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The Morning Line

Fevered Investors Eager to Forget the Latest News

Index futures were wafting higher Tuesday night, evidently unfazed by mounting evidence that coronavirus has already slowed the pace of global economic growth significantly.  Such worries as occupy investors’ tiny, fevered brains these days centered on Apple, the most valuable company in the world. (I don’t count Aramco because, well, who cares that it’s actually bigger?) The Cupertino manufacturer of egregiously overpriced cellphones and accessories, and of late an aspirant in the overcrowded streaming-content business, announced Monday afternoon that Q1 results would take a big hit from work slowdowns and weakened sales in China. Apple shares had to play along with the announcement, since it would have been unseemly and even a little bizarre for the stock to have risen on such news, emanating as it did from Apple’s own PR desk. Other stocks in the FAANG/lunatic sector were not so deferential, however. Most chalked up solid gains on the day, implying they are chomping at the bit as they wait for Apple’s troubles to be perfunctorily discounted and forgotten in perhaps a few more days. (Note: Technically, AAPL looks primed to fall for reasons covered in my latest tout, below.) That the FAANGs and other multinational giants are themselves vulnerable to the same virus-related forces presently impacting on Apple will not likely be a concern on Wall Street, where the sole imperative is to throw Other People’s Money at a relatively small handful of stocks.  Actually, Apple’s bearish guidance may ultimately help this Ponzi scheme along, since it will afford analysts an easy opportunity to do what they are paid to do: underestimate earnings ahead of the next round of announcements.

Be Sure You’re Strapped in Before the Bell!

Index futures were getting drubbed Monday night on news that Apple’s Q1 revenues will take a hit from coronavirus-related work slowdowns and lower iPhone sales in China. However, it remained to be seen whether this so-far controlled selloff will become an avalanche when stocks open Monday morning. If it were a Sunday night, the FAANG/lunatic stocks would be moving lower in tandem with the E-Minis. However, it would appear that exchange rules governing holiday trading have left stocks temporarily frozen at Friday’s record highs. Will they plummet on the opening bell in order to catch up with the overnight selloff? My hunch is that they will and that the plunge will be unusually nasty. Ordinarily the arse bandits who work the night shift tend to let stocks fall hard on Sunday night when there has been disquieting news over the weekend. Their strategy is to take prices down low enough to dry up sellers, making it easier to run stocks back up the old wazoo after the bombed-out opening bar. This can be a tricky engineering feat, but it invariably succeeds when DaBoyz flip the switch to send short-covering bears into a full-blown panic. In this case, though, at the opening bell, the pros will be hard-pressed to predict the exact extent of the FAANG selloff about to unfold.  But once it begins they’ll need to let it run its course and bring the broad averages down even lower in sympathy. Their One-Trick Pony It’s a feedback loop that is bound to be worse than on a Sunday night, when stocks are free to trade on the news rather than having to wait half a day to catch up with it. The Masters of the Universe could find themselves deeply underwater by mid-day, but don’t expect them to sit for long on all the shares they’ve had to suck up. They will attempt to goose bears as viciously as possible to get the obligatory short-squeeze going. Given the circumstances, this squeeze could be memorable — the moreso, perhaps, if their one-trick pony should go lame in the attempt. _____ UPDATE (9:01 a.m. EST): You can unbuckle your seat belts, since the rough-and-tumble is about 90% over. The exchanges, unfailingly helpful to the Wall Street mafia that keeps the game rigged, unleashed stocks at 4 a.m. (who knew??), enabling them to get as fully oversold as index futures ahead of the opening bell. With about 27 minutes to go before the public floods in, AAPL has recouped more than half of its $15 plunge to $310. It has traded as high as $319.77 on the bounce and is murdering shorts at the moment. They are  buying stock from exchange-sanctioned criminals who acquired it down near $310 in a fleeting moment of  heavily manipulated ‘opportunity’. That is how the game is played, a carnival midway on an epic scale. Credit an assist from roving clowns supplied by the business channels. Next amazing trick: Make everyone completely forget about AAPL’s revenue slowdown in China, its second-largest market. That could take a few more days. _______ UPDATE (11:54 a.m.): Stocks are relapsing sharply following a game try to run ’em up shorts’ old wazoo. If the Dow closes down more than 500 points, that would be the ‘lame pony’ scenario mentioned above. It’s nice to see the arse bandits getting buggered themselves for a rare change.

