Why is it so hard to make money in this market? I think it's because there is a diminishing list of what's working, what's safe to own, and what's downright detritus that can't be seen anywhere near your portfolio.
And it's almost like there's a check-down where you, the quarterback, can thread the needle and hit a receiver. But if you don't get rid of the ball in time, you are likely to be sacked, perhaps for a big loss or worse, or fumble it or toss a pick six, a run back for the other side for a touchdown.
At times like this so many of your potential receivers are covered that you have to throw it away in order to not get hurt, and increasingly that's the pattern.
Let's use some real life examples. Last night, on the eve of the big trade talks with China, you would expect some hopeful tweets or comments from the President. Sure enough, you got an interview where the President was predisposed to say positive things about what could occur if the meetings go well.
That would seem like a green light to buy some companies with big exposure to China. Whoops, not too fast. Just as you were about to hit your best wide receiver, the Commerce Department steps in with a list of 28 Chinese companies that it doesn't want business done with because they are complicit with what Secretary Wilbur Ross calls "the brutal suppression of minorities in China."
And then this very afternoon the Trump administration slapped on visa bans for those Chinese officials responsible for the orchestrating those civil rights violations.
While the Chinese companies themselves are not well known to Americans we know that analysts were quick to suggest some American companies that may be seeing their numbers cut because of the edict, and they include Intel (INTC) and Nvidia (NVDA) . It's too bad. Intel's been creeping up and represents a low-risk semi investment. More important, though, we know that Commerce is eager to limit facial recognition technology that helps the Chinese identify enemies of the state and the company that is identified with facial recognition is Nvidia. This is the one semi stock that had been climbing both because its graphics chips have been in wide demand by data centers and because it was thought, until this announcement, that the Chinese might allow Nvidia, at last, to buy Mellanox (MLNX) , an Israeli company that has incredibly complementary technology and would allow Nvidia's business to increase in 2020. Suddenly you have a double whammy making it so if you threw at Nvidia, you got intercepted.
It gets worse. The other day the general manager of the NBA's Houston Rockets, widely considered the home team of China in a sport that's wildly popular there, tweeted support for the Hong Kong protesters. The reaction was swift and even though many of the owners seemed to side with the PRC because of business concerns, Adam Silver, the commissioner, expressed support for freedom of speech, which would seem to endorse the comments of the general manager even as they have since been taken down. To me, though, it's more likely, once again, that we might get some sort of boycott perhaps of Nike (NKE) , perhaps of Starbucks (SBUX) , perhaps of Apple (AAPL) . The Chinese haven't yet chosen to exercise that kind of punishment, but throwing to one of those hitherto attractive stocks has become, well unattractive.
So perhaps you want to stay domestic, especially because Fed Chair Jay Powell seemed to indicate in a speech today that he favors more easing of various sorts?
That would normally cut toward retailers. But if the trade talks are going to be stalled by the Commerce Secretary's comments, that means we are going most certainly to get a bump up in tariffs on October 15. It's hard to imagine anyone wanting to buy a retailer in the face of these new rates except, perhaps, one with the scale to handle them. I think Target (TGT) , Walmart (WMT) and Costco (COST) can measure up. But they are barely down. Seems a little high risk without knowing more. As for the other retailers? Most do not have the scale to offset the tariffs or make it so they can argue for better prices from suppliers.
How about health care? That's immune from China, right? The strongest portion of health care has been medical devices. But this very morning we got a shocking preannouncement from Qiagen (QGEN) , a diagnostics company that rocked that reliable group. Worse, the shortfall was in its China business. There wasn't supposed to be any economic sensitivity. That turned out to be just plain wrong.
How about drug stocks or the managed care cohort, thought again to be immune to the economy. I think you are lining up in the cross hairs of the Democratic front-runner, Senator Elizabeth Warren.
Non-China tech? Warren again. How do you know she won't hit you with a vicious stump speech slamming the tech companies that she deems too powerful.
How about some potential bargains? The rails have been down relentlessly. How about a bounce back? Be careful of the never-ending GM (GM) strike.
Banks? On the verge of reporting. With that yield curve they are way too dangerous. Aerospace? You know something about Boeing's (BA) woes that I don't?
Frankly that doesn't leave too many companies for the moment. You can take a shot at a homebuilder on lower rates. But those have been bid up. You can maybe buy a consumer packaged goods company that might be doing well. The strongest, however, tend to have big businesses in China and this tussle has turned so hot that who knows if we wake up tomorrow and, instead of positive trade talks, we get an outright cancellation of them or a suggestion that the Chinese better be careful with the suppression of protesters in Hong Kong.
So, if you are the quarterback what do you do? I think you keep just try to protect the football. Don't do anything outrageous, anything fancy. And wait, wait for a better time when China isn't so in the balance and the hope for the trade talks diminishes to the point where we are ready for next week's tariffs to be put in place. The timing for the visa hold up and the technology nixing couldn't have been more poorly handled if you own or are thinking of buying stocks. But if your goal is to ratchet up trade tension?
There couldn't been a better moment, hence one of the worst moments for the stock market since the trade battle began.
(Apple and Nvidia are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells AAPL or NVDA? Learn more now.)
