(10-27-2018 03:20 AM)Alpha_Romeo Wrote: What are your thoughts on the mid-term elections? If the Dems get majority in the House (likely) or Senate (not likely but possible), Trump's going to have a difficult time getting anything done. Anyway, if this scenario plays out the markets will reel. Wondering if there are any smart plays to profit on this. Short SPY or DIA?
My politics are simple there are Patriots and there are Traitors and you do not need to be a perfect person to be a perfect Patriot (Myself and Trump included) and I have a warriors hatred of traitors and agree with George Washington that a firing squad is a kind solution to dealing with Traitors.
That said I do subscribe to some of the top political/economic analysts to get their insights to apply to my own planning - though the incredibly brilliant Green Panda has taught me that the Markets Do what they are Supposed to Do - nothing happens in this universe according to Chaos and in all chaos one can detect and predict patterns with the correct tools and methods. And given the 3 actionable picks at the end of this long informative post - I am in the Green Pandas Camp why invest in individual companies subject to insider profits and stock price manipulation (Recently MNST Beverage, GE, WMT as examples) when you can invest in the entire market with safe leverage via S&P Futures and SPY Options as it is nearly impossible to manipulate all 500 S&P Corporations simultaneously.
The Latest Anaylsis per Strategic Intelligence (Former CIA Financial War Strategist) regarding Mid Term Elections and the Economy:
Midterms Mayhem: The Only Thing Certain in the Markets Will Be Uncertainty
New Issue Posted 1 Days Ago By Byron King, Jim Rickards, And Nomi Prins
Midterms Mayhem: The Only Thing Certain in the Markets Will Be Uncertainty
In April 2017, shortly after Donald Trump’s inauguration as the 45th president of the United States, I wrote the following under the title of “America’s New Civil War”:
American politics has reached its most dysfunctional state since the Civil War. This condition will not go away and will intensify until either President Trump is politically disabled or his opponents are politically sidelined. This unprecedented state of affairs has enormous implications for markets and investors… Those who cling to the notion of “politics as usual” will suffer enormous losses as the dysfunction plays out.
After Trump completed his inaugural speech, address to a joint session of Congress and most of his “first hundred days,” one might expect that the White House would fall into a businesslike routine, and the opposition would die down. Nothing could be more wrong. The Trump opposition is emboldened by some early success at wounding the White House, while the White House itself is scrambling from the attacks while aggressively advancing its agenda at the same time. Both sides are dug in for a long battle.
In effect, the United States is in its second civil war. This time it’s not North versus South. Now it’s President Trump and a relatively small band of top officials versus Democrats, global elites, mainstream media, mainstream Republicans, the permanent government, holdover Obama appointees and Obama himself.
This new civil war is not violent or bloody like the first, but the stakes are just as high. The first Civil War (1861–65) was fought over momentous issues including succession, slavery and states’ rights. It resolved the unfinished business of the American Revolution and the Constitutional Convention, and set the United States on the path of civil rights and federal governance it has pursued ever since. This new civil war is being fought on a larger stage over the issues of nationalism versus globalism, secure borders versus open borders, trade, sound money, domestic manufacturing and so-called progressivism versus tradition.
Trump’s election as president shocked the progressive-globalist forces now aligned against him. Progressives viewed their agenda as irreversible: a kind of “liberal ratchet” that always turns in one direction and never goes in reverse. Trump is now moving the ratchet in reverse. But as with a real ratchet, resistance is strong and something will break before the situation is resolved.
For their part, opponents of Trump have called openly for impeachment or have sought to create conditions for a forced resignation in a scenario where both Republicans and Democrats turn on the president. There is no middle ground. Either Trump will subdue the progressives or he will leave office early. Either outcome will prove highly disruptive to the normal political and economic functioning of the United States.
In the same article from which this quote is taken, I outlined five methods by which the so-called “resistance” would try to disable Trump. The first was impeachment. The second was recourse to the 25th Amendment, by which a president can be removed from office for mental unfitness, among other causes. The third was a forced resignation because of the dysfunction caused by relentless harassment. The fourth was assassination (four presidents have been assassinated, and several more were targets of failed assassination attempts), and the fifth was a simple inability to function because of deep state sabotage. I called these the “five arrows” of the resistance.
