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Monday Market Madness – Drone Attacks Threaten Global Oil Supplies
Phil – September 14th, 2019 at 3:17 pm
"Oil/Emike, Bert – Yeah but it's the same thing. FUNDAMENTALLY we knew the Saudis would do something to support $60 on /BZ due to the Aramco deal. Last summer they pulled the deal but now they are too far along so their only option is to do SOMETHING to boost the price.
Oil (/CL) right at $55, Gasoline (/RB) coming off $1.55. Brent (/BZ) $60.33 should hold $60 so /CL is not a bad long at this line over the weekend – maybe something will blow up? "
And THAT is how you make $5,000 PER CONTRACT trading oil into the weekend!
In our Live Memeber Chat Room, we are not conspiracy theorists – it's simly that we have observed many, many times that, when the Saudis need to boost the price of oil (and they desperatately needed the price highers as the Aramco (state-owned oil company) IPO is looming), things tend to blow up. Whether it's Nigerians attacking a pipeline or Iran or Houthis (who are taking credit for the current attack), we call them "Rent-A-Rebel" as they are perpetually on-call to jack up oil prices off key supports.
Creating a sense of unease in the supply chain is a great way to jack up the Futures and jacking up the futures by 10% is a $100-200Bn payoff for the valuation of Saudi Aramco – that's enough money to make even Dr. Evil stand up and take notice. Do you think the Saudis are above sacrificing a few men for that kind of money? Jamal Khashoggi would certainly tell you otherwise.
IN PROGRESS
NEGATIVE 0.5%!
What a crazy week already.
Here we are again!
It's quiet time.
We'll see how the trend is going today.
What a night it's been!
Hong Kong protests are getting worse, not better and we're now 60 days away from a "NO DEAL" Brexit that will throw the EU into chaos and UK Prime Minister, Boris Johnson has said he will call for new elections (they can do that) if Parliament tries to block…
To trade or not to trade?
There's a huge move up in the Futures this morning simply because 
We're down a lot for the month.
And up we go again!
$2,075,462!
It's all about Jackson Hole on Friday though all we're really going to get there is more Fed spin and, as I noted in yesterday's Live Trading Webinar, I'm getting more and more inclined to cash out our portfolios while we can as we're finding less and less things to buy and, as value investors – that's a pretty good sign the market is putting in a top – 
Of course, as usual, the markets are reading it wrong and, as usual, traders have absolutely no grasp of history as, historically, the Fed raises rates in a GOOD market and LOWERS rates in a bad market – ESPECIALLY at the top of a bad market as they attempt to forestall a looming disaster so the cut of July 31st was a warning – not a bullish signal!
Well, here we are.
Trump says we're "
More free money!
The delayed tariff date will also boost orders into the holidays and give us a better Q4 than we probably would have had as people rush to beat the tariffs with their orders. That's something that will blow back on us next year, but Trump won't have to run on next year's GDP as it won't be over by the election so this year is his "report card" and, like his school career – the President is willing to cheat to get a C.
A bit of a roller-coaster, right?
As you know, the bond market is already pricing in a Recession with the inverted Yield Curve, Germany and South Korea are both very close to recessions already, with almost no growth in the first half and Global Industrial Production and Manufacturing is also very near the contraction line below 50. Trade Growth is, of course, negative and not looking like it's going…
China is boiling over.
Hong Kong Airport is one of the World's busiest, with hundreds of flights each day, it's closure disrupts a lot of business in Asia and, long-term, if people begin to feel they can't rely on it, there could be major economic repercussions.
We're making some progress.
Don't be fooled.
In addition to the currency move, Beijing said that Chinese companies had suspended purchases of U.S. agricultural products, and that the government has not ruled out putting tariffs on U.S. farm goods purchased after Aug. 3rd. China’s Central Bank said Monday’s depreciation was “due to the effects of unilateralist and trade-protectionist measures and the expectations for tariffs against China.” People’s Bank of China Governor, Yi Gang, said that China…
Can America seem more our of control?
And again, this is ONLY shootings with AT LEAST 3 people being shot in a single incident. So far, in 2019, we average 1.2 of those every day, :no_upscale()/cdn.vox-cdn.com/uploads/chorus_asset/file/8319829/gun_homicides_developed_countries.0.jpg)
The US…
What a mess!
Whaaaaaaah!
The ECB left their rates unchanged at last week's meeting but our beloved Commander in Chief has made it very clear that he will not tolerate any more responsible monetary decisions by our own Fed and he will get his rate cut or 
How will July end?
With interest rates near their lower band, a key transmission channel of unconventional monetary policies – quantitative easing, yield curve control and forward guidance – has been to entice investors to take greater risk and hunt for yield outside of the traditional investment-grade bond market. This has inflated stock valuations, made junk bond yield look like investment-grade, and increased housing prices in major cities where real estate is a prized possession. All of…
We take advantage of this foolishness all the time in our options plays, where mispricings occur daily and I'm certainly not saying that Google, with their $60 per share in annualized earnings, don't deserve a $1,200 (20x) valuation – it's just that is certainly didn't really generate that kind of interest yet and it's a good example of how many, many stocks in this market are severely overpriced – having risen to all-time highs on very thin trading which povides very little support should sentiment ever turn negative.
Are we there yet?
Despite leaving rates unchanged, Draghi did say that they expect rates to remain at the current level AT LEAST through the first half of 2020. 10-year notes in Europe currently yield 0% and, taking into account transaction fees AND…
Politics!
Market-wise, we're sitting right on that 3,000 line on the S&P this morning as the Futures have dropped overnight, giving up about half of yesterday's gains. Mueller is testifying at 8:30 and…
5%.
The Justice Department is “taking the position that anything outside the written pages of the report are things about which presidential privilege hasn’t been waived,” the former U.S. official said. That, in and of itself, is obstruction of justice but only the Attorney General can bring those charges – and he's the one doing the obstructing! Trump invoked the broad privilege claim just minutes before the committee 
We're waiting on the Fed.
On the whole, expect to see the usual…
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.
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.