Whenever a well-known bearish analyst is interviewed in the financial press, it usually coincides with an important near-term market bottom – Clif Droke

1. Berkshire Returns to Energy Sector with $4.5B Stake in Phillips 66 — according to an SEC filing disclosed late on Friday, Berkshire Hathaway (BRK.A, BRK.B) has taken a $4.5B stake in Phillips 66 (NYSE:PSX), as Warren Buffett takes a renewed interest in the energy industry. Berkshire now holds nearly 58M shares after purchases this week, or more than 10% of the total outstanding. The latest wager comes amid a slump in crude prices, driven by concerns that a supply glut will persist.
2. Hedge Funds Took a Beating in August — billionaires David Einhorn and Daniel Loeb saw heavy declines at their main funds during August’s dramatic market selloff, as many other hedge funds suffered significant losses. Einhorn’s Greenlight Capital (NASDAQ:GLRE) fell 5.3% in August, extending the roughly $12B firm’s loss for the year to 13.8%. Others like Pershing Square Holdings portfolio dropped 9.2%, and is now down 0.1% since January. Last year the fund gained 40%, beating the S&P’s 13.7% gain. Other hedge fund losses for August: Third Point -5.2%; Jana Partners -4.3%; Viking Global -2.1%; Andor Capital -4.5%.
3. China Targets Media In Market Rout — Beijing punished nearly 200 people for allegedly spreading Internet rumors amid its market sell-off. In a broadcast confession, a reporter for a top Chinese financial news publication said he caused stock market “panic and disorder”. The head of the hedge fund’s Chinese unit has been detained by police to help with an investigation into market volatility.
4. Chinese Markets Closed on Sept 3 & Sept 4 due to Military Parade — Chinese markets closed on Sept 3 & Sept 4 due to a giant military parade marking the 70th anniversary of the end of World War II. Presiding over the extravaganza, President Xi Jinping said China would remain committed to “the path of peaceful development” and unexpectedly pledged to slash 300K troops from the country’s 2.3M strong military. The cuts, the largest reduction since 1997, will be mostly complete by the end of 2017.
5. ECB Ready To Add Stimulus — the ECB, seeing weaker growth and inflation, left open the door to expand and extend its monthly $66.7 bil bond-buying program, which is set to end in Sept 2016. ECB President M. Draghi signaled that the central bank is prepared to act. The ECB cut its GDP growth forecast to 1.7% from 1.9% in June and its inflation forecast to 1.1% from 1.5%.

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. China Markets Fall Sharply Despite Fresh Help From Beijing — Chinese shares plunged again last week as investors shrugged off a series of regulatory support measures. The panic in mainland markets also rippled across the border including Hong Kong.
2. FOMC June Meeting Minutes — minutes from the Fed’s June 16-17 meeting showed most policy makers continued to justify an interest rate hike later. However, they were worried about Greece & China, where conditions have since deteriorated. Fed officials also voiced concerns about US consumer caution, business investment and exports.
3. IBM Announced New kind of Ultra-Dense Chip — IBM has announced a new kind of ultra-dense chip, which squeezes in four times as much computing power as the best silicon currently available. The new chips will usher in the possibility of creating 7-nanometer transistors (a strand of DNA in comparison measures 2.5 nanometers in diameter). IBM (NYSE:IBM) made the research advance by using silicon-germanium instead of pure silicon, allowing transistors to switch faster and use less power by sitting more densely on a chip.
4. Europe Weighs Greek Proposal as Tsipras Seeks Lawmaker Support — the Greek PM submitted the packet of spending cuts, pension savings and tax increases to the European Commission. The government offered to meet most of the demands made by creditors in exchange for a third rescue to “fully cover” Greece’s financing needs through 2018. The bailout from the European Stability Mechanism may amount to 59 billion euros.
5. Investor Sentiment Rebounds Slightly — according the weekly sentiment survey from the American Association of Individual Investors (AAII), bullish sentiment increased from a depressed reading of 22.61% last week to 27.91% this week. Even at current levels, though, bullish sentiment remains low by historical standards. In fact, it has now been below its bull market average of 38.28% for 15 straight weeks, which is the longest streak since July 2012.

6. Greece Capitulates To Stay In The Eurozone — the eurozone and Greece have agreed in principle to a third bailout that will keep the beleaguered country in the currency area, for now, after almost total capitulation from Prime Minister Alexis Tsipras. Greece will have to put €50B of state assets in a trust fund so that they can be sold off and the proceeds used to repay debt. The government will also have to get further austerity measures through parliament, a tough ask given the “no” vote in the recent referendum.

The week ahead — Economic data from Econoday.com: