Week 1 – 2 (May 1 – 10):
Trump trade woe’s continue. When companies buy high bang-per-buck (Productivity divided by cost) resources in foreign countries like Mexico, such as with our automobile industry, it maximizes output per cost or, equivalently, minimizes cost per unit of output. In other words, our automobile industry becomes more competitive by using Mexico’s production resources. China has a communist government and cannot be traded with or used for production because the cost of stealing our technology outweighs the benefit of high bang-per-buck production resources. Trump, the isolationist, wants production in China to continue under his negotiated conditions or to be reallocated to the US where low-bang-per buck resources would destroy our comparative advantage in trade. Instead, why not incentivize resource reallocation from China to Mexico. By doing that, we stay competitive and technology theft by government direction will no longer occur. Mexico’s economy will be greatly improved and the incentive to migrate to the US greatly reduced. Mexico may be so grateful it may offer to build Trump’s wall. Unfortunately, Trump’s thinking that Mexico is somehow stealing our automobile and other industry trade prevents him from choosing this strategy. Because Trump fails to understand optimal resource allocation and the sources of comparative advantage in trade that lead to increased US exports, he will make the US and the rest of the world worse off. He may even cause a global recession so get ready.
In the meantime, the best Zack’s number 1 stocks are AU and TALO. The best dividend growth stocks are APAM, AVAL, and NBLX. Pure growth stocks are GLDD and HTZ and the best ETFs are PXMG and FXL. As for myself, I’ll be heavily weighted toward cash. Eventually, like at the end of 2018, that strategy will lead to a buying opportunity while at the same time preserving capital. Good investing!
Week 2 – 3:
Why can’t we just stop dealing with a communist government’s inability to conduct free market trade? They really don’t want to engage in free market trade, which should be clear enough already. Instead, simply incentivize all US companies to cease doing business in China and be done with it. As it is, Trump is trying to cut a hole in the Chinese end of the trade canoe. In other words, the main effect of tariffs or taxes is to distort prices and trade flows which harms both parties about equally, so get ready for some higher prices. To me, it’s like watching a dual where both parties take ten steps, turn, and then shoot themselves in the head. On top of this idiocy, Trump wants to put more tariffs on autos and Mexican production . . . again trying to cut a whole in the other end of the canoe. Ultimately, this must end badly, but just not right away.
In the meantime, some long positions in growth stocks might include: ERIC, NOA, RYI, TGH, MBUU, QD, and SSL. Top ETFs are PSJ, FCOM, and PXMG. Dividend growth stocks to consider include: BMA, APAM, PUK, ad NCMI. Good investing!
Week 4 (May 25 – 31):
People generally underestimate the negative supply-side tax increase policy of increased tariffs and isolationism. It is estimated to cost the average household about $800 per year which offsets the corporate and income tax decreases about equally. Reduced producer regulations remain the only net positive so the pricing in of negative trade effects aren’t trivial and may occur in subsequent rounds of adjustment. Assuming the tariff policy doesn’t lead to a global recession in the short-term, this represents a possible overcorrection and buying opportunity within the domestic economy. Thus you should consider some dividend growth stocks to research and watch such as USAC, GLT, EPM, AEG, VSAT, GTLS, FSI, CNMD, and ABR. Strong growth stocks include NOA, RYI, TGH, VRNT, QD, OSIS, GPI, CUB and JCOM. Some good ETFs are XLP and XLV. A long-term growth mutual fund to consider is CPOBX. Good investing!
