes through that level again, I will take advantage by buying -- and holding -- my favorite Chinese growth stories.
My clients know that I have made sitting on my hands into an art form, but as much as I love analyzing these companies, I just have never been able to pull the trigger.
Give me a 15% correction from these levels, though, and I will begin buying -- and report on this in my Real Money columns.
So, here's a list in order of preference. Again, I am not buying these names today, but let's see what China's Vice Premier Liu He and U.S. Trade Representative Robert Lighthizer (Mr. Liu is reportedly not meeting with President Trump on his trip) come up with Thursday tonight and over the weekend.
If it is "a whole bunch of nuthin," Chinese stocks will continue to dive and I will start buying these names:
iQIYI, Inc. (IQ)
Don't call it the Netflix (NFLX) of China, because iQIYI sells ads on its platform and Netflix does not. Trading at $21 today, I'll jump in closer to its 52-week low of $14
The EV battery colossus with a client list of blue-chip automakers and none of the Musk/Panasonic drama that looms over Tesla. CATL is a little hard to find for U.S investors (it trades in Shenzhen,) but pester your broker and he'll get you some shares. CATL is trading at CNY72 today after massive run-up through CNY90 in March. I'll wait for CNY50 and then buy with both hands
Tencent Holdings (TCEHY)
Tencent does have an ADR, TCEHY, and its runup from the October low of $33 to $47 leaves more downside in my opinion. I love WeChat and use it every day. So do 1.3 billion other people (WeChat and QQ's combined user base.) WeChat is Facebook without all the Evil Empire stuff, but, again, I think I will be able to get Tencent cheaper than its price today.
NIO Inc. (NIO)
The electric car company is bouncing off a 52-week low in today's trading, at $4.64 after an August IPO on the NYSE at $6.16. I will wait until the market really panics and NIO breaks $4 per share to initiate a long-term position. Chinese vehicle sales have slowed dramatically this year, and that includes sales of BEVs, which peaked in December ahead of new subsidy regime. Sound familiar? Yes, just like Musk's Model 3 in the U.S., NIO's ES8 electric SUV (which was introduced last summer) has seen falling sales in recent months. Unlike Tesla, however, NIO has incredibly strong financial backing from sponsor Tencent and private equity partner Hillhouse, so this company can withstand a slow consumer uptake of its product.