Wall Street a Little Too Zen about Coronavirus

Stocks seem to be shrugging off disquieting news about the coronavirus a little too easily, so be careful.  Most of the bad news has concerned the apparent spreading of the disease more rapidly than had been anticipated just a week ago. Far from peaking, the virus seems to be gaining momentum. Wall Street took the most recent headlines about this not merely in stride, but used them to beat stocks down Wednesday night in order to set up some bargain hunting opportunities ahead of Thursday’s opening. We should pay particular attention to AAPL, the most important stock-market bellwether of them all, because there are technical signs that its flirtation with new highs over the last month or so has masked distribution by the usual sleazeballs. All too often, the firms they work for tout stocks like AAPL to make it easier for them to unload shares on the unwary. If that sounds shocking, then you’ve been living on Mars.

The Yellow Flag Is Out

I’ve unfurled the yellow flag, since the E-Mini S&Ps topped Tuesday slightly above a 3369.25 rally target I’d been drum-rolling for more than a week. Monday’s price action was both peculiar and deceptive, since the day began with index futures extending an overnight rally with their usual brio. But about an hour into the session they turned south, presumably correcting to recharge for another rally. Your editor took the bait with a buy recommendation that turned into a loser when the bounce sputtered out just shy of a profit target. This is unusual, since nearly all of the tricks we’ve been using to get long have been working perhaps 80% of the time. Not this time, however, and the fact that it did not should temper our enthusiasm for bottom-fishing until we’ve seen a few more abcd patterns play out in both directions. _______ UPDATE (Feb 12, 9:37 p.m. EST): Just when it seemed as though the futures would never fall, they’ve plummeted nearly 20 points tonight in mere minutes. The purported reason is a jump in coronavirus cases, but as far as Wall Street pros are concerned, this ranks right up there on their worry list with a Martian invasion. Let’s see how DaBoyz maneuver this sleazy shakedown before we place any new bets. _______ UPDATE (Feb 13, 7:56 a.m.): Hidden Pivot supports got crushed overnight. This implies DaBoyz are starting to think the coronavirus story could be robust enough to help them push stocks down to relative bargain levels. The risk is that the virus will spread sufficiently to become a true menace even on Wall Street, where heedless complacency has had more than a decade to become as entrenched as the worst cancers.

Either Drink the Kool-Aid or Shut Up

Wall Street and the conference room at Goldman Sachs are apparently the only places on earth where no one seems terribly worried about the growing spread of coronavirus. Crazed investors have driven U.S. stocks into a nearly vertical ascent that will soon push the Dow Industrials to 30,000.  Over at Goldman,  a couple of their perennially bullish analysts are predicting the virus will not have much impact on the global economy and even less of an effect on America’s consumption-driven, debt-financed GDP. Tell that to China, India, Canada, Africa and a dozen other countries where officials are bracing for a dramatic slowdown. Read more about it  at ZeroHedge.  Complicating the picture for U.S. stocks is the fact that they are being viewed as a haven asset by foreign investors. Just what stocks needed 11 years into a very mature bull market that could use a rest, even in the estimation of the most wildly bullish fund managers. There is also the problem of a very strong dollar that is certain to bite deeply into the earnings of U.S multinationals. Even so, it’s hard to imagine what could possibly end America’s decade-long shopping spree or even slow it down. We’ll find out eventually, of course, but for now it’s either drink the Kool-Aid or enjoy the show from the sidelines.

Could It Possibly Get Any Better?

