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Things to know
- All quiet on the Western Front
- Trump returns to DC – Didn’t create drama at the G7
- Twitter all quiet – stocks moving higher
- No eco data to drive the mkts – all geo-political news to drive sentiment
It was all about the Geo-Politics yesterday……China, Trade, G7, France, Iran, Russia and in all that Donny was front and center……and by the way – this years G7 produced NO communique – which means they all came together, they dined, they chatted and then they all went home…..
So someone must have had a conversation with President Trump over the weekend – and told him to smarten up and back off a bit…because as we awoke yesterday – Trump was using his twitter to tell the world what a ‘Great Leader and Brilliant man’ Chinese President Xi Jingping was and that the Chinese had reached out over the weekend and made multiple phone calls (at least 2 – but maybe more) to try and put the trade talks back on track…..saying that they were ready to come back to the table (all Donny’s words) … he then went onto say that a meeting with French President Emmanuel Macron was ‘very positive’ and then a joint news conference with Macron – he even said that he was open to meeting with Iran’s President Hassan Rouhani who appeared to support that comment saying that he too was ‘open to talks’ with the US…….(Macron trying to get that to happen in 2 weeks – Good luck with that!) and that is all the mkt wanted to hear……just needed something positive to focus on…and focus on it they did…..futures which had been under pressure on Sunday evening did an about face and surged into the opening bell….- The Dow added 250 pts as the bell rang taking all the other indexes with it…..and for the most part the mkts remained higher all day as everyone tried desperately to confirm or verify what he was saying did in fact happen……
You see – While the meetings with Macron did happen and the issue of the French Digital Tax came up and the talk of US/Iranian diplomatic THAW was true – the story about the Chinese phone calls was all a mystery…. the Chinese had no record of any such calls being made, so they were a bit confused which then caused the algo’s to freeze – as they tried to decipher the headlines….either way – Trump kept up the conversation and managed to spin it in such a way as to point to a Chinese news headline that supposedly indicated the desire to come to the table….its all very confusing really…..as we watch the media try to figure it out……..By the end of the day – the Dow added 270 pts or 1.05%, the S&P surged by 31 pts or 1.10%, the Nasdaq tacked on 102 pts or 1.32% (big winner) and the Russell regained 16 pts or 1.13%….all good, but less than half of what they gave up on Friday’s rout…..but – it is August and this being the last week of summer taking us into the Labor Day Weekend is typically quiet on the eco front so much of what happens revolves around what happened at Jackson Hole and the G7 – just as we’ve seen.
In the end – what is very clear is that nothing is really clear….there is no clarity on trade – and the threat of tariff rates rising is still very real – and the conversation now is suggesting that we should not really expect a resolution anytime soon…..discussion surrounding Fed Chair Jay Powell’s comments on how the Fed would respond to any ongoing trade war is fueling the story that if Donny keeps the trade war going – he can force Jay to lower rates (by not solving the trade issue) and then solve the trade war right ahead of the November 2020 elections…….which would allow him to say – “Look what I’ve done…..lowered rates and hardball negotiating to get China to the table – vote for me!” that would not be an unbelievable plot line at all….and so – let’s just see, because how many times are we going to get duped into thinking that a trade resolution is really nearly done….recall that Treasury Secretary Stevey Mnuchin told us back in July that we are “90% there!” and now its September and we are no where near done at all….in fact the temperature has been raised since then. In the end – we should all expect that the trade war is going to be an ongoing part of the investing dynamic for months….
Which is then all the more reason to remain focused on the long term plan…if you are an long term investor – saving for retirement – then stick to the plan….do not get caught in noise….remembering that long term investing is all about the roadmap….confusing times demand some tweaking to the plan – but that does not mean bail at all….it just means a recalibration of the mix….Remember that the mkt likes clarity – either way (positive or negative) – it could be negative as long as it’s clear because then you can change the course and if it more positive you can change the course again – now you shouldn’t change the ‘core part of the plan’ but you can tweak the edges to produce additional alpha that will help to boost your portfolio’s return….………..it is when investors feel that they don’t have clarity or control is when confidence wains……but until we get that – the way to control it is to stick to the plan……
Stocks moved higher overnight…..think movement on trade war…….and the Chinese set the Yuan at 7.0810 vs the dollar – and the mkt is not reacting…. Recall that when it pierced 7 only 3 weeks ago – the mkt had a meltdown….and now it has only gotten weaker but the mkt appears to not be paying any attention……which only goes to show you how headlines influence the algo’s – because the headlines at the time were all negative and accusatory suggesting that China was devaluing the Yuan to counter any trade war effects…..words like Currency War and Currency Manipulation sent the algo’s into RISK OFF mode….and remember what happened then? In addition Chinese Industrial Profits surged by 2.6% in July vs. the -2.4% in June (bullish). Japan +0.96%, Hong Kong -0.06%, China +1.36% and the ASX +0.48%.
