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Dow record close today. Closes above the 29,000 level.

  
Analysis, US Market
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S&P index and NASDAQ eked out a small gains but off highs

The down industrial average closed above the 29,000 level for the 1st time and close at a record high level. The S&P index also closed at a record level with a modest 6.21 point gain.
The final numbers are showing:
  • S&P index +6.21 points or 0.19% at 3289.36. The high price reached 3298.66. The low extended to 3280.69
  • NASDAQ index closed up 7.366 points or 0.08% at 9258.69. The hi reached 9298.824. The low extended to 9231.137
  • The Dow closed at 29030.83. That was up 91.16 points or 0.31%. The high reached 29127.59. The low extended to 28897.35.

European shares end mostly lower. FTSE 100 does rise though

  
Analysis, Global Indices
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UK FTSE 100, +0.23%

The major European indices are ending the session mostly lower. The the exception is the UK’s FTSE 100 which has moved up by 0.23% on the day.
The provisional closes are showing:
  • German DAX, -0.28%
  • France’s CAC, -0.2%
  • UK’s FTSE 100, +0.23%
  • Spain’s Ibex, -0.24%
  • Italy’s FTSE MIB, -0.69%
In the European debt market, the benchmark 10 year yields are mostly lower (with the exception of the Portuguese 10 year note):
The European yields are lowerIn other markets as London/European traders look to exit for the day (and just ahead of the ceremonial signing of the US/China phase 1 trade deal):

  • Spot gold is up $4.25 or 0.28% at $1550.63
  • WTI crude oil futures are trading down $0.51 or -0.86% at $57.74
In the US stock market the major indices are higher and trading at record levels:
  • S&P index up 14.9 points or 0.46% at 3298.13 (high for the day). It is getting closer to the 3300 level
  • NASDAQ index is up 42.84 points or 0.46% at 9294.17. The high reached 9298.82 just short of the 9300 level
  • The Dow is up 168 points or 0.58% at 29108.24
In the US debt market, the yields are lower and the yield curve flatter again with the 2 – 10 year spread down to 22.44 basis points from 24.09 basis points at the close yesterday.

Ruble slides after Russian government resigns

  
Analysis, Forex
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Ruble falls to one week low

Prime Minister Medvedev says the Russian government has submited a resignation and that Putin will decide the makeup of a new government. Separately, Putin appointed Medvedev deputy head of the security council.
The ruble is down about 0.5% on the news.
Earlier today Putin called for a nationwide vote that would distribute power to parliament and the PM and away from the Presidency. That sounds like Putin is giving away power but his term as President expires in 2024 and it would give parliament the power to choose the prime minister.
In the same speech, Putin announced measures to incentivize a higher birth rate. It’s fallen to 1.75 and he announced cash incentives, increased child benefits, hot lunches for kids and grants to mothers of large families.

US Treas Sec Mnuchin says tariffs on China to remain in place until phase 2

  
  Analysis
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US Treasury Secretary Mnuchin

  • says tariffs will stay in place until there’s a phase 2 of china trade agreement
  • says Trump may consider removing tariffs under phase 2
  • says China has made strong commitments it will not manipulate currency

US Treasury Secretary Mnuchin 

US president Trump to attend World Economic Forum annual meeting in Davos on 21-24 January

  
  Analysis
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The WEF confirms, releasing a list of attendees for the event

Trump

The US delegation will also comprise of Mnuchin, Ross and Lighthizer. From the EU camp, the notable attendees will be ECB president Lagarde as well as European Commission president von der Leyen.

Something to look forward to next week after the trade deal with China is all wrapped up.

US Treasury says real dollar is 8% above its 20 year average

  
  Analysis
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Treasury’s semi-annual report does not list China as a currency manipulator

US Treasury:
  • says currency practices of 10 countries require close attention, but no major US trade partner met criteria for currency manipulation
  • Says China made ‘enforceable commitments to refrain from competitive devaluation’ in phase 1 trade deal withUS
  • says China should ‘no longer be designated as a currency manipulator’ in semi-annual currency report
  • China needs to take necessary steps to avoid a persistently weak currency
  • China also agreed in trade deal to publish relevant data on exchange rates and external balances
  • Says improved economic fundamentals and structural policy reforms would underpin stronger Chinese yuan over time
  • Says continuing to monitor currency practices of China, Germany, Ireland, Italy, Japan, South Korea, Malaysia, Singapore, Vietnam and Switzerland
  • China must take decisive steps to further rebalance economy, allow greater market openness to strengthen long-term growth prospects
  • Switzerland should use ample fiscal space to more forcefully support domestic activity – treasury
  • Japan should enact bolder structural reforms to strengthen domestic demand
  • Germany’s current account surplus remains largest in world, sees urgent need for Germany to cut taxes, boost domestic investment
  • Ireland only meets one of three criteria to be on monitoring list, would be removed in next report if that remains the case
  • Taiwan, Thailand close to triggering thresholds to be added to currency monitoring list
  • continued dollar strength is “concerning” given INF’s judgment that dollar is overvalued on a real effective basis
  • Says real dollar remains about 8% above its 20-year average; sustained dollar strength would likely exacerbate persistent trade, current account imbalances

I wonder if politics played a role in removing the currency manipulator label from China? LOL, I’m kidding. I am not wondering at all.

