Are We Back To The Apprentice?
Before Mr. Trump was the president of the United States he was very successful in a number of business ventures including real estate, casinos and on the media. He had a hit show for a number of years called The Apprentice and if he didn’t like your answers he didn’t whack you like Don Barzini but he did give his version of a hit which was “you’re fired”.
In many ways the White house has been run like the apprentice. Every step forward seems to be met with a number of steps back. There have been some accomplishments in foreign policy but the big one was to occur on June 12 when Mr. Trump was to meet with Kim Jong Un to discuss the nuclear disarmament of North Korea and perhaps for the first time in seventy years, a possible solution to the Korean peninsula problem.
It didn’t happen, and the big question is why? Is Mr. Trump practicing what he calls the art of the deal which happens to be the title of his best-selling book, or is he just bluffing to see if he could get “rocket man” to show his cards. It appears now that what we have is truly a misunderstanding as to what both sides of the market view as a solution. In a sense, the deal got lost in the translation.
Mr. Kim used both the media and the diplomatic channels to convey to the South Koreans and the world that he had taken a new position on the nukes that he has in his arsenal. Mike Pompeo, the new secretary of state met with Mr. Kim twice in recent weeks and apparently he realized that Mr. Kim and Mr. Trump were not on the same page when it came to how far the N. Koreans were willing to go to get a deal done.
Mr. Kim felt that Mr. Trump wanted to take the same path that happened in Libya when Moammar Kadafi agreed to give up his nukes and was immediately killed by dissidents. It appears that the disconnect started there and only got worse as Mr. Kim called vice president Pence “a diplomatic dummy”. One thing led to another and ‘Poof’ the summit went up in smoke. Is this the end of a diplomatic solution or is Mr. Trump using a chapter from his book to pull off the deal. My guess is that after some more name calling and threats that a new summit will occur, and this time Mr. Trump will be showing more of his cards.
Ask Mr. Seifert
I am constantly asked questions about trading and how to exploit certain market factors to insure success. Each week I will answer one of those questions here with a short paragraph.
What is an Iron Condor, and does it have unlimited risk or reward?
An Iron Condor is a very useful spread that has limited risk and limited reward. It is initiated by buying or selling two vertical spreads in the same serial. One of the spreads is a vertical call spread the other is a vertical put spread. Each spread is either above or below the current price of the underlying equity. If you sell both spreads you create a credit and are hoping that the price of the underlying asset will stay near the current price until expiration. If you are correct one or both of the spreads will be winners and you will cash the trade. Your risk is limited to the difference between the strike prices minus the credit that you received when you sold the spread. If you buy both spreads you are creating a debit and you are hoping that the price will move in one direction or the other far enough allowing you to collect on one of the debit spreads that you bought. Most professional traders sell Iron Condors as one leg of the spread must be a winner mathematically and it is possible to collect on both ends of the credit spreads if the price falls in the middle.
The Wise Guy Report: The View From The Electronic Floor
Each week I talk about how the Wise Guys (floor traders) find the soft spots in the market and take advantage of price dislocation. Each week I take a look at the price action from the electronic pits in one of three major commodity markets: Gold (GC), Crude Oil (CL) and Long-Term Interest Rates (ZB). On the equity side, I cover MSS which is the Mister Seifert Sez Composite Index. This is a proprietary index that I created which measures the dollar flow of the four major indexes (S&P 500, Nasdaq 100, Russell 2000 and the Dow Jones Industrials) on an unweighted basis.
Ten Year Continues To Go Lower (Downtrend)
Last week we talked about the benchmark of 3% in the ten year and whether or not that was of significance to the U.S. economy. Since the price movement in the other major markets was nonexistent this week, we will continue to look at the U.S. interest rate markets. The ten year did rally and rates dropped below 3%, but it should be noted that economists are watching how the 10 year is performing in a couple of key areas. One is the housing market and how it is being affected by higher rates. So far there has been only a slight dip in most markets, but that could be on a seasonally adjusted basis. Also, how the dollar is preforming versus the rest of the world, and right now the 10-year note in the U.S. is the top dog. Currently we have the highest 10-year note rate among major currencies. You heard that right. Even Italy, which appeared to be on the verge of bankruptcy eight years ago has turned it around and is lower than the U.S. ten year. Japan, which got into the QE game late still has almost a zero yield and Germany is less than one half of a percent. The Fed has signaled that in order to unwind QE, U.S. rates would likely rise and now the question is, is this the top of the U.S. ten-year market? Until we see what our competitors do and how it effects the dollar no one will knows for sure, and if they do they are not talking!
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Mr. Seifert