TAOST Recap For Week Ended 20 December 2019

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Subject: TAOST Recap For Week Ended 20 December 2019

TAOST Wrap

Week Ended Friday

20 December 2019

Just think...

"I will either find a way or make one. Many things which nature makes difficult become easy to the man who uses his brains. The mirrors in your mind can reflect the best of yourself, not the worst of someone else. "

-- Hannibal Barca

Greetings Traders:

As 2019 comes to a close, I would like to thank all of you for your continued support and kind words this year. Your feedback has been incredible and greatly appreciated. It’s made it a real pleasure for me to write this recap on a (mostly) weekly basis since I started it. The year has been filled with a lot of excitement on all the major fronts - macro, micro and capital markets - and given the state of the global backdrop, 2020 is setting up to be another volatile year with major headlines dominating market activity. Looking forward to digging in with you.

Last Week

In Sum

For the week, the S&P 500 hit another all-time high for the seventh straight session on the back of continued optimism on resolving the U.S.-China trade war and strong economic releases out of the U.S. also helped buoy the markets. Both the S&P and the Nasdaq had their best weekly gains since August.

S&P 500 +1.5%,

Nasdaq +1.2%

DJIA +2.1%.

45 excited investors this week when he tweeted that he had a “very good talk” with China’s President Xi about the trade deal, noting that “China has already started large scale purchases of agricultural products and more (see below).”

On the economic front, Q3 U.S. consumer spending growth was revised higher to 3.2% from 2.9%, according to new government data. Construction of new homes rose in November to a seasonally adjusted annual rate of 1.365 million, just shy of August’s mark, which was the highest since 2007. Sales of existing homes rose 2.7% in November, the fifth straight month of year-over-year gains. U.S. Industrial production posted its biggest month-over-month increase since October 2017 as output in the auto sector rebounded following a strike at GM. And the Atlanta Fed’s GDPNow tracker which had Q4 growth at a 0.3% pace on November 15 is now tracking up to a 2.3% pace.

Risks of an imminent recession appear to be receding, but I think it’s still too early to declare that the economy is fully on the mend, especially when the rest of the world is still struggling. We will keep a close eye as things progress in 2020.

This time of year also brings about forecasts and predictions for the year ahead. This week, Fortune published their 2020 predictions which I found interesting (although not surprising). Here is a quick summary below:

Fortune’s Top Predictions for 2020 (based on users inputs):

IPOs: Founders will increasingly choose direct [going around investment banks] listings over traditional IPOs.
Fundamentals: Profitability will prevail over growth at all costs.
Corporate Governance: Expect a bigger focus on corporate governance, employee rights, and inclusive cultures.
M&A: Expect some major acquisitions in the coming year [this 1 is funny to me].
The Wild Cards: Billionaire lawsuits, aliens, e-sports in the Olympics.

Incidentally, this will be the final weekly recap for 2019. Thank you again for your continued support and I wish you and your families a very Happy Holiday season and a safe and prosperous New Year!

SPY -- S&P 500 ETF Trust

SPXL - S&P 500 Bull 3x Shares

SPXS - S&P 500 Bear 3x Shares

Macro News

45 became the third U.S. president to be impeached, in a House vote that almost entirely followed party lines—no Republicans voted for impeachment, and only a few Democrats voted against (with one of them, Jeff Van Drew, being set to become a Republican.) As with the House impeachments of Bill Clinton in 1998 and Andrew Johnson in 1868, the Senate is expected to acquit 45.
Besides agreeing to buy around $200B worth of American-made goods, China said it would crack down on intellectual property theft, forced technology transfers and deepen access to its financial markets. Beijing also suspended additional tariffs on some U.S. goods that were meant to be implemented on Dec. 15, as the U.S. held off on new duties and reduced existing levies. The deal, after proofreading and legal checks, will be signed in the first week of 2020.
China has threatened retaliation if Germany bans Huawei from supplying 5G wireless equipment.
A bipartisan majority passed the United States Mexico Canada Agreement (USMCA) bill in the House of Representatives. In a rare sign of unity between Democrats and Republicans, the House voted 385 to 41 in favor of an updated version of the North American Free Trade Agreement (NAFTA), spearheaded by 45’s Administration. Democratic leaders supported the bill due to a series of changes made in regards to environmental and pharmaceutical provisions, which also received support from influential labor unions. The bill is also expected to receive bipartisan support in the Senate.
The AI Now Institute, a center at New York University dedicated to understanding the societal impact of A.I., has called for a ban on the use of emotion-recognition software in important decisions in its latest annual report. Such systems, which purport to detect human emotions from video of people's faces, have increasingly been used in hiring as well as in some other contexts, such as patient pain studies. There are so many ways this could go wrong.
The U.S. economy is becoming increasingly concentrated in large cities and by the coasts. Just 31 counties, or the top 1% by share, made up 32.3% of U.S. gross domestic product in 2018, according to data released last week by the Bureau of Economic Analysis that included nearly 20 years of county-level GDP data. That's despite these counties only having 26.1% of employed Americans and 21.9% of the population last year. Their combined GDP share is also up from a recession low of 30.1% in 2009.
Moody's has followed Fitch in warning about the danger of Chinese corporate debt. Moody's chief economist, Mark Zandi, says the debt is the "biggest threat" to the world economy, with Chinese companies struggling to deal with the impact of the trade war and other factors. This may sound like good news to Americans… but I promise that the Chinese won’t forget if the US initiated trade war leads to a bad outcome at home. It will revisit our shores eventually if that’s the case.
Congress passed the most significant changes to the nation’s retirement system in more than a decade. One prominent provision of the legislation which 45 is expected to sign, encourages 401(k) plans to replicate a feature of old-fashioned pensions by offering products with guaranteed income payments. The legislation also seeks to expand retirement plan coverage by making it easier for small companies to join together to offer 401(k) plans and share costs. A deeper breakdown of the changes and my thoughts to follow this week.
California’s so-called gig-economy law set to debut Jan. 1, is sparking fresh legal and political battles. While the law threatens to force Uber and Lyft to reclassify their drivers as employees, which would upend their business model, the companies maintain the law does not apply to them. Their stance is being legally tested through lawsuits that will play out into the new year. The new measure authorizes the state’s four largest cities and the state attorney general to sue firms seen as misclassifying workers, though they haven’t indicated whether they will. I’ve said before and I say again… Uber and Lyft drivers do not meet any traditional definition of employee. When you can work when you want… where you want… for as long as you want… you’re not an employee. California can change its laws all it likes… but this is not gonna work out like they think.
Sweden's Riksbank has swum against the tide of global monetary policy by hiking its benchmark repo rate by a quarter point to 0.0%. The move, which ends half a decade of negative rates, may lead to other central banks admitting to some downside amid fears of penalizing good savers, supporting companies that might otherwise collapse and inflating bubbles in the property market.
U.S. military and intelligence officials tracking North Korea’s actions by the hour say they are bracing for an imminent test of a missile capable of reaching American shores.
An investigation into the smartphone tracking industry reveals surveillance so omnipresent in our digital lives that it seems impossible to avoid. The Times’s Opinion section obtained the largest known leak of phone tracking data. It included more than 50 billion location pings from the phones of more than 12 million Americans as they moved through several major cities.
A secret group of Russian assassins operated without Western security officials having any idea about their activities. The specialized group, known as Unit 29155, was made up of Russian intelligence operatives and had for years been assigned to carry out killings and political disruption campaigns in Europe. It’s the same unit responsible for the 2018 assassination attempt against Sergei Skripal, a Russian former spy in Britain, officials say, among other operations. Now, Western security and intelligence officials say that the poisoning of an arms dealer in Bulgaria is a critical clue that has helped expose a campaign by the Kremlin and its sprawling web of intelligence operatives to eliminate Russia’s enemies abroad and to destabilize the West. Nothing to even write here...

TNX - 10 Year Note Interest Rate

The modest bounce in interest rates as represented by the 10 year note continues, but the chart suggests rates will eventually fall again.

GLD - Gold Trust Gold Shares

Gold continues to meander, but looks set to push higher again eventually.

Bitcoin - USD/Bitcoin

The only way for Bitcoin to show clear strength to me is by breaking up through the down trend line.

JNK - High Yield [Junk] Bond ETF

JNK looks like it will challenge resistance in short order.

BRN - Brent Crude Oil Futures

Crude continues to struggle below resistance despite OPEC's efforts.

VIX - S&P 500 Volatility Index

The VIX looks comfortable at these "low" levels.

Micro News

The Google Maps app now allows users to search for electric vehicle charging stations by plug type. The app has continuously been adding features built for electric vehicle drivers.
FreeNow, the ride-hailing venture owned by Daimler and BMW, expects to double its revenue this year and next, a fresh challenge to Uber in Europe and Latin America.
The Army agreed to a $111 million contract with Palantir Technologies, the data analytics company backed by Peter Thiel.
Mercedes delays its U.S. electric debut after Jaguar and Audi S.U.V.s flop.
Goldman Sachs will no longer directly finance any new or expanding coal-fired power projects, thermal coal mines, or Arctic oil exploration and production schemes. It will also phase out financing for coal mining firms without a diversification strategy.
Google will no longer be able to work with Turkish carriers on new Android phone releases in the country, because the Turkish competition regulator says the company has not made compulsory changes to its business contracts.
Researchers have created a system that can turn two-dimensional images into three-dimensional ones, without any access to a three-dimensional training set. This is the first system that can predict not just the shape of three-dimensional objects, but also their colors, textures and lighting from a simple two-dimensional drawing.
Amazon is blocking its third-party sellers from using FedEx's ground delivery network for Prime shipments. The ban on using FedEx's Ground and Home services starts this week and will last "until the delivery performance of these ship methods improves," according to an email Amazon sent to merchants.
Members of the Sackler family, the owners of Purdue Pharma, took $10 billion out of the company as pressure on the drugmaker over the opioid crisis increased in the past dozen years. The money was distributed among trusts and overseas holding companies, according to a new audit commissioned by Purdue.
Fortune Analytics has done some interesting research, in conjunction with SurveyMonkey, on Americans’ use of video streaming services, with good news for Disney. A full 90% of Disney+ subscribers say they are satisfied with the new service. Some 39% of Netflix users say they could have a Disney+ account by early next year. And 5% of Disney+ subscribers are people who have cancelled Netflix over the past two months, in favor of the new platform.
A court has approved the $13.5 billion settlement between the bankrupt Californian utility PG&E and the victims of fires linked to its equipment. California Gov. Gavin Newsom still doesn't like PG&E's bankruptcy exit plan, but won't move against the settlement.
Uber can no longer submit ride-hail requests through its app in Germany. The ride-hailing company was banned from operating its own ride-hailing service in Germany in 2015. As a way to circumvent the ban, the company started pushing ride-hailing requests from its app to professional car-hire services or existing taxi fleets. The move essentially allowed Uber to act as an intermediary between riders and fleets, which a regional court in the country said was not allowed because the company did not own a ride-hire license itself. The court said Uber can appeal the decision, but should suspend these services immediately.
Amazon’s in-house delivery network, which operates 150 U.S. delivery stations and employs more than 90,000 people, is "on track to deliver 3.5B packages by the end of the year," according to a new press release. Morgan Stanley estimates the Amazon delivery network will move 6.5B packages by 2022, more than UPS at 5B and FedEx at 3.4B, dealing a potential long-term threat to the rival shipping firms.
Goldman Sachs may pay a $2 billion fine to settle a Justice Department probe into its part in the 1MDB Malaysian corruption scandal. According to a report, the bank would also admit guilt to the violation of bribery laws, and agree to the installation of an independent monitor to oversee changes to its compliance procedures.
France's competition authority has fined Google $167 million over antitrust abuses in its ad business. The watchdog said Google's rules for advertisers were non-objective, non-transparent and discriminatory. The monetary fine is accompanied by an order for Google to change its terms and procedures.
YouTube's young stars are getting burned out. Having achieved success, some top influencers are deciding to disconnect from the video-sharing platform, worn down by what some say are the demands of YouTube’s algorithm for fresh content to promote.
Airbnb execs were breathing a sigh of relief today, after a top European court ruled that it's an online platform and not a real estate company. As Politico explains it, "Airbnb’s status as an 'information society service' will grant it greater regulatory freedom in Europe and strengthen its hand in ongoing battles against municipalities such as Paris and London, which have been pushing for tougher regulation.”
Amazon, Apple, Google and the Zigbee Alliance have announced a new partnership called "Project Connected Home over IP." It will create a new standard that will make it easier for the fragmented ecosystem of smart home products to work together. “The project is built around a shared belief that smart home devices should be secure, reliable, and seamless to use,” the companies said in a press release.