After the steepest drop in US equities in history back in February, the stock market rebounded 63% and passed all-time highs from pre-crash levels. With an economy that was once booming turned into a recession, but the market did not seem to care from the belief that the Fed would keep money flowing in and the banks, during a period of almost 0% interest rates, had nowhere to put their money except in the stock market. Led by tech, the market climbed higher than ever before. USD pairs got crushed as GU and EU skyrocketed. Although the S&P has already dipped over 6% in the past week, it seems that the time to buy is not that attractive to investors. Here are some reasons why:

Illusion of the Fed

The Fed, with seemingly unprecedented power to fuel the equities market, made investors feel backed by the central bank to where the market had nowhere to go but up. There was an illusion that the Fed would never let stocks dip whatsoever, but that can only go so far. Fueling the market means printing money, which means increasing debt and inflation. If interest rates rise, the market will tumble as well, so interest rates need to stay low while the USD deals with inflation rising. Keep in mind that interest rates were already very low to begin with as Trump promised the best market we have ever seen. Once corona hit, interest rates only had so far it could go before it reaches 0% or negative. Yes, it is true that missing this most recent bull run killed bearish sentiment, but the bears aren't going to sleep forever. The Fed won't keep printing money forever, and at some point, it is not up to them where the market decides to go.

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The lack of new stimulus

Millions of Americans are still out of work, even more so than the great financial crisis of 2008. The unemployment numbers have been greater than 2008 for over 6 months now, and companies are still having lay-offs. Initial jobless claims data shows that the economy is not really recovering. We finally dipped below 1 million a few weeks ago, but the number each week has now been hovering in the 800,000s. The damage done is irreversible, and will take a long time to recover. Some analysts expect 8-10 years to be fully recovered. However, this will not necessarily affect the stock market and major pairs as much. The fact that Americans have been out of stimulus payments since early August shows the true colors of Congress as Democrats and Republicans continue to debate over which package is best. Now is not the time to push agendas or make Capital Hill look bad. It's time to put differences aside and help the people that need it.

Vaccine Drawbacks

News on vaccine has definitely been a major driver in the market's direction this year, but failures in the trials have brought fear back in to the minds of investors. After one patient in a voluntary vaccine trial came down with an unknown illness, the market freaked out and dipped hard with big tech leading the drop. The first step in this biological crisis is to find either a vaccine or efficient treatments to the virus and stabilize the number of cases. The number is still rising now that schools and universities are calling students back to campuses. The University of Georgia made business news when cases spiked over 1,400 positive tests. Sports teams are postponing games, some teams are not playing at all, and billions of dollars in revenue could be lost if cancellations continue.

What will tomorrow bring?

Tomorrow and next week will be interesting. Last week had moments of short-term uptrends forming before price got wiped out again. This pattern happened a lot last week. The bulls are losing momentum with all this crazy news coming out, and tomorrow may be grim. The market is following the same pattern from February: sell offs begin to bring price down before that big correction happened of -34% on the SPX500.

You can tell that the dips are becoming successfully more aggressive the higher we climb. The red candles are now overpowering the green and this recent dip has already wiped out 3 weeks of gains. The healthy thing would be for the market to correct making stock prices and value reach closer to equilibrium. Otherwise, we will see a bull market run completely by FOMO investors who want to make a quick buck on each swing up, and an inevitable correction farther in the future will be worse than if it were to do so now. Since the market has dipped back into correction territory, it's time for it to make a decision. Will we continue to buy in to the Fed-fueled rally, or will we let the market healthily correct so that it makes more sense to start investing again?
We will find out soon.


Disclaimer:

Please note that this email is my personal opinion only. I am not a licensed financial advisor, and any information shared or discussed is not to be construed as investment advice. Trading and investing involves a degree of risk, and is not suitable to all investors. Please consult with your financial advisor before making any sort of investment decisions.

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Gores Metropoulos Inc. (NASDAQ: GMHI) has marked a deal with global leader in artificial intelligence on highway autonomy, Luminar, and is going public on this merger worth over $3 billion.

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A little about Luminar Tech

Luminar works in the field of highway safety using various AI tools for detection of objects up close or even from a considerable distance. One of their products, the Iris, can detect objects from a max distance of 500 meters away.

https://www.luminartech.com/

Just from clicking on the website, you can get an idea of the kind of technology that Luminar is working with without the use of many words. The front page is an interactive picture of a city street that the users can look around with. Immediately, the site can not only grab the users attention, but expose the advanced technology without explaining it in depth.

The company is well-established in the private sector with 50 partnerships including several of the top Original Equipment Manufactures in the world.

GMHI

Gore's most recent earnings report came as a surprise to a lot of investors in a good way. On top of that, the size of this merger is a little bigger than Nikola's merger with VTIQ earlier this summer. This might be a good sign to traders now that the market cap sits at a little over $1 billion. The new valuation of $3.4 billion might drive the price up. Luminar will receive an immediate $170 million in finance as the ticker will change from GMHI to LAZR on the Nasdaq. The deal is expected to close at some point in the 4th quarter.

