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Market Morning: Gold Slingshot, Cannabis Consolidation, Baidu Debacle, Vietnam Tariff Bazooka

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Gold Recovers after “Trade Deal Progress” Fall

It didn’t take gold (NYSEARCA:GLD) long to recover after declining to $1,384 on Monday on news of the best meeting ever between President Trump and Chinese President Xi Jinping on Monday. Xi promised to buy US agriculture, even though the Chinese government doesn’t actually buy food, but rather Chinese companies, and they already do this anyway. The two leaders agreed on nothing substantial and existing tariffs are still in place, but for some reason the gold market interpreted this as bearish. Over the long term, gold prices have nothing to do with trade wars, but rather currency debasement, which is certainly going on and has been for a very long time. Gold has recovered all the way up to its recent highs of $1,441 overnight, with prices rising particularly fast during Asian trade after US market close on Tuesday. Gold stocks recovered almost all of their Monday losses, though silver (NYSEARCA:SLV) continues to lag behind, which is unusual during a gold breakout. Either the breakout will be reversed, or silver has a lot of catching up to do.

SEE: Canada’s Largest Cannabis Retailer Posts Operations Update; Plans to Open 40 Stores in 2019

Cannabis Consolidation Continues

The cannabis sector is slowly maturing, but still filled with small companies sprouting up like mushrooms and snails. Rollup is occurring slowly but surely among the smaller companies trying to find various niches to fill in the new space. The latest minimerger is one between TransCanna Holdings (OTCMKTS:TCNAF) and Lifestyle Delivery Systems (OTCMKTS:LDSYF), with TransCanna being the acquiring firm. The combined firm will be focused on the California market, and is now big enough to avoid certain taxes and regulatory fees that should help increase profit margins. It will run close to 200,000 square feet of growing space and 25.5 acres of land in California designed for outdoor cannabis cultivation.

“This proposed transaction represents an opportunity for all of the combined shareholders to benefit from an exceptionally well integrated platform, capable of avoiding excessive industry fees and taxes creating significantly larger profit margins. Merging the revenue generating assets created by the LDS team, including the flagship CannaStripsTM, with the scale oriented TransCanna team and their 196,000 sq ft vertically integrated, cannabis focused facility in central California equals, in our opinion, a California-based powerhouse,” stated Brad Eckenweiler, CEO of LDS.

Is Hong Kong Anger Spilling Over Into Baidu?

Beijing-based search engine Baidu (NASDAQ:BIDU) may be getting some backlash, perhaps connected to the uprising in Hong Kong against Chinese communist rule, though no connection has been determined yet. An unknown assailant poured a bottle of water over the head of Baidu CEO Robin Li as he was giving a talk on artificial intelligence and search.  Li then screamed, “What’s your problem,” to the person, who did not respond, but quickly left the building, leaving Li all wet and bothered. He then attempted to tie in the unexpected hiccup to his determination to continue developing AI. The anger could be over Baidu cooperating with Beijing over the censorship of search results. Information is at a premium in China, as the communist regime typically censors information from the outside world, though it’s not as bad as North Korea. At least not yet.

Trump Raises Taxes 456.23% on Americans Buying Vietnamese Steel

Trump has declared a trade war on Vietnam. Hopefully this won’t restart the draft. Tariffs on imported steel from Vietnam have been raised to as high as 456.23%, because 456.24% would be considered just a tiny bit too high, 0.01% too high to be exact. The Commerce Department has decided that countries like South Korea and Taiwan, in an effort to circumvent the steel tariffs currently charged to Americans in order to import steel from them, have been shipping their steel to Vietnam to undergo minor processing, but the Trump Administration is now plugging that loophole with a giant wad of tariff gum. According to Trump, Vietnam is “almost the single-worst abuser of everybody.” Almost, but not quite. Trump did not elaborate on who was the single-worst abuser of ‘everybody”, ahead of Vietnam. Possibly North Korea? But he did go visit his friend Kim Jong Un after he got bored of the G20 meeting.

Tesla Delivers Record Number of Cars, Investors Cheer

Tesla (NASDAQ:TSLA) finally surprised markets with an impressive delivery total of 95,200 cars in three months, from April to June. Shares are up in European trading about 7.6% and look to follow in US trading at market open. The success, relatively, comes in the face of US tax credits of $3,750 being cut in half at the beginning July, and an expected loss this quarter. However, CEO Elon Musk has said that the company will be net positive for the second half of the year, though he’s made promises before, perhaps more than he should have. In another iffy sign, Tesla did not reiterate its guidance for deliveries of 360,000 to 400,000 cars delivered in 2019, even when prompted about the status of that guidance given last quarter, which means the number probably won’t be hit and the rate of 95,200 per quarter may not be sustainable.

 

 

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