“I have been trading for decades and I am still standing. I have seen a lot of traders come and go. They have a system or a program that works in some specific environments and fails in others. In contrast, my strategy is dynamic and ever evolving. I constantly learn and change.” – Thomas Busby

1. Kinder Morgan (KMI) Fears Crushing Entire MLP Sector — the Kinder Morgan (NYSE:KMI) contagion triggered a selloff throughout the entire MLP space late last week as fears of a wave of yield cuts have spread throughout the market. Moody’s changed its outlook on PAA to Negative from Stable while affirming the company’s Baa2 rating, saying it is concerned about PAA’s 5.4x debt-to-EBITDA ratio and sub-1x distribution coverage ratio. The continuing slide in crude oil prices obviously is weighing on MLP prices, but year-end selling also may be playing a major role – not just tax-loss harvesting, but the “year-end liquidation of a losing trade,” says Michael Shaoul of Marketfield Asset Management. Furthermore, Kinder Morgan has slashed its 2016 quarterly dividend to $0.125/share from the current $0.51, marking the company’s first-ever dividend cut. The company said the move will enable it to use a significant portion of its cash flow to fund the equity portion of its expansion capital requirements, eliminate any need to access the equity market for the foreseeable future, and maintain a solid investment grade credit rating.
2. Carl Icahn Ups Cheniere Stake Again — activist investor Carl Icahn has raised his stake in struggling Cheniere Energy (NYSEMKT:LNG), marking the eighth time he upped his holdings in the company since taking an initial 8.2% position in August. According to a Dow Jones report, the billionaire boosted his stake to 13.8% from 12.7% previously.
3. Apple Suspends TV Service Plans as Big Media Resists — Bloomberg reported Apple (NASDAQ:AAPL) has suspended plans to offer an online TV service, and will focus for now on helping media companies directly sell content via the App Store. The news service adds that Apple (NASDAQ:AAPL) isn’t completely giving up on providing a live TV service, but notes its original plan to sell 14 or so channels for $30-$40/month has “run into resistance from media companies that want more money for their programming.” Media executives have said they expect Apple and other new entrants to pay more per channel than pay-TV incumbents.
4. Chipotle Store (CMG) in Seattle Closed Due to Health Violations — Health officials in Seattle closed down a Chipotle (NYSE:CMG) store due to “repeated” food safety violations. The store has recently re-opened after being shut down following the E. coli outbreak which impacted some Chipotle stores in the Pacific Northwest. Separately, the toll of students at Boston College who became sick after eating at a Chipotle store has risen to 141.
5. Baker Hughes Deal Will Likely Close in 2016 — Halliburton’s proposed $35B acquisition of rival Baker Hughes (NYSE:BHI) will likely close in 2016 instead of this year as talks with U.S. regulators continue, Halliburton (NYSE:HAL) CFO Christian Garcia told a Wells Fargo Energy Symposium. Both companies have already agreed to divest $5.2B in overlapping businesses to quell concerns that the merger, which would create the second-largest oilfield services company, would lead to higher prices and less innovation.

The week ahead — Economic data from Econoday.com:

FOMC Meeting Week

“Nothing created by the mind of man has ever equaled the stock market in terms of its sheer ability to frustrate people. Why is this? The answer is that the stock market frustrates because millions of traders and investors across the face of the U.S. and the world are trying to make money out of the market. Now when millions of people are trying to make money out of the market, you know right off the bat that it can’t be done. A majority of people are not fated to make money doing anything, much less beat the stock market. ‘It’s not fair’ you complain, ‘why can’t all those nice, well-meaning people make money with their trading and investing?’ There’s one simple fact that makes it difficult. And that fact is that throughout history there have always been a small number of financial winners and an army of financial losers. So when we state that the stock market is frustrating, we must qualify the statement by asking, ‘frustrating for whom?’ And the answer again is that the stock market is frustrating to the great majority of participant-losers but highly rewarding to the small minority of informed, hard-working, intelligent winners.” — Richard Russell

