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Member since: Tue May 13, 2014, 06:50 PM
Number of posts: 5,556

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DOW 25901

Previous close 25628. 52 wk high 27398. 52 wk low 21712. Today's low 25716. High 25930.

NASDAQ : 7853 ▲

S&P : 2878 ▲

Soybeans : 8.52 ▲

Up tweet day ▲

We have reached the "hallucination" phase of the trade war.

Trump Says China "Called", Wants To Restart Trade Talks; China Denies, Has No Idea What Trump Talking About

“China called last night our top trade people and said let’s get back to the table.”

Trump says China wants to restart trade talks during a meeting with Egypt’s President #G7Summit
— Bloomberg TicToc (@tictoc) August 26, 2019

But one glimpse at Mnuchin's face (the worst poker player ever) tells you all you need to know about what really happened:

Reporter: "Did you mean to say that there was also a call last night or was there not actually a call?"

Steve Mnuchin: "There were discussions that went back and forth, and let's just leave it at that."

Trump : "Last night. And before last night."
— Bobby Lewis (@revrrlewis) August 26, 2019

Sure enough, algos which didn't care if Trump was lying, immediately kneejerked stocks higher:

However, Chinese foreign ministry spokesman Geng Shuang said he could not confirm Trump’s comments about further negotiations.

“I have no information about what the US side said about the phone calls over the weekend,” Geng said in Beijing. “I have not heard about that.”

Be careful out there.

DOW 25628

Previous close 26252. 52 wk high 27398. 52 wk low 21712. Today's low 25507. High 263320

NASDAQ : 7751 ▼

S&P : 2847 ▼

Soybeans : 8.42 ▼

Had computer problem yesterday. But, TGIF and enjoy the weekend everybody...

Its moving day at Liberty University for two Budds

That’s the case for North Carolina Republican Rep. Ted Budd, who’s sending his son Joshua off to Liberty University’s School of Business. The father-son duo tag-teamed the move into Joshua’s dorm room with help (or lack thereof) from an old colleague, former congressman and tea party favorite Dave Brat.

Joshua Budd, who’s entering his freshman year, will be majoring in outdoor adventure leadership with a minor in business, according to a spokesman from Budd’s office.

The major “strategically prepares you with the Biblical foundation and professional skills you’ll need for planning, organizing, programming, and marketing Christian camping and outdoor adventure ministry programs,” according to the university’s website.

Liberty, a private Christian university in Virginia, was founded in the 1970s by televangelist Jerry Falwell. It’s now led by his son, Jerry Falwell Jr., an early and vocal supporter of President Donald Trump.

About those degrees that can secure a good paying job? lol...

DOW 26203

Previous close 25962. 52 wk high 27398. 52 wk low 21712. Today's low 26141. High26268.

NASDAQ : 8020 ▲

S&P : 2924 ▲

Soybeans : 8.60 ▲

Up tick for today..

DOW 25962.

Previous close 26135. 52 wk high 27398. 52 wk low 21712. Today's low 25952. High 26160.

NASDAQ : 7948 ▼

S&P : 2900 ▼

Soybeans : 8.56 ▲

Corporate debt, rate cuts, and the stock market.

The amount of corporate debt has increased substantially in the last decade.The graph below shows how leveraged loans have more than doubled since 2006. This is not a financially healthy situation.

"Of course, many of these bonds are simply financial engineering to buy back stock to increase earnings per share. Uber-low long-term interest rates thanks to QE have allowed companies to do this cheaply.

The FED must have realized that raising interest rates to 3% or over would have resulted in such a large amount of debt becoming unsustainable and turned dovish in March 2019.

It is important to understand that companies have concentrated on financial engineering to boost stock prices by implementing share buyback programs that have been financed by debt. The capital has not been invested in R & D (Research and Development) or in Capex (Capital Expenditure) in order to strengthen the company and make it more resistant to a crisis or recession. Capital has been grossly misallocated, and the economy is basically weaker than it should be and therefore more prone to suffer disastrously when there is an economic downturn.

Then there is the shale oil Ponzi scheme to be considered in the context of corporate debt. Even with an oil price over $60 small and medium-sized producers are still going to have to cope with negative cash flows. As the oil majors crowd into shale oil, they too will find that the rate of well depletion is so high that continually more capital is required to keep production at a high level. The amount of debt owed by the shale oil producers is extremely high. At a certain point investors are going to stop financing operations that are cash burners just as investors have begun to tire of the hype over Tesla automobiles.

Fear of widespread defaults could cause investors and banks to be unwilling to finance zombie companies and those with negative cash flow. An economic slowdown could crimp company profits and slow down the rate of corporate share buybacks,

The federal debt is increasing at a fast pace, and the Treasury is going to need a lot of money to cover budget deficits. The government could thus soak up significant amounts of liquidity as it covers its need for cash. Of course if the market does not come up with liquidity, the FED could always buy Treasury paper,

If that is what will be necessary to avoid a liquidity crisis and the ensuring credit crunch that would result, it will be interesting to see how far the FED will go.

Please understand this is the a look of how things are today. So you have a better view of what supports the price of the stock market. Why the FED may lower rates is not solely about the trade war with China.

The FED can do so much with rate cuts. It can not prevent a down turn in the global growth cycle. As growth in the global economy slows, liquidity slows, lending slows and stock markets contract.

Taken together, the trade war and the slowing of the economic cycle, it's like watching Humpty-Dumpty on the proverbial wall.

DOW 26135

Previous close 25886. 52 wk high 27398. 52 wk low 21712. Today's low 26020. High 26215.

NASDAQ : 8002 ▲

S&P : 2923 ▲

Soybeans : 8.54 ▼

Trump Grants Huawei 90 Day Reprieve

Trump Grants Huawei 90 Day Reprieve To Buy From American Suppliers

late on Friday Trump made another unexpected concession when the Commerce Department announced it would extend a reprieve given to Huawei permitting the Chinese firm to buy supplies from U.S. companies so that it can service existing customers.

Back in May, after the US Commerce Dept blacklisted Huawei, it allowed the Chinese telecom giant to purchase some American-made goods in a move aimed at minimizing disruption for its customers, many of which operate networks in rural America.

The “temporary general license” will be extended for Huawei for 90 days, according to Reuters, and will renew an agreement set to lapse on August 19, continuing the Chinese company’s ability to maintain existing telecommunications networks and provide software updates to Huawei handsets.

Despite the last minute reprieve, the world’s largest telecommunications equipment maker is still prohibited from buying American parts and components to manufacture new products without additional special licenses. Many Huawei suppliers have requested the special licenses to sell to the firm. Commerce Secretary Wilbur Ross told reporters late last month he had received more than 50 applications, and that he expected to receive more.

And one more flip-flop by trump.

DOW 25886

Previous close 25579. 52 wk high 27398. 52 wk low 21712. Today's low 25678. High 25929. DOW + 1%

Last Friday DOW 26287.

NASDAQ : 7895 ▲ +1.6%

S&P : 2888 ▲ +1.4%

Soybeans : 8.67 ▲

WTI crude oil 54.87 ▲

A positive note for the end of the week. Stay safe and enjoy the weekend everyone.
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