Could it possibly get any better?  Trump has shrugged off impeachment and taken a well-earned victory lap, the Democrats are headed for a landslide loss in November, and the U.S. consumer economy is hitting on all twelve cylinders, powered by shop-till-you-drop exuberance that has made even the ongoing, trillion dollar writedown of shopping malls a relatively niggling concern. There are job opportunities for every American who wants to work, and real wages are rising for blue collar jobs. As for the stock market, it is not merely at a permanently high plateau, as it was famously described in the halcyon days of the Jazz Era; it continues to rampage skyward without ever selling off for more than two consecutive days. Third-day bets on the pass line haven’t enjoyed such surefire odds since Secretariat bolted out of the gate in the 1973 Belmont. A Bull’s Checklist Just look at Tesla, the feistiest stock of them all.  The price of a single share recently came within an inch of $1,000 (shades of RCA, aka ‘Radio’!) after nearly quadrupling since October. Some analysts are saying the stock eventually could hit $6,000.  Need more reasons to be crazy-bullish? Here’s a checklist from John Jay, who posts regularly in the Rick’s Picks forum: 1) easy access to low interest car loans — “No job, No credit, No problem!”; 2) a vast ‘off the books’ business universe; 3) 22 million people working for some level of government, almost twice the number working in manufacturing; 4) God-knows-how-many-people from #3 above now retired with great pensions/healthcare + COLAs; 5) the “Port Royal” effect, as buccaneers from all over the globe come here to buy mansions and kick back; 6) easy access to HELOCs for those home equity to burn; and, 7) Silicon Valley-types cashing in on stocks, options, IPOs from their cash-burning, publicly traded corporations. Contrarian Alert! All of which has led me to recommend, in contrary fashion, that subscribers sell the S&P 500 index short if it falls from last week’s record peak at 3348 to a certain price not far below. That would trigger an ‘rABC’ sell signal, according to the proprietary rules of the Hidden Pivot Method, generating a position with the potential to make money even if the S&Ps eventually go on to achieve new record highs. The signal works more or less mechanically, but in this case I’ve added a smidgen of instinct in order to go gently against my own rules. My concerns about coronavirus played a role in this recommendation, since the potential of the disease to put the global economy in recession is, in my opinion, being seriously underestimated.  Even if I am wrong and the spread of the virus is checked, we won’t know it for probably another month or two. Under the circumstances, the stock market, priced for perfection at these levels, seems like a risky place to be. Bear markets do happen, and they usually seem to come out of nowhere. If one were to kick in now, queering Trump’s sunny re-election odds, the Dow could find itself at 10,000 not long after some rancid flavor of Socialist takes the oath of office on January 20.

Booming U.S. Consumption ‘a Mystery’

What’s powering the U.S. economy? ‘It’s a mystery,’ concludes a think-piece by Noah Smith posted Wednesday at Bloomberg.com. He ultimately settles on a boring economic environment as the main reason why U.S. consumers continue to spend. While we may be living in all-too-interesting times from a geopolitical standpoint, the U.S. economy is arguably on a modest glide path, with no misguided Fed policies, oil price spikes or wild speculation to trigger a recession, Smith writes.  Of course, the eternal optimists who nurture and sponsor bull markets have voiced similar thoughts just ahead of every recession that has ever occurred, so we should probably take what they are saying now with a grain of salt. Stocks are priced, if not for perfection, then for expectations that nothing will go seriously wrong. Paradoxically, the worst thing that could actually could go wrong, and eventually will, is the onset of a bear market. It is predictable that it will begin for reasons that will not be apparent until we are all waist-deep in it.

Will Dow 30,000 Be the New Dow 1000?

