“The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance, or the get-rich-quick adventurer. They will die poor.” – Jesse Livermore

1. U.S. Delays Tariffs on European Union, Canada and Mexico for 30 days — the Trump administration is delaying a decision about whether to impose steel and aluminum tariffs on the EU, Canada and Mexico until June 1, giving key allies a reprieve as the countries carry out further negotiations. The Iran deal is also on watch.
2. CFTC Chair Comments on Crypto Currency Regulation — according to CFTC Chairman J. Christopher Giancarlo, Bitcoin has “elements of all of the different asset classes,” stating that the popular crypto-currency is part currency, part security and part digital coin. “At the end of the day, it’s for Congress, and not regulators, to decide whether new policies should be evolved for these new asset classes… I don’t see it being resolved any time soon.”.
3. U.S. Trade Team Heads to China — A U.S. delegation led by Treasury Secretary Steven Mnuchin is on its way to China to discuss economic matters and the trade deficit. “Very much like North Korea, this should have been fixed years ago,” President Trump wrote in a tweet. Some economists anticipate that a short-term bargain involving the automobile industry and other previously announced moves could be struck. The yuan has weakened against the U.S. dollar for the fourth straight day with the trade talks just getting started.
4. FOMC Meeting Recap — the Federal Reserve held interest rates steady after its two-day policy meeting and said it will monitor inflation. The policy-making committee used the word “symmetric” twice in relation to its inflation target, in a potential cue to bond traders that a small overshoot past the 2% inflation target will be tolerated. The Fed noted that risks to the economic outlook are roughly balanced. “The FOMC statement reinforced market expectation for another 25 basis points rate rise in its June meeting,” said JPMorgan chief market strategist Tai Hui.
5. Iran Won’t Renegotiate Nuclear Deal — President Trump warns that unless European allies rectify the 2015 nuclear deal’s “terrible flaws” by May 12, he will refuse to extend U.S. sanctions relief for the oil-producing Islamic Republic. Foreign Minister Mohammad Javad Zarif stated that “Iran will not renegotiate what was agreed years ago and has been implemented,”.
6. Berkshire Increased Apple Stake in Q1 by Adding an Additional 75M Apple Shares — Berkshire Hathaway bought 75M additional Apple (NASDAQ:AAPL) shares in Q1, with Warren Buffett outlining that the company “earns almost twice as much as the second most profitable company in the U.S.” The new investment brings its total stake in the tech giant to 240.3M shares worth $42.5B.
7. AAII Weekly Sentiment — according to this week’s sentiment survey from AAII, bullish sentiment declined from 36.91% down to 28.4%. While anything sub-30% is considered low, we actually saw a lower weekly print back in the first half of April, when bullish sentiment dropped down to 26.09%.

While bullish sentiment declined over 8 percentage points, bearish sentiment increased by less than 5 points. At the current level of 30.25%, it is nowhere near its recent high of over 40%.

The week ahead — Economic data from Econoday.com:

“If I have positions going against me, I get right out; if they are going for me, I keep them… Risk control is the most important thing in trading. If you have a losing position that is making you uncomfortable, the solution is very simple: Get out, because you can always get back in.” – Paul Tudor Jones

1. Iran Unrest Lifts Crude Prices — crude oil benchmarks, Brent and WTI, have both started the year above $60 per barrel for the first time since January 2014. “Growing unrest in Iran set the table for a bullish start to 2018,” the U.S.-based Schork Report said in a note to clients. Iran is the third-largest producer in OPEC, which agreed last year to extend its oil output cuts through Dec. 31, 2018.
2. China Became Biggest Importer of Natural Gas — Beijing’s crackdown on pollution has put China on track to overtake Japan this year as the world’s biggest importer of natural gas. Already the largest importer of oil and coal, China is the world’s third biggest user of natural gas behind the U.S. and Russia, but has to import around 40% of its total needs as domestic production can’t keep up with demand.
3. Trump to ‘Sharply’ Expand Offshore Drilling, Including Pacific Ocean — looking to boost domestic energy production, the Trump administration has proposed opening nearly all U.S. offshore waters to oil and gas drilling, including in the Atlantic, Arctic and Pacific oceans. That would reverse the Obama-era order placing 94% of the Outer Continental Shelf off limits to drillers.
4. Attorney General Sessions to Allow State Attorneys Decide on Federal Pot Enforcement Law — Attorney General Jeff Sessions has rescinded an Obama-era policy that had discouraged prosecutors in states where marijuana was legalized from bringing pot-related charges, unless they involved distribution to minors, revenue sale benefiting gangs and a few other federal priorities. In its place, prosecutors will be given discretion (not guidance) to pursue marijuana-related prosecutions.
5. AAII Weekly Sentiment Survey — According to the weekly sentiment survey from the American Association of Individual Investors (AAII), bullish sentiment increased to 59.75% from 52.65% last week. Not only is this the third straight week where bullish sentiment has been above 50%, but it’s also the second-highest reading in bullish sentiment of the bull market!