GMHI on the 1D chart. For those who are trying to trade this pre-merger, support can be found in the 10.70-80s price range. Price hasn't been able to break above the $12 mark yet, so a potential retest could happen come merging time. 14-Day RSI stands little under 60.

I am currently holding a position on this stock, however it is small. Remember that anything can happen in these unpredictable markets, especially the SPACs, so it's important to keep a level head and risk what you are willing to risk.


Disclaimer:

Please note that this email is my personal opinion only. I am not a licensed financial advisor, and any information shared or discussed is not to be construed as investment advice. Trading and investing involves a degree of risk, and is not suitable to all investors. Please consult with your financial advisor before making any sort of investment decisions.

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Politics preventing new financial stimulus

The economic recovery in the major global economic powers depends on several important factors. One of the most vital part, the spread of the virus and the government's answers to it. With a decrease in daily cases of COVID-19 to 50,000 in the U.S.A. Yet U.S. A remains the most significant global threat being the largest economy in the world. The trend of the virus in Europe has begun to worsen. With the majority of countries experiencing an increase in the past weeks.

The economic impact of global shutdowns, although severe, was cushioned by massive government aid and hawkish monetary responses everywhere. The U.S., after a slow start, introduced the most aggressive fiscal response in the form of its $3 trillion CARES Act. This funnelled cash to businesses and workers impacted by the pandemic and got forced into lockdown. 

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It had a significant impact on consumers, in particular despite a 10% reduction in salaries of employees in April. Due to substantial job losses, individual incomes in the U.S. A grew by approximately 10% due to a doubling of government funding. This mainly came through further unemployment assistance that entitled people to an additional $600 a week in aid. Despite this surge in government support, the household savings ratio increased to over 30% in contrast to an average savings rate of just 7%. Only to fall falling to 19% in June. However, there are critical factors here that contribute to the falling of savings rate: Those in the higher-income brackets, who would be less likely to have been affected, have seen savings spike. Those who were more likely to have needed the additional unemployment aid had a higher inclination to consume their stimulus cheque on necessities. Consumer spending is vital to any economy, especially in the U.S.A., which accounts for the vast majority of U.S. A GDP, is therefore vulnerable to the suspension of this stimulus cheque. 

These payments have been stopped at the end of July, and although President Trump has authorised a temporary (reduced) cost, there is no certainty about the policy beyond the end of this month. This is due to the ongoing conflicts between Republicans and Democrats on the next stimulus package. Democrats initially intended a package worth $3 trillion, with Republicans at $1 trillion. It appears that significant steps forward have been made towards a new stimulus package, but notable differences among them still remain. 

Given the fast-approaching nature of the election, it is unlikely that legislators on either side want to be criticised for another spending slip and citizen unease. That is why I still think a deal will be completed. Given the ongoing excitement within equity markets, it is likely that the market is also anticipating a deal to be done. 

Draghi returns  with Advice for policy maker

Former E.C.B. president Mario Draghi sent the current policymakers some critical advice about how best to control this financial crisis. His advice is really deserving of notice.

The speech is jumbled with historical quotations, such as to the wars, the global financial crisis of 2008 and the euro sovereign crisis of 2010, but we take away a few crucial bits of advice that are relevant to how policymakers may deal with today's obstacle. 

  1. This crisis is something modern policymakers have not yet seen so needs flexible thinking and innovative solution. The urgency and severity of the economic downturn caused by the pandemic that sticking rigidly to conventional views of monetary and fiscal policy risks worsening and lengthening the downturn the world is in. Policymakers in this crisis have shown to be realistic in introducing economic and fiscal assistance which we have never seen before. These actions have cushioned the fall for employees and corporations. For this efficient response to the global recession, they earned our respects. In European circumstances, it was feared that monetary rules would hurt governments from making these kinds of decisions. However, the European Commission has shown a sensible approach in waiving the rules for 2020 and possibly, for 2021. With blended resources also expected to be used for the first time, the union shown in the alliance of nations is a welcome and surprising characteristic of this mess.  
  2. There is what we can call "good" debt and "bad" debt. The significant increase in government debt levels due to crisis-related expenditure is sustainable, but only IF the funds are set towards productive uses. The actions of the E.C.B. have facilitated this. But it is not a cure. In the first instance, Draghi advises legislatures to protect the vulnerable to ensure social union. We have seen social division rise during this time, also causing major unrest. However, resources must be put to productive use and not wasted. In consequence of World War II, this took the form of a reconstruction of physical infrastructure throughout Europe. This time around, Mario Draghi advises that the investment should take the form of large-scale investment in human capital. Education is seen as a crucial part of the growth in productivity and economic growth. If economies are to prosper and the debt is to be paid back in the future, governments must have a revived focus on growing the productive potential of their economies. 

