True/False: “Tariffs Are Idiotic”

Dear Rundown Reader,

Regarding the question of whether the trade war’s working, particularly when it comes to China:

“When we can pick up items in our stores that say made in the USA instead of China then progress has been made.”

And this definitive response:

“No the meltdown isn’t working.

“China has already had talks with Europe and other countries as far as their goods.

“China won’t cry Uncle.

“POTUS has seen this and added the extra $200-billion tariffs.

“POTUS is wishing and hoping, and sweating.”

Last, from the perspective of a business owner:

“Tariffs are idiotic.

“As a European I worked with tariffs and exchange rates in the seventies when I ran a little import business.

“Government spends lots of time and money on administering the tariffs.The companies hit by tariffs usually find some loopholes to avoid them.

What most people do not see is that the tariffs are on the import prices, not the retail prices. Often the retail prices are double or more of what the import price is. The importers go for the lowest price to maximise their profits and often there is enough room to keep the business relationships intact.

“Many companies that do not have the financial wiggle room will move to business partners from countries that are not being hit by tariffs. So it could be that we see Russian products being rebranded in Pakistan or some other funny combinations.

“The best that can be done is friendly negotiations to prevent price dumping  and have a transparent business environment.”

To be fair, several readers responded in the affirmative. One reader simply wrote “I DO” to the question, “Do you think the trade war’s working?”

Your Rundown for Friday, September 21, 2018…

Shuffling S&P 500 (Like a Deck of Cards)

The tech sector currently accounts for 26% of the S&P 500 Index’s market cap. That’s making Wall Street and Main Street investors jittery.

Rightly so.

Consider just five tech companies — Facebook, Amazon, Apple, Microsoft and Alphabet (Google) — constitute 15.6% of the S&P 500’s market cap.

Put another way, just five companies account for more of the index’s market cap than two entire stock sectors: healthcare and financial.

As an aside, two companies achieved trillionaire status this year. Google’s well on its way.

S&P 500 Market Cap

We thought this chart makes a point. From trillion-dollar index to trillion-dollar companies in less than 4 decades.

Back to the bloated tech sector, in an effort to rebalance the index, the S&P 500’s relabeling the telecom sector communications services.

If only it were that simple.

Monday morning, three sectors will be shuffled together.

Companies from technology, consumer discretionary and telecommunications will be cobbled together under communications services. Most notably, Google, Facebook and Netflix will move to the rejigged sector.

Too many consequences to mention here. One to be aware of: “Investors who use passive index funds and ETFs are the most exposed to the big tech-stock and sector moves,” says CNBC.

“It is very important for investors to understand how the reclassification will affect their portfolios, since the ETFs that they currently hold may no longer suit their investment objectives,” says Neena Mishra, ETF researcher at Zacks.

Do your homework, contact your adviser and proceed accordingly.

Market Rundown for Fri. September 21, 2018

S&P 500 futures are up 9 points to 2,940.23.

Oil’s up less than a dollar to $71.02.

Gold dropped by $14.80 to $1,196.50.

Bitcoin added $264.52 to $6,770.42.

Enjoy the weekend. We’ll talk Monday.

For the Rundown,

Aaron Gentzler

Aaron Gentzler

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Aaron Gentzler is the publisher of Seven Figure Publishing. He is also the editor of The Rundown. Aaron’s been with Agora Financial/Seven Figure Publishing for 13 years. He's been covering technology and markets for over a decade.

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