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What Now Wednesday – Will 10 Fed Speakers Stop the Slide?

Image result for trump impeach cartoonWheeeee – it's so much fun to watch this from the sidelines!

Last Wednesday I listed Impeachment as one of the reasons we were cashing out our portfolios as the market went back to the top and BOY are we happy we did that!  Impeachment is a pretty big uncertainty to throw at the market and the expectation of that (which came to pass yesterday) along with all the other issues we saw looming for Q4 gave us good reason to get to CASH!!! and see where things land during the final earnings season for the year.

We also didn't believe China was "fixed" and apparently it is not though now the pressure is on Trump to pull that rabbit out of his hat in order to distract people from all the other scandals he's drowing in – just like Nixon did when he opened relations with China in February, 1972 – ahead of his own re-election campaign.  The Committee to RE-Elect the President (or CREEP) didn't break into the Watergate hotel until June of 1972 and it took all the way until July 27th of 1974 for there to finally be an impeachment hearing and Nixon resigned on August 9th, 1974, leading to two glorious years of Gerald Ford, which made Chevy Chase's career.

So it's going to be chaos for the next few weeks but don't worry, we have TEN (10) Fed speaches to guide us through the rest of the week, starting with Chicago's Charlie Evans, who already said this morning that not only is trade policy uncertainty slowing U.S. business investment decisions, limits on trade and immigration could mean slower potential economic growth overall.  Evans supports more rate cuts and seems to be preparing us for a weak GDP Report tomorrow morning – possibly below 2%.

This is the 3rd revision of Q2, which started off closer to 3% (and the markets went higher on that BS) but was revised down dramatiallly as Residential Fixed Investment (includes Durable Goods) declined 2.9% and state and local Government Spending was revised down to 2.3% from 3.2% while net exports dropped 0.72%.  Only Consumer Spending was a bright spot and we just got a TERRIBLE Consumer Confidence Report yesterday (125.1 vs 134.2 in Aug) - so it's not likely that's going to improve – though it's still historically high.

Note that expectations have dipped below 100 as people turn much more pessimistic on the economy – even though their present situation is still very good.  It's also interesting to note that Consumers see inflation running at 4.8% while the Government officially says it's 2.1% and, based on that complete and utter BS, they are only raising Social Security benefits by 1.6% in 2020 (it was 2.8% in 2019). 

Federal Revenue and SpendingThat 1.2% drop may not seem like much – just $24 a month out of a $2,000 benefit payment – but it's $13.2Bn Trump gets to take away from old people so he can give it to his kids, campaign donors and other rich friends.  

Here's a quick quiz you can take since we have this budget chart – see if you can find Corporate Taxes?  We have a PLANNED $1Tn budget shortfall but, in reality, we passed $1Tn in August already yet, under Trump's Tax Cuts, Corporations are paying just $221Bn (and they are paying less than $200Bn in reality) despite earning $2.25 TRILLION in the first quarter of 2019.

Q2 has been weaker, with just $1.9Tn beind reported so far so you can't expect them to come up with $13.1Bn (0.7%) just to keep Grandma from having to eat cat food, can you?  Once upon a time in America (until the 60s), Corporations used to pay 2/3 (66%) of all tax revenues, now it's 6.3% – ONE TENTH (1/10) of what they used to pay – and they still complain about that!  Since they are never going to be happy anyway – why not let Elizabeth Warren loose and give them something real to complain about?

Instead, the Corporations have taken over our Government and they have taken over the courts, which is why they are now considered to be Citizens (see Citizens United), which has given them control of the Senate and they are working on the House and they clearly control the GOP and, if you do want to stop them – this coming election is probably your last chance because we're either going to reverse this tide or it's going to drown us!  

Trump isn't the whole problem – he's just a symptom of what's really wrong with this country – Oiligarchy…  

Image result for oligarchy zero hedge


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  1. Phil – I enlarged the charts by 30% to show more months and give more context. Let me know if that works for you.