Now, two years since Trump’s election and 18 months since my original article, and with new elections in a matter of days, is a good time to take stock and see how well my analysis has held up and forecast what’s next in America’s New Civil War and more specifically the War Against Trump.
How’s The Resistance Doing?
My five arrows analysis was highly accurate. Fortunately, there have been no assassination attempts, but the other four arrows were not only used but continue to be used.
Impeachment. If the Democrats take the House of Representatives on Nov. 6 (a possibility discussed below), they will move straight to impeachment hearings as soon as they are sworn in as members in mid-January. The impeachment process will take up a lot of the House’s time during the first half of 2019 (which won’t affect Democrats’ policy agenda because that’s already dead in the water). For investors, the result will be more market uncertainty and the likelihood of a declining stock market because of the uncertainty.
Removal of the president under the 25th Amendment. This got a boost recently when it was revealed that the Deputy attorney general, Rod Rosenstein, offered to “wear a wire” to entrap President Trump into making comments in private meetings that could be offered as evidence of his mental unfitness. The idea is ridiculous and provides easy grounds for Rosenstein’s dismissal and possible prosecution. But it put new life into the ongoing 25th Amendment fantasy harbored by Democrats.
Relentless harassment and deep state sabotage. The harassing of Trump , mainly by the media, and deep state sabotage, mainly from the State Department, Justice Department and the Intelligence Community, has continued as I expected. Yet they have failed. There is no evidence that Trump is worn out by it or even thinking of resignation. In fact, Trump seems to thrive on it and is energized by the opportunity to expose his opponents as “fake news” and “leakers.” This is not just rhetoric.
The list of intentional and negligent reporting errors by The Washington Post and The New York Times is embarrassingly long at this point. Many deep state leakers have either been arrested for leaking or pleaded guilty to lying to investigators. The perpetrators include Treasury official Natalie Edwards (arrested), James Baker (under investigation, resigned from FBI), Andrew McCabe (under investigation, fired by FBI), James Wolfe (Senate staffer charged with leaking) and many others. The deep state may not be dead, but it has been exposed for what it is.
Similarly, the continual harassment and sabotage have not stood in the way of Trump’s agenda. He has renegotiated NAFTA, cut taxes, appointed two conservative justices to the Supreme Court, (Neil Gorsuch and Brett Kavanaugh), partially repealed Obamacare, tightened border security, repealed regulations and much more. Few presidents have accomplished as much in so short a period of time as Trump.
Democratic resistance operative Wilfred Michael Stark III (shown above) was arrested on Oct. 16, 2018 for assaulting a female Republican campaign manager in Nevada. He
has prior arrests and has been accused of stalking, assaulting and harassing other Republican women. His actions are funded by George Soros. More Details Here.
So here’s the scorecard on the resistance.
Assassination has not been tried and hopefully never will be. Impeachment and the 25th Amendment are left-wing talking points for now, but impeachment could take center stage beginning in January. Deep state sabotage and media harassment have unfolded but have not slowed down Trump’s agenda.
My biggest surprise is that the resistance continues despite their failures. I fully expected the resistance to use every tool at their disposal, but I did not expect them to continue the resistance this long or this aggressively in the face of continual failure.
At some point, I expected the resistance to accept their 2016 defeat and turn to the 2018 midterm elections with fresh faces and fresh policy ideas. They have some fresh faces, but the policy ideas are the same mix of higher taxes, open borders and more regulation. The midterm elections are technically local but are shaping up as a national referendum on more Donald Trump versus more Nancy Pelosi.
For now, the resistance continues, but so does Trump. On Nov. 6, we’ll see who prevails. Here is the latest update on the prospects for the elections.
Tuesday, Nov. 6, 2018, is the date of the U.S. midterm elections that will decide control of the U.S. House of Representatives and the U.S. Senate. The outcome of those contests will determine whether Trump is allowed to finish his first term or not. The turmoil surrounding potential efforts to unseat Trump could roil markets to a greater extent than any event since the 2016 votes by the U.K. to leave the EU (“Brexit”) and the election of Donald Trump as president.
The Democrats Have No Likely Path to Senate Control
The Senate is currently divided between 51 Republicans and 49 Democrats (including two Independents who caucus with the Democrats). A change of two seats in favor of the Democrats will give Democrats control of the Senate under the leadership of Chuck Schumer of New York.
Of the 100 Senate seats, 35 are up for election in 2018. Those 35 Senate seats are currently divided among 24 Democrats, two Independents who caucus with Democrats and nine Republicans. Simply put, the Democrats have more turf to defend and potentially more to lose. Twenty of the 35 seats are considered safe for the incumbent party; those seats will not change parties and will not affect the balance of power in the Senate.
The remaining 15 seats consisting of 10 Democrat and five Republican incumbents are close in the polls and will determine the balance of power. Six of those 10 Democratic seats are leaning Democrat. One Democrat seat is leaning Republican. Three of those five Republican seats are leaning Republican. The remaining five seats, of which three are Democrats and two are Republicans, are too close to call. The close races are Arizona and Nevada (both now Republican) and Missouri, North Dakota and Montana (all now Democrat). The Democrats would have to win all five of those close races, while keeping all of their current seats, to gain control of the Senate.
The Democratic control scenario is extremely unlikely to happen. The one Democratic seat leaning Republican is Heidi Heitkamp of North Dakota. The latest polling (Oct. 4) shows Republican challenger Kevin Cramer ahead of Heitkamp by 12 percentage points. Heitkamp’s vote against confirmation of Brett Kavanaugh doomed her chances. North Dakota is a pickup for the Republicans.
This means that the Democrats would have to go five-for-five in the close races and score an upset in one of the “lean Republican” states such as Tennessee or Texas. But Republicans in those states are ahead by 14 points (Blackburn in Tennessee) and 8 points (Cruz in Texas), respectively.
In short, the Democrats have no likely or clear-cut path to Senate control. Investors can safely conclude that the Senate will remain Republican with a slightly larger majority of 52-48 or even 53-47 once the close races are decided.
The House Races Are a Different Story
All 435 seats are up for election in the midterms on Nov. 6. Republicans currently control the House by 236 seats to 193 for the Democrats with six vacancies that will be decided in the upcoming election. The Democrats will have to hold all of their existing seats (including the two Democratic vacancies) and pick up 23 currently Republican seats to gain control of the House.
Of the 435 seats up for grabs, 405 seats (206 Democrats and 199 Republicans) are considered safe for the incumbent party or lean in favor of the incumbent. That leaves only 30 seats that are too close to call. Among the seats that are sure winners or leaning to one party or the other, the Democrats have a net pickup of 12 Republican seats. The remaining Democrat pickup of 11 seats (for a total of 23 pickups) will have to come from that group of 30 toss-up seats in order to win control of the House.
The 30 toss-ups consist of 29 now held by Republicans and one held by Democrats. If the Democrats hold the single Democrat seat and win 11 of the 29 remaining toss-ups while Republicans hold 18, the Democrats will take control of the House.
That’s it. The Democrats have to win 11 of 29 toss-up races for seats now held by Republicans to win the House.
Predicting the outcome of those 29 close elections is extremely difficult because important indicators such as polling, likely turnout and enthusiasm are changing by the day. In addition, the 405 seats that are counted as safe or leaning include 44 seats in the leaning category that could move into the toss-up category by Election Day.
The electorate is in a dynamic mode at the moment and could move to Republicans (as part of the Kavanaugh backlash) or to Democrats (based on concerns about health care policy). Even the best possible analysis must come with fair warning that this is a close election and we won’t really be sure of the outcome until the day after the election, or maybe later.