1. Puerto Rico Debt Payment Comes Due –Puerto Rico makes a $354M debt payment owed to creditors late last week, while a U.S. congressional hearing about the island’s fiscal crisis takes place in Washington. Analysts have warned that the debt owed by the Government Development Bank could be the first major payment skipped by the San Juan government as part of a strategy to preserve cash and force creditors to negotiate.
2. China’s Renminbi Is Approved by I.M.F. as a Main World Currency — NYTimes, the IMF added the yuan to its Special Drawing Rights basket. Effective Oct. 1, 2016, the renminbi will officially be recognized as a reserve currency, meaning central banks will have an alternative for foreign exchange reserves. The yuan also meets criteria of being “freely usable,” or widely used for international payments and in foreign exchange markets, boosting China’s influence in the global economy. The move will help pave the way for broader use of the renminbi in trade and finance, securing China’s standing as a global economic power. Just four other currencies — the dollar, the euro, the pound and the yen — have the I.M.F. designation.
3. ECB Cuts Deposit Rate, Launches Fresh Stimulus — ECB President Mario Draghi said the bank would cut the deposit rate to -0.30% from -0.20%. Mr. Draghi noted the success of the bank’s existing QE program, and said it would be extended until March 2017 or “beyond if necessary.” The Frankfurt-based ECB will also extend quantitative easing by six months until at least March 2017 at the current rate of 60 billion euros a month and broaden the assets purchased to include local and regional debt, ECB President Mario Draghi said last Thursday.
4. FOMC Chairwoman Eager to Raise Rates — Fed Chair Janet Yellen said she’s “looking forward” to the first interest rate hike in nearly 10-years. She stated data since the Oct. gathering have been “consistent” with improving labor market, which should lead to 2% inflation.
5. American Association of Individual Investor (AAII) bullish sentiment — courtesy of BIG, In this week’s report, bullish sentiment dropped from 32.36% down to 29.49% for the first sub 30% reading in bullish sentiment since the early October lows. The latest survey shows investors are increasingly less willing to take a stand on the market in one way or the other.

The week ahead — Economic data from Econoday.com:

“If you have an approach that makes money, then money management can make the difference between success and failure… … I try to be conservative in my risk management. I want to make sure I’ll be around to play tomorrow. Risk control is essential.” – Monroe Trout

1. Conservative Mauricio Macri Wins Argentina Presidency — Argentina conservative opposition candidate Mauricio Macri has been confirmed as the winner in Argentina’s presidential elections, defeating the ruling Peronist party’s Daniel Scioli by a smaller margin than expected. Macri will have to deal with the difficult economic legacy of Cristina Fernandez de Kirchner, who with Nestor Kirchner, her late husband and predecessor, ruled Argentina for the past 12 years. Since taking over in 2007, Fernandez has seized pension fund assets and the nation’s largest energy company, while increasing welfare programs and battling U.S. hedge funds over defaulted debt.
2. Turkish Warplanes Shot Down a Russian Military Aircraft On the Border With Syria — Turkish Officials said the Su-24 jet was downed after it knowingly violated Turkish airspace and its two pilots ejected before it crashed. Russia has warned its former ally and trade partner that diplomatic and commercial relations between the countries are at risk, calling the downing “a stab in the back.” The incident also dims the prospects for a grand international coalition to change the course of chaos in Syria.
3. U.S. Probe into Wal-Mart Foreign Bribery Finds Possible Misconduct — WSJ reported A Justice Department probe has found evidence of possible misconduct by Wal-Mart (NYSE:WMT) in Brazil, after uncovering little to support sweeping allegations involving the company in Mexico, WSJ reports. Prosecutors have focused on $500K believed to have gone to an individual hired to secure government permits to construct two stores in Brasilia between 2009 and 2012. Investigators are now assessing whether Wal-Mart employees knew about or approved of the suspected payments.
4. China Battered as Brokerage Probe Sparks Selloff — Chinese equities dove sharply last Friday after the Chinese authorities disclosed investigations into several major brokerages over suspected trading violations. The probes into Citic, Guosen, Founder and Haitong Securities followed additional souring market sentiment that revealed lackluster Chinese industrial data in October. The Shanghai Composite Index fell 5.5% to 3,436, wiping out most of its gains this month and recording its biggest one day drop since Aug. 25.

The week ahead — Economic data from Econoday.com:

“I’m always thinking about losing money as opposed to making money. Don’t focus on making money, focus on protecting what you have” – Paul Tudor Jones.

