Look at who just warned the situation in China is worse than people think.
China: Worse Than People Think
February 6 (King World News) – Bill Fleckenstein: Overnight the SPOOs continued their recent fantasy that all will be well shortly, or alternatively that nothing matters anyway, so let’s party. However, soon after the market opened in New York it was back to about flat.
Symptoms May Include Weakness, Fatigue, and Headaches
The more I read about the consequences of the coronavirus and the behavior of the Chinese, a couple of things are clear. First, we don’t know what’s really going on, not just because the data is a couple of weeks old, but it’s almost a guarantee that the Chinese aren’t telling us the whole truth. One thing is for sure: the news doesn’t fit the official behavior.
Second, folks need to understand that China, which is the de facto manufacturer for the world, is going to see its GDP growth essentially fall to zero. You can’t shutter as many cities and factories as they have and not see a dramatic slowdown. Given the length of time that some of these closures will be in effect, and that airlines aren’t going to be flying there for a few months, would indicate to me that this is going to be much worse and last much longer than most people seem to think.
The market certainly seems to be convinced that it has already been solved, but then again, there’s no thinking going on by people blindly buying stocks these days in the first place. We’re liable to walk in one day and find out that, oh, my God, China actually matters. Whether that is in the next two days (when there will be no Rap, as I’ll be traveling) or down the road, I can’t say…
Mining legend Ross Beaty (Chairman Pan American Silver) is investing in a company very few people know about. To find out which company CLICK HERE OR ON THE IMAGE BELOW.
Worming Its Way
I haven’t done much about this yet because, as I have noted, my feeling is that monetization #4 matters more than any fundamentals. But I am looking for an opportunity to take some action. To me, Apple is probably the single most vulnerable company in the U.S. that also has a ridiculous valuation. Not that its P/E of 25-plus is so ridiculous compared to others, but given its size and lack of growth, it certainly is. And in any case, it’s uniquely vulnerable from a production standpoint, since that all comes from China, which is also a big customer.
I also think Micron will be very vulnerable because the recovery that’s supposedly been underway for a year isn’t. My feeling is if you can’t win on those two, probably nothing is going to work. However, if you do win on them, almost anything will probably work. Tesla is also vulnerable, but that’s a whole other cult.
Reality: the Ultimate Hangover
I’m sure folks can come up with other great ideas. I just want to focus on ones that I think will be the most vulnerable, although, as noted, if sobriety breaks out, there will be lots of targets. At the same time, that would mean weaker stock prices, and then the Fed would be riding to the rescue at some point as well, but that’s a couple of steps ahead. In any case, that’s kind of my game plan, which I wanted to share.
Turning back to the action, after the early stall the market took off again to close modestly higher, led by the Nasdaq, which gained 0.5%.
Away from stocks, green paper was stronger, fixed income was weaker, and the metals were higher, led by silver, which gained 1% to gold’s 0.5%, while the miners were mixed.
KWN has just released an audio interview!
Gerald Celente discusses China shutting down entire cities and industries and quarantining and rounding up people. To listen CLICK HERE OR ON THE IMAGE BELOW.
ALSO RELEASED: BUCKLE UP: Big Things Are Happening CLICK HERE TO READ.
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