The Pollsters Have It Wrong… Again
The vast majority of polls and pundits are predicting a Democratic victory in the House. But those predictions must be taken with more than a grain of salt. Here’s why:
Most major pollsters are associated with media outlets such as ABC, NBC, The Washington Post, The New York Times and others who heavily favor the Democrats. Their polling methods can skew the outcome in favor of Democrats by sampling all voters (instead of “likely” voters) and by oversampling Democrats in general and African-American Democrats in particular. Also, small samples can produce larger margins of error. These were the same mistakes the pollsters made in 2016 when they predicted Hillary Clinton would be elected president with a likelihood of 70–90%. The pollsters who were wrong in 2016 will likely be wrong again because they have done little to improve their models or balance their methodology
The quality of polls and the final election results depend entirely on turnout. Pollsters make assumptions about millennial, Hispanic, female and African-American turnout and likely voting patterns that are incorrect. Liberal pollsters routinely overestimate millennial and African-American turnout. They also overestimate the so-called “gender gap.” Focusing on the fact that more women support Democrats ignores the fact that more men support Republicans and the two factors tend to cancel out. Women are more independent-minded than the liberal pollsters assume and male turnout will be greater than the same pollsters assume. Finally, Hispanic voters seem to be splitting 70-30 for Democrats instead of the 80-20 pro-Democratic split the pollsters assume. Once the polls are adjusted for all of these factors, the Republican showing will be much stronger than the media project.
Finally, let’s look at some recent polling data from actual bellwether races. Here are 13 races (shown by state and district number) to watch on election night and in the weeks ahead to get a feel for how the overall House election will turn out:
If the election were held today based on these data, the result would be four seats for the Republicans, six seats for the Democrats and three seats still too close to call. The final results of these 13 bellwether races could be seven Republicans and six Democrats, or nine Democrats and four Republicans. Both outcomes are possible. This is a simple illustration of how close this election really is.
While these data slightly favor Democrats, a few words of caution are in order. Eight of the 13 districts have polling results within the poll’s margin of error. When that information is put in the context of the polling critique above, the races may be closer than they seem. The other caution is that some of these data are over 10 days old. Given the dynamic nature of this midterm election and recent trends toward Republicans, the North Carolina 9th District and the California 10th District may produce surprise victories for Republicans.
Here’s The Bottom Line for the Outcome
Democrats are slightly favored to take control of the House of Representatives.
But the election is much closer than headlines and polls make it appear. When polling deficiencies and dynamic surges in turnout are taken into account, the election will be close and Republicans may hold onto the House, if just barely. Since all of these trends are still in play, close attention needs to be paid over the next two weeks before final forecasts of the outcome can be made with confidence.
If the Senate and House both remain in Republican hands, expect more of the same. The Senate will continue to confirm Trump-appointed conservative judges to the federal courts, and perhaps a justice to the Supreme Court should another vacancy arise. Even with a narrow majority in the House, party discipline will enable a Republican House to work with a Republican Senate and the White House to increase defense spending, pursue bilateral trade negotiations and isolate China on the global scene. Trump will continue his efforts to build the wall and tighten immigration enforcement.
The Left’s Radical Hidden Agenda
If the Senate remains in Republican hands (as expected) and the House is controlled by the Democrats (a close but likely outcome as of today), investors should expect radically different results. With Nancy Pelosi as speaker of the House, Adam Schiff as chair of the House Permanent Select Committee on Intelligence, Maxine Waters as chair of the House Financial Services Committee and Elijah Cummings as chair of the House Oversight Committee, the House will engage in a frenzy of investigations, hearings, subpoenas and other actions with the sole purpose of removing Trump from office or paralyzing his administration. Chief among these efforts will be hearings aimed at impeaching Donald Trump.
Specifically, Elijah Cummings will subpoena Donald Trump’s business and personal tax returns as part of an expanded investigation into alleged Russian money laundering by Trump entities. Trump will certainly resist this on grounds of executive privilege. The result will be protracted acrimony, name-calling and litigation possibly going to the Supreme Court.
Any decision by the Supreme Court will then lead to calls for recusal by Kavanaugh and a revival of various Kavanaugh allegations and investigations of those. An impeachment of Justice Kavanaugh may proceed side by side with an impeachment of Donald Trump. This will lead to an undermining of the role of the Supreme Court and a breakdown of relations between the executive and legislative branches of government. The worst constitutional crisis since Watergate will be the result.
Progressive Democrats have an even more radical agenda than the investigations and impeachments described above. Democrats want to tear up the Constitution as it now stands, based on the view that America should be a “pure” democracy instead of the republic it has always been. Democrats now favor packing the Supreme Court with more justices in order to appoint liberals, apportioning Senate seats based on population rather than two per state, adding Puerto Rico and the District of Columbia as states in order to increase Democratic seats in the Senate, abolishing the electoral college, imposing term limits on Supreme Court justices and other radical steps that rewrite the Constitution without a formal constitutional convention.
