- The financial tool so powerful the feds investigate it
- More secrets of the hedge funds, spilled today
- Guenthner on whether the new “tech wreck” is over yet
- Trade war jitters recede; Rickards says they’ll return
- If Trump goes after Amazon, here’s who will benefit most
It’s a financial tool so powerful it’s been investigated by the SEC. Twice.
We hinted at it yesterday — something that was key to the success of our Zach Scheidt years ago, when he was managing a hedge fund.
“I was in charge of $20 million of my firm’s money, as well as $20 million in individual clients’ accounts,” he recalls. “My job was to help high-net-worth clients generate income while minimizing risk.
“To do that, I had access to an endless array of analytical tools, from a complete library of historical financial data to some of the most sophisticated computer systems ever developed.”
But the most powerful tool of all was, in a way, a happy accident.
The firm Zach worked for happened to rent office space from one of the major investment banks. Along with the office space came access to the firm’s technology and trading platform — along with something called the squawk box.
The squawk box looks a little like an airplane’s black box. While an airplane’s device records the past, the squawk box broadcasts the future… at least, what analysts believe the market’s future will be.
“The box was responsible for giving the investment bank’s traders access to the most profitable opportunities day in and day out. And since I had a squawk box on my desk,” says Zach, “I had access to the very same profit opportunities typically hidden behind Wall Street’s cloak of secrecy.
“Squawk box networks give traders such an unfair advantage that the process has even been investigated by the SEC.” Zach notes: “In 2006 and again in 2012, prosecutors investigated Wall Street firms and individual brokers for offering information to traders that was too powerful and gave them an unfair advantage.”
Granted, the bulk of traders with access to the squawk box used it ethically. But it still afforded them advantages that everyday investors could only dream of.
“I once heard the firm’s stock analysts predict that a small tech company was about to find itself in the middle of a bidding war,” Zach recalls. “The brokerage instructed its traders to acquire shares of the company for their best clients.
“I got in on the action, too. And when two major companies starting going after the small company, I handed my clients a nice gain.
“Of course, without the squawk box, I wouldn’t have known about the opportunity until well after the fact. Everyday investors were in the dark until the takeover rumors made headlines. And by then, the biggest profits had already been made.”
Now you can see what we meant when yesterday we referred to “the biggest hedge fund secret of all.” Zach is making the power of the squawk box available to you — leveling the proverbial playing field.
As you can imagine, there are powerful forces on Wall Street who aren’t happy about what Zach is doing. For that reason, he has a small request before he tells you more about the squawk box and how it works and the sort of profit potential it can deliver you. He’s asking you to sign a confidentiality agreement.
It’s available at this link. All you have to do is agree to the terms and then enter your initials. The form doesn’t obligate you to do a thing. All you’re agreeing to do is not share the information you’ll see with anybody. As soon as you agree to the terms, you’ll be taken to a web page where Zach reveals all — including trades that could make you well north of $10,000 in a matter of days. Simply initial the agreement right here to get started.]
To the markets today — where tech stocks are once again dragging everyone else down.
When we left you yesterday, the Dow was up 200 points. By the close, it was down nearly 350. The tech-heavy Nasdaq closed down nearly 3%. Colleague Greg Guenthner tallies the carnage…
- “Notorious short-selling firm Citron Research slammed Twitter (in a tweet, ironically), nailing the stock with a $25 price target. Twitter will generate $400 million selling user data in 2018, Citron notes, putting a target on the company’s back once the feds are finished trashing Facebook. A wave of selling sent the stock lower by 12% on the day
- “Nvidia Corp. added fuel to the tech flameout as it suspended its self-driving vehicle tests following last week’s fatal self-driving Uber accident in Arizona. It finished Tuesday trading down almost 8%
- “Not to be outdone, Tesla Inc. (NASDAQ: TSLA) stock also posted a major breakdown yesterday. Shares slid below $300 for the first time since November after news hit that the National Transportation Safety Board opened a probe into a fire that resulted from a Model X crash in California. The stock dropped more than 8% by the closing bell.”
Thing is, bad news happens all the time with tech stocks. It’s the reaction that’s different now. “Six months ago,” says Greg, “no one would have batted an eye over Twitter selling user data. After all, that’s how the company makes money! But sentiment has taken a dramatic turn against big tech.”
If you’re thinking now’s the time to “buy the dip,” Greg urges you to think twice. “Give the tech sector some time to settle down before we start thinking about what we want to buy. Frantically bottom-picking tumbling stocks could leave us stuck with some nasty losses in a tough market.”
Indeed, as we write the Nasdaq is down another 1% today.
Alas, money fleeing stocks is not flooding into gold. After cresting $1,350 on Monday, it’s below $1,330 this morning.
That’s largely a function of dollar strength, with the dollar index approaching 89.8.
It’s Treasuries that are rallying in a serious way. As you might know, yields fall when prices rise… and this morning the yield on a 10-year note is 2.76% — the lowest since early February.
We have two big economic numbers today. The first is the Commerce Department’s third and final guess at GDP for the final quarter of last year. It rings in better than expected at an annualized 2.9%.
