E Tourism Trouble

Today stock markets globally moved into the red, because of mounting fear of inflation along with China's crackdown on crypto-currencies heralded by statements from 3 Chinese regulators, of Internet Finance, Banking, and Payments & Clearing. Reuters says they are banning crypto trades. Despite our usual theory that globalizing your positions will help overcome a big drop in the USA—such as we have seen in the last week—it is not working out now. The main London FTSE index fell below £7000 and I cannot find any foreign markets indexes in the black today.

Photo by Annie Spratt on Unsplash

There is one modest winner, gold. JP Morgan analysts wrote today that institutional investors are dumping bitcoin and buying into gold futures instead. But if this is so, gold has much further to rise.

Today's Financial Times front page features former US Treasury Sec'y, Larry Summers accusing the Fed of “dangerous complacency” because “policy projections are suggesting that rates may not be raised for close to 3 years. This is an underestimation of risks both to financial stability” and “to conventional inflation of protracted low-interest rates.” Summers is blamed for “the taper tantrum” when he was Treasury Secretary to Bill Clinton and raised interest rates too soon.

He warns that the theory that there is an equal balance between the risks of inflation and deflation is “very far off an accurate reading to the economy right now.”

What you are supposed to do now is buy into stocks because as prices fall, the odds of your gaining rise. This is how great investors like John Maynard Keynes or Warren Buffett and Charlie Munger and their mentor Benjamin Graham or Peter Lynch managed to outperform.

The good news: stock market gurus like Cathie Wood and Elon Musk will cease getting newbie copycats for their ideas. 20-somethings with cash burning pocket holes will seek wisdom elsewhere.

*I wrote yesterday that AT&T is not a share I cover. Today Rida Morwa writing in seekingalpha.com makes the case for buying T after the panic over its plan to cut its dividend when it gives shareholders stock in its new company. He points out that you will get $2.08/sh until the Newco deal is done, and then get shares you can always sell for his estimate of $9.50 to $12.33 per share of Newco.

*One of our shares is doing a spinoff too, sooner than T. Merck MRK on June 2 will distribute to shareholders, including us, shares in a new company being spun off, Organon & Co. It will be handling 49 Merck products and biosimilars with time to run working in the area of women's health and some established brands. This will include a low dose estrogen-progestin, Nexplanon-Inplanon, and NuvaRing contaceptives; Livial hormone replacement therapy; Follistime for infertility;

The rest of its portfolio will be called Merck Retained Products. You will get 1/10 of an Organon share tax-free for every Merck share you own, without charge. There is bound to be a lot of trading in OGN as people allign their portfolios. OGN will be in Delaware while Merck is HQ's in New Jersey

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