Bulls are in good position for another shot at Dow 30,000, not that anyone should have doubted they’d be back. Few could have foreseen, however, that their second-wave assault would come so soon. It was only last Friday that stocks were getting hammered on fears that coronavirus would take a toll on the global economy. It will, of course, but this has had little net effect so far on stocks that are constantly being pumped by giddy portfolio managers who are paid to throw Other People’s Money at a small handful of high-profile stocks. Oil Traders Know Better Oil traders know better and have pushed quotes down into bear-market territory in response to the already significant curtailment of economic activity in China. Copper prices have fallen sharply as well, with the implication that the Fed may soon be battling deflation. Again. But with what? The interest rates the central bank controls are already too low to get much pop from easing. The alternative is prayer — that China and the world are able to contain the virus quickly and convincingly. This can’t happen too soon if U.S. stocks are going to sustain altitude. A short ascent to Dow 30,000 seems inevitable in any event, but there will remain the possibility that this historical benchmark could become the Dow 1000 of this era: very closely approached in 1966, but not exceeded until 17 years later.

Bear Panic Trumps Coronavirus Fears

Bulls doubled down on their bet Monday that the U.S. will remain an economic island, unaffected by the spread of coronavirus. The Dow was up nearly 400 points in the early going, briefly recouping two-thirds of what it had lost on Friday. Have traders lost their minds? China, after all, was in a state of lock-down, with quarantines in many large cities affecting the mobility of scores of millions of people. The potential impact of this on the global economy was not lost on energy traders, who sent crude-oil quotes plummeting a further $1.50 a barrel on top of last week’s nearly $3 loss.  This happened despite Saudi Arabia’s threat to curtail supplies by whatever amount is necessary to prop up prices. When the dust settled, the Dow Industrials had gained a respectable 144 points, pushed by… well, let’s allow someone from Wall Street who is paid to be an incurable optimist explain.  According to Michael Mullaney, director of global markets research at Boston Partners, U.S. stock investors may have seen Friday’s selloff as a buying opportunity. Mullaney, as reported Monday in The Wall Street Journal, noted that with past outbreaks, such as severe acute respiratory syndrome, or SARS, stocks have tended to drop initially, only to bounce back once the rate of new infections slows. “Once you see a slowdown in the uptick of new cases, historically the market has generally done quite well after that,” he said. Virus Deaths ‘Slowing’ Buttressing Mullaney’s congenital optimism was a note posted in the Rick’s Picks Trading Room by one ‘Signfisher’: ‘The coronavirus death to case rate has dropped dramatically from almost 10% now down to about 2% which is a good thing. After this coming weekend hopefully these numbers will hold and even drop.’  Hopefully indeed. However, it seems most unlikely that stocks would have zoomed higher Monday morning just because coronavirus  seemed to be killing fewer people. No, there was something else at work — something you are unlikely to read about in MSM stock-market wrap-ups: the short-squeeze factor.  Which is to say that every trader/observer/investor on earth, without exception, expected stocks to fall Sunday night. And that is why the Dow Average began the day socking them in the eye with a nearly 400-point gain. Realize that panicky short-covering is far more powerful than merely bullish buying. You can spot it in any rally that seems too crazy to be real, especially when said rally seems to flout headlines, statistics and common sense.  So it was on Monday with Tesla shares, which in dollar terms are in the throes of the most consequential short-squeeze in all of history.  The stock was up as much as $136 on Monday, or 21%, to $782. Naturally, a few attention-hungry analysts were predicting TSLA is on its way to as high as $7,000 a share.  Only on Wall Street could a supposed ‘expert’ say something like that and instead of being ridiculed and censured, garner favorable press clips and lucrative speaking engagements. ______ UPDATE (Feb 4, 10:04 p.m.): Getting a little sick, isn’t it? Even the Wall Street shills who would ordinarily be telling us why the rally is authentic must have a foreboding sense by now that something very unhealthy is pushing it.