Stocks in Europe began the day a bit weaker but have now turned and are all slightly higher…..in addition to all of the news above – German 2Q GDP met the estimates of +0.4% and is not really a factor in mkt action today. Italian politics is front and center – the ruling 5 Star party has appeared to make an agreement with the opposition – the Democratic Party – to form a new gov’t….Yawn……FTSE -0.18%, CAC 40 + 0.20%, DAX + 0.36%, EUROSTOXX +0.25%, SPAIN +0.58% and ITALY + 1.09%.
US futs are up…Dow futures are +36, S&P up 9, Nasdaq +23 and Russell +6…..for the most part global equities are directionless while the safe haven assets continue to find support…Gold is up $2 at $1,539 and Longer term Treasuries are outperforming this morning resulting in the 10 yr and 2 yr Treasury yield spread inverting to new lows… – which is sure to cause the recession conversation to continue. (or maybe we’ve beaten that one so much that no one is paying attn anymore – kind of like the Yuan vs. the Dollar issue).
There are no Fed speakers and nothing of any real consequence in terms of eco data…..There is a 2 yr treasury note auction today – if the demand is soft then you can expect 2 yr yields to rise which only makes the 2 yr/10 yr relationship that much more difficult as it would force a further inversion and that may cause the whole recession to breathe new life…..Stay tuned.
Oil up 68 cts at $54.32 continues to hover between $54/$55 barrel as it too responds to potential new trade talks….Yawn…….as the news settles oil moves up but once the headlines turn negative oil immediately comes under pressure and until we get clarity we can expect oil to remain in the $51/$56.50 range…..API (American Petroleum Institute) to report weekly crude inventories at 4:30 pm.
Take good care.
Kp
Potato and Veal Meatballs.
These are great as appetizer type cocktail party dish or can be paired with a mixed green salad and become a light lunch or dinner meal. Unlike traditional meatballs – these do not go in the sauce……Try these “polpette” (Italian for meatball) and you will not be disappointed…..
For these you will need: 1 lemon, bag of frozen artichokes, 2 lg Idaho potatoes, 2 lbs of ground veal, finely chopped thyme, 2 lg egg yolks, fresh grated parmegiana cheese, whole milk, s&p, butter, olive oil, about 3 cups of beef broth, 4 med carrots – peeled, cut in half lengthwise and then cut into bite size chunks, 1 shallot diced, splash of dry white wine, ˝ c of heavy cream, and chopped parsley.
In a saucepan, bring beef broth to a simmer; remove from heat and cover to keep warm.
Next boil the quartered potatoes in salted boiling water until soft – maybe 15 mins? Drain and then crush in a classic potato ricer into a large bowl. Add veal, thyme, 1 egg yolk, cheese, milk and s&p. Mix well with your hands -do not over mix. Form into balls….now if you are using as an appetizer then make them small bite size balls…if you are using as a lunch or dinner – then make the more traditional “bigger than a golf ball but smaller than a baseball” .
In a large nonstick high sided pan – heat a dollop of butter and a bit of olive oil over medium-high heat – fry meatballs, turning occasionally, until well browned and cooked through, – depending on the size will dictate the time….small balls – 4 mins or so…larger balls – maybe 7 mins or so….remove and set on a plate lined with a paper towel.
Add a bit more olive oil in the nonstick pan and heat on med high. Add shallots and sauté for 3 mins….now add artichokes & carrots. Cook, stirring frequently, for about 4 mins. Add wine and broth – bring to a boil, reduce to a simmer and cook for 10 minutes. Now add meatballs (If you like – you can add in a bag of frozen peas at this point in the process) and continue cooking for about 10 more mins….gently turning meatballs halfway through. You want the veggies to be nice and tender.
In a separate bowl – squeeze 1 teaspoon juice from the lemon. Whisk together with the remaining egg yolk and cream. Carefully introduce this mixture into the pot with meatballs. Return broth to simmer and cook for 3 minutes. Sprinkle with parsley.
Buon Appetito.
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