What is behind 5 consecutive weeks world markets have been hammered?

25  May 2019

Dear Fellow Investor,

For 5 consecutive weeks world markets have been hammered.  Asian markets have seen USD 2 ½ Trillion  wiped off equity values.

What is behind this and what is the likely result ?

If you listen to the media it has to do with the escalating China trade war. Each negative headline fuels the onslaught of selling.

Professional investors and company insiders are taking advantage of the selling by buying back their company shares and buying for themselves. Apple announced an 80 billion dollar share buyback. Semiconductor companies such as Micron, Intel and AMAT are heavily buying back their shares. Hedge fund manager Stanley Drukenmiller is buying beaten down semiconductor shares  

This is  good use of company funds. It means they are buying  quality at a discount. It shows confidence of recovery and raises the earnings of existing shares.

Once the capitulation is over, expect recovery in the semiconductor space. There is nothing stronger than insider buying support. After all company insiders understand their companies better than anyone. No insider will buy unless he thinks the share will go higher.

As a value investor, I am not much concerned about politics but I am mindful of the current political background and how it might effect our investments.

The world has not been playing a fair trade game with the US. If a US car company wishes to sell a car to Europe the tariff is 25 % but if Europe sells a car to the US the tariff is less than 5 %. The same is true for China, Canada Japan and Korea.  These unbalanced tariff levies apply to almost all manufactured goods and commodities including beef, pork, grains cosmetics, steel, aluminium  and pharmaceuticals.

I do not blame China, Japan and Europe for the one sided  trade balance. I blame the corrupt political hacks, lobbyists and weak leadership in the US

The last great president who stood up for America was General Dwight Eisenhower. He defeated the Nazis and Japanese in WW2  America has never won a war since WW2.  Eisenhower was  incorruptible. and was able to build consensus with the opposition party to build a vast intrastate highway system which connected America from coast to coast. just like the North South highway in Malaysia.

Then Trump arrived on the scene 58 years too late. He is a man of action and not talk. He decided to make things right and get better trade deals. He has made progress with Korea, Mexico and Canada but not Europe and China. This will happen in my opinion

There has been tremendous opposition to Trump’s fighting for fair trade policy by his political opposition, the deep state, the Chinese, and the Europeans. To get rid of Trump   they have plotted to bring down world stock markets including the Dow Jones, Nasdaq and S & P. The whole world establishment seems to hate Trump. They want to get rid of Trump and put a weak compliant crony in his place such as Obama or sleepy Joe Biden  Then corrupt business as usual

China has said it is not afraid of Trump. My view is that when someone expresses they have no fear they are afraid. China will negotiate

Trump has the financial support of the US Federal Reserve and the Treasury.  The US economy is booming, tax revenues are up and there is full employment.  Trump has the power of money behind his back. There is value in some of the beaten down semiconductor shares and markets should recover and creep higher going into 2020.

Our shares are high quality dividend producers and should hold up despite the volatility.  Our position in Inari has been effected but they have no exposure to Huawei and  should recover being a proxy to Apple and Apple as well as Inari are buying back their shares. Our positions in Kossan and Riverstone are also effected due to rubber glove oversupply  but both are financially solid and should recover. Demand trends for rubber gloves continue to move higher despite recent weakness. Our consumer stocks and REITS are holding up

Invest well and grow your wealth
Bill      

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