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Now, It’s Mueller Time: Indictments Weigh on Markets

By John Persinos on October 30, 2017

The shoes are dropping, as special counsel Robert Mueller shows that his efforts are neither “fake news” nor a bluff.

On Monday, three former Trump campaign officials were indicted by a federal grand jury. Mueller’s most notable collar was ex-Trump campaign chief Paul Manafort.

Manafort and his crew were indicted on 12 charges, including tax fraud, conspiracy against the United States and money laundering. The indictments came in connection with Mueller’s investigation into Russian interference in the 2016 presidential election.

Manafort could face 40 years in prison. If he sings to the feds to save his own skin, we could witness the unraveling of the Trump regime.

Panic is sweeping the executive branch, as the president’s associates wonder who’s next. The White House’s natural state of disarray is lapsing into chaos.

The Trump-Russia scandal threatens to undermine tax cuts and the rest of President Trump’s pro-business agenda. A report on Monday that tax cuts might be enacted incrementally over a long period of time didn’t help the mood among traders.

Did the long-awaited correction start on Monday? That’s unclear. Trying to time the market is a mug’s game.

What’s quite clear, though, is that anxiety is replacing confidence on Wall Street. As indictments came down on Monday, so did equities. Here’s your session snapshot.

Monday Market Wrap

  • DJIA: -0.36% to close at 23,348.74
  • S&P 500: -0.32% to close at 2,572.83
  • Nasdaq: -0.03% to close at 6,698.96

Monday’s Big Gainers

Toy maker gains on takeover talk.

Chemical maker approaches Brazil-based peer for merger possibilities.

Investment managers boost stake in the cable TV operator.

Monday’s Big Losers

Chip maker keeps dropping in wake of analyst downgrades.

Several analysts downgrade drug maker after cancer treatment withdrawn.

Retailer issues weak outlook as consumers embrace cheaper brands.

Letters to the Editor

In today’s smartphone age, most people would rather communicate via short texts. My Millennial daughter is among the worst offenders. Asking her to send me an email with complete sentences is like asking Superman to pick up a piece of Kryptonite.

Hence my gratitude for the effort readers make in sending emails to me. Letter writing, even in electronic form, is an increasingly neglected art that still serves an important function. Let’s get to the latest letters.

The lithium gold rush…

“I’ve been reading a lot about lithium. Demand for the substance seems to be picking up. Is it a good investment or just a lot of hype?” — Tony D.

I have a keen eye for hype and I can tell you that investor excitement over lithium is justified.

Lithium is used to create heat-resistant glass, ceramics and lubricants. It’s also used in industrial applications, such as steel and aluminum production. In the field of drug treatment, it’s used to treat mood disorders.

The biggest growth driver for lithium is the burgeoning demand for lithium-ion batteries used in electric vehicles and renewable energy. The smartest way to invest in lithium is through well-capitalized mining stocks.

You should shun the penny mining stocks that are getting into the lithium boom. Most are shaky and due for a fall.

The investment blues…

“I’m afraid to pick up the newspaper these days. The world seems to be in turmoil. Should I sell my stocks?” — George G.

When hasn’t the world been in turmoil? I remember getting letters from readers who were upset that Obama had won election in 2008. These investors hated and feared the new president so intensely, they ignored my counsel to be patient and dumped all of their stocks. The result? They missed the second-longest bull market in history.

The surest way to make money over the long haul is to control your emotions and see the world the way it really is, not the way you want it to be. Dispassionate analysis, not wishful thinking, is the true path to investment wealth.

Case in point: The Mueller indictments on Monday should not dictate your investment decisions. Tune out the political noise; pick stocks that will thrive even without tax cuts or deregulation.

Got questions or feedback? Drop me a line: mailbag@investingdaily.com — John Persinos.

This Day in History

October 30, 1961: The Soviet Union detonated the biggest bomb in history. It was the depths of the Cold War. The United States and Russia were competing for predominance. John F. Kennedy was in the White House and Nikita Khrushchev ruled in the Kremlin. At the time, the communists seemed to be winning.

The 57-megaton hydrogen bomb, dubbed Big Ivan by its creators, exploded over a test range in the Arctic Circle. At a height of 13,000 feet, the flash of light was visible over 1,000 kilometers away. The blast was a surprise to American intelligence services.

The world faced more surprises ahead.

A year later in 1962, the Cuban Missile Crisis brought humanity to the brink of Armageddon. In early 1963, President Kennedy pushed through an atmospheric test ban treaty. Kennedy was concerned that the arms race was getting out of control. Later in 1963, the young president was assassinated.

In 1964, Khrushchev was ousted from power. The reformed-minded Soviet premier was replaced by the hard-line Leonid Brezhnev.

In 1991, the Soviet Union disintegrated into 15 different countries. The Cold War was over.

The lesson for investors: the only constant is change. A company that seems to dominate its market can one day unexpectedly collapse. Remember Enron? Bear Stearns? Lehman Brothers?

Your father (and his father before him) called certain blue chips the “Nifty Fifty” — those buy-and-hold stocks to keep in your portfolio forever.

But in today’s tumultuous times, you can’t afford to bet your nest egg on stodgy mega-caps that might get upended by disruptors.

In the business world, the spoils don’t go to the strongest. They go to those companies that adapt to change. Careful stock picking is key.

Number of the Day: 1,597

That’s the number of bank branches closed by Bank of America (NYSE: BAC) since the depths of the financial crisis in 2009. The money center bank faced an existential crisis that year, as the global economy and markets melted down.

Today, the bank has a market valuation of $293.2 billion and operates about 4,600 branches. BAC has repaired its balance sheet, reformed its shady practices and paid its government fines. As with the rest of the financial services sector, BAC has been thriving in 2017.

Moral: companies that seem to be on the ropes can turn around their fortunes.

Quote of the Day

“A bank is a place that will lend you money if you can prove that you don’t need it.” — Bob Hope

 


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