With just weeks having passed since Hurricane Harvey demolished southern Texas, Hurricane Irma devastated the Florida Keys and Hurricane Maria wiped out Puerto Rico, a new storm, Tropical Storm Nate, has just formed in the Southern Caribbean and looks set to strengthen to a hurricane just before making landfall in the Gulf this weekend. 

As AccuWeather points out this morning, Nate is currently expected to make landfall somewhere between Louisiana and the Florida panhandle as a Cat-1 storm on Sunday even though they warn that it could strengthen rapidly once it hits the warm waters of the Gulf of Mexico.

Tropical Depression 16 has strengthened to Tropical Storm Nate near the Atlantic coast of Nicaragua and will threaten part of the southern United States as a hurricane this weekend.

 

Since Nate will be moving inland over the U.S. this weekend, people may have little time to react and prepare for a tropical storm or hurricane.

 

“Nate will make landfall along the U.S. upper Gulf coast on Sunday,” according to AccuWeather Meteorologist Brett Rossio.

 

The U.S. Gulf coast areas from Florida to Alabama, Mississippi and southeastern Louisiana may be at risk for damaging winds, coastal flooding, rough surf and beach erosion this weekend and into early next week.

 

“In all likelihood, this storm will impact areas not severely impacted by Harvey or Irma. The extent of the damage will depend, of course, on the precise path and whether the storm intensifies beyond a Category 1 storm,” AccuWeather Founder, President and Chairman Dr. Joel N. Myers said. “The most likely place for it to hit is the Florida Panhandle.”

Meanwhile, unlike Hurricane Irma, most of the models for Hurricane Nate are fairly consistent and see the storm moving directly north through the Gulf then turning to northeast to follow the eastern U.S. shorline.  Here are more details from the National Hurricane Center:

At 800 AM EDT (1200 UTC), the center of Tropical Storm Nate was located near latitude 13.9 North, longitude 83.4 West.  Nate is moving toward the northwest near 8 mph (13 km/h), and this motion is expected to continue this morning.  A north-northwestward motion at a faster forward speed is forecast to begin later today and continue through Friday night.  On the forecast track, the center of Nate should move across northeastern Nicaragua and eastern Honduras today and then over the northwestern Caribbean Sea tonight and Friday. The center is expected to approach the coast of the Yucatan peninsula late Friday.

 

Maximum sustained winds are near 40 mph (65 km/h) with higher gusts.  Little change in strength is expected today as the center of Nate moves across northeastern Nicaragua and eastern Honduras. Strengthening is likely over the northwestern Caribbean Sea tonight and Friday.

 

Tropical-storm-force winds extend outward up to 60 miles (95 km) mainly over water to the east of the center.

And while Nate’s wind speeds are tame compared to Hurricane Irma (at least for now)….

WIND:  Tropical storm conditions are expected within portions of the warning area in Nicaragua and Honduras today and tonight.  Tropical storm and hurricane conditions are possible within the watch area in Mexico beginning late Friday.

…it is expected to dump a massive 15-30 inches of rain in Nicaragua.

RAINFALL: Nate is expected to produce the following rain accumulations through Friday night:

• Nicaragua…15 to 20 inches, isolated 30 inches
• Costa Rica and Panama…5 to 10 inches, isolated 20 inches
• Honduras and Belize…2 to 5 inches, isolated 8 inches
• Eastern portions of the Yucatan peninsula…4 to 8 inches, isolated 12 inches

 

Heavy rainfall will occur over a wide area, including locations well away from the center along the Pacific coast of Central America. This rainfall could cause life-threatening flash floods and mudslides.

Of course, just like with Hurricane Harvey, energy traders will be hyper focused this weekend on how/if the massive network of Gulf drilling platforms will be impacted by yet another storm.

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Netflix stock prices is soaring over 3% to a new record high this morning after announcing plans to raise the price of its most popular U.S. service plan by 10 percent as the streaming video giant looks to help pay for its ambitious budget for TV shows and movies.

Netflix will be raising prices on its middle and top tier plans in the U.S. starting in November. Subscribers who currently pay for the standard $9.99 service will be charged $10.99. The price of the premium tier will rise from $11.99 to $13.99.  Good news for people on the basic $7.99 plan—that price is staying put, for now.

