Tag: news

2017 Was A Year Of ‘Hope’, 2018 Is The Year Of ‘Reality’

Via RealInvestmentAdvice.com,

Fireworks To Start Q3

As America went back to work following “Independence Day,” the markets set off some ‘fireworks” of its own with back to back gains Thursday and Friday. Moving average lines continue to play an important role in providing levels at which buyers have consistently shown up. Last week, the Dow gained +0.7% and continues to lag behind the rest of the market mainly due to several of its constituents are more vulnerable to trade problems. The S&P 500 gained a stronger +1.5% on the week and, as shown below, ended the week above its 50-day average. With MACD lines (lower box) getting close to turning positive, the market will have to deal with a lot of overhead resistance at both the June highs and the current downtrend line from all-time highs earlier this year.

The market has remained confined to a fairly broad trading range as shown below. While the decline from the June highs reversed the short-term overbought condition, the rally from the 50% retracement level has “reversed that reversal” once again.

Love volatility yet?

With the market still on a short-term sell signal, it suggests the current rally is likely limited to the June highs keeping the markets confined to the broader trading range for now.

The good news is the break above the 61.8% retracement level, as we noted last week, keeps the markets intact (Pathway #1) for now. And, as suggested above, a retest of recent June highs seems very likely. However, Monday will be key to see if we get some follow through from Friday’s close.

Currently, a continued trading range between the 100-dma and the June highs seems to have the highest probability levels (Pathway #2a and #2b). While there is always a risk of something going wrong (Pathway #3) the odds currently seem somewhat diminished. However, with the ongoing trade war rhetoric brewing between China and the U.S., a negative surprise certainly maintains a high enough probability to pay attention to.

As I noted over the last few weeks, participation remains concerning as Bob Farrell’s rule #7 states:

“Markets are strongest when they are broad and weakest when they narrow to a handful of blue-chip names.”

For the year, 10-stocks have made up almost entirely all of the gains of the market. Actually, a better way would be to say:

“The top-10 stocks have more than offset the losses from the rest of constituents so far this year given the markets are only up 3.22% ytd.”

The biggest risk to the markets over the next couple of months will be earnings announcements and economic data as the “trade war” continues to mount. As noted by Reuter’s Christopher Beddor:

“The U.S.-China trade war will be fought in the trenches, and it’s going to get ugly. The first round of tariffs hits on Friday, and U.S. President Donald Trump says they might come to cover more than $500 billion of goods. Exporters will feel the pain first, but uncertainty will also dampen investment, impede research and twist reform. It marks a moment of mourning for those who hoped the world’s two largest economies could work things out.

The initial round of U.S. duties cover just 2 percent of China’s total exports, calculate analysts at JPMorgan. They reckon that even if the White House slapped a 25% tariff on every Chinese product sold in the United States, Chinese economic growth would slow by only around 0.5 percentage points.

More damage could come from economic aftershocks. Equity markets in China and the United States have swooned already, in part because investors worry that global supply chains will need to reroute. Some American businesses say they are already scaling back or postponing capital spending because of uncertainties around trade, according to minutes from the Federal Open Market Committee. In China, the government has been forced to moderate monetary policy to cushion financial markets.”

With valuations elevated and earnings expectations extremely lofty, the risk of disappointment in corporate outlooks is elevated. Furthermore, despite those who refuse to actually analyze investor complacency measures, both individual and institutional investors remain heavily weighted towards equity risk. 

In other words, while investors may be “worried” about the market, they aren’t doing anything about it due to the “fear of missing out.”  

This is the perfect setup for an eventual “capitulation” by investors when a larger correction occurs as overexposure to equities leads to “panic selling” when losses eventually mount.

It is exactly for that reason that we manage risk. But, managing risk is NOT the same as sitting in cash.

As we note each week in this missive, our portfolios remain primarily weighted towards equity risk, for now. However, in early February of this year, we reduced our equity allocation models to 75% exposure which has served us well in reducing portfolio volatility over the last few months.

These periods of either “equity risk reductions/increases” are driven by the investment discipline we discuss with you each week. The chart below shows the history of the model allocation adjustments going back to 2006 when we first started tracking changes to the model used in our 401k plan manager at the end of this newsletter.

While there are certainly periods where the model under-performs the benchmark index, particularly an all-equity index, it is the reduction in drawdowns which leads to longer-term out-performance over a passive index. The obvious point here is simply “getting back to even” is not the same as “growing value.” 

