People are always asking me, "How do you play the trade talks." They want to know my insight into the opportunities that can be gleaned and the sources worth trusting when it comes to any deal that might be had with the Chinese.
I have a simple answer: stop playing and start investing.
In the years since I have known President Trump - dating back to before his presidency - he keeps his counsel close and thrives on unpredictability as a way to get the upper hand in a deal.
That means he's not easily gamed, if able to be gamed at all and if you think he can you are probably going to be wrong. Even his closest advisers may not know what he may do and, up until the moment he tweets or talks at an impromptu press conference, he may not know himself.
As someone trying to figure out what the president's next move might be when it comes to China I have reached a conclusion that I am doing a disservice trying to anticipate his next move. If you claim you know what he is going to do you are most likely going to be wrong.
So what do I mean about not playing and, instead, investing?
Okay, let's take the stock of Home Depot (HD) . Here's a company that, while mostly domestic, is considered to be caught in the cross hairs of the trade talks. If the president or China cannot reach a deal to forestall the next round of U.S. declared tariffs, the possibility of the stock of Home Depot going down is pretty great.
That would seem to cut in favor of selling the stock ahead of the talks.
Now, though, layer on the big analyst meeting that Home Depot has tomorrow. I know that Home Depot's management didn't feel that the stock itself got a fair shake after its last quarter which was widely panned because of an execution glitch and some weaker comparable stores than expected.
My charitable trust (Action Alerts PLUS) owns the stock, has for some time, and while I like the stock of Lowe's (LOW) very much, too, because of the work CEO Marvin Ellison is doing, there's no denying that Home Depot's stock has come down to attractive levels.
Still, let's stick with this trade issue. Tomorrow I expect the costs of tariffs to be addressed in depth by Home Depot management. I expect a quantification of the impact right down to the pennies per share. If it turns out that there isn't much of an impact, than you will be able to do something that I always advise, you will be able to buy this stock at a discount if there is no trade agreement reached this weekend. You will be armed and ready.
That's what I mean about trying to use these discordant stories, often highly inaccurate stories in your favor, to build positions in great American companies that are caught in the cross hairs of disinformation.
Of course you may not even want to own a retailer in this environment. That's up to you. But the value I think I can add comes down to one thing: is a stock up too much or down too much based on trade talk news that may not turn out to be news at all?
Everything else is just rank speculation, useless for investing and suspect even for trading given a president that is not going to show his cards, perhaps even to himself.