Market Morning: Brexit Rebellion, GE Dividend Chopping Block, MbS Phones Khashoggi?

Market Morning

This Week In The Economy

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It’s a relatively quiet week on the economic calendar but there are a few things to watch out for. On Wednesday, new home sales, home prices, and the 30-year mortgage rate. We’ve been seeing some early signs of an economic slowdown including a slowdown in housing sales. Ironically, the real estate price gains that are generally considered a sign of a healthy housing market are crimping sales due to lower affordability, which is just the flipside of the coin of higher housing prices. At some point they become unaffordable and sales slow down, which is the same in every market. On Friday we will see the advance estimate of Personal Consumption Expenditures prices, the Federal Reserve’s preferred measure of inflation. The market is expecting a rate of 2.2%. The advance estimate of GDP growth also comes in on Friday, expectations at 3.3%.

Related Tickers: (BATS:ITB)

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Brexit Rebellion Against Theresa May Gets Serious

The chances of a hard Brexit may – pun intended – increase this week as Chief Brexit Secretary David Davis has called on fellow ministers to rebel against Prime Minister Theresa May and it appears that Davis may himself run for #10, the British version of #1600, except it’s on Downing Street instead of Pennsylvania Avenue. The Express, which admittedly has the reputation of being a quazi-tabloid, has reported that Davis is ready to oust the Prime Minister and is talking tough on Europe in the event of a no-deal Brexit. If that happens, he wants to close British airspace to European flights, which would have serious economic consequences and disrupt the movement of goods and of course people. Davis is steaming at May’s latest proposal to extend the transition period, which Davis sees as simply delaying Brexit. Watch UK stocks this week for any sign of weakness or panic. (NYSEARCA:EWU)

General Electric May End its Dividend After Nearly 120 Years

General Electric (NYSE:GE) needs cash, and it’s spending $4.2 billion a year paying its shareholders, which it can no longer afford to do. Strapped for money and swimming in debt, a dividend cut for this bleeding stock owned by widows and orphans and mom-and-pop types could mean an exodus of passive retail holders and bring the stock to a new low. At current prices GE pays close to a 4% dividend on $0.48 a share, but lost $5.8 billion last year and current debt is at $115 billion and rates are rising. Once again as in 2008, the company is reeling from a fishy subprime mortgage business and insurance losses. Remember those? In 2008 GE almost imploded completely before Warren Buffet saved the firm by pouring in money in exchange for shares. GE is still above its 2009 lows but could break those lows if financial conditions do not improve.

Turkish Media Reports that Crown Prince Spoke With Khashoggi Moments Before Murder

Put this one through Google Translate and watch oil markets carefully. Turkish media is now reporting, via Yeni Safak, which means something in Turkish, that Saudi Crown Prince Muhammad bin Salman spoke with Washington Post columnist and Saudi dissident Jamal Khashoggi moments before his alleged murder by a 15-man Saudi hit squad that either butchered him, conducted a botched interrogation, or got into a fist fight that killed him, depending on what story you want to believe. On the phone, the Crown Prince is said to have tried to convince Khashoggi to return to Riyadh, though Khashoggi refused for obvious reasons. If this turns out to be true, there would be a direct connection between the Crown Prince and Khashoggi’s murder. Someone is going to be demanding access to phone records out of the embassy now. If the Crown Prince can’t get out of this pickle, we may start to see calls for sanctions against Saudi Arabia by Congress, followed by some unstable price action in oil markets. Will bin Salman be deposed?


Trump Exits Nuclear Arms Deal With Russia

The Cold War era nuclear arms pact was an agreement to keep nuclear missiles out of Europe. Sounds reasonable, but now they might be put back in there because when did a few nukes ever hurt anybody? The Trump Administration has accused Russia of violating the agreement, though details are sparse on how exactly they are violating the agreement. Mikhail Gorbachev, then the leader of the crumbling USSR, helped shape the agreement back in 1987 with then-President Ronald Reagan, and Gorbachev is not happy about the agreement being scrapped. He said it would be a mistake for Washington to quit the treaty. “Do they really not understand in Washington what this could lead to?” Interfax news agency quoted Gorbachev as saying. The good news is, it’s all for national security, because the main man behind this move is the National Security Advisor, which means he advises about national security, and his name is John Bolton. So everything’s fine.

Related Tickers: Everything. Nuclear weapons aren’t good for any markets.






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