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Federally Funded Friday – Rally Continues on Rate Cut Expectations
That's the chorus line the market pundits are taking this week and the Fed speakers have given them plenty of ammunition with Vice Chairman Clarida and New York's Williams making more doveish comments yesterday, which sent the indexes flying higher into the close and pushing the S&P 500 back over that critical 3,000 mark so it will look pretty for the weekend.
Since the data certainly isn't supporting a rate cut the Fed has now turned to fortune-telling to justify doing Trump's bidding:
“You don’t need to wait until things get so bad to have a dramatic series of rate cuts,” Clarida told Fox Business Network, citing economic research. “We need to make a decision based on where we think the economy may be heading and, importantly, where the risks to the economy are lined up.”
Clarida’s remarks line up with testimony last week by Fed Chairman Jerome Powell, and comments a bit earlier in the day from Williams, that have cemented expectations for a rate cut. Investors, weighing their words, increased betsThursday that the Fed will move by a half point at the July 31st meeting. While the U.S. economy is “in a good place,” Clarida said recent global economic data have been softer than expected. “We’ve had mixed data, but I do think the global data has been disappointing on the downside,” he said. “Disinflationary pressures, if anything, are more intense than I thought six weeks ago.”
Lowering rates 0.5% with the market at record highs and the unemployment rate below 3% is unprecidented and very probably insane but that is what the market is now expecting a week from Wednesday.
IN PROGRESS
We did not hold it.
So far, so good.
$246,000,000,000,000.
While the Chinese Government is "only" about 100% of their GDP in debt, Chinese Companies make up for it with their own $21Tn pile of debt, 155% of their current GDP. In fact, Chinese firms accounted for 42% of all Corporate Bonds issued in Emerging Markets this year and the IIF says there are now serious risks of default next year and in 2021. Sonja Gibbs the IIF’s Managing Director for Global Policy Initiatives, said:
And we keep going higher!
350%!
Ignorance can truly be bliss in a bull market as traders are content to ride stocks like Amazon to the moon while more cautious investors might have taken some off the table half a Trillion Dollars ago. Just yesterday, AMZN gained 1.5% or $15Bn in market cap despite the fact that only $10Bn worth of shares…
A new portfolio!
TODAY is the day!
Traders are keying off "Fed will act as appropriate to sustain expansion" which indicates they are 100% behind this rally but it's a bit of cherry-picking as Powell is also saying we are on track to hit the inflation target (so easing makes no sense) and the "worries" he has for the economy are still Trade and Brexit (and their effect on…
To ease or not to ease…
That's the difference between thinking like a child and thinking like an adult, of course and, as our friends in the UK like to point out – Trump is essentially a giant baby with low attention span who likes to repeat catchy phrases with little understanding of the underlying issues and has an absolute melt-down if he doesn't immediately get what he wants.
Wow are "THEY" trying hard to sell you this rally.
$2.1 MILLION Dollars!
There's not much going on this week.
Meanwhile, my theme of the week is gathering steam as now 
2,982.
The Dow is up 250 points pre-market.
Notice that 87 S&P 500 companies have already pre-announced negative guidance for Q2 and, when we get back from the Holiday weekend next Monday, we'll begin to see those Q2 earnings reports. So, while we hedged heavily into the weekend – just in case the G20 went badly – we will be using those hedges into Q2 earnings season, albeit less aggressively as we sell some covers as well.
We've got high hopes!
Wheeee, what a ride!
At least it's not 2,800.
Meanwhile, tensions with Iran continue to heat up as Iran's President Hassan Rouhani called the White House “mentally retarded,” dismissing the Trump administration’s 
There's a whole lot of nothing going on this week.
One major data-pont that has us worried is Factory Activity, whichhas gone into contraction in the US, Europe and Japan and is sitting at decade lows 
It's quad witching day!
We are so close – again.
More free money!
We're wating on the Fed.
Housing, as always, is a major driver of the economy and it's kind of hard to ignore it when it begins to falter – but that's exactly what the market is doing at the moment. This is where the panic is coming from as even a 1% rise in rates last year has caused a 10% decline in housing activity and we NEVER came close to getting back to our pre-2008 levels in the first place.
Day 6 of the rally.
All is well, again.
Hope reigns eternal.
We are hitting our goals.
Cuba's economy is 20 times bigger than Puerto Rico and they mostly trade with countries in South and Central America – not Russia – not at all. Canada is 10% of Cuba's trade but it's dominated by Venezuela, more than 1/3 of the total and Venezuela's a mess and that hurts Cuba.
We import $346Bn worth of goods from Mexico and a 25% tariff tax, paid by the…
This is not good!
"Sell in May and Go Away."