We have been and currently remain underweight equity. But, as I stated, being “underweight equity” is far different from assuming we are sitting entirely in cash. While we certainly do not advocate market timing, we certainly do adhere to the principals of risk management and capital preservation.

With valuations currently trading at the second highest level in history, the outlook for forward returns over the next decade are extremely low. In fact, it is highly probable that bonds will once again outperform stocks over the next 10-year period. However, when that over-valuation is reversed, we will certainly become “raging equity bulls” once again.

But that time is not now, and I agree with Doug’s comments this past week that risks continue to outweigh the rewards.

Kass: Concerns Remain Plentiful

I am still carrying a small net long exposure with a plan to short strength in the S&P area of 2750-2775.

But my forward looking concerns are plentiful – trade wars, the message of the bond market (as well as the message of the bank stock market), rising geopolitical risks (the immigration issue is dividing the EU and splintering some of the entrenched parties) and the possibility of policy mistakes at both the White House and the Federal Reserve as the later pivots away from monetary largesse.

Importantly, the rising ambiguity of global economic growth (and the possible repudiation of the so called synchronized global economic recovery) will likely give investors some pause into the Summer:

The powerful symbol of the yield curve. An excerpt:

You can try to play down a trade war with China. You can brush off the impact of rising oil prices on corporate earnings.

But if you’re in the business of making economic predictions, it has become very difficult to disregard an important signal from the bond market.

The yield curve is perilously close to predicting a recession and so is the absolute level of interest rates – something it has done before with surprising accuracy…

* PMI manufacturing new orders by region are turning lower:

And hastily crafted White House policy (conflated with politics), developed on the back of a napkin and delivered by tweet is dangerous in an interconnected world. Policy developed by hardliners like Navarro and by an inexperienced President that seems at its epicenter the faulty notion that US imports and US GDP are inversely related – when in fact deficits and growth are directly correlated – is likely also to prove dangerous. (President Trump is making economic uncertainty and market volatility great again. #MUVGA)

Finally, as expressed recently, I am constantly shocked how optimistic investors, strategists, analysts and biz news commentators apply first level thinking when considering the wide range of possible political, economic and market outcomes (many of them adverse). But, to me, we are in a vortex of uncertainty and in a new regime of volatility — at a time in which global monetary policy has pivoted from being expansionary to being contractionary and is no longer suppressing volatility. (We will soon see the end of ECB QE by year end, with it being cut in half in three months. That’s a really big deal as liquidity flow becomes a drain both here and over there).

Bottom Line

  • 2017 was a year of hope, in which the S&P Index’s valuation experienced a three handle valuation increase. Wall Street triumphed over Main Street.

  • 2018 is a year of reality, in which the S&P Index’s valuation has and will likely to continue to contract. Main Street is triumphing over Wall Street.

I will grow more cautious as stocks move higher in the near term — as downside risk increasingly dwarfs upside reward.

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Chinese Refiner Halts US Oil Purchases, May Use Iran Oil Instead

With the US and China contemplating their next moves in what is now officially a trade war, a parallel narrative is developing in the world of energy where Asian oil refiners are racing to secure crude supplies in anticipation of an escalating trade war between the US and China, even as Trump demands all US allies cut Iran oil exports to zero by November 4 following sanctions aimed at shutting the country out of oil markets.

Concerned that the situation will deteriorate before it gets better, Asian refiners are moving swiftly to secure supplies with South Korea leading the way. Under pressure from Washington, Seoul has already halted all orders of Iranian oil, according to sources, even as it braces from spillover effects from the U.S.-China tit-for-tat on trade.

“As South Korea’s economy heavily relies on trade, it won’t be good for South Korea if the global economic slowdown happens because of a trade dispute between U.S and China,” said Lee Dal-seok, senior researcher at the Korea Energy Economic Institute (KEEI).

Meanwhile, Chinese state media has unleashed a full-on propaganda blitzkrieg, slamming Trump’s government as a “gang of hoodlums”, with officials vowing retaliation, while the chairman of Sinochem just become China’s official leader of the anti-Trump resistance, quoting Michelle Obama’s famous slogan “when they go low, we go high.” Standing in the line of fire are U.S. crude supplies to China, which have surged from virtually zero before 2017 to 400,000 barrels per day (bpd) in July.

Representing a modest 5% of China’s overall crude imports, these supplies are worth $1 billion a month at current prices – a figure that seems certain to fall should a duty be implemented. While U.S. crude oil is not on the list of 545 products the Chinese government has said it would immediately retaliate with in response to American duties, China has threatened a 25% duty on imports of U.S. crude which is listed as a U.S. product that will receive an import tariff at an unspecified later date.