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Warren Buffett, one of the most successful and richest investors of all time, long-time owner of the established conglomerate, Berkshire Hathaway, and mega bull has recently turned bearish on the US stock market. Granted, he has been saying this since the April rebound, but he finally put his money into action.

Although Buffett would probably never short the market, he decided to get rid of his bank stocks by dumping JP Morgan, Wells Fargo, Goldman Sachs and other banks with smaller positions. He sold over 250 million shares, hundreds of billions of dollars worth in total, but that's not all.

https://www.cnbc.com/berkshire-hathaway-portfolio/

The oracle of Omaha had also replaced his stake in bank stocks for a gold mining company, Barrick Gold Corp (NYSE: GOLD).
But why sell bank stocks when the Fed has funded them with trillions of dollars and pushing the S&P passed all-time highs?

Surprisingly enough, bank stocks have largely under performed the market in this latest bull rally. This is due issues regarding credit and debt; Analysts expect banks to be close to $900 billion in losses by 2022, according to CCN.

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https://www.advisorperspectives.com/dshort/updates/2020/08/04/market-cap-to-gdp-an-updated-look-at-the-buffett-valuation-indicator

Here's the indicator Buffett uses to measure the Wilshire Stock index valuation compared to overall GDP. The way it's measured on this site (which is the accurate way) is by taking the annual GDP from Q1 and using that as the denominator throughout the year. So, it is basically the index divided by Q1 GDP.

In most recent numbers, GuruFocus has us at 179%, which they consider 'significantly overvalued' for the market. They also predict a 2.9% decline in stock market returns this year.

https://www.gurufocus.com/stock-market-valuations.php

What Now?

It's hard to predict what is going to happen in the market with tons of factors at play. For example, two weeks ago, jobless claims dropped into the 900,000s range, and investors believed the economy was recovering. The market shot up. Last week, jobless claims (which have been driving the market either up or down) reported back over 1 million at 1.1 million. Despite bad news, the market shot up harder than the previous weeks.

The problem investors are running into is that Wall Street will tell you that the economy doesn't reflect the stock market. And when there's bad news about the economy, the market tends to go up. However, when there's good news about the economy, that news matters all of the sudden, and it causes a buying frenzy. As an investor who's got most of their money sitting on the sidelines since April, it's frustrating to try to get an idea of when is the best time to buy. Do we brush off the fact that the US is in a recession? Do we join the hype train and ride with the bulls?

The answer is painfully simple: Bull and bear markets all come to an end eventually before it resets. Look past the trees and view the whole forest. Is a vaccine going to fix the damage already caused by the pandemic? Most stocks on the S&P 500 are showing negative returns expect for a certain few. There is lasting damage to the economy, and if you were forward-looking, it would make sense to see the market reflect that in stocks. Some analysts are talking years of rebuilding before the economy 'normalizes' again.

Here is the US30 on the 4H chart showing long wicks on both the tops and bottoms of several candles. That is a big sign of uncertainty where investors can't decide on what to do. No one really knows what is about to happen in the next week, month or year, not even Buffett himself. It's about being rational and understanding what makes sense in the long run.

Put yourself in an unbiased position and ask, 'should the S&P really be at all time highs right now?' The obvious answer should be no, but again, the market does not always make sense.

What to Look Out For This Week

Watch for vaccine news: This week may see another frenzy of buyers as a successful breakthrough on treatments to the coronavirus will most likely become approved by medical officials.

Watch Big Tech: The stocks like Amazon, Apple, Google, etc have been the main drivers of the market. Analysts are finding long entries on all of these companies excluding Netflix.. Traders are likely to follow.

Watch Technicals: This is definitely a trader's market now. News does affect price, especially good news, but indices are respecting lines of support, resistance, breakouts, wedges, etc. On the 4H chart, the US30 broke above the wedge with a strong green candle. A break in highs could mean that the SPX500 might want to continue its run for now.


Disclaimer:

Please note that this email is my personal opinion only. I am not a licensed financial advisor, and any information shared or discussed is not to be construed as investment advice. Trading and investing involves a degree of risk, and is not suitable to all investors. Please consult with your financial advisor before making any sort of investment decisions.

Featured Pic: https://news.theceomagazine.com/wp-content/uploads/2020/02/warren-buffett.jpg

Warren Buffett is one of the most idolised, investors in the world.

At the time of writing , his company, Berkshire Hathaway, has a market cap of $495 billion and Buffett himself has a net worth of $79 billion.

His approach to value investing, combined with his influence over the companies he invests in , has seen him generate an average annualised return of 20.8% per year. Just over double the 9.7% annualised returns the S&P 500 delivered over the same period of time, since 1965.

He’s known as the Oracle of Omaha. A wise investor whose name is synonymous with wealth and investing, a modern icon of success in the financial markets.

…This is his story.

Early Years

Warren Buffett was born on the 30th August 1930, in Omaha, Nebraska.

His father Howard was a stockbroker, with his own brokerage firm and his mother Leila was a housewife. Buffett had two sisters.

