What You Need to Know Today

Trump delays tariff increases

China exempts some US products from tariffs

The Saudi's & OPEC talk of more production cuts

and the ECB announces a smaller rate cut but a bigger QE plan.

The spike higher yesterday in the mkts is all about trade and the ECB....Rumors of thawing in trade talks as well as expectations from the ECB all contributed to another winning day across the board.  By end of day - the Dow added 227 pts, the S&P was ahead by 21, the Nasdaq tacked on 85 pt and the Russell outperformed and surged by 32 pts.  

Now - first things first....Beijing announces that they are 'exempting' 16 types of American products from an ADDITIONAL tariffs.....(ok, that's nice) and then Trump returns the volley and announces that in 'a gesture of good will' he will delay the imposition of INCREASING existing tariffs on $250 bill  worth of Chinese goods by two weeks -  in recognition of the 70th anniversary of the founding of the People's Republic of China.   (This request to delay apparently coming from China directly) - The  tariffs were to go into effect on October 1st....the same day that the party starts in China - so in a move to show decency - Trump says - 'Ok Xi Xi, I'll push the increases to October 15th vs. the 1st so that you can throw you party.  

Ok - so lets repeat - Trump delays increasing tariffs from 25% to 30% on $250 bil worth of goods from China for two weeks and the algo;s did what?  they took the mkt up another 1/2% on that news.....because they interpret this move as 'POSITIVE' so boom...they create buy orders to celebrate......Taking the S&P from +10 to +21 or 0.73% the Dow from +120 to +227  or +0.85% the Nasdaq from +40 to +85 or +1.06% and the Russell (which is NOT affected at all China tariffs) from +15 to +32 or a 2.12% surge.

Let's just discuss the Russell surge for one min.....if you look at that index - it has under performed the broader mkt all year as worries over a slowing global economy translated to a US 'recession' and since Russell names are all US centric - meaning that they are mostly unaffected by global trends but are affected by US trends - the under performance was seen as a 'caution ahead flag' - analysts and strategists pointing to the canary in the coal mine....but yesterday  this index performed better than twice that of the broader market - suggesting what really?"  That the BS on Twitter about good will gestures suddenly suggests  that the trade war is over and that the global economy is alive and well and that the dreaded US recession is all but a distant memory?  Really????  What about the 'inversion' two weeks ago that sent the media world into a frenzy over the 'big bad recesssion'?  Calls of imminent disaster just ahead were the headlines.....so where'd they go? Poof!  Gone?  Just like that?  

Is this 2 week delay really worth some 15 pts on the S&P or 150 pts on the Dow?  Don't even discuss the 50 pts it added to the Nasdaq....Now I'm not saying that the mkt shouldn't rally - but it should rally on  'real fundamental' news, it shouldn't rally on more BS only to be completely undone when the BS is proven to be just that - BS.  .....because how many times this year alone have we seen that?  ....

I'm just saying that this news is NOT earth shattering by any stretch...all he did was delay the increase of already existing tariffs by two weeks....so tariffs are still ln place and if nothing happens by the 15th in terms of trade resolution then tariffs on $250 bill of goods will go from 25% to 30%.....so what exactly am I missing?  In the end - this small concession does NOT mean that the trade war is over at all.........and while it looks like both sides are dialing back a bit - let's not go dancing just yet.....the fact remains - this latest headline is just that - a headline...it reminds me of the 1980's Burger King commercial - "Wheres the beef?"

Next up is the ECB - so here it is.....the day of reckoning.....Two things are happening...1. it's Uncle Mario (Draghi's) last day on the job and 2. will he deliver 'whatever it takes' once again to stop the EU (European Union) from circling the drain?  Recall that a lot of the rally has been tied to the fact that the ECB (European Central Bank) was about to announce a HUGE stimulus package (think another 20 bps cut) and more QE (Quantitative Easing) - but more recently - the tone is changing.....talk of a 10 bps cut and NO QE is an idea that is gaining momentum.....and while the move would be seen as something, it would not be seen as 'enough' and BOOM!  The mkt will move lower.....Now - it does depend a bit on how he couches it...what he says, what he sees etc....but if the mkt begins to fall, will he be able to jawbone the mkts into submission....? And if he can't can Christine?   So again, Where's the beef?  

Now overnight a couple of things happened on the way to the forum......First - the Saudi's and OPEC announced that DEEPER CUTS will be considered in December. and a declaration of Full Compliance is expected by all members.   Surprise, surprise!  I mean diid anyone not thing THAT was coming?  

Recall that  yesterday - Oil fell on news that Trump suggested that he would consider  easing up on Iranian sanctions...thus bringing more oil onto the mkts.....and more oil means more supply and more supply means lower prices.....Econ 101

So - the Saudi's - in a move to trump TRUMP announce possible increases in production cuts!  Bingo....so my suggestion?   Let the US keep pumping and fracking to keep the wheels turning..

Next - a bunch of Germans from one of Germany's economic think tanks announce that a German recession is 'likely'.......OH boy....here we go again....'LIKELY'?  And someone pays these guys to come up with that analysis?  Guess what?  It will 'likely' rain in the near future as well....(that'll be 6k Euros please). European PMI's are showing stabilization, but weakness does persist in the industrial complex.  Questions surrounding the effectiveness of more easing are getting louder and louder.....while Draghi keeps beating the drum of low inflation.....  And so European mkts turned lower as they await the announcement that is due at any moment now....7:45 am EST.  Now remember - the mkt expects HUGE, and word has it that some ECB officials are striking a bit of a less 'dovish tone'.....So we wait..........and wait.........and wait.  After the announcement - the European mkts are mostly ahead by 0.2%...because they expected this move.  

US futures are all up prior to the ECB announcement...but let's see what happens after... Here at home - the focus is the easing of trade rhetoric....(BS)....the spike higher yesterday taking the S&P back to 3000 is a bit premature- I think - but hey....it happened.  Investors will wait to hear the press conference coming out of the EU before they make any more bets on the mkts....

And boom...its off to the races...the ECB announces a 10 bps cut and a HUGE NEW  bond buying program..(QE) - so the mkts are ok with it.....European mkts move back to the upside and US futs continue ot move a bit higher....Currently Dow Futs are up 69, the S&P's up 6, the Nasdaq is ahead by 34 pts and the Russell is up 2.  So what's next?  The FED decision on the 18th.....again 25 bps is what is expected but 50 bps is what some of the mkt participants want to see.....So its more of the same. A slow burn up.....

 

Fried Baloney Sandwich

Considering all this baloney…here you go…

You need: Sandwich roll, butter, onion, 4 slices of bologna, Dijon mustard, mayo and Yellow American Cheese

Caramelize the thinly sliced onion in a sauté pan. 

Spread the butter on the sliced roll and place cut side down on a griddle.  Toast it until golden brown. Remove

In the same pan – add the bologna and heat up – now stack 2 slices of bologna and top with 1 slice of the American cheese and let it melt. (so, you have two sets of bologna and cheese).

While this is happening – spread some mustard and mayo on the toasted roll.  Now add a layer of the caramelized onions and then the bologna with melted cheese.   Add another layer of onion and top with the remaining stack of bologna and melted cheese. 

Place the top of the bun on the sandwich and serve it up with potato chips and a Coke (or Pepsi)

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