Under the current system, voters in presidential elections vote for a specified number of electors in their state who are then instructed to cast all of their votes for one presidential candidate or the other based on which party’s electors were chosen. Under the Democratic plan, the electoral college would be abolished and presidents would be elected by a simple nationwide popular vote. This means that New York and California would dominate national politics and Republicans would find it almost impossible to win a presidential election. This is the Democrat’s answer to Trump’s victory in 2016.
This hidden agenda was captured nicely in a recent article by Ezra Klein in Vox:
It is not difficult to imagine an America where Republicans consistently win the presidency despite rarely winning the popular vote, where they control both the House and the Senate despite rarely winning more votes than the Democrats, where their dominance of the Supreme Court is unquestioned and where all this power is used to buttress a system of partisan gerrymandering and pro-corporate campaign finance laws and strict voter ID requirements and anti-union legislation that further weakens Democrats’ electoral performance. If this seems outlandish, well, it simply describes the world we live in now, and assumes it continues forward. Look at North Carolina, where Republican legislators are trying to change the state Constitution to gain power over both elections and courts. Look at Wisconsin, where state Republicans gerrymandered the seats to make Democratic control a near impossibility. Look at Citizens United, which research finds gave Republicans a 5% point boost in elections for state legislators. Look at Georgia, where the GOP candidate for governor currently serves as secretary of state and is executing a voter purge designed to help him win office.
Klein’s reference to “pro-corporate campaign finance law” conveniently overlooks the decades of pro-union campaign finance that preceded the Citizens United case. His reference to “strict voter-ID requirements” ignores decades of double-voting and illegal voting by felons and deceased voters. His reference to Republican gerrymandering ignores Democratic gerrymanders such as Maryland, where the city of Baltimore is sliced and diced to provide Democratic votes for suburban communities that then elect Democrats. The inconsistencies don’t trouble Klein. His point is that anything other than direct popular voting helps Republicans and therefore must be opposed. The fact that the American Constitution was designed to avoid direct popular voting at the national level is a casualty of Klein’s ideological zeal.
A related analysis based on Klein’s original article was provided by David Leonhardt of The New York Times:
“First, the United States has never gone through a prolonged period of minority democratic rule — that is, when a minority of enfranchised citizens held power over a majority for years on end…
Second, the party now empowered by a minority of voters — the Republicans — is not merely playing by the rules. It is trying to change those rules to maintain power. It is preventing some citizens (usually those with dark skin) from voting, and it is changing campaign-finance laws.
That second point leads directly into a third: The rules governing our country have frequently changed over the last 230 or so years. The number of states has more than tripled. Women, African-Americans and 18-year-olds, among others, have gained the right to vote. In all, the Constitution has been amended 27 times.”
One would think that expanding the vote to include women, blacks and those under 21 would be counted as progress. But for Leonhardt, it’s just a prelude to direct popular voting for president and an end to the electoral college.
The Democratic agenda has been laid bare by columnists like Klein and Leonhardt, even if very few politicians have not said so publicly. If the Democrats take the House, these and many other radical plans will be laid on the table in the form of legislation or calls for constitutional amendments. The Democrats hope to ride this radical platform to victory in the 2020 presidential elections.
The Democrats’ Newest Weapon
Both the policy agenda of impeachment and investigations and the hidden agenda of constitutional change come on top of the Democrats’ newest weapon, which is violence in the streets.
In recent weeks, Democratic activists from Antifa and other radical groups have hounded a Trump Cabinet secretary, press secretary and a U.S. senator and their spouses from restaurants (including most recently Mitch McConnell and his wife, Transportation Secretary Elaine Chao); sent death threats to senators and their staffs; vandalized Republican offices in three states; sucker-punched several Republican candidates, causing one to suffer a concussion requiring weeks of recovery; and sent poison packages to the White House, Pentagon and several senators; among other threats and acts of violence.
Prominent Democrats have had ample opportunity to distance themselves from these illegal and reprehensible acts. Instead, they have remained silent or actively encouraged the violence. Former Attorney General Eric Holder said his recipe for Republicans was to “kick them.” Maxine Waters encouraged Democrats to give Republicans no peace when they are seen in public. Hillary Clinton said “civility” can wait until after the elections. It appears the violence and social disorder are here to stay and will grow worse if the Democrats take the House.