Dow 30,000 Milestone Taunts Bulls

Coronavirus anxiety has replaced trade war anxiety as the one-size-fits-all explanation for the stock-market’s bad days.  Wall Street initially thumbed its nose at the virus threat, staging a strong rally early last week even as the death toll mounted in China.  But when a few cases turned up in the U.S. and airlines started canceling flights in and out of China, investors took notice. Their anxiety became manifest in Friday’s 603-point decline in the Dow Industrials, and no one was suggesting the selloff was climactic. For unlike tariff anxiety, which rose or fell every time Trump tweeted on the subject, the path that coronavirus takes is unpredictable and could remain so until illnesses and deaths either start to taper off or become catastrophic. Will the stock market be able to bide its time, hovering somewhat beneath current levels, until the virus is better understood? That would be the optimistic scenario, especially since the economic fallout from coronavirus has already driven commodities, most significantly crude oil, sharply lower. This could spread more than mere ripples into the economy, since inflated oil prices underpin the global financial system’s hyper-leveraged store of collateral. A Scary Place to Get Long From a technical standpoint, it is troubling that the Dow’s seemingly invincible rally sputtered out without having reached the 29,757 target shown in the chart. This is close enough to the milestone number 30,000 that it should be considered magnetic. A case of ‘close but no cigar’?  Wall Street would be forever shamed if the greatest bull market of them all were to die just inches from so obvious and compelling a target.  It will remain viable nonetheless unless the pattern’s point ‘C’ low, 27,326, is exceeded to the downside. I should also mention that, under the rules of our trading system, the Dow would trigger a ‘mechanical’ buy at 27,934, stop 27,326. This would be a scary place to jump in, but that’s what the ‘mechanical’ set-up — one of five that we use to get long or short — was designed to handle. We won’t presume to know how things will turn out this week, but our inclination would be to sell into strength as long as the virus story appears to be waxing.

Will They Ever Learn?

Amazon has taken flight, up $230 at the moment, or a little more than 12%, following earnings announced moments after the close beat analysts’ expectations.  The stock looks bound for 2342.79, the Hidden Pivot target in the chart above. You have to wonder who the geniuses are who get paid to do the expecting, since their estimates so often fall a few crucial pennies shy of whatever numbers are released. Do these Wall Street shills perhaps receive bonuses for lowballing their dartboard predictions? This would make sense, since estimates that can be easily beaten have potentially lucrative implications for insiders. Short-Covering Fools If  analysts are merely dumb, even dumber are traders who bet against after-hours eruptions that have become the hallmark of this bull market. Ironically, short-covering fools are the only source of buying power strong enough to goose stocks past heavy layers of supply and prior peaks. The more bets the fools pile up against the aging bull, the more spectacular the stock market’s leaps. Just look at Tesla.  The biggest winners, of course, are those who hold millions of shares in the small handful of companies worshipped by portfolio managers. The net worth of these zillionaires grows in mere minutes by sums that took a lifetime for robber barons like Carnegie, Astor, Rockefeller and Morgan to accumulate. Rather than treat himself to a good Cuban cigar, Bezos could buy, oh, New Zealand, or Ted Turner, the Sioux Nation or the Rockettes, to celebrate.

AAPL May Be Nuts, but TSLA Is…Freakish

A stock-market rally fizzled for a rare change, possibly because AAPL’s after-hours leap Tuesday on strong earnings wasn’t quite strong enough to knock the crowd’s socks off. It was impressive, to be sure — a 19-point jump amounting to about 6%. But this evidently wasn’t quite powerful enough to be regarded as freakish. Tesla demonstrated what freakish is all about after the close, ripping shorts’ testicles off with an 84-point thrust to a so-far high of 659.95. This was somewhat above the ambitious, $639 rally target I sent out to subscribers on Jan 14, when the stock was trading more than $100 lower. The rally is unlikely to have a discernible impact on the the broad averages as the week draws to a close, however, because TSLA, unlike AAPL, is not regarded as a respectable stock that moves higher to discount future earnings, but rather as a rabid badger impelled by one of the most vicious short squeezes in history. TSLA reported ‘strong’ Q4 earnings after the close, and the imbeciles who were short ahead of this news richly deserved what they got. So will the analyst who ostentatiously predicted TSLA will hit $6000 a share, but that will be another story for another day. For what it’s worth, the company would have lost $28 million in Q4 if not for regulatory credits, according to Wolf Street editor Wolf Richter.

Bull Fever Didn’t Cool for Long

A killer virus on the prowl around the planet evidently was not on investors’ tiny, fevered brains Tuesday as they reminded us yet again that betting heavily on a rally when stocks have been down for two straight days is nearly always a winner. The S&Ps rose an impressive 32 points, with a corresponding gain in the Dow Industrials to 28,722 that has  made 30,000 an odds-on bet. The leap that Apple shares took when record earnings were announced after the close is likely to have a bullish impact on the shares of Microsoft , Facebook, Amazon and Boeing when the respective companies announce earnings between now and Friday.

Reaction to Apple’s Earnings Holds Key

Buyers hung tough on Monday because DaBoyz were able to exhaust sellers ahead of the opening bell. They won’t be able to rig the game this way on Tuesday, however, since the ‘coronavirus effect’  — on stocks, not humans — is already well in play. Rumors continue to swirl concerning the death toll in China, but it would take a very large pile of bodies to slow Wall Street’s buying orgy for more than two days. Investable funds are effectively unlimited, implying they will continue to exert irresistible, upward force on stocks. Coronavirus, on the other hand, is hardly an immovable object — just a scary news story that continues to mutate but will lose force with nut-so investors if dead bodies fail to pile up to the sky.  Absent that pile of bodies, however, and for the time being, bulls would seem to hold the edge. That could change following Tuesday’s market close, however, with the release of Apple’s earnings. The reaction should give us a good read on the robustness and vigor of the bull market, setting the tone for earnings announcements later this week from the biggies: Boeing, Facebook, Microsoft and Amazon.  

Breakout in Dollar and T-Bonds Could Be Signaling a Major Tone Change

Friday’s nasty stock-market reversal was the most interesting we’ve seen in a long while. The ostensible cause of the selloff was mounting anxiety over the spread of the deadly coronavirus from China to the U.S. and elsewhere. Three cases have been reported so far in the U.S. and 2,000 worldwide, and although no one seems to expect a major outbreak in North America, it’s not hard to imagine a mere handful of new cases hobbling, for starters, the airline industry and an import/export sector that was expected to revive because of the recent trade deal.  The spread of the disease in China may already have derailed the country’s tepid economic recovery, with a corresponding impact on energy markets that took a beating last week. Heedless Buyers I’d written here on Friday that it would take a lot more than a virus to kill a U.S. bull market that has been powered by reckless buying. But we shouldn’t dismiss the possibility that coronavirus could turn out to be the black-swan event that investors knew would arrive eventually. The heavy selling that ended the week was noteworthy because it was accompanied by bullish breakouts in the Dollar Index and T-Bonds. Although it is difficult to predict exactly what this may portend, it is safe to say that if the respective uptrends in these massive markets gain momentum over the next week or two, a major tone change for financial markets and the global economy could lie in the offing.

The Seduction of Betting Against the Sure Thing

The buy-the-dips mentality has become so entrenched over the last few months that it’s hard to imagine what could possibly derail the bull market. Wall Street feigned mild concern for a few hours over the spread of a deadly virus in China, but absent news that Americans are keeling over dead from it in their back yards, we can expect the broad averages to forge higher.  The uptrend has been so relentless that it has come to practically guarantee a quick return for any investor who jumps aboard on a given day. In no instance during the last three months has any bull  suffered a third straight day of losses.  A strategy as simple as buying the S&Ps whenever they are trading lower for a second consecutive day has been a spectacular winner. Contrarian Bloodfest This has only increased the number of contrarians eager to bet against a trend that has come to seem nearly as predictable as tomorrow’s sunrise.  The more contrarians who get slaughtered, the more enticing the seduction of trying to pick The Mother of All Tops. We prefer to use AAPL as a  benchmark — not to pick THE top, but to nail lesser peaks that can reward short-term bets on the ‘Don’t Pass’ line. But even hitting the swings perfectly has not been paying off lately. The stock is currently in its tenth day trying to get past a 319.92 Hidden Pivot target we’d identified earlier, but there has been only one pullback from this number deep enough to nudge put options slightly into-the-black. Now, if the stock closes above 319.92 for two consecutive days , look for a run-up to at least 336.35. The broad averages cannot but follow suit, entranced by the seeming invincibility of the world’s most popular stock. The contagion of exuberance may not be fatal like coronavirus, but its long-term consequences could prove more significant.