And amid an escalating tit-for-tat war between Trump and Xi in which neither leader is even remotely close to crying uncle, industry participants expect the tariff to be levied, a move which would make future purchases of US oil uneconomical for Chinese importers.

“The Chinese have to do the tit-for-tat, they have to retaliate,” said John Driscoll, director of consultancy JTD Energy, adding that cutting U.S. crude imports was a means “of retaliating (against) the U.S. in a very substantial way”.

In an alarming sign for Washington, and a welcome development for Iran, some locals have decided not to see which way the dice may fall.

According to Japan Times, in a harbinger of what’s to come, an executive from China’s Dongming Petrochemical Group, an independent refiner from Shandong province, said his refinery had already cancelled U.S. crude orders.

“We expect the Chinese government to impose tariffs on (U.S.) crude,” the unnamed executive said. “We will switch to either Middle East or West African supplies,” he said.

Driscoll said China may even replace American oil with crude from Iran. “They (Chinese importers) are not going to be intimidated, or swayed by U.S. sanctions.”

Oil consultancy FGE agrees, noting that China is unlikely to heed President Trump’s warning to stop buying oil from Iran. While as much as 2.3 million barrels a day of crude from the Persian Gulf state at risk per Trump’s sanctions, the White House has yet to get responses from China, while India or Turkey have already hinted they would defy Trump and keep importing Iranian oil. Together three three nations make up about 60 percent of the Persian Gulf state’s exports.

To be sure, for some turmoil in the oil market present opportunity: “If China retaliates with tariffs on U.S. crude, that could improve South Korea’s terms of buying U.S. crude…because the U.S. would need a market to sell to,” said the KEEI’s Lee, while JTD Energy’s Driscoll said U.S. oil sellers were “already discounting” their crude.

While next steps remain unclear, the potential outcome for the US isn’t: should China fully pivot away from US exports and replace them with Iranian product, the US trade deficit will resume rising, further adding to the pressure of what is Trump’s biggest economic hurdle: the double US deficits.

The flipside is that since less Iranian oil exports will go unused, it may provide a solace to the US consumer facing the highest gas prices in four years. However, if the ongoing pipeline bottleneck in the Permian is not resolved soon, said  solace will prove to be short-lived.

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UK Brexit Secretary David Davis Resigns From Theresa May’s Government

U.K. Brexit Secretary David Davis resigned from Theresa May’s government late Sunday, his office has confirmed to multiple news outlets. 

Davis resignation comes two days after May received backing from her cabinet, including Davis, for a new “soft Brexit” plan which envisioned keeping close ties with the EU after the UK’s departure from the block, news which was cheered the UK business lobby and which had set cable on an upward trajectory in early Asia trading, before the news hit which halted the pound’s ascent.

Former Brexit secretary David Davis

The cabinet signed up to the proposals, which were hammered out at Chequers – the country house of the UK Prime Minister – this week, and they will be set out in full in parliament this coming week.

Davis had disagreed with May’s plans for keeping EU rules for goods and adopting a close customs model with the bloc, and his resignation threatens more political turmoil, this time in the UK, as moderates are set off against hard brexiteers.
However, some pro-Brexit Tories are angry about the plan, with speculation that it could end up in a leadership challenge.

According to BBC’s Laura Kuenssberg, “Davis concluded he could not stay in post after a meeting” with Theresa May earlier today – “understand he was furious at Number 10 handling”

As a reminder, late on Friday Theresa May won approval at an all-day Chequers summit for a pro-business plan to keep Britain intimately bound to the EU single market and customs union, beating back Eurosceptic cabinet opposition to her new “soft Brexit” strategy, the FT reported.

May briefed the media at 6.45pm on Friday that the cabinet had agreed a collective position to create a “UK-EU free trade area which establishes a common rulebook for industrial goods and agricultural products”. The plan would see Britain commit in a treaty to adopt new EU rules for goods— an approach viewed by some Tories as leaving the UK as “a vassal state”. Parliament could break the treaty, but trigger severe market reprisals from the EU if it did.

May challenged critics including foreign secretary Boris Johnson to back the plan for a “UK-EU free trade area” in a confrontation seen by senior Tories as a decisive moment in the tortuous Brexit process.

Johnson and five other cabinet ministers met on Thursday night at the Foreign Office to plan a counter-attack to try to preserve a clean Brexit, but they eventually concluded they could not stop Mrs May’s plan.

