Just think... "A man will lie with his tongue... but never with his wallet..."
-- Pops
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| | Traders:
I have a lot of favorite sayings from my grandfather... aka Pops... but the above is probably my favorite. It also tells you everything you need to know about the market.
The question is can you hear what it's telling you?
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I'm tired folks...
TIRED... and not because I drove nearly 1700 miles over the last 72 hours.
No... my weariness is directly related to my "conservative" friends who support the NRA and give lip service along with their "thoughts and prayers" every time there's a mass casualty shooting.
I believe in the right to bears arms... the right to protect one's family. But I also believe in reasonable restrictions... background checks... limits on types of weapons available, etc.
These moves may not eradicate gun violence... but I can't imagine it won't be better than allowing lobbyists to purchase the ability to maintain the current Wild, Wild West environment. |
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In Sum The markets continued to defy gravity this week, with the Dow and S&P 500 shattering their previous all-time record highs, including the first-ever 28,000 finish on the Dow. Optimism over a potential U.S. China trade deal (what else) drove the momentum after White House advisor Larry Kudlow said a deal was close, dismissing concerns around headlines earlier in the week that the two sides were at odds over the terms of a phase one agreement.
S&P 500 +.9%, Nasdaq +1.2% DJIA +0.8%.
As sentiment around trade tensions ease, traders are turning to options contracts that could profit if Chinese stocks and emerging markets equities climb even higher. Interest in bullish options has jumped by 200% during the past month in some of the biggest exchange-traded funds tracking emerging markets, like iShares China Large-Cap Exchange-Traded Fund, FXI, and the iShares MSCI Emerging Markets ETF, EEM, according to UBS. The interest has centered on options pegged to the funds gaining up another 10% through March 2020.
This month’s Marquee QuickPoll of 1,320 Goldman Sachs clients also showed renewed investor optimism, as fears over a near-term recession receded and global growth expectations improved. Key findings included: a) The bulls outnumbered the bears this month by a ratio of 2:1 (a sharp reversal from October where the bears outnumbered the bulls by 3:1); b) Investors continued to favor the S&P 500 as the stock index they expect to outperform in the coming month, and MSCI-EM coming in second, signaling a vote of confidence in emerging markets; and c) Despite the bullish outlook, investors have not taken on more risk in their portfolios - fear of buying the top.
A Bank of America Merrill Lynch survey also showed a similar sentiment as the net number of fund managers expecting global economic growth to improve over the next 12 months posted its biggest monthly jump on record in data going back to 1994. More than half of those surveyed said stocks will be the best-performing asset class in 2020, while only 5% picked government bonds.
We must be getting close to a top, because no-one seems to be worried about the downside? |
| | | | - Federal Reserve Chairman Jerome Powell told House lawmakers the central bank is optimistic that its interest-rate cuts this year would support the U.S. economy against headwinds, including trade uncertainty and a global slowdown. Throughout two days of testimony on Capitol Hill, Mr. Powell didn’t highlight any risks that would prompt the Fed to raise rates, indicating a bias toward lowering them.
- Oil prices were depressed on Monday, after Oman’s oil minister said OPEC is likely to extend current oil supply cuts until the end of March, but is unlikely to make deeper cuts, writes the WSJ.
- Hong Kong police say the city is on the "brink of total breakdown" following a second day of violence. The police again fired tear gas in the Central financial district in order to break up pro-democracy protests, and also on two university campuses. Yesterday, they shot a protestor at close range and a man was set on fire after confronting protestors.
- Multinational corporations from the U.S., Europe, Japan and Korea continue to pump billions of investment dollars into China despite its slowing economy and the protracted U.S.-China trade war. In a Bloomberg report this week, foreign direct investment into China rose nearly 3% in the first nine months of 2019 from a year earlier, according to China’s Ministry of Commerce. That’s about the same pace as China’s inbound FDI growth for 2018.
- Some 33% of people trading in cars to buy new ones in the first nine months of 2019 had negative equity, up from 28% five years ago and 19% a decade ago, according to automotive-industry data provider Edmunds.
