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What’s happening in China is much worse than we hear. Bernie Sander’s China insanity; Should I own bonds?

What’s happening in China is, sadly, not good

China is clearly managing the news flow out. So our TV and print media report the little they have. And it’s gruesome.

The New York Times leads off today with:

Workers are stuck in their hometowns. Officials want detailed health plans before factories or offices can reopen. Assembly lines that make General Motors cars and Apple iPhones are standing silent.

More than two weeks after China locked down a major city to stop a dangerous viral outbreak, one of the world’s largest economies remains largely idle. Much of the country was supposed to have reopened by now, but its empty streets, quiet factories and legions of inactive workers suggest that weeks or months could pass before this vital motor of global growth is humming again.

The global economy could suffer the longer China stays in low gear. It has been hampered by both the outbreak and its own containment efforts, a process that has cut off workers from their jobs and factories from their raw materials. The result is a slowdown that is already slashing traffic along the world’s shipping lines and leading to forecasts of a sharp fall in production of everything from cars to smartphones.

  Joel Ross reported this morning in his Ross Rant newsletter:

The possibly more real number of virus cases in China slipped out on Tencent, and it may be true that far more have died, and as many as 150,000- 200,000, or more, possibly are already infected, or are suspected of being infected since there is evidence that infected people are being turned away from hospitals because there are no more test kits or other medical supplies to cope. China only reports what they claim are “confirmed “ cases, not possible cases. And nobody believes what they say.

However,  a smuggled video taken inside a Chinese hospital shows extreme chaos with dead bodies in the hall with crowds of patients. A friend, who is a general in the US army medical corps, has been inside Chinese hospitals surreptitiously before the virus. He said they are not capable of coping, which is some verification of that smuggled video. He also has a Chinese sister-in-law still in China who claims things are really bad. Nobody knows what is really going on. Food is becoming in short supply in quarantined areas.  This whole situation is horrendous for China no matter the real numbers. It not only creates vast disruption to their economy now, plus inflation, but the more this continues, the more and faster companies will move out permanently, the fewer tourists will come for a long time. The public is getting very upset by what is happening and the lack of transparency. It is a nightmare scenario for China. At the same time, the CDC and HHS are doing a great job of protecting us, so the US will come out of this with nil impact. This just adds to the US strength over China for future negotiations. We likely will never know the truth, but it is very bad. The condo markets in the US, Vancouver and London will get hit hard with no Chinese able to travel.

You cannot vote for Bernie Sanders

Cramer ranted against him last night. That prompted me to start learning more about the man’s beliefs.

It’s frightening how little he understands of the real world of business and commerce. Which is understandable since he’s never had a real job and never met a payroll.

His ideas on China border on insanity. From his web site, FeelTheBern.org,

Bernie’s Agenda for America calls for ending free trade policies. Instead of passing such trade deals, Bernie argues we must “develop trade policies which demand that American corporations create jobs here, and not abroad.”

His “solution” is, inter alia, supporting unions. “Standing with workers on picket lines is something I’ve done my entire life– that’s what I do and what I believe. Unions are my family.”

I don’t have to explain to my readers the enormous benefits of free trade. I don’t have to explain how many wonderful things I buy that are made in China — yet give American workers jobs designing them, selling them, servicing them, etc. Want to make iPhones, laptops, backpacks, sneakers, clothes in America? Find the workers. Good luck. We’re at full-employment.

Bernie’s idiotic policies would destroy vast American industries.

Our stock portfolio continues to do extremely well

Today, our biggest gainers are TMUS, CCI, AMT, NVDA, QRVO and SWKS.

But Amazon is way over $2000 — it’s now $2,158 and Apple is $322.

Should you own any fixed income? CDs. Bonds. Should you chase yield? Hold enough for a year’s spending. But read this. It’s also from today’s Ross Rant.

Jeremy Siegel, the stock market professor at Wharton, now says having 40% in bonds does not make sense, given that rates will likely remain quite low for maybe years. One of his points is that with the aging of population, there are huge increases in the number of investors in bonds, which then drives down yields. The more money pouring into bond funds needs to be invested, so bond prices rise and yields decline. An article in the Saturday WSJ makes an analogous point that there are massive amounts of money pouring into bond funds. Siegel makes the same point I have made for a long time. Over time, stocks will be less volatile than bonds, and will provide a materially higher return. Back to my duration point recently. Short term bonds are less volatile, but yield a lot lower returns as a result of lower risk over time. I reiterate, that unless you need the money in the very short run, holding mostly equities is a far better risk reward structure that 60-40 bonds. A lot depends on your term horizon. If you note, even after the crash in 2008, the equity markets have gone on to record new highs over 11 years. You just need to know when to get out at the start of a massive crash scenario like 2000 or 2008. The key is to not react to short term events, and to take a long term view of rates, inflation  and the US economy. You have to look past the pundits who are paid to react to the latest whatever, and who try to be heroes, and instead  just make your own assessment of the world. The US is on a roll, and it might be able to last for many more years depending on the 2020 election. If Trump wins, then the good times will roll on. If one of the insane Dems like Bernie wins, go all cash or gold.

The bottom line:

+ Yields are staying low.

+ If you owe money — say on real estate — refinance it instantly, if not sooner.

+ Yield stocks can make a little sense, since some offer capital appreciation. We have two:  LADR (7.3% yield) and BXMT (6.4%).

+ Technology/cloud stocks make sense, but so do nice growing industrials, like Generac, which can’t keep up with the demand for emergency generators and ZTS, which keeps our precious pets alive and healthy.

+ Keep away from all the sectors I’ve warned against — energy, cannabis, bitcoin, big banks and others I can’t remember this morning.

+ Residential real estate is crashing in some weird places — like the east side of New York City, which used to be pricey, but now is far cheaper than the West Side. Moreover, some of the east side apartments I’ve eyed lately have magnificent views.

+ If own holiday or second or third homes in SALT states and are considering selling, do it instantly. Prices will continue to fall. Take your loss and invest it in the market. You’ll recoup your loss in months.

+ Meantime, get a new lower appraisal on your property. That will at least reduce your taxes.

+ You buy an apartment or house today you love it, want to live in it and enjoy it. You don’t buy it because it may appreciate, says master New York broker Nan Schiff.

+ Despite the recent rise in stocks, there are still great buys out there. Go through my list and see what you like — Click here.

I’m proud of my advice in this column over the past several years. I hope some of you followed it and are up nicely.

There are problems we can’t solve. Hence I leave you with this famous story:

The classic Jerusalem story

A female CNN journalist heard about a very old Jewish man who had been going to the Western Wall to pray, twice a day, every day, for a long, long time.

She went to check it out.

She went to the Western Wall and there he was.

She watched him pray and after about 45 minutes, when he turned to leave, using a cane and moving very slowly, she approached.

“Pardon me, sir, I’m Rebecca Smith from CNN. What’s your name?”

“Morris Feinberg,” he replied.

“Sir, how long have you been coming to the Western Wall and praying?”

“About 60 years.”

“60 years! What do you pray for?”

“I pray for peace between the Christians, Jews, and the Muslims.”

“I pray for all the wars and all the hatred to stop.”

“I pray for all our children to grow up safely as responsible adults and to love their fellow human being.”

“I pray that politicians tell us the truth and put the interests of the people ahead of their own interests.”

And finally “I pray that everyone will be happy”.

“How do you feel after doing this for 60 years?”

“Like I’m talking to a stone wall!”

— See you tomorrow. — Harry Newton

 

 

 

 

 

  • Glenn

    What % was your column/technology investor portfolio up in 2019? Wish it showed purchase date on right hand side. Between Adobe (wish I bought this year), AMT, APPL, BX, DOCU (I use everyday), SEDG, etc. You must have been up 45% for the year?

  • Dman

    Harry….you do remember me telling you that Trump was going to deposit your evil satanic dem party into the trash-bin-of-history?

    The Great Awakening
    WWG1WGA
    Q

  • TomFromVa

    If I were King, I would require everyone to have a “real” job before entering politics. And to have managed people and payroll before entering the upper ranks.

    I have pretty much given up on bonds. I used to buy Munis when you could get 5% tax free. But that hasnt happened since 2008 and I am reluctantly concluding that it never will. I think the reason for this is that America has a tiger by the tail – if interest rates go to 5% then we have to pay over a trillion dollars EVERY YEAR just for interest on the federal debt. The result is that I am sitting on a large pile of cash that I was planning to use to jump in when bond yields came back. Now its just sitting there getting 1.5% interest – but at least I sleep well at night.

  • Scooter

    Unfortunately there are more socialists in the Democratic party that we think.

    • Dman

      Harry will vote for Bernie.

      Hey Harry that AG from the southern district of Manhattan is soooo very very impressive….LOLOL!

      Yea, affirmative action is just great isn’t it?

  • Dman

    Harry….Tell Morris Feinberg that all of his prayers are going to be answered.

    The Great Awakening
    Trust The Plan
    WWG1WGA
    Future Proves Past
    Enjoy The Show
    Q