Market Morning: Saudis Boycotted, Sears Circled, Deficit Explodes

Market Morning

Ford, JPMorgan, Alphabet, Blackstone, and Blackrock Move to Isolate Saudi Arabia

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Vote with your feet, or the lack of them. Following the murder of journalist Jamal Khashoggi in the Saudi Arabian embassy in Turkey, which Turkey claims it has tapes of, Ford (NYSE:F), JPMorgan (NYSE:JPM), Alphabet (NASDAQ:GOOGL), Blackstone (NYSE:BX) and the largest asset manager in the world by assets under management, BlackRock (NYSE:BLK), are all blackballing Saudi Arabia by refusing to attend the Future Investment Initiative taking place in the kingdom from October 23rd to the 25th.

SEE: Bitcoin News Crypto Currency Daily Roundup October 15

As for President Trump and Treasury Secretary Steve Mnuchin, Mnuchin will decide by Friday and Trump has called his administration’s participation uncertain. On the one hand, if Trump attends or has one of his staff attend, it will be turning a blind eye to a cold-blooded murder. On the other hand, if he doesn’t attend, it will be accusing a key ally, who Trump sells lots of weapons to, of a cold-blooded murder, and also backing up Jeff Bezos, Washington Post owner, who is not best friends with the President by any means. Meanwhile, the Saudis have threatened to pull oil (NYSEARCA:USO) from the market it they are accused of anything, which means they’re probably very guilty. If that happens oil could skyrocket, but it probably won’t happen, because everyone will forget about this in about two weeks or so when social media becomes obsessed with something else.

What to do?

Oil will probably still head higher even if this blows over. And if you’re a journalist critical of the Saudis, don’t go anywhere near their embassies.

The Buzzards Circle Sears

Target (NYSE:TGT), Walmart (NYSE:WMT), and Lowe’s (NYSE:LOW) are among the retailers that are looking to carve themselves out a piece of the Sears (NASDAQ:SHLD) carcass. Sears includes K-Mart, the not so popular competitor to Target and Walmart. Home Depot (NYSE:HD) has its eyes on Sears as well, poised to gain about half a billion in 2018 sales as appliance hunters switch away from Sears. Sears will not be entirely dead however, closing only 142 of its 700 stores. Its third incarnation after a debt restructuring would still struggle to keep on going, unless it simply gets absorbed into one of the other big box retailers in an auction.

Futures Up After Equities Stagger At Yesterday’s Close

The S&P 500 (NYSEARCA:SPY) fell 25 points in an hour yesterday before the close, moving from session highs to session lows. Futures are up this morning, though volatility appears here to stay for now as bulls and bears battle it out as to which way the market is going. Asian stocks are higher and the bond market is quiet this morning so far. However, as equities were falling into the close yesterday, yields also rose, another sign that the debt and equity markets are trading together now and that bonds are not the safe haven they once were. Gold (NYSEARCA:GLD), however, was up again.

2018 Federal Deficit at $779 Billion

The biggest budget deficit in 6 years has eclipsed last year’s deficit by 17%, and is only expected to widen. Deficits this big outside of a recession or war are unprecedented, but so is everything these days when it comes to debt and spending. Next year’s deficit should eclipse $1 trillion at the very least, and if we dip into recession, some interesting things could end up happening. Collapse of the already weak bond market, a flight to commodities, general confusion, loss of faith in the Federal Reserve come to mind. Remember though, it’s not the “loco” Fed who is running these deficits. They’re just monetizing them. It’s the “loco” Trump Administration that’s in charge of the actual spending.

What to do: Duck and cover.

 

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