Here is a look at what is happening as gold tumbles $25 and interest rates rise.
On This Day…
November 5 (King World News) – Art Cashin: On this day in 1895, a patent was issued to George B. Selden. It was the kind of patent mere mortals could only dream of. It ranked at or above those granted for the telephone or the electric light. What was it that Selden had invented that was so great – – it was the automobile – – only Selden didn’t invent it.
Selden was a clever chap who had noticed the products being produced by the Duryea Brothers and Ransom Olds, in the preceding two decades. He had even read of the work of Karl Benz in Europe. Since he was a patent attorney, he devised a broad based patent to cover all future automobiles. As the 1900’s began, autos began to sell. Selden grabbed some Wall Street buddies and began to sue the early producers. Each one caved and Selden’s Association of Licensed Automobile Manufacturers began to get a royalty from everybody.
In 1903, a guy named Henry Ford applied for membership. Hoping to up the ante, they turned Ford down. Ford (my hero – – he once said the role of your body is to carry your brain around) choose to keep making cars. For six years, they fought in Federal Court. Then a judge said Selden’s patent was valid. The effect was electric. Everybody, including GM, decided to pay. Selden and the Wall Street types, sensing billions, magnanimously offered to let Mr. Ford pay at the old rate.
Ford told them where to place their offer and took them to Appeals Court, claiming the patent was too broad and counterclaiming they owed him and others damages. Two years later a judge with a sense of humor and a way with words held that Ford was right. Knowing when to cut and run (and save damages), the Selden/Wall Street Crowd puppied up. The automobile business was wide open and Ford became a multi-billionaire.
To celebrate pull in to the Pierce Arrow Drive-In Tavern and winterize with as much anti-freeze as you like. But don’t put both feet on the running board.
The bulls revved up their engines again yesterday as Wilbur Ross added to the trade deal optimism that sprang up on Friday.
Ross indicated that a China trade deal might be signed as early as this month. He also said that licenses could soon be issued to allow U.S. companies to work with Huawei and that an indicated hike in tariffs on European autos might not be needed.
Not only did the trade comments put a bid under equities, they also caused a rally in crude prices which, in turn, raised prices for the energy stocks.
The trade hopes inspired rallies in Europe and Asia, which seemed to bolster the upbeat mood in the U.S. markets.
U.S. stocks popped on the opening, allowing the Dow to join Nasdaq and the S&P in record territory.
The opening pop held throughout the morning as Ross’s comments were repeated in several news stories on the possibility of a trade deal soon.
Stocks eased off the highs very slightly as we moved into afternoon. There was some speculation that China might insist on removal of all current tariffs as a condition to a deal.
The ease back off the morning’s highs never turned into real selling and it appeared to be just a mild reduction of enthusiasm among the buyers.
To the bulls’ advantage, no one undercut the upbeat comments from Wilbur Ross and so the market held the bulk of its gains into the close.
Advances beat declines again but in a somewhat narrower range than we saw in Friday’s all out rally.
The tempering of the action led to some traders questioning whether the market is getting a bit tired and might be setting up for a short-term topping pattern. We should know by week’s end.
The bulls were satisfied to see three key indices close at record highs. A nice move as October moves into the rearview mirror.
More On The Potential Tariff Pullback – This morning my friend, Peter Boockvar, the guru of Bleakley Advisory, wrote about the possibility of full pullback of tariffs. Here’s a bit of what he wrote:
It was music to my ears when I heard last night the possibility that the administration is considering, upon request of the Chinese, to also roll back the September 1st tariffs on about $110b worth of consumer goods. In return we’ll have to see but it would at least further temper the negative economic impact of tariffs and take us back to where we were on July 31st, the day before they were initially threatened. China buying US ag products to the extent spoken about would take us back to where we were in 2017. So, the point of this whole thing? Hopefully we’ll get as close as we can on IP protection that we were in early May on the deal that was supposedly 90% done.
The stock market highs driven by trade deal hopes, Brexit resolution optimism, another rate cut, and QE4 via Tbills (The Fed’s balance sheet is back over $4 Trillion as they are back to monetizing the US budget deficit) has the CNN Fear/Greed at 86 and ‘extreme greed’ read and the highest level since late 2017 during the euphoria over the tax reform bill. The index, which ranges between 0-100 was 8 one year ago and 67 just one week ago. The market rallied right into mid January 2018 so don’t use this as a timing tool but do realize how much the mood has changed. What separates this index from II and AAII is that it measures what people are actually doing rather than just the emotions of II and AAII. It encapsulates the put/call ratio, the difference in the 20 day return between stocks and bonds, how extended the S&P 500 is above its 125 day moving average, the McClellan volume summation index, new 52 week highs vs 52 lows, the yield spread between high yield and IG bonds, and lastly the VIX. We’ll get the II figure tomorrow and expect a further stretch between Bulls and Bears to around 40.
Overnight And Overseas – Japan sees a sharp rally on its return from holiday. There were moderate rallies in Hong Kong, Shanghai and Korea.
In Europe, German markets are flat with defensive stocks under some pressure. London is slightly higher with mining and energy sectors leading.
Among other assets, Bitcoin continues to churn around $9300. Gold is slightly lower but remains above $1500. Crude is firmer again with WTI trading just below $57. The euro is flat against the dollar, while yields inch higher.
Consensus – President Xi spoke at the opening of the China International Import Expo. He said China would “open its doors, only wider”. That helped markets. He did not reference the current negotiations.
On a separate level, the Bank of China eased a bit by cutting the cost of one year funds for banks. Stay wary, alert and very, very nimble.
***KWN has released the powerful audio interview with Bill Fleckenstein where he discusses the gold market at length, what to watch in the stock market and much more CLICK HERE OR ON THE IMAGE BELOW.
Gold’s Rounded Bottom
READ THIS NEXT! Look At Who Is Creating Demand For Gold, Game Of Chicken, Plus Gold’s Rounded Bottom Is Leading The Way CLICK HERE TO READ.
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