When Investing Becomes Dangerous What Are Your Best Choices?

When Investing
Becomes Dangerous
What Are Your Best
Choices?
By www.ProfitableInvestingTips.com

http://profitableinvestingtips.com/bond-investing/when-investing-becomes-dangerous-what-are-your-best-choices
The long-term bull market is not only
weakening; it is becoming
a treacherous market according
to Mad Money’s Jim Cramer.

So, when investing becomes
dangerous what are your best choices?
Here is some of what Cramer says.

Between the mixed messages on U.S.-
China trade and concerns about an
economic slowdown, day-to-day stock-
picking is becoming very challenging
for the average investor, CNBC’s Jim
Cramer acknowledged on Tuesday.

“We’ve got to call a spade a spade.

This market isn’t just volatile, it’s
treacherous,” he said after yet another
turbulent trading session on Wall
Street.

“I don’t want the treachery, which is not
going to go away, to get to you. Use it
to your advantage.”

The best way for investors to take
advantage of the swings is to ignore
them altogether, said Cramer, host of
“Mad Money.”

Instead, he suggested focusing on
long-term themes “that hold up through
this madness” because they aren’t tied
to China or the welfare of the broader
economy.

Intrinsic Stock Value

This is the long term investing, value
stock approach that uses intrinsic
stock value as a guide.

As we mentioned in the intrinsic value
article, a key to making this approach
work is knowing what a company does,
how its business plan will make money,
and how that business plan will remain
viable into the future.

In this regard, here are the approaches
that Cramer recommends.

Cramer suggests a general approach of
picking individual stocks that are not
tied to trade with China, are not tied to
the welfare of general economy, and
have both high dividend yields and
strong financial positions.

His specific suggestions are cloud-
based companies as this sector is
growing, health care and
pharmaceuticals because people will
always need their products and
services, and companies in cyber
security which seems to be an ever-
increasing need.

To his list we might add biotech
companies to the degree that you can
reliably pick the winners in this arena.

And, of course, any company that
stands out with more than one of the
criteria will be worth a look.

Berkshire Hathaway, an Example of Intrinsic Value Investing

Investments That Will Not
Lose Money

What are your other best choices when
investing becomes dangerous?

Recently we wrote about how to invest
without losing any money.

We looked at ways to preserve cash in
return for foregoing growth
opportunities. The four suggestions
were these.

• Put money in the bank where it is
protected by Federal Deposit
Insurance
• Buy US Treasuries, Bonds, Notes,
and Bills

• Purchase Investment Grade Bonds,
AAA or AA
• Select investments with long term
value using intrinsic value as a guide.

Essentially putting all of your assets
into cash (bank deposits and
government bonds) is a time-honored
approach when markets look chancy.

Famously, Warren Buffett held a strong
cash position going into the dot com
crash because he said the market
made no sense and thus he was not
going to invest until it did!

AAA Bond Rating

In Regard to China-Related
Investments

China has been the growth story for the
last couple of decades.

There are investments in China that
have done well and investments in
companies that do business with China
which have also done well.

However, all grow stories eventually
correct and level off.

In today’s China the phenomenal
growth story is changing for more
reasons that simply getting old or
because of the risk of a protected trade
war.

Bloomberg has an interesting and
useful article about how damage to the
Chinese economy from the trade
war is already done.

The damage to China’s economy from
the trade war with the U.S. can’t be
immediately made good even in the
case of a resolution with President
Donald Trump, Citigroup economists
say.

That’s because the tariff war is
underlining China’s rising cost of labor
at a time when the job market is under
pressure, Citi economists led by Liu Li-
Gang said in their 2019 economic
outlook report.

The trade war with the U.S. could cut
China’s export growth by almost half
next year, putting around 4.4 million
jobs at risk, the economists wrote.

“It is a reality that China is losing some
of its cost competitiveness, especially
in labor-intensive and low-value-added
sectors,” according to the report.

“Although shifting the supply chains is
not feasible in real time, manufacturers
may seriously weigh the option of
leaving China if punitive tariffs last
longer than expected.”

China has become important to the
global economy both as a supplier of
inexpensive finished products and as a
consumer of commodities.

A more-expensive China makes
products more expensive around the
world and will tend to drive supply
chains out of China.

A substantial reduction in raw material
use by China will hurt commodity-
dependent economies around the world
as we noted in our “resource curse”
article some time back.

The bottom line for investors is that
China is not the best choice right now
for investing by foreigners and
especially not by investors who are
simply following the herd because the
China-investing herd is about to “head
south” in a big way.

Likewise, companies that have profited
by selling to China, like Boeing, will be
hurt in a prolonged trade war.

When Investing Becomes
Dangerous What Are Your
Best Choices?

All of this is great in theory but how do
put these thoughts into practice?

Cramer makes several specific
suggestions.

Cloud-based businesses he suggests
are Salesforce.com, Splunk, VMware
and Workday.

These stocks will be volatile like the
rest in today’s trading but have strong
potential for long term growth as
computing requires more memory and
processing power which will be found in
networked computers (the cloud).

His suggestions for health care and
pharmaceuticals are United Health
Care, Merck, Centene, and Johnson &
Johnson.

For cybersecurity he suggests Palo Alto
Networks.

In the “strong balance sheet” and “high
dividend” niche he suggests AT&T.

If you are going to choose any of these
don’t just take Cramer’s advice or ours.

Apply the intrinsic value approach to
each possible investment along with
ways to invest without losing money.

An interesting choice, also mentioned
by Cramer, is Microsoft.

This company has a strong balance
sheet, a huge cloud presence, and is
one of the two US companies along
with Johnson & Johnson that has
bonds with an AAA rating!

When Investing Becomes Dangerous What Are Your Best Choices?

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When Investing Becomes Dangerous What Are Your Best Choices?