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September 23, 2019

What You Need to Know Today

  • Mkts continue to be concerned over trade and interest rates
  • European macro data is weak but German macro data is weaker
  • US to get both Manf and Services PMI’s

So stocks ended lower on Friday – seemingly exhausted by all of the ongoing news….If it isn’t trade, then its interest rates and if it isn’t interest rates it’s the global slowdown and if isn’t the global slowdown, then it’s the attack on the Saudi Aramco oil facilities by the Iranians  and if it isn’t that – then it was the news that the FED began to inject cash into the system after declines in bank deposits caused a new concern for the mkts…….As NY Fed President Johnny Williams  told us – “ The ability of the system to move money around and redistribute it – did not work the way we’ve seen in the past”   – and this caused some investors to sound the alarm bell………..especially after Johnny said that the NY Fed would continue to add $75 bil daily into the financial system through October 10


as well as offer 3 separate 14 day cash loans of $30 bil each next week….Now while none of this is cause for concern – (it’s central banking 101) – once the media got ahold of it – it was a repeat of the inverted yield curve from one month ago…..Remember – when the temporary inversion created that whole conversation about the recession?   How it was knocking on the door, how investors needed to change everything for an event that might happen 18 months from now?

Now trading was relatively muted on Friday morning but got kicked in the gut when it was learned that the Chinese trade delegation would return home earlier than expected – once again sending the algo’s into a frenzy……by the end of the day – the Dow swung 268 pts from high to low ending the day down 160 pts, the S&P swung 32 pts from high to low ending the day down 15 pts, the Nasdaq swung 116 pts eventually giving up 66 pts and the Russell was by far the best performer swinging 16 pts from high to low and only giving up 2 pts by 4 pm.

Now as expected – money went into the safe havens…..treasuries rose sending yields down to 1.74% from 1.90%, Gold moved higher   and is once again higher this morning as the angst continues to give investors/traders reason or pause.   Oil, (WTI)  which has spiked a bit more than 10%  last week after that attack has in fact come back in – giving up 9% of that move  and is now trading below $60 barrel – sitting right on trendline support at $57.10.  News that the Saudi’s were going to have this all fixed by month end contributing to the pullback and – let ‘s not kid ourselves – the oil mkts today are very different than they were only 10 yrs ago.  The US is now the biggest oil producer and so the balance of power has clearly shifted……and while this event 10 yrs ago would have sent oil toward $100/barrel – that is no longer the case and an event that would have shaken the energy mkts to their core was relatively muted.

Next up – what is next for the FED?  Are we in the rate cutting cycle or not?  Is the FED in fact independent or has Trump succeeded in pressuring the FED to do as he instructs?  And while the mkt EXPECTS more rate cuts – until we get more clarity  – the mkts will have a tough time surging up and thru this year’s high.   Now the latest word is that the FED is talking in circles and is not clear enough – Really?  I think the FED has been nothing but clear, he has said that they will consider the next move based on the data – Period.  What is unclear about that?  I’ll tell you – the quants and the younger set – want to know exactly when, by how much and for how long will the FED push rates lower………and to this – I would say – grow up – it is not the FED’s responsibility to lay out a plan before they get hard data, he has made that very clear…..but the mkt is not satisfied because they want all the answers up front….It’s more of the same.  In fact it got so ridiculous last week  – that St Louis’s Jimmy Bullard might as well have thrown Jay Powell under the bus…..saying that the FED should have made a deeper cut last week – Why doesn’t Jimmy just go to zero and then suggest that he would be willing to go negative  – this would secure his position as the next FED chair.

