Equities and the Economy

Good morning.

U.S. equities meandered all day, mostly mildly negative, but literally in the last 5 minutes buying came in pushing stocks very marginally into the green. The Dow closed up 15 at 17,231, the S&P 500 added a single digit to 2,034 and the Nasdaq performed the best up 19 to 4,905. Energy shares weighed on the entire complex with oil prices getting hit hard. Actually, almost all commodities lost ground primarily to the rising U.S. dollar (relative to other currencies.) The general market was very quiet but you’re going to love this one. Yesterday it was announced that Oprah Winfrey bought a 10% stated in Weight Watchers. She paid Friday’s close price of $6.79 per share and bought 6.36 million shares which doing some simple math equates to $43.2 million. Well the stock price yesterday shot up 105% reaping a profit of $50 million, in one day! Weight Watchers stock has just gotten crushed over the last 4 years losing 92% of its value from its high of $80 in 2011. If anyone can rescue Weight Watchers Oprah can!

The big report yesterday, which I discussed yesterday, was that China reported its GDP at 6.9%. 0.1% less than the government’s goal of 7%, and at a 6 year low. Now this may seem and is and insignificant deviation from goal, but here’s the real issue. Many, many, many (you get the idea!) investors and economists are extremely skeptical of the Chinese data. Some economists even say the true rate is as low as 4%. But why would the government mislead (if not downright lie!). Because there is pressure on the statistics bureau to publish a figures that is reasonably in line with the government’s target. Remember, the world’s second largest economy is a communist nation. The communist government relies on rising living standards to help sustain public acceptance of its monopoly power. Chinese GDP growth officially it a high of 12% back in 2010 and has been slowing ever since, but this slowdown in growth is being orchestrated by the government leaders because they know 12% growth is unsustainable and needs to get to a “new normal” of slower stable growth to avoid wrenching and violent changes and shore up public confidence. Complicating it all, many experts believe China’s economy is significantly bigger than the government data reports blaming a data collections system which is grossly outdated, instituted in 1993.

U.S. homebuilders are feeling the happiest they’ve been in 10 years! A report from the National Association of Homebuilder’s/Wells Fargo noted its sentiment gauge increased to 64 this month, the highest since October 2005 and up from September’s 61. Similar to the PMI, readings above 50 mean more respondents said conditions were good. Confidence climbed in 3 of the 4 regions with builders in the West showing the greatest improvement while confidence cooled a little in the Midwest. Interpretation: with the economy continuing to improve more people are working and feeling secure in their jobs and willing to take out a mortgage.

This morning is yet another lackluster start to the markets with Dow futures down 12 points. Complete chatter. Asian markets closed mixed with China’s Shanghai rising 1.14%, but this is a very volatile index and a move like this is not anomalous. More importantly, European markets are struggling a little bit trading lower between 0.22% and 0.81%. Not too bad, but red, not green.

Oil

A very bad day for oil and gas producers was yesterday with WTI falling $1.37, 2.9%, settling at $45.89 and Brent down more, $1.85, 3.7%,closing at $48.61. It wasn’t data or news from OPEC or economic growth or contraction yesterday but it was falling gasoline prices, which tumbled 5%, that pulled crude prices lower. The autumn refinery maintenance season is just about over, (that’s when refineries switch to producing a less expensive blend of gasoline for the winter season) and traders are speculating inventories will build from current levels increasing supply. After having tried to push and stay above $50, WTI prices have once again retreated and are consolidating around the $46 figure. However, in the bull’s pocket is that Saudi Arabia’s “new” (one year old) policy of maintain production and sacrificing price is beginning to have an effect on U.S. oil production which for the last 4 months has been marginally declining.

The November Nymex WTI contract expires today and is up 15¢ as I write.

Courtesy of MDA Informations Systems LLC

Natural Gas

Natural gas prices started out a little strong yesterday morning being up about a nickel on the cash market but as the day worn on they settled back closing up 1.2¢ at $2.442. After having pushed to within a couple of pennies of a 3 week high last week just below $2.60 they’ve dropped back and are consolidating just above this month’s earlier 3 year low, thanks to last week’s bearish EIA storage report.

The bulls haven’t given up for natty is up 4.2¢ on the cold that’s been lingering in the east. That’s going to rapidly change for as you can see from the weather map, above to normal temperatures will be invading the Midwest and east over the next 10 days.

Natty prices are very cheap amigos.

Elsewhere

The Prophet together with his twin brother, Tecumseh, were Indian leaders who created a great deal of trouble for the United States government in the area north of the Ohio River during the 1800’s. So irritating were their exploits that General William Henry Harrison was sent to pacify the Indian brothers and their followers. This he accomplished at the battle of Tippecanoe, but not before the Prophet announced a curse on Harrison.

Nothing much was thought of the Prophet’s curse until Harrison was elected president of the U.S. in the election of 1840. In March of 1841, the sixty-nine year old Indian fighter gave his inaugural speech in a pouring rain, caught pneumonia, and died one month later. It was at that point that somebody recalled that curse of the Prophet which raised eyebrows and speculation ran rampant. Then when Abraham Lincoln was assassinated, someone remembered the Prophet’s curse and noticed something that the two fallen presidents had in common. They both were elected in a year ending in zero. And when James A. Garfield, elected in 1880, was shot, the curse of the Prophet was given wider credence. What could be more obvious? Fate was decreeing that every president elected in a year ending in zero must die in office, and thus it was that every twenty years the cures of the Prophet renewed. William McKinley, elected in 1900, died in office. Warren Harding, elected 1920, died in office. Franklin Roosevelt, elected in 1940, died in office.

Then came Ronald Reagan, elected in 1980. Would the curse of the Prophet hold true? It almost did! On March 30, 1981, John Hinckley Jr. shot President Reagan but fortunately he survived putting an end to, if not the curse of the Prophet, at least the 140 year old macabre belief that a series of strange coincidences were somehow dictated by fate.

Have a good day.