  2. Morning, All!

    It's webinar day! Join Phil at 1pm, here:

    https://attendee.gotowebinar.com/register/9035390035135907853


  3. Wow, moving to Maine I think:


  4. Good Morning!


  5. Interesting topic:

    https://www.institutionalinvestor.com/article/b1h7r2s6bz1c3m/Why-Private-Equity-Is-Ripe-for-Vanguard-Style-Disruption

    At any rate, Yin argued that new ideas for passive private equity won’t come from the industry, which has been experiencing record profits. 

    “Passive has disrupted the public space, I don't see why it couldn’t disrupt the private space as well,” he said. “They're both equity, just in a different form.”


  6. There is an historical disconnect between the pace of expansion we have experienced and the rise of the market:

    https://theirrelevantinvestor.com/2019/09/23/the-next-recession/

    I’ve heard people make the case that the next recession could be mild due to the tepid nature of this current expansion. They liken it to jumping out of a first floor window. We haven’t climbed that high, so how bad could the fall really be? This might be true with respect to the economy, but what about the stock market?

    Unlike the economy, the stock market has grown at a blistering pace. The chart below shows the change in stocks during every economic expansion going back to 1950.


  7. Good morning!  

    Big Chart – I like the change as now the changes in the moving averages seems to make more sense.  Notice the 20 dmas stopped the slide yesterday for the Dow and S&P but that means anything red today is bad and we'll likely test the 50s before the next bounce. 

    Nas already failed and it doesn't look likely the NYSE and RUT won't be testing the 50 dma so I'd say that /ES makes a good short below the 20 dma at 2,967.50 (now 2,972) with VERY TIGHT STOPS but, if that fails – we have a good shot to make 2,950 and 17.5 /ES points is good for $875 per contract – so worth watching.

    Oil down 2.5% alread at $55.80 as API showed a 2.3Mb build in oil and a 1.9Mb build in gasoline but a 2.2Mb draw in Distillates – so not completely terrible and saveable if EIA looks better at 10:30.  The Dollar is also up 0.5% – putting pressure on everything.

    Even honey badger got slammed

    Insufficient readiness/StJ – I know there is NO readiness here in Florida.  How can there be though – this state will be underwater.  Maine is going to be lovely in 50 years but I'd stay away from the coast.  Sharks have already moved up to New England, following the warming waters.  Canada needs to start building a wall before all those climate refugees from the US begin showing up.

    Image result for waterworld animated gif

    The slide in CMG continues!  That hedge is doing just what it's supposed to do in our Hedge Fund – making a fortune while the market corrects.  Fund will be up 10% this month if we can get back to $800 on CMG….

    Disconnect/StJ – Well that's pretty much exactly my problem with market valuations.  We need a big correction.


  8. New Home Sales and Investor Confidence at 10 and Esther George speaks too.  EIA tat 10:30 and Business Uncertainty Survey at 11 then a 5-year note auction at 1pm and Kaplan speaks at 7pm.

    GDP, Corporate Profits and Retail Inventories at 8:30 am tomorrow and Kaplan again at 9:30 so it looks like his job is to save the market and, if that doesn't work – Bullard speaks at 10 am along with Pending Home Sales followed by the KC Fed at 11.  7-year notes at 1pm  but Daly at 11:45, Clarida at 1:45 and Kashkari at 2pm.

    Seems to me that they Fed is expecting a lot of bad news and is planning to spin the crap our of it.

    Glad I'm in CASH!!!


  9. OMG – Trump straight up asks Ukraine for servers and information and says "there's a lot of talk about Biden's son and a lot of people want to find out about that so, whatever you can do with the Attorney General would be great."  – THAT's according to Trump's people's own notes!  


  10. Trump / Phil – 6 months ago or so, Pelosi said not to rush to impeach because Trump will self-impeach. I have been frustrated with her but man, she looks like a genius today. She read Trump so well. The guy just can't help himself. Leave it to a grandmother to predict the actions of a 5-year-old man-child!


  11. Image

     

     

     

    No update to Investor Confidence yet:

    Ukraine President has Trump by the balls – they are both at the UN and he can ask Trump for anything in exchange for saying he didn't feel any pressure from Trump – which is what is likely to happen.