Unfortunately, Trump has chosen to bluff when he had no idea what cards China held and now it turns out they have a very strong hand and are not afraid to play it. It is simply not possible for the US to fill their demand for rare earth materials without China and Trump has pushed China into a corner where they may have to retaliate to our sanctions with this, er, trump card they've been holding the whole time.
Speaking of things that were up to you – congratulations to all who stuck it our with us on 
Up and down we go – but mostly down.
The President is losing it.
Not again!
We did get a nice pop this morning on Natural Gas, which was our long idea from 
The markets are very moody.
Are we weathering the storm?
This is not pretty.
What, us worry?
No deal!!!
The art of the deal?
Down and down we go.
The July $32 calls are now $1.15 after bottoming at $1.10 and, since we expect $1.70, that's a 0.55 (48%) gain from here so actually it's good for a long play at this point too! We're nothing if not flexible in our outlook because we're Fundamental Investors which means we know the value of an option and, since we fell the July $32s are worth $1.70, but not more – just…
Is this fun or what?
Wheeeeee – down we go!
Though it may seem like we're treading water, we're actually rotating our sectors.
That's how we're seeing all these companies, without the benefit of having more sales, dropping more and more money to the bottom line and we're only in the very early stage of this automation cycle – like the beginning of the Industrial Revolution – which led to World Wars 1…
The market can't seem to get the hang of Thursdays.
$11.5 Billion Dollars.
There's a lot at stake here as the US imports 10% of its oil from Venezeula yet it is thought that the country could produce 1-2 Million more barrels per day if the right investments are made but to make the right investments, we need a Capitalist-friendly Government that will allow US-based oil companies (ie. Trump donors) to take over Venezuela's valuable oil assets so – Viva la Revolution!
In a REALLY crazy move – even for Republicans, 
Now we'll see.
To me, this is not a recipe for a record-high stock market. If the US consumer breaks (and they are certainly stretched to the breaking point), then there's no one left in…
I love earnings season!
I'll be on 
There's not much news and it's a silly pre-holiday trading day so I'm going to reveiw the OOP instead.
8,000 on the Nasdaq Composite!
If we want to determine whether 8,000 is too much for the Composite, we should look at the top 10 holdings, which make up a whopping 40% of the indexes weight while the other 2,629 components fight for the other 60%. The simple question we can ask here is are these companies worth 60% more than they were in 2016 and, to do that, we can simply look at earnings and revenues because we should expect some real changes, right?
Wheee, up 180!
So, while we may see it rebuilt and think "it's not the same" – our great, great, great grandchildren will probably see it as an achitechtural classic once again – providing we do something about Global Warming, which came within 3 feet of breaking over the embankments during the 2016 Paris Flood.
It's earnings season!
Wheeee – that was fun!
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Are we recovering from yesterday's dip?
We're testing another major level at S&P (
Our last Non-Farm Payroll Report really sucked.
Over 2,850 on the S&P 500 (
In a trend that will challenge the sector, declining reimbursements for prescription drugs cut into the company's profit margins. 
It's not just earnings that are a problem, we just got…
Good news everyone!
According to the WSJ
I am 56 today.
Really?
So close but yet so far.
Somehow, this makes me worry more because 2019-1970 = 49 years and Draghi is saying we've had FIFTY (50) 2-quarter slowdowns in less than 50 years – and he thinks that's OK? Sounds like a good case to get out of the EU to me! Speaking of which – the first rat to attempt to leave the sinking EU ship is, of course, the UK and the chart on the left gives us an idea of where they stand.
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No, nothing happened.
Well, Friday was a disaster, wasn't it?
See, if you say it loud enough and often enough, you may actually start to believe that. Who needs reasons when we have chants? Well, I guess the answer is people with globes, people who understand that it's a global economy and not a local one any more but those people are called "Globalists" and they are vilified by the right as if reality is some anti-American agenda.
Just because the economy is weak doesn't mean FDX is suddenly a bad company – so it's a great play for long-term investors on a $47Bn company ($45Bn this morning!) that dropped $4.5Bn to the bottom line last year but, even adjusting for one-time tax breaks – they should still be netting about $3Bn in profits in 2019 so $45Bn ($170) is very fair.
Up and up we go – so far.
Remember, I can only tell you what is likely to happen and how to make money playing it – the rest is up to you!
Here we are again.
No Brexit deal again.
Certainly investors haven't learned NOT to buy stocks on margin as Margin Debt is 25% higher than it was in 2007 – despite being drastically reduced over the past quarter. First Margin Debt contracts and then the Indexes contract is pretty much the market norm – as people have to buy stocks with real money and begin demanding real performance and we'd better keep our eye on this chart because it seems to indicate we're pretty close to a significant correction.
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In the Lion Air crash, investigators have indicated the pilots fought the MCAS system as it strongly and repeatedly pushed down the plane’s nose, but didn’t follow an existing procedure to deactivate it. On MAX 8 models, under certain conditions, pilots may be unable to pull the plane out of a dive unless they react quickly and proceed to the most relevant portion of their emergency checklist. Outside safety experts have questioned how the FAA gave the green light for such a design lacking redundant software or hardware safeguards.
There's a lot at stake here as Boeing is a large part of US Exports and, while only…
Wheeeee!
That's why we've been "Cashy and Cautious" since we cashed our our 5 Member Portfolios in December of 2017, when I decided the risk of holding through the holidays wasn't worth it after a year of such spectacular gains. I was a little early with that call but we got a great sell-off last January and we jumped in with our new Portfolios and now they have made ridiculous gains – especially our skeptical Short-Term Portfolio, which we use to hedge our Long-Term Portfolio.
Back to 2,800!
No deal!
My working theory remains that Trump does not want a trade deal with China because he's taxing AMERICANS hundreds of Billions of Dollars a year in order to balance the tax cuts in his budget. In other words, the tariffs are nothing more than Trump's way of robbing the poor to give to the rich and, even though 
It's always something!
Criminal conduct!
Sure, that's the ticket, right? Well, the market has been willing to move along, even as 
"
Uh-oh!
Is this rally real?
There is no trade deal.
That was easy!
8:30 Update: Oops, DISASTER! 
55 Miles, $1.4Bn.
Despite all the progress we're making in keeping out the tired, the poor and the huddled masses yearning to breathe free, Small Business Optimism contines to decline, especially in Future Expectations, which are down 10% since the last reading. That seems to be the general trend at the moment – people are content with the current conditions but they are worried that the country is going to Hell in a handbasket…
Steve Mnuchin to the rescue?
Now, there's nothing wrong with sending a tough negotiator to China but Lighthizer is more of an anti-China negotiator but even that may have a place if you have a highly skilled person keeping him in line but there's no indication that's the case with Mnuchin and, even if it were, it is complete folly for the markets to believe that this duo is going to be able to quickly resolve the many issues that the US and China are very far apart on in trade.
Low expectations.
Still, I would not go into today's end without hedges – just in case we have a repeat of last year and the great efforts to prop up the market end as soon as the President is done telling you how great things are. Trump also bitched about Government Regulations and said it was ridiculous that we were once able to build the Empire State Building in one year and now it takes 10 years to get a road built but 5 people died…
Well, we've made a bit of progress.
It costs real money to do these stiulus packages and it's money we're borrowing from the Future in order to what? in the present? Again, where's the beef in this economy that it can't stand even a little bit of price correction? 
America is barely working.
Asked by reporters to respond to Mr. Ross’s comments, Mr. Trump said that he had not heard….png)
Hold that line!
If we were serious about Trade, we'd also be making concessions, not simply saying we'd stop doing something we only started doing so we could use it as a negotiating tool down the road – which is now. Even if China were that stupid (and they are not), Lighthizer didn't come all this way just to make a deal. His goal is the economic destruction of China and he…
As of this morning, the 50-day moving averages are:
Well, we're making no progress.
Don't even try to compare that to CSpan – it will make you cry. British Parliament is based on debate and consensus so any MP is a skilled orator – it's basically a job requirement. Most of our Congresspeople can't put two coherent sentences together without their entire staff working overtime to prep them and God forbid our Congresspeople get interrupted – that's game over for them but that's the entire game in the UK – a much better way to discuss the issues.
At the end of this week, we'll have gone a month without a Government.
We're right in the middle of Flu Season and 30 people are dead and 9,000 people are hospitalized but 
Well, we're right on track…
Well candy didn't work.
Pretty, pretty please?
Here we go again.
After a coup in 1973, the new Government in Chile declared a State of Emergency that lasted for 15 years and Myanmar declared one as recently as 2012, imposing emergency powers to segregate the Muslims leading to many "disappearances". Make no mistake, there is no "National Emergency" here, Trump is declaring an emergency to punish another branch of the Government for…
Well, we're still closed.
The much bigger deal this week is 
Though Trump is repeating those same economic mistakes, at least he hasn't done anything to stop the 
Only $84Bn?
That kind of madness internally means the markets can be moved on any sort of insane rumor because ANYTHING is possible. "Trump Declares War on Apple" is not a headline you would ignore because it MIGHT be true and, unfortunately, modern trading algorithms are trained to respond to headline news – on the assumption that thing that make the headlines of mainstream media are likely to be true. This is no longer the case as the MSM also doesn't know if something is too insane for Donald Trump or not.
