Not long after this column goes online, my co-coach/stepson Gunnar and I will grab the laptop, gather some papers off the countertop and head down to our neighbor’s house.
We’ll eat a chicken wing or two, hold some last-minute discussions and then get our fantasy football draft underway. Hopefully, the bonding time we’ve spent preparing will pay off with a neighborhood league victory a few months down the road.
Up until I started doing this a couple years ago, I didn’t realize how much work goes into it. Scouring player reports, researching sleepers and busts, coming up with a rock-solid draft strategy, deciding which players are worth paying up for and which aren’t, making trades and lineup changes during the year – it’s kind of like building a portfolio.
But there’s also one major difference: When you lose at fantasy football, there aren’t any significant real-world consequences. When you make bad financial choices or fail to come up with a solid investment strategy, it hits you right in the wallet.
|Apple is preparing for a product refresh.|
That’s why the next several days are so important. Our fantasy league playoffs and the NFL Super Bowl are a long way off. But some real-life, financial market matchups and showdowns are right around the corner, and each one has the potential to rock stocks to the core.
Key tech bellwether Apple Inc. (AAPL) will kick things off tomorrow when it holds its annual product refresh meeting in San Francisco. Analysts expect the consumer tech giant to unveil the iPhone 6S product line, with potential upgrades like an improved camera, upgraded processor, and a “Force Touch” screen similar to the one already included on the Apple Watch.
The company may also update its Apple TV box with voice control, universal search, and integrated gaming functions. Lastly, we could see a new iPad Pro tablet with a larger screen and/or touch-sensitive screen.
Why is this event so important? Because Apple is holding it at a time when investors are very concerned about the firm’s future growth. They’re worried about slowing iPhone sales momentum, underwhelming watch adoption, and problems in China tied to that country’s economic slowdown. Those concerns have combined to lop 15% off Apple shares since July, so the company really needs to score a touchdown tomorrow.
|“Next up is the Federal Reserve policy meeting Sept. 16-17.”|
Next up is the Federal Reserve policy meeting Sept. 16-17. It seems like hardly a day goes by without another Fed member opining on the state of the economy, the markets and interest rate policy.
The latest was San Francisco Fed President John Williams, who told the Wall Street Journal he’s optimistic about the outlook for growth but remains concerned about a strong dollar and market volatility. That’s similar to the message coming out of other Fed speakers recently.
Bottom line: This Fed decision could really be one for the ages. The clock is ticking down … the Fed wants to get into the rate hike end zone … but they’re hoping the stock market equivalent of Malcolm Butler doesn’t show up and ruin the play!
Then there’s China, a country that’s getting blitzed, sacked, or run over almost every single day. We just learned that Chinese exports dropped 5.5% in August, while imports plunged 13.8%. That implies the yuan will need to depreciate much further to give the country’s sputtering exports a boost.
But the very same devaluation trend is causing foreign and domestic investors to bolt. Fresh data showed China burned through a record $93.9 billion worth of foreign exchange reserves in August trying to prop up the yuan and offset capital outflows.
At the same time, Goldman Sachs estimates China has shelled out another $236 billion to prop up its stock market. But even that financial Hail Mary hasn’t been able to boost asset prices for more than a few hours or days. The Shanghai Composite Index is down more than 40% just since June.
That tells me a major Super Bowl-style showdown between the bulls and bears is looming in China. Given the history of major market moves in September and October, it could come at almost any time.
In light of these major showdowns, I hope you’re sticking to the game-winning strategies I’ve been outlining recently …
First, keep playing defense with most of your funds. The deteriorating fundamentals and technicals I highlighted all summer long hinted at the August market chaos. None of those indicators have improved since then. If anything, they’ve gotten worse.
That means you have to keep more cash on hand, grab profits and cut losers more quickly, and stick with very highly rated stocks in safe sectors.
