Nell Sloane of Capital Trading Group summarizes a dozen trading developments: The link between climate and commodities. Jeff Gundlach is the new EF Hutton. A slap for WFC. Volatility good for banks. Yield curve inversion. Bearish Apple and more.
Well, folks we finally had temps reach near 60 degrees in Chicago, a sign that maybe the cold wintry claws of winter are finally losing their grip. Chicago is a beautiful vibrant multicultural city and summers here are awesome along the expansive Lake Michigan shoreline.
The winters however can be brutal, but it seems they seem to define our gritty Chicago nature. However, it seems that if summer is getting shorter and shorter, maybe the sun has something to do with it.
We have been hearing about the sun now moving into a “Maunder Minimum,” named such by John Eddy, a solar scientist in 1976 and after E.W. Maunder an English scientist who first noticed a decrease in solar activity in the late 1800s.
This decrease in solar activity will lead the climate here on Earth to cool, not heat as all the global warming crowd has been so adamantly insistent upon.
Why are we discussing this? Why does this matter?
How climate affects commodities: Because from the long-term viewpoint, we want our readers to know that the climate affects commodities and energy and thus a major driver of resources in the coming years.
We have already heard Jeff Gundlach’s bullish opinion on commodities and we have highlighted it for quite some time now.
We think this topic of weather volatility and cooling will have a profound effect upon global productivity and resources, so we firmly believe our readers should begin to look at commodity- driven investments whether it be in futures, ETFs or other various funds.
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Speaking of Gundlach, in his monthly webcast to clients last July, he spoke highly of commodities and his bullish outlook for the sector.
For those who don’t know, when titans like him speak of a position they like, you can bet your bottom dollar that they are already in.
We have long considered Jeff Gundlach the EF Hutton of the modern age, we feel you should too. For those of you too young to remember the EF Hutton commercials from the 70’s and 80’s, we have one here.
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The PowerShares DB Commodity Index Tracking Fund (DBC): Obviously, this is a longer-term viewpoint and in no way suggests a straight up decade long linear driven central bank style equity run up.
Commodities are fickle things, subject to a plethora of supply, demand aggregates, so realize that longer term we are bullish, but shorter term, better locations to get in may be had.
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Last week Wells Fargo (WFC) announced the largest settlement levied by that Liz Warren pet project known as the Consumer Financial Protection Bureau as well as the OCC.
The fine was marked at $1 billion, which is nothing more than a slap on the wrist, once again nobody goes to jail, just another subsidized fine for the bank so beloved by Warren Buffett himself.
Who cares about duping customers or opening millions of fraudulent accounts? Sounds like too big to fail, is too big to punish now also.
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WSJ reporting that the Trump tax cut boosted major banks earnings collectively by more than $2.5 billion (subsidy) in Q1 alone, Goldman Sachs (GS) was an outlier as trading income grew by 23%. And who says volatility isn’t good!
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Bayer + Monsanto: The Justice Dept. approved the $62.5 billon Bayer (BAYN) acquisition of Monsanto (MON), combining pharma, chemicals, pesticides and crop gene technology.
So, let us get this straight, we are combining drought-resistant seeds, with pesticides to kill the bugs that eat the seeds, which then contaminates our food, which we eat, because they say it’s all safe. And then provide the drugs for us when we get bowel pains and other diseases – yep, makes sense, cover all the bases from table to deathbed…wait that’s too harsh.
Bayer gains Russian approval for Monsanto deal.
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The Federal Reserve is proposing to lower capital requirements for the GSIBs (man, do they love their acronyms) or Globally Significant Banks.
What they really mean is the banks and their lobbyists are trying to figure out how to capture wider credit spreads so they have more loans to charge consumers more interest. Or in layman’s terms, increase their profits via higher interest charges, while increasing their own internal leverage and risk. And when they fail again, it’s taxpayer bailout time, can’t lose strategy!
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Chicago for rent: Locally, according to CBRE local Chicago retail vacancy rates hit an 8-year high jumping to 11.4% up from 9.5% in Q1. Landlords always amaze us on their resiliency to lower rates. They’d rather sit vacant as per square foot charge sits at $18.66, a 10-year high according to Crain’s Business.
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The U.S. 10-year Treasury note is in spitting distance of the all eyes on level of 3%.
What we are looking for here is a spike above and rejection back below. We all know interest rates can’t rise too far, as the math would destroy the U.S. from within and force nearly a trillion dollars in interest payments per year.
So, we should expect the yield curve to bounce as the long rates rally, but to resume their flattening bias as the U.S. yield curve marches closer and closer toward inversion.
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Now: the yield spread between the U.S. 10-year and U.S. 2-year Treasury notes.
As the Federal Reserve continues to hike, which we believe to be just two more times this year and then done, this yield spread should continue to fall. Danielle DiMartino Booth and Mark Yusko were on Anthony Crudele's Futures Radio Show podcast this past week and they agree with the two and done thesis.
If you haven’t heard the podcast before we highly recommend it, here is a link to last week's, Trading the Fed.
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Bearish Apple Inc. (AAPL) has been hit hard lately as peak smart phone has found their price ceiling, we noted our bearish outlook on Apple back in Q4 2017 as fundamentals were not in line with the firm’s rosy expectations.
We noted peak ceiling price would see insufficient demand as well as highlighted their sole reliance on the iPhone itself as its main income generator.
Without new tech, we find Apple will continue to struggle. Yes, we know they have a ton of cash, on net probably around $200 billion, but considering their costs, R&D of $10 billion a quarter, it goes fast.
Competition is fierce and only gets harder as you fail to innovate.
The Swiss National Bank (SNBN) owns 19.14 million shares and counting, so keep an eye out on this one, should get interesting…
Let’s see if the iPhone 8 Red edition helps, we highly doubt it, but it looks cool, but will the followers, follow through with buying, we doubt it?
The chart of Apple Inc., $147/$150 seems logical here, but $125 ultimately.
