Thursday Flip Flop

The madness continues!  

Yesterday, the Dow dropped 200 points as Trade Talks turned sour but then recovered into the close as the White House insisted they were still talking to China but then rumors came out after the close that we were still very far apart but then China invited the US to come to Beijing to continue negotiations and we are back up 200 points yet again into this morning's open.  That little range pays $1,000 per contract in the Futures EACH TIME – so much fun!  

If only I had a friend in the White House who could tell me which way the wind was going to blow so I could place my bets…  That's rumored to be happening – a lot – but, so far, no whistles have been blown on that one.  

 

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Wednesday Weakness – Broader Indexes Can’t Close the Deal on New Highs

Image result for water freeze animated gif"Water freezes at 32 degrees

That's a FACT we can all agree on, right?  Unless, of course, you are using Celsius, in which case 32 degrees is 90 degrees (89.6 for your sticklers) Fahrenheit and -402.07 Farenheit if your 32 was in Kelvin.  But water doesn't care, it still turns from solid to liquid at the same temperature – no matter what your opinion of measurement is.  It's not the FACT of water changing that is in dispute, it's how you choose to interpret that fact but that does NOT mean that "everyone is entitled to their own opinion" about what temperature water freezes at.  

So there can be an absolute fact but there can be endles confusion about how to report the fact and that then leads to many interpretations of what the facts actually mean and the more facts you are using the more complex the interpretations can become – and that's the stock market.  Not only are the measurements used by Economorons always in flux but there is even the added challenge that we don't have consistent measuring tools. 

Image result for facts and figures"For example, trade could be up 3% from last year but, if the Dollar is 5% weaker, then our Import Spending would rise 8% while our Export Revenues would fall 0.2%, leading one to conclude that the trade gap had widened by 10%.  Of course, it's much more complicated than that because each trading partner has their own currency exchange and some goods are price flexible and some are not and some, like Oil, are priced in Dollars anyway.  All in all it's enough to make your head spin if you think about it – so most people don't.  

Companies do have real value – it is just distorted through so many lenses that most people think it's difficult to determine as, not only do you have to adjust for current business measurments, currency fluctuations, taxes, etc. but you also have to determine if the past is directly comparable to the future and you then have to predict the future for the company, which means predicting the future of their particular sector and perhaps the overall economy locally, nationally and globally.  …
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Tempting Tuesday – China Adds More Stimulus to the Global Excess

What are they so afraid of?

I know I sound like an old curmudgeon, always looking at the downside of all these rallies but doesn't it seem odd that our Governments seem to find it necessary to add various forms of stimulus to economies they keep telling us are great – again?  This week it's China, with the PBOC cutting rates on its Repos for the first time since October of 2015 – sending the Shenzhen Index up 1.8% overnight and even Hong Kong's Hang Seng Index rose 1.5% to the sound of gunfire on the streets exchanged between students and the police.

Having had a day to digest that news, investors seem to believe that the rate cut is indeed a sign of better liquidity on the way, lifting more sentiment-driven stocks in Shenzhen,“ said Bill Chen, CIO at Shenzhen Valley Asset Management Co.  As to the Hang Seng – it was in danger of failing 26,000 and turning negative for the year and China doesn't want it to look like the protests are affecting their business – even though they clearly are.  

Image result for china state media cartoon"In fact, the headline in the South China Morning Post is:  "Hong Kong's Stock Market Bulls Shrug Aside City's Street Protests" saying: "42% investors surveyed by Bright Smart Securities expect the Hang Seng Index to rise 5% next year, while only 6% see it declining from the current level." 

Apparently, 52% of the investors were hiding from the Government surveyors…  “The protests may have led Hong Kong’s economy into a technical recession in the third quarter, but the survey shows Hong Kong investors are cautiously optimistic about the stock market next year,” said Edmond Hui, chief executive of Bright Smart Securities.

 

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Monday Market Momentum – Still Going Up!

Image result for curiouser and curiouser"Curiouser and curiouser.

Now we're approaching 3,150 on the S&P 500 (/ES) and my prediction was 3,300 IF we got a trade deal (and then back below 3,000) but, if we're getting this simply on rumors of a partial trade deal maybe happening sometime – who knows what madness lies ahead?

"One pill makes you larger, and one pill makes you small
And the ones that mother gives you, don't do anything at all
Go ask Alice, when she's ten feet tall
And if you go chasing rabbits, and you know you're going to fall" – Jefferson Airplane

Image result for a very merry unbirthday animated gif"Uh oh!  The last time I started making Alice in Wonderland references about the stock market being ridiculous was back in the Summer of 2008 when, as it turned out – it was ridiculous and we crashed horribly soon after.  Today we are celebrating that crash's UnBirthday though the situation is a bit different this time and apparently traders have gotten older – simply not wiser… 

Back in 2008 oil was over $100 per barrel and most people thought it was a sign of a strong economy but I said "How can the Consumers afford to keep paying this?" and, lo and behold – they could not.  Now we have a rally that is fueled not by oil money but FREE MONEY and, while Consumers are spending at record levels – their debts are piling up at record levels as well.  How can the Consumers and the Government afford to keep paying this?