- New York City is trying a new approach to steer the almost 4,000 people who live on the streets in shelters. The city will train 18,000 of its municipal workers to use 311 apps to send real-time information to social workers. The service requests will go through a new homeless services joint command service. There are 79,000 homeless people in the city, most of whom are in shelters.
- More farmers are taking on high interest loans outside traditional banks to stay in business amid low crop prices, the trade war with China and record wet weather. Farm debt is projected to hit a record $416 billion this year, up nearly 40% since 2012. Defaults and bankruptcies are rising as well, crimping the ability of cash-strapped farmers to secure funding for seed, fertilizer and fuel, WSJ.
- Moody's Analytics economist Maria Cosma estimates the federal government has propped up U.S. farmers with about $50 billion from the fourth quarter of 2018 through the third quarter of 2019. It hasn't been enough. Farm incomes in the Midwest have dropped by more than 30% between the first and second quarters of 2019 amid soft commodity prices, bad weather and the loss of what had been the top destination for U.S. farm exports—China. "Not only are farm incomes dropping, but farms are going out of business entirely. … Chapter 12 [bankruptcy] filings in Iowa, Illinois, Minnesota, Nebraska and Kansas are above their Great Recession highs and rising.”
- Seaborne imports into the largest U.S. gateway for trans-Pacific goods plummeted last month. The ports of Los Angeles and Long Beach handled 120,077 fewer loaded inbound containers in October than a year ago, a 14.1% drop. The Pacific ports together handle about 37% of U.S. seaborne container import volume, and are considered a bellwether of U.S. trade. The decline in container volume followed the U.S. implementation of a new round of tariffs in September on more China-made products, including the first large swath of consumer goods to be slapped with levies.
- 45 will reportedly delay potential tariffs on European car imports for six months. This would stave off a major trade dispute until later in the 2020 election season. The EU has refused to strike an early, limited trade deal with the U.S. (whereas Japan, in roughly the same boat as Europe when it comes to trade disputes with the current administration, did just that).
- China lifted a 4-year ban on imports of U.S. chickens Thursday, which the U.S. Trade Representative says will lead to an extra $1 billion dollars in annual sales. Beijing banned U.S. poultry imports in 2015 following an avian flu outbreak. Opening up the chicken trade could contribute towards the $50 billion of agricultural imports the U.S. wants China to agree to as part of its phase 1 deal but it will also help China make up for its plummeting pig stocks, which have been decimated by African Swine Fever.
- China’s central bank injected $28.6 billion—Rmb200 billion—into the market on Friday, marking the second time the People’s Bank of China (PBoC) has done intervened with cash injections this month. Last week, the PBoC supplied Rmb400 billion.
- Indiana passed a new law offering any business that commits at least $750m towards building a data center in the state 50 years of exemption from sales taxes, according to a Bloomberg report.
- U.S. carriers could be prohibited from using federal subsidies to buy telecom equipment from Huawei and ZTE if a Federal Communications Commission proposal passes this week. The order would designate the two Chinese companies as national security threats.
- With medical bills skyrocketing, hospitals across the country are increasingly suing patients for unpaid bills.
- The FDA approved a Chinese cancer treatment drug, developed by Beijing-based BeiGene Ltd., for the first time. China’s own national drug regulator has yet to approve the Brukinsa capsules offered by BeiGene. U.S. genetics giant Amgen Inc bought a 20.5% stake in BeiGene earlier this month for $2.7 billion to jointly develop cancer therapies.
- The Government and Tech Sector Must Coordinate on A.I. That was the conclusion of the National Security Commission on A.I.'s first report to Congress. The commission, which is chaired by former Google CEO Eric Schmidt and includes representatives from Amazon, Google, Microsoft and Oracle, said the U.S. currently leads the world in A.I., but that more must be done to make sure U.S. military and intelligence agencies are benefitting from technology developed in Silicon Valley. The report notes that China is quickly gaining on U.S. capabilities and that Chinese government-sponsored R&D spending was on track to exceed America's within a decade.
