What a ride the beginning of the year has been so far. As we warned in our year end and 2019 outlook, the equity markets were most likely set up for some bottom pickers to step in and show their support out of the gates.
So let’s get to it, what did we learn over the past week? We were informed by Intel that its computer chips were affected by a bug that makes them vulnerable to hacking. All computers with Intel chips from the past 10 years are affected. Considering that computer chips are basically the backbone and brain behind everything electronic including the entirety of the internet itself, this should be very alarming news. We can’t say that we are surprised, we have said in many past writings that the internet itself will have to adapt to these internal threats. Not to mention the internet security threats that future quantum computing presents. To say that this news out of Intel is alarming, is quite an understatement and it’s why the future of technology will need to be completely and openly discussed by all major stakeholders. This will take a collaborative effort, one by which profits will need to be set aside for the greater good. Whether or not this can be achieved is another thing, but the viability of the internet, the Internet of Things and Artificial Intelligence comes completely into question now. Intel’s stock price barely fell 5% and why should it, if these things need to be replaced, that means more sales and of course no rebates.
Also out this week the AP reported that the FED projects $80.2 billion in remittance back to the Treasury Dept. Here is a chart of the last decade in remittance. As you can see the FED has paid back billions to its enabler, is it safe to say this is like a drug kingpin and his pushers…maybe that’s too harsh…Anyway the charts show 3 years in a row of declining remittance and one thinks we can just continue to raise rates, can you imagine this levered behemoth and its Dv01 crushing leverage if equities turn and interest rates rise?
This week we are just going to touch upon a few of the subjects that are driving our markets. Saudi Arabia and the house of Saud continue their crackdown within the kingdom. We aren’t quite sure where all of this will lead, but instability comes to mind and when you are confiscating at will apparently this much wealth, rest assure repercussions will follow. Last week we touched upon the curious reasons for all the oil appreciation and then this all transpired, hmm who leads who, fundamentals or technical’s? We always believe the price at any given moment is reflective of two components, the known, and the soon to be known. In this case the price was rising and the news of the purge followed. We can only hope that transgressions will be muted, that the rising tide of volatility in the region doesn’t lead toward a wider conflict. However, it will not shock us to see the media start to pull the old Iran vs S.A. out of the hat again. Then there is the question of where the Chinese will begin to figure in this mix. Let’s just say the situation just got a whole lot more interesting.