Another round in the tariff tantrum scares markets away after a good start. IBM bid for Red Hat has me banking profits and spreading the investment across other cloud computing names and a few other long term plays. Brazil election has me changing sides from short to long. 

![Oct29Trades.png](https://cdn.steemitimages.com/DQmcESeZp4zpWdx5BrYURdg7YgzVAFL6yurYBhkSLd2k5EC/Oct29Trades.png)

<h3>Portfolio News</h3>

**Market Jitters - Tariff Tantrum = Market Selloff v2.0** 

I watched US markets open higher. I woke up in the morning to a mess. What happened? 

![Oct29US.JPG](https://cdn.steemitimages.com/DQmc8DyUVvekhbTp1AX3AqhxPCh4N6QeSsm8fHb28vbjnqa/Oct29US.JPG)

Donald Trump went back to his agenda book and spouted off about the final $257 billion worth of Chinese goods that have yet to be tariffed. The markets took umbrage and took their toys away - BANG!! It is hard to fathom how his mind works. One minute he is telling us how fantastic his administration has
been for the US stock markets and the next minute he pulls the rug. He does always go back to his agenda book and he is really desperate not to lose ground in the mid term elections - strange that as the commentators are not really talking about the mid terms as a market factor. He has made it one.  

Time to step back a little. New York Federal Reserve published an article a little while ago based on research it had done on regional manufacturers and service firms. 

<blockquote>About two-thirds of the manufacturers indicated the existing tariffs had already increased their input costs and more than 70 per cent believed they would push those costs higher in this year and next. About half said they expected the tariffs to have a negative impact on profits this year.</blockquote>

More damning is evidence that suggests that the tariffs will not improve the trade deficit but could make it worse as exports and imports both drop. What becomes pretty clear is with rising input costs and rising import costs, price inflation has to increase. And then the Federal Reserve inflation card comes more fully into play. 

https://www.smh.com.au/business/markets/trump-scores-own-goal-on-tariffs-and-now-the-uk-has-put-the-boot-in-20181030-p50cv3.html

And to add grist to the tariffs mill, UK budget includes a provision to tax technology firms 2% of UK revenues. This will spread to EU and Australia before too long. 

The economist in me sees a few rational business responses to the tariffs. Shift supply chains away from China to other low cost countries. That takes time and is does not change the deficit story - it just shifts it from China to somewhere else.  But that may actually be the global hegemony game that is going on - subdue China through trade so they spend less on military spending and more on propping up a trade hit economy. 

There is another piece of data which tells me that the tariffs are not going to create a lot of American jobs. It is a chart I have shared a few times before.  Even if businesses wanted to move jobs back to the US, there are not enough workers to do the work. 

![Oct29U6Rate.JPG](https://cdn.steemitimages.com/DQmcZGHRCuB435soX6FTsqpFvazqEBEauXTxVuEJ4oXn5vr/Oct29U6Rate.JPG)

The chart is U6 Rate = total unemployed plus all marginally attached workers (e.g., ex convicts) plus total employed part time for social reasons (e.g., working mothers; early retirees). This has reached a level lower than before the 2008 recession and not far off the pre-2000 recession levels. Of course those 18 years have increased the number of people who are not going back to work because they choose not to = baby boomers. They are not coming back.  

https://fred.stlouisfed.org/series/U6RATE

Now there is one more step back to consider as to whether this selloff is just a mess or the start of something really bad. One market factor suggests that markets are in a better state than the investors or analysts think. Credit risk remains muted. This chart is the chart that allows me to keep investing - we are a long way from the flash crash levels or the the 2016 selloff and certainly the last two recessions. 

![Oct29Risk.JPG](https://cdn.steemitimages.com/DQmWG7zrcJMirCxWHaXBk978pazfNmTAJjrRSj53pMzxEt8/Oct29Risk.JPG)

I will be taking action to reduce market exposures long when this passes 4.0 and heads toward 5.0 - i.e., if it makes a higher high.

https://fred.stlouisfed.org/series/BAMLH0A0HYM2?cid=32297

<h3>Bought</h3>

I am using the selloff to average down some entry prices in energy, marijuana, online retail and cloud computing. I put these trades on in the first hour of trade. I would have been a lot happier to have put them on in the last hour of trade as they all dropped from the levels I bought at.  BUT I do have to sleep. 

**BP PLC** (BP.L): Integrated Oil Producer

**Harvest One Cannabis Inc** (HVT.V): Canadian Marijuana. The carnival looks like it has run its course and the profit takers have come to visit. Now the investment game is to find the winners for the long haul. Harvest One continues to add growing capacity and has got approval for some of its gel delivery capsules. They are here for the long haul 

**Amazon.com, Inc** (AMZN): Average down buying one more share in two portfolios. 

**VanEck Vectors Brazil Small-Cap ETF** (BRF): With the swing to the right in the Presidential elections expectations are improving for the Brazilian economy. Small caps is always a strong way to start the swing upwards and price has already moved off the lows. Idea from Mark Mobius who has a strong emerging markets bent. He said that now is the time to be stock picking but he did like Brazil small caps as a sector. 

**Cloud Computing** With IBM announcing they would acquire Red Hat (RHT), I spread my Red Hat investment across the following cloud computing plays to average down entry prices on positions

**salesforce.com, inc** (CRM): Customer Management. 

**VMWare** (VMW): Virtualisation software.

**Workday, Inc** (WDAY): Financial and working capital services.


<h3>Sold</h3>

**Red Hat** (RHT): Open Source Software. I have learned over the years to exit investments whenever there is a major corporate action like a takeover bid. IBM bid is only expected to close in mid 2019. There is a lot of uncertainty before that. I took the exits and banked a 24% blended profit since September 2018 and 44% on purchase made 10 days ago. 