  12. Stl/Trump/Pelosi

    Stj, while I agree with your asessment, please don’t forget that the genetic makeup of ALL politicians is fundamentally crooked. The smarter crooked politicians are just more dangerous.


  13. I would not say ALL Maya but the self-preservation instinct drives the actions of all of them.


  14. Balls / Phil – And there you have it, a president that can be subjected to blackmail is a security risk! Of course Putin has most likely more material to work with!

    And also, commentators have been saying that politically impeachment could be bad for Dems because look what happened to Clinton. His popularity increased. My response is – how did that help the Gore presidency?





  15. Barr books Trump’s hotel for $30,000 holiday party



  16. Oil had a net draw overall so a relief rally off $55:

    • EIA Petroleum Inventories: Crude +2.4M barrels vs. -0.2M consensus, +1.1M last week.
    • Gasoline +0.5M barrels vs. +0.3M consensus, +0.8M last week.
    • Distillates -3.0M barrels vs. -0.7M consensus, +0.4M last week.
    • Futures -2.50% to $55.86.

    Big jump in the market on release of Trump transcript but, if it's this bad in the notes – I don't think the full call is going to exonerate him.  What really popped the market was someone in the administration made a well-timed comment that a China deal could come "sooner than you think".  So what they do is time a market rally with the release to "prove" the markets are happy that Trump is innocent – smart…

    The White House released a transcript that showed President Trump urged Ukraine’s leader to contact Attorney General William Barr about opening an inquiry tied to Joseph R. Biden Jr. Two intelligence officials referred Mr. Trump’s activity to the Justice Dept. for a possible criminal inquiry. It declined to open one.

     

    Here’s what you need to know:

    Investor confidence jumped back up to 80.1 but not for the US – we're still trending down.  Still, no one reads past the headline number, sadly. 

    Highlights

    Global institutional investors reduced their exposure to equities at a slower pace in September, according to State Street, whose Investor Confidence Index based on actual portfolios of their institutional clients rose to 80.1, up 3.3 points from August's revised reading of 76.8. Risk appetite rose mainly in Europe, where the regional sub-index jumped 18.5 points to 107.6. The North America sub-index fell further by 1.7 points to 71.8 while Asia was down 1.9 points to 87.4.

    • Wells Fargo rates strategists see U.S. House Democrats' move to proceed with an official impeachment inquiry curbing risk appetite and they expect a modest rally in the 10-year Treasury to drive yield down as much as 10 basis points.
    • "We look for markets to continue undergoing a mild risk-off episode as investors and traders digest the news that the impeachment investigation is under way," write Michael Schumacher and Zachary Griffiths in a note.
    • However, a more immediate implication could be deferral of other business in Washington, such as further spending, that could push yields higher, they write.
    • via Bloomberg First Word.
    • 10-year Treasury slips after the Trump Administration released a summary of the much-talked-about call with Ukraine's president. Yield rises 5 basis points to 1.697%.
    • iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT) falls 1.0%; ProShares UltraShort 20+ Year Treasury ETF (NYSEARCA:TBT) rises 2.1%.
    • Boeing (BA +2.3%) has settled the first claims stemming from last year's Lion Air 737 MAX crash, and families of those killed will receive at least $1.2M each, Reuters reports.
    • The Wisner Law Firm settled 11 of its 17 claims against Boeing on behalf of families who lost their relatives in the crash, according to the report.
    • The claims would be the first to be settled out of 55 lawsuits against Boeing in U.S. federal court in Chicago and could set the bar for mediation talks by other Lion Air plaintiffs lawyers that are scheduled through next month.

  17. Transcript of Trump’s call with Ukrainian president shows him offering U.S. assistance for Biden investigation




  18. BA up 7 points is 1/2 the Dow rally and an S&P contributor too.

    They are excited because it turns out human lives aren't that valuable in court settlements.


  19. /ES topping out at the same place it was this morning but the other indexes are higher.  Dollar higher too, at 98.63.  

    Webinar time (10 mins).