But the other number of the day bodes ill for GDP in the quarter that ends this week. The February trade deficit totaled $75.4 billion.
“Net exports” are a drag on the GDP figure. As of last Friday, the Federal Reserve Bank of Atlanta was projecting first-quarter GDP growth at an anemic 1.8%. Look for that number to continue climbing down…
“On Thursday, March 22, 2018, the trade war that has been brewing between China and the U.S. broke into full-scale combat,” says Jim Rickards.
Yes, we know. The market has shaken off trade war jitters in recent days. Jim assures us they’ll be back.
“President Trump signed an executive order pursuant to Section 301 of the Trade Act of 1974,” he explains. “This order imposed $50 billion of penalties and tariffs on Chinese exports to the U.S.”
It didn’t take long for China to take the gloves off and strike back. In a matter of hours, China imposed tariffs on $3 billion of U.S. exports.
The first trade war with China since 1930 is on… and, according to Jim, “may continue for years to come.”
The trade war should come as no surprise: Trump’s been gunning for it since his early days on the campaign trail in 2015.
“It’s useful to review the events of the past few months to see how this trade war has been escalating,” says Jim, “before we consider the full implications of the Section 301 penalties and tariffs.”
Robert Lighthizer — United States trade representative, Cabinet member and Reagan administration veteran — is a pivotal player in this trade war.
“In the early 1980s, Lighthizer used high tariffs on automobile imports to force Japanese and German auto manufacturers to move their plants to the U.S.,” Jim says, “This resulted in the creation of thousands of high-paying auto manufacturing jobs in the U.S.”
Lighthizer is breaking out his old playbook — only this time, he’s set his sights on China and “a long list of industries and manufactured goods including steel, aluminum, electronics and telecommunications equipment.”
Here’s a timeline of events just this year, leading up to an all-out trade war:
- Jan. 22: “The USTR announced 30% tariffs on imported solar panels and 20% tariffs on washing machines.” It’s not surprising that China and South Korea are leading exporters of both
- March 1: “President Trump announced 25% tariffs on imported steel and 10% tariffs on imported aluminum. These tariffs were primarily aimed at China but were applied globally”
- March 2: “The EU threatened to strike back at the U.S. steel tariffs by imposing their own tariffs on a variety of U.S. exports to the EU. President Trump was unfazed by the threats and wrote that ‘trade wars are good, and easy to win.’
“The trade wars were escalating, at least rhetorically, before the first tariffs were even collected,” Jim says.
But “inside the Beltway, conventional wisdom said that Trump would not follow through on his threats… The conventional wisdom proved wrong.”
Trump showed he was serious about punishing China for — among other things — theft of U.S. intellectual property that’s estimated at more than $1 trillion.
“The process for Section 301 is that the USTR conducts a study to prove the theft of intellectual property, estimates the economic impact and makes recommendations to the president for penalties that might be imposed,” Jim says.
“The president then has 90 days to impose those penalties,” he continues. “He barely waited 90 minutes!
“China wasted no time with their retaliation. By late Thursday afternoon, New York time (early Friday morning in Beijing), China announced tariffs on $3 billion of U.S. exports.
“It is believed that these $3 billion of tariffs are just a token response to save face and show that China will not take the Trump tariffs lying down.”
How will Section 301 affect the U.S. economy and markets? When Trump signed off on Chinese tariffs and penalties, the Dow shed 700 points. The next trade war shock to the markets? That’s only a matter of time…
[Ed. note: Jim recently took the wraps off an investing strategy honed years ago during his work with the CIA. Only now in 2018 has he been in a position to “declassify” what he knows.
He spells it out in a brief video here — it’s only about three minutes. Fair warning, though: This video will be pulled from the web at midnight tomorrow night.]
Meanwhile, the president is also eyeing a massive “backdoor bailout” for pensions and insurance companies.
At least that’s our takeaway from a story at the political website Axios that Drudge linked to this morning. It revisits the possibility of a federal antitrust lawsuit against Amazon. “He’s obsessed with Amazon,” says an anonymous source. “Obsessed.”
But here’s the part that got our attention: “Trump’s wealthy friends tell him Amazon is destroying their businesses. His real estate buddies tell him — and he agrees — that Amazon is killing shopping malls and brick-and-mortar retailers.”
Hmmm… Is Amazon the biggest concern of “his real estate buddies”? Or is it all the debt they incurred to finance their stakes in all those malls and storefronts?
You know who’s also at risk because they hold big stakes in commercial real estate? Pension funds and insurance companies. Surely they’d breathe a sigh of relief if the administration followed through on the president’s “obsession” with Amazon. Stay tuned…
Best regards,
Dave Gonigam
The 5 Min. Forecast
P.S. Seriously, we don’t know how long we can keep Zach Scheidt’s new presentation online. He’s spilling one of Wall Street’s most profitable secrets — making it available to everyone.
Because of its sensitive nature, he’s asking you to keep everything on the QT. That’s the reason for the confidentiality agreement. But as long as you initial the form, you too will be in the know!
