We’ve talked about the case for a shakeout in Amazon. It was up big today on news that it would be buying a big online pharmacy.
That worked to curtail the slide in the stock (for now). But it only exacerbates the building regulatory scrutiny and the President’s wrath against Amazon’s developing monopoly and power (much of which has been garnered overtime from the unfair advantages Amazon has enjoyed from operating as an internet company).
If there’s one thing we know about Trump as a President, he’s done what he says he’s going to do. And he’s had plenty of verbal threats directed squarely at Amazon. We can only assume that he will carry out the offensive he’s been promising — against a company that has crushed industries by price wars.
On a similar note, let’s talk about China. As we’ve discussed quite a bit, China’s rapid economic ascent in the world came through currency manipulation. They held their currency down, to underprice the world on exports. And as the world stood by and watched (and bought lots of stuff from them), they became the world’s second largest economy, and the accumulated the largest war chest of foreign currency reserves.
China is to the world, as Amazon is to corporate America. And Trump is attempting to deal with them both head on.
Interestingly, China is quietly fighting back, via the currency. The go to tool in China is currency devaluation.
That’s what they’ve been doing over the past three months. And that has accelerated in just the past 10 days – they’ve devalued by almost 4% against the dollar. This is something to watch closely. A big one-off devaluation out of China would be a geopolitical cage rattling.
Join our Billionaire’s Portfolio today to get your portfolio in line with the most influential investors in the world, and hear more of my actionable political, economic and market analysis. Click here to learn more.
While the media continues to be stuck on the global jawboning about trade. We’ve been talking about the continued domestic “leveling of the playing field.”
We’ve seen the verbal and Twitter shots taken by Trump at the tech giants since he’s been in office. And the threats have slowly been materializing as policy.
Late last year, we talked about the repeal of the Net Neutrality rule. And now we have the Supreme Court ruling that subjects internet sales to state tax.
Before you know it, the tech giants (Facebook, Amazon, Netflix, Google …) may actually be held to a similar standard that their “old economy” competitors are held to. They may have to pay for real estate (i.e. bandwidth). They may be liable for content on their site, regardless of who created it. And they may be scrutinized more heavily for anti-competitive practices.
That means, the costs may go UP for these companies. And the cost may go UP for consumers. But a more balanced and stable economy and society may come with it.
So, the balance of power is shifting, just as people were becoming convinced that Amazon was taking over the world. As we’ve discussed, if the market starts pricing OUT the prospects of Amazon becoming a monopoly, then the jaws may be closing on this chart …
Join our Billionaire’s Portfolio today to get your portfolio in line with the most influential investors in the world, and hear more of my actionable political, economic and market analysis. Click here to learn more.
Last Thursday we talked about the important Supreme Court ruling, which would subject internet sales to state tax. As I said, this was another “level the playing field” step for the Trump administration. And another shot across the bow of the tech giants — the near monopolies that have destroyed industries over past decade, in large part to the regulatory advantages they’ve enjoyed relative to their old-line industry peers.
With that, on Thursday, we looked at this big reversal signal that developed in the tech-heavy Nasdaq — an ominous signal for the tech giants.
Today, we got this …
And this, in Amazon…
Meanwhile, what was UP on the day? Brick and mortar retail. Walmart was up 2%. Target was up 1%.
A lot of attention on the day, from the financial media, was given to trade threats. But this domestic “level of the playing field” is the real story.
Join our Billionaire’s Portfolio today to get your portfolio in line with the most influential investors in the world, and hear more of my actionable political, economic and market analysis. Click here to learn more.
We’ve talked about the big OPEC decision this week, and the prospects for oil prices.
When we get a market that thinks they know the outcome, we get a market that begins leaning too hard in one direction. And that creates an market outcome that can be asymmetric (i.e. lopsided). That’s what we had today.
In this case, Trump’s verbal attacks on OPEC’s price manipulation generated a media frenzy surrounding the OPEC meeting. And with the media swarming, the oil ministers seemed happy to oblige with commentary and pontification. And that set expectations for the outcome.
And this morning, OPEC released their communique, but it was far from the clean production increase the market was looking for. With that, we got this chart …
It went straight up. Oil was up almost 6% on the day and nearing $70 again. And this lack of enough action (as we should expect) from OPEC, to balance the oil market, may serve as a catalyst to push oil much higher from here (which serves OPEC’s interests).
And as we discussed yesterday, with high oil prices now squarely on the radar (for Trump, the media and the market), we may begin seeing oil prices weigh on stock prices.
Join our Billionaire’s Portfolio today to get your portfolio in line with the most influential investors in the world, and hear more of my actionable political, economic and market analysis. Click here to learn more.
