Monday Market Madness – Drone Attacks Threaten Global Oil Supplies

Image result for saudi drone

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

 

 

 

 

 

 

 

 

 

 

Lucky Friday the 13th – Markets Retest their All-Time Highs

"Let me tell ya, your love (your love keeps lifting me)

Keep on lifting (love keeps lifting me)

Higher (lifting me)

Higher and higher (higher)

I said your love (your love keeps lifting me)

Keep on (love keeps lifting me)

Lifting me (lifting me)

Higher and higher (higher)" – Jackie Wilson

Here we go again!  

3,028 was our July high on the S&P 500 and we're so close this morning we might actually get there into the weekend – isn't that great!  This is the highest the S&P has been since it dropped 200 points (6.66%) in the last week of July/first week of August but we held that top for a good two weeks so it's not that likely we'll fall right back off the cliff on Monday – especially as the driving catalyst is "progress" on the China deal and we're not actually meeting until October – so we can have a whole month of enthusiasm before the next breakdown.

That's good news because we'll be adjusting our portfolios into next Friday's Options Expiration Day and it's Quad Witching as the quarter is ending as well so Futures contracts expire along with stock options and I'm going to be very hard-pressed for a reason not to take the money and run on a good deal of our positions, rather than risk an uncertain Q4 – keeping in mind that last year we rolled into September making a new all-time high at 2,950 (that's right, the S&P is only up 75 points (2.5%) since last year) but plunged 600 points (20%), below 2,350, into Christmas.  

I think a proper China Trade Deal could take us up to 3,300…
continue reading

Thrilling Thursday – Back Over S&P 3,000 as the ECB Eases

NEGATIVE 0.5%!

That is now the European Central Bank's Deposit Rate.  That's 2.6% lower than our Fed's current 2.1% rate and 0.75% lower than our all-time low of 0.25% (and you thought we couldn't go to zero!) back in the throes of the Recession.  As you can see from the bottom of the Fed's historical rate chart – this has never happened before in the history of the World so don't listen to people who tell you that they know what is going to happen in a negative-rate World – no one has any friggin' idea what is actually going to happen when we go below the zero line…

We've had Recessions, Depressions, Hyper-Inflation and even Deflation in Human Economic History but we have not had a situation in which rich people (Banksters) CHARGE YOU money for holding your money.  And they are not HOLDING it, you are lending it to them and they are using it to make more money (as Jimmy Stewart explains) – they don't even HAVE your money – IT's GONE!!!  

Negative rates sent the Euro plunging lower (if you have 100 Euros, and you put it them the bank for 10 years, you get back 95 Euros), which will not make Trump happy, as he wants a weak Dollar to inflate the value of his real estate assets so he will pressure the Fed to lower our rates further, so Trump can then borrow money at lower rates to buy more buildings and, of course, the US Taxpayers pay the bill for all these artificially low rates through gigantic deficits and Putin wins again – but there's no collusion – things just work out for him… all the time.  

In fact Russia has been hoarding gold and dumping US assets – almost as if they knew what Trump was going to do.  Russia has been the World's largest buyer of gold recently with the value of their reserves climbing 42% in the past year alone.  “Russia prefers to cushion its macroeconomic stability through politically neutral tools,” said Vladimir Miklashevsky, a strategist at Danske Bank A/S in Helsinki. “There is a massive substitution of U.S. dollar assets by gold — a strategy which
continue reading

Which Way Wednesday – Why Not Both Ways?

Image result for scarecrow both ways ozWhat a crazy week already.

Yesterday the Dow topped out Monday at 26,900 and fell back to 26,700 yesterday, closed at 26,909 and is now up another 40 points in the Futures as President Trump is back on Twitter this morning saying:

The Federal Reserve should get our interest rates down to ZERO, or less, and we should then start to refinance our debt. INTEREST COST COULD BE BROUGHT WAY DOWN, while at the same time substantially lengthening the term. We have the great currency, power, and balance sheet….. 

….The USA should always be paying the the lowest rate. No Inflation! It is only the naïveté of Jay Powell and the Federal Reserve that doesn’t allow us to do what other countries are already doing. A once in a lifetime opportunity that we are missing because of “Boneheads.”

By the way, that's not my emphasis, that's his – I have no idea how he gets twitter to make giant text like that.  In this case, Trump is not wrong(ish) as his "plan" is to have the Fed lower rates to zero and then WE can borrow $22,000,000,000,000 to "refinance" our existing debt (by confiscating existing bonds?) and then sell even longer-term bonds at 0% or maybe even BELOW 0% so PEOPLE WILL PAY US to lend us money in which case the more in debt we go – the more money we'll make forever and ever and ever – what could possibly go wrong with that plan?

