Asian markets traded better on the heels of last nights presidential debate following the firm US closes with Japan especially strong climbing 1.4%. The Nikkei is now trading at the highest levels since April and the JPY looks to have rejected the attempts to regain the par level. Shanghai and Hang Seng were little changed as most awaited the ECB’s rate announcement and following Q+A session.

It was a wait and see game for the European morning with markets flat whilst all eagerly waiting to see what would be said about the QE program (which is due to expire March 2017). ECB left rates unchanged but it was the Q+A session that, despite Draghi’s attempt to avoid the question, was taken by the markets to mean, “Yes”,  we can expect a continuation of the program. Not that this is what was said but by the end of the evasive session the markets heard what they wanted to hear and that was that. The EURO was hit, stocks rallied and bond markets recovered. Only time will tell if they have interpreted it correctly but that is how we ran into the weekend. DAX and CAC up about 0.5%, IBEX +1.25% and FTSE unchanged, even with a weaker GBP. Banks stocks loved the thought of continued QE and so helped all indices into the weekend. We are expecting ratings news on Portugal over the weekend and a downgrade would make their bonds ineligible for ECB bond buying operation.

Despite a 2% decline in the price of oil late Friday, core US stock markets did very little. Early gains were wound back in on data but we then spent the rest of the day scrambling back to unchanged. Even in the last hour of the day that pattern did not change and we closed a very quiet day with little movement. Given the resumed QE continuation the DXY took its chance and went for Q1 highs. The DXY Dec Future was last seen playing with the years high (98.40) set in February. Yes, we did see Dec futures briefly breach the 100 level back in January so that will be the next target towards year end.

Bonds like the QE interpretation with the US curve flattening while the core European curves steepened. US 2’s closed 0.82% (+2.5bp) while 10’s closed +1bp higher at 1.75% (2/10 curve at +93bp). German Bunds closed 2’s -0.675% and 10’s 0.01% (curve +68.5bp). Italy 1.37%, Greece 8.29%, Turkey 9.53% (-15bp), Portugal 3.18% (+2bp) and UK Gilt 10’s at 1.07% (-1bp).

Buckle up, because a Hillary victory will be devastating to the economy for taxes are going to rise SUBSTANTIALLY. We are looking at major changes coming in inheritance taxes and of course when Hillary says she will increase taxes for social security and payroll, notice she says the “rich” revealing her core socialist belief that anyone who owns their own business and employs others is that nasty group of “rich people” she has campaigned against so hard. The higher the taxes the lower the economic growth and one need only look to Europe to see what it has produced. Facts do not matter, this is a vendetta.

The only way to avoid this type of abusive tax that is hopelessly lost because they will not allow social security to “invest” in anything but government bonds. Therefore, lowering interest rates to help banks is making Social Security even more insolvent and that means higher taxation. Small business will be forced to hire any employee only as a private contractor. Then social security taxes will at least be paid just once instead of twice for which the employee will never receive anyway.
Get ready. We will see the greatest tax increase in American history from all the inside sources behind the curtain. The Press will make sure Hillary wins. It’s over. Just turn out the lights. This is how the West collapses – running straight into the theory of Karl Marx; which Russia and China discovered did not work. Let’s get real. If anyone in the private sector ran a fund like Social Security, it would be a Ponzi scheme and 25 years in prison under SEC law.

QUESTION: Marty, do you think nuclear weapons will be used this time?

PDH

ANSWER:  History is a road map to the future because human nature remains the same. People are far too often foolish. They attribute guns as the cause of violence as if humankind was peaceful before the invention of the gun. At an ancient battlefield site in Scotland, archaeologists unearthed the largest cache of Roman lead sling bullets ever discovered. You see, the Romans also had bullets. They used powerful slingshots to propel them instead of gunpowder. So, even the idea of shooting someone with a lead bullet is nothing new.

It is true that technology advancements have aided conquests. The Turks took Constantinople, which had been impregnable, because of the invention of the cannon, which depicted in the painting of the fall of Constantinople. The cannon was invented in China where they discovered gunpowder. This replaced ancient siege engines and battering rams. Today we have nuclear weapons. The weapons themselves are not evil, only the people who push the buttons to launch the weapons are evil.

A weapon by itself does not kill. Even biological weapons must be deployed, which is by no means a modern unique development. Lord Jeffrey Amherst, for whom Amherst Massachusetts was named, was indeed the commanding general of British forces in North America during the final battles of the French & Indian war (1754-1763). He won the wars, but his reputation was a bit tarnished in the end. Amherst’s name became associated with germ warfare. He approved giving smallpox-infected blankets to the American Indians. This was reported in Carl Waldman’s “Atlas of the North American Indian” (1985). There are surviving letters, such as that from Colonel Henry Bouquet to General Amherst, dated July 13, 1763, concerning the distribution of blankets to “inoculate the Indians.”

History repeats ONLY because people repeat the same patterns with whatever technology they have available at that moment in time. World War I was notorious for the use of chemical weapons, which infected about 1.2 million people and killed about 90,000. The chemical weapons used produced very slow-moving or static gas clouds over the battlefields. Additional chemical weapons included disabling chemicals, such as tear gas, but also included lethal chemicals like phosgene, chlorine, and mustard gas.

If we indeed see World War III, this time all bets will be off. I would expect the use of tactical nuclear weapons on the battlefield. Hopefully we are not looking at intercontinental nukes.

The State Department is deeply involved in criminal activity. They are trying to steer the FBI into a deal to cover-up Hillary’s emails by changing classifications to support her insistence that nothing was classified. This campaign is just getting insane.

Then there is the Clinton retaliation against Matt Lauer for daring to ask her legitimate questions that were off the list that was handed to her in advance. Hillary lost it and was yelling at everyone off camera. Her staff then went on to destroy Lauer in the press. Rumors are now circulating that NBC may fire the “Today” show anchor under claims that they pay him too much — good one!

Everyone knows Hillary is vindictive and ruthless. She will destroy anyone who crosses her. There are more and more reports of voter fraud taking place with voter registrations being destroyed. This election is just a total mess.

Then there are just very disturbing videos even though they say the the guy that makes the videos is a felon and not trustworthy. Yet, people resigned and the CNN had to admit the video tapes are still very disturbing.

Meanwhile, the media digs up allegations on Trump that are all sexual against women that are supposed to be disqualifying for a President, but somehow were not for Bill Clinton. Then others are coming forward and saying these allegations Trump are made up by eye witnesses. Clinton emails continue to show she is by no means against the bankers, even emails concerning Deutsche Bank.

COMMENT:  In the recent presidential debate, Clinton boasted of her 30 years of PUBLIC service. Trump spoke of the Clintons having a personal fortune of $250M. If this fortune was made during her and her husbands PUBLIC service, in what way did they really serve the public. I just don’t get it …. I don’t understand why this is not the primary focus of Trump – that Clinton and co are enriching themselves by trading on inside information. This is the whole problem of the Washington crowd … this would resonate with the average person who is struggling to make ends meet.

JD

REPLY: Trump could really do a better job. But the media is bought and paid for and Capitol Hill is just corrupt. They will steal the election from Trump and that will probably lead to a major backlash for 2018, as took place in Scotland. They are just not about to allow any outsider into their private sandbox. The speaking fees Clinton gets are off the charts. It is amazing how many people cheer her just because she is a woman and could care less about the country. This is no longer about substance (not that Trump is really substance either), this is down to the fact that nobody qualified wants to even get near this mess. The press will tear you apart. They have conspired against the people and this will be their own doom.

The Nikkei opened on a wobble but after the first couple of hours progressed steadily to close up +0.3% on the day. As JPY found the renewed bid, and even in late trading, the Yen was knocking on the 102 handle as futures trades close to unchanged. Shanghai also found comfort with Q3 GDP reporting at +1.8% growth which takes us to a 6.7% growth rate for the year; still in line with the governments 6.5-7% forecast. A fairly uneventful days trading in Asia as we opened the Europe session.

It took all day but all core European indices closed better despite weaker morning trading. It was not until after lunch that market found their way into positive ground and even then only making marginal gains (0.25% generally). It was the bond market that dominated most of the market gossip today after Saudi Arabia offer $17.5bn of bonds ranging from 5 years up to thirty years. Rumours of eventual pricing is around 5’s at T (Treasuries) +135bp, T+165bp over 10’s and T+210 over 30’s. Obviously the bids outweighed demand with all grey markets trading around 50-70cents premium. Many traders were confident these issues would sell and at the same time expected they would be pricing them again soon! Saudi Arabia joins other Middle Eastern sovereign borrowers Qatar, Oman and the UAE as oil prices starts to see a bounce in recent months. It is worth keeping an eye on the SAR FRWDS (FX Forwards); even if just to see how the currency fairs after this debt issue (don’t forget the spot market is fixed). The 3M SIBOR has been moving up for the past 15 months (settled today at 2.386%) the highest in 7yrs.

A healthy start for US stocks as earnings numbers continue to beat, oil rallies (1yr highs) and we see the demand return for the USD. Some argue that a rate increase will halt this rally whilst others debate it is the most expected hike in history, so why worry! As oil rallied, so did gold, bonds and stocks an unusual occurrence but the common denominator is the USD.
DOW and S+P closed better on the day +0.3% with the NASDAQ lagging slightly at 0.15%.

US 10’s closed almost unchanged at 1.74% with Bunds 0.03% which closes the spread at +171bp. Italy 1.38%, Greece 8.28%, Turkey 9.68% (-13bp), Portugal 3.17% (-5bp) and UK Gilts also almost unchanged at 1.08%.

Capital flows are intensifying. This is why oil is up, gold is up, euro down, US share markets up. Things are shifting quietly. Norway reports that Russian ships are on their way to Syria. Obama may get his wish all before the election in hopes of boosting Hillary.

QUESTION: Marty, can you say what the actual capital flow number was per month?

ANSWER: The net foreign private inflows were $113.0 billion, and net foreign official outflows were $39.3 billion for August on securities. That is cash, minus trade. So this is the amount of money running into money instruments.

This will be one of the preloaded programs on the tablets that attendees will receive at the 2016 World Economic Conference in Orlando. This video shows you how to use the program, which is very simple — just type in your question. You can ask questions about various aspects from markets to economics, including terms. This program will respond verbally to provide the answer to your question. This is a first step into the portal for a gateway into Socrates.

Note: We will eventually make this available to clients unable to attend the 2016 WEC because we have sold out.

Trump’s “Ethics Reform” is one of the major reasons the elite Republican support Hillary. Besides banning members and staff from becoming lobbyists for 5 years, Trump has added to that list TERM LIMITS FOR CONGRESS! In other words, he is proposing the END of career politicians. This, along with his promise to repeal Obamacare, which was really to line the pockets of hospitals so they no longer had to treat people for free, as well as reducing the corporate tax rate to 15% to bring back almost $3 trillion they keep offshore, with his stated policy to end the military nation building (which Eisenhower warned about and JFK said was the sole issue undermining Bretton Woods in the 1960 debate), are probably the most profound proposals in the campaign that would really make a difference.

This is why the “ESTABLISHMENT” are so hell-bent on defeating Trump at all costs. The Empire is Striking Back shutting down Wikileaks and pulling the plug on RT, and forcing the head of FOX News to resign. The Democrats were hiring people to pretend to be Trump supporters to start violence to blame that on Trump supporters. This is a scorched earth campaign to deny the right of the people to seek political change at the voting booth. Washington is NOT about to allow Trump to win the White House and they will tear up the Constitution if they have to. There is no way these people will accept term limits. Of course, there is no way to save the world without term limits. So we must crash and burn but these people will start World War III to divert the people from any possible rebellion against the “ESTABLISHMENT” at any cost.