    • Crude oil prices are down but off earlier lows, as Saudi Arabia restores production more quickly than expected after the Sept. 14 attacks on its oil facilities and U.S. crude inventories recorded a surprise increase.
    • U.S. WTI November crude (NYSEARCA:USO-1.9% to $56.21/bbl; November Brent -2% to $61.85/bbl.
    • Saudi Arabia has restored its oil production capacity to 11.3M bbl/day, with output from the Khurais field now at 1.3M bbl/day and from the Abqaiq field currently at 4.9M bbl/day, Reuters reports.
    • Meanwhile, U.S. government data showed crude stockpiles unexpectedly rose 2.4M barrels in the week to Sept. 20 instead of declining 249K barrels as analysts had forecast.
    • "The report was bearish due to the overall rise in crude oil inventories and the large rise at the Cushing delivery hub," says Again Capital's John Kilduff. "The slight rise in domestic production was also bearish, if not notable, as the rig count has been on the decline."
    • Separately, Saudi Aramco reportedly is set to formally announce its listing plan next month.
    • Among oil and gas companies trading lower: XEC -2.6%EOG -2.5%CXO -2.1%.
    • Sellers continue to dominate cannabis producers, although prices have rebounded off session lows in today's action. The ETFMG Alternative Harvest ETF (MJ -0.9%) has lost half of its value since peaking at $44.29 almost a year ago and  is currently mired in its longest-ever losing streak since its debut in late 2015.
    • Selected tickers: Aurora Cannabis (ACB -2.8%), Tilray (TLRY -1.9%), Cronos Group (CRON -0.7%), Canopy Growth (CGC +0.4%)
    • In testimony before the U.S. House Energy and Commerce Subcommittee, acting FDA Commissioner Ned Sharpless, M.D. stated that, despite media reports to the contrary, the agency does not plan on banning flavored e-cigarettes but will enforce existing laws limiting the marketing of said products, adding that if a company's application for a specific product meets the standard set by Congress, then it would authorize it for commercial sale.
    • The agency is about to finalize its compliance policy related to flavored electronic nicotine delivery systems (ENDS) that will be clearly aimed at protecting public health.
    • Non-tobacco flavors, including fruit and menthol/mint, are very popular among young people. Recent data showed that more than 25% of high schoolers are vaping.
    • Selected tickers: Altria (MO -1.7%), Philip Morris International (PM +6.4%), Juul (JUUL), British American Tobacco (BTI +2.4%), Vector Group (VGR +0.4%), Imperial Brands (OTCQX:IMBBY +1.6%)
    • Business uncertainty index90.2 (Sep) vs. 97.4 prior month.
    • Business expectations index 86.5 vs. 91.7 prior.
    • Decline in business uncertainty coupled with rising Capex growth is a positive.
    • strong earnings report from Nike is helping to lift a large number of footwear and athletic apparel stocks. A well-timed comment by President Trump on a potential U.S.-China trade deal is also helping sentiment across retail in general.
    • Notable gainers include Foot Locker (NYSE:FL+3.44%, Urban Outfitters (NASDAQ:URBN+3.11%, Crocs (NASDAQ:CROX+3.07%, Under Armor (NYSE:UAA+2.44%, Skechers (NYSE:SKX+1.85%, Gap (NYSE:GPS+1.80%, Nordstrom (NYSE:JWN+1.77%, Wolverine World Wide (NYSE:WWW+1.75%, PVH (NYSE:PVH+1.65%, Columbia Sportswear (NASDAQ:COLM+1.59% and Steven Madden (NASDAQ:SHOO+1.55%.
    • The SPDR S&P Retail ETF (NYSEARCA:XRT) is up 1.00% vs. +0.44% for the S&P 500 Index.
    • Boeing (BA +2.3%) has settled the first claims stemming from last year's Lion Air 737 MAX crash, and families of those killed will receive at least $1.2M each, Reuters reports.
    • The Wisner Law Firm settled 11 of its 17 claims against Boeing on behalf of families who lost their relatives in the crash, according to the report.
    • The claims would be the first to be settled out of 55 lawsuits against Boeing in U.S. federal court in Chicago and could set the bar for mediation talks by other Lion Air plaintiffs lawyers that are scheduled through next month.