Second, for a portion of your money, consider investment vehicles like inverse ETFs and put options. How much you invest, and whether you want to go beyond simple hedging to outright speculating, is up to you.
But they can provide peace of mind during downturns, not to mention spin off handsome profits, if you remain flexible, prudent, and nimble with their use. That’s what I’m doing in my Interest Rate Speculator service.
So that’s my take. What’s yours? Do these upcoming events portend some major market moves in the coming days and weeks? How are you preparing, if at all? Do you think Apple has what it takes to regain momentum? And what about Chinese policymakers? Make sure you swing by the Money and Markets website and share your thoughts when you get a chance.
I hope you enjoyed the long weekend, and are as energized as I am about what the rest of 2015 has in store. In the meantime, many of you weighed in on the European migrant crisis, the markets overall, and the U.S. employment picture.
Reader Chuck B. said the jobs figures show why our economy remains challenged, even several years after the end of the last official recession. His take:
“So, there were employment gains in service industries like health and finance, but without gains in productive industries like commodities and manufacturing that underlie the economy. Service employment is kind of robbing Peter to pay Paul. It will eventually peter out for lack of support.”
Reader Delores also sounded a worried note on the job market, saying: “I do not believe in the accuracy of any government figures. They are not true figures. They are made up to make the economy appear to look better, but the people know that this is not true.
“The homeless situation is getting worse all over the country and part-time jobs and service jobs are not enough to carry our economy; they just do not reflect the true unemployment.”
When it comes to stocks, Reader Robert P. said: “It seems now is the time to be nimble and play it both ways. Get in step with the markets, now that they’ve got things whip-sawing, and play it going up and then play it going down. I’ve seen other bloggers post basically the same thought and I believe they’re right.”
As for Europe, Reader Vic said: “My heart goes out to those poor people trying to escape war and terrible living conditions. I try to imagine what it must be like to be in a situation so terrible that you leave everything and risk your life and that of your family’s.
“I don’t know what Hungary and other countries can do as this problem gets worse. United Nation intervention is needed. The only thing these people have done is to have the misfortune of being born into such a horrible condition.”
Reader Fuad added: “It’s very sad and tragic to see those displaced migrants of all ages leaving their countries seeking better human living conditions from the Middle East and Africa, and starving and dying en route.
“Why don’t the Arab kingdoms like Saudi Arabia, Qatar, Dubai and Abu Dhabi — who have vast empty lands and are loaded with money — take them in? They can build towns with schools and hospitals, and create jobs and give them work building those towns.”
I appreciate the feedback – and if I didn’t get to your comments here, I’ll do my best to address future ones in the space I have. Feel free to respond to your fellow posters here as well.
Germany is bucking the trend seen in other parts of the world, offering to take hundreds of thousands of displaced migrants in if need be. But critics say the generous benefits offered to immigrants by that country and Sweden are only encouraging more individuals to make the dangerous trek from the Middle East and Africa.
In any event, the migration crisis shows no sign of letting up. That means more deaths tied to boat sinkings, botched smuggling attempts, and other causes are likely in the weeks and months ahead.
If you needed something else to worry about when it comes to stocks, consider that more and more “death cross” patterns are showing up in global index charts. The cross occurs when an index’s 50-day moving average trades down through its 200-day moving average.
It’s generally interpreted as a negative signal of lost momentum, one that predicts even more downside. We’ve now seen death crosses in Germany’s DAX index and the U.S. Russell 2000 Index, and we’re just about there in China too.
Big-time energy mergers are gaining steam overseas, with Australia’s Woodside Petroleum (WOPEY) launching an $8.1 billion bid for competitor Oil Search. Tracking firm Dealogic said total oil and gas takeovers are now running at almost $334 billion, more than double what we saw in all of 2014.
What do you think about Europe’s refugee crisis, and what Germany is doing in response? How about the latest Chinese intervention – is it a waste of money or will they succeed in propping up markets? I encourage you to share your opinions on these or other stories online here.
Until next time,