Young Warren

As a young child, Warren Buffet would spend most of his time at his father’s brokerage firm, writing numbers on the chalkboard and reading books. He was close to his father and describes his father as affectionate and inspirational man. He credits a lot of his success to him and says he was the one who introduced him to investing and his love of books.

As a young boy, he was always a lover of numbers.Even from a very early age he had an appreciation for business. This was became clear after reading a book called “One Thousand Ways to Make $1000”. Apparently, as a child, Buffett told a friend that if he wasn’t a millionaire by 30 he would jump off the tallest building in Omaha.

Some of Buffett’s first ventures were to sell chewing gum and bottles of cola door-to-door. He had many other ventures, such as finding and selling used golf balls and selling popcorn at football games at the University of Omaha.

When Buffett was 11, his father took him on a trip to New York. The main things Buffett wanted to see were the New York Stock Exchange. When he saw the NYSE for the first time, he saw a young boy rolling cigars for the traders to keep them happy, this is when he realised that stock investing was where the real money was.

At only 11 years old, Buffett made his first real investment, using the money he had earned so far (around $120) to buy his first stocks.

He decided to buy shares for himself , in an oil and gas company called Cities Service. He bought 3 shares priced at $38.25 per share. After investing in these, the price quickly dropped to around $27 per share, but an anxious young Buffett held on and waited until the price increased to $40, at which point he sold his stocks and took a small profit.

After taking the profit, the price increased a lot more, up to $202 and Buffett realised he could have made a lot more if he had waited. He says he learnt a lot from this early investment, like the need to be patient and not to rush into a decision without reason.

Buffett bought his first property at the young age of 15 using the money he had earned from his paper round and other ventures. He used around $1200 to purchase a 40-acre farm in Nebraska. Buffett hired a tenant farmer who worked the land for him and they shared the profits.

Buffett graduated from high school in 1947 at the age of 17, with the caption under his yearbook picture reading: “Likes math; a future stockbroker”.

His father persuaded him to enrol at the University of Nebraska where he graduated at 19, earning his degree in Business Administration.

It is believed that Buffett was so frugal at an early age that he chose to live in the YMCA whilst at University, so he could spend as little as possible and save his money instead.

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After Graduation

After graduation, Buffett wanted to go to Harvard Business School, as he thought this would be more mentally stimulating and give him a chance to learn more. Sadly he got rejected...

Instead, he decided to go to the Columbia Business School to study for his Masters. Buffett chose Columbia after reading the book “The Intelligent Investor” by Benjamin Graham, which Buffett says is the best book about investing ever written.

THE INTELLIGENT INVESTOR - ndiio.com

When he heard that Graham taught at Columbia, he had to go there. Graham became a massive influence on Buffett, who says he was one of the most influential people to him after his father.

Buffett learnt about the fundamentals of investing whilst in Graham’s classes and was the only student to ever get an A+. He was able to find assets that were valued at a lower cost than they could be worth, by thinking like a business owner. He then manages the investments efficiently over the long term.

After graduating, Buffett was keen to go straight to working on Wall Street, but both his father and Benjamin Graham pleaded with him not to. Buffett even offered to work for Graham for free but Graham refused, so he returned to Omaha and started working at his father’s brokerage firm.

As a very introverted, shy and nervous person, Buffett decided to take a Dale Carnegie public speaking course. He credits this as being one of his most important investments.

It was around this time that Buffett met his first wife Susie. They were married in 1952 and lived in a small run-down apartment. They had their first child, Susie, and to save money they turned a drawer into a bed for her.

Warren and Susan Buffett-wedding 1952 | Celebrity wedding photos ...

He began teaching night classes in investing at the University of Ohama, where most of his students were twice his age.

Finally, Buffett was contacted by Benjamin Graham who offered him a job at his partnership and in 1954, he moved back to New York to work there.

He spent most of his time at the partnership searching for opportunities and analysing reports. He became more interested in how companies worked and thought about the company’s management as part of his investment decision process. Graham was more interested in the balance sheets as his main investment decision process.

Already in these early years of his career, there were aspects of finance that he was obsessed with — the most important being that of compound interest. It’s thanks to this that he was able to build huge levels of wealth over the years.

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Starting his own partnership

In 1956, Buffett decided to leave the partnership and move back to Omaha. It was here that he started his own partnership called Buffett Associates Ltd. Seven family members and friends invested $105,000 in total, with Buffett only investing $100 himself. By the end of the year, he was managing around $300,000.

Buffett had two more children and, with a growing family, he decided to buy a house for $31,500.

In 1960, Buffett spoke to one of the partners who was a doctor and asked him if he could get another 10 doctors to invest $10,000 each, he succeeded in this and got 11 doctors to invest.

By 1962, the partnership was now worth $7.2 million, and Buffett decided to merge all the partnerships together into one; forming Buffett Partnership Ltd. The minimum investment amount was $100,000.

It was also in this same year that Warren Buffett met Charlie Munger and they hit it off straight away, starting the famous friendship that was to last for years to come.