Republican State Rep. Sarah Anderson of Plymouth, Minnesota, was punched by a self-proclaimed “anarchist” after she told him to stop ripping down her campaign yard signs. The full story is here. This is part of a rising wave of violence aimed at Republican candidates and staff.
Trump will respond in kind and effectively go to war with the Democratic-controlled House. Trump thrives on such controversy and will use the impeachment effort to energize his own campaign for reelection in 2020.
The result will be a paralyzed government unable to pursue effective fiscal policy, domestic policy or international relations. While the impeachment wars are raging, the 2020 presidential campaign will go into full swing after the midterms, which will politicize the environment even more. The hardball politics and bitterness that suffused the Kavanaugh confirmation will be back with full force, except the dysfunction will last for two years, not two months.
The Return of a Bear Market
As if this political dysfunction were not bad enough, U.S. stock and bond markets have now turned more volatile and are suffering huge losses for the first time since last February. The difference between now and then is these losses may presage bear markets rather than being mere blips in long bull markets.
Many analysts have opined on the volatility and downward trend in U.S. stock markets in October 2018. The 5% decline in stocks from Oct. 1 through Oct. 12 was the steepest decline since February. However, stocks recovered the February losses and reached new highs by September. The October decline, although not as steep as February so far, may contain the seeds of a full-scale bear market.
Theories about this decline include a reaction to continued monetary tightening by the Fed, the impact on earnings of multinational companies from a strong dollar and the potential for inflation and higher wages that could hurt corporate profits. While all of these theories have some merit, the most likely explanation is also the simplest one: The market is discounting uncertainty arising from the upcoming elections. If the government is about to become dysfunctional based on possible Democratic control of the House, that’s a good reason to lower expectations for U.S. growth and therefore stock prices.
The bond market decline is even easier to explain. The Fed is raising rates, but there is still little evidence of inflation. In fact, the latest inflation figures show a slight decline in inflation compared with recent months. This means that increases in nominal rates controlled by the Fed are also increases in real rates as dictated by the economy. Bond prices move inversely to yields. As the Fed raises rates, and as markets anticipate further rate increases, bond prices collapse. Some analysts foresee the end of the 37-year bull market in bonds that began in 1981.
It’s unusual to see stocks and bonds collapse in tandem. In a strong economy interest rates may rise, hurting bond prices, but stocks do well based on growth. In a weak economy, stocks may suffer, but bonds rally on lower interest rates. The current situation, where the Fed is raising rates even with signs that the economy may be slowing due to the strong dollar and trade wars, results in stocks and bonds both going down. Investors have nowhere to hide except possibly cash or gold
This reality of the current economic factors described above is an accident waiting to happen in good times, but is even more likely to occur during volatile and highly contested election cycles. Violence by the resistance, including Antifa, can easily trigger a violent response by their targets or by radical right-wing militias. This will be one more tragic step on the path of social disorder and the new Civil War. Markets will be repulsed by this and investors will head for the exits, looking for safe harbors such as the aforementioned cash and gold, along with land, natural resources and other hard assets.
How You Should Play the Election
What does this outlook mean for investors?
With stocks and bonds declining at the same time, there are few sanctuaries in U.S. securities markets. Overseas markets are no better because of uncertainty in Europe due to failed Brexit negotiations and Italian resistance to EU budget directives.
Emerging markets are on edge due to currency and debt crises in Venezuela, Argentina, Turkey, Indonesia and elsewhere.
Even China, the world’s second-largest economy, is running out of tricks and is now staring at a slowing economy, rising inflation, capital flight and an emerging debt crisis.
Investors have nowhere to turn.
One bright spot we see will be U.S. defense stocks. President Trump is determined to rebuild America’s military strength despite deficit concerns. Nondefense agencies may have to tighten their belts, but the military has been given a green light to acquire F-35 fighters, Ford-class aircraft carriers, drones and satellites and to restock depleted inventories of cruise missiles and artillery. The defense buildup will proceed regardless of fiscal constraints or even a U.S. recession.
