Did I mention that it was August? I believe so. It is the month of beaches, boating, golf, Saratoga and the unexpected. In August we have seen: the Invasion of Kuwait (1990), the Russian Coup D’etat (1991), Russian Financial Crisis (1997) and US Government debt downgrade (2011), as examples of the unexpected. These exogenous events have come out of nowhere to wreak havoc on the financial markets. This August, specifically yesterday, China delivered the body blow when it devalued its currency, sending the US dollar yet higher and stocks lower.
It was a complete reversal of Monday’s rally. Apple (AAPL) which rallied over 4 points on Monday slip over 6 points on Tuesday and now sits below key technical levels. However, Amazon (AMZN) was higher and Netflix (NFLX) was barely changed in the stormy Tuesday session. This means that buyers for growth are still lurking in the high grass.
Now you know why I advocated hedging positions as we entered August. However, hedging only reduces risk, but does not completely remove risk, so there was pain to be felt. That is except in bonds or dividend oriented stocks which performed well. The message that the markets got yesterday, or shall I say telegraphed to the FOMC is that the US cannot afford further strength in the US Dollar and hence a rate tightening, widely anticipated in September should be further delayed.
What China did in devaluing its currency is certain not to be a one and done event. Expect further devaluations and what could very well be a Chinese version of quantitative easing.
However, be careful not to hit the panic button. Just as we learned in 1990, 1991, 1997 and 2011; the end of the world did not occur. We took some pain but eventually bounced back. So, the best prescription is to hedge your positions and then as the market declines and uncertainty rises, unwind those hedges and buy stocks in an opportunistic, disciplined and piece meal fashion.
Speaking of China, Alibaba (BABA) will release its quarterly results today. The stock has gone, in very short order from being loved to being hated.
Let’s end on some good news. Soft Idea placed in her race having to overcome a six post position, a strong contender on the rail, the generally lousy Monticello race track and a semi-sloppy condition. If she was not in the 6-hole she would have won, in my opinion. Also, Endless Summer, in her first truly competitive race came in third at Pocono.
Of course, don’t forget that in August, Anything Goes ………………
Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView AssetManagement, LLC was long AAPL, AMZN, BABA & NFLX — although positions can change at any time.
Scott Rothbort is the President & Founder of LakeView Asset Management, LLC, a registered investment advisor specializing in high net worth private wealth management. For more information on investing with LakeView Asset Management, LLC call us at 888-9LAKEVIEW or request more information by clicking on the contact button on the top right hand corner of the website. LakeView Management, LLC is a Nevada LLC, with its principal office located in Henderson, NV and branch office located in Millburn, NJ
Scott Rothbort is also the publisher of the LakeView Restaurant & Food Chain Report, a newsletter focusing in on food, restaurant, beverage and agricultural stocks. An individual subscription to the newsletter can be ordered at www.restaurantstox.com Furthermore; Scott is also a professor at the Seton Hall Stillman School of Business in South Orange, NJ.
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