Billionaire Charlie Munger praises this 1 skill of Warren Buffett's

Berkshire Hathaway

Buffett started buying stocks in Berkshire Hathaway in 1962 when it was mainly run as a textiles company and was owned by Seabury Stanton.

He decided continue to buy more shares in the company. He eventually took over Berkshire.

Buffett tried to stick with the textiles part of the business at first but realised there was not so much profit in it and started to phase it out. He started investing in insurance companies instead, and in 1967 bought the National Indemnity Company and National Fire & Marine Insurance Company.

In 1970, Buffett named himself as Chairman of the Board at Berkshire Hathaway and wrote his first letter to the shareholders. These letters from Buffett would later become very famous and something studied by many investors around the world.

Investing in a Moat

In 1971, he made the biggest investment of his career until then. Through Berkshire Hathaway, he bought a company called ‘See’s Candy’ for $25 million in cash.

“The single most important decision in evaluating a business is pricing power, if you’ve got the power to raise prices without losing business to a competitor, you’ve got a very good business.” - Warren buffet.

Berkshire Hathaway’s value rose over the years, and between 1965 and 1975 it went from $20 per share to $95 per share.

Gaining the Float

This acquisition and involvement of the insurance business in Berkshire Hathaway have also become a trademark part of Buffett’s success.

When insurance companies collect people’s premiums, they don’t get paid immediately in other insurance claims. This cash stays with the company and is known as its ‘float’.

Berkshire Hathaway, thanks to its insurance businesses, has a float that was $39 million in 1970 and has risen to over $100 billion.

In the late 70s, Berkshire’s stock prices went up to over $290 per share and Buffett was worth around $140 million. Buffett’s net worth was tied up in Berkshire and therefore the only money he had to spend was his salary of $50,000.

His solution was to start investing his personal money in stocks as well. He made himself $3 million dollars in investments.

Apparently, around this time a friend spoke to him about investing in property, but Buffett refused, saying “Why should I buy real estate when the stock market is so easy?”.

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Buffett in the 80s

Investments Buffett made throughout the 80s really typify his approach.

Buffett set his sights on Nebraska Furniture Mart in 1983, so he walked in to speak to the owner and offered to buy it. The owner agreed at a price of $60 million, which Buffett agreed to and shook hands. A contract and cheque were sent along just days later.

In 1984, Berkshire bought into Scott and Fetzer. The company had been going through a hostile takeover and were panicking. Berkshire offered $60 per share and Scott and Fetzer agreed.

In 1988, Berkshire began to buy shares in Coca-Cola. The owner, who was an old neighbour of Buffett, noticed the shares being bought and began to panic and started investigating. Upon investigation, he recognised that it must be Buffett and gave him a call to find out what was going on, but Buffett wouldn’t say anything until he was required to (once they hit the 5% threshold).

Berkshire managed to own a share of 7% in Coca-Cola, which was worth over $1 billion. Buffett became a billionaire in 1990.

Buffett in the 90s

In the late 90s, the lure of the new dot.com companies was simply too appealing for most investors and it soon became a bubble. Buffett, on the other hand, steered clear.

In his letter to shareholders, he claimed that technology investors had overstayed the party. He said value is destroyed, not created by any business that loses money over its lifetime.

During this time, many people thought Buffett had lost his touch, with Barron’s even writing “What’s Wrong, Warren?” as Berkshire stock had gone from a high of $81,000 to around $40,000 per share.

However, Buffett, in hindsight, was right. As the share price recovered to its previous highs once the bubble and hysteria ended. His vision to avoid the hype and stick with his long-term approach beat other investors yet again.

The Financial Crisis

During the financial crisis of 2007-2008, Buffett was once again criticised. This time it was for allocating capital too early and not getting the best deals.

Throughout 2008, he acquired large stakes in big companies such as Goldman Sachs and General Electric. It was at the times of panic that Buffett was able to use his huge hoards of cash to gain companies at a large discount from the value he saw in them.

However, the criticism may have been misplaced, as already 5 years later he was reported to have made over $10 billion profit from the deals he had made between 2008 and 2011. This is despite showing a drop in profits of 62% during 2008 itself.

In particular, Buffett’s investment in Bank of America is seen as being a genius move. A $5 billion investment in warrants were able to be exercised for a stake worth $19 billion; meaning by 2017, he had made a profit of $12 billion.

Philanthropy

In February 2011, Buffett attended a ceremony at the White House where he, along with fourteen others, received a Presidential Medal of Freedom, which is America’s highest civilian honour. It was awarded by President Obama, who said the people being awarded were “some of the most extraordinary people in America and around the world”.

When talking about Buffett, Obama said he was “not only as one of the world’s richest men but also one of the most admired and respected” and he has “demonstrated that integrity isn’t just a good trait, it is good for business”.

Philanthropy

In February 2011, Buffett attended a ceremony at the White House where he, along with fourteen others, received a Presidential Medal of Freedom, which is America’s highest civilian honour. It was awarded by President Obama.