 

The U.S.-only price hikes will begin to go into effect in November, varying depending on individuals' billing cycles. Starting on Oct. 19, subscribers will be notified and given at least 30 days notice about the increase.  Netflix declined to make any executives available for interview but did release a statement regarding the price increases:

 

"From time to time, Netflix plans and pricing are adjusted as we add more exclusive TV shows and movies, introduce new product features and improve the overall Netflix experience to help members find something great to watch even faster."

And shareholders love it…

Netflix has been spending billions of dollars on TV shows and movies for its online video service and has been borrowing to help finance their development (twice as much as Amazon).

Source: Mashable

We wonder if the price-hike is due to the fact that people are finally starting to worry about this…

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Americans' confidence suffered its biggest weekly setback in more than a year as optimism about personal finances slumped according to Bloomberg's Consumer Comfort Index figures.

Highlights include:

• Consumer comfort measure dropped to 49.9 from 51.6, the sharpest decline since September 2016
• Index of personal finances fell to 57.1 from 60.1, the biggest decrease since August 2016
• Gauge of current views on the economy slipped to 50.9 from 51.8
• Index of buying climate deteriorated to 41.5 from 42.8

The headline index is down 4 of the last 5 weeks… the biggest drop since Sept 2016.

As 'Personal Finances' plunge (despite soaring record highs in stocks…

However, one interesting data point is that sentiment among black respondents rose to its highest level since November and fell among whites to the lowest since mid-July…

Bloomberg highlights the key takeaways as:

The data marked the fourth decline in the last five weeks following a 16-year high at the end of August. The index, now the lowest since July, is down 3.4 points from that peak.

The weakness was driven by a sudden drop in optimism about personal finances, which had reached a three-month high a week earlier. The result may partly reflect what Americans are paying at the gas pump, as prices remain elevated after climbing sharply in response to Hurricane Harvey.

Sentiment was particularly weak among women, with the gauge falling to the lowest level since January on more concern about personal finances and the economy. In contrast, male respondents were more upbeat, leading to the widest gender gap since December 2006.

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US manufacturers saw factory orders rebound from their 3.3% plunge in July with a 1.2% rise in August (better than the 1% expectation), but still remains down 2.2% across the two months – the biggest consecutive drop since June 2016.

Additionally, final Durable Goods data for August also saw a modest increase from preliminary and July data but as the chart shows we have gone nowhere for 5 years and still remain below the 2007 peak…

And all of this was before the storms struck!

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Catalonia’s bid to separate from Spain had prompted investors to dump bonds issued by the region’s two biggest lenders, CaixaBank SA and Banco de Sabadell SA. Today, in a signal that the banks are taking thelikelihood of Catalonia independence very seriously, Sabadell has called a board meeting to approve a change of headquarters outside of the region.

The last few days' drop in Catalonia's biggest bank bonds has prompted an even more serious reaction by the banks themselves.

Sabadell notified the Spanish stock regulator CNMV that it will hold a board meeting today at 5pm local time on the possible change of location of its corporate HQ.

Bloomberg reports that the move was prompted by “uncertainty” from the challenge presented by independence movement, citing unidentified people in the market.

 

Sabadell officials offered no denial, saying HQ change would be to guarantee the legal safety that’s currently provided by the European Central Bank.

And as is clear, this is having a positive impact on the bonds (albeit modest).

Furthermore, Spanish Economy Minister Luis de Guindos told Bloomberg this morning that Catalan banks have indicated that if this process goes on, they are totally open to relocate their headquarters to other places in Spain.

Speaking on Thursday in a Bloomberg Television interview, de Guindos slammed the Catalan administration for its illegal actions and said independence is out of the question. Spain has nothing to discuss with the secessionists until rule of law is restored, he said. The instability may persuade Catalan banks to shift out of the region, he added.

“They have indicated that if this process goes on, they are totally open to relocating their headquarters to other places in Spain,” de Guindos said.

 

“This is a clear indication of how insane is the regional government of Catalonia.”