Northrop Grumman (NYSE:NOC) is the defense stock we recommend buying. Northrop produces many components that go into the F-35 fighter jet. It also has a dominant position in critical defense programs including the B-21 bomber, satellites, cybersecurity and drones. With industry-leading revenue growth prospects, shares of NOC are likely to rise by 15–20% over the next year. In a rockier market environment, many investors will seek the safety of defense stocks, like NOC, which have visible streams of revenue and generous dividends and stock buybacks.
We will not be tracking Northrop Grumman in our regular portfolio that Strategic Intelligence readers receive each month but feel it is a great addition for income in today’s financial and political climate.
The acrimony, uncertainty and violence described above will be highly negative for U.S. stocks and bonds. It’s not that markets will choose sides. It’s more the case that markets despise uncertainty, and the political dysfunction described above will produce the greatest political uncertainty since the Cold War and Watergate.
Investors can prepare for this outcome now by reallocating stocks toward defense names like Northrop Grumman and also increasing allocations to cash and gold. Then be prepared to stay up late on election night to see how events transpire.
ACTION TO TAKE:
Buy Northrop Grumman (NYSE: NOC) up to $330 per share.
Speaking of America’s defense, read on as my collaborator, Byron King, gives his insight on the state of America’s military and his recommendation to profit from an oil and gas powerhouse poised for a rebound. His analysis is below.
Regards,
Jim Rickards
Editor, Rickards’ Strategic Intelligence
More Actionable Picks:
I like Schlumberger (NYSE: SLB), the oil field service company. Nearly a century old, Schlumberger is a technology powerhouse. It’s a critical, indispensable global provider to the arenas of geophysics, downhole well logging and production. With a market cap of $81 billion, shares currently sell at a five-year low of $58. Dividend yield is 3.3%.
With global oil prices continuing to rise in the months and years to come, I see Schlumberger shares moving back up toward the $100 range, for a potential 66% gain before dividends.
In the past year, Schlumberger has posted an unusual earnings loss. Management is working to turn things around. When the earnings return — and they will — I expect that SLB shares will become Wall Street darlings again.
ACTION TO TAKE:
Buy Schlumberger (NYSE: SLB) up to $65 per share.
How to Play the Infrastructure Boom
As central bank money becomes even more necessary to sustain growth, expect an infrastructure spending shift to take place globally in the coming months.
Infrastructure stimulus could counteract global GDP slow-downs in the U.S., the EU, China and other more stable emerging markets that are closely connected to more developed economies.
As I discovered from my meetings, locales like Mexico are well positioned to benefit from such an infrastructure boom. In the aftermath of the post-Trump tax cut world, this will be a key investment theme in the coming months and into 2019.
Mexico’s premier cement company, Cemex (NYSE: CX), is a superb infrastructure play to consider. The company is heavily exposed to construction activity in Mexico but also has strong demand and projects in the U.S. and Europe and around the world.
A new administration will take office in Mexico starting Dec. 1. It has already committed to infrastructure building as one of its key platforms.
Cemex is involved in major projects in Mexico as well as the U.S. Just this month, the company announced its participation in the construction of Salesforce Tower, the tallest building in San Francisco. It has also won accolades for its plants throughout the U.S., where it employs American workers at over 160 facilities in the southeast alone.
On the domestic front, Cemex announced supplying over 60,000 cubic meters of concrete for the construction of what will become the tallest tower in Mexico City. Cemex is scheduled to report its third-quarter results on Oct. 25, and we believe these will provide a lift to the infrastructure sector.
In general, long-term construction projects that enhance infrastructure and extend on both sides of the border will transcend periodic slower-growth periods. This is important to note before the release of U.S. GDP figures on Oct. 26. We believe the figures will reflect what the IMF’s recent report concluded about the U.S. — that GDP growth is likely to slow next year. But sectors such as infrastructure, that are more strategic about their own growth, will outperform the markets.
Being strategic in certain sectors of the market gives savvy investors an edge in market performance. We expect shares of CX to rise by 30–50% in the coming months on improved sentiment toward the infrastructure sector.
ACTION TO TAKE:
Buy Cemex (NYSE: CX) up to $6.50 per share.
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Good to hear the scotch.