Treasury's semi-annual report does not list China as a currency manipulator 

US to Iraq: Kick out our military and we will seize your central bank accounts

  
Analysis, Politics
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US puts the petrodollar at risk

US puts the petrodollar at risk
The US warned Iraq that if it kicks American forces out of the country, it would lock the country out of its central bank accounts held at the New York Fed.
Iraq uses the account to settle oil sales of oil and other international transfers.
Iraq’s elected legislature voted last week to expel US troops who were invited to the country to fight ISIS in 2014. The Prime Minister moved forward with those plans this week in a call with Secretary of State Mike Pompeo.
The threat may spark a shift away from US dollar use and pricing in the international oil trade. It could also cause other countries to reconsider keeping money or other financial assets in the United States.
An adviser to the prime minister, Abd al-Hassanein al-Hanein, said that while the threat of sanctions was a concern, he did not expect the U.S. to go through with it. “If the U.S. does that, it will lose Iraq forever,” he said.
In its most-recent disclosures from end-2018, Iraq’s central bank said it held $3 billion in overnight deposits at the NY Fed.

What were the financial lessons of the 2010s?

  
Analysis, Education
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The next decade is often different from the prior one

The next decade is often different from the prior one
“Financial markets tend to base their expectations of the future on the experiences of the recent past”
That’s a part of human nature that has repeatedly led to folly. Nowhere moreso than in financial markets.
We’ve started a new decade with the same enthusiasm that ended one of the greatest decades in stock markets. Yet few people are out there to remind market participants that the S&P 500 had an average annual total return of negative 0.95% from 2000 through 2009.
One is the WSJ’s Jason Zweig who wrote the Heard on the Street column edited the latest edition of Benjamin Graham’s classic the Intelligent Investor.
In a recent article he highlighted how investors (and traders) tend to pile into trades that have worked recently. A parallel from the 2000s decade as the carry trade. Buying NZD/JPY was a spectacular trade, until it wasn’t. In the most-recent decade the market fell in love with the US dollar.
Market patterns don’t reverse in 10-year cycles like clockwork; there’s no guarantee that the coming decade will be the opposite of the one that just ended. But before you bet that the future will be like the past, it’s worth remembering that this decade hasn’t turned out the way investors predicted it would 10 years ago.
Here is how FX returns looked in the past 10 years:
FX returns from the past decade
What that doesn’t include is emerging markets. The South African rand lost 48%, the Russian ruble 52%, the Brazilian real 56.5% and the Turkish lira 75%.

US Market : Record close for the major indices

  
Analysis, US Market
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Dow toys with extending above 29,000, but stalls just short of the level today

The major US stock indices are closing once again at record highs.  The down industrial average toyed with the idea of breaking the 29,000 level. The index moved above the 28,000 level on November November 15. The high price today reached 29,988.01 before backing off.
The closing levels are showing:
  • S&P index up 21.66 points or 0.67% to 3274.71. That is just off the high price of 3275.58. The low reached 3263.67.
  • NASDAQ index rose 74.184 points or 0.81% to 9203.42. The high price reached 9215.95. The low extended to 9158.504
  • Dow rose 212.08 points or 0.74% to 28957.12. The high reached 28988.01. The low extended to 28844.31.
Some big winners today included:
  • Beyond Meat, +10.84%
  • Chewy, +2.97%
  • Bristol-Myers Squibb, +2.47%
  • AMD, +2.36%
  • Apple, +2.16%
  • Goldman Sachs, +2.05%
  • Starbucks, +1.82%
  • Coca-Cola, +1.79%
  • Alibaba, +1.79%
  • American express, +1.79%
  • Costco, +1.60%
  • Boeing, +1.52%
  • Home Depot, +1.51%
  • Microsoft, +1.22%
  • McDonald’s, +1.21%
Some losers today included:
  • under armor, -3.09%
  • Slack, -2.4%
  • Walgreens boots, -2.08%
  • Tesla, -2.08%
  • AT&T, -1.5%
  • Verizon, -1.47%
  • General Mills, -1.15%
  • Netflix, -1.05%
  • DuPont, -0.91%
  • Lam research -0.78%
  • Broadcom, -0.76%
  • Walt Disney, -0.47%
  • Cisco, -0.42%
  • micron, -0.35%
  • Caterpillar, -0.25%
  • Wells Fargo, -0.17%
  • Southwest Airlines, -0.13%

Major indices close higher but late selling sends indices lower on Baghdad bomb chatter

  
Analysis, US Market
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Nasdaq closes at a record

The major US indices are closing higher on the day. However some late day selling on Baghdad bomb chatter helped to push the indices off highs into the close.
Nevertheless the NASDAQ index is closing at a record level.
The final numbers are showing:
  • S&P index up 15.88 points or 0.49% at 3253.06. The high price reached 3267.07. The low extended to 3236.67
  • NASDAQ index rose 60.66 points or 0.67% at 9129.24. The high price reached 9168.88. The low extended to 9059.38
  • Dow rose 161.45 points or 0.56% at 28745.20. The high price reached 28866.18. The low extended to 28522.51.
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