The bottom line indication from these moves is simple – the banks (and the government) are increasingly convinced that Catalan independence is going to happen.

And judging by Spain's decoupling from Germany…

And Catalonia's decoupling from Spain…

The market is not waiting for the final decision, even as Bloomberg reports that, according to two people familiar with their plans, Catalan separatists are trying to find a way to put off a definitive declaration of independence to create space for a negotiated settlement with Spain.

The movement’s leaders are divided over their next step, with hardliners from the party CUP demanding the regional government make good on its plans for a unilateral declaration of independence following Sunday’s illegal referendum, according to the people, who asked not to be named because the conversations are private.

 

Regional President Carles Puigdemont’s mainstream separatist group is concerned that such a move would have immediate negative consequences for the economy, the people said.

We find this a little doubtful and very interesting timing ahead of Monday's planned separation, that could well be designed to sow some more chaos as the establishment continues to paint the Catalonia-independence-voters as extremists…

Markets are ready to bounce on any headline…

Spanish Economy Minister Luis de Guindos said in a Bloomberg Television:

“The group within the Catalan government that is calling the shots is the CUP, an extremely radical group with a lot of anarchist links and they are the ones setting the agenda… Everybody has started to realize.”

 

“This is not a question of arbitration or mediation, it is a question of a government that has to enforce the law."

 

“There is nothing to negotiate without the full respect of the rule of law.”

Additionally, Bloomberg admits that a spokesman for the Catalan government didn’t respond to three calls and other messages seeking comment.

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Many are of the opinion that what Doc Copper does, can send an important price message about the strength or of lack of in the overall economy. Doc Copper is important to keep a close eye and how Basic Materials stocks are performing can be important to keep aware of.

Below looks at Basic Materials ETF (XLB) over the past few years-

CLICK ON CHART TO ENLARGE

Ascending triangles are rewarding patterns to find in bulls markets, as this pattern breaks to the upside two-thirds of the time. This pattern also helps with risk management, as it helps one apply stops, should the pattern fail to break out, which it does one-third of the time.

Below looks at a different Basic Materials ETF (IYM)–

CLICK ON CHART TO ENLARGE

Strenght in Doc Copper, XLB and IYM often times is a good sign for the macro economy. If both of these would continue higher, it could send a concerning message to bond hold holders. The global growth story wants/needs to see both of these continuing to head higher.

If you would like to receive weekly Power of the Pattern thoughts on Copper and the Basic Materials sector, we would be honored if you were a Metals or Sectors Member, as we update both memberships on these patterns each week.

 

 

The Power of the Pattern at work to save people time, improve decision-making & results.   

We identify high probability big pattern reversals and breakouts in global indices, sectors, commodities, several metals and select individual stocks

Send us an email if you would like to see sample reports or a trial period to test drive our Premium or Weekly Research

Email services@kimblechartingsolutions.com 

Call us Toll free 877-721-7217 international 714-941-9381

Website: KIMBLECHARTINGSOLUTIONS.COM

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The bond bubble is right back where it started.

After a torrid three-week rally, high grade corporate bond spreads as measured by the BoA/ML Corporate Master Index OAS yesterday hit a fresh post-crisis tight level of 105bps, down from 105 bps on Tuesday and inside the low of 106bps from the summer of 2014. That’s the lowest it’s been in more than ten years, since July 18, 2007. The BoA/ML High Yield Master II Index OAS was 354 basis points yesterday, down from 355 basis points on Tuesday. That matches last Friday as the lowest since July 9, 2014, although at this rate, it too will take out post-crisis lows in just a few weeks.

What happens next? According to BofA’s Hanks Mikkelsen, the rally has now paused and the bank’s view is that “the big, rapid, initial move tighter is behind us.” Mikkelsen believes that there were a number of catalysts for the rally to lose strength, including a lack of overnight buying as several Asian countries including China, Korea and Taiwan were on holiday. While Taiwan returns overnight, they are out again on Tuesday next week (after Columbus Day).

And yet, despite the brief temporary weakness in foreign demand the credit strategist continues to see large inflows to high grade bond funds/ETFs, including on average $813mn daily over the past ten business days (Figure 2) – and this is based on 50% of AUM so the real number could be twice as much.

In short, leveage may be at record highs…

… but the party is just getting (re)started, and demand for paper is on par with where it was at the peak of the last credit bubble.

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Taking another bite out of the fortune they’ve built for FedEx and UPS shareholders, Bloomberg is reporting today that Amazon is “experimenting” with a new program, called “Seller Flex,” which would have them takeover the process of picking up packages directly from third-party warehouses and delivering them to customers. 

Amazon.com Inc. is experimenting with a new delivery service intended to make more products available for free two-day delivery and relieve overcrowding in its warehouses, according to two people familiar with the plan, which will push the online retailer deeper into functions handled by longtime partners United Parcel Service Inc. and FedEx Corp.

 

The service began two years ago in India, and Amazon has been slowly marketing it to U.S. merchants in preparation for a national expansion, said the people, who asked not to be identified because the U.S. pilot project is confidential. Amazon is calling the project Seller Flex, one person said. The service began on a trial basis this year in West Coast states with a broader rollout planned in 2018, the people said. Amazon declined to comment.

 

Amazon will oversee pickup of packages from warehouses of third-party merchants selling goods on Amazon.com and their delivery to customers’ homes, the people said — work that is now often handled by UPS and FedEx. Amazon could still use these couriers for delivery, but the company will decide how a package is sent instead of leaving it up to the seller.

Not surprisingly, FedEx and UPS investors were not thrilled with the encroachment on their business…though we’re sure they’ll ditch their ephemeral bout of depression and push the stocks to brand new highs by the afternoon.  Just another opportunity to BTFD.

Of course, with the company spending nearly $20 billion per year on fulfillment expenses, it’s hardly a surprise that they’re relentlessly looking at everything from their own drones to a fleet of cargo jets to deliver packages faster and at lower costs to their end consumers.

Amazon increasingly wants a direct hand in the path from one-click purchase to Main Street. There is the company’s homegrown drone project, which for now is more marketing stunt than reality. Amazon hires its own employees or contractors for expedited deliveries to Prime members in select cities. Amazon has tested using its own delivery trucks in some places, either to drive among the company’s warehouses or for the routes to shoppers’ homes. The company has opened a couple dozen package sorting centers to organize deliveries and expanded by 13 percent this year the number of warehouses to get goods closer to population centers. The sorting centers let the company “control a lot more of our shipments for longer,” Amazon’s CFO has said.

 

Control of the delivery process is Amazon’s obsession. Now the company is negotiating to lease 20 cargo jets, according to the Seattle Times, again with the ambition of having more autonomy over a part of the delivery path typically handled by shippers such as UPS and FedEx.

Seller Flex would also give Seattle-based Amazon more visibility into the warehousing and delivery operations of its merchant partners, potentially helping it make full use of their product inventory, storage space and proximity to customers while still guaranteeing quick delivery.

The project underscores Amazon’s ambitions to expand its logistics operations and wean itself off the delivery networks of UPS and FedEx. A rush of last-minute holiday orders in 2013 forced Amazon to issue refunds to shoppers who didn’t get gifts in time, highlighting the perils of being overly dependent on partners for a main part of its business pledge — quick, reliable delivery.

Will a new internal logistics company be just enough to once again thrust Jeff Bezos to the top of the world’s wealthiest leader board?

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Authored by Alex Christoforou via TheDuran.com,

Catalonia continues to press on with its independence movement, much to the dismay of Spain and the European Union. Catalonia is not the only region in the EU demanding more autonomy or independence.

Here are seven regions in the European Union that may seek separation, and cause more fragmentation in an already weakened Europe.

1. Scotland, Britain

In 2014, Scotland had a historic referendum on leaving the United Kingdom resulting in a narrow 55 percent vote against leaving the UK.

First Minister Nicola Sturgeon, head of the pro-independence Scottish National Party, is now calling for a second referendum once Britain’s exit from the EU becomes clear.

Scotland is home to 5.2 million people and has been semi-autonomous since 1998 with a devolved parliament that handles matters of education, health, environment and justice.

Diplomacy and defense remain under the control of London.