Is Copper Signaling the Return of Inflation?

I’ve been a hardcore deflationist for so long that it took a wake-up call from the always astute Jesse Felder to jolt me out of my complacency. His latest report is headlined Dr. Copper Could Soon Deliver a Diagnosis of Inflation, and it’s an eye-opener. The chart accompanying Felder’s think-piece suggests that copper futures have been developing thrust for the last several years that could launch a steep rally. He uses a pennant formation to show this, and the breakout point on his chart would come at around $2.95 per pound if it occurs this month. I have illustrated his pennant in the chart above with red lines. My perspective is somewhat different and uses the Hidden Pivot Method to extrapolate a breakout at exactly $3.12 per pound. Any higher, especially if the futures can close for two consecutive months above that price, would be very bullish. But even someone with no knowledge of technical analysis can see that all signs point higher, with many uptrends of varying degree in play simultaneously. My technical runes say that a strong breakout to the upside would have the potential to push the price of a pound of copper as high as $5.33. If so, the corresponding inflation we might expect to see in the price of goods and services would be severe and a jolt to the global economy, especially since inflation has lain dormant for nearly 40 years. ‘The Doctor’ Is Usually Right Concerning copper’s ability to predict inflation, I’ll let Felder explain:  Traders call copper ‘Dr. Copper’ because he has a Ph.D in economics. In fact, most of the time, Dr. Copper forecasts recessions and recoveries, inflation and deflation, far more accurately than his colleagues in the ‘dismal science,’ so it pays to pay attention to his macroeconomic messages.  Just so.  And although I continue to believe that a deflationary endgame for the global financial bubble is unavoidable, if copper were to bolt sharply higher I would have to concede that the deflationary bust I’ve been anticipating for so long may lie further down the road. Regardless, the potential for a catastrophic outcome, presumably but not necessarily deflationary, would remain. That’s because steep inflation would push interest rates high enough to implode the global debt bubble, a quadrillion dollar credit edifice that is fatally addicted to low rates and which could not adjust to a sudden, 100-basis-point upthrust, let alone entrenched rates of 5% or more. _______ UPDATE (Jan 21, 9:56 p.m.): Doc Copper took a flying dive on the opening, seemingly validating the notion that a virus outbreak in China could threaten the global economy. If so, it would qualify as a genuine black swan event — i.e., something no one could have predicted ending these boom times.  No question, there will be economic ripples in China, starting with a reduction of their New Year’s extravaganza.  But until such time as the Wuhan bug sickens dozens of people in a few major U.S. cities, it’s hard to imagine Wall Street acting worried for long.

