Market minutes for the week of december 10th – cascade investment group gas utility cost


Here’s what I am thinking and hearing: *1.) Billionaire hedge fund manager and founder of Omega Advisors Leon Cooperman hears me, speaking to CNBC: “I think your next guest ought to be somebody from the SEC to explain why they have sat back calmly, quietly, without saying anything and allowing these algorithmic, trend-following models to wreak havoc with what has, up to now, been the best capital market in the world.” Former floor trader and president of Sarge986 LLC hears me: “Something needs to change…Now, as volatility has exploded, it has become all too apparent that the speed of not only execution but also the speed with which these algorithms can cancel one side or the other, causes excessive imbalances, and thus overshoots in both directions…Something is going to have to change in order to re-establish the public trust, and to indicate that markets can function well, in a stabilized fashion more often than not.” Marko Kolanovic, global head of macro quantitative and derivatives research for J.P. Morgan shared his thoughts with CNBC, “Automated trading strategies from quant hedge funds and the massive shift to passive investing have helped to remove liquidity from the system in times of panic…index and quant funds made up two-thirds of assets under management globally and the majority of daily trading.” Jim Cramer hears me: “This economy is either going from 90 mph to minus 30 mph, or this stock market isn’t functioning right. I am usually reluctant to say the market isn’t functioning right. electricity outage But we all know it isn’t…The algorithms are the machines now and they are overwhelming everything, very ’87-like and, like 1987, no one seems to know how to shut them off, least of all the government.” Institutional Investor Hall of Famer and legendary Wall Street analyst Richard Bernstein sees a disconnect as well: “The fundamentals really don’t argue for a bear market. In fact, I would even argue the fundamentals don’t argue for the correction we are seeing.” *2) From the frontlines of the trade war: J.P. Morgan’s Marko Kolanovic estimates that the destabilizing impact of Trumps trade policies has shaved about 10% off the return of the S&P 500 in 2018. GoPro announced it is moving production of U.S.-bound cameras out of China to avoid being caught up in the tariff fight. International-bound camera production will however remain in China. The trade war is really beginning to hurt the Chinese economy. Chinese export growth slowed dramatically in November as the effects of shipment frontloading ahead of the tariffs has started to unwind. Chinese automobile sales fell 14% to 2.55 million units to mark the fifth straight month of declining volume in the region. Total vehicle sales in China for 2018 are on track for the first annual decline since 1990. Industrial output in China fell to a 3-year low, and retail sales rose at the weakest pace since 2003. Beijing is reportedly planning to scale back its “Made in China 2025” policy that will allow foreign countries greater access to its economy by eliminating the currently required joint venture policy. electricity experiments for preschoolers U.S. grain traders say Chinese state-owned companies have recently bought at least 500,000 metric tons ($180 million) of soybeans from U.S. producers, the first major purchase since President Trump and President Xi met earlier this month. The New York Times and sources close to the investigation say that the Chinese government was involved in the hacking of 500 million Marriott customers over the past four years. *3.) In an interview after his appearance before Congress where he had to repeatedly explain that Google doesn’t make the iPhone, Google CEO Sundar Pichai said that more conversations need to happen between Mountain View (Calif.) and Washington. *4.) Is a Santa Claus rally coming to town? According to the latest American Association of Individual Investors survey, pessimism among retail investors is at the worst level in about 5½ years. Bulls fell by 17 points last week to 20.9%, the lowest reading since 2016, while the bear camp rose to 48.9% for the highest reading since April 2013. Over the years the AAII survey has been a reliable contrarian indicator. Although pessimism among retail investors is high, opportunity seems to be knocking for corporate insiders who are buying their stock with both hands at levels seen only five other times in the past decade. An open insider Buy/Sell ratio of 152.0 in each prior case has occurred at or near market bottoms. *5.) Nothing like price to change sentiment. According to Lipper Analytics, “U.S.-based stock funds posted a $46 billion outflow in the week ended Wednesday; the largest withdrawals on record, dating back to 1992. U.S.-based money market funds attracted $81 billion [in the week ended Wednesday, the] largest inflows on record dating back to 1992.” Hmmm, Santa Clause could be coming to town.

Real Money Pro author Tom Graff: “Hear again I encourage readers to think like the Fed and not like a trader. Data dependent to them is going to mean ’is unemployment still falling?’ Not ‘are company earnings growing?’ If they really only care about the former, they will be hiking until unemployment is rising, and by then it is likely that they’ve caused enough economic damage that it’s too late to avoid a recession. gasco abu dhabi address The bottom line is this: A more data dependent Fed is just a less predictable Fed, it isn’t a more dovish Fed.”