 

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Thank Kudlow It’s Friday – Trade On!

Image result for kudlow crazy"Larry Kudlow says things are going great!

That's enough to pop the indexes another half a point overnight because there is ALWAYS about to be a trade deal with China and we ALWAYS celebrate it as if it's a surprise party – over and over again.   As George Orwell said:

"And if all others accepted the lie which the Party imposed -if all records told the same tale — then the lie passed into history and became truth. Who controls the past,' ran the Party slogan, 'controls the future: who controls the present controls the past. And yet the past, though of its nature alterable, never had been altered. Whatever was true now was true from everlasting to everlasting. It was quite simple. All that was needed was an unending series of victories over your own memory. 'Reality control', they called it: in Newspeak, 'doublethink'."

 

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Trade Off Thursday – Words Speak Louder than Actions

Image result for trump trade football charlie brown"And now there's no trade deal – again.

Keep in mind that, a month ago, we were told the deal was ready to sign and it amazes me that, almost every day, the Financial Media carries articles that say "President Trump Says Great Progress Being Made" as that's like running headlines saying "Boy Who Cried "Wolf" Says There's a Wolf".  Are we seriously that dumb?  Apparently, you can fool some of the people ALL of the time because someone is that dumb and the market rallies EVERY SINGLE TIME on the same news it rallied about last time

Remember, all Trump even promised was a LIMITED deal, a part one of 5 or whatever because there was no way they could even pretend to be close on an overall deal.  In fact, 100 Economists polled by Reuters don't expect a real trade truce until 2021 - let alone next week.  While the median probability of a Recession for the coming year fell to 25% from 35% last month, the Economic Growth outlook remained modest. 

Image result for economic forecast cartoon"Over 80% of 52 respondents to an additional question said the Fed had done enough to delay the next recession but that already-modest growth forecasts were largely left unchanged.  "I think in terms of the risks, they are probably still tilted towards the Fed maybe cutting rates once more at some point in the coming months if growth slows further, certainly if there is some renewed breakdown in trade talks," said Andrew Hunter, senior U.S. economist at Capital Economics.  "But barring that, it does look like they have done enough to avert a recession. In our baseline forecast, there is growth slowing a little bit further over the next couple of quarters but starting to recover next year."

I gave my own Economic Forecast last night on Money Talk, embracing the uncertainty:

As you can see, the NYSE has indeed been drifting along under the 13,500 line for two years after breaching it early in 2018.  The NYSE is the…
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Wild Wednesday – Trade In Doubt, Impeachment Begins, Powell Testifies and We Take Money Talk to The Street!

Where do I begin?  

The Index Futures are down about 0.5% as Trump once again puts a Trade Deal into doubt.  Europe and Asia are down more like 1% so we might be just getting started or Trump could send out one of those "I was joking" tweets after he threatened China with more tariffs yesterday.  “In the short term the market’s been too optimistic. The best interpretation of the trade situation is that almost everything that can be tariffed has been tariffed,said Christopher Mahon, director of asset allocation research at Barings.  

How come when he says it on Nov 12th, he's quoted in the WSJ but when I've been saying it for two months – no one notices?  I have to get a better publicist – or A publicist….  

Speaking of which, I guess I will have a better publicist as we move some of our Member Portfolios over to TheStreet.com starting with our Money Talk Portfolio, which kicks off this evening on BNN (Bloomberg Canada) at 7pm this evening.  Through the end of this quarter, the Money Talk tab usually found on PSW will ALSO be found on TheStreet but, over time, they will get the exclusive on that and a couple of other portfolios as well as some PSW content (also a subscription).   

We closed the old Money Talk Portfolio after two years with a 148.1% gain on Sept 18th as I didn't trust the upcoming quarter enough to risk the gains.  Turned out I was premature in my worries (as I often am because I'm a worrier) but I'm still worried so we're going to start with a couple of conservative trade ideas and see how things go.  The rule of the Money Talk Portfolio is we only do trades we announce on the show, once each quarter so it's a very low-touch portfolio using our options strategies to hedge the risk and lever our returns. 

When closing down the MTP, I did make the following suggestion for a good use of our $124,042 of cash:

Our 2019 Stock of the Year is IBM (IBM) and


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Testification Tuesday – Let the Impeachment Begin!

Image result for trump i am not a crook"Here we go!

