“I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.” — Warren Buffett

1. Foreign Buying of U.S. Treasurys Softens, Unsettling Financial Markets — foreign investors, traders and central bankers are buying fewer Treasurys. The foreign pullback has helped fuel a bond selloff this fall, which has driven the 10-year yield to 3.17% and has shaken the nine-year-long rally in U.S. stocks, and that continuing reductions in foreign appetite could further unsettle financial markets. China and Japan still both own more than $1 trillion of U.S. debt, according to the U.S. data.
2. Amazon, Qualcomm partner on Alexa headphones — Qualcomm is teaming up with Amazon (NASDAQ:AMZN) to spread the use of its voice assistant, releasing a set of chips that any maker of Bluetooth headphones can use to embed Alexa directly into the device. The functionality would be similar to Apple’s (NASDAQ:AAPL) AirPods, which let users tap the devices to talk to Siri.
3. Moody’s Decided Against Cutting Italian Debt Ratings to Junk — the euro is under pressure amid a bout of disappointing data on the eurozone’s two largest economies. German business activity was shown to have grown by its slowest rate for nearly three and a half years, while French manufacturing also struggled as its PMI index hit a 25-month low.
4. Target Ramps Up Same-Day Delivery Program and Offering Free Two-Day Shipping — In a bid to win shoppers over rivals like Walmart (NYSE:WMT) and Amazon (NASDAQ:AMZN), Target (NYSE:TGT) for the first time ever is offering free two-day shipping – with no minimum purchase required – this holiday season. Target said its “Drive Up” service – where shoppers can place their orders online and have them brought directly to their cars – will also be available at nearly 1,000 stores.
5. U.S. to China: No Trade Talks Without Firm Proposal — the U.S. is refusing to resume trade negotiations with China until Beijing comes up with a concrete proposal to address Washington’s complaints about forced technology transfers and other economic issues, officials told WSJ. The impasse threatens to undermine a meeting between President Trump and Xi Jinping at the G20 summit in November. Businesses have been counting on sufficient progress for the suspension of the next round of U.S. tariffs.
6. AAII Weekly Sentiment Survey — according to the latest weekly sentiment survey from AAII, bullish sentiment saw another decline this week falling from just under 34% to 27.97%. That’s low enough to rank as the fourth weakest reading in bullish sentiment this year.

On the bearish side, negative sentiment rose by a similar amount that bullish sentiment declined, jumping from 35.0% up to 41.0%. That’s the highest reading since the last week of June, right before the July 4th rally, and the third highest reading in bearish sentiment of the year.

“I believe in analysis and not forecasting.” — Nicolas Darvas

1. Sears Files for Chapter 11 Bankruptcy — Sears has filed for bankruptcy after years of staying afloat through financial maneuvering, a merger with Kmart and relying on billions of CEO Eddie Lampert’s own money. It’s set to shutter 142 stores towards the end of the year and begin liquidation sales shortly. While Lampert will step down as CEO, he’ll remain Sears (NASDAQ:SHLD) chairman, as his ESL Investments negotiates a debtor in possession loan and other funding to support what was once the country’s biggest retailer through the bankruptcy process.
2. Italy Endorses Deficit-Hiking Budget — Italy’s government signed off on an expansionary 2019 budget late Monday – with planned measures that would boost welfare spending, lower the retirement age and cut taxes – in defiance of EU rules that require a shrinking deficit. The draft budget law has rattled financial markets in the past month, with investors demanding significantly higher interest rates to buy Italian bonds.
3. Fidelity Starts Crypto Unit — Fidelity Investments is getting into the crypto scene with a new unit called Fidelity Digital Assets Services. “Our goal is to make digitally-native assets, such as bitcoin, more accessible to investors,” announced CEO Abigail P. Johnson. “We expect to continue investing and experimenting, over the long-term, with ways to make this emerging asset class easier for our clients to understand and use.”
4. U.S. to Open Trade Talks with EU, UK, Japan — Just weeks after the retooling of NAFTA, the U.S. Trade Representative’s office has informed Congress it intends to open trade talks with the EU, U.K. and Japan, aiming to “address both tariff and non-tariff barriers and to achieve fairer, more balanced trade.” Under fast-track rules, the U.S. cannot start trade talks until 90 days after notifying Congress.
5. Canada Legalizes Marijuana Nationwide — Canada begins legalization of recreational marijuana sales in Canada, with provinces handling their own regulations for sale, growth and taxation. Adults will be allowed to carry and share up to 30 grams of legal marijuana in public, cultivate up to four plants in their households and make products such as edibles for personal use. Canadians can also order weed through the mail. Companies related are — TLRY, CRON, CGC, MJ
6. Fed Minutes Point to Continued, Gradual Interest-Rate Increases — the latest Fed minutes shows officials voted unanimously at the September meeting to raise their benchmark rate to a range between 2% and 2.25%. Projections released after the meeting show most officials expected they would need to raise rates one more time this year and around three times in 2019 if the economy performs in line with current forecasts.

