Just think... "If your trading strategy requires an ability to predict the future and/or a ridiculously high win percentage, your profitability is very likely unsustainable."
-- The Trader
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| | Traders:
The markets rallied again this week on the back of headlines from China’s Ministry of Commerce that the U.S. and China had agreed to remove duties on each other’s goods in phases. However, an agreement has not yet been completed, and a deal could fail to materialize as it has in previous rounds of negotiations. 45 hinted as much on Friday when he indicated that he had not yet decided which levies, if any, he might eliminate as part of the trade agreement. This is where I would normally make a snide comment, but I'll refrain... for now.
I make it a point to avoid politics for the most part here... and this is not to delve into that area notwithstanding (this is actually more about game theory for 45's handlers anyway in my opinion), but I find it hard to believe that any of this gets resolved this far ahead of the 2020 elections. The incentives are too great for 45 (or better put, his handlers) to keep this going until the last minute.
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| | In Sum
The equity markets traded in a fairly tight range this week and ended higher for the most part.
S&P 500 +.8%, Nasdaq +1% DJIA +1.1%.
With the holiday shopping season set to kick off, all eyes will be on the consumer as a gauge for the health of the overall economy. First up, Alibaba hosts its annual Single’s Day event on Monday November 11. The company generated $30B in sales last year and is expected to once again bring in more money than Black Friday and Cyber Monday combined. Adobe Analytics reports that about 24% of U.S. retailers plan to run promotions for Single’s Day. However, there are concerns that U.S. brands may be shut out on reports that Chinese consumers are considering avoiding American companies. Tariff impact anyone?
And finally, given that I'm constantly thinking about and debating “where the puck is going” so to speak, I spend a lot of time focusing on the needs, values, habits, preferences, etc. of the current generation/s. I wanted leave you with some highlights from an article recently released by Moody’s Analytics and BlueCross BlueShield titled: “The Economic Consequences of Millennial Health.” According the the report, as millennials reach their mid-to late 30s, they're seeing their health decline more rapidly than their GenX counterparts. This extends to both physical health conditions, such as hypertension and high cholesterol, and behavioral health conditions such as major depression and hyperactivity. According to the CDC, accidental deaths, which include overdoses, and suicides were the cause of 60% of the deaths among 25-29 years old in 2017. Without intervention, millennials could feasibly see mortality rates climb up by more than 40% compared to Gen-Xers at the same age (and health care treatment costs rise as much as 33%). Poorer health among millennials will keep them from contributing as much to the economy as they otherwise would, manifesting itself through higher unemployment and slower income growth. Under the most adverse set of projections, lower health alone could cost millennials more than $4,500 per year in real per capita income compared to similarly aged Gen-Xers. Disturbing to say at the least, but a good reason for you to focus on health technology as a major thesis in your trading and even investing. |
| SPY Hedge longs/tighten stops... But hold on to them. |
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| | | - Commerce Secretary Wilbur Ross has indicated that the U.S. may not levy big new tariffs on European cars. Ross: "Our hope is that the negotiations we’ve been having with individual companies about their capital investment plans will bear enough fruit that it may not be necessary to put [national-security-related trade measures] fully into effect, may not even be necessary to put it partly in effect.”
- Ross also suggested that the U.S. could reach a “phase one” trade deal with China this month. He also said that licenses for American companies to sell components to Huawei were coming “very shortly.”
- The World Trade Organization has allowed China to impose sanctions on up to $3.6 billion of American goods in a six-year fight between the countries over cheap Chinese products.
- With the U.S. considering rolling back tariffs on Chinese imports, the yuan has strengthened beyond seven per dollar for the first time since August. The move, if confirmed, "can be regarded as a turning point" in the U.S.-China trade war," according to Ken Cheung, a Mizuho currency strategist.
- In the trenches of China’s debt-addled economy, the government has made a startling decision: Let companies fail. After years of pumping out financial support to keep the economy humming and workers happy, China has embarked on a debt reckoning. Beijing is building a bankruptcy system to take on a significant pickup in corporate defaults. The country now has more than 90 U.S.-style specialized bankruptcy courts to help sort through a morass of corporate debt that, until recently, would have been swallowed by state banks and other creditors. While it likely doesn't seem so, this is actually bullish for the Chinese economy. Nothing inspires investor confidence like cleaning up balance sheets and weeding out weak companies.
- Asia’s Regional Comprehensive Economic Partnership, billed as a mammoth that could be China’s alternative to the Trans-Pacific Partnership, is shaping up to look more like a mouse. The second-biggest economy involved, India, bailed out. The tariff-related liberalizations are modest. The most comprehensive study into the deal, by Renuka Mahadevan of the University of Queensland and Anda Nugroho of Indonesia’s Ministry of Finance, shows an RCEP excluding India would add just 0.08% to China’s 2030 gross domestic product. The only two countries for which the deal would be worth more than 0.5% of GDP over the same period are South Korea and Vietnam, Mike Bird reports.
- U.S. homeowners are staying in their residences much longer than before, keeping a glut of housing inventory off the market. That helps explain why home sales have been sputtering. Homeowners nationwide are staying put an average of five years longer than they did in 2010 (typically 13 years), a new analysis from real-estate brokerage Redfin shows.
- Europe's factories slashed output and employment again in October. IHS Markit's purchasing managers index for manufacturing showed another contraction in activity as the sector endures its steepest decline in seven years.
- Iran on Monday announced it had launched a new batch of modernized centrifuges, capable of refining uranium 10 times faster, according to the head of the Atomic Energy Organization of Iran.
- It was only last week that China launched commercial services for its superfast 5G mobile networks, but the country is not stopping there. The government has charged 37 experts at various universities and institutes to oversee the research of 6G, according to a statement by the Ministry of Science and Technology.
- A week after banning online sales of e-cigarettes, China outlined plans to prohibit vaping in public places to stem a "distinct increase" in activity among teenagers. The stance would put China squarely with countries that have outlawed e-cigarettes outright, including India, Brazil and Singapore.
- “Billionaires’ wealth fell by $388 billion globally to $8.539 trillion,” Reuters reports, citing a new report by UBS and PwC. That’s the first decline since 2008, and the report blames geopolitics, with U.S.-China trade tensions and global political uncertainties cited as the main reasons. There was “a particularly sharp decline in Greater China,” Reuters explains. The net worth of China’s richest people “dropped 12.8 percent in dollar terms on the back of tumbling stock markets and a weaker local currency,” it adds.
- The likelihood of a U.S. recession has decreased in recent months, according to Deutsche Bank Securities chief economist Torsten Slok, who pointed to a steepening of the yield curve. The New York Fed yesterday put the probability of a recession at 29%, down from 40% in the weeks following the curve's inversion in August.
- Michael Bloomberg is poised to enter a presidential race that has many voters anxious and searching for the perfect candidate.
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| GLD The Bull Flag is intact on the weekly chart. Still watching and waiting for a break higher. |
| | | - The Securities and Exchange Commission last week gave the green light for a pilot project in which blockchain—the technology behind bitcoin—will be used to settle trades in stocks like General Electric and AT&T. Paxos, the blockchain startup leading the project, hopes to build a faster and cheaper way to process stock trades, ultimately reducing costs for Wall Street banks and investors alike.
- The sportswear firm Under Armour is under federal investigation over its accounting practices. The Justice Department and SEC are reportedly examining whether the company shifted sales from quarter to quarter in order to prettify its financials.
- Microsoft Japan appears to have found the perfect recipe to Monday morning blues and it actually led to an almost 40% jump in productivity levels for its workforce. The firm experimented with a four-day workweek this past August - giving Fridays as paid leave - and 92% of employees said they were happy with the program by the end of its run. Printing 58.7% fewer pages and using 23.1% less electricity, Microsoft Japan is planning to conduct a similar work-life challenge this winter.
- Apple announced a $2.5 billion commitment toward easing the California housing availability and affordability crisis via a $1 billion commitment to an affordable housing investment fund, $1 billion toward a first-time homebuyer mortgage assistance fund, and $300 million in Apple-owned land, which will be made available for affordable housing.
- Startup micro-mobility company Inboard has laid off all 24 of its employees, as it liquidates all its intellectual property and assets. The move comes ahead of the company's planned pivot to electric scooters. Inboard founder Ryan Evans told The Verge that the development timeline for its electric scooter “outstretched” the company’s finances.
- Bloomberg reports that Tesla has reached a preliminary battery supply deal with Chinese battery manufacturer CATL. The publication said CATL will initially supply batteries for Tesla vehicles produced for the Chinese market, but the two companies are also exploring a global partnership.
- At the Specialty Equipment Market Association (SEMA) trade show, Ford created a one-of-a-kind electric Mustang sports car with a manual gearbox. The vehicle, dubbed the “Mustang Lithium,” has an 800-volt battery that can provide more than 900 horsepower. Although this is a prototype, and consumers will likely never see this version of the vehicle on the market.
- Intel self-driving unit Mobileye is partnering with Chinese EV company Nio to develop a self-driving vehicle that will be sold to consumers. Some experts believe autonomous vehicles will drastically change the structure of car ownership, with most autonomous vehicle fleets being owned by ride-hailing firms or tech companies. But the partnership between Nio and Mobileye envisions consumers owning their own self-driving car. The collaboration would allow Nio to engineer and manufacturer a self-driving system that could be sold directly to consumers.
- Softbank’s operating loss in the September quarter amounted to $6.5 billion, the first quarterly loss since 2005. Its big bet on WeWork, whose valuation has fallen to $7.8 billion from peak $47 billion, is the major reason for the loss. As of September, Softbank, together with its $97 billion Vision Fund, had lost around two-thirds of its $10.2 billion investment into the company. But Softbank decided to double down on the investment earlier this month after WeWork’s failed initial public offering.
- Due to concerns over rising rents, Jersey City residents voted overwhelmingly in favor of stricter regulations on short-term rentals, rebuking Airbnb, which spent at least $4.2M on an effort to sway voters. Officials at Airbnb fear the new proposed regulations would mean an outright ban on listings in New Jersey and that it could mean an end to the company altogether as it prepares to go public.
- Two former Twitter employees used their platform access to spy on Saudi dissidents on behalf of that country's regime, according to a criminal complaint. The Justice Department alleges that "Saudi agents mined Twitter's internal systems for personal information about known Saudi critics and thousands of other Twitter users.
- Google is reportedly considering changing its political-advertising policy, though it's not clear how. The issue has already caused ructions at Facebook and Twitter, the latter of which has opted for a straight ban. Google recently ran the same Trump campaign ad, including unsubstantiated claims about Joe Biden and Ukraine, that sparked a debate over Facebook's political-ad policy.
- Monetizing WhatsApp. After buying the app for $19B in 2014, Facebook is finally building out the service's e-commerce tools by launching a catalog feature where businesses can display a "mobile storefront" showcasing their wares with images and prices.
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| Interesting Stocks From Last Week |
| Under Armour [UA] -- Accounting irregularities? As if this stock needed more negative headlines. |
| | Apple [AAPL] -- Would I sell here? Nah... but I would definitely hedge any long position via cheap, long dated put options or a Collar. |
| | Tesla [TSLA] -- After ripping the hearts out of many shorts, Tesla looks prepared to go higher still. |
| | Ford [F] -- It's gonna take more than an manual, electric Mustang to change this trend. |
| | Alphabet [GOOG] -- What will disabling political ads do to Alphabet's revenue stream? |
| | Bitcoin/USD -- Price is still navigating a weekly pullback relative to the strong up move 3 weeks ago. Strong resistance overhead at TAOST Magnet Zone, but I suspect we'll see another leg higher soon. |
| | | 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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