- Chinese hackers may have stolen data from the U.S. National Association of Manufacturers, a powerful Washington lobby group. The attribution for the attack this summer came from a cybersecurity firm hired by NAM to investigate the incident; China says the accusations are "creating something from nothing and have ulterior motives.
- The European Central Bank, Switzerland, Japan and Denmark all maintain negative policy rates. Sweden has had enough. The Scandanavian country's central bank next month is expected to unwind them amid concerns about distortions in the financial system, Caitlin Ostroff reports.
- One thing the Fed doesn’t have to worry much about right now: inflation. The consumer-price index - which measures the costs of everyday goods and services—increased 1.8% from a year earlier in October. Core prices, excluding often volatile food and energy categories, were up 2.3% over the year. The latest data show overall price pressures remain mild, Amara Omeokwe reports.
- Retail sales rose 0.3% in October from a month earlier, the Commerce Department reported Friday. That was better than the 0.2% economists expected, but the details of the report were mixed. Much of the gain was driven by increased car-dealer and gasoline-station sales, while several categories, such as furniture-store and clothing-store sales, posted outright declines.
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| GLD The gold etf broke the bottom of the weekly flag, but price remains above support. |
| | | - Capitalizing on the rollout of its Impossible Whopper in the U.S., Burger King today is launching a vegetarian burger in more than 20 markets across Europe. The Rebel Whopper, made with patties from Unilever-owned The Vegetarian Butcher, will be available in more than 2,500 locations across the continent. Boosted by the success of the Impossible Whopper, Burger King’s U.S. same-store sales grew by 5% during the third quarter, its biggest jump since 2015.
- Final figures from Alibaba's 24-hour Singles' Day event showed that sales hit a record $38.4B, more than Amazon's haul last quarter from online store sales.
- China’s Tencent aims to make more console games for U.S. consumers by leveraging its partnership with Japan’s Nintendo.
- The global consulting firm McKinsey & Company is said to be facing a federal criminal investigation into its conduct advising bankrupt companies, Mary Williams Walsh and Emily Flitter report in the NYT, citing unnamed sources. Prosecutors are trying to determine whether McKinsey, which advises many of the world’s largest and most powerful institutions, used its influence over insolvent companies “by quietly steering valuable assets to itself or favoring its own clients over other creditors.” Uh oh... First Arthur Andersen... now McKinsey?
- U.S. regulators recently considered grounding more than three dozen Southwest Airlines jets because the airline couldn’t show that they met all mandatory safety standards, according to government documents. The basic problem Southwest is grappling with stems from a lack of reliable paperwork needed to verify that repairs, small fixes and a host of maintenance actions were conducted while the planes were being flown by their previous operators. Late last week, after discussions between senior FAA and Southwest officials, the agency permitted the planes to continue carrying passengers once Southwest agreed to accelerate required inspections so all the aircraft will be checked out completely by the end of January... Soooo, in the meantime?
- Apple’s new credit card is facing an investigation after complaints that it was giving men limits many times higher than those given to women. On November 7, web entrepreneur David Heinemeier Hansson posted a now-viral tweet that the Apple Card had given him 20 times the credit limit of his wife. Goldman Sachs posted a statement on Twitter at the weekend where it said that gender is not taken into account when determining creditworthiness. But the unexplainable disparity in the card’s credit limits is yet another example of how algorithmic bias can be unintentionally created.
- Two cannabis-based medicines - manufactured by GW Pharmaceuticals have been recommended for use by the NHS for the first time. Epidyolex has been approved for two rare types of epilepsy, Lennox-Gastaut and Dravet syndromes, while the spray Sativex has been recommended for muscle spasms in multiple sclerosis.
- U.S. Department of Defense and Philips Team Up to Predict Infection. Philips worked with the Department of Defense on a project to develop an A.I. model able to predict which hospital patients were likely to develop infections. In tests on existing data, which included vital signs as well as hospital lab results for patients already admitted to hospitals, the software was able to successfully make forecasts to 48 hours before doctors diagnosed infection.