When talking about Buffett, Obama said he was “not only as one of the world’s richest men but also one of the most admired and respected” and he has “demonstrated that integrity isn’t just a good trait, it is good for business”.

Since the year 2000, Buffett has donated more than $46 billion, making him the most charitable billionaire. It was always his aim to build up wealth in order to give it away to help the wider society. His lifestyle of frugality shows how money holds little value for him other than being a measure of his success in what he calls ‘the game’.

He has also pledged that 99% of his wealth will go to charitable causes, with 83% of that going to the Bill and Melinda Gates Foundation, the foundation co-founded by one of his best friends, Bill Gates.

When you look at the life of Warren Buffett, it’s clear that you have a man who lived by principles and integrity. This included his investment decisions, which always followed fundamental rules that he stuck to, as well as his private life.

Rather than letting his life be dictated by his huge wealth, he lived a humble lifestyle and appreciated the close group of people around him. As he says:

"It takes 20 years to build a reputation and 5 minutes to ruin it. If you think about that, you’ll do things differently.”

Once it’s all said and done, in the history books, his reputation will be regarded as one of the greatest investors and businessmen of all time; a humble and generous man who enjoyed and understood the game. 

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At 8:30 am EST, the Bureau of Labor Statistics released US unemployment rate and the number of jobs added in the month of July. The results were better-than-expected, but was it good news?

https://www.bls.gov/charts/employment-situation/civilian-unemployment-rate.htm

Total unemployment rate came down to 10.2% after economists predicted a rate of 10.5%. The number of jobs expected to increase this month were around 1.6 million, and reports came out that around 1.8 million were added.

This could be taken two ways:
Investors see that the economy is slowly recovering, as recoveries don't happen immediately. At least we are starting to see some improvement.

The other way could be taken like this: The amount of growth we saw in the last two months provided much more promising numbers that it makes this month's report look like a joke.

In the month of May, the US was able to gain 2.5 million individuals to the payroll. June gave us 4.8 million says Washington Post. Two months of progress started looking promising, but July gave us a number less than May and June. With 1.8 million more employed shows that we have seen a slow-down in economic progress.

GBPUSD 4H Chart

During the market's dip this morning, we saw some movement on major pairs like GBP/USD and EUR/USD to the downside. Starting in early afternoon, the stock market began to recover, and those pairs followed.

We started seeing some decoupling of certain pairs from the market, but today's behavior did not reflect that.

Although unemployment rate has come down to 10.2% from 14%, there are still many concerns over how long it will take to reach a full recovery. The US has a long way to go from the decent 3.5% unemployment we saw in April. If not for the Fed, US markets would be down well below highs in late February. Washington Post also added that the Congressional Budget Office mentioned that the US will not see a full recovery for another 10 years. If that does not provide gloomy sentiment for stock investors, I don't know what does.

What to look out for

Last month has definitely showed that the US is not doing as great as they thought. With this earnings week coming to an end and this month's jobs data out, it's time to do some forward thinking. Because the market always looks to the future, next month's results should be considered. Any type of good news tends to be more effective than bad news. Jim Cramer, on CNBC, recently talked about how the market can be stupidly bullish sometimes, and the latest rally came out of nowhere. If the number of jobs increase by even a little bit for August, that's more than enough reason for retail traders and big banks to invest.

The US30 seems to have entered an area of consolidation between 27184 and 27625. This area is something to watch as lawmakers continue to delay new stimulus measures. Our overall sentiment on US markets is still bearish, but being bearish and calling bearish moves are two very different things. In other words, knowing that the market is due for a correction is different from calling it. The market is definitely overbought, but the question is how overbought? We will be looking to a break in that consolidation zone to the downside. If price comes up to that top at 27625, we will look for a short sell limit as well.


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Disclaimer:

Please note that this email is my personal opinion only. I am not a licensed financial advisor, and any information shared or discussed is not to be construed as investment advice. Trading and investing involves a degree of risk, and is not suitable to all investors. Please consult with your financial advisor before making any sort of investment decisions.

Featured Pic: https://www.kbic.com/blog/healthcare-finance/files/2016/11/Job-Hunting-for-Thanksgiving-4-Tips-to-Bag-the-Quarry.jpg

This article will be updated throughout the day tracking any news on the FOMC press conference, tracking news, Powell's statements, and results with investor sentiment. This meeting will impact US indices including US30, as well as major currency pairs like GBP/USD, EUR/USD, USD/CAD, etc.
Featured Pic: https://www.google.com/url?sa=i&url=https%3A%2F%2Fwww.nbcnews.com%2Fbusiness%2Fmarkets%2Fwe-may-well-be-recession-says-fed-chairman-jerome-powell-n1169291&psig=AOvVaw1clhDC8PvVOe9UF4Htu9nJ&ust=1596123578700000&source=images&cd=vfe&ved=0CAIQjRxqFwoTCNjHnOzl8uoCFQAAAAAdAAAAABAD

12:36 EST

Fed Chairman, Jerome Powell is set to speak today at 2:30 EST. He will most likely have to address the most recent spike in cases that occurred in several states and what his plans are to carry forward. Notably, interest rates are expected to remain unchanged or somewhere in between 0-.25%. Powell may also discuss their current balance sheet of over $6 trillion and possibly an increase in more bond buying, according to Economic Times. High volatility is expected during the discussion. Overall expectation is that the Fed will probably do nothing excessive, and leave most policy unchanged with brief statements of positive forward-looking sentiment.