According to CNBC, “tightening financial conditions and intensified skittishness over trade will cause the Federal Reserve to follow a less aggressive path when it comes to hiking rates [in 2019]…[Goldman Sachs] economists still think the market has it wrong on Fed policy, and they see three increases in 2019.” They went on to say that a December hike has a 90% chance of occurring, another move in March now seems unlikely.

CoreLogic reports, the average homeowner with a mortgage saw an increase of $12,400 in home equity (price appreciation plus mortgage balance pay-down) between the third quarter of last year and the end of the third quarter of this year. That number is down from the second quarter year over year gain of $16,000 and is the smallest gain in two years. California accounted for almost 75% of the decline in tappable equity.

Despite investor worries, top CEOs told the CNBC Business Roundtable last week that they don’t see an economic downturn on the horizon. kansas gas service bill pay Despite worrisome indicators such as an inverted yield curve, J.P. Morgan CEO Jamie Dimon, AT&T CEO Randall Stephenson and Boeing CEO Dennis Muilenburg were overwhelmingly optimistic on the state of the economy. Randall Stephenson: “It feels like we’re almost talking ourselves into a downturn.” Boeing CEO Dennis Muilenburg: “We think about the tax reform passed last year, ripple benefit to our economy is extraordinary. The biggest thing we’re doing with that tax reform benefits is we’re plowing it back into innovation and R&D. That’s creating jobs and that’s creating competitive advantages.” Jamie Dimon: “[Clouds] have always been there…People act like buying back stock is a bad thing. It’s not. We have to educate the American public and my Democratic friends about how that benefits America.”

The U.S. Energy Information Administration has cut its 2018 and 2019 forecasts for WTI and Brent crude oil prices and increased its forecast for U.S. production. According to the EIA monthly report, the WTI 2018 price is expected to average $65.18/bbl., down 2.4% from its November forecast and for 2019, the EIA forecasts $54.19 /bbl., down 16.4% from 2018. Brent crude is pegged at $61.00/bbl. for 2019. The EIA expects the U.S. to produce 12.06 million barrels per day of oil in 2019 up by 1.18 million barrels per day in 2018.

According to a study by Georgetown University and NYU’s Stern School of Business, college and university endowments have “badly underperformed” the market benchmarks. In a sample of 28,000 endowment funds, the median annual return for the entire sample was just 3.75% or 1.14% below the 10-year Treasury note and 5.53% below the standard annual return for a 60% equity – 40% bond allocation.

At $39 billion, Harvard University’s endowment is the largest in the world. According to Reuters, over the past 5 years the endowment’s wholly-owned subsidiary Brodiaea, has been quietly buying vineyards and farmland in Santa Barbara and San Luis Obispo counties. The investments which went on the books at $60 million, are now worth according to the endowment, $305 million. Why the wonderful return on investment? Apparently, the vineyards sit on top of massive underground aquifers which Brodiaea has acquired the water rights to.

According to Business Insider: “The U.S Farm Bill passed on Wednesday legalizes hemp, a plant that is roughly identical to marijuana and is a key source of the highly-touted wellness ingredient CBD. arkansas gas association The move alters the language of a major drug law that had previously remained unchanged for half a century. The new bill exempts hemp from that law and defines it as an agricultural product. That means farmers and researchers of hemp now get some of the same benefits as farmers and researchers of other crops, like the ability to apply for insurance and federal grants.”

Seeking Alpha reports: “Online retail sales for the period of November 1 to December 6, was up by 18.6% year over year for a total of $80.30 billion, according to tracking by Adobe Analytics…The number of shoppers who bought items online to be picked up in store was up 46% from a year ago…Sales from smartphones were up 55% to $23.7 billion during the period.”

Apple has announced that it will invest $1 billion in a new campus in Austin, Texas. CNBC says, “The 133-acre campus will be located in North Austin and will accommodate an initial 5,000 employees, with the capacity for 15,000 employees total.” The company also said that it will open new sites in Seattle, San Diego and Culver City, Calif. over the next three years.

For “simplicity” reasons, Delta Air Lines has announced a new boarding process that consists of 8 categories based on the type of ticket purchased. Delta “One” (elite) passengers board first, followed by Delta “Premium” economy and first-class, followed by Delta “Comfort +” in coach and other lower tier frequent flyer elites. The following and final four boarding calls will be for low-cost, no-frills fliers.

Next week: Earnings from: Oracle, FedEx, Paychex, General Mills, Accenture, Nike and ConAgra. Economic reports: FED’s Empire District Manufacturing Survey for December, Philly FED’s Manufacturing Survey for December, U.S. gas prices going up or down New Home Starts for November, U.S. Existing Home Sales for November, U.S. Leading Economic Indicators for November and U.S. Durable Goods Orders for November.