- Google has signed a deal with Ascension, the second-largest hospital system in the US, to collect and analyze millions of Americans’ personal health data, according to the WSJ. Ascension operates in 150 hospitals in 21 states. Eventually, data from all of the company’s patients (birth dates, lab results, diagnoses, and hospitalization records for example) could be uploaded to Google’s cloud computing systems, with a view to using artificial intelligence to scan electronic records, or diagnose or identify medical conditions. The project, code-named “Project Nightingale” began in secret last year, the WSJ reports. Neither patients nor doctors have been notified. "Began in secret?" Not good...
- Disney+ has gone live, challenging the likes of Netflix, Apple TV Plus and HBO Max with a low price of $6.99/month (or $69.99/year). It'll also offer a triple bundle - including Hulu and ESPN Plus - for $12.99/month. Waves were already made after the Mouse House gave Verizon customers a free year of the service, as well as broadening device support to nearly every platform: Apple OS, Android, Fire TV, Roku, etc. Disney has called the service - which will be the exclusive home of Star Wars, Marvel and Pixar - the future of the company, and is building out a slate of original shows and movies based on those brands like The Mandalorian.
- WeWork's losses continue to grow—it just reported a $1.25 billion net loss for Q3, which is more than twice as bad as the year before. However, its annual revenue run rate is, at almost $4.2 billion, more than double the figure from a year ago.
- T-Mobile CEO John Legere is reportedly in talks to become the new CEO of WeWork as the troubled office-share company looks to get a fresh face at the helm as soon as January.
- Google is moving into banking. Its project, code-named Cache, is expected to launch next year with checking accounts run by Citigroup and a credit union at Stanford University. Google is setting its sights fairly low—checking accounts are a commoditized product, and people don’t switch very often.
- Nike is going to stop selling directly on Amazon.com ending a pilot program that began in 2017 (in exchange for stricter counterfeit policing and restrictions on unsanctioned sales). Retail unease?
- Uber - New Jersey has demanded that the ride-hailing company pay $649M for years of unpaid employment taxes, arguing that Uber drivers were really employees, not independent contractors.
- The largest-ever Starbucks opened in Chicago this week, marking the company's sixth Reserve Roastery across the globe. The 35,000-square-foot location has five floors, three coffee bars, a cocktail bar and an artisan bakery and cafe.
- Walmart shows shoppers are still spending. The retailer said its U.S. comparable sales—those from stores and websites operating for at least 12 months—rose 3.2% in the latest quarter. The company’s U.S. e-commerce sales rose 41% from a year earlier, boosted by grocery orders. The results marked a five-year streak of quarterly sales gains for Walmart, offering comfort to retailers worried about fallout from the U.S.-China trade war and the health of the global economy.
- Amazon is formally protesting the Pentagon's award of the decade-long, up-to-$10-billion JEDI cloud contract to Microsoft, on the basis that "numerous aspects of the JEDI evaluation process contained clear deficiencies, errors, and unmistakable bias.”
- Shipping giant Maersk sees only slight growth in container traffic next year, thanks to the dampening effect of ongoing trade wars. Maersk: "The continued weakening of global sentiment, above all in the manufacturing sector, reduces the likelihood of a growth pick-up in 2020.”
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| Interesting Stocks From Last Week |
| | | | | | | | | | | | | | | | | | | | Select Economic Announcements: - Monday - Housing Market Index
- Tuesday - Building Permits, Housing Starts, Redbook
- Wednesday - Crude Data, FOMC Meeting Minutes
- Thursday - Jobless Claims, Philly Fed, Existing Home Sales
- Friday - PMI, Consumer Sentiment
Select Earnings Announcements: - Monday: Nothing worth noting
- Tuesday: Home Depot, Medtronic, TJ Maxx, Kohl's
- Wednesday: Lowe's, Target, Copart
- Thursday: Intuit, Ross Stores, The Gap, Nordstrom, Williams Sonoma, Macy's, BJ Wholesale
- Friday: The J.M. Smucker Co., Foot Locker
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| | | | As always, make up your own mind and, more important, minimize your risk no matter what you do.
KIS,
The Trader
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