By Zach Scheidt
This post The Time To Buy Is Now… Before The Rebound appeared first on Daily Reckoning.
I bought a new car earlier this year…
Well, actually it wasn’t new. It was new to me. I can’t justify paying crazy money for a car that just rolled off the assembly line floor.
I did my research, picked out the year and model that I wanted, and found a dealer selling a car like the one I wanted.
After a test drive and a few minutes of chatting, we got started on the fun part.
He told me how much he wanted for the car. I told him what I was willing to pay. We went back and forth like I knew we would.
And then I executed my perfectly planned move…
“Well, it looks like we’re a little too far apart on price,” I said politely. “Best of luck, I’m going to keep shopping around.”
With that, walked out to the parking lot and got in my original car. I checked the rear view mirror to see if he was coming after me with a better offer.
He wasn’t.
And so I drove away. A little disappointed, mind you… Because I thought my tactic would work.
But I had a price in my head I was willing to pay. And I wasn’t going to let a salesman convince me to pay more than it was really worth.
The next day, I was pleasantly surprised to get a phone call from the dealer.
“I talked to my manager and he’s got a better price for you.”
Bingo!
The dealer flinched!
That afternoon, I signed the papers and drove away in a car that had some extra foot room in the back for my kids. And I didn’t pay a penny more than the number I originally committed to before I ever met the dealer.
Why does this car buying experience matter?
Because Trump and his counterparts on the global trade battlefield are having similar negotiations.
And today, you’ve got an opportunity to lock in some big profits when one (or more) of the sides flinch. It’s just a matter of being in the right place before it happens!
A Skewed Investment Opportunity
As an investor, I love to find situations where the odds are skewed heavily in my favor.
Imagine someone offered to play a game with you, where a coin was flipped and you received $50 for every time the coin landed on heads. But if the coin landed on tails, you only had to pay $10. As long as the coin was fair, you’d play that game all day long!
Sure, there will be an occasional loss.
But your potential gain would be so much greater!
As a matter of fact, the expected payoff is $200 if you played the game 10 times.
If you’re an investor who finds opportunities like this over and over, you’ll make some great returns over time!
That’s exactly the type of play investors have with the trade war scenario right now. Especially when it comes to the Chinese stock market.
Just like my conversation with car dealer, Trump and his Chinese counterparts are seemingly at an impasse. Tariff threats are flying, and some are actually being implemented. And Chinese stocks have moved lower as investors hunker down for an extended trade war.
So what are the possible outcomes here?
One outcome is that the trade war continues to drag on and Chinese companies are essentially shut out of the U.S. market.
This is the scenario that the Chinese market seems to be discounting right now. So a protracted trade war would likely leave Chinese stocks right where they are today — or possibly slightly lower.
Since the stocks have already moved lower, it’s not likely they’ll get much worse.
Of course, another possible outcome is that someone flinches.
An olive branch is extended… Maybe one or two exceptions are made…
And before you know it, the world leaders are sitting back down at the negotiating table and hammering out a deal.
If this were to happen, Chinese stocks would soar! Because it would mean these companies once again have access to the biggest market in the world right now. And profits would be expected to move sharply higher!
So what’s the takeaway for us?
Well, today, we’ve got a chance to invest in China at discount prices thanks to a big fear pullback that has investors’ attention. The potential risk with this trade is minimal.
The potential gain on the other hand is likely to be very big! And this is exactly the type of lopsided or skewed investment scenario that I love!
So today, before there’s a new announcement of a trade resolution, I recommend adding some exposure to Chinese stocks in your account. It’s a great reward-to-risk scenario for growing your investments.
Here’s to growing and protecting your wealth!
Zach Scheidt
Editor, The Daily Edge
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The post The Time To Buy Is Now… Before The Rebound appeared first on Daily Reckoning.
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