Today I added shares of Tencent (TCEHY) and the iShares China Large-Cap ETF (FXI) to my portfolios at least partly on the strength of China’s AI rally. Tomorrow, March 25, I’d adding shares of Alibaba (BABA) to my Jubak Picks and Volatility portfolios.
On Monday, March 24, I’m adding these Tencent ADRs (TCEHY) TO my Jubak Picks and Volatility Portfolios.
Just because we’ve seen this page from the play book before and just because I’m skeptical about the long-term effects of this policy doesn’t mean I don’t want to own the China rally now. On Monday March 24, I’m adding the iShares China Large-Cap ETF (FXI) to my Perfect Five ETF Portfolio and to my Jubak Picks and Volatility portfolios. (In the Perfect Five ETF portfolio I’m replacing my India ETF with this China ETF.)
Today’s Hot Money Moves NOW: Buy VIX Volatility Call Options. Toward the end of January, I bought VIX Call Options, hoping to make money as volatility increased in the market. I bought a VIX call with a strike of 20, and a VIX call with a strike of 26–both with May 21, 2025 expirations. Both of these buys were up about 40% before Friday’s snap-back rally. And looking at probable “events” I think volatility is going to increase in the second half of March. But this week we may see some optimism bring the VIX down and you may be able to buy more options on that future volatility at a temporarily depressed price. I would look to buy these options this week and hold for the next three weeks or so, through more tariff uncertainty in April and sell before the May 21 expiration. For more detail om my VIX options buys see the Volatility Portfolio on my subscription JubakAM.com site.
Friday’s snap-back rally took a big bite out of the CBOE S&P 500 Volatility Index (VIX). The VIX dropped 11.72%, or 2.89, to 21.77. But the plunge in Call options on the VIX was even bigger with the VIX Call option with a strike price of 20 and an expiration of May 2025 falling 23.34% and the VIX Call option with a strike price of 26 and an expiration of May 2025 26.000 falling 31.34%. (I’m citing the action on these two options because they are the Calls that I own in my Volatility Portfolio.)
This is exactly the opportunity I flagged last week to add more volatility bets without paying too much after the run upon options prices that came to a screeching halt on Friday.
Today Goldman Sachs Group raised its year-end target for gold to $3,100 an ounce. Central banks are buying gold at a faster than expected pace and flows into gold ETFs are accelerating.
Today’s Hot Money Moves NOW is China Buys More Gold. Gold seems like a good asset to own right now but it’s also trading at record highs. So while gold is safe, especially if inflation goes up, how much higher do you expect gold to go? One thing to look at it is who is emerging as a buyer. Central banks have been buying gold to hedge risks and diversify, which has contributed to the record highs. Recently, the Chinese government announced that 10 big Chinese insurance companies will now be allowed to put up to 1% of their portfolios into gold. This hasn’t been allowed in the past and will provide about $27 billion for new gold buying. This is also just another sign that countries and businesses are looking to hedge risk by buying gold and it’s one of the safer places to be in an uncertain market.
In the current market environment, with uncertainty running rampant and risk climbing, I want to find hedges against a downturn in U.S. stocks. Gold remains an attractive option even though it is trading near its nominal all-time high near $2900 an ounce. I think systemic risk–the odds that something fundamental will go wrong somewhere with the United States, China, and the European Union (through its exposure to Italy) are all worry hot spot–is on the rise. In the U.S. market alone, I see higher risk of a nasty mix higher inflation, slower growth, higher interest rates, and bigger government deficits.
Today’s Hot Money Moves NOW is “Gold via 747.” It is extraordinary when big New York banks like Goldman Sachs have hired 747s to fly physical gold from London (where it’s cheaper) to New York. Most investors don’t own a 747 and may not be able to do this trade, but it is indicative of the high degree of uncertainty in the market. Flying gold from London to New York is a truly extreme move, and you wouldn’t see that without an underlying fundamental stress in the market. Gold is trading near all-time highs and you may not make a whole lot of money buying gold ETFs from here, but you would be avoiding some risk in the rest of the market. I have the GLD ETF in my Jubak Picks portfolio and will likely look for another to add.
Stocks moved down slightly on Friday–with the Standard & Poor’s 500 off 0.50% and the NASDAQ Composite down 0.28%–as investors started to revise their belief that President Donald Trump wasn’t really serious about raising tariffs.
Now that the White House as made it clear that the first round of tariffs–on Canada, Mexico, and China–will go into effect on Tuesday, I think we’ll see more downward movement in stocks. I don’t expect the drop to be swift or especially severe to start. That will have to wait until the economy starts to register the effects of higher prices for so much that we import. But I’d like to get ahead of this revision in sentiment with some sells now.
When AI stocks plunged on Monday on the news out of China’s AI startup, DeepSeek, and fears that this meant the end of the AI ‘bubble,” shares of AI stocks such as Nvidia (NVDA) and Broadcom (AVGO) plunged 17% and the NASDAQ Composite tumbled. But the market as a whole was remarkably unperturbed. The CBOE S&P 500 Volatility Index (VIX), the “fear index” did climb by 20%.
TO ALMOST 18. 18? The 10-year average for the VIX is 18.26! So with the prospect of a collapse in the AI bubble–which I don’t see despite clear extremes of valuation in the sector–the AI trend is real and revolutionary. With the possibility that the Federal Reserve will dash hopes for interest rate cuts in 2025. With the possibility that a renewal of the 2017 Trump tax cuts and new tariffs will revive inflation. With the possibility that the ungovernable extremes of the Republican party will be unable to govern and will really shut down the government in a huge debt ceiling/budget fight. With all of that danger lurking out there, the VIX traded at just 18 on Monday and closed at 16.56 today, January 29? In my opinion this hedge on risk is on sale.
U.S. farmers harvested some of the largest corn and soybean crops in history this year. The timing couldn’t be much worse for farm incomes and commodity prices. And for shares of farm stocks.