Federal Interest Rates:

https://tradingeconomics.com/united-states/interest-rate

Treasury Yield Curve:

https://www.gurufocus.com/yield_curve.php

2:06 pm EST

Powell says interest rates will hold as they are, but economic growth is much worse than 'pre-pandemic' levels in the statement.

In the Fed's statement, they said that they would, "support the flow of credit to households and businesses, over coming months the Federal Reserve will increase its holdings of Treasury securities and agency residential and commercial mortgage-backed securities at least at the current pace to sustain smooth market functioning, thereby fostering effective transmission of monetary policy to broader financial conditions."
Now it's time to wait for the conference in 20 minutes...

2:49 pm EST

Powell mentions economic inequalities saying that they are not related to monetary policy, but fiscal policy. He wants to decrease the unemployment rate and keep a tight labor market. They also plan to continue to buy and hold more mortgage back securities and increase credit flow in the economy. Powell is happy with their current strategy and think the economy is in a good place right now for recovery.
Markets are now flat...

Amid vaccine hopes and earnings, concerns lie ahead on the new stimulus bill called the HEALS Act. Markets sold off today as the announcement of the new bill is being discussed. The SPY at $322.56, down 0.19% at the time of writing this. Now questions remain on whether the bill will pass through or if the second round of checks will be stalled in August.

https://tradingeconomics.com/united-states/government-debt

Members of Congress are hesitant to accumulate more debt as we have mounted somewhere in between $26-27 trillion as of June 2020.

HEALS Act

After doing some research on what is in the HEALS Act on the Tax Foundation website, here are a few things that I found:
- $1,200 every month to single taxpayers who make under $75,000 adjusted gross income
- Expanding the Payment Protection Program (PPP) with another $190 billion
- Helping small businesses with up to $2 million loan for payroll costs
- $105 billion for students to return to school

If passed, the second round of stimulus will mount another $1 trillion to the existing $2 trillion from the CARES Act. The goal of the program is to instill a short term recovery will longer term growth in the economy. The additional $600 a week provided by the CARES Act expires this week and would not continue should the bill get passed. Instead, the money would cut to $200 a week which has made the Democrats in Congress unhappy. The second round of stimulus was supposed to be more of a 'mild' version of the first with the expectation that the economy would have been closer to a full recovery by now.

But, clearly that's not the case.

https://www.bls.gov/charts/employment-situation/civilian-unemployment-rate.htm

Unemployment rate as of June 2020 still stands staggeringly high at 11% unemployed, higher than the rates from the financial crisis in 2008. Small businesses are hurting the most as benefits are appearing to shrink. One thing to consider is that the relief bill may not be passed in time. The cure for coronavirus is still in the early stages of developing, although Pfizer announced it's second out of three phases in the clinical trial. Relief funds will surely run out before the end of the week, and a new round needs to be implemented. Some reports say that Democrats in the Senate are likely going to vote against it as it does not contain their suggested amount of at least $3 trillion.

What I think

There is not much time left to negotiate which means Americans' financial security relies on the stubbornness or cooperation of either party. In my opinion, it's likely that some form of the new HEALS Act will get passed within the first week of August or it's citizens will blame the party that postpones it. With both sides in agreement on several issues, it's only a matter of how much money they agree to spend. Any delay could cause more days in the red for the major indices. If the bill is passed on time, we could see some more of that bullish rally from the past couple months.

Here are some trade setups we like based on certain conditions:

If HEALS passes on time:
We see some potential long positions on the US30 anywhere in that support zone ($26,400s) on the daily chart. RSI not showing signs of being overbought yet with room to run.

If a delay is announced:
On the 4H chart, US30 has resistance on the falling trend line ($26,845) for possible shorts. Stronger support would lie around the 200 Day Moving Average.

Featured Pic: https://www.senate.gov/resources/images/col2_senatefloor.jpg


Thanks for reading! If you are interested in joining our trading community, we have chat rooms, trade alerts from our top traders, and educational content. You can join using the link below, and get a discount on your membership.

Disclaimer:

Please note that this email is my personal opinion only. I am not a licensed financial advisor, and any information shared or discussed is not to be construed as investment advice. Trading and investing involves a degree of risk, and is not suitable to all investors. Please consult with your financial advisor before making any sort of investment decisions.

Thoughts on Gold

Gold prices reached over $1,900 today as futures shot up in earlier this morning. This metal seems to gain more and more momentum as news between US and China becomes worse. Uncertain markets and uncertain currencies give gold more of an appeal to it. Although gold has been overbought on the 14-Day RSI for several days, it seems like there is no end to its demand.

