foxex: Farmed Out

The Market Sum | Insight after the bell

By Caleb Silver, Editor in Chief

Wednesday's Headlines

1. Markets Rise Despite Trade Concerns and Fed
2. Disney Boasts 10 Million Subscribers to Disney+ on First Day
3. The Federal Reserve is Comfortable with Interest Rates at these Levels

4. U.S. Farmers Caught in Trade Impasse

5. The Regional Impact of Higher Tariffs

Markets Closed

Dow
27,783.59 +0.33%

S&P
3,094.04 +0.07%

Nasdaq
8,482.10 -0.05%

VIX
13 +2.52%

Bitcoin
$8,810.97 +0.26%

US 10-Yr Yield
1.87 -2.04%

Image: Getty Images

Markets Today

U.S. markets managed gains on a day where global markets could not. The DJIA notched a new record high on the back of a 8% rise for Disney (DIS), which says that more than 10 million subscribers signed up for Disney+, its new streaming service that debuted yesterday.

Headlines

U.S.-China trade negotiations have reportedly hit a snag over China's agricultural purchases from U.S. farmers in exchange for agreements on issues like currency manipulation, commitments to rules to safeguard companies' intellectual property, and opening up its financial markets.
U.S. Federal Reserve Chairman Jerome Powell told Congress that the Fed is comfortable with monetary policy and interest rates as they stand today. As long as the economy continues to grow, and unemployment and inflation remain low, the Fed says current levels are "appropriate". The Fed has cut interest rates three times in 2019, helping propel U.S. markets to record highs.
The U.S. budget deficit topped $1 Trillion for the first time since February 2013, according to the Treasury Dept. The budget deficit grew 34% in the first month of the fiscal year as government spending outpaced revenue. Spending was driven higher by the military, health care, and social security. The Treasury Dept. said the 34% increase was in part due to the timing of certain payments and receipts that had shifted in 2019 from 2018.
The International Energy Agency says shale oil output from the U.S. will stay higher for longer than previously projected, reshaping global markets, trade flows, and security concerns. It predicts that U.S. shale, which is projected to account for 85% of the increase in global oil production until 2030, will reduce the influence of OPEC members and Russia.
Facebook (FB) announced the launch of Facebook Pay yesterday, which allows users to make payments and purchases on its social network and its apps,Messenger, Instagram, and WhatsApp. The company specified that the payment system has its own infrastructure and has nothing to do with Libra or the Calibra wallet. It will begin rolling out in the U.S. this week on Facebook and Messenger.
Google will soon offer checking accounts, according to The Wall Street Journal. The project, codenamed "Cache," partners Google with Citigroup and a credit union at Stanford University to offer basic checking account services and bill paying. Read more here.
Alibaba has received approval for a secondary listing in Hong Kong. The company expects to raise as much as $13.4 billion with the sale of up to 500 million primary shares, according to Reuters. The move is seen as a vote of confidence for a city engulfed in chaos.
Disney (DIS) reported more than 10 million new subscribers for Disney+, its new streaming service, which launched yesterday amid technical difficulties. Priced at around $7 per subscription, the service is cheaper than rival networks, including Netflix, HBO Go, and others. The Company said it will release additional subscriber numbers in its quarterly earnings reports, but today's announcement helped boost Disney shares by 7%. The stock is up nearly 28% in the past year.

chart courtesy YCharts

Shares of Netflix (NFLX), incidentally, fell over 3% today. While one could tie that to Disney's rise today, NFLX has been trending lower since early July as subscriber growth slowed and Disney announced its lower price point for Disney+.

chart courtesy YCharts

Trade Impasse Puts Farm Purchases in the Middle

The U.S.-China trade talks appear to be snagged on agreements surrounding China's promise to purchase as much as $50 billion in U.S. soybeans, pork, and other agricultural products annually. The WSJ reports that China is unwilling to put that $50 billion figure into an actual agreement without the U.S. committing to lift tariffs on key Chinese imports.

According to the WSJ, China has also been reticent to agree to other issues, including not manipulating its currency, making commitments to rules to safeguard companies' intellectual property from what is known as Forced Technology Transfer, and opening up its financial markets to provide more transparency for outside investors.

The agricultural purchases are a political and economic hot potato given the steep losses U.S. farmers have suffered this year as a result of poor weather, a slowing global economy that has curbed exports, and of course, the trade war.

The Trump administration has granted $16 billion in aid to U.S. farmers this year, but their losses have surpassed that due to all the factors mentioned earlier.

Furthermore, U.S. farmers are dealing with debt levels approaching 30-year highs due to both real estate liabilities and other costs. Farm debt is set to surpass farm equity in 2019, according to the U.S. Farm Bureau.

Trade War's Impact on Jobs and the Economy

Much has been written and said about the economic impact of the trade war, but the broader impact of U.S. imposed tariffs on jobs is more difficult to quantify. With unemployment in the U.S. near 50-year lows, it's easy to forget that jobs are being impacted by the multiple tariffs the U.S. has imposed on China, Europe, Vietnam, and Brazil, among others.

The Port of Los Angeles (one of my favorite sources), has tried to quantify the impact on jobs in a new report entitled BY THE NUMBERS, Jeopardizing the National Benefits of Trade Through America's Busiest Port Complex .

It's a heavy, but fascinating read. The upshot from the report is that nearly 1.5 million jobs are impacted by tariff increases on goods that come through the Port of Los Angeles and the Port of Long Beach (the nation's busiest ports), which put pressure on both imports and exports. That cargo, the Port argues, directly impacts jobs.

The report mapped out which U.S. regions are impacted most by the tariffs on goods that come through the San Pedro Bay ports, just in case any politicians are paying attention to their constituents in these regions.

Chart courtesy The Port of Los Angeles

More News:

Behind Google's Plan to Enter Consumer Banking

Arrowhead Shares Are Still Alerting Big Buy Signals

Could Private Markets Threaten the ETF Industry?

(chart courtesy YCHARTS)

Walt Disney Co rose 8.2% after the launch of its streaming service, Disney+. The service attracted over 10 million subscribers after one day. The number of subscribers so exceeded Disney's expectations that the subscription service was plagued by technical issues due to the demand overtaxing its servers.

Fertilizer maker Mosaic dropped 5.9% as JPMorgan downgraded it to
"Underweight." Energy firm Hess fell 4% after it said it needed to assess the commercial viability of its oil reserves in Guyana.

Word of the Day

Electronic Payments Network (EPN)
The Electronic Payments Network (EPN) a financial clearing house for the private sector that handles various types of electronic funds transfers, either among accounts at the same bank or to different accounts at separate financial institutions. The EPN may process credit transfers, such as payroll payments, social security benefits, tax refunds, and dividends; as well as debit transfers, such as loan payments, utility bills, and insurance premiums.

Today in History

November 13, 1878

Today in 1878 the first telephones were installed on the trading floor of the New York Stock Exchange. As the speed at which information could be used to trade sped up over history, more and more technological investment has gone into lowering the delay between the decision to make a trade, and the execution of that trade. Some high-speed trading firms have taken to purchasing right of way for increasingly straight fiber-optic lines to minimize latency for trades.

Source: https://jasonzweig.com/this-day-in-financial-history/

https://www.wired.com/2012/08/ff_wallstreet_trading/