We talked yesterday about the big influence of oil. And how the swings of the past few years have directly impacted the global economy.
Too low was threatening another global financial crisis. Now, too high is threatening to choke off the strength of the economic recovery.
Both high and low prices have been manipulated by OPEC. And we now await a decision from OPEC nations on whether or not a they will hike production to curb the level of oil prices. For a group that operates for their best interest, it doesn’t seem to be in their best interest. That decision will be announced tomorrow at a press conference.
Given the attention the Trump has given to OPEC and oil prices recently, a negative surprise (i.e. no production hike) may trigger the oil price/stock market inverse correlation trade (oil goes up, stocks go down).
On that note, we have some negative momentum going into tomorrow. Before today’s close, the Nasdaq was up 14% year-to-date. Meanwhile, the S&P 500 is up just around 3%. That’s a lopsided market.
But today we get a big outside day (key reversal signal) in the Nasdaq futures.
And the catalyst for this technical reversal setup was the Supreme Court ruling today that internet sales should be subject to state tax.
We’ve talked about the building scrutiny from the Trump administration facing the tech giants. This is another “level the playing field” step. If Amazon is pricing in the prospects of taking over everything (i.e. monopoly), this is the shot across the bow.
Join our Billionaire’s Portfolio today to get your portfolio in line with the most influential investors in the world, and hear more of my actionable political, economic and market analysis. Click here to learn more.
Stocks continue to prove resilient in the face of trade war noise. After a global stock sell-off that started last night on news that the tit for tat tariff threats were escalating, small caps actually printed another new record high today and finished up on the day.
Bottom line: Dips continue to be bought.
In the category of “stocks that can soar even on tumultuous market days?”
We had these three charts today …
The first two stocks are biotech. If you have much experience in investing, you’ll know that biotech stocks can cut both ways (most of the time, painfully).
Here’s my pro tip: ONLY BUY BIOTECH STOCKS WHEN A BILLIONAIRE INVESTOR IS INVOLVED!
Who was involved in the two above?
Not surprisingly, the best biotech investor in the world, billionaire Joe Edelman of Perceptive Advisors, is the biggest shareholder in SLDB.
He was also the biggest investor in Sarepta until it quintupled back in 2016 on an FDA approval. Sarepta was up as much as 50% today on early trial results of gene therapy treatment of the devastating Duchenne Muscular Dystrophy (DMD) disease in boys. SLDB is similarly working on gene therapy for DMD.
What about SandRidge (the energy stock)? SandRidge was up nicely today, in a broadly down market, because billionaire activist Carl Icahn successfully de-seated a corrupt board of directors at the post-bankruptcy energy company. That board and leadership that drove the company into bankruptcy, yet has been handsomely compensated in the process, has finally been shown the door. Great news for shareholders.
Join our Billionaire’s Portfolio today to get your portfolio in line with the most influential investors in the world, and hear more of my actionable political, economic and market analysis. Click here to learn more.
We’ve talked about the case for much higher oil prices since I started writing this daily note back in January of 2016. And we’ve since had a triple off of the February 2016 bottom.
The crash in oil prices from 2014 to 2016 was induced by OPEC as an effort to crush the competitive U.S. shale industry. While they nearly succeeded, these oil producing countries nearly killed their own economies in the process. So, in effort to drive oil prices higher, to salvage oil revenues, they had to flip the switch in late 2016, cutting production for the first time since 2008. And they did so, in a market that was already undersupplied. And in a world where demand has been underestimated, and growing.
So now, we’ve had this big recovery – nearly a round trip back to those 2014 levels.
The problem? The oil price crash was a threat to the global economy, as bankruptcies were lining up and deflationary forces were returning in the global economy. But now, current oil prices (and higher) are threatening to the recovery too, specifically the economic gains from fiscal stimulus.
And that’s on the wrong side of Trump. So, we’re seeing pressure on OPEC from the White House.
Will OPEC comply?
They are meeting now to determine whether or not they stick with current policy, or make an increase to production.
The expectations have been set for an increase. But there is dissension in the ranks at OPEC. If they surprise markets and maintain current output (i.e. no increase), we could see oil move much higher, and quickly. That would throw a wrench in almost everything. Remember, Trump’s tough positioning has a lot to do with the leverage he gets from a strong economy. $100 oil would threaten the economic outlook, and change the face of trade negotiations and the geopolitical environment.
We will likely hear leaks on Friday and probably hear a decision from OPEC on Saturday.
Join our Billionaire’s Portfolio today to get your portfolio in line with the most influential investors in the world, and hear more of my actionable political, economic and market analysis. Click here to learn more.
