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What I Think I Learned Last Week #21

To celebrate the anniversary of Donald Trump’s inauguration one year ago, the US government shut down and stock markets continued their relentless move upwards.

Returning from the long Martin Luther King holiday weekend, US stock markets raced out of the gates as the Dow Jones Industrial Average rose above the 26,000 level for the first time. It then promptly rolled over to have its largest one-day reversal since 10 February 2016. It then reversed this reversal the next day and blasted through the 26,000 barrier once again.

Sign of the Market Melt-Up: Applied Optoelectronics stock rose 6.7% in heavy after-hours trading Thursday night when it issued a press release announcing that it had set its earnings release date for next month. It is truly a bull market when an announcement announcing an announcement is reason to drive a stock price up.

According to the Wall Street Journal, buyers committed a net $58 billion to mutual funds and ETFs that invest in global stocks over the four weeks through Wednesday, the biggest inflows going back to 2002 for any similar stretch of time.

The Financial Times, citing a Bank of America Merrill Lynch study, noted that « allocations to eurozone equities are a net 45 per cent overweight, well above the long-run average even despite a climb in the euro. » Can anyone say « Crowded Trade? »

The US 10-Year Treasury yield rose to its highest level since 2014.

Bloomberg’s US Consumer Comfort Index is at its best level since 2001.

The British pound continues to move upwards, hitting its highest level against the dollar since the Brexit vote.

The International Energy Agency said the US is well-placed to replace Russia and Saudi Arabia as the world’s largest energy producer as relentless production growth pushed US production to its highest level in almost 50 years.

OPEC revised upwards its expectation of non-OPEC oil supply by 160,000 barrels per day, driven by the US and Canada. At the same time, OPEC revised downwards their expectations of demand for their own oil.

OPEC’s report also showed Venezuela’s crude oil production falling 13% last, hitting a 28-year annual low. The « socialist paradise » is truly a nightmare economy.

China’s official economic growth accelerated for the first time since 2010 with an annual growth rate of 6.9%. Naive analysts proclaimed it another good year; those who thought about it said the number was too high to believe. From my experience, most official statistics from China are closer to fairy tales than believable numbers.

Germany raised its 2018 growth forecastto 2.3% and expects to create 500,000 new jobs during the year.

Canada’s central bank raised interest rates as the country’s jobless rate is the lowest since the mid-1970s (or, using the Canadian calendar, around 3 BG– 3 Years Before Gretzky).

Facebook’s messaging application, WhatsApp, said it will start to allow business accounts for the first time. Analysts say this is a step towards monetization for the free service. With 1.3 billion WhatsApp users, this could add up to a lot more money for Facebook (note of disclosure: Echiquier Global has a position in Facebook. A big position).

IBM’s revenue rose for the first time in 23 quarters (almost six full years!) and beat estimates.

General Electric, on talk of a need to break itself up, saw its stock price drop below $17 for the first time since 2011.

Good Trump: Apple joined the Trump tax cut parade by announcing it would pay a repatriation tax of $38 billion on its overseas cash and invest $30 billion in the US over five years, creating more than 20,000 jobs (special note: when Apple says it is creating jobs, that does not mean it is actually hiring workers, as pointed out in this MarketWatch article) This follows a series of companies, including AT&T and Walmart, among many others, that are boosting wages and paying bonuses with the savings from the tax cut. I know socialists don’t like to believe it, but taking money away from the government and giving it back to those who earned it is generally a good thing.

Bad Trump: President Donald Trump says terminating the North American Free Trade Agreement would get the US the « best deal » on the trade pact. « I may terminate NAFTA, » he said. The #StableGenius President is under the impression that if you quit your agreements, your negotiating partners are much more likely to negotiate more agreements with you. It’s kind of like thinking that breaking your promises means people will trust you more. #BorderWallPaidByMexico #WeddingVows #RepealAndReplace #ChinaCurrencyManipulator #RebuildingInfrastructure

And that’s what I think I learned last week…..