This is Mrs. Scott Rothbort back helping Scott publish today’s My Gut Feeling. Scott continues to make progress and he’s anxious to get back in the saddle; but realizes he needs more time to get back to peak physical condition. Trust me, if he is not at Saratoga Race Course in August, he is not back to normal yet. As always, he devotes his energy to the daily grind of trading and performing market research.
The last time Scott wrote, he focused on what could happen in August. The concern is always not what to expect but what can happen unexpectedly, i.e. an exogenous event. Until a few days ago, the month was performing quite well and corporate earnings reports were exemplary in the aggregate; that is until the sabre rattling came out of the People’s Republic of North Korea (PRNK). That was followed by a unanimous United Nations resolution and President’s Trump’s warning that any provocation by the PRNK would be met with “fire and fury.”
Donald Trump Faces Similar Missile Challenges As Did JFK
It may surprise you that there are many similarities between President Kennedy and President Trump, including economic, tax and foreign policy, as well close ties with an inner family circle; but we can leave that to another time to discuss.
Many of you who date back to the construction and ultimate destruction of the Berlin Wall understand what it was like to live during The Cold War. Now, a new version of the cold war is underway, with the provocateurs being the PRNK and Iran. For those of you who did not, this article will provide some historical context.
So of course, the market’s reaction has been to sell off risk and increase volatility. Scott sees great parallels between what is happening now with what happened during the Cuban Missile Crisis of 1962. So, let’s go back 55 years in history.
The Cuban Missile Crisis was created when the then Soviet Union (USSR) placed missiles (presumably with nuclear warheads) in Cuba, a short distance from the shores of the US Mainland. The current crisis has missiles (again presumably with nuclear warheads) within reach of South Korea, Japan and the US territory of Guam.
Going back in time, the Cuban Missile Crisis elapsed over a period of thirteen days. The John F Kennedy Presidential Library and Museum has an excellent timeline of what occurred.
Of course, that was before the cable news and Internet age, so in 1962 news dissemination was slower and more closely guarded. While there may have been a sense of something being afoot, and perhaps some leakage to the media, prior to Crisis Day 7, October 22, 1962, it was not until 7:00PM on that day that President Kennedy addressed the nation. Parenthetically, it is hard to believe that this great man would have turned 100 this year, had his life not been cut short. Enjoy the nostalgic video below.
Stock Market Panic Will Be Short Lived
So, this now begs the question: how did the stock market perform before, during and after the Cuban Missile Crisis? Scott went to his deep database to share this table with you:
|DATE||S&P 500||DAY CHANGE|
Note the elevated day to day market volatility back during the Cuba Missile Crisis. The markets are now in that pre-October 24, 1962 phase of the PRNK crisis. Please note that the market declined in 1962 for a few days after President Kennedy’s speech to the nation.
Scott sees a similar pattern to what occurred in the stock market 55 years ago and what will likely play out now. He also sees a resolution of the current crisis where the People’s Republic of China and the Russian Federation make similar announcements in support of the UN Resolution and warning the PRNK not to act unilaterally. He expects weekend diplomacy to take place between the three global superpowers. With today being a summer Friday, the sell-off that began this week will likely continue today. A rebound could commence as early as Monday if there is a meeting of the minds between those three nations and if President Trump tones down his bluster and perhaps addresses the nation in a more traditional way. Otherwise it may play out a few more days before these events come together.
The market was in panic mode on Thursday. It was a real nasty session. What you need not do is panic. Panics don’t end on the afternoon close, but rather end after a reversal of a lower morning opening. Hence, that’s why I think this fear and panic has a bit longer to play out. The end of the world is not coming. Good will win out over evil. It’s August and unexpected things seem to happen in August as Scott has noted. The stock market has had a fantastic bull run since Election Day, and was due for a pullback. The sabre rattling from the lunatics in DPRK just might be the cause of such a much-needed correction.
P.S. Back to stocks. Nvidia (NVDA) reported results after the market closed yesterday. The company far exceeded top and bottom line estimates as well as the “whisper” numbers of higher than officially published expectations. Fundamentals will drive this stock in the long run and fundamentals are growing quite rapidly for NVDA. The stock traded lower in the after-hours session by about 7%. In any other market, without the North Korean hysteria, NVDA would be rising handily.
Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView Asset Management, LLC was long AAPL, EDC, EEM, SSO, SPXL & XIB — 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.
– Read Scott’s intra-day thoughts and comments on Scutify for which he is a co-founder of its parent company Wall Street All-Stars, LLC
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