What I Think I Learned Last Week #8
I’m So Fed Up! The US Federal Reserve did exactly what was expected by announcing the gradual reversal of quantitative easing (can we call it quantitative tightening?), beginning in October. Additionally, the Fed hinted that it may yet raise rates again before the year ends. The dollar gained, bonds sold off, and the stock market paid no attention whatsoever, basically saying “That Don’t Impress Me Much“.
Quit Playing Games: Toys ‘R’ Us filed for chapter 11 bankruptcy. Lots of debt, online shopping and children preferring electronic gadgets instead of traditional toys have all added to the company’s woes.
Rocket Man (seriously cool link) Responds: North Korea threatened to detonate a hydrogen bomb in the Pacific Ocean, kind of appropriate for the first day of fall. Earlier, Rocket Man described President Trump as “mentally deranged“. President Trump responded with a tweet describing the North Korean leader as “obviously a madman”.
Going ballistic: General Dynamics won a $5.1 billion contract to complete the design of the US Navy’s next-generation ballistic missile submarine. Construction of the non-yellow submarine is scheduled to begin in fall 2020.
An Out-of-this-World Deal:
In yet another aerospace deal, defense contractor Northrop Grumman is buying rocket maker Orbital ATK for $9.2 billion. Just in time for the Trump v. Rocket Man show at the UN.
A Return to Orbit:
Portugal regained its investment grade status and its bonds had their biggest Jump
in price in seven years.
Bull in a China Shop: Not. For the first time since 1999, S&P Global Ratings cut China’s sovereign credit rating, dropping it from AA- to A+.
C’est dommage! Falling yogurt sales cause revenues for General Mills to drop for the ninth straight quarter. Not a big deal in the US, but as I pointed out last month, yogurt is considered a strategic asset of France, so a sales decline would be nothing less than a national tragedy.
C’est si bon! The French government said it will finally meet its 3.0% Maastricht Treaty deficit target with the 2017 budget deficit equaling 2.9% of GDP. This would mark the first time since 2008 that France has met its treaty obligation to not spend way too much. Vive la France!
Money, Money, Money! Citi reports that Global Equity and European Equity funds each saw inflows of $1.7 billion for the week ended September 20.
You Auto Know: Led by autos, Japanese exports posted the biggest gain in four years, up 18%. President Trump will not like this news, especially since Ford Motor announced last week that they were idling production lines at three plants in the US, scheduling one to three weeks of downtime at factories as auto sales slow.
Some crude comments: After the Iraqi oil minister said OPEC was considering further output cuts, oil prices spiked. The oil market is now on track to have its best third quarter in 13 years.
Finally, I am now on Twitter: @DavidRossCFA. I can’t let Rocket Man & Trump have all the fun!
And that’s what I think I learned this week….