Also, Bearish sentiment dropped from 20.63 down to a paltry 15.56%. The only week where bearish sentiment was lower was in November 2014, when it dropped to 15.05%.

The week ahead — Economic data from Econoday.com:

“The rarest thing on Wall Street is patience!” — unknown

1. Doha Disappoints as Saudi Arabia’s Refusal to Participate In The Deal Without Iran Agreement — the world’s largest oil exporters failed to reach an agreement in Doha to freeze output at January levels. The major sticking point during the meeting was the heightened tension between Saudi Arabia, the de facto OPEC leader, and Iran, which made a last-minute decision not to attend the gathering. Although no one expected Tehran to freeze production after its international sanctions were lifted, it wasn’t clear if the Saudis would demand that Iran immediately join the pact.
2. Mitsubishi Admits To Cheating In Fuel Economy Tests — Mitsubishi Motors Corp. reported late last week there were improprieties in its tests related to fuel-economy performance, affecting about 625,000 vehicles. The improper testing was conducted on four minicar models sold in Japan, Mitsubishi said. Two of the four models are manufactured by Mitsubishi and supplied to Nissan Motor Co. 7201, -0.97% NSANY, -1.27%.
3. SunEdison Files for Bankruptcy After Buying Spree Sours — SunEdison Inc. filed for bankruptcy protection after a two-year, $3.1 billion acquisition binge that drove its debt to unmanageable levels. SunEdison is one of the largest non-financial companies to do so in the past 10 years. Once the fastest-growing U.S. renewable energy developer, SunEdison embarked on an aggressive acquisition strategy that left it struggling with $12 billion in debt.
4. Volkswagen Posts Deep Loss After Taking $18.28 Billion Hit on Emissions Scandal — Volkswagen AG took a €16.2 billion ($18.28 billion) charge related to the emissions-cheating scandal, forcing it to slash its 2015 dividends and post a deep loss. The car maker took a major step toward resolving the scandal, agreeing to offer U.S. owners of nearly 500,000 vehicles a blend of car buybacks, repairs and compensation.
5. Bullish Sentiment Rebounds But Still Below 40% — courtesy of BIG, according to AAII, bullish sentiment increased from 27.9% up to 33.4%. After a huge rally off the February lows that has taken the S&P 500 back within a couple of percentage points from its all-time high. The subdued level of enthusiasm on the part of investors is a trend that has been in place for well over a year now, and one we have thoroughly documented. In fact, this week’s 33.4% reading in bullish sentiment represents the 25th straight week where bullish sentiment was below 40%, and outside of one week in late October, bullish sentiment has been below 40% for 59 of the last 60 weeks.

The week ahead — Economic data from Econoday.com:

“The essence of portfolio management is the management of RISKS, not the management of RETURNS.” — Benjamin Graham

1. Berkshire Ups Stake in Phillips 66 (NYSE:PSX) — Berkshire Hathaway has resumed its purchases of Phillips 66 (NYSE:PSX), spending roughly $832M in January to boost its stake even as the oil refiner’s profit margins narrowed. According to a regulatory filing, the conglomerate paid about $198M last week for 2.54M shares of PSX, giving it 72.29M overall, or a roughly 13.7% stake in the company. Phillips 66 is Berkshire’s (BRK.A, BRK.B) sixth-largest stock holding.
2. S&P Cuts Ratings of 10 U.S. Oil Companies — S&P ratings cut a number of energy companies by one notch: Chevron (NYSE:CVX), Apache (NYSE:APA), Continental Resources (NYSE:CLR), Devon Energy (NYSE:DVN), EOG Resources (NYSE:EOG), Hess (NYSE:HES), Hunt Oil, Marathon Oil (NYSE:MRO), Murphy Oil (NYSE:MUR) and Southwestern Energy (NYSE:SWN).
3. Florida Governor Declares Zika Health Emergency — Florida Governor Rick Scott has declared a state of emergency in four counties where people have been diagnosed with the Zika virus. While nine cases of the mosquito-borne illness have been detected in the state, health officials believe all of the viruses were contracted while traveling to affected countries. The disease, for which there is no vaccine and no specific cure, has been linked to a recent surge of birth defects in Brazil.
4. American Association of Individual Investors (AAII) Bullish Sentiment Declined — according to the weekly sentiment survey from the American Association of Individual Investors (AAII), bullish sentiment declined from 29.75% down to 27.55%. That makes 48 weeks out of 48 where bullish sentiment has been below 40%. Even as bullish sentiment declined, bearish sentiment also declined falling from 39.96% down to 34.72%.