The week ahead — Economic data from Econoday.com:

There will not be any Weekly Re-Cap for the week of Oct 8 to Oct 12 2018. We are away for some needed R&R.

The staffs at EGS.

The week ahead — Economic data from Econoday.com:

“I have learned through the years that after a good run of profits in the markets, it`s very important to take a few days off as a reward. The natural tendency is to keep pushing until the streak ends. But experience has taught me that a rest in the middle of the streak can often extend it.”– Martin Schwartz

1. Sharp Joins the OLED Revolution — Japan’s Sharp (OTCPK:SHCAY) has finally jumped into the organic light-emitting diode market as it looks to catch up to rivals. The long-awaited decision comes as the major iPhone supplier continues its recovery after being bought two years ago by Taiwan’s Foxconn (OTC:FXCOF). Sharp will offer the OLED panels in its new smartphones later this year and plans to sell the screens to other manufacturers.
2. Exxon Eyes Major Investment at Singapore Refinery — Exxon Mobil is considering a multi-billion dollar investment at its Singapore refinery, the company’s largest, as the shipping and oil refining industries scramble to prepare for new marine fuel regulations starting in 2020. New rules from the International Maritime Organization limit sulfur content to 0.5%, from 3.5% currently, to curb pollution produced by the world’s ships. Singapore is also home to Exxon’s (NYSE:XOM) biggest integrated petrochemical complex.
3. Shell Green Lights Canadian LNG Project — Royal Dutch Shell (RDS.A, RDS.B) is pressing ahead with Canada’s largest-ever infrastructure project, designed to send gas from Canada, where prices are relatively low, to demand centers in Asia. Construction of the 14M tons/year venture – which is expected to generate an internal rate of return of around 13% – will start immediately, with LNG production expected to begin before the mid-2020s. Minority partners include PetroChina (NYSE:PTR), Mitsubishi (OTCPK:MSBHY), Korea Gas and Malaysia’s Petroliam Nasional Bhd.
4. U.S. and Canada Reach Last-Minute Pact to Revise Nafta — the U.S. and Canada struck a deal at the last minute to revise the North American Free Trade Agreement just before a U.S-imposed deadline of October 1. The pact allows Canada to join the accord reached between the U.S. and Mexico in August. The new agreement, to be officially called the U.S.-Mexico-Canada Agreement, now includes rules for financial services and digital business that have emerged since Nafta was originally signed in 1994. Canada agreed to curb protection for its dairy industry, while the U.S. dropped demands to get rid of special Nafta courts that allow member states to challenge trade restrictions imposed by others.
5. AAII Weekly Sentiment Survey — According to the weekly sentiment survey from AAII, bullish sentiment surged 9.4 percentage points to 45.66% from last week’s reading of 36.22%.
That move represents the largest one-week increase since early July and the highest weekly reading since mid-February. While we’re not quite at the 50% reading yet, we would note that the last time optimism in this survey neared the 50% level was in late December. That wasn’t the exact top of the market right before the correction, but it was close to it.

bearish sentiment is back down in the mid-20 percent range, which is a level it has seen repeatedly throughout the year.

