$XAU, $GLD, $USD, $CHN
Monday, President Trump Tweeted “China dropped the price of their currency to an almost a historic low. It is called “currency manipulation.” Are you listening Federal Reserve? This is a major violation which will greatly weaken China over time!”
For equity investors all this does not augur well as uncertainty because of an accelerating trade dispute between the US and China that may hurt business confidence in a huge part of the world economy.
For example, China could allow “weakness” of its currency, the RMB Yuan which may go to 7.20 CNH, or even higher, to USD, which would mean bad news for practically everybody, including China.
In this context, investors could do well keeping in mind what Warren Buffett wrote in his latest letter to the shareholders of Berkshire Hathaway Inc. “In the years ahead, we hope to move much of our excess liquidity into businesses that Berkshire will permanently own. The immediate prospects for that, however, are not good: Prices are sky-high for businesses possessing decent long-term prospects.”
Mr. Buffett is sitting on $122-B cash pile and waiting for the opportunity to buy back into stocks, say a pullback of 8 -10% today that number is 6%.
Today, JPM is telling equity investors to “buy the dip”. Likely, will wait a few days for the SPY to fill the gap open down at 288.21. Meanwhile, the money has rotated into gold and US Treasuries.
Keep in mind that “historically” the month of August has proven not such a good month for equities, as The Street has dubbed August the Dog Days.
Over the last 25 years non-negligible amounts of stocks have been sold in August in “prepositioning” moves before September that has seen average declines in:
- The DJIA of 0.8%,
- The S&P 500 of 0.5%, and
- The NAS Comp index that was 1st established in Y 1971 has declined an average of 0.5%.
These are averages only.
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