Talk about Plunge Protection!
It is rare that we start out with an exclamation point for the market morning report, but yesterday’s action warrants it. In what looked to have been caused by a fiery chariot flying down from the clouds on top of the New York Stock Exchange and slamming the buy orders to turbo setting on every stock, all major stock indexes began to fly maniacally higher at about 2:34pm and for the next 86 minutes kept levitating. The move was reminiscent of the August 9, 2011 reversal , Zerohedge is reporting a massive $64B buy program triggered by pension reallocation back into stocks from bonds at the end of the day. While this could be a short term bottom, if it was just a one-time rotation back into equities, then Wall Street may have a hard time keeping the gains form the last two days. We’ll find out what’s going on over the next week or two in any case. (NYSEARCA:SPY) (NASDAQ:QQQ)
Sears Has Only Hours to Live
Sears (OTCMKTS:SHLDQ) is on its deathbed, for real this time. CNBC reports that if a bid does not come in today by 4:00pm EST at market close, the 125-year-old retailer and ironically the first retailer to step away from the brick-and-mortar model with its iconic and history-making catalogue, will start the process of liquidation. Sears employs 68,000 people whose jobs are now in serious jeopardy. The only chance the company has of survival is a $4.6B bid by the retailer’s chairman Eddie Lampert. The problem is that he still has to secure funding for this and liquidity is getting tighter since the Fed started pushing up interest rates and corporate bond markets started to crack. Sears was once America’s biggest retailer and the first “everything store” but never successfully adjusted to the age of the internet as online retailers continually ate into Sears’ market share.
Pot Profits Getting Eaten By Taxes
So far the cannabis market in the US has been disappointing. In a bit of an expressive piece of finance journalism out of Fox Business, one writer wonders why California, with all its “free love and damn hippies”, is struggling to churn out the cannaprofits. Bemoaning the fact that what was projected to be a billion dollar industry out of the gate has only brought in $471M this year in the state, she admits that she, “spend[s] more than that in a quarter on shoes and Uber rides!”
The problem is that California has a triple mark up for “sin taxes” which are deemed sins by politicians who know sin intimately, so they are amply qualified for these sorts of categorizations. Alaska, she writes, is the only state that makes sense as there are no excise taxes on marijuana and the system is not trying to rid you of your bad habits by economic force. The only tax is a $50 surcharge on growers. She concludes with a polite message to outgoing California governor Jerry Brown, saying, “Is that so hard, Jerry Brown, you fiddling fussbudget?? Hopefully incoming governor Gavin Newsome will be a little more thoughtful with future taxes and regulations.” (NYSE:CGC) (NYSE:ACB) No comment, other than to question the meaning of the term “fussbudget”.
Oil Suffers Worst Decline Post OPEC Cut Ever
Oil (NYSEARCA:USO) is up this morning, but has still suffered its worst ever decline following an announced OPEC cut, ever recorded. According to Bloomberg, Brent crude has fallen 16% following the cartel’s announcement of a cut in production by 1.2 million barrels a day. The cut will catch up to price eventually. The last time oil tanked after a cut in production was implemented was November 2008 in the throes of the financial crisis. Oil is up close to 3% this morning, pushing on $46 a barrel. The low so far has clocked in at $42.36. If it sticks it would be a 45% decline from highs of $76.90. The previous low hit in June 2017 was at $42.05, so a double bottom may be in play here.