For much of last summer, we talked about the building bull market in commodities.
The price of crude oil has nearly doubled since that time. But broader commodities have yet to take off.
Remember, we’ve looked at this chart of commodities versus stocks quite a bit.
You can see the clear divergence in these two key asset classes over the past five years.
As we’ve discussed, the only two times commodities have been this cheap relative to stocks were at the depths of the Great Depression in the early 30s and at the end of the Bretton Woods currency system in the early 70s.
And from deeply depressed valuations, commodities went on a tear, both times.
Now, since last summer, the trajectory of commodities has been up. But so have stocks. Still, this gap has narrowed a bit. Stocks are up 13% in the past year. The CRB index is up 17%.
The big difference between this year and last year, is the level on the 10-year yield. Last year this time, yields were 2.20%. Today, yields are closer to 3%. That’s because the economy is hotter, and inflation is finally reaching the Fed’s target of 2%.
What asset class should perform the best in a rising inflation environment? Commodities. As we’ve discussed in recent weeks, the data on the economy is lining up for some big positive surprises. That will be fuel for commodities prices.
If you are hunting for the right stocks to buy, in my Forbes Billionaire’s Portfolio. We have a roster of 20 billionaire-owned stocks that are positioned to be among the biggest winners as the market recovers.
The big approval on the AT&T takeover of Time Warner has opened the door to big industry consolidation coming down the pike.
When Trump won the election in November of 2016, by December, the billionaire Japanese business man Masayoshi Son was meeting with the President-elect in Trump Towers. Son owns more than 80% of Sprint and was wanting to merge with TMobile to challenge the duopoly in the wireless carrier industry (AT&T and Verizon). The prospects of this deal (a merger) were killed by the Obama administration, as antitrust enforcers warned it would put the dominance of the wireless industry in too few hands (from four to three) – making it less competitive. That deal had new prospects with Trump. So Son got on a plane.
He clearly knew the Trump administration was going to be very pro-business. And the likelihood of getting a deal blessed under Trump’s watch (relative the outgoing administration) improved dramatically on election day.Indeed, deal making is hot under Trump. Last year, there were over 18,000 merger and acquisition transaction in North America — the highest on record. This year, a little less than half way through the year, and we’ve had a little less than half the volume of last year. And Son’s deal with TMobile is now in the queue for FCC approval.
And of course, we now have the 21st Century Fox bidding war. The company had already agreed to sell (most of) itself to Disney. But when the AT&T deal was approved, Comcast stepped in an upped the ante. All of these deals have everything to do with keeping their footing in the “Information Revolution.” If not, they get made irrelevant by the tech giants. They are fighting to maintain their moat on internet infrastructure, but they are also fighting to keep their dominant position in content, while going head-to-head with the new players, in taking that content direct-to-consumers.
Meanwhile, the market seems to be pricing in future dominance and monopolies in the FAANG stocks. These deals are making that less likely.
Join our Billionaire’s Portfolio today to get your portfolio in line with the most influential investors in the world, and hear more of my actionable political, economic and market analysis. Click here to learn more.
Tech stocks and small caps continue to behave like an economy that is about to take off.
The Nasdaq is now up 14% on the year. The Russell 2000 is up 10%. The S&P 500 (with more global exposure) is lagging it all, up just 4%.
Is it telling us that the investments in the U.S. are gaining more favor, relative to the rest of the world? Maybe. Is it telling us that capital is flowing toward the U.S. to align with Trump policies and away from those that may be harmed by being on the wrong side of Trump. Maybe.
With that said, we know Europe has been slowing. We know the “Italy-risk” presents another drag on that outlook. As such, the ECB followed the Fed’s hike yesterday with a rather dovish outlook this morning. Draghi laid out a timeline for following the Fed’s lead on normalization that was a little slower/ little later than expectations. That sent the dollar soaring, the euro plunging, and rates in Europe lower.
Tonight, we hear from the Bank of Japan. Remember, this is the lynchpin in keeping a lid on global interest rates. As long as they have the QE spigot wide-open, our yields (and therefore our consumer rates) will be well contained.
Japan’s policy on pegging its 10-year yield at zero has been the anchor on global interest rates. Forcing their benchmark government bond yield back to zero, in a world where there has been upward pressure on interest rates, has meant that they can, and will, buy unlimited amounts of JGBs to get the job done. That equates to unlimited QE. When they finally signal a change to that policy, that’s when rates will finally move.
Join our Billionaire’s Portfolio today to get your portfolio in line with the most influential investors in the world, and hear more of my actionable political, economic and market analysis. Click here to learn more.