1. Japan’s Economy Relapses Into Recession — Japan’s economy slid back into recession in the third quarter, marking the latest setback for Prime Minister Shinzo Abe and his “Abenomics” policies. With consumer spending still soft and businesses cutting back on investment, gross domestic product shrank at an annualized rate of 0.8%, putting policymakers under pressure to deploy more stimulus measures. The GDP figure follows a revised 0.7% contraction in April-June, which was the first decline in three quarters.
2. S&P 500 Shows Q3 Earnings With Negative Growth — with more than 90% of companies having already reported results, S&P 500 earnings are on track to close their first season of negative growth since 2009. Thomson Reuters data suggests this will occur again in Q4, predicting a bigger 2.4% contraction and setting up for a bona fide ‘earnings recession’ (two consecutive periods of declines).
3. U.S. Investigative Panel Plans Hearing on Drug Pricing — a U.S. House of Representatives investigative panel plans to hold a 2016 hearing on skyrocketing drug costs, a move that comes at a time when Valeant Pharmaceuticals (NYSE:VRX) is facing increased scrutiny into its pricing practices. Earlier this month, the U.S. Senate Special Committee on Aging launched a probe into drug pricing at Valeant and Turing, signaling growing bipartisan agreement over the need to review prescription medicine costs across the nation.
4. Fed Closer to Dec Rate Hike — minutes from the central bank’s Oct 28 policy meeting showed “most participants” think Dec’s meeting “could well be” the time to increase benchmark rates for the first time in nearly a decade. A strong jobs report and comments from Fed officials since Oct’s meeting have pointed to a Dec rate hike.
5. U.S. Sets Tax Inversion Curbs — the Treasury released new measures to limit US companies ‘ use of overseas takeovers to shift their tax domocile overseas, cutting their exposure to high US tax rates. Some of the rules are retroactive to Sept ’14.

The week ahead — Economic data from Econoday.com:

“One characteristic I’ve found among successful traders is that they function effectively when they’re not trading. When markets become very quiet and range bound, they occupy themselves with a variety of activities, from sharing ideas with peers to conducting research. Traders who do not tolerate inactivity well inevitably feel the need to trade, often when there is no objective edge present. For them, losing money is less onerous than experiencing boredom.” — unknown

1. OECD Lowers Global Growth Outlook Again — the OECD is cutting its world forecast as slower growth in emerging markets spilled over into countries such as Germany and Japan. The Paris-based organization stated “Global growth prospects have clouded this year, the outlook for emerging-market economies is a key source of global uncertainty at present.” The OECD now expects the world economy to expand 2.9% in 2015 and 3.3% in 2016, down from the 3% and 3.6% it predicted in September.
2. OPEC Policy Change Unlikely at Upcoming Meeting on Dec. 4 in Vienna — Saudi Arabia is determined to stick to its policy of pumping enough oil to protect its global market share, indicating that the country is in no mood to change tack ahead of OPEC’s Dec. 4 meeting in Vienna. “The only thing to do now is to let the market do its job,” said Khalid al-Falih, chairman of Saudi Aramco. “There have been no conversations here that say we should cut production now that we’ve seen the pain.”
3. G20 Summit on Nov. 15-16 in Turkey — at the G20 summit this week, the U.S. will likely urge leaders to use monetary, fiscal and structural tools at their disposal to offset a shortfall in global demand and will push countries with extra fiscal space to spend. Treasury Secretary Jack Lew will join President Obama and others at the summit on Nov. 15-16. The U.S. is also expected to support the inclusion of the yuan in the IMF’s benchmark currency basket, provided China meets existing criteria of the international lender.
4. Three Men Charged Over Massive Cyberfraud That Hit J.P. Morgan — U.S. prosecutors have unveiled criminal charges against three men accused of running a sprawling computer hacking scheme that included the largest ever theft of 100M customers’ data from twelve financial institutions and publishers. The cyberfraud, which began in 2007, also involved inflated stock prices, online casinos, payment processing for criminals and an illegal bitcoin exchange. Among the hack victims: JPMorgan (NYSE:JPM), TD Ameritrade (NYSE:AMTD), E*Trade (NASDAQ:ETFC), Scotttrade and News Corp. (NWS, NWSA).
5. Puerto Rico Likely to Default on Some Debt According to Moody Credit Rating Agency — according to Moody’s Investor Service, Puerto Rico is likely to default on at least some of its $355M in debt payments due Dec. 1. the U.S. commonwealth, facing around $70B in total debt, is struggling to breathe life into a stalled economy with a roughly 45% poverty rate. Moody’s, which has Puerto Rico rated at Caa3 negative, said the island “continues to operate with extremely limited internal liquidity and no access to external sources of financing.”
6. US Retail Sales Rose 0.1% in Oct vs 0.3% Rise Expected — the Commerce Department said on last Friday retail sales edged up 0.1 percent last month after being unchanged in September. Retail sales excluding automobiles, gasoline, building materials and food services rose 0.2 percent after an upwardly revised 0.1 percent gain in September. “Core” retail sales correspond most closely with the consumer spending component of gross domestic product. Core retail sales previously were reported to have dipped 0.1 percent in September.

