Connecting the dots on global arrests

The global arrests of seemingly disparate individuals and international probes of banking corporations have been adding up over the last two weeks to show a more common thread.

Deutsche Bank and Danske Bank have been at the center of these financial probes with investigators seizing hordes of documents.

A global money laundering operation appears to be investigators’ focus. Illegal dealing with Iran and Russia outfits — despite sanctions existing to bar the banks from doing business with these rogue actors — is the initial reason for these probes.

Now it appears the individuals on the other side of the dealings are very well-known American and European billionaires working at the urging of once powerful political leaders from the EU and US.

We will have to wait until Dec. 13 for US Attorney John Huber’s congressional update of his Clinton Foundation investigation. His testimony was pushed back due to the funeral of ex-president George HW Bush.

On Wednesday Sabrina Meng, CFO and daughter of the founder of Huawei, the Chinese telecommunications giant, was arrested in Vancouver at the urging of the US Justice Department. The feds allege Huawei was dealing with Iran violating the sanctions.

That’s the initial charges, but it probably goes much deeper.

We also have Saudi leader Prince Mohammed bin Salman’s troubles appear to be wrapped up in this global financial upheaval. Whether he gave the order to kill Jamal Khashoggi as the initial charges have been made, will probably never be prosecuted and if charged will not be prosecuted.

Look at the fear and loathing in the stock market. The Dow plunges 800 points on Tuesday and appears to be looking at shedding another 500 points on Thursday’s open.

I am not buying the China tariff war as the culprit for this sell off. It appears that large selling by institutional investors, which cater to moneyed individuals. There appears to be a great need to be liquid at this time. The economic numbers being put out by the feds do not warrant a fear or panic in the market.

With great change, comes some pain and we may be at the beginning of something huge about to break.


Stock answer is we don’t know about next 6 months

How can the equity markets trade looking six months out — as is the traditional metric — when it doesn’t know what the next six minutes will bring?

The Dow Jones traded down 274 Thursday on, pick your poison:

  1. Terrorist attack in Barcelona,
  2. White House finance chief Gary Cohen’s departure.
  3. Algos in control since its August
  4. All of the above

It has to be near impossible to be able to formulate an earnings picture looking out the next quarter, when a 140-character tweet can throw all the analysis into the trash bin.

Here’s a analyst’s note on Friday morning, explaining very succinctly what he is up against when figuring direction of the market:

“In a week where we started by worrying about nuclear war, markets have quickly moved on from this, with yesterday’s weak session more of a response to fears that Mr Trump’s strategy for the economy and business is falling apart and later the terrible terrorist attack in Barcelona,”
Deutsche Bank analyst Jim Reid.

So off of that note we haveĀ  stocks marginally down for the week. I say that’s not a bad performance even without mentioning the civil unrest in Virginia last weekend.

Markets sink on ‘I’ word, and it’s not inflation

The stock market Wednesday was shocked to hear the “I” word, and it had noting to do with inflation.

The impeachment word is being used on Capitol Hill, which took the street by surprise and sent the Dow Jones industrial index plunging 373 points or -1.8% for the day.

While the impeachment process will probably not take place and is just Democratic bluster, investors believed that the Trump Pump of tax cuts and infrastructure spending will probably be put off even further while dealing with these investigations.

So Wednesday became the Trump Dump, which many market technicians believe needed to have a sell off to build a solid bottom to move higher. The VIX index, which measures volatility, soared more than 40% yesterday and is up nearly 60% in the last 5 trading days.

This index measuring investor sentiment was below 10 just over a week ago and Thursday morning is hovering at 16, which is still on the low side historically.

Thursday morning’s futures show the Dow shaving another 100 points at the open, which would give the exchange a 2% move down for the two days, which is not enough of a shake out.

A 2,100 point move to the downside would put stocks into correction mode of being off 10% from the recent highs, which would put the Dow at around 19K.

If you look at the economic data a 10% move downward in stocks is warranted as GDP is straddling the flat line of 0% growth, while Federal Reserve projections are looking for 4% growth in the second quarter, which is pie-in-the-sky thinking.

So there are two “I” words now that can hit the market. Inflation is not the worry. Impeachment is the word du jour, but I don’t feel that word has legs from the information that is out there right now.