RISK OFF!

By KENNY POLCARI

Things you need to know:

  • Charlie (Schwab) cut commissions to zero one month ago, sends the retail industry into a tail spin. TD Ameritrade lost 28% of its value, and then Charlie comes back this morning and makes a “low ball bid” for the shop! Capitalism at its best! SCHW down 2.3% AMTD up 18% in pre-market trade. E-trade left out in the cold. Can’t wait to hear what Lizzy says about that!
  • China says that US headlines over trade are not “correct.” Liu He remains “cautiously optimistic” while Trump remains confused.
  • Is the danger of escalation going unnoticed? Henry Kissinger at 96 years old, woke up and warned of another “cold war.” For you millennials, Henry was the US National Security Advisor for both Nixon and Ford. (They were both US Presidents in 1969-1974 and 1974-1977).

Try the Medium Shells


RISK OFF! At least it was for a bit of the day. At 1:30 all of the indexes were bleeding, with the Dow off by 258 points, the S&P lower by 28 points, the Nasdaq down 100 points, and the Russell lower by 16 points. But by the end of the day, they all rallied back, still ending lower but off the lows of the day.

Reuters started the bleed by reporting that there is little chance of a “trade deal” this side of Christmas, quoting Trump saying: “That we will see what happens.” And China is “not stepping up to the level I want.”

Trump then went onto making it clear that he has no problem not only raising tariffs on Dec. 15, but raising them even more than the markets thought. Then he got on a plane to go to Austin, TX to tour a plant that manufactures high end ($6000) Apple Mac Pros, celebrating Apple manufacturing in America! One small point, the plant where these products are manufactured is not an Apple facility. It is an outsourced American facility, Flextronics, that has been making these products for a while. So, while it was all exciting to see this, the pomp and circumstance was not the drama it was made out to be… BUT, there was drama…

Timmy Cook (Apple CEO), who has become a good friend of Donny and Melania along with “the kids” (Donny Jr, Eric, and Ivanka), has been schmoozing the President, calling and visiting the WH, becoming friendly with the staff etc. This is all in the name of trying to get Donny to reconsider future tariffs on China as it will affect Apple’s bottom line, and if that doesn’t work, then he wants the President to EXEMPT APPLE from the tariff trade war. He has done an exemplary job of “working the president” on that point. Late yesterday, Donny indicated that he IS considering an Apple Exemption, all in the name of fairness, as Samsung a direct Apple competitor, is not affected by China tariffs. So Timmy pleads his case, telling Donny that the December tariffs will punish a great American company while giving Samsung, a South Korean company the upper hand. And as you can imagine that comparison hit Donny hard, thus the announcement.

This morning we are hearing that even Marky Mark (Zuckerberg) is also making friends in the WH, but that’s more for contributing to the FB Fake News issues and political upheaval caused by the social network as he tries to shield FB from further negative commentary in the media as Lizzy (Warren) threatens to break him up, along with AMZN, AAPL, MSFT, and BABA. (Ok, maybe not BABA)

News this morning that Liu He has invited Stevey (Mnuchin) and Bobby (Lighthizer) to Beijng next week to continue the discussions. I guess they don’t realize it’s Thanksgiving here in America.

AAPL which closed down $3 on Wednesday at 4 pm, rallied a bit in the post market trading session as that headline hit the tape. Because in the end, we know what’s next. If he imposes tariffs as expected, then expect that Apple gets an exemption. This is sure to cause an uproar for other companies that will suffer. And the drama continues to unfold.

Overnight, global markets remain in the Risk Off mode. Asian markets closed lower as the reality of a Phase One deal being “inked” by year end now fades, increasing tensions causing investors to back off a bit to see what the sellers do. Remember, Dec. 15 is D-Day for increased tariffs, so unless someone comes out to say they have been delayed, then we can expect them to be imposed. But hey, maybe it’s all FAKE news. And yesterday the House passed a “Hong Kong Rights Bill,” joining the Senate which is sure to further complicate the negotiations and put Donny between a rock and a hard place. I’m not saying it isn’t the right thing to do, I’m just saying expect pushback from Xi Xi.

Japan -0.48%, China – 0.47%, Hong Kong – 1.57%, and ASX -0.74%.

Same story in Europe: markets there are weaker on trade threats and on the increasing tensions between Hong Kong, China, and the US. In the UK, the countdown to the Dec. 12 election is in high gear PM BoJo is looking like the winner. But hey, there is still time.

FTSE -0.64%, CAC 40 -0.35%, DAX -0.31%, EUROSTOXX -0.28%, SPAIN -0.41%, and ITALY -0.16%.

US futures are trending lower this morning for all of the reasons cited. Dow futures are -16 points, S&Ps are -2 points, the Nasdaq is -5 points, and the Russell is +1 point. Economic data today includes: Philly Fed Survey – exp of 6, Init Jobless Claims – exp of 218k, Cont claims of 1.683 mil, Leading Economic Index – exp of -0.2%, Existing home sales month/month of +2%. 

Yesterday’s FOMC mins revealed that a last month’s decision to cut rates was not well supported. Most thought they should be in “wait and see” pattern until the prior two cuts have had a chance to work their way through the system. But they did reiterate that we would need a “material reassessment of the outlook” before we cut rates again.

Yesterday we saw the S&P trade down to 3090 before it found support and rallied back to close at 3108. I still think that the S&P could (should) test the 3070 level. If nothing happens on trade and tariffs get imposed (and potentially increased more than expected as per his hint), then yes, you will see the market test 3070 and then 3000.

Macy’s (M) just reported and guess what? They missed again, on all lines. I guess the Macy’s experience is not what it used to be. They blamed less tourism and a glitch in their website – whatever! The Consumer is fine, just watch what happens on Black Friday (next week) and Cyber Monday. Expect blowout numbers as retailers promote more aggressively to make up for the lost 5 days in the shopping season this year. 

Take good care.

Kp

Send your feedback here: AskKenny@sevenfigurepublishing.com

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