Trading with Focus – North Florida. Man.
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If you’re anything like me, you’re probably sick to death of hearing about this US election, but there’s one last little bit that could affect your trading.
Sure, I laughed along when The Don stuck his hand up to take over from Saint Obama (not my words), but was shocked and concerned when he actually got in. Not wanting to make this more politically charged than necessary, and focusing purely on stockmarket returns, that massive orange clown has actually made me a lot of money.
Luckily in Australia there’s no direct link between me making stockmarket money at the expense of all the less fortunate, so I can sit here and say that I am not feeling guilty about it. We invest in good companies that employ people on fair wages and pay taxes and that money doesn’t fund the military at the expense of hospitals.
But again, not the point of this article.
Now that the people of the US of A have shown their true colours I’ll be honest, I’m not too concerned about going there again. The TV shows from the US always used to be funny, and the gunslinger stuff always seemed a bit like hyper-reality, just like I never really believed step-moms were easy.
But, now with the internet and social media, we aren’t seeing the Parks and Rec/Brady Bunch style of US humanity. It’s more like Honey Boo-Boo meets The Handmaid’s Tale meets The Wire. Now they’re voting again… sort of.
So, I googled Georgia, and to my, well, not surprise, but it’s north of Florida and nestled between South Carolina and Alabama. I don’t want to cast any broad aspersions, but immediately I worry about the outcomes of their voting.
Well, the Georgia run-off elections, for whatever reason, will dictate whether the new Biden government can get things done easily, or whether they get blocked in the whatever house by the other mob every time they try to make a sweeping change. No-one really understands the US election system, but that’s my spin.
Here’s a lovely box I drew (using Marketech’s amazing charting package) back when The Don first won the election:
On the day he won, the ASX fell out of bed, a big intraday selloff. Evil human parodies aren’t supposed to run superpowers in this day and age, surely…
But then, the US traders understood that Don’s business strategy was to shift all the remaining money from the poor who voted for him to the rich who didn’t, and that business tax cuts and strategies to underpin the stockmarket would be the most likely ways to do this. So their market went up, big, the next day, and continued to run for several years.
Even Covid caused barely a short term panic in the market, as all the policies seem to be designed to prop the stockmarket, and certainly not to improve standards of living because of socialism, which is what we call ‘not paying for the doctor’.
Now, obviously, giving billionaires free rein to do whatever they want seems morally questionable. Minimum wage in Australia means you must suffer the embarrassment of a secondhand Commodore. In the US it means you have to live outdoors. But…they voted for it and protect it with guns, so who are we to judge?
Anyway, the Georgia run-offs. If the Democrats win, this means they’ll probably try to roll back the tax breaks for the rich and force evils such as healthcare upon the people, and better wages, all of which is less likely to be to the benefit of corporations. The market will not love that idea.
If the Republicans win (which I think is Donald’s old party, it’s all very confusing), the other ones will struggle to roll back those tax breaks – yay for the market! (But obviously, morally, when you are seeing what it is doing to their people you may feel conflicted…)
So, what to do?
Well my mate reckons this is a pretty big potential event that the market hasn’t considered yet.
It’s never the stuff you see coming because the market can factor that in; it’s stuff like GFCs and global pandemics that crush your hopes and dreams. But in this case (his opinion), this could be the beginning of a major long term change in the way that America has underpinned the sharemarket, with the backdrop of massive internal unrest, a growing humanitarian crisis and a national debt that is so large as to be literally unimaginable. And guns.
If you hadn’t noticed, the market is almost back to where it was pre-Covid. I don’t have to make a point there, it just is. But then Afterpay is a $33bn company these days, so these are strange times indeed.
Even Qantas is back to the bottom of the range that they were before Covid, and yet their domestic capacity is only at 68%, they are losing money hand over fist and are only doing repatriation flights internationally.
Now I’m not saying that the bottom is about to fall out of the stockmarket, but when the US is potentially about to move to a reactionary new policy setting, Top 20 stocks are trading at negative PEs (because they are losing money, not making it), bank dividends are still in the balance and the AFR are reporting on TikTok financial bloggers as if they are legitimate sources of advice, well, it just kinda makes me think.
So, I’m trimming a few highly speculative positions, putting alerts into the general market in case it starts panicking, and starting to look at where I’d buy back in. It’s been a great financial year, and if I sell out a bit early and have to rebuy I don’t care, as I only pay $5 or 0.02% in brokerage.
But if this is a major change in US financial policy, good for them. Eventually they’ll have to deal with the mess they’re in, but do they have to do it right now? I’m probably a bit too long.
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