Archives of “August 2019” month

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Pres. Trump held call with top bankers as market tumbled

  
  Analysis

Pres. Trump is sensitive to the stock markets

In another indication on how Pres. Trump is tied to the stock markets, it is being reported that he held a call with three bank CEO’s on Wednesday while the market was tumbling, JP Morgan’s Jamie Dimon, Citigroups Michael Corbat, and Bank of America’s Brian T. Moynihan.
Pres. Trump and Jamie Dimon
The meeting took about 20 minutes and came after a regulatory meeting with the bankers and Treasury Secretary Mnuchin.

On the trade war, the CEOs told the President it is rattling the business community. It is impacting business confidence and capital expenditures. The President was somewhat respectful of those arguments but that he liked tariffs

On the global front the bankers and the president discussed Hong Kong, Pakistan, Mexico, India, and Brexit and other non-US forces that are impacting the economy.
On the Federal Reserve, the bankers told the president that a  25 basis point cut by the Federal Reserve is not going to affect capital flows in a large way. President Trump reiterated he believed the Fed should not have raised rates last December.
Interestingly, Pres. Trump has refrained from his criticism of Fed chair Jerome Powell both yesterday and today. I wonder if his comment with the top bankers influenced his demeanor toward the Fed chair (or at least made him realize he is on the home team and criticizing does not do a heck of a lot from what is traditionally an independent body. It may even make them less inclined to do as the President wishes).
The Dow fell 800 points on Wednesday and fell to a lower low yesterday before rebounding. The Dow is up 278 points or 1.09% currently at 25857. The S&P index is up 39 points or 1.3% 2886.65. The NASDAQ is leading the way at up 125 points or 1.62% at 7892.

European shares have a recovery day

  
Analysis, Global Indices

Solid gains for the major indices

The European stock markets are closed for the day and for the week and they are ending with solid gains after a not so solid trading week:
  • German DAX, +1.2%
  • France’s CAC, +1.2%
  • UK’s FTSE, +0.7%
  • Spains Ibex, +1.1% (best day in six months)
  • Italy’s FTSE MIB, +1.51%
For the week, the gains today helped to lessen the declines for the week:
  • German DAX, -1.2%
  • France’s CAC, -0.4%
  • UK’s FTSE, -1.8%
  • Spains Ibex, -1%
  • Italy’s FTSE MIB, unchanged
In the 10 year note sector today yields recovered after making new all time lows this week. The yields rose by 3.0 to 7.8 basis points for the major countries today.
Solid gains for the major indices_

OPEC sees “somewhat bearish” outlook even as oil market tightens

  
Analysis, Crude

OPEC comments in its latest monthly report

OPEC

The cartel views the outlook for the global oil market to be “somewhat bearish” for the rest of the year amid slowing economic growth and ongoing global trade tensions. That comes despite their view that supply in the market will be tighter than previously thought.

In the report here, OPEC raised its assessment of consumption for this year and next by 50k barrels per day and also trimmed its projections for non-OPEC supplies by 40k barrels per day in 2019 and by 90k barrels per day in 2020.
With fears of the global economy starting to enter a period of more profound slowdown/weakness, it will no doubt take its toll on oil demand over the next year or so. In turn, that will put further downside pressure on prices in the bigger picture.
That will definitely raise some concern among OPEC members and create more incentive for markets to expect additional and bigger production cuts to keep prices supported.
The not-so positive outlook here has seen oil prices pare gains somewhat with WTI crude falling from $55.40 to $54.80 currently.

Common Psychological Fallacies on Risk and Probability

  
Analysis, Education
  • Tendency to overvalue wagers involving a low probability of a high gain and to undervalue wagers involving a relatively high probability of low gain.
  • Tendency to interpret the probability of successive independent events as additive rather than multiplicative.
  • Belief that after a run of successes, a failure is mathematically inevitable, and vice versa (aka Monte Carlo fallacy).
  • Perception that a favorable event has higher probability over an unfavorable event even though their mathematical probability is the same.
  • Tendency to overestimate the frequency of occurrence of infrequent events and to underestimate that of comparatively frequent ones after observing a series of randomly generated events.
  • Confuse the occurrence of “unusual” events with the occurrence of low-probability events (e.g. getting 13 spades is just as probable as getting any other hand).

US President Trump says China is doing poorly, wants to make a deal

  
Analysis, Economy

I believe this is what the psychiatrists refer to as ‘projection’.

And, more:
  • US consumers may have to pay more to cover costs of tariffs
(ps there is no may about it)
More:
  • Does not think China would retaliate for an increase in tariffs
(LOL)
Still going:
  • thinks trade war with China will be fairly short
  • he understands September meeting between US and China negotiators is still on
  • Powell should be cutting rates, other countries are cutting and we should stay even
I believe this is what the psychiatrists refer to as 'projection'.
—-
Oh, if you are down this far …. here are some Asia rumours beginning to do the rounds:
  • China has frozen mainland assets of Hong Kong citizens
  • Yang Jiechi delivered letter to Trump – with news that China is to to fully take over Hong Kong…. in return China to sign 153 pages of previous agreement on trade deal and buys 10-30 bln $ farm products
Juicy rumours but that’s all they are. Make up your own mind. I can’t see China caving in and signing the previous agreement FWIW. And, if China want to snaffle up HK they’ll do so regardless.

Japan is once again the largest holder of US Treasuries

  
Analysis, Forex
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Japan re-takes the lead

The latest TIC flows data is out and shows:
  • Japan Treasury holdings at $1.123 trillion
  • China holdings at $1.113 trillion
They’ve been neck and neck for awhile. Two years ago China passed Japan but they’ve now reversed. One line of thinking will be that this is trade war related but I wouldn’t be so quick to draw that conclusion.

Trump pressured Mnuchin to name China a currency manipulator

  
  Analysis
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Trump increasingly dictatorial

The Washington Post reports that Trump “exerted immense pressure” on Mnuchin to name China a currency manipulator.
One of the people with knowledge of Trump’s pressure on Mnuchin said the White House wanted China labeled as a currency manipulator so that it prod Chinese officials back to the negotiating table. This has proven unsuccessful so far. Instead, it has inflamed tensions between the two countries.
Read it here.

Jamie Dimon and Warren Buffett can’t get it right

  
  Analysis
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Jamie Dimon and Warren Buffett can’t get it right

15 months ago Jamie Dimon and Warren Buffett were warning people not to buy bonds. At the time, US 10-year yields were at 3.0%. Today they’re at 1.48%. 30-year yields are now below 2%.
Here’s a look at 30-year futures since:
Jamie Dimon and Warren Buffett can't get it right
They’re up 16% while the S&P 500 and Berkshire Hathaway shares are both flat.
He wasn’t alone. On the same weekend last year, JPMorgan CEO Jamie Dimon was warning about the 10-year rising to 4%.
Dimon
The point here isn’t to point out incorrect calls. I’ve had plenty myself.
It’s a reminder that no one knows the future. Jamie Dimon is going to continue to be the greatest bank CEO of his era while Buffett will remain the greatest investor of all time.
Sometimes you’re wrong. Roll with the punches.

Bank of Mexico delivers surprise 25 basis point rate cut

  
Analysis, Economy

Mexico lowers rates to 8.00% from 8.25%

Cuts, coming soon to a central bank near you.
Economists were roughly divided on whether they would cut or not but the majority came down on the side of holding. The central bank said it wasn’t a unanimous decision with one dissent.
They said the balance of risks to growth were still tilted downwards in an environment of marked uncertainty.
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