Feel the Cold!
The one thing the Democrats didn’t feel in IOWA was the Bern, just the cold.
Here are the facts:
• Iowa has 3.1m population,
• 584,111 registered Democrat ACTIVE Voters
• 612,112 registered Republican ACTIVE Voters
• 726,819 registered Independent ACTIVE Voters
• 30 Republican delegates
• 44 Democrat delegates.
I looked at the voting data this morning (reported by major news outlets) and I was shocked. According to the media the Democrats collectively didn’t even receive 1400 VOTES in the entire state of Iowa. That is not even 1% of the active registered Democrat voters. University of Iowa alone has 30,000 enrolled. Hillary received just 701 votes and Sanders was only a couple of votes behind Hillary. I can not believe it is correct – yet every major news outlet are reporting these numbers (something is wrong). Perhaps it will be corrected – but no one seems to be that concerned. Of course people don’t pay attention to the math.
[CORRECTION: While the major news outlets have reported on TV and on their websites that Hillary only received 701 VOTES, the truth is the Democrats do NOT count votes - but count some "delegate equivalent", while Republicans count actual "votes". Be nice if the media reported correctly and explained - rather than just labeling them VOTES. I stand corrected!]
IF it were true – as the media reported – votes, here would be some embarrassing facts:
• Over 4,500 people showed up for Hillary’s rally in Iowa 3 days ago. Only 701 people in the ENTIRE state voted for her.
• Bernie had over 5,000 people at his Iowa rally and only 697 people voted for him.
• Hillary spent $9 million in ads in Iowa, or $12,875 per vote.
• Bernie spent $7.5 million in ads in Iowa, or $10,791 per vote.
(Seems like I am the only one that finds it odd.)
Courtesy of wikipedia
Feel the Cold
The Democrats in Iowa are not just feeling the cold, the economic data and earnings remain cold as well. The oil market continues to be the main headline that is driving market activity or at least getting the attention from the talking heads on T.V.
Exxon and Oil
Exxon’s profits continue to get hammered, down over 50% from a year ago. Company posted 67 cents a share vs. 1.32 a share a year earlier. The real story is the top-line revenue at $59.8 billion vs. $87.28 billion.
Yet Exxon and many other oil companies are not getting hit exceedingly badly as compared to the actual commodity. Exxon is still off the low of $68 from August of 2015. There are many thinking we are hitting a bottom in the oil market. Even Warren Buffett has increased his position in Phillips, now the largest shareholder over $5 billion worth and over 15%.
Dollar Strength or Oil Weakness?
As I mentioned in a previous market preview, is oil down or is the dollar up? It is certainly a combination; the dollar rally has certainly put pressure on dollar priced commodities. True oil prices are down against all foreign currencies as well, but nothing like it is down against the dollar. The dollar is the big factor that is driving this oil price sell off. Yeah, I know we keep hearing from the talking heads on TV about oil production and gluts and this or that. However, factor in dollar strength and oil is not down nearly as much.
Why is Buffett, considered the “Sage of Omaha” investing billions in the oil markets and willing to take losses and huge volatility – when everyone is selling? Because he KNOWS this is more of a dollar play than an oil supply & demand issue.
If we look at the math of extraction vs. consumption, we are talking about fluctuations that have to be measured in the sub-1% range. In fact, consumption on a worldwide basis continues to expand. So demand continues to drive higher. Yet oil prices have collapsed. Now price oil in another commodity (like gold) or price it in Yen, Rupee, or other depressed currency against the dollar. Guess what, oil prices have not declined all that much. Certainly not looking cheap like in the U.S.
Betting Against the Dollar!
Buffett’s bet and others – is betting against the dollar and investing in commodities that the world will continue to consume regardless of the dollar. Buffet is not betting on oil prices rising as much as he is betting on the dollar weakening.
He may not have to wait that long. Even the Fed Vice Chair, Fisher, tone was far more Dovish. Smart money is not looking at rate hikes, but actually rate cuts and MORE QE or something similar. However, these people are few and far between, but they are the ones we should pay attention to: Gundlach, Dalio, and others. Buffett is saying the same thing, through his investments.
Support & Resistance
We popped back up into that 16,400 range, but I am not so sure we can hold in there. In the short-term expect some volatility. A pull back into 16,200 is in the cards this morning. Don’t look for a trending market yet.
We are seeing some resistance in here and not all is rosy in the tech sector. Expect volatility and a move to 4200 or as high as 4350.
Hit that resistance point and stopped on a dime. I would look at 1900 as short-term support with a resistance area around 1980 if we get a break-out move. Just expect some volatility.
RUT 1000 – 1040
The broadest index continues to be the best source for monitoring money flow into or out of the market. Resistance up at 1040 seems to be solid and I think we could bounce around this range without trending for the week.
I certainly think the market can rally, but the perception has to be that the Fed is going to cut rates and inject more QE stimulus (become Dovish). Dalio and others are betting on it. However, as long as the market believes in a Hawkish Fed, combined with weak economic/earnings data, and the dollar remains strong – we will see weakness in the equity and commodities market.
I am in the Buffett, Dalio, Gundlach camp – sure they are in the minority, but the math is telling me that the objective bet is in the right. Of course you can choose to listen to the subjective view that is blinded by a handful of politically bias headline data points.