The week ahead — Economic data from Econoday.com:

“Never follow the crowd.” ― Bernard M. Baruch

1. MSCI Prepares for Chinese A-share Inclusion Through ADRs — MSCI will begin to add overseas-listed Chinese shares to its emerging market indexes this month, which could eventually lead to mainland-listed stocks, known as A-shares, finding their way into global equity portfolios. The addition of American Depositary Receipts will be the first test of foreign demand for greater exposure to China since its stock market plunge over the summer. About $1.6T tracks the MSCI Emerging Markets Index (ETF: EEM), which will be the most affected fund by the ADR inclusion.
2. Google Plans to Start Delivering Packages By Drone in 2017 — Google disclosed a delivery drone initiative called Project Wing. Wing chief David Vos has publicized that the company aims to begin delivering packages to consumers via drones in 2017. However, details remain scant on what types of packages will be supported, where they’ll be delivered, and at what scale. The Atlantic previously reported Google’s (GOOG, GOOGL) drone design is “a hybrid of a plane and a helicopter that takes off vertically, then rotates to a horizontal position for flying around.”
3. More Car Pollution Problems at VW — VW (OTCQX:VLKAY) revealed it has understated carbon dioxide emissions for about 800K of its vehicles sold in Europe, and overstated the cars’ fuel economy, a move that could result in an estimated €2B in financial penalties. Those costs would be on top of the €6.7B the company has already set aside to address its central emissions crisis, which affects 11M diesel vehicles worldwide.
4. Facebook To Launch Notify App Next Week — Facebook’s new standalone news app called Notify is scheduled to launch next week, FT reports, featuring content from dozens of media partners including Vogue, The Washington Post, CNN and CBS. Notify, which will send out push notifications from news sources, follows a positive response from publishers and readers to Facebook’s (NASDAQ:FB) Instant Articles, which embeds stories in its mobile app.
5. U.S. Economy Added 271,000 Jobs in October, Unemployment Rate at 5% — the American economy added 271,000 jobs in October, the government reported. The unemployment rate dipped to 5 percent, from 5.1 percent in September. Average hourly earnings also bounced back, rising 0.4 percent in October after showing no increase in September; that lifted the gain to 2.5 percent over the last 12 months, the healthiest since 2009. The combination of the surge in job creation, rising wages and the falling unemployment rate, the odds of a hike by the Federal Reserve have jumped above 70%, according to the CME Group’s FedWatch tool.

The week ahead — Economic data from Econoday.com:

