A SEMI CONSPIRACY RANT

Several times I have referenced JP Morgan’s Jamie Dimon’s view about the state of today’s research reports.  Dimon opined many reports lack credibility at best, but impact trading given the contents of the reports is often times repeated in the Blogosphere thus offering false legitimacy.

Last July the SEC stated it will look into the “proliferation of disingenuous research reports” in an attempt to discern if there is/was market manipulation.

As widely accepted the market volatility can increase on five word tweets.

Last week Bloomberg commented about the impact of Artificial Intelligent (AI).  Via AI the Newswire wrote a fictitious story about a fictitious company and discussed how quickly and how many times the story could be repeated or rewritten.

In my view the story itself was convincing, sounded legitimate including the utilization of hyperlinks and noted experts to give the report credibility.  It was frightening.

I re-read a dated Jeff Bezos interview (circa 2013) that Amazon had the ability to write algorithms to predict or influence events including stock prices.  Bezos commented that this is “of course illegal and Amazon would never do it.”

I have also commented many times that both the SEC and FINRA believes the markets are “imbalanced,” there is a “lack of price discovery” because of technology based trading that includes passive indexing, and the markets lack liquidity partially the result of the end user is now the customer where in times of crisis fear arises to be a greater motivator than greed.

Today the vast majority of “fail safe” trading strategies have imploded.  Several marquee investment managers have been forced out of the industry, forced to liquidate their funds if the liquidity is available.

As noted many times I still can’t fathom a trillion dollar company is viewed as a growth company much less the proliferation of negative interest rates.  The crowding out of other ideas is beyond deafening.

In my view it is not if today’s environment will change but rather as to when.  Unfortunately only history will tells us when the transition commenced.

Enough of the semi conspiracy rant, markets were flat yesterday. Retail sales were disappointing as the initial print was considerably lower than expectations.  Sales fell for the first time in seven months.  On the other hand homebuilding sentiment rose to the highest level since February 2018 and registered its fourth consecutive advance.

The Fed’s Beige Book or statistical compilation utilized at the next FOMC meeting indicated the economy is expanding at a “slight to modest pace” as “persistent trade tensions and slower global growth weighed on activity.”  This was a “mild downgrade” from its September report according to Bloomberg.

Household spending remains “solid” and employers continued to report worker shortages across skill level and occupations.  The report indicated even in the manufacturing sector, employers resisted laying off workers.  Price increases were modest.

There was little reaction to the release.  Equites were mixed with the NASDAQ down about 0.35% and the Dow almost unchanged.

What will happen today?

Last night the foreign markets were up.  London was up 0.50%, Paris up 0.01% and Frankfurt up 0.21%. China was down 0.05%, Japan down 0.09%  and Hang Sang up 0.69%.

The Dow should open nominally higher on Brexit and profit optimism.   The 10-year is off 7/32 to yield 1.77%.

 

The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. The information contained herein has been compiled from sources believed to be reliable; however, there is no guarantee of its accuracy or completeness. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. The material provided in Daily Market Commentaries or on this website should be used for informational purposes only and in no way should be relied upon for financial advice. Please be sure to consult your own financial advisor when making decisions regarding your financial management. Members of FINRA and SIPC, Capitol Securities Management is a privately owned full-service retail brokerage and investment advisory firm headquartered in Richmond, Virginia. For nearly 30 years, we have been serving the needs of our investors. Today, more than 200 Capitol Securities Management investment professionals and support staff serve approximately 18,000 customer accounts from Southern Florida to the New England coast.