A good day for me ($3k+) closed off some EU, HSI & NIK225 longs. Tue will be another wait & see day before deciding to enter into new positions. I remain net short in the US and net long in the EU
A word on the impeachment. Mitch McConnell’s tactic has long been to use the Senate majority party’s scheduling power to block any attempts by Democrats to do anything, including progressing with impeachment, but if the Republicans simply refuse to schedule the impeachment debate and vote, then there’s absolutely nothing the Democrats can do about it. Assuming that Nancy is astute enough, she can make it so that the impeachment process is scheduled and run by the Chief Justice of the Supreme Court — John Roberts. In which case, the Republicans don’t have the power to block the impeachment inquiry and Trump then has no standing.... he’s not actually a party to the impeachment process until after he’s been impeached on decision of a single justice, the full Supreme Court and even if Gorsuch or Kavanaugh did have some sort of illicit bargain with Trump, they’re simply not going to be involved in the process. Trump is rather cocky on the subject of impeachment as he thinks he has the upper hand, however, Nancy might outsmart him and so impeachment could be the black swan that turns market sentiment especially if things turn so that Nancy becomes the President. My take on the subject? It makes me spew when the democrats say its a constitutional matter, not a political matter. The reality is that the Democrats have talked about impeachment from day 1, they are intent in reversing the results of an election, pure & simple. For me, this stinks! So Trump got accused of corrupt conduct but then so did Biden (and Hillary), however, it is "patriotism" that makes the Dems act on Trump... What shall we then call their refusal to investigate Biden (or Hillary)?
Well, Trump's claim that China is "desperate" for a deal is just hype. China put a spanner in the works y'day by making public their "price" for a deal and today they said none of the meeting places for a summit are suitable... does not sound like desperation to me and markets did not react to either announcement... trade war fatigue perhaps? or is it that despite Trump's claim that the proposed mini-deal is a big win, markets are yawning at it as it has no substance. I think market players are focused on the elections, these are now close enough to create the uncertainty that could affect earnings, more than trade could. CNBC's Patti Domm writes that a dramatic decline in earnings is expected and this will not bode well for stocks, while UBS equity strategist Francois Trahan said: “A contraction in forward-earnings will spell a difficult backdrop for the overall equity market.” He goes on to say: “There is no debate on S&P 500 forward earnings, a contraction appears imminent.” As for what the election might mean to markets, here's an interesting graph by Goldman Sachs.
Stocks were up Thursday when reports indicated that China and the U.S. were likely to roll back tariffs, this was a Chinese initiative that was not likely to be endorsed by Trump simply on the reason that it took the thunder away from him. As expected, on Friday, President Trump said he did not agree to take tariffs off the negotiating table i.e. Trump wants to be in charge, he does not want an automatic "we do this and you do that" arrangement. No surprise to Trump's reaction, the surprise was that markets didn't tank but ended the trading day higher. I subscribe to Patti Domm's view that a dramatic decline in earnings is expected and this will not bode well for stocks, however, for now, the sentiment is high, trade has not dented the optimism but a focus on the elections might. I remain net short in the US.
I see symmetry in the Oct18 to Ded18 patterns with the Aug19 to Nov19 pattern. In 2018 we had Powell playing silly bugger, in 2019 we have the Democrats swinging their wrecking ball indiscriminately wrecking things. Patterns are showing similar investor's behaviour to the similar risk the 2 periods had, and, PE is 145% of GDP, bubble territory. At these highs and with an economy growing slower than in 2018, investors are more likely to take profits than to buy more. The 2018 paterns show that in Oct18 investors were selling, dump money was buying what they sold, by Dec18 the dumb money dried up and markets tanked, in my eye, the same thing is happening.
Trump played-up the mini-deal, now he's backtracking... Took him a month to realize that the Chinese were plying him, offering what they had previously promised to do, however, the regurgitated promise now had tariff relief attached. A step in the right direction?, not in my view, the proposed deal was a step back for the US... finally Trump sees it! Today's backtracking tweet should not be market-moving news. Asia, however, is down on escalating events in HKG and China's statement that the Chief Executive in HKG must be a "patriot" i.e. aligned to China's interests, this can be taken as a warning to Carrie Lam and something that Nancy will no doubt comment on with foot in mouth entangling the US into China's internal affairs (unless she's so focused on impeaching Trump that nothing else matters).
Randy Frederick, vice president Charles Schwab: “When you see a huge amount of complacency and excessive optimism … that’s when you tend to get a snapback in the other direction”
Market highs could portend a breakout to even more gains, or they might just give investors the jitters. Here are 2 sides of the coin... Side 1, the investors: UBS has surveyed 3,400 high net worth investors, 55% of them expect a significant drop in the markets in 2020. Side 2, the analysts: Bank of America chart strategists Stephen Suttmeier has made a technical case for a 20% jump in stocks after months of consolidation. Adding "Once the S&P 500 surged past 3,063, it marked the “bears’ last stand.” On the whole, it seems we are at a point of indecision. I put my money with the investors, these are the people with their ear to the ground while analysts are, by and large, rear viewing academics working on theory.
In a nutshell both major events, the impeachment hearing and Powell testimony, had little effect on US markets. US shares finished modestly higher, defying a sell down in Europe.
Must add that Powell is a changed man... still an idiot but no longer a wrecking ball, He's keeping to script and refrains from giving his opinions. I think that Bernanke & Yelling dragging him on stage last Jan to retract his "auto-pilot" announcement made him realise that the job is over his head, so now he keeps to script which is likely being written by Yellin.