In Europe – Are ultra-low (negative) rates really helping anybody?  I mean Germany has negative rates and they are choking  – macro data today only confirming that trend.   German factory sentiment is now at the lowest level in more than a decade….German private sector activity shrank for the first time in 6 yrs, manufacturing got worse and growth in the service sector is losing momentum.  German flash PMI falling  to 49.1 – below the magic 50 number – suggesting contraction and the manufacturing segment of the report coming in at 41.4!  So what does it all mean?  Are continued low rates and talk of negative rates really where we want to go?  And then across the European Union – September EU flash composite PMIs were also ugly,  the headline report dropped to 50.4 vs. the expectation of 52.0 while manufacturing fell to 45.6 vs. the expectation of 47.3.  But let’s keep cutting rates…Seems to be working well for the Europeans.  Look – these are not good numbers and they do not suggest that the European economy is stabilizing.    FTSE – 0.65%, CAC 40 – 0.96%, DAX – 1.17%, EUROSTOXX -1%, SPAIN -1% AND ITALY – 1.20%,  

Here at home –  U.S./China trade is once again on the front burner…… Eco data today includes Chicago Fed Survey – exp of -0.03, Markit US Manf PMI – exp of 50.4 and Markit US services PMI of 51.4.  If these numbers come in weaker it will only solidify the talk of the global slowdown and the future of the US economy.  We will also get to hear from 3 Fed members…..NY’s Johnny Williams at 9:50, St Louis’s Jimmy Bullard at 1 pm and San Fran’s Mary  Daly at 2:30 pm – Don’t look for any of them to change the direction of the conversation….But expect to hear Jimmy continue to pound the table for lower rates….(exhausting…..).

I expect that we will remain in the 2950/3025 range.  Unless we get some real clarity on trade or the FED comes out to say that rates are going lower (for sure) on this specific date  – then I don’t see any reason for us to push to new highs.  US futures have been all over the place overnight – …..Dow futs were down more than 100 pts in the early hours but have since rebounded and are down only 31 pts at 7 am.  S&P’s are flat, Nasdaq lower by 10 and the Russell off by 4 pts.

Take good care.


Classic Bolognese

What exactly is Bolognese sauce?  It is a meat based thick, hearty sauce for pasta –that originated in Bologna.   Now Bologna is the largest city in the region of Emilia-Romagna in Northern Italy and is the 7th largest city in all of Italy.    It is a very cosmopolitan city rich in art, history, music, culture and food.   It is also home to many of Italy’s finest universities.   This particular sauce has numerous variations – but no matter how you make it – you cannot go wrong at all….

For this you need:  Ground beef,  3 lg cans of plum tomatoes, fresh basil, whole milk, butter,  olive oil, s&p, onions, carrots, celery and garlic.

Begin by sautéing sliced garlic in some olive oil over med hi heat.   Next add in the sliced onions, diced carrots and diced celery – stir and cover – allow to cook thru and soften up, stirring every 5 mins or so.  Once the veggies have softened  – remove and set aside.

In the same pot – add in the ground beef – and brown nicely…..season with s&p.  Add back the veggies and stir.

Next run the plum tomatoes thru the blender – quickly – you want some chunk left to them… do not liquefy.  Add to the pot and  simmer.

….   Now you want enough tomatoes so that you have sauce and not all just meat – capisce?  But this is supposed to be a hearty sauce – so keep that in mind.   Add in some fresh chopped basil, s&p and bring to a boil.  Now turn it down to low and let simmer for 45 mins…Now turn off the heat – let it cool for 10 mins and add in 1 cup of whole milk and ½ stick of butter and stir.     – taste and adjust if necessary.

Bring a pot of salted water to a boil and add the Rigatoni pasta – cook until aldente  about 8 – 10 mins.

Before straining – remove a mugful of the pasta water to remoisten.  Drain the pasta and return to the pot….add back ¼ c of the pasta water and stir. Allow the pasta to absorb the water – do not make a puddle on the bottom of the pan….Add a ladle or two of the sauce to the pot and mix well to coat.

Next – serve in warmed bowls…..add a ladle of the Bolognese sauce on top and sprinkle with fresh parmigiana.

Buon Appetito.

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