The week ahead — Economic data from Econoday.com:

“When the fear of losing money overcomes the fear of looking stupid . . . that’s a bottom!” — Arthur Cashin

1. China GDP Growth Sinks to 25-Year Low — China’s Q4 gross domestic product eased to 6.8% from a year earlier, while full-year growth slipped to 6.9%, adding to the troubling economic picture that’s unsettling traders around the world. Experts expect Beijing may do more to stimulate its economy.
2. Iranian Sanctions Come to An End — July’s nuclear deal between Iran and six world powers came into effect, triggering an end to years of sweeping sanctions on Tehran. $100B worth of Iranian assets are set to be unfrozen and many global companies will now be permitted to do business with the Islamic Republic. Iran has also said it plans to scale up oil production and exports by 500K bpd – a move that comes as crude prices languish below $30/bbl and amid deteriorating relations with Saudi Arabia.
3. Saudi Arabia Warns Banks Against Riyal Speculation — the Saudi Arabian central bank has warned commercial banks against betting on depreciation of the riyal as tumbling oil prices put pressure on the Saudi currency. Banks and hedge funds are also speculating that low oil prices might eventually prompt Riyadh to scrap its peg to the U.S. dollar (which has been linked since 1986). Bets for a devaluation of the riyal reached their highest in almost two decades this month, driving 12-month forward contracts to their highest since at least December 1996.
4. Russia Ruble’s Dramatic Plunge Continues — Russia’s ruble fell more than 5% late last week, to hit a new record low of 85.97 per dollar amid a global crash in crude prices. The country is suffering considerably from the oil slump, which has sparked widespread predictions of a second straight year of recession.
5. Venezuela Fears of Default Grows — the plunge in the price of oil is causing more investors to bet that Venezuela will default on its $120B pile of foreign debt, an event that would trigger a messy battle over the country’s oil shipments and deepen its economic and political crisis. Oil accounts for 96% of Venezuela’s export earnings.
6. AAII Bullish Sentiment Ticks Higher — according to the weekly survey from the American Association of Individual Investors (AAII), bullish sentiment increased from last week’s depressed reading of 17.9% up to 21.52%. Even at that level, though, sentiment remains extremely bearish.

The week ahead — Economic data from Econoday.com:

“Expect Volatility and Profit From It” — Benjamin Graham

1. Deadly Quebec crash raises doubts about oil trains — the blast, which killed at least five people in Quebec town of Lac-Megantic, is the most serious in a series of accidents involving freight trains. Those include Canadian Pacific (CP) and Berkshire Hathaway’s (BRK.A) BNSF. The accident could strengthen the case for approving TransCanada’s (TRP) Keystone oil pipeline.
2. German exports, industrial output slump — German exports dropped at the sharpest rate since 2009 in May, sliding 2.4% vs -1.4% in April and consensus of -0.4%. Imports grew 1.7% vs +1.2% previously, while the trade surplus tumbled 19.4% on month to €14.1B. The factors hurting German exports include the eurozone debt crisis and the slowdown in China. Meanwhile, industrial production dropped 1% in May vs growth of 2% in April and consensus of -0.5%.
3. Chinese Exports Signal Slowing — CNBC, China’s consumer inflation accelerated in June, driven by a rise in food prices. However, exports in June unexpectedly fell 3.1% vs. a year earlier, the worst drop in years; Chinese imports also sank 0.7%. The data reflect weakness both at home and overseas.
4. White House cuts GDP, deficit forecasts — the Obama administration has trimmed its economic outlook, predicting that GDP will grow 2% this year vs a prior forecast of 2.3%, and 3.1% in 2014 vs 3.2%. The White House’s Office of Management & Budget cited “serious headwinds” for the reduced estimate, such as sequestration, European austerity and China’s slowdown.
5. American Association of Individual Investors (AAII) bullish sentiment — courtesy of BIG, bullish sentiment increased from 30.3% to 42.0%. This is the largest weekly reading since 5/23 and the largest one-week increase since 3/14.

6. BOJ holds steady, cuts inflation outlook — the Bank of Japan has kept its monetary policy unchanged, leaving interest rates at minimum levels and maintaining its pledge to increase base money at an annual pace of ¥60-70T ($600-700B). The BOJ said the economy is “starting to recover moderately,” but cut its FY 2014 real growth forecast to 2.8% from 2.9% and median inflation outlook to 0.6% from 0.7%.
7. China Finance Minister Expects GDP Growth of 7% in 2013 — CNBC, China GDP expanded 7.5% on year in Q2, although that was down from 7.7% in Q1. China’s government has continued to dial down expectations for the country’s economy, with Finance Minister Lou Jiwei forecasting that GDP will rise 7% this year, below official targets of 7.5% and the 7.7% achieved in 2012.

The week ahead — Economic data from Econoday.com: