The Dollar is strong, the markets are weak.
That’s the story of the morning so far, along with all sorts of hand-wringing because Nancy Pelosi, who held up pro-democracy banners in Tiananmen Square 30 years ago, is still not backing down to the Chinese Government, who REALLY do not want her to visit Taiwan.
As Speaker of the House, her visit carries a bit more weight but Congresspeople go all over the place and their visits are not the same as state-level visits and Taiwan is a major trading partner with the US – especially with Pelosi’s California. Should she back down and let China dictate our foreign policy? China has threatened her life – saying they would shoot down her plane if it violated their air space (which is on the way to Taiwan). Yet, if you listen to Fox News, you would think it’s Pelosi that’s doing something wrong.
Of course, Pelosi isn’t just risking her life – she’s risking World War III or WWIIIb since we already started WWIII with Russia in Ukraine. Still, being a “strong” country doesn’t mean pounding your chest and having military parades – like our previous administration liked to do – it means BEING strong and taking stands and leading by example – the way America used to do.
It’s very easy to look away or talk about how “it’s too hard” to get involved when Russia invades Ukraine or China isolates Taiwan or the Taliban takes back Iraq (Biden’s team just killed Bin Laden’s successor last night)… Foreign Policy has always been this President’s field of expertise and reminding the World we don’t back down is a good thing.
Anyway, all this tension is making the markets nervous and Gold (/GC) is blasting higher this morning, back to $1,805 with Silver (/SI) at $20.50 and the Dollar is more than 0.5% stronger than it was yesterday and the indexes are 0.5% lower than they were yesterday – nothing unexpected and THIS IS WHY WE HEDGE.
If Nancy survives her trip then I think this will become healthy consolidation as we prepare to test 4,160 (weak bounce) on the S&P 500 for the first time since losing it in mid-April:
Notice we still have that strong MACD line but maybe too strong now as it’s getting toppy and, if we don’t get over 4,160 this week – that technical tailwind will be over and it will be more likely we re-test our baseline at 4,000 first. That’s a shame but it’s been a good run – we’ve already made a bearish adjustment on our TZA hedges and we’ll do some more if we don’t get a Pelosi bounce tomorrow.
We’ll be saying farewell to Cowen (COWN), who are in our Future is Now Portfolio, as they are getting bought by TD Bank (TD – another favorite) for $1.3Bn which is miles above our target price for January of $30.
We worked on that one and stuck with it over time and now it’s paying off the full $15,000 so congratulations to all who played! That’s the down side to value investing – they keep taking our favorite stocks away…
The up side is there’s always something we can buy that other people just don’t love – we just have to keep an open mind.
