Before I list my picks and review the state of the economy, I’d like to add a comment on trade protectionism and the negotiation strategy of the Trump administration with China. The problem is that China is an unfair trader and its communist government’s strategy is to steal as much technology as is possible. Something must be done to counter a development strategy such as this. Unfortunately, Trump’s trade protectionism and attempts at negotiation will ultimately fail as a countermeasure.

First, trade protections are the opposite of Adam Smith’s “The Wealth of Nation’s.” We will save or create a few jobs but be worse off because consumers lose out through higher prices. On the average and across the globe, for every job saved or created through protectionism, the cost to consumers is about $200,000.00. These jobs, especially since they are in import competing industries that are highly cost sensitive, aren’t paying that much. Therefore, as a nation we are worse off as a result of the Trump administration’s strategy. More succinctly, instead of hurting China we are instead shooting ourselves in the foot.

Second, China has a long-run oriented government and trade and development strategy. We, on the other hand, have only a short-term political cycle and no long-run political or policy strategy. Thus, China will get around any short-term trade agreement and go back to their normal way of doing business after Trump is out of office — whether that be now or in four years. We need a long-term solution that corresponds to China’s long-run communist institutional structure. Something analogous to the DOJ’s anti-trust division that can approve or disapprove a horizontal merger of companies within an industry would work much better. Based on the risk of sensitive or strategic technology theft or transfer, or the risk of creating a supply chain subject to foreign disruption, foreign private investment and international partnerships with foreign enterprises could also be approved or disapproved. Once a governmental division within the DOJ is set up and appropriately staffed by scientists and military intelligence personnel, it would then become a permanent and long-term countermeasure to not only China’s IP theft problem, it would provide long-run strategic benefits regarding supply-chains. Although it couldn’t escape short-run political influence, It would remain in place forever. (Just try to get rid of any government agency!)

Third, with such a division within the DOJ we could then get back to our leadership in globalization and the promotion of free trade among nations. Free trade leads to increased economic efficiency and growth by allocating resources toward what they do relatively better. This increases productivity and reduces production costs. Beyond that, it also reduces monopoly power by increasing market competition — another benefit to consumers. These benefits result in greater economic growth among those nation’s that avoid protectionism.

Stock and Fund picks

Clearly there is no stimulus package on the way before the November elections. Moreover, the markets seems to be pricing in a Biden win. This does not mean there are no opportunities in the market though. This is because after the tantrum for not getting a fiscal stimulus package is over many stock and fund prices will be lower. Here are some long positions to consider: CCS, MDC, MTH, PHM, TMHC, BXC, THO, WGO, RUSHA, and MDL. Some dividend growth stocks to take a look at are: JHG, SUN, AB, and FNF. The top 5 ETFs for October are: WCLD, SMH, SOXX, IGV, and FNY. If you want to short anything, consider: VNET, ACC, BILI, CRSP, CYTK, DEI, KW, and QURE. That’s all the free stuff — or Halloween candy — I’m handing out for October. Good investing!