“People are not happy with what is being proposed but people are keen to keep the government together,” said one of those at the meeting at Mrs May’s country residence.

May’s team had vaunted the prime minister’s ability to face down the Eurosceptics, encouraged by pleas from mainstream Conservative MPs that the time had come for her to tell her critics to put up or shut up.

Davis’ unexpected resignation threatens to further inflame cabinet tensions, especially in light of an earlier Mirror report that 42 lawmakers had formally expressed no confidence in Theresa May.

It is unclear if there will be more resignation in Davis’ footsteps, but according to the BBC at least one more minister is on their way out:

Following the news, cable dipped modestly however it has since regained much of the losses and looks set to continue on its upward trajectory established last Friday. As Bloomberg’s Mark Cranfield adds, “EUR/GBP will quickly unwind last week’s drop and then climb further as David Davis’ resignation leaves the U.K. without its most experienced Brexit negotiator. This dramatically reduces the chances of Theresa May being able to push the Brexit White Paper through the U.K. parliament this week.“

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Bookstore Owners Calls Cops On Woman Who Confronted Bannon

The owner of a Richmond, VA bookstore says he called the cops on Saturday after a woman confronted and berated former White House chief strategist Steve Bannon – calling him a “piece of trash,” according to the Richmond Times-Dispatch, which noted that Bannon grew up in Richmond. 

Nick Cooke, owner of Black Swan Books called police around 3:15 p.m. to report “someone yelling at a political figure in the bookstore.” Richmond police confirmed the call to the Dispatch. 

“Steve Bannon was simply standing, looking at books, minding his own business. I asked her to leave, and she wouldn’t. And I said, ‘I’m going to call the police if you don’t,’ and I went to call the police and she left,” Cooke said. “And that’s the end of the story.”

Cooke told the Dispatch: “We are a bookshop. Bookshops are all about ideas and tolerating different opinions and not about verbally assaulting somebody, which is what was happening.“

One wonders if Cooke can next look forward to angry protests outside his bookstore after defending Bannon.

The Saturday confrontation marks the latest in a spate of incidents in which pro-Trump individuals have been harassed by angry liberals, which has accelerated since Rep. Maxine Waters (D-CA) openly called for liberals to harass Trump supporters. 

In June, demonstrators confronted Homeland Security Secretary Kirstjen Nielsen at a Mexican restaurant in Washington, D.C., and the owner of the Red Hen, a restaurant in Lexington, declined to serve White House Press Secretary Sarah Huckabee Sanders.

This past Monday, a woman with her 2-year-old son confronted Trump’s now former Environmental Protection Agency Administrator Scott Pruitt in a D.C. restaurant and urged him to resign. Trump said Thursday that he had accepted his scandal-plagued EPA chief’s resignation. –Richmond Times-Dispatch

Protesters with the Democratic Socialists of America – Alexandria Ocasio-Cortez’s party also showed up at Nielsen’s Alexandria townhouse.

Meanwhile, White House adviser Stephen Miller – largely credited with pushing President Trump’s “zero tolerance” immigration policy of arresting and processing those entering the U.S. illegally – was heckled at a Mexican restaurant two days before Nielsen was harassed. 

In Early June, photos of “caged children” in ICE detention centers which happened under Obama went viral – but by the time anyone pointed that out, the outrage machine was already in full swing. 

Largely ignored was the fact that Trump is merely enforcing laws created under Bill Clinton and strengthened under Bush II – while Obama separated migrant families all the time and is being sued for keeping children in brutal conditions. Making matters worse was a fake news picture of a crying “separated migrant child” who was never actually separated from her parents. 

Meawhile back in Richmond, Cook would not speak to whether he has a personal relationship with Bannon – only describing the former White House adviser as “a private person in my bookshop.” Meanwhile, some in social media wasted no time in trotting out the “N” word. 

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Ethereum’s Vitalik Buterin Blasts Centralized Crypto Exchanges: “I Hope They Burn In Hell”

Authored by Helen Partz via CoinTelegraph.com,

Co-founder of Ethereum (ETH) Vitalik Buterin criticized centralized exchanges, saying that he hopes they will “burn in hell,” in an interview with a TechCrunch journalist Jon Evans, July 6.

image courtesy of CoinTelegraph

Buterin has reiterated his positive stance on decentralization, claiming that by developing “better” decentralized platforms, the  crypto community should be able to take away the “stupid King-making power” from centralized crypto exchanges.

“I definitely personally hope centralized exchanges burn in hell as much as possible.”

The creator of Ethereum criticized centralized platforms for having the ability to decide which cryptocurrencies “become big.” According to Buterin, they do this by charging “these crazy ten to fifteen million dollar listing fees.” He then added that further decentralization would better satisfy the “blockchain values” of “openness and transparency.”

Decentralized exchanges (DEX’s), unlike centralized ones, are built in a such way as to allow users to retain ownership of their cryptocurrencies and private keys. However, DEX’s also have disadvantages – the relative lack of liquidity, compared to their centralized counterparts, being one of the examples.

In the interview, Buterin cited one example to demonstrate the advantages of the current decentralization of Ethereum: “if someone puts a gun to [his] head and tells [him] to write a hard fork patch,” he would definitely do so. However, “relatively few” users would then download and run the update, and that, according to Buterin, “is called decentralization.”

The degree of decentralization of Ethereum itself has been put in question by some experts, who cite, for example, the possibility of collusion between mining pools to manipulate the network.

As of press time, Ethereum is the second largest cryptocurrency with a market capitalization of around $47.5 billion.

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Here Comes Q2 Earnings Season: Expect Stellar Numbers But Watch The Deterioration In Outlooks

Following a blockbuster Q1 earnings season in which EPS rose at the fastest pace since the financial crisis, yet which saw a surprisingly muted market reaction perhaps as a result of growing global protectionism fears coupled with rising rates, a slowdown in China and generally tighter financial conditions, traders turn their attention to the second quarter earnings season which officially begins on Friday the 13th.

As usual, the big banks are among the first to report, with Citigroup, JPMorgan, PNC Financial, Wells Fargo, Bank of America, and BlackRock all reporting results by July 16. In total, 87% of S&P 500 market capitalization will report 2Q results by August 3.

What to expect?

According to Goldman’s chief equity strategist, while modestly below Q1’s blockbuster 25% EPS increase, results are still expected to be strong, with consensus expecting 20% year/year EPS growth.

Here Bank of America’s Savita Subramanian chimes in predicting that EPS will come in modestly better than analysts expect, hitting 22% YoY supported by very strong results from early reporters, positive (though decelerating) US data surprises, better-than-expected US GDP growth (which is tracking 3.6% in 2Q vs 2.3% in 1Q), and strong ISM indices.

With just days left until the start of earnings reports, Wall Street analysts are still revising up estimates; typically they cut estimates by around 3% in the prior three months. Sales growth is expected to remain healthy at 8% YoY (similar to in 1Q). A weaker average US dollar relative to the year ago quarter should contribute about 1ppt to YoY sales growth, and higher oil prices— WTI +40% YoY on average—should also benefit growth.

In some good news for the Fed, if not so good for corporate employees, while profit margins are forecast to expand by 88 bps to an all-time high of 10.9% – which suggests that wages continue to remain subdued, while limiting the “threat” of a wage induced inflation spike – this will be aided by a 14 pp reduction in the statutory corporate tax rate.

However, as Kostin notes, strong 2Q earnings growth is not just a function of lower corporate tax rates, as sales are also expected to rise by 11%, which would be the fastest pace of year/year revenue growth since 3Q 2011, thanks to a weaker average US dollar relative to the year ago quarter, as well as higher oil prices— WTI +40% YoY on average— should also benefit growth. Pre-tax earnings are also forecast to climb by 13%.

Drilling down on specific sectors, earnings are expected to rise in all 11 S&P 500 sectors, with Energy and Materials earnings growth set to pace the market at 135% and 40% year/year, respectively, largely thanks to the 16% YTD surge in Brent. Consumer Staples EPS is expected to be roughly flat year/year, but results in that sector and Health Care are complicated by CVS Health Corp’s recent acquisition of Aetna and subsequent sector reclassification, according to Goldman. Consumer Staples and Health Care EPS are also expected to grow by 8% and 9% in 2Q, respectively.

One question investors have is whether this earnings season will see the surprisingly muted response to earnings beats observed in Q1, while punishing those who missed. Goldman believes that this time around, investors will be more lenient, to wit:

We expect the prevalence of earnings beats will moderate from an impressive 1Q rate but the market will reward beats more. In 1Q, S&P 500 EPS grew by 24% (7 pp faster than consensus estimates) and 55% of companies beat consensus EPS estimates by at least 1 standard deviation, the highest level since 2Q 2010. A slightly weaker macroeconomic environment will result in earnings beats normalizing from elevated 1Q levels. However, firms beating EPS estimates outperformed S&P 500 by only 44 bp on the day after reporting, well below a historical median of 103 bp. One reason is that positioning was already long: our prime services colleagues’ net leverage data show that net length was above-average in 1Q reporting season. In contrast, net leverage recently fell below the 10th percentile vs. the last 12 months.

Additionally there is material room for upside, as analysts do not believe the conditions that led to strong 1Q beats will continue: as shown in the chart below, consensus estimates of 2Q, 3Q and 4Q 2018 EPS growth have barely changed since the start of 1Q reporting season.

And while Q2 earnings will hardly disappoint, traders will eagerly await guidance from management teams on two key issues, the strengthening dollar and protectionism in the context of escalating trade wars.

On the first, front, the USD weakened in 2Q vs. the year-ago period, but according to Goldman, its recent sharp rise suggests it could become a headwind to S&P 500 sales growth.

The trade-weighted USD was 3% weaker on average in 2Q 2018 than 2Q 2017, benefiting S&P 500 sales growth. Info Tech, Materials, and Energy are the three sectors with the largest share of sales from abroad and also rank as the top three sectors based on consensus estimated 2Q sales growth. However, the trade-weighted USD rose by more than 5% during 2Q, suggesting the dollar could become a headwind to exporters. Internationally-exposed stocks lagged in line with strength in the USD.

Which leaves tariffs as the biggest risk to market sentiment, although according to Kostin, the potential impact to aggregate S&P 500 EPS – for now – is limited given exports to China comprise just 1% of US GDP. Even so, despite their limited aggregate impact, tariffs will have a disparate influence at the stock level, especially on firms with high China sales and high reliance on imported COGS.

Morgan Stanley is less sanguine, and in a Sunday note from chief equity strategist Michael Wilson, the bank writes that “we do think that 2Q earnings season will bring an inevitable acknowledgement from companies that trade tensions increase the risk to forward earnings estimates, even if managements don’t formally lower the bar.”

Bank of America echoes Moran Stanley’s caution and tells clients to beware any deterioration in corporates’ outlooks…

This quarter we will be paying close attention to management guidance and commentary for any deterioration in outlooks driven by uncertainty around growth or trade, which could halt the capex recovery and stall confidence. So far, so good – management has continued to guide above analysts’ upwardly revised earnings estimates (Chart 5), and has also continued to guide above analysts’ forecasts for capex (Chart 6), though the capex guidance ratio fell to slightly below average levels as of our latest update in June.

… As well as further pressures from higher wages and input costs.

Companies who cannot pass through higher wages and/or input costs could also be at risk. 10% of companies cited higher labor costs in 1Q18 vs 8% in 4Q17 (the highest since we began tracking in 2015), and wage growth is at post-crisis highs (Chart 7). We have not seen a hit to margins yet, but operating margins have softened in Consumer Discretionary (the most labor-intensive sector) plus several others. We are monitoring our BofAML Corporate Misery Indicator (Chart 8), a macro proxy for profitability that has been strongly correlated with, and sometimes leads, the profits cycle. This indicator has been volatile in recent months, but wage growth has generally outpaced CPI. If it turns south, profits are likely to decelerate, and a margin squeeze could be in the works, unless demand and/or pricing pick up.

In conclusion, when it comes to the most important variable, namely how single stocks – and the broader market – will respond to Q2 earnings, the answer may not be found in either backward looking revenue and EPS numbers, or forward looking guidance, which changes day to day based on the macro picture, but what Trump may tweet at 6 am on any given day, and how China will respond. And those, as the past 6 months have shown, are completely unpredictable

 

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“Shelter In Place”: All Hell Breaks Loose In Haiti As Violent Mobs Try To Murder Trapped American Tourists

The US embassy in the Haitian capital of Port-au-Prince warned American tourists to “shelter in place” as violent demonstrations erupted across the island over a fuel price hike.

An estimated 120 Americans are believed to be staying at a Port-au-Prince hotel targeted by protesters, who attempted to bypass security and set the building ablaze. Youth groups and missionaries from an array of U.S churches are also stranded in the Caribbean nation, unable to make it safely to the airport for departure. –Fox News

The State Department notice reads: “Do not travel to the airport unless you confirmed your flight is departing,” adding “Flights are cancelled today and the airport has limited food and water available. Telecommunications services, including Internet and phone lines, have been affected throughout Haiti.  It may be difficult to reach people through normal communication methods.”

“We express our deepest condolences to all those affected by this event. We are closely monitoring the situation and remain in close contact with Haitian authorities to verify the welfare and whereabouts of U.S. citizens in the area.” 

The Haitian government halted a planned fuel price hike on Saturday after riots broke out late last week. Haiti Prime Minister Jack Guy Lafontant had previously announced a 38% increase in gasoline, diesel and kerosine prices in order to balance the budget. 

A source on the ground in Haiti described the situation as “on fire” and only getting worse, with more major demonstrations expected Sunday in the wealthy enclave of Pétion-Ville, south-east of the capital city. –Fox News

“Government vehicles are moving to high ground, we have been told to initiate total lockdown measures immediately,” the source added. “We have to see what develops.”

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Woman Exposed To Novichok Nerve Agent Has Died

Unlike the Skripals – who miraculously walked away from their alleged exposure to the deadly nerve agent Novichok – Dawn Sturgess, 44, who was exposed on Thursday has died.

In a statement, Assistant Commissioner Neil Basu, the head of UK Counter Terrorism policing, said: “This is shocking and tragic news.”

“Dawn leaves behind her family, including three children, and our thoughts and prayers are with them at this extremely difficult time.

“The 45-year-old man who fell ill with Dawn remains critically ill in hospital and our thoughts are with him and his family as well.

“This terrible news has only served to strengthen our resolve to identify and bring to justice the person or persons responsible for what I can only describe as an outrageous, reckless and barbaric act.

“Detectives will continue with their painstaking and meticulous work to gather all the available evidence so that we can understand how two citizens came to be exposed with such a deadly substance that tragically cost Dawn her life.

“Dawn’s family has asked the media to kindly respect their privacy at this difficult time.”

Prime Minister Theresa May said:

“I am appalled and shocked by the death of Dawn Sturgess, and my thoughts and condolences go to her family and loved ones.

“Police and security officials are working urgently to establish the facts of this incident, which is now being investigated as a murder.

“The Government is committed to providing full support to the local community as it deals with this tragedy.”

Just as The World Cup reaches its conclusion, and just days before the Trump-Putin summit, this horrible tragedy suddenly occurs – three months after the Skripals’ poisoning?

As a reminder, in his statement to the House of Commons on 5th July, the British Home Secretary, Sajid Javid, stated the following:

“The use of chemical weapons anywhere is barbaric and inhumane. The decision taken by the Russian government to deploy these in Salisbury on March 4 was reckless and callous –  there is no plausible alternative explanation to the events in March other than the Russian state was responsible. The eyes of the world are on Russia, not least because of the World Cup. It is now time the Russian state comes forward and explains exactly what has gone on.”

So we are well aware of what happens next – more diplomatic expulsions, more sanctions, and more pressure on Trump not to meet with Putin.

 

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Stormy Daniels Blows Off Migrant Children At Border, Instead Finds Time To Strip For Cash

In the two weeks since Stormy Daniels pledged to visit migrant children housed at the border following Melania Trump’s June 21 trip to McAllen Texas, the adult film star appears to have blown the kids off – instead stripping for cash at nine clubs around the country while the children suffer. 

Her attorney, Michael Avenatti, took on several cases last month for families of detained migrant children in what is surely inside his wheelhouse and certainly not a PR stunt – so when a Twitter user asked Daniels to join him and “please use your platform to help Avenatti and these kids,” Stormy replied “I am headed down in a week. Don’t worry. Just figuring out my best course of action to maximize my resources.”

Instead, it seems that Stormy’s “best course of action” was to twerk her way to the bank at several stops across the country.

Wait a second – as the Gateway Pundit‘s Kristinn Taylor noted on Friday, one of the clubs Stormy danced at Thursday is 2.8 miles away from the Upbring New Hope detention facility Melania Trump visited on June 21, and a one hour drive from the Brownsville, TX detention center visited by Sen. Jeff Merkley (D-OR).

No word on when she plans to visit those children, though she did make $75,000 during a single night in Vegas in January – so maybe she’s saving up for gift baskets before she embarks on her Mother Teresa mission to kiss the feet of the unwashed.

Stormy did however fire off a Saturday tweet to signal her virtue – writing “The children detained at the border have families who love them and want them back. Let’s reunite them so the resources being wasted can be used to help others in need.” 

And as Breitbart‘s Josh Caplan notes, Daniels got defensive when someone replied “Really, Ms. Porn star, what can you do for them?? Strip??” to which the porn star stripper shot back: “Donate money and raise awareness just as you and anyone else can. Now pull your head out of your c–t.” 

Unfortunately for the kids, it looks like the closest Stormy has gotten to actually making her way inside of a detention center is a porn she did in a jail last week: 

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Hedge Fund CIO: What Does It Mean When Stocks Rally On The Day Trade War Begins

Submitted by Eric Peters, CIO of One River Asset Management

“What does it mean when stocks rally into the first shot of a trade war?” asked Yoda, high in the Rockies.

The S&P 500 finished Thursday +0.9%, the deadline looming. And certain his question did not require an answer, I waited quietly. “When that same market closes sharply higher on the day the trade war begins, what is it telling you?” asked Yoda.

In the distance, peaks everywhere, each unique in shape, though formed by identical forces. “The market never likes to be told what to do. It moves on its own terms, none other. And it was too short.”

“There’s plenty of anxiety in markets,” said Roadrunner, surveying the landscape. “Risk premiums aren’t cheap. The selling of volatility into rallies is no longer massive,” continued the market’s biggest equity volatility trader. “On the slightest fear in the world, the VIX jumps to 18 almost immediately.” Since mid-April the VIX index has oscillated between 11 and 20. “This is a healthier market than when the VIX gets stuck between 10-12. And it just trades like the market believes Trump will be more talk than action. I guess we’ll see.”

“There’s one market where the volatility selling is relentless,” said Roadrunner, his army of market makers filling the void left by investment banks. “There is almost constant selling of 5yr, 10yr and 30yr interest rate volatility. We keep getting buried.” Having pushed through 3.00% in May, 10yr bond yields are back to 2.83%, stuck amidst the 2.71% – 3.10% range since February. “Feels like it’s one of these big structural sellers, though hard to say for sure. All I know is that at these levels, I’d rather be long it than short.”

* * *

“The resiliency of Bitcoin is impressive,” continued Roadrunner, building a presence in crypto trading. “It’s held up despite talk of bursting bubbles and exchange hacks.” Bitcoin is down 67% from its highs, which takes it back to last October’s price. “Down the road, everyone will hold some percentage of their wealth in digital assets. The winner may not be Bitcoin, but right now it feels like the one.” Bitcoin market cap is $112bln, Ethereum is #2 at $46bln, followed by Ripple at $18bln, Bitcoin Cash $12bln, EOS $6bln, and Litecoin $5bln.

“2017’s rally was total euphoria,” explained Roadrunner. “People anticipated a Bitcoin ETF at the end of the year.” It never happened and the price tanked. “People then were either unaware or underestimated their capital gains tax liabilities into April, and that cut prices in half.” Ever since it’s been in a $9,900 – $5,900 range (last price $6,500). “The futures market trades in light volume but it’s a start, a success. Coinbase (the dominant exchange) will go public at some point with a crazy valuation. And when the Bitcoin ETF arrives, the price will double.”

* * *

And a bonus anecdote from Peters:

His passion for it was fading. He knew that much. “But what to do?” whispered the Economist, mostly to himself. For decades he’d examined every word, placing it into context, comparing the endless stream of Fed statements to their predecessors. He took great pride in not missing a single interview by all twelve voting members. While he couldn’t recite Fed Chair press conferences verbatim, he got close. And that impressed his employer’s biggest clients who considered him Rain Man. He loved it, even if more recently it felt narrow, hollow. In his early years, Greenspan had been exciting in a nerdy kind of way. Alan knew that in a fiat system it is vital that the central bank exude confidence, wisdom. But deep down the Maestro understood how little we know. So he hid that truth in obfuscation, erudite nonsense, saying much and nothing, all at once. Bernanke was an authority on the Great Depression’s monetary mistakes. And this assured that his zealous commitment to prevent a repeat blinded him to the far-reaching unintended consequences of his policies.  Every major central bank followed Bernanke’s lead.

Politicians ceded control, central banks ruled supreme. As global interest rates fell to zero and below, debts soared while interest payments sank. This increasingly fragile construction proved stable provided nothing changed. Yellen inherited the bizarre legacy in 2013. She had previously invented the Dot Plot, an experiment in communicating expectations for the future by an economics team that consistently misjudged it.

The goal was to abolish policy uncertainty. But uncertainty is immutable, and escaping the central bank’s grasp, manifested in an anti-establishment political wave.

“What use am I now?” sighed the Economist, having devoted his career to Fed watching, still hanging on to every inconsequential word, as the age of the central banker passed, and power returned to politicians.

 

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