Impeachment Can’t Compete with a Bull Market

If the farce of impeachment has had an impact on the stock market, it appears to have steepened the bull’s ascent. A fact not lost on investors is that Trump’s reelection odds have probably gone up as a result of the Democrats’ ill-conceived, relentless attempts to sink him. Pundits still talk as though the 2020 election will be close, but as things stand, a pro-Trump landslide appears more likely. Biden’s own Ukraine-related transgressions are far more serious than anything Trump is alleged to have done, and only voters terminally afflicted with Trump Derangement Syndrome could fail to see this. As for the competition, does anyone actually believe a Socialist who lives for the chance to swing a wrecking ball at the U.S. economy, could get elected with unemployment running at 3.5% and the stock market hitting record highs?  Hillary and Mike Bloomberg are waiting in the wings and probably have a better chance of unseating Trump, but not much. The latter, a white billionaire, will have more than a little difficulty getting nominated at a convention controlled by the Democratic Party’s ultra-left wing. As for Clinton, she is as disingenuous, corrupt and unlikeable as ever, and only a hack editorialist at the New York Times or some idiot pollster could think she has a chance of regaining the White House. The Biggest Risk The foregoing notwithstanding, a bear market that comes, as they always do, from out of nowhere, could still spoil Trump’s re-election bid. Odds of this happening will decrease with each passing month, and the waxing bullish effect could soar out-of-control if stocks are holding steady come summer. In the meantime, the bull market and an exceptionally strong economy have made a mockery of the impeachment hearings, which almost no one is watching anyway.

Trump Got a Pretty Good Trade Deal After All

Stocks have been running in place since Friday, presumably developing thrust for a move to new record highs. Ordinarily, the signing of the trade pact with China might have been expected to provide more boost than we saw on Wednesday. But the news was tempered with some facts that evidently were not widely known. Reportedly, many of the tariffs put in place during the two-year trade war will remain there until after the U.S. election. The very good news, however, is that President Trump has not given away the store just for the sake of appearances. He is willing to scale back tariffs on more than $300 billion in goods if China shows good faith toward the pact just signed. That means not only opening up certain markets to U.S. producers, but taking preliminary steps to demonstrate respect for intellectual property.  We’d been skeptical that the agreement would amount to much, but it’s probably as good a deal as we could have hoped for. The opportunity to improve on it during new rounds of talks will surely have a positive impact on the stock market between now and next November.

A Growing Scandal Has Barely Fazed Boeing Shares

Boeing shares were up more than $5 at one point Tuesday, ostensibly on news that orders had fallen to a 16-year low. Go figure. The dearth of new business is a predictable result of the global grounding of the best-selling 737 MAX following two collisions that killed 346. Lately, there has been a non-stop onslaught of bad press that will blacken the company’s reputation for years or even decades. Just last week, internal memos surfaced that showed Boeing to have been recklessly irresponsible for downplaying the need for simulator training to familiarize pilots with the MAX’s automated flight-control system. Moreover, a Congressional inquiry revealed, according to a report in the Wall Street Journal, that “the apparent pressure to save money and make the MAX more marketable to airline customers without upfront simulator training didn’t come from individual employees, [but from] high up in the Boeing corporation.” A week earlier, Boeing reportedly increased its reserves by $5 billion to handle legal fallout from the MAX crashes. Remember GE’s Long Goodbye? That’s not exactly what investors want to hear. And yet, preternaturally strong hands have so far managed to hold the stock above lows near $320 recorded last October, after the second crash. This has been possible in part because sales of other aircraft, including 787s and wide-body 777s, have remained relatively robust. Boeing has lost considerable ground to archrival Airbus nevertheless, and it is still uncertain when the MAX will fly again. It has been no small feat under such duress for the institutional investors with whom Boeing shares reside to plump them for distribution. But who would be the buyers? Certainly not widows and pensioners, since the stock sells for more than $300 a share.  Whoever steps in, it seems likely that BA will trade for significantly less before the company has extricated itself from the MAX morass. Don’t be fooled in the meantime when BA rallies spectacularly now and then, as it will. This tends to happen no matter how grim the outlook for a giant company that happens to be over-owned by institutions.  DaBoyz will take their time before they pull the plug, enforcing an omerta that would ostracize any institutional seller who breaks ranks. The same was true of GE, which took nearly a decade to fall from $58 to a still unsurpassed low at $5 in 2009. An intervening rally that peaked at $32 in 2016 might have suckered the rubes, but the stock has since relapsed to a low in December of 6.40. Caveat emptor.