Equities and the Economy

It was a sea of green yesterday with all the major stock indexes rallying strongly. The Dow gained a huge 320 points, 1.87%, ending at 17,489, the S&P 500 added 34, 1.69%, to 2,053 and the Nasdaq an even 80 points, 1.65%, finishing at 4,920. As Jim Cramer would say, “Booyah!” The explosion was made up of a trifecta of events. First, better than expected earnings were announced from bellwether stock McDonalds, second, economic data came in positive in the form of the weekly unemployment claims report which I mentioned in yesterday report and at 42 year lows (basis the 4 week moving average) and the National Association of Realtors reported existing home sales rose 4.7% in September to an annualized rate of 5.55 million homes which far exceeded Wall Street’s expectation, and thirdly, and maybe the most important, Mario Draghi, the ECB president, comments stating the bank was studying new stimulus measures which could be implemented. All bullish news!

“Laissez les bons temps rouler!” Apparently not to be outdone by their European counterparts, the People’s Bank of China today announced that it’s cutting its benchmark interest rate by 25 basis points which is further fueling equities with the Dow up 136 as I write. It’s going to be a good week for our portfolios and 401K’s amigos!

Oil

Although oil prices rose they definitely didn’t share in the euphoria in equities with WTI gaining only 18¢ to $45.38 and Brent adding 23¢ settling at $48.08. Chatter. High inventories continue to put a cap on this market and until we see a decline in production rallies will be tough to come by. This morning WTI is down $1.06 and you can point directly at the U.S. dollar. Upon Mr. Draghi’s announcement of more QE the euro got pounded vs. the dollar hitting a 2 month low and making prices higher for all commodities priced in U.S. dollars. The euro continues to be under pressure which continues to weigh on WTI with it being down 91¢. Prices are off 10% over the last 2 weeks.

Natural Gas

The EIA published its weekly storage report noting 81 Bcf was injected last week which was bullish being the market was expecting an 86 Bcf. The bulls immediately jumped in buying and pushing prices up a few cents, and they proceeded to get slaughtered as selling came in and at day’s end natty closed down 1.8¢ at $2.386. No doubt El Nino is trumping storage. The 6-10 day forecast is showing some slightly below temperatures for the northeast but that time frame is bookended by above normal temps throughout the entire Midwest. Prices have dropped 9%, almost 25¢, in less than 2 weeks and are trading at a 3 year low. The pressure continues this morning with natty being down 6.1¢ this morning.

Courtesy of MDA Information Systems LLC

Elsewhere

Now here’s a bizarre story. As we all know, San Francisco is renowned for its tolerance and diversity, and cockamamie ideas. Take the case of Joshua Abraham Norton. Norton came to San Francisco in 1949, already a rich man, and continued to grow his wealth. Until 1959, which is when he lost everything speculating in the rice market. It was at that point something inside the man snapped because he began to present himself to the public as Norton the first, Emperor of the United States and Protector of Mexico. Dressed in a rumpled old military uniform one day Norton strode proudly into the offices of a San Francisco newspaper and gave notice of his self-coronation. Whether in satire or not, the editor printed the notice and overnight created Norton I, Emperor of the United States.

For the next two decades Norton graced the streets of San Francisco with his presence. Citizens passed him addressing him as “Your Majesty.” Policemen saluted him. He reviewed state militia. He had a special chair reserved for him in the state legislature! Newspapers published his proclamations, one of which he abolished Congress and fired both Abraham Lincoln and Jefferson Davis.

To finance his royal affairs Norton printed his own money, which, although legally worthless, was grabbed up by tourists at above face value. To supplement his finances, Norton I taxed all businesses in town and collected the two or three dollar assessments personally.

On the night of January 8, 1880, Norton I suddenly passed away. Newspapers ran the headlined “The King is Dead.” Ten thousand people passed his casket and his funeral cortege was two mile long. His tombstone was engraved “Norton I, Emperor of the United States and Protector of Mexico, Joshua A. Norton 1819-1880.”

Pretty amazing that a man who had the gumption to declare himself emperor of the United States could manage to get an entire town to humor him for more than twenty years. I declare myself the Energy Wizard!