Sturgeon openly condemned the Spanish police violence during the Catalonia independence vote.

2. Flanders, Belgium

Housing the center of EU oligarchy, Belgium is anything but a unified state.

Created 1830 as an independent nation to act as a buffer between France and Germany, Belgium is a mix of a Flemish-speaking, conservative northerners and  French, left-leaning southerners.

The Flemish nationalist sentiment is more powerful than ever, and the separatist New Flemish Alliance (N-VA) is now one of the biggest party in Belgium, and a key partner in the coalition government.

The N-VA is pushing for the creation of a Flemish republic, and during the 2018 elections, it may have its chance.

Flanders’ Minister-President Geert Bourgeois called on the Spanish government to start talks with “the legitimate leaders of a peaceful people”.

3. Basques, Spain

Separatist group ETA was founded in 1959 to promote the interests of the Basque region. later turning into a violent independence campaign blamed for 829 deaths.

ETA carried out its last attack in 2010. It has since disarmed in April of this year.

ETA members have now joined a Franco-Spanish Basque political party called Sortu that is working for “full freedom” for Basque’s 2.2 million population.

40,000 people demonstrated in Bilbao in support of Catalonia’s referendum.

The regional president, Inigo Urkullu, called for the recognition of the Catalan and Basque nations.

4. New Caledonia, France

Under French rule since 1853, New Caledonia reached an agreement in 1998 with Paris for greater autonomy, although many activists say autonomy has not been fully granted.

New Caledonia has on-fourth of the world’s known resources of nickel, but as is the case with most colonial relationships, wealth is properly shared.

5. Corsica, France

Corsica is a Mediterranean island with a population of 330,000 people. It is part of France with its own language.

The separatist National Liberation Front of Corsica (FLNC) ended its armed struggle in June 2014, and has now pushed for a political solution to its demands.

Since 2015 nationalists have been leading the island’s assembly, as Corsica currently has a special administrative status that affords it certain powers, and retains strong autonomy.

The Corsica assembly highlighted “the indisputable legitimacy of the government of Catalonia”.

6. Faroe Islands, Denmark

With a population of 48,000, Denmark’s Faroe Islands will hold a referendum in April 2018 on a new constitution that would give the islands self-determination.

Faroe Islands have been autonomous since 1948.  Foreign affairs and defense are under the control of Copenhagen.

7. Lombardy and Veneto, Italy

These wealthy regions in northern Italy are set to hold non-binding consultative referendums on October 22, asking voters if they favor more autonomy from Italy’s central government.

Politicians in Lombardy and Veneto, which combined account for nearly a third of Italy’s economy, demand a bigger share of tax income.

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On the heels of our earlier note regarding the disastrous speech Theresa May gave yesterday and the backlash from her own party, it appears the mutiny is mounting as The Telegraph reports that Tory rebels have said that there is a "50/50" chance they will confront Theresa May in the next three days and demand that she steps down before the end of the year.

Ed Vaizey, a former minister, today became the first Tory MP to break ranks and said that "quite a few people are firmly of the view that she should resign" after her disastrous conference speech.

The Telegraph understands that the rebels, who have the support of around 30 Tory MPs, believe there is a "small window of opportunity" to force the Prime Minister out.

They say that if they can attract sufficient support they will confront the Prime Minister directly and tell her to go.

"It has to be all or nothing," one of the Tory MPs said.

 

"We can't have a situation where a few go public with their criticism and the rest fade away. There is a small window of opportunity here, more people are coming forward.

 

"This is not about any personal animosity towards Theresa May. She just no longer seen as credible or competent."

The reaction in cable is clear – as the pound drops to one-month lows…

Once again, we are reminded of Kit Juckes' comments overnight:

If collapsing props, coughing fits and a comic interruption are all that matter than politics truly is all about style rather than substance, but the pound is a little weaker on the back of this news but it's still ‘bumping along the bottom' rather than heading into uncharted waters.

 

If EUR/USD has limited downside, so too does GBP/USD. Olivier pointed out yesterday that the lower spot provides the opportunity to Buy distant OTM calls, as the GBP risk is now getting very asymmetric.

Sad.

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