How Much Do Political Events Really Impact Markets?

The metastasizing series of scandals following the Trump administration is heating up to a simmer this evening, as Special Counsel Robert Mueller has announced he is opening an investigation into potential “obstruction of justice” by the Commander in Chief himself.

At times like these, we as investors have to ask ourselves how much weight political events have on markets. It’s tempting to freak out over every new revelation in the Russian collusion case, but first let’s take a step back and look at some history.

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Ether: Currency of the Future

In Market Morning earlier today, I covered how mining of Ether, the cryptocurrency associated with Ethereum, is driving sales of AMD graphics cards. Kristian and Zach and I talked a little bit about Ether and the Ethereum project but I think we failed to emphasize what makes Ethereum different from other cryptocurrencies and just how revolutionary Ethereum is.

As I alluded to this morning, basic cryptocurrencies like Bitcoin are arguably not meaningfully different from pyramid schemes – all value comes from the willingness of newcomers to buy in. If demand dried up, the entire value of Bitcoin could evaporate tomorrow, and everyone holding it now would be a sitting duck. For more about the mechanics of cryptocurrencies, see Kristian’s great post from a few weeks ago.

So how is Ether different?

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Dynalect Sells Position in GM Among Emerging Emissions Scandal

On Thursday, the news broke that GM had been accused of using illegal devices in its Chevrolet Silverado and GMC Sierra trucks to cheat on nitrogen oxides (NOx) emissions tests, making it the latest automaker to be caught up in a NOx emissions scandal. According to reports, the amount of illegal pollution generated by the trucks is at least as much as that generated by Volkwagen’s cheating passenger cars before their lawsuit in 2015, a lawsuit which has resulted in enormous fines, recalls, and sales declines for VW. There’s real potential for GM to face serious consequences as this scandal unfolds, but a few key factors suggest that GM stock might not fare as poorly as that of VW in the wake of scandal.

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Don’t Wait to Buy the Dip

It’s a common-sense strategy that makes intuitive sense: if you think a correction or even a bear market is coming, wait it out until stock prices drop, then buy up stocks at a discounted price and watch them rebound. A classic tactic of active investors, waiting for price declines or “buying the dip” can also be justified from a value investing perspective. If a particular security or even the whole market seems overvalued, waiting until it’s more fairly priced would seem to be more prudent.

An active investing strategy that appeals to value investors? Surely any idea that can unite such opposite philosophies must be correct, right? Wrong. At least, sorta. This week I’ll guide you through the do’s and don’t of trying to wait out fair prices, and what it means for preparing for the next correction or recession.

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Time to Buy Gold?

If you own any investments, you probably had the same moment as me this morning when you realized you’d lost a lot of money and it wasn’t even noon. So far today I’ve watched my personal portfolio fall by a little over a percent, and the S&P is down more than 1.5%.

This drop-off was probably precipitated by the news that Donald Trump allegedly fired FBI Director James Comey in order to stall investigation into former national security adviser Michael Flynn’s ties to Russia, and that even some Senate Republicans are beginning to use the “i” word. This turn of events signals a potential coming period of political instability, during which Congress won’t have much time to pass the tax reform it’s been talking so much about.

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Tesla Researcher Announces Battery Lifetime Breakthrough

It’s been only three weeks since we published our report on energy storage, but already the ever-evolving field of battery technology has seen another advancement. Jeff Dahn, a prominent battery researcher for Tesla at Dalhousie University in Halifax, Canada, announced at a talk at MIT last week that his team has substantially extended the lifetime of batteries of Tesla stationary charging stations. This is less than a year into his five-year research partnership with Tesla, and already he and his team have met a major research objective. Both the significance of this discovery and the potential that it signals for the pace of future research might make Tesla a more attractive buy.

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Complicated Times Ahead for U.S. Automakers

This morning, the stock prices of GM and Ford tanked by about 4% each in response to a decline in April auto sales.

My first response, of course, was to have a brief heart attack. But in an effort to avoid giving in to my cognitive biases I decided to head to the news and see the details. The crux of today’s freakout seems to come from the fact that it’s seen as a confirmation of the recent narrative among automaker investors that auto sales are reaching a medium-to-long-term peak, which might be true for a few reasons. At the same time, I’m very hesitant to see this month’s numbers as actually indicative of a significant trend, for reasons I’ll explain.

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