“Don’t try to buy at the bottom and sell at the top. It can’t be done except by liars.” — Bernard Baruch
–> Apology for the late post as we enjoyed a long weekend <--- 1. China Currency Yuan Poised to Join IMF Currency Basket — IMF representatives are set to give the all-clear for China’s yuan to be included in the lender’s Special Drawing Rights basket, laying the groundwork for a favorable decision by policymakers. Meanwhile, China took another step toward liberalizing its financial system, after the PBOC removed the cap on deposit rates. That move was paired with another cut to interest rates and banks’ reserve requirements.
2. White House, Congress Reach Tentative Budget Deal — the White House and Congressional leaders have reached a tentative deal on a two-year budget plan that would suspend the debt limit through mid-March 2017 and boost spending by $80B through September 2017. Those increases would be offset by cuts in spending on Medicare and Social Security disability benefits, and savings and revenue from other programs.
3. Walgreens Boots (WBA) to buy Rite Aid (RAD) –Walgreens Boots Alliance Inc.(WBA), said it would buy Rite Aid Corp. for $17.2 billion in an all-cash deal. The tie-up with Rite Aid(RAD), uniting two of the country’s three biggest drugstore owners, would create a drugstore giant as companies across the U.S. health-care industry look for ways to bulk up. CVS is the overall leader. Drug distributor AmerisourceBergen (ABC) is seen as a benefactor, which as a deal with Walgreens while McKesson (MCK) supplies Rite Aid (RAD).
4. Third-quarter GDP Growth Just 1.5% — Gross domestic product (GDP) the value of everything a nation produces — rose at a 1.5% annual pace from July through September, the government reported. The U.S. had grown at a crisp 3.9% rate in the second quarter. In the third quarter as companies cut back production to prevent a worrisome buildup in inventories, particularly of goods destined for foreign markets. However, consumer spending, the single largest determinant of U.S economic growth, rose at a 3.2% annual pace following an even larger gain in the second quarter.
5. FOMC Stands Pat, Drops Hints — the Central Bank left rates alone, but cut its reference to the global market turmoil that kept it on hold in Sept. The question is whether it will hike in Dec., rather than when, if ever, a rate rise will be appropriate, policymakers reported. Fed funds futures raised the odds of a year end hike.

The week ahead — Economic data from Econoday.com:

“The main purpose of the stock market is to make fools of as many men as possible.” ― Bernard M. Baruch

1. China GDP Grew 6.9%, Slowest Pace Since 2009 — China’s economy grew 6.9% in the third quarter from a year ago, beating forecasts for 6.8% growth, but decelerating to its slowest pace since the global financial crisis. The results add to doubts the country can meet its year-end GDP target of about 7%, and raises pressure on Beijing to roll out more stimulus measures following a summer stock market plunge and devaluation of the yuan.
2. ECB. Holds Interest Rates Steady — the European Central Bank (ECB) also left unchanged its economic stimulus program, but said it would review its impact on the eurozone economy in December. Grounds for extending QE would include deflation risks, slowing growth in China and stock market volatility.
3. Deadline for the “Debt-Ceiling” Must Be Raised By Nov. 3 — Treasury Secretary Jacob Lew is concerned that “last-minute brinkmanship” in Congress could lead to a legislative “accident” in which lawmakers would fail to raise the debt ceiling before a Nov. 3 deadline. The standoff is bubbling through financial markets as investors limit their exposure to Treasury bills that mature in November, pushing yields to levels last seen two years ago, when Congress went through a similar episode.
4. Hedge Fund Losses Swell Continue Into September — per Hedge Fund Research, hedge funds suffered their largest quarterly loss in assets since the financial crisis during the three months that ended in September. The third-quarter saw the average fund lose 3.9% driven by slowing growth in China, sliding commodities prices and a likely U.S. Fed rate hike that sent stocks tumbling. Well known Hedgefunds such as Bill Ackman’s Pershing Square (OTCPK:PSHZF) has now fallen 12.6% for the year, while David Einhorn’s Greenlight Capital (NASDAQ:GLRE) is down 17% YTD.
5. China’s Central Bank Cuts Rates for 6th Time Since Nov — the People’s Bank of China (PBOC) cut rates for the 6th time in less than a year and relaxed reserve requirements yet again. Growth has flagged in the world’s No. 2 economy. China has pursued its most aggressive policy easing cycle this year since the 2008/09 global financial crisis, as policymakers seek to invigorate an economy beset by weak demand and excessive industrial capacity.