  20. BA    I seems a human life is worth $1.2M


  21. Minus legal fees of course Stockbern!


  22. Oh yes, legal fees, then subtract 25-33%   The $1.2M is a lot of money to some, to others its barely chicken scratch. I've seen members here ask about stock/option positions larger than that. 


  23. RRD – One of the $3 portfolio stocks (from $2.23) trading up 20% today to $3.66.


  24. Humans/Stock, StJ – Well a slave used to cost about $100,000 (adjusted) and then you had to feed and clothe them for lets say 20 years so maybe another $100,000 which means $800,000 per person for dead passengers is at least a bit of an improvement.  Still, when you consider that a single 767 is $200M and BA has built 1,200 of them so far – then it's a lot cheaper to write a few bereavement checks than it would be to spend even 1% on safety ($2.4Bn).

    Image result for ethics dilbert

    Image result for ethics dilbert

    RRD/Albo – I never got back into them after the spin-off but the core company is still pretty solid.

    • Gold futures (NYSEARCA:GLD) suffered their worst loss in nearly three weeks, with December Comex gold settling -1.8% to $1,512.30/oz., weighed by strength in the dollar and U.S. stock market, as investors largely dismiss the start of the House's impeachment inquiry.
    • The record of Pres. Trump's controversial phone conversation with Ukraine's president show Trump asked to "look into" former Vice President Biden and his son but did not appear to show a pro quo.
    • Gold's move offers "more evidence that the gold price is headline-driven right now," says Gold Newsletter editor Brien Lundin, adding Trump's phone call is "being interpreted as a nothing-burger, so stocks are rallying and gold is selling off."
    • Lundin says he is "still confident that the underlying trend of ever-easier monetary policy will return to drive gold higher, but right now that's not moving gold as the headlines continue to whip it back and forth."
    • Precious metals miners trade broadly lower: CDE -9.7%EGO -8.8%NGD -8.2%MUX -8.2%AG -6.5%HMY -6.5%AGI -6.4%IAG -4.6%BTG -4.4%NG -4.1%GOLD -3.8%WPM -3.7%AU -3.7%.

    HOV really flying:


    • Federal Reserve Bank of Chicago President Charles Evans, who supported the Fed's two rate cuts this year, remains open to the possibility that another cut could be needed, he told reporters after a speech in Lake Forest, IL.
    • "I think we're in a good place in terms of the rate setting," he said, adding "I'm open-minded to additional action if that's how the discussion goes… I'm sympathetic" to more rate cuts.
    • Evans, who is a voting member of the monetary policy-setting Federal Open Markets Committee this year, said he expects this year's two rate cuts will help nudge inflation to the Fed's 2% target. After that, he'd like to see slight increases in the federal funds rate to a level by 2022 that would be just below a neutral point that neither boosts nor hampers growth.
    • He also said that recent market volatility could be a sign that the central bank's balance sheet may have shrunk too much.

  25. This is interesting/concerning:

    • The central bank needs a buffer of more than $200B to avoid repeating periodic spikes in the repo market, wrote BMO strategists Jon Hill and Benjamin Jeffery in a note.
    • The Fed can do that quickly or at a more gradual pace that would use repo interventions, they said.
    • The first option of a "one-off" large-scale program to rebuild the buffer doesn't necessarily mean it would be all in one day, but that "they would be very front-loaded," the strategists wrote.
    • The less aggressive option would build a $240B buffer over a couple of years through repo operations and may avoid confusion that the Fed might be starting a shadow QE program.
    • Via Bloomberg First Word
    • ArcelorMittal's (MT +3.2%) South Africa unit says it may close some operations, as it battles cheap imports, rising costs and a weak local economy.
    • The unit says it plans to review some of its major operating sites, individual plants and production areas, but will exclude its coke operations and the Highveld Structural Mill.
    • MT says it has started consultations with employees and trade unions on jobs but does not offer further details; the unit said in July it planned to cut more than 2K jobs.

    That's another one for the Watch List!

    • Diamond Offshore (DO -5.5%), Nabors Industries (NBR -3.2%), Noble Corp. (NE -4.3%), Transocean (RIG -4%) and Valaris (VAL -5.7%) are all downgraded to Sector Perform from Outperform at RBC, where analyst Kurt Hallead says the sector's pace of recovery has been slower than expected, which has pushed out the timeline for the companies to become free cash flow positive.
    • Hallead thinks DO has the "least capital structure risk" and the most contract visibility within his coverage, and says NBR's reduced free cash flow generation and higher relative debt load could trip the debt-to-capital covenant on its revolver.
    • The firm cuts its stock price targets for DO to $10 from $11, NBR to $3.50 from $9, NE to $3 from $9, RIG to $9 from $17, and VAL to $9 from $13.
    • Echo Buds: The wireless, in-ear headphones offer five hours of battery life and up to 20 with the charging case. The wearables use Bose technology for noise reduction, which you can turn on or off with a double tap. The Buds are Alexa-enabled, but users can also hold the button to summon the native assistant to their smartphone, so Siri or Google Assistant. Preorder today for $129.
    • Echo Buds are meant to compete with Apple's (AAPL +1.3%) AirPods.
    • Ring: The Ring Alarm Retrofit Kit lets users pair Ring with an existing alarm infrastructure, costing $199 or $375 when bundled with the Ring Alarm Hub.
    • The $99 Ring Stick Up Cam offers 1080p video, motion detection, and night vision in a body that can operate through a plug, battery, or solar.
    • There's also the new Ring Indoor Cam ($59.99).
    • Echo Flex: The $24.99 mini Alexa-enabled devices plugs into an outlet, has two buttons, a status light, and a charging port, and can be paired with a nightlight or motion sensor. The add-ons are $14.
    • New Eero: The mesh WiFi router offers dual-band radio, adaptive backhaul, and promises a 10-minute setup. The big news is the price with one costing $99 and a pack of three selling for $249. The new Eero is on sale in the U.S. starting today and will come to Europe later this year.
    • Echo Glow: The $29.99 companion lamp offers multiple colors, blinking to music, and a campfire mode. Tapping the top makes the Glow cycle through the colors. Pre-orders start today with shipping before the holidays.
    • Echo Show 8: The update comes with a HD 8-in. display, better auto, a privacy shutter, and a cheaper $129 price tag (versus the Show 10) and pre-orders start today with shipments before the holidays.
    • Discovery and Food Network have launched new recipe services and Alexa will serve as Food's exclusive voice service.
    • New drop-in on all feature lets a user start a group/audio chat with everyone in the family.
    • Echo Studio: A new smart speaker packing 3D audio and Dolby Atmos, which automatically tunes to the sound in a room. There are three mid-range speakers, directional tweeter in front, and a 5.25-in. bass driver with a bass port. Echo Studio costs $199.99 with pre-orders starting today.
    • AMZN says it's working with Sony, Universal, and Warner to get more tracks that support 3D audio.
    • Sonos (SONO -2.4%) shares are dipping after the announcement.
    • Update: New Echo: The $99 to the flagship smart speaker model starts pre-orders today. The body and fabric look like last year's Echo Plus, and seems to share the audio upgrades but not the ability to function as a hub.
    • Alexa Guest Connect: Guests to your home can now connect to the local Alexa devices to access their own personal media and information.
    • Original: Amazon's (AMZN +0.6%) hardware event starts with some new privacy features and the reveal of the Echo Dot with Clock.
    • The Alexa-enabled features include the ability to ask the voice assistant what she heard and why she performed an unusual activity, like suddenly playing music without a prompt. Ring owners will gain the ability to turn off recording while the owner is at home.
    • New Dot: The Echo Dot with Clock retails for $59.99 and includes an LED display that can show the time, alarms, and outdoor temperature. You can tap the top to act as a snooze feature.
    • Developing story with new updates appearing at the top.




  26. Elizabeth Warren is rising everywhere





  27. Did Trump Just Impeach Himself?