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China’s crackdown on several industries has demolished Chinese stocks listed in the United States. on.
And when I say everyone I mean Everyone. And if the person has an opinion on Chinese stocks, it will be that you should sell them and run for the hills.
As the collapse in those stocks has accelerated, there are margin calls, and this forced liquidation is making its way into the markets on Tuesday in not only Chinese stocks but also some US stocks. The crappy small-cap tech stocks I’ve long warned against are falling apart.
Betting against the tide
I’m going to bet against the tide in the middle of this forced sell-off action on Chinese stocks while munching on some Tencent TCEHY,
and the iShares MSCI China ETF MCHI,
for shorter term trading. And I buy back some of the JD.com JD,
that we had been selling at higher levels over the past few months. Be careful, as always, because if Chinese stocks continue to fall, the action of these names could accelerate their impact on US markets.
One of the great things to know that the market has moved from the Blow-Off Top phase to somewhere on the other side of the Bubble-Blowing Bull Market for most stocks is how they react to news of further increases. of funds. In January and February and March of this year, whenever a company made an announcement stating that it was selling securities to raise funds for the balance sheet to invest in its businesses, the stocks would rally on the news.
This is no longer the case, because Virgin Galactic SPCE,
and many others who have raised funds have seen their stocks collapse on the news. The reaction reflects the continued decline of thousands of small-cap stocks, most of which are down 70% or more from their early-year highs.
IPO zombies
Meanwhile, I want to remind you that there are literally hundreds of actions that have gone public in the past couple of years that will be void. Some will be fraudulent. Some will suffer bad luck and simply fail.
It doesn’t matter why – they will cost people billions in the months and years to come. There is a lot of garbage in the markets. I took the photo below when describing how I think there is a lot of “junk” in the stock markets and crypto exchanges on a road trip to White Sands in New Mexico on the weekends -end last and I looked out the window at the passing train with graffiti on it:
Profits as an indicator
Meanwhile, we have entered the earnings season, and the reaction to Tesla’s TSLA,
Monday’s report will either prove to be an outlier or a harbinger of what’s to come for most tech stocks.
The report, released after the market closed on Monday, was good, even stronger than expected. While the comment from CEO Elon Musk – who has said he won’t be doing most of Tesla’s revenue calls from now on and who I think is probably good as he has so many other ways to communicate with us – focused on supply chain issues. delaying the company to get me a Cybertruck by the end of this year, maybe that’s what the market doesn’t like.
Or maybe, as with the stock action of the fundraising companies I mentioned above, the decline in Tesla shares is more indicative of a broader market pullback than the earnings report. of Tesla himself.
We won’t have to wait long to find out who it is because Apple AAPL,
Microsoft MSFT,
and hundreds of other companies are reporting profits this week.
In the hedge fund, I still have a lot of short covers and a lot of put options, but I cover, as you might expect, some of the short selling and panic sell a few of the options on Tuesday.
Aside from the aforementioned munchies, I’m sitting tight in the personal account, as I’ve been most of the time lately. I see bargains starting to grow with the widespread collapse – can we call a 70% drop in four months for thousands of small-cap tech stocks a “crash”? Yes, I think we can – has accelerated lately.
Stay tuned. I think we will have new names to buy. I will send trade alerts in the days and weeks to come. No rush, as always.
We can patiently sift through the rubble (although I plan to run out of many of the crappiest small-cap tech stocks for a while, at least). Don’t let FOMO, MOMO, YOLO, Blow-Off Top Phases, Sector Crashes or anything else distract you from the mission of building wealth while minimizing risk over many years.
Cody Willard is a columnist for MarketWatch and editor of Revolution Investing newsletter. Willard or its investment firm may own or consider owning securities mentioned in this column.
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