Despite the surge in the Futures, we haven't gained a single green box since 
Nice bounce.
Wheeeee – what fun!
Merry F'ing Christmas!
Meadows still gets paid, 6,200 Federal Employees who work in his district will not. Even his fellow Republican Rep, Ryan Costello blasted Meadows for being a total ass. Unfortunately, Costello is a good man and has chosen not to seek re-election as he's an actual person trying to do what's best for the country and not some partisan hack who sucks up to the richest monster he can latch onto.
Wheeeee – such fun!
18 out of 22 people at dinner had IPhones and that's in a wealthy part of Florida but my ordinary town in NJ (middle to upper-middle class) is probably 80% IPhones as well. Now, I'm sure it's different somewhere in America because, nationally, IOS (Apple's operating system) is only on 50% of the phones in the country but, as of April, 
Will the Fed save us or doom us?
I'm not happy about it, this means the damage is worse than expected already and the Fed really shouldn't be tightening this afternoon but they kind of have to tighten as rates are still…
A World without Trump!
What's it going to take to stop the bleeding?
Are the dip buyers still out there?
Meanwhile, both 
Wheeeee – what a ride!
Why does the Fed not want inflation? Because you take a fixed loan on your home of, for example, $250,000 and put down a $50,000 deposit and, at 4.5%, you pay $1,266.71/month (not including taxes, insurance, etc) for 360 months which works out to $458,933 (plus your $50,000 deposit) paid out on your $300,000 home. The problem the Banksters have, however, is that the last $1,266.71 you pay them isn't worth as much as the first $1,266.71 you paid them due to inflation so they want inflation to be as low as possible to maximize your effective payments. THAT is what the Fed is concerned about.
DOOM!!!
We're still in technical trouble.
Trump has named China hard-liner, Robert Lighthizer, to head up the negotiations
Donald Trump will save us.
Opponents—including generic drugmakers, insurers and the influential AARP advocacy group for older Americans—say the deal would make it harder to ease those rules in the U.S. and restrict competition regionally. The Association for Affordable Medicines coalition wrote to U.S. Trade…
Wow, what a comeback!
Rather than focusing on "still low by historical standards" the media chose to focus on the much vaguer "just below the broad range of estimates" which shows a complete lack of understanding of what a range is – whether intentional or otherwise. Fortunately, we know exactly what range Powell is talking about as it's the Fed's famous "Dot Plot" that shows exactly what the range for rate expections is among the 12 Fed Governors.
Well, we flipped the NYSE's weak bounce line green at 12,150.
And it's not just the NYSE, the Russell has already crossed and the Nasdaq will cross early next week and the S&P will cross within two weeks and the Dow MIGHT avoid a death cross, but only if it gets back over 25,000 and stays there. This morning, the 
Does he do it on purpose?
Trump has done NOTHING for jobs and, in fact, Trump's first 22 months in office created just 4.1M jobs while Obama's last 22 months in office created 4.8M jobs – Trump inherited a triple and turned it into a double and, at this pace, it will dribble out into a weak single.
The good news this morning is progress on Brexit, hopes that the US and China can make trade progress at the G20 and oil has finally stopped falling at $50 – so the energy sector is having a bit of a relief rally. Also, border patrol agents seem to have saved us from that deadly migrant caravan by 
I had predicted way back on Jan 25th that 2018 was going to be a stock picker's market
Down and down we go.
Back in October, we looked at the "30 Risks to Markets in 2018" and that is why we expected the correction and those risks are still out there for the most part but now many of them are REALIZED by investors – so they are less likely to cause panic selling when they bubble up in the news cycle and that means we MIGHT stablize here – down 10%, but I'd still feel a lot better about buying if we weak bounce here and continue on to a full 20% correction.
40%!
In other words, I don't think many of Facebook's 3.6Bn users are going to delete their accounts over privacy issues, election hacking or whatever until there's a better place to share pictures of their puppies and children. Likewise, my kids couldn't even contemplate life without Instagram and they have no idea its owned by Facebook and people in Europe aren't going to drop WhatsApp and start paying for their phone calls (much as the telcos who fund the political and media attacks would like them to).
When at first you don't succeed…
As you can see from the chart above, a massive effort was made just a month ago to rescue the market and, since then, we've drifted along but still haven't filled the gap that occured in October that took the market down 15% and even that is just 1/2 of the overall 30% decline since January.
Well, you can't say we didn't see this coming.
We're still 
It's not even possible for the BOJ to…
Oh what a beautiful morning!
Usually something like that in an attorney's past would immediately derail any chance they had of becomming the Attorney General of the United States of America but this is the Trump Administration…
Is this guy delusional or what?
It's election day.