Gold takes a breather after soft PPI earlier propels bullion to new 2-month high
The news broke yesterday that Meng Wanzhou, the CFO of Huawei and daughter of the group's founder, was arrested on Saturday in Canada. Huawei is accused of violating US sanctions with Iran. Ms Wanzhou will appear in court today, and depending on how it goes may be extradited to the US. The news of the arrest sent financial markets reeling.
Imagine if Tim Cook was taken into custody in China? Think about how angry the US would be. The next time the US and China sit down to talk about trade, the first thing on the agenda will be a discussion about the release of Ms Wanzhou. The massive sell-off in markets yesterday tells you what traders think about the future relationship between the two powerhouse countries.
A saving grace for the US market, with about 2-hours left of trading, was the news that the Federal Reserve might slow, even further, the raising of interest rates. The news even helped the Nasdaq finish in the green. Does this show that the market is more concerned with the Fed than with trade talks?
Yesterday the JSE FTSE/JSE All Share closed down 1.75%, the S&P 500 closed down 0.15%, and the Nasdaq closed up 0.42%.
Michael's Musings
Last week Barry Ritholtz went on a rant about share buy-backs; Bad Buybacks.
He makes the point that companies are wasting billions on share buy-backs, instead of using that money for innovation. In his rant, he implies that directors are biased when considering when to do share purchases because creating extra demand for your stock also increases the value of insider share options.
One of the companies that he sets his sights on is Apple (NASDAQ:AAPL). His suggestion was, instead of spending tens of billions on buying back stock, what about buying Tesla, Netflix (NASDAQ:NFLX) or Disney? Imagine how Tesla or Netflix would fly if they didn't have to worry about their growing debt burden?
We have had the same suggestion in the office for the last few years. In the case of Tesla, you would have Musk focussing on producing the best car in the world, and Apple would focus on funding it. It is not too late!
Signing off
Asia is higher, Tencent is higher and so is the JSE All-share. Last night the US showed that they are officially an oil net exporter, the first time in 75-years. This coincides with OPEC meeting in Vienna, where the cartel is likely to reduce their production. The big data points for today; there is EU GDP and the US jobs data. If you managed to get your hands on Cape Town 7's tickets, enjoy! Go Blitz Bokke.