After months of nonsense, the public Impeachment Hearings finally begin next week and, just to be clear, this is just a show for the public because the witnesses have, for the most part, already testified in closed-door meetings and will now be asked to repeat the highlights of their testimony for public consumption.  That's not a knock on the Democrats – that's just how these things work.  

Later on, there will be fresh testimony from people closer to the top of the Trump Food Chain – as well as from people who are, even now, attempting to block being forced to testify so they can (hopefully) avoid being charged as co-conspiritors, enablers or traitors.  During Nixon's impeachment, we had testimony from:

James McCord: One of the Watergate burglers who used to be in the CIA and the FBI.  Security officer for the Committe to RE-Elect the President (CREEP).  McCord wrote a letter to Judge Sirica claiming the defendents had pled guilty under pressrue and committed purjury.  In January 1973, WH Security Liaison Caulfield had told McCord the White House would grant him clemency, money and a job if he accepted his prison sentence and didn’t testify against members of the administration. When McCord relayed he had been offered clemency “from the highest levels of the White House” before the Senate Watergate committee on May 18, 1973, Nixon’s ties to the efforts of the White House to break into Democratic National Committee Headquarters finally surfaced.

John Dean: Former WH Counsel pled guilty to obstruction of justice in Oct, 1973.  Spent 4 months in jail.  Barred from practicing law (as Guilianni will be), Dean became an author and does well as a guest and speaker post-Watergate.  

HR Halerman:  Nixon's Chief of Staff.  A tape revealed the President discussing with Haldeman a plan to have the CIA divert the FBI from the probe because it involved national security. Haldeman resigned in April 1973 and was jailed for 18 months.  Halderman went to work for David Murdock's Real Estate Company.  

Alexander Butterfield: Nixon's Deputy Chief of Staff who revealed the existence of the taping system in the first place saying “When Don Sanders, the deputy
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Monday Market Momentum – Lost Due to Trade Setback

Trade off!

Over the weekend we had a little setback in the trade negotiations as Trump said he has NOT agreed to remove tariffs on Chinese goods and that news came after Chinese markets had closed on Friday so this morning,  the Shanghai Composite wwas down 1.8% and Hong Kong's Hang Seng dropped 2.6%.

Also in Hong Kong, tensions escalated even further this morning as the police opened fire on protesters while Hong Kong's Governor said the Govevernment won't "yield to violence."  A man was also "set on fire" – apparently by the protesters.  Around midday, crowds of office workers were seen fleeing clouds of tear gas filling the streets. Some rushed into the lobbies of buildings to seek shelter and poured water over their eyes to relieve the pain. Police made a number of arrests as people chanted abuse at them.  

Combine that level of chaos in a densely packed city AND have the market start to collapse – that's a recipe for disaster and one of the main reasons we've been leary about re-committing our capital to the market.  Chinese protests, however, also gave us our shorting premise on Booking.com (BKNG), as we discussed last week in our Short-Term Portfolio Review.  We felt the earnings would be impacted by the protests – which have been going on all quarter and we got a nice dip in BKNG on earnings, leading to a massive $18,872 (19%) portfolio gain in just two days – your welcome!  

 

 

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Fabulous Friday Finish

Wow.

I mean WOW!  Check out the headline on the front page of today's Wall Street Journal.  Is it really "news" to say the same thing, over and over again for month after month?  I guess it is news to traders because, once again, we're up in pre-market trading.  This is just what we were talking about yesterday, MADNESS!  

I guess it helps distract Conservative readers from the headline in the NY Times that says: "Impeachment Inquiry Tests Ties Between Barr and Trump" as it turns out Trump put pressure on Barr to make an official statement that his Ukraine call was "perfect" but Barr refused to say the President did not commit a crime when Trump demanded the Ukraine launch an investigation of Joe Biden and his son in exchange for the military aid Congress had already approved for our NATO allies in the Ukraine.  

Mr. Trump on Thursday angrily denied a report in The Washington Post, which was confirmed by The New York Times, that he wanted Mr. Barr to hold a news conference to say that the president had broken no laws, only to be rebuffed by the attorney general.  In a Twitter post, Mr. Trump called The Post’s article “pure fiction,” adding: “We both deny this story, which they knew before they wrote it. A garbage newspaper!” Mr. Barr, however, did not publicly deny the account.

Image result for trump obstruction impeachment"Perhaps if Trump hadn't already had Barr make a fool of himself attempting to exhonerate the President in the Meuller Report, Trump would still have some political capital to spend but the sheer volume of scandals surrounding the President makes it hard for Barr to be the point man defending every crime – lest he himself become an impeachable obstructor.  

Barr is getting into hot water as he's been in the loop as half the witnesses called by the House Committee investigating the matter have refused to testify.  Failure to answer a Congressional subpeona is a jailable offense but, so far, the House is just skipping ahead to the next witness and will re-call the dodgers next week in the public hearings so they can publically defy Congress and then there will be…
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