<h3>Shorts</h3>

**iShares MSCI Brazil Capped ETF** (EWZ): Brazil Index. Closed out the short for 22% loss since June 2018. Brazil presidential election was decided in a run off vote with far right candidate Jair Bolsonaro winning comfortably. This trade (a Real Vision idea) was set up ahead of the election uncertainty and well before it became clear how well the far right could do. Was there a time for an earlier exit on the trade? 

![Oct29EWZ.JPG](https://cdn.steemitimages.com/DQmaFZrZrxwuJsPKSRt4mUixfjkqbFZexbTX8PUsxDqdTkd/Oct29EWZ.JPG)

Had I been paying attention to election polling I had a chance to escape at breakeven from the September lows. I also had a chance to reduce my losses when the 1st election pointed to a far right lead that looked hard to beat in the runoff. Sadly I was not paying attention - well I was but I chose not to exit then.

Now it is not all bad news as the one long stock investment I have in Petrobras (PBR), the Brazilian oil company has done handsomely and I will cover my losses with the right exit here. 

<h3>Income Trades</h3>

3 new covered calls written without changing strike prices. What is noticeable is how implied volatility is increasing. 

**Canadian Solar Inc** (CSIQ): Canadian Solar. Sold November 2018 strike 14.5 calls for 2.69% premium (2.77% to purchase price). Closing price $13.00 (lower than last month). Price needs to move another 11.5% to reach the sold strike (easier than last month). Should price pass the sold strike I book a 14.6% capital gain. Income to date amounts to 7.6% of purchase cost. 

**SPDR S&P Bank ETF** (KBE): US Banks. Sold November 2018 strike 44 calls for 1.02% premium (1.39% to purchase price). Closing price $41.07 (lower than last time). Price needs to move another 7.1% to reach the sold strike (easier than last time). Should price pass the sold strike I book a 46% capital gain. Income to date amounts to 4.5% of purchase cost. 

**Bank of America Corporation** (BAC): US Bank. Sold November 2018 strike 29 calls for 0.53% premium (1.44% to purchase price). Closing price $26.39 (lower than last month). Price needs to move another 9.9% to reach the sold strike (easier than last month). Should price pass the sold strike I book a 199% capital gain. Income to date amounts to 4.8% of purchase cost. 

<h3>Cryptocurency</h3>

**Bitcoin** (BTCUSD): Price range for the day was $212 (3.3% of the high). Well we got the price break out of the tight band price has been in. 

![Oct29BTC.JPG](https://cdn.steemitimages.com/DQmZ2Qhy5CBAV55hjGMs2CME8JvVP3kQWwg2v57HGZf7iyp/Oct29BTC.JPG)

Whenever price breaks out of a zone, it breaks hard with volatility 3 times higher than we have seen of late. That said, 3.3% volatility for a day is low given the 7 to 8% we were accustomed to seeing a few months ago. I have learned that Bitcoin markets do respect short term levels - this time the brown line from August just below $6225, which has been respected 3 times now. Price moves like this are invariably driven by a news catalyst - maybe it was the Maple Exchange hack. 

![Oct29BTCNews.JPG](https://cdn.steemitimages.com/DQmYtSb7fEAL6DQQUQNDKG1TJ38wh5N6ttpeTA5GpPo46CB/Oct29BTCNews.JPG)

If this is the news driver, do not be surprised to see price move back up in a consolidation zone between this level and $6450

**Ethereum** (ETHUSD): Price range for the day was $11 (5.4% of the high). Price reacted to the Bitcoin news in the same way and dropped hard with 5 times volatility we have seen for the last 10 days into "no mans land" to a level which coincides with a September low (the pink ray). 

![Oct29ETH.JPG](https://cdn.steemitimages.com/DQmbeJQxL7UBsJyfZ4kgePTD3ekYAjYuvDx5ssz49VHQAw6/Oct29ETH.JPG)

I have not noticed the same short term level matching in Ethereum as in Bitcoin - let's watch. I must say I was not surprised to see price reject the underside of the downtrend line (the blue arrow). That trend line tells me where the sellers are lurking. If price holds this support level, we could see a break higher out of what is becoming a very compressed zone.  

<h3>CryptoBots</h3> 

**Outsourced Bot**  No closed trades. 

**Profit Trailer Bot** No closed trades

**New Trading Bot** Trading out using Crypto Prophecy. Update tomorrow 

<h3>Currency Trades</h3>

**Forex Robot** did not close any trades and is trading at a negative equity level of 22.7% (higher than prior day's 21.4%).

**Outsourced MAM account** Actions to Wealth closed out 2 trades for 0.13% profits for the day. 

Cautions: This is not financial advice. You need to consider your own financial position and take your own advice before you follow any of my ideas

Images: I own the rights to use and edit the Buy Sell image. News headlines come from Google Search. All other images are created using my various trading and charting platforms. They are all my own work

Tickers: I monitor my portfolios using Yahoo Finance. The ticker symbols used are Yahoo Finance tickers

Charts: http://mymark.mx/TradingView - this is a free charting package. I have a Pro subscription to get access to real time forex prices


October 29, 2018