Banks, Trade Wars And The Next Great Opportunity (Chris DeMuth)

|
Includes: BNCC, NXPI, QCOM, ZTCOF
by: Brian Bain

Summary

Chris offers high marks on tax and regulation, low marks on trade tactics.

China is the world’s most important trade relationship and we are poorly positioned to have an adversarial relationship.

China does not want to be dependent on any exports in the future.

NXP is high on his list, there is a $20 spread on the price vs the current offer.

BNCCorp has been on the back burner for a number of years and the vast majority of shareholders want it to sell.

The story behind the interview:

Government Policy has played a huge role in 2018 including tax reform, regulation reform, and trade wars.

Chris and Brian talk about how to make sense of it all and where to find opportunities.

For those who prefer to read, my full interview notes are copied below.

Interview notes:

  • There are dramatically positive public policy changes that Chris has been researching and investing in recently. Tax reform has been very positive for equities and M&A. For example, the worth of companies has become more transparent. High corporate tax and lack of clarity on rates it makes it hard to know how to value things

  • Regulatory reform in banks and thrifts have been really positive. Compliance laws for small banks were deeply constraining and repealing these along with tax cuts have been great.

  • Chris offers the administration high marks on tax and regulation, low marks on trade tactics.

  • Chris' views on trade:

    • From an economics perspective, one should focus on the comparative advantage as opposed to nationalistic concerns.

    • The question to answer is: Are you producing goods that you are best at producing and partnering with others where you don’t?

    • Typically, the more trade the better. In trade, you get something for what you spend, something of greater value than you pay. Trade is good and makes people richer.

  • China is the world’s most important trade relationship and we are poorly positioned to have an adversarial relationship.

    • Chinese have been relatively sophisticated in targeting American goods and services that impact the Trump administration

    • We hope the Chinese leadership does not take the US leadership too seriously

  • Chinese are focused on the long-term. China does not want to be dependent on any exports in the future. We are fighting over the short term, whereas they have different long-term goals

  • How is Chris viewing this going forward?

    • Watching Chinese regulatory decisions w potential impact on his investments

    • Appears China is still very open for business, seem more free enterprise than the US

    • ZTE (OTCPK:ZTCOF) has been hugely discounted due to trade concerns

    • Qualcomm (QCOM) purchase of NXP is of interest, the walk date on the deal is 7/25

    • He expects lots of drama and big discounts as the markets are responding poorly to trade talks.

  • What is Chris excited about?

    • NXP (NXPI) is high on the list, there is a $20 spread on the price vs the current offer. It is worth the current market price even if the deal falls and there could be other deals in the future.

    • There will be a ton of consolidation in media and telecom and banks and thrifts.

    • BNCCorp (OTCQX:BNCC) has been on the back burner for a number of years. The vast majority of shareholders want it to sell. There has been a hiccup with a board member opposed to a sale.

Want to enjoy my next interview with Chris DeMuth?

If you'd like to be notified of future interviews and content from Chris DeMuth and other authors...

Please click the "Follow" button at the top of this page. To receive bonus content, please select "get email alerts."

If you prefer to have interviews delivered to your mobile device, please subscribe on iTunes.

Disclaimer: This article is for information purposes only. There are risks involved with investing including loss of principal. Brian and Investor in the Family make no explicit or implicit guarantee with respect to performance or the outcome of any investment or projections made. There is no guarantee that the goals of the strategies discussed by Brian and Investor in the Family will be met.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.