 

IN PROGRESS

 

 

Technical Tuesday – 3,000 or Bust on the S&P 500

Here we are again!  

2,978 on the S&P 500 is within spitting distance of 3,000 and today it will be all about Apple (AAPL) and the market's reaction to their event at 1pm today, where they are expected to announce yet another new IPhone and probably more watches and stuff about their TV Service and who knows what else…

Apple is 3.5% of the S&P – its largest component and it's 14% of the Nasdaq – by far the largest component and it's a Dow component where each $1 move in AAPL stock moves the Dow by 8.5 points.  So, to say there's a lot riding on AAPL today is a huge understatement.  

The Nasdaq, for it's part, is having a rough week – so they could use some good news from Apple, who are the only FAANG stock besides NFLX who are not involved in anti-trust investigations and NetFlix WISHES they were more of a monopoly because AAPL, DIS and a dozen other streaming companies are putting pressure on their bottom line and limiting their growth (our hedge fund is short NFLX). 

My early summer comments to our Members on NFLX were:

CMG/Sun – NFLX would be my top short, I just don't think they can keep their growth up, there's no moat to their business and costs are skyrocketing because they are a movie studio selling subscriptions (HMNY) when push comes to shove, not a tech company.

As I said in the Webinar, it's not really possible for them to sustain that ridiculous valuation.  They are no different than TWX or CBS and those companies trade at 15-20x earnings.  The same people who were convinced to subscribe to HBO over the past 40 years


continue reading

Monday Market Movement – Back to the Top

It's quiet time.

With a Fed Meeting a week from Wednesday, the Fed has entered a "quiet period" where there won't be any policy statements.  At the moment, based on last week's comments, odds are strongly favoring a 0.25% rate cut – even though the market is at record highs, unemployment is at record lows and inflation is at or over the Fed's 2% target so a rate cut, if we get one, will undercut faith in the Federal Reserve as being independent of the Government and will render them far less effective for years to come – but at least Trump will get his bonus rally.

As you can see from the S&P chart, as we expected, breaking out over the Strong Bounce line is taking us back towards the highs and last time we did this (June) on hopes of a China deal and a rate cut, we ran up another 2.5% over 2,950 to 3,020 so 3,100 would be the ideal goal of this run on the S&P (/ES) – at which point we'd probably start shorting again – deal or no deal with China.

Still, there's probably a month of this nonsense to deal with – 30 days in which the bulls will once again become insufferable with their ever-rising predictions for higher and higher market prices.  It's a very annoying time to be a Fundamentalist and, come to think of it – we don't enjoy the crashes either – maybe I should stop thinking and become a TA guy…

Not a very exciting week on the Economic Calendar and earnings are barely trickling in at this point but still a few big guns reporting – even at this leat stage:

Image

GameStop (GME) is very interesting as yes, they are going through a rough patch but not as rough as is not indicated by their $4.30 price as they made $7.5M last quarter and $4.30 is just $413M for the whole company so, even if they only made $30M for the year – that's still pretty reasonable but Q4 is their big one and they had an operating income of $196,300 from 11/2-2/2 which was wiped out
continue reading

Non-Farm Friday – Is America Working and Do the Markets Care?

We'll see how the trend is going today.

On the whole, job growth has been weaker than expected, especially since the US population grows by 2M people each year so we need 166,000 new jobs per month just to stay even.  That's just about been Trump's average since he was elected, a far cry from the 10.2M jobs (212,500 per month) Obama added in his second term.

In fact, we generally average 200,000 jobs per month under Democrats:  Clinton added 23.5M new jobs in two terms and even Carter added 10.3M jobs in a single term and Kennedy/Johnson put up 15.6M jobs in 8 years.  Even Ronald Reagan managed to add 15M jobs in his 8 years so Trump will be a real outlier if he continues at this anemic pace but, fortunately, he can always point to the Bushes, who added a total of 3.3M jobs in 12 combined years at the helm, leaving 32M new Americans with very little opportunity to work.  

It would seem amazing that Americans would want to return to those days yet they voted for a guy who espoused the same policies the Bushes used to run this country into the ground (S&L Crisis from Poppa, Great Recession from Junior) but that's where we are at the moment and now the question is whether we WANT a strong job number or not because a strong jobs number (over 200,000) could take the Fed off the table at the next meeting (18th) as this is the last major data-point before they make their decision.  

Total private industries employment.png

With China "fixed" and strong jobs and record-high market levels – what possible justification would the Fed have in two weeks to lower rates?  Inflation is clearly climbing and wages are rising – these are generally reasons the Fed would RAISE rates, not lower them so, if you are a big fan of FREE MONEY – you'd better hope this job report is another disaster – like last month was!  

