Tune out the market 'noise'; Western executives who visit China are coming back terrified; Trading in QMMM remains suspended; Lululemon Athletica's founder says the company is 'in a nosedive'
1) As you know, stocks sold off hard on Friday on fears of an escalating trade war between the U.S. and China.
That prompted plenty of memes – like this funny video entitled "Retail investors in the US stock market on Friday."
But markets are rallying today. Beijing downplayed the significance of its latest restrictions on rare earth materials on Saturday. And yesterday, President Donald Trump posted to social media that "it will all be fine."
This is all just market "noise" that long-term investors should tune out.
2) Speaking of China...
A new article in the U.K.'s Telegraph is sobering. As it says, "Western executives who visit China are coming back terrified."
For example, approximately 80% of all new industrial robots deployed worldwide are in China, as the charts in this post on social platform X show:
The Telegraph article cites Ford Motor (F) CEO Jim Farley:
"Their cost and the quality of their vehicles is far superior to what I see in the West," Farley warned in July.
"We are in a global competition with China, and it's not just EVs. And if we lose this, we do not have a future at Ford."
And as it continues with a quote from another CEO:
"We visited a dark factory producing some astronomical number of mobile phones," recalls Greg Jackson, the boss of British energy supplier Octopus.
"The process was so heavily automated that there were no workers on the manufacturing side, just a small number who were there to ensure the plant was working.
"You get this sense of a change, where China's competitiveness has gone from being about government subsidies and low wages to a tremendous number of highly skilled, educated engineers who are innovating like mad."
As I've said time and time again in my daily e-mails, I don't recommend investing directly in China or in Chinese stocks because there's too high a chance of being defrauded.
However, I continue to follow developments there because of the effect on companies and industries around the world. For example, seeing comments like that from Farley makes me increasingly wary of the stocks of Western automakers.
3) And speaking of China frauds...
Shares of Hong Kong-based QMMM (QMMM) – about which I've warned my readers many times (archive here) – were due to start trading again today after the U.S. Securities and Exchange Commission's ("SEC") order halting trading through October 10 expired.
But the Nasdaq extended the halt "until QMMM Holdings Limited has fully satisfied Nasdaq's request for additional information." If these shares ever trade again, I expect they will be on the pink sheets for pennies.
As I've been saying for years, the SEC should simply ban all Chinese companies from U.S. stock exchanges.
4) Another company I've written about often (archive here) is apparel maker Lululemon Athletica (LULU).
I'm attracted to it because I love the products, the company has high margins and free cash flow, and the stock is beaten up – down 60% from its 52-week high.
But I haven't recommended it because growth has stalled and I can't tell whether the company's problems are cyclical (short term) or secular (long term).
I'm leaning toward the latter after reading a letter that Lululemon founder Chip Wilson published as a full-page ad in the print edition of the Wall Street Journal last week. You can see a full picture of it in this post on X.
In the letter, Wilson blasts the board. As he says:
Lululemon's directors have systematically dismantled the business model and lost employees who held the institutional knowledge that made the company great.
Like a plane crash, decline rarely happens because of a single failure, it's a series of mistakes.
In the full letter, he goes on to list the issues he sees – including "loss of creative," "culture erosion," and "loss of cool." He also lists five points for a "path forward."
And as Wilson concludes:
Lululemon can keep growing, but growth alone is not a healthy measure of success. The true measure must be innovation and brand reputation. When those are strong, growth comes naturally; when they're not, growth halts. The path is clear, but only with a revitalized board of directors with diverse capabilities.
(Again, you can see the picture of the full letter in this post on X.)
Wilson also went on CNBC and, according to an article on Investing.com, suggested that "he may work with activist investors to force changes at the athletic apparel retailer."
I don't think I'll recommend Lululemon until there are major changes along the lines that Wilson outlines.
But if that happens and my team and I at Stansberry's Investment Advisory think the stock looks compelling enough to add to the model portfolio, our subscribers will be the first to know. (If you aren't a subscriber already, find out how to become one as part of this special presentation.)
Best regards,
Whitney
P.S. I welcome your feedback – send me an e-mail by clicking here.