“If you take emotion – would be, could be, should be – out of it, and look at what is, and quantify it, I think you have a big advantage over most human beings.” — John Henry

1. Bitcoin Tops $6,100, A New Record High — Bitcoin hit an all-time high of $6,147.07 last week, according to CoinDesk, recording gains of over 500% this year, more than any other tradable asset class. Some are attributing the latest rise to another upcoming split in bitcoin known as a “fork,” which will lead to the creation of a new cryptocurrency called bitcoin gold.
2. Venezuela Missed $586M Debt Payments — Venezuela has now missed $586M in payments tied to the debt of the government, state oil giant PDVSA and utility Electricidad de Caracas, just days before the first of two can’t-miss debt deadlines. “I don’t see how any person who’s involved in Venezuelan debt can be anything except concerned, except for those who have credit default swaps,” said Russ Dallen, managing partner at Caracas Capital Markets.
3. Arbitration Rule Win for Wall Street to Block New Regulations Allowing U.S. Consumers to Sue Their Banks — Vice President Mike Pence cast a tie-breaking Senate vote to block new regulations allowing U.S. consumers to sue their banks, handing a big victory to Wall Street and other big financial institutions. By defeating the rule, Republicans are dismantling a major effort of the Consumer Financial Protection Bureau, the watchdog created by Congress in the aftermath of the financial crisis.

The week ahead — Economic data from Econoday.com:

“I will not abandon a previous approach whose logic I understand.” — Buffett

1. Qualcomm Hails Big Victory in 5G — Qualcomm’s long march towards 5G is a few steps closer to reality, as the company showcased the first working 5G data connection to a mobile device via its Snapdragon X50 chipset. The demonstration, shown at Qualcomm’s (NASDAQ:QCOM) 4G/5G Summit in Hong Kong, will up the ante against rivals such as Intel (NASDAQ:INTC) and Huawei in the battle for next generation mobile broadband.
2. China Reported GDP Growth for Q3— China’s economy grew at 6.8% in the third quarter year-on-year, slightly below the previous period but still above the government’s full-year target of “around 6.5%.” The figure will likely boost President Xi’s effort to consolidate power at a quin-quennial Communist party leadership transition, where he will seek to install loyalists in key positions.
3. Lawyers Hunt for California Fires’ Ground Zero to Go After PG&E — lawyers are already combing through the destruction to make a case that PG&E Corp. is to blame. Under a legal theory that private property owners are entitled to compensation for damage caused by public services, a state court judge found in June that PG&E was responsible for a 2015 fire in the foothills of the Sierra Nevada mountains that torched 70,000 acres and destroyed more than 500 homes. The utility admitted the culprit was a tree that fell into a power line. The utility has about $800 million in liability insurance for potential losses. Under a worst-case scenario, JPMorgan Chase & Co. estimated the company faces $12 billion of potential gross liability for fires statewide.
4. Healthcare Sector Recovers after Senate Strikes Deal — the healthcare sector recovered from last week drubbing after two U.S. senators reached a bipartisan agreement to shore up Obamacare for two years by reviving federal subsidies for health insurers. President Trump, during comments at the White House, suggested he could get behind the Alexander-Murray plan as a short-term solution.
5. Senate Passes a Budget, Moving the GOP Closer to Tax Reform — Senate Republicans approved a $4 trillion budget measure late last week, taking a crucial step toward their goal of passing a tax plan this year. The resolution, split mostly on party lines, was crafted through a technical amendment of reconciliation, which enables the GOP to pass a tax bill with a simple 51-vote majority in the Senate.
6. Many of the Indices have Formed Bearish Upside “rising wedges” Chart Patterns — courtesy of thechartstore.com, the charts below suggesting either stocks must explode higher, or a near-term top was at hand. Obviously, the upward explosion has occurred in this parabolic rally, which typically tends to end badly on a trading basis.

The week ahead — Economic data from Econoday.com:

“If you take emotion – would be, could be, should be – out of it, and look at what is, and quantify it, I think you have a big advantage over most human beings.” — John Henry

1. Honeywell is Looking to Spinoff Subsidiaries — sources indicate that the company is considering a plan to spin non-core assets in a streamlining strategy that could see at least two new publicly listed companies created. The development arrives with hedge fund Third Point applying pressure on the Honeywell board.
2. EPA Pruitt Confirms Withdrawal from Clean Power Plan — EPA Administration Scott Pruitt announced in a speech in the coal mining state of Kentucky last week that “Regulatory power should not be used by any regulatory body to pick winners and losers,”. The Clean Power Plan, which required states to reduce greenhouse gas emissions by one-third by 2030, was blocked by the Supreme Court in February 2016 as it worked its way through the courts. New York state Attorney General Eric Schneiderman says he will sue to stop the repeal, likely one of several lawsuits in what promises to be a broad legal fight from states and environmental groups to preserve the plan.
3. Time Launches Print Cutbacks at Newsweekly, SI, Fortune and Others — Time Inc. (NYSE:TIME) is cutting back on its print – both in circulation and in frequency of key magazine titles – as it intends to cut circulation of the weekly Time magazine by a third to 2M copies. In part this will be done by cutting back on promotional copies and focusing more on an ad-friendly core audience. It will cut circulation for People en Espanol as well. Meanwhile, seven other titles will come out less often, including Sports Illustrated, Entertainment Weekly and Fortune. In 2018, SI will publish 27 issues rather than this year’s 38, but there will be 23% more editorial pages in each, on a weightier paper stock. The moves are effective January 1 2018.
4. Equifax Hack Included Breach of Driver’s License Data — according to the WSJ, driver’s license data for roughly 10.9M Americans were compromised during the cyberattack on Equifax (NYSE:EFX). This news is in addition to the personal information of more than 140M Americans, not all of whom would have had DL information with Equifax. In a separate announcement, the company said a file with 15.2M U.K. consumer records was also part of the breach (roughly double the previous number of those in the U.K. thought to be affected).
5. Trump to Cut Off ACA Subsidies to Health Insurers — the Trump administration says it plans to cut off billions of dollars in payments to health insurers that offset their costs for providing subsidies to consumers. The payments will stop immediately, with no transition period, Acting HHS Secretary Eric Hargan and Centers for Medicare and Medicaid Services Administrator Seema Verma stated. Given the ongoing uncertainty over the payments, many health insurers had dramatically raised the premiums they planned to charge for next year in anticipation of not getting the funds. The move, coming just hours after President Trump signed an executive order that paves the way for a proliferation of pared-down insurance plans for individual buyers, marks the start of what promises to be a long and contentious campaign to unravel the Affordable Care Act. Companies effected include: CNC, MOH, UNH, AET, WCG, CI, HUM, ANTM, GTS, HQY, QHC, HCA, THC, UHS, LPNT, CYH, HCP, SEM.
5. GM Joins List of Automakers Checking Safety in Aluminum Supplier Scandal — Kobe Steel is the largest supplier of aluminum panels for automobiles in Japan, and it has a large share of the global market for forged aluminum pieces used in suspension systems. General Motors (NYSE:GM) said it is checking whether any of its cars contain falsely certified aluminum parts or components sourced from Japan’s Kobe Steel (OTCPK:KBSTF). The company joins a list of Japanese manufacturers involved in scandals over product quality control in recent years. Toyota (NYSE:TM), Nissan (OTCPK:NSANY) and Honda (NYSE:HMC) all said that aluminum from Kobe Steel was used in their car hoods and doors, Subaru (OTCPK:FUJHY) and Mazda (OTCPK:MZDAY) said they believed the aluminum could have been used in car hoods, Mitsubishi Motors (OTCPK:MMTOF) said it used Kobe Steel aluminum in the past and was assessing the situation, and Suzuki (OTCPK:SZKMY) said the aluminum was used in its motorcycles; ~200 companies used the metal in their products. Boeing (NYSE:BA) said it is inspecting its supply chain but “nothing in our review to date leads us to conclude that this issue presents a safety concern.”

The week ahead — Economic data from Econoday.com:

“Take a theory and stick with it. But you also have to be open-minded enough to switch tracks if you feel that your theory has been proven wrong.” — Tony Saliba

1. Puerto Rico Seeking Major U.S. Aid — Puerto Rico will need “tens of billions” of dollars in aid from Washington as it struggles to stabilize a humanitarian crisis in the wake of Hurricane Maria, according to the island’s treasury secretary. The estimate comes as President Trump arrives in San Juan to receive updates on relief and rescue efforts. He will then meet with Governor Ricardo Rossello for a “briefing with senior military personnel.
2. Senate Panel to Hold Hearing on Yahoo Data Breach — the U.S. Senate Commerce Committee plans to hold a hearing later this month over the 2013 massive data breach at Yahoo (NYSE:VZ) after the firm bumped up its estimate for users affected to 3B from 1B. Senator John Thune said he will ask witnesses whether “new information has revealed steps they should have taken earlier, and whether there is potentially more bad news to come.”
3. Holiday Retail Sales Expected to Rise 4% — the National Retail Federation expects holiday sales to increase between 3.6% and 4.0% this year. The forecast is higher than the 3.5% annual growth seen over the past five years. Retailers are expected to hire between 500K and 550K temporary workers this holiday season, down from last year’s total of 575K.
4. ITC (International Trade Commission) Ruling On Washing Machines that Surging Imports are Hurting U.S. Producers — President Trump will have broad leeway to impose a sweeping remedy after an ITC ruling found that surging imports of washing machines from the likes of LG (OTC:LGEAF) and Samsung (OTC:SSNLF) are hurting domestic makers such as Whirlpool (NYSE:WHR). Whirlpool’s “global safeguard” tactic may prompt Trump to issue a sweeping tariff covering many countries, rather than the more focused barriers in typical trade cases. The ITC will hold a public hearing on possible remedies October 19, and will recommend those to President Trump by December 4.
5. Tropical Storm Nate threatens Gulf Oil and Gas — oil markets are wary as Tropical Storm Nate heads for the Gulf of Mexico ahead of a likely U.S. landfall. Nearly 15% of oil production and 6.5% of natural gas output in the U.S. Gulf had been shut as of late last week as operators evacuate offshore facilities in advance of the storm. While energy production may be hampered, most Gulf offshore rigs and platforms, and oil refining and gas processing on the coast, likely will be on the west side of the storm – typically the weaker side;
6. S&P500 Index (SPX) Overbought On a Short-Term Basis — the SPX index is two standard deviations above its 50-day moving average, which typically means it doesn’t get much more overbought than that before at least a pause or pullback develops.

The week ahead — Economic data from Econoday.com: