Trump Signs A Deal with Canada - Lonnie Escapes JailTime

Stocks ended the week in the plus column and ended the qtr with their best performance since 2013 as strong economic growth and continued strong earnings helped to support investor enthusiasm……You know the drill…..And now overnight we learned that the US and Canada have reached a trade deal that keeps NAFTA -  which will now be known as The US-Mexico-Canada Agreement or USMCA -  as a ‘Trilateral Trade Bloc’ and that is sending stocks around the world higher and US futures into a frenzy – currently up 18 pts  on the first trading day of the 4th qtr.  Stocks in Europe are also higher as news of this trade deal hit the newswires.  (Chock up another win for Donny…. I mean come on – if you hit him when he does something wrong – you must acknowledge when he succeeds in doing something right.)
 
But are we getting a bit too excited?  Maybe or Maybe not!   There are several issues coming up soon….and any one of them can rock the boat.  First there are earnings which start next week, and by all accounts this qtr is also expected to return double digits both in top line and bottom line – (the issue will be if they miss these elevated targets) …..Financials are the first to kick it off – in fact JPM is the first to confess and this always marks the beginning of the ‘beauty pageant’……followed by WFC, C, GS, BAC and MS…..This will set the tone….especially since the group has been under pressure.  Look at the XLF – for the past qtr. It has struggled for sure…. the ETF is up 4. % for the qtr – which isn’t horrible, but we need the financials to be the leaders…and the fact that they are not – is a bit of a concern.  Investors will be looking for what these CEO’s say about the future and how rising interest rates and strong demand will be a net benefit for them.
 
Next up are the mid-term elections – which are shaping up to be – how do we describe it?  Contentious?  Antagonistic?  Combative?  And the drama unfolding on the Capitol stage is only serving to ignite even more unrest as it divides men from women and democrats from republicans…. leaving the nation battered, bruised and disoriented and while this ‘ ‘issue’ will not price stocks – it is riveting to watch what it has done to the nation as this story unfolds.  A topic that had been taboo – Is now front and center and part of the discourse – in the end – as difficult as it is to address – it is a reality for so many and needs to be addressed.    As the temperature gets turned up – you can be sure that it will get uglier as we approach November 6th and that has implications for stock prices…. A divided House will lead to gridlock - some will say that is good, while others will say it is bad. 
 
And then there is a fourth-rate hike coming in December along with an increase in the amount of money rolling off the balance sheet – next month the FED will be raising that monthly rate to $50 bil as they contemplate a 4^th rate hike…. – this is no surprise – it was all laid out more than a year ago……. Over the weekend – Peter Bookvar told CNBC that he thinks ‘the FED is hiking us right into a recession’… and is that a surprise?  10 of the last 13 rate hike cycles have always produced a recession…. why should this one be any different?  The question remains – what is the tipping point?  3%?  4%? 
 
And last week - Wharton Professor Jeremy Siegal warned investors of the ‘growing risk stemming from trade tensions and the Federal Reserve Policy’ – Well Jerry – we just sealed the US/Canada issue – so the only big one left is China (and I think that is coming too) and about the FED – yes – they are tightening but they laid out this schedule months ago – none of this is new news…..and the mkts continue to surge higher…..the economy continues to be strong, but like anything – all good things must come to an end….Investors should always be prepared. 
 
On Friday we learned that FB has suffered another data breach - this time it is 50 mil subscribers or at least that this what they are admitting.....hackers took advantage of a weakness in the code and boom....they commandeered your identity....and if you use your FB login info for other websites - then you may be in trouble there as well.  And all these breaches only beg the question - What have we done to ourselves?  And while this may seem significant - just wait until one of the big banks get hit.... because you know that is coming....
 
Smoke anyone? 
 
And Lonnie’s ‘innocuous’ August tweet - where he said he was thinking of taking TESLA private at $420/sh - cost him his Chairman of the board seat, $20 mil, plus  another $20 mil from the company.....that money going to be used to correct the wrongs created by his stupidity.....he was in the end though able to keep his CEO position at the company – so I just want to know who got paid off to allow him to stay out of jail and retain his CEO position after clearly ‘manipulating’ his stock price?  He should thank God for friends in high places.... Too many big names involved here....to many VC funds, and PE guys are at risk if they forced him out – Lawyers lining up on both sides……this story is only beginning…and this morning Lonnie is telling us to ‘ignore the noise’ surrounding his settlement…..the stock is rallying hard this morning.....taking back everything it lost on Friday and then sum….trading at $314/sh up from $264 on Friday’s close  
 
This morning US futures are higher.... up 18 pts as the sun rises.... Eco data today includes: Market US Manf PMI – exp of 55.6, Construction Spending exp of +0.4%, ISM Manf PMI – exp of 60.0. ISM Prices Paid – exp of 71.4 down from 72.1 last month.  Ward Total Vehicle Sales – 16.8 mil…. These eco data points need to remain strong to keep a floor under stocks.  The new 3-way deal with Mexico and Canada does reduce trade uncertainty on this continent – but does nothing about US/Sino relations….and the fact that they cancelled a security meeting between our two nations is not a positive.  And while the mkts are celebrating the new trade deal – let’s not forget – this deal was also expected…. the wildcard remains China……So depending on your assumptions of whether we will get a deal – will determine your stance.   
 
The chart on the S&P shows support at 2900 and resistance at 2945….and while this feels good today…. I think this rally is short lived…. clarity will come when we settle (or not) with China. 
 
European stocks are all ahead as they digest the trade agreement and as British PM Terry May bangs the drum on her BREXIT plan. European mkts are all higher by 0.5%.   EU Manufacturing PMI slightly missed at 53.2 vs. est of 53.3 and German Retail Sales dropped –0.1% vs. est of 0.5%.  
 
Asian mkts were mixed…......China is closed until next week (Oct 7) – but China did report weaker Sept Manf PMI of 50.8 vs. the exp 51.2. 
 
 
Oil is flat at $73.35/barrel-  and Gold is down $7.50 at $1188.50 – this on the back of the USMCA deal…. if Gold fails to hold right here…then look for a test of $1165 ish…. the August lows. 
 

Pumpkin/Butternut Squash Risotto 

It is that time of year.... you see the pumpkins all around....it is fall, the air is brisk and this weekend you need to try this great hearty dish.  Easy to make because you BAKE this one and it is delicious to eat......

 You will need:  Chicken Broth, Arborio rice, Butternut squash, 1 1/2 cups of pumpkin puree (not the pie filling that you buy in the store - you need real pumpkin puree), large diced onion, chopped fresh basil, plenty of fresh grated Parmegaina Cheese, olive oil - and the kicker - 3 tblspn of Mascarpone Cheese. - (Mascarpone is a soft white cream cheese from the Lombardy region of Southern Italy.  It is the result of the culture being added to the cream skimmed off the milk used in the production of Parmegiana.  It has the consistency of soft cream cheese and is used in a variety of Italian dishes including deserts)

 Preheat the oven to 400 degrees.

 In a baking dish - combine the rice, cut up butternut squash, the pumpkin puree, diced onion and the chicken broth.  Season it with a bit of s&p and mix well.  Cover it tightly with a lid or with tin foil and place in the middle rack in the oven.  Re-visit it in 10 mins intervals and stir.   It will be done when most of the broth has been absorbed and the rice is no longer hard.  This should not cook any longer than 40 mins max.

Remove from the oven and add - the Parmegiana, the Mascarpone and the chopped basil - mix well (but do not smash the butternut squash) and serve immediately in warmed bowls.   
 

  
Buon Appetito.