6. Chinese Spy Chip Report Weighs on Apple Suppliers — shares in Apple’s suppliers saw a broad decline on the back of a bombshell report that alleged Chinese spy chips were discovered in data center equipment used by Amazon (NASDAQ:AMZN) and Apple (NASDAQ:AAPL). The tech giants have denied the allegations by Bloomberg Businessweek, which said the hack reached almost 30 U.S. companies and compromised America’s technology supply chain. Companies effected are: AMS,Largan, LG Display, Murata, Wistron, Hon Hai, AAC Tech, Merry, TDK, TSMC .

The week ahead — Economic data from Econoday.com:

“Prices are too high” is far from synonymous with “the next move will be downward.” Things can be overpriced and stay that way for a long time . . . or become far more so.” ― Howard Marks

1. Brent Crude Spikes to Fresh Four-Year High Near $81/bbl — brent crude jumped to its highest in four years overnight after the world’s biggest oil producers, led by Saudi Arabia and Russia, decided against further increases in production, despite calls from Pres. Trump for OPEC to lower prices. At its last meeting in Algiers, OPEC said it was satisfied “regarding the current oil market outlook, with an overall healthy balance between supply and demand.” Brent spiked as much as 2.6% higher to $80.94 per barrel to its loftiest levels since 2014, while U.S. WTI climbed 1.8% to $72.06 per barrel, its highest since this June.
2. EU Plans Route To Do Business with Iran Without U.S. Sanctions — the EU will establish a special payment channel allowing companies to legally continue financial transactions with Iran without exposure to U.S. sanctions. The mechanism would facilitate payments related to Iranian oil trade, exports, and imports. The details of the mechanism will come after future meetings with technical experts. The special purpose vehicle was jointly announced by EU foreign policy chief Federica Mogherini and Iranian Foreign Minister Javad Zarif.
3. Ontario Expected to Unveil Cannabis Law — expectations on Ontario that a new legalization law will be unveiled on Sept 28 ’18. Ontario is the only province that hasn’t created guidelines for how cannabis will be sold in brick-and-mortar retail shops, despite the province accounting for more than 40% of all cannabis usage in the nation last year. An announcement isn’t anticipated until after the market closes today, which could lead to more speculative trading on Aurora Cannabis (OTCQX:ACBFF), Canopy Growth (NYSE:CGC), Cronos Group (NASDAQ:CRON) and Tilray (NASDAQ:TLRY).
4. SEC Sues Elon Musk For Fraud, Seeks Removal from Tesla — the SEC sued Elon Musk for fraud and sought to remove him from Tesla Inc(TSLA). It sued Mr. Musk in Manhattan federal court, alleging he “had not even discussed, much less confirmed, key deal terms, including price, with any potential funding source,” according to the lawsuit. U.S. law forbids public-company executives from making false statements or misleading investors about information that is material to an investment decision.
5. U.S., Japan Agree to Trade Talks; Japan Avoids U.S. Auto Tariffs For Now — President Trump and Japanese Prime Minister Abe have agreed to start trade talks in an arrangement that for now protects Japanese automakers from further tariffs. As part of the agreement, Abe said the U.S. would not impose additional tariffs on the auto sector, while also protecting the politically important farm sector from access that goes beyond the terms in the Trans-Pacific Partnership agreement that Trump abandoned last year. U.S. Trade Representative Lighthizer said the talks would occur in two “tranches” with hopes for an “early harvest” from the initial talks on lowering trade barriers.

The week ahead — Economic data from Econoday.com: