China’s Alibaba Antitrust Case, Yuan Appreciation, FANMAG Not Confirming New Market Highs And Cathie Wood

This is important because of the amount that we import from China and how much of our debt they have historically bought. As the Yuan (CYB) strengthens against the Dollar (UDN) our imports from them become more expensive resulting in inflation for consumer goods and business inputs. China has also stopped accumulating US treasuries which, ceteris paribus, should cause our interest rates to rise. Finally, according to Stephanie Pomboy, by letting its currency appreciate, China is trying to make the Yuan a viable alternative to the Dollar: “Progress toward that goal, I believe, will be the central topic shaping the New Year and those that follow,” Pomboy wrote.

“[FANMAG has] refused to confirm the new highs in the market.” If they start to break down, “that could be an important warning”, writes Ned Davis of Ned Davis Research, quoted in Ben Levisohn, “Small Caps Have Been Too Hot”, Barron’s, December 26 [SUBSCRIPTION REQUIRED]

While everybody is focused on the red hot Russell 2000 which has doubled in the last 9 months, less attention is being paid to the lagging Mega Caps that led most of the bull run since March. Of AAPL AMZN MSFT GOOG GOOGL FB & NFLX, only GOOG GOOGL has made new highs since September 2 and are therefore not confirming the overall markets new highs. As these six stocks make up more than $8 trillion in market value as of Thursday’s close, it’s a concern how much higher the market can go without them.

The best lack all conviction while the worst are filled with passionate intensity – WB Yeats, “The Second Coming”

Instead of investing in the Mega Caps, investors have moved on to hotter, sexier, smaller names like those owned by Cathie Wood’s Ark Invest. Wood became famous for her outlandish Tesla (TSLA) Price Target which has miraculously come to fruition and Ark’s Innovation ETF (ARKK) is up more than 300% since the March lows, 40% of which has come just since November. As a result, performance chasing investors have rushed into the ETF causing AUM to explode to around $18 billion.

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