 The Market Sum | Insight after the bell
By Caleb Silver, Editor in Chief Wednesday's Headlines 1. Markets on Pause 5. How's the Loonie, eh? Markets Closed
 U.S. Market Rally on Pause Markets trended lower all day today and stayed that way. We are not in the dog days of summer yet - but it kind of feels that way. With no trade news or hints from the Fed on the direction of interest rates, there were not a lot of catalysts to move markets.
Oil prices, however, have been moving in a steady stream downward for the past several weeks.
What's Happening? Crude oil futures fell to a five month low as oil inventories surged to their highest levels in nearly two years, according to a report from the Energy information Administration (EIA).
On Tuesday, the EIA cut its forecast for global oil demand growth to roughly 1.2 million barrels per day (bpd) in 2019, down from last month's projection of about 1.4 million bpd. OPEC and the International Energy Agency are scheduled to update their demand outlook over the next two days. Expect similar results.
Why is Demand Fading? The simple answer is that the global economy is slowing. Slower economic growth translates into less demand for fossil fuels. The trade war is also a factor, as everything from manufacturing to transportation gets held up due to the uncertainty around if, how, and when it will end.
The Bright Side Less fossil fuel extraction and consumption is good for the planet - full stop. Climate change is real and our dependence on fossil fuels is one of the main causes of it.
But that's another conversation for another time.
A spike in oil prices can often be one of the catalysts for a recession given the higher input costs for manufacturing, transportation and power generation.
While we have had a few mini spikes over the past two years, we are well out of the danger zone if you look back over the past three decades. In the chart below from Haver Analytics, the gray bars are recessions.  Does that mean we won't have a recession? Absolutely not. Higher oil prices are just one of the factors that can tip an economy into a recession.
Incidentally, more than half of U.S. CFOs think we are headed for one.
A new survey out from Duke University's Fuqua School of Business shows that most Chief Financial Officers surveyed expect a recession to start in the first or second quarter of 2020. Do they know better than everyone else? Arguably, they have better visibility into the domestic and global economy than the rest of us do. But predicting recessions is not a part of their job requirement.
Read more: How to Plan for a Full Scale Bear Market
Cargo Concerns One of my favorite economic indicators that doesn't get a lot of attention is cargo loads at major international shipping ports. If you have ever driven past a major cargo port like the Ports of Los Angeles and Long Beach in California, they look like enormous hives of constant activity. It is ground zero for supply chain management, and everything works like clockwork. Cargo companies have their fingers on the pulse of the global economy like no other industry.
What they are telling us now is a bit concerning.
Combined inbound loaded containers at the ports of Los Angeles and Long Beach, one of the largest in the world, fell 6.3% last month from a year ago. The ports handled 48,256 fewer loaded import containers than they did in the same month last year. Combined exports at the two ports also fell 7.4%. To be sure, it's just one month of data, but if you look at the monthly trends in 2019, they don't look strong.  The National Retail Federation and Hackett Associates survey all domestic ports on a monthly basis. Its Port Tracker survey shows a relatively steady stream of imports throughout the year with increases expected throughout the summer. But the NRF surveys U.S. importers, and they are telling the federation that they are stocking up on imports in anticipation of an extended trade war and further increases to tariffs on Chinese imports, in particular.  CrowdStrike Strikes Cybersecurity and cloud computing are two of the hottest trends in investing right now. Cybersecurity is the number one concern for most CFOs while cloud computing and data storage is an absolute business necessity for most enterprises.
Data is the 21st century currency, so storing and managing it is mission critical.
CrowdStrike, a company that offers both services, went public on the Nasdaq today and promptly shot up 97% on its debut. It closed 70% above its IPO price by day's end, giving the company a market cap of $11.4 billion, nearly quadruple that of its last valuation.
The company lost $140 million for the year ending Jan. 31, while revenue more than doubled to $249.8 million, according to its prospectus. Alphabet's Capital G venture arm is a big investor in the company, and today's pop added $1 billion in share value to its holdings.
I'd never heard of CrowdStrike, but I have heard of Uber, Lyft and about 100 other companies that have gone public this year to much fanfare.
It just goes to show that the public markets are not a popularity contest. Investors are the ultimate arbiters of taste when it comes to picking winners. The hype for CrowdStrike might not last, but today's enthusiasm was notable. 
chart courtesy www.koyfin.com  Mattel's stock surged more than 5%, as the LA Times reported that the company rejected a merger bid from the privately held rival toymaker MGA Entertainment.  Nabors Industries fell nearly 12% today, as the crude oil market took a hit. Makes sense for a company offering "automated rig components" and "integrated drilling solutions."  Word of the Day There's an article on the WSJ today, providing updates to the Federal Trade Commission's investigation into Facebook's privacy practices. The investigation began more than a year ago, following reports that the personal data of tens of millions of Facebook users had ended up in the hands of the data analytics firm Cambridge Analytica, a firm working for President Trump's 2016 campaign, in many cases without users' consent or knowledge.
Facebook has been operating under "a 2012 consent decree with the agency related to privacy." According to the article, emails sent around the time may suggest that Mr. Zuckerberg and other senior executives didn't make compliance with the FTC order a priority. The company has already set aside $3 billion for the expected fine from the FTC. The fine could end up being more than that.
This is what we call a specific risk, in investing terms: "Specific risk is a risk that affects a minimal number of assets. Specific risk, as its name implies, relates to risks that are very specific to a company or small group of companies. This type of risk is the opposite of overall market risk or systematic risk. Specific risk is also referred to as "unsystematic risk" or "diversifiable risk."  Today in History June 12th, 1931 - Al Capone and 63 of his associates are indicted for violating Prohibition laws. While this is not a pure financial story, finance does play a big role in organized crime. While not a typical financier, Capone was a criminal mastermind who made a fortune running gambling books and bootlegging operations to get around the Prohibition laws of the late 1920's. He was arrested, convicted and jailed for several crimes, including tax evasion and racketeering. He is also one of the 8 richest gangsters of all time. Chart of the Day: Canadian Dollar Tumbles on Crude Oil Slide  The Canadian dollar (otherwise known as the "loonie") took a significant hit on Wednesday as crude oil prices fell around 4% to re-test the multi-month lows of last week. The Canadian dollar is known as a commodity currency that is closely correlated with oil prices because Canada is a major producer and exporter of crude oil, particularly to the U.S.
The USD/CAD currency pair is the most accessible way to trade the Canadian dollar – it depicts the exchange rate of the U.S. dollar against the Canadian dollar. Any move up for USD/CAD represents a rise in the U.S. dollar's value against the Canadian dollar, or a drop in the Canadian dollar's value against the U.S. dollar. Conversely, any move down for USD/CAD represents a rise in the Canadian dollar's value against the U.S. dollar, or a drop in the U.S. dollar's value against the Canadian dollar.
As shown on the chart above, Wednesday's price action was decisively to the upside for USD/CAD, representing both a drop in the Canadian dollar on weak oil prices as well as a rebound for the U.S. dollar. This U.S. dollar rebound comes shortly after last week's sharp fall that was driven by the big disappointment in the U.S. jobs report.
That jobs-driven plunge for the greenback is clearly seen on the chart as having prompted a USD/CAD breakdown below a key uptrend line that extends back to the early February lows. Wednesday's USD/CAD rebound pared some of last week's losses, but the trendline breakdown is still valid, at least for the time being. Any further move below the 200-day moving average to the downside would confirm the breakdown and could prompt a further move down to key support around 1.3100.
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Wednesday, June 12, 2019
The Pause
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