Swan Lake – July 9

The Global Macro Monitor defines “macro swan” as any global macroeconomic or financial event with the capacity to spill over into world markets causing risk aversion and lower asset prices.  – GMM

“We won the trade war.”  The market narrative du jour.  Nonsense.

But wait!  The Shanghai was up triple the S&P today.  Doesn’t that mean China won the trade war?

Professor Jeremy Siegel said today a protracted trade war only 10 percent priced.

trade war is another factor for stocks, but the market sees only a 10 percent probability of that happening, he added.

“If it heats up, wow. That’s a lot of downside.”  – Jeremy Siegel

As my 2-year old daughter used say while cupping her ears as the saws were buzzing and nails being hammered during our remodel a few years back,  “Noise, daddy.”

Swans lathered up with the market.

Will the U.K. exit the BREXIT after England wins the World Cup?  We hope so on both.

The 2,792 level on the S&P beckons and the 2,792-2,802 range is yuuuuge.

 

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The Week Ahead: Trump’s Euro Trip & US bank results – FT

The FT’s Vanessa Kortekaas highlights the key stories to watch in the week ahead, including US President Donald Trump’s long-awaited visit to the UK, a Nato summit and US banking results.

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Week In Review – July 6

Summary

  • Bounce week in the holiday-shortened sennight
  • The trade war began but the sun came up and the world didn’t end, so they bought ‘em
  • Defensive tone to trading, however. Telecom, utilities, and healthcare outperform
  • Big rallies in Brazil and Indonesia local bond markets, while Turkey continues to tank
  • Mexico, Argentina, and South African currencies stronger
  • Latin stocks up, China down
  • Russell 2000 up over 3 percent
  • Copper looks interesting after almost 16 percent sell-off since June 7th, the steepest four-week loss since 2011. Nice Dragonfly Doji on Friday.  Watch copper, needs to rally if equities are going to hold in.

Commentary:   Stocks continue to bang around pulled by expected strength in earnings and declining global liquidity, and warning signals flashing on geopolitics.  Tough to take anything away from the holiday-shortened week.  Payrolls came in a bit better than expected and a little above the 9-year monthly average of 200K.   Looks like boomers don’t have enough saved and have to remain in workforce past traditional retirement age, depressing wages.

Heavy lifting now begins.  Watching to see if S&P can take out 2792 and copper can bounce for us to at least be less bearish.

Fed steps up QT to $40 billion per month this quarter and reserves are declining in many emerging markets = shrinking global monetary base and tighter liquidity.  Moreover, the Fed will have less to rollover into Treasury auctions.

Emerging markets a long way from bottom and conviction medium to long-term buy.   Trading longs with rentals only and looking to get shorty higher or lower when market breaks.

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Sector ETF Performance – July 6

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Global Risk Monitor – July 6

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Tweet of the Day: Dancing on Dmitry’s Grave

Ouch! That must have hurt.

Remember the war between Honduras and El Salvador that, in part, started over a World Cup qualifier?   The “Football War” or “100 Hour War.

Feel bad for Russian player, Mario Fernandes,  who missed the entire goal during the shootout.  Hold your head high, my brother, you got the Russian team into the shootout with your header in late overtime, and, most important, you were in the arena!

It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat. – President Theodore Roosevelt, Paris – April 23, 1910

 

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QOTD: On Bullshitting

Bullshitting is defined by philosopher Harry Frankfurt as “communicating with little to no concern for evidence or truth” –  ‘What a Bunch of Bull: The Art and Science of BS,’  Psychology Today

(QOTD = Quote of the Day)

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THE WORLD THIS WEEK – France24

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Tweet of the Day: Double Yikes!

Unqualified term “war”?   Tell us it ain’t so, Ray Dalio!

Remember the Great War with Japan started with trade tensions in response to the country’s agression in Manchuria, among other regions,

Tokyo and Washington negotiated for months leading up to the Pearl Harbor attack, without success. While the United States hoped embargoes on oil and other key goods would lead Japan would halt its expansionism, the sanctions and other penalties actually convinced Japan to stand its ground, and stirred up the anger of its people against continued Western interference in Asian affairs.  – History.com

Mark this day on your calendar, folks, we have now entered a period of nonlinear dynamics, and who knows how this will end.

Count us in as having zero confidence and support for the buffoonery of the so-called “Art of the Deal”, a total farce, in our opinion.   Washington’s cluelessness risks a major global economic and political disruption.

Nations can’t bully others into submission unless supported by the vast majority of the international community.  These deals have to be done in a rules based framework, and not willy-nilly driven by implulse with 5 A.M. tweets.

The U.S. is becoming increasingly isolated, and now viewed as the bad guys.  In our Orwellian world, “America First” will have a tragic and painful ending for the majority of Americans.  America First sounds good on paper, or as 10-second political sound bite, but will likely end as America Last.

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James Simons of Renaissance Technologies

Must view.

Follow it up by reading this Bloomberg piece:

Billionaire Mathematician James Simons Flopped the First Time He Invested

James Harris Simons has been described as “the world’s smartest billionaire”, amassing a fortune through the clever use of mathematics and computers. He is now a renowned philanthropist.

Chern-Simons paper: http://bit.ly/ChernSimons

NUMBERPHILE:  Website: http://www.numberphile.com/

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