17 Oct 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%.