The week ahead — Economic data from Econoday.com:

“Buy when others are despondently selling and sell when others are greedily buying” — Mark Mobius

1. China Trade Data Shows Further Weakness in — China’s trade slump has extended into September. Dollar-denominated imports plunged 20.4% Y/Y last month, while exports slipped 3.7%, translating into a trade surplus of $60.34B.
2. US Retail Sales Rose 0.1% in Sept Smaller than Expected — Retail sales excluding automobiles, gasoline, building materials and food services slipped 0.1 percent after a downwardly revised 0.2 percent gain in August. Cheaper gasoline weighed on service station receipts, but gains in purchases of automobiles and other goods pointed to solid domestic demand that could shield the economy from slowing global growth.
3. IPO Market Remains Under Pressure — following in the footsteps of Neiman Marcus (NMG), Albertsons (NYSE:ABS) has delayed its IPO due to Wal-Mart’s (NYSE:WMT) lower guidance weighed heavily on the U.S. market and pummeled retailers’ shares. Separately, payments processor First Data (NYSE:FDC) priced its initial public offering at $16/share, below its previously indicated range of $18-$20/share.
4. Square (SQ) (Mobile Card-Reader/Payment Service Provider) Files for IPO — Square has filed a public S-1. The mobile card-reader/payment service provider is listing on the NYSE under the symbol (SQ). Square generated $23.8B in gross payment volume in 2014 via 446M payments, and had over 2M sellers accepting five or more payments in the 12 months ending in June. 1H15 payment volume totaled $15.9B (+53%).
5. Fitch Downgrades Brazil to One Notch Above Junk — Fitch has cut Brazil’s credit rating to the brink of junk, warning the country could soon lose its coveted investment grade due to the “rising government debt burden, increased challenges to fiscal consolidation and a worsening economic growth backdrop.” The rating agency left a negative outlook on the new rating, suggesting it eventually could follow Standard & Poor’s recent downgrade to junk. Brazil’s economy is the 7th largest in the world at $2.4Tn – that’s above Italy, India, Russia, Canada, Australia and just under France ($2.8Tn) and the UK ($2.9Tn). S&P cuts Brazil credit rating dropped to BBB- by last month as well.
6. AAII Bullish Sentiment Dropped — According to the weekly sentiment survey from the American Association of Individual Investors (AAII), bullish sentiment dropped from 37.5% last week to 34.1%. This week also marks the 33rd straight week that bullish sentiment has been below 40%, which is also the longest streak on record. Oh well, maybe next week. Chart below via courtesy of BIG.

The week ahead — Economic data from Econoday.com:

“I made my money by selling too soon & never lost money by turning a profit” — Bernard Baruch

1. Trans-Pacific Partnership Agreed — after five years of talks, a dozen nations across the Pacific Basin clinched an agreement that would reduce tariffs in countries making up 40% of the global economy. Tough issues surrounding the Trans-Pacific Partnership, including auto trade, dairy exports and monopoly periods for next-generation drugs were agreed.
2. Facebook To Beam Internet From Space to Africa — Facebook (FB) plans to launch a satellite in partnership with France’s Eutelsat Communications (OTCPK:EUTLY) to bring connectivity to large parts of sub-Saharan Africa. The satellite, part of Facebook’s Internet.org platform, is under construction and will be launched in 2016.
3. German Exports Slowed The Most Since 2009 Recession — German exports slumped the most since the height of the 2009 recession in another sign Europe’s largest economy is losing momentum in Q3. Foreign sales slid 5.2% to €97.7B M/M and imports tumbled 3.1% to €78.2B, narrowing the trade surplus to €19.6B. The data follows sharp declines in industrial orders and output in August, suggesting waning demand from abroad may be leaving its mark on Germany.
4. VW America CEO Knew of Emissions Problem in 2014 — shock revelations over Volkswagen (OTCQX:VLKAY) emission scandal have already wiped more than 40% off Volkswagen’s market cap, but the direct and indirect costs are still being assessed as the company risks severe fines and possible damages from customers’ lawsuits. In testimony of his hearing with the House energy committee, U.S. head of Volkswagen (OTCQX:VLKAY) Michael Horn offered a “sincere apology” over the “deeply troubling” pollution scandal and admitted he was made aware of “a possible emissions non-compliance” as early as spring 2014. According to an estimate by Warburg Research, the automaker will ultimately face costs and lost revenue from its damaged image of more than €35B ($39B).
5. Fed Minutes Shows Fear of Weak China, Prices — from the Sept 16-17 meeting, Fed policy makers chose not to raise rates last month due to worries about China and other overseas economies possible impact on US exports and overall economy. The minutes also show how concerned members were about inflation remaining persistently low.

The week ahead — Economic data from Econoday.com: