It’s official: Trump is about to tariff the entire Chinese economy. A report by Bloomberg on Monday claimed that hundreds of billions in new tariffs on imports from China was in the works and ready to be announced in December. If enacted, the U.S. will have exacted tariffs on every appliance, every piece of plastic, and every poorly made child’s toy that enters our economy. And, presumably, China will have done the same to us. Stocks didn’t take kindly to the news. And neither did American companies. But despite this most recent announcement, there are growing signs that China cannot withstand the kind of pressure being put on it. If President Xi has any hope of sustaining Chinese power, he may be forced to deal with President Trump whether he wants to or not.
It’s the second most expensive tech acquisition in U.S. history, but desperate times call for desperate measures. IBM announced on Sunday that it had acquired software maker Red Hat Inc. for nearly $34 billion in hopes of staving off irrelevancy and competing with the likes of Amazon, Google and Microsoft in the lucrative cloud computing services sector. It’s a risky play by IBM. It may also be necessary to its survival. If the company cannot grow its revenues beyond its core legacy services, its future will be put in serious doubt. We’ll show you why that is, and how the market is responding to the news of the merger.
As they say on Wall Street, the market goes up on an escalator and down on an elevator. This month’s sell off has been violent, bringing most U.S. stock indexes into the negative for the year, and crushing global equities to lows not seen since the early 2010s. Market bulls have evaporated into thin air as each rally bounces dead-cat like into deeper and deeper lows. Coincidentally, the drop in U.S. equity markets occurred in October, a month with a reputation for volatility and bearish sentiment. In fact, the number of terrible Octobers have been so great, that traders coined an expression out of the phenomena: The October Effect. We’ll shed some light on this October’s stock drop and provide some background for The October Effect. Later, we’ll share our reasons why this may be a great time to reassess our portfolios while still maintaining an overall bullish outlook on the markets.
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Elon Musk, the comeback kid. Musk and Tesla smashed projections on earnings in Q3, with Tesla delivering its third profitable quarter in company history. Tesla’s Model 3 sedan was the best-selling car in the U.S. for the quarter (measured by revenues) and the 5th best-selling car by volume. Not bad for a company which has been plagued by high C-suite turnover, an eccentric CEO, a federal investigation, and safety fears over its brake system. Shareholders and analysts alike hailed the news as a major step forward. But many experts still believe Tesla’s a long way off from regular quarterly profit taking. Is that true? Perhaps, but there’s more to it than meets the eye.
For the second time this month, President Trump is going on the offensive against the Federal Reserve. And this time, he’s calling out the man he appointed as Federal Reserve Chairman, Mr. Jerome Powell. The remarks, which were from a recent Wall Street Journal interview, came on the heels of renewed selling in equity markets. To hear Trump tell it, blame for the drop should be placed on the Fed for their rate policies (and, of course, on his predecessor, former president Barack Obama). But are Trump’s attacks on the Federal Reserve consistent with his view of economics? Probably not, and this whole situation might be a contingency plan in case the market continues to drop.
Pot stocks are down across the board, as popular ETFs like Horizons Marijuana Life Sciences Index (TSX: HMMJ) got hammered on Monday, with a long way to go before finding key support. Marijuana is now legal in Canada, but the buildup to legalization ended up forming a “mini-bubble” that got popped once trading started this week. Cannabis investors may be upset, but in the long run this is going to be good for the legalized marijuana industry, and something that allows new investors to get on board.
The Chinese market, as reported by the Shanghai Composite index, has approached a critical moment. With prices dropping to 5-year lows, things could get a whole lot worse thanks to a rapidly growing debt bubble. With things going so poorly in China, Trump has decided to lay off the tariffs (at least temporarily) until they get back into fighting shape, because a Chinese collapse could have huge implications for the other major economies of the world.
According to some expert analysts, the next real estate bubble is set to pop, but it won't happen in the United States. Instead, the Chinese real estate market - which is responsible for almost 30% of the country's GDP - has reached astronomically high property and land values, outpacing even the “ritziest” cities in America. With equities suffering as a result of the trade war with President Trump, the Chinese Communist Party needs to choose its next steps carefully to avoid an all-out economic collapse.
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