8:30 Update:  Disaster it is!  Only 130,000 jobs were added in August and July, which was already a weak 148,000, has been revised down to 131,000 so, even with that – we're worse than last month!  Hourly earnings, on the
continue reading

Trade Talk Thursday – China Negotiations Back On!

Wheeeeeeeee – this is fun!

We're up another 1% this morning as Trade Talks between the US and China are now officially scheduled to resume – in "early October" and if that isn't worth another 300 Dow points – I just don't know what is?  According to the WSJ: 

Expectations for a breakthrough in trade talks are low, as tensions have risen between the two countries. Neither Beijing nor Washington specified a start date for the talks, which would be the 13th round in a series of on-and-off negotiations that began in January, after the U.S. initially agreed to hold off on further tariffs to try to reach a trade deal.

“The path to even a modest deal is strewn with many obstacles, as neither side is likely to pull back any of the existing trade sanctions without substantial concessions from the other side,” said Eswar Prasad, a China expert and economist at Cornell University.

Hell, that's got to be worth 1,000 points – doesn't it?  We're up 600 points on they Dow since Friday and up 1,200 points off our August 23rd low at 25,400.  Correct me if I'm wrong but isn't the trade war the ONLY reason the Fed was considering raising rates and isn't a good part of this last 1,200 point rally based on expectations the Fed will lower rates?  So are we now expecting the Fed to lower rates AND to get a China Trade Deal?  It's like Santa Clause AND the Tooth Fairy will come on our birthday!  I'm sure it has happened to some kid, somewhere – but it's got to be pretty rare – not the sort of thing you should bet your portfolio on…

Not only that, but didn't we have a rally in June when trade talks were scheduled for September?  That never happened and then we crashed from S&P (/ES) 3,020 back to 2,800 in August and then we began the "Fed will save us" narrative that took us back to 2,950 and now we're going
continue reading

Whipsaw Wednesday – Hong Kong Capitulates and Johnson has a Coup

Hong Kong shares jump, with property subgauge up most since 2015What a night it's been!

The MSCI Hong Kong Index popped 5.4% – the biggest gain since a massive stimulus bill in October, 2011 led by Real Estate firms that almost hit the limit up 10% as the Government finally gave in to protesters and witdrew the extradition legislation that had started the protests over a month ago.  Hong Kong also declined to set up a comission to investigate the protesters – another point of contention

The index had fallen 8.6% in August as the protests raged and properties were down 20% as the real estate market ground to a halt and values began dropping.  It's not clear, however, that the protests will end as there are several more issues on the table but any sign of flexibility on the part of the Government is a huge step forward and, for now, the markets are thrilled.

Yesterday we also noted that, while Boris Johnson was talking on the floor of Parliament, one of his House Conservatives, Phillip Lee literally got up and walked across the aisle to join the opposition party, taking Johnson's one-vote lead with him. 

“I have reached the conclusion that it is not possible to serve my constituents’ and country’s best interests as a Conservative Member of Parliament,” Lee said in a statement.  “This Conservative government is aggressively pursuing a damaging Brexit in unprincipled ways. It is putting lives and livelihoods at risk unnecessarily and it is wantonly endangering the integrity of the United Kingdom.”

If only the Republicans in this country had the same level of integrity!  Lee's defection stops Johnson from forcing a "NO DEAL" Brexit next month and, of course, that's a massive relief to European markets.  Lee inspired 21 other Conservative politicians to defy the Prime Minister and vote to delay Brexit until 2020.  Johnson was, of course, outraged and called for a general election in an attempt to get the public to give him more Ministers but he's clearly lost control of his party
continue reading

Tuesday Already? Short Week Opens at 2,900 on the S&P 500

We're not off to a good start

Of course we knew last week's "rally" was nothing but BS window-dressing to end the month on a high note, though the indexes were still down overall, giving us a losing month that caused a lot of technical damage on the charts. 

The S&P was at 2,900 last September and we held on all the way until early October, and then we crashed into the end of the year, hitting 2,400 at Chrismas, down 17.25% and it took us all the way until April to get back to 2,900 – and here we still are! 

"Well we know where we're going

But we don't know where we've been

And we know what we're knowing

But we can't say what we've seen

And the future is certain


Give us time to work it out" – Talking Heads 

What is certain is that Trump did carry out his evil scheme to put more tariffs on Chinese products that US Consumers have to pay for and, as we feared (though was denied last week), China IMMEDIATELY retaliated by placing a levy on US crude imports, encouraging buyers to stop buying US OIl, which is exactly what Trump's donors didn't want though, of course, Putin wins again as Russia is China's largest supplier.  China also placed tariffs on additional US Goods and the Chinese Government has filed a complaint with the World Trade Organization, who are very likely to rule against Trump so our next crisis may be pulling out of the WTO.  

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
continue reading