An issue that always comes back into mind is that confusing times do not always bring out panic selling but panic buying as well. Investors don't want to miss out on the price swings so they continue to buy up positions before prices break previous highs at $1,918. That price is what we're looking at as potential resistance for the metal. We definitely think there is some downside potential ahead, but we don't think it will last long. A long position now would seem like a price chase but it could work out as we think gold has a little more room to run. Citi Group, on the other hand, feels that XAU can go all the way to $2,000 before major demand for the metal dies down. RSI currently at 82 which indicates that price is really high. A price of $1,918 in the next few days could set the RSI closer to 90 which means that investors might dump what they have before a pullback. Overall, we are bullish on gold but temporarily waiting for some give in prices so we don't go price chasing.

https://www.marketwatch.com/investing/future/gold

Futures still look promising although current price is well above July contracts. Pushing highs does not seem out of reach, but will wait to see what futures look like after once that level is hit. If they're trading higher than before, then a break in long term resistance will be a very bullish sign for investors.

Tech stocks

All US indices fell yesterday as big tech dropped after earnings. The surge of buying pressure from the passed months finally stopped when investors dumped shares to take profit.

Trade Ideas on NAS100

Prices initially fell after the index tested highs again and formed more resistance at $10,788. The last 4H candle actually came down to the 200H moving average before bouncing back up today. Some mild resistance in the way at $10,527, but stronger resistance lies above at $10,788.

Tech Stocks

Intel plummeted to April lows at $49.52 after earnings and news of their delay in chip production. RSI reading that price is oversold and could be something to consider looking in to.

Tesla falls over 4% today after the big sell off. Recent news states that Tesla is suing the company Rivian for possibly stealing some of Tesla's intellectual property. TSLA's run looks like it's taking a break for now.


Thanks for reading! If you are interested in joining our trading community, we have chat rooms, trade alerts from our top traders, and educational content. You can join using the link below, and get a discount on your membership.

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Disclaimer:

Please note that this email is my personal opinion only. I am not a licensed financial advisor, and any information shared or discussed is not to be construed as investment advice. Trading and investing involves a degree of risk, and is not suitable to all investors. Please consult with your financial advisor before making any sort of investment decisions.

Next week, China plans on debuting their very own technology index tracking the largest tech companies trading in Hong Kong. The new index will be called the Hang Seng TECH Index, according to CNN Business. The article also mentions some stocks that will list on the new index include Alibaba, Tencent, Meituan Dianping and Xiaomi.

Why this is important

The prominent disputes between the US and China probably pushed China into making this decision. As you may know, the US plans to delist Chinese companies from American exchanges, leaving stocks like Alibaba to be traded elsewhere. By making it more difficult to trade Chinese tickers, stocks could suffer. That is why China's response to making their own index could really benefit those tech companies.

Although China is still considered a communist state, it very much resembles a capitalist economy. A stock market is kind of the reason why they aren't entirely communist, even though the government has the power to seize entire companies if they please. Creating this index seems like a power move by China in retaliation to President Trump's revocation of US's Special Relationship with Beijing. The Chinese government placed another security law on Beijing that the US considered as binding Beijing to the government so it was no longer independent and operated as a free entity. In other words, Trump signed an executive order cutting off China's special trade status. China says they will respond with sanctions on US entities as well.

What this could do to the market

Both countries seem to be at war with each other, jeopardizing the foundational trade relationship between the two. China accounts for 13% of US tech consumer market, netting hundreds of billions of dollars a year in revenue. Without them as a partner, both economies will hurt as China moves their stocks to new platforms to trade on. The Hang Seng Tech Index will track the 30 largest tech companies with growing consumer interest.

Shanghai Composite after news of new tech index debut

I personally think that delisting Chinese companies from US exchanges will cause a major sell off in our indices, not for the reason of losing stocks to trade, but because it would signify how tense the relationship between the two powerhouses has become. The US will lose a little under $2 trillion in market cap if Chinese stocks are taken off.

However, foreign investors will still have access to these companies by investing in foreign markets. The US will not only lose over 200 Chinese companies, but individual investors will continue to trade them offshore. Once China releases its new index, foreign investors will just find a way to put their money into either the individual companies or into the index itself, benefiting China's economy.

Featured Pic: https://www.ft.com/__origami/service/image/v2/images/raw/https%3A%2F%2Fs3-ap-northeast-1.amazonaws.com%2Fpsh-ex-ftnikkei-3937bb4%2Fimages%2F9%2F7%2F5%2F1%2F24131579-1-eng-GB%2Fchinaiustechref.jpg?source=nar-cms


Thanks for reading! If you are interested in joining our trading community, we have chat rooms, trade alerts from our top traders, and educational content. You can join using the link below, and get a discount on your membership.

Disclaimer:

Please note that this email is my personal opinion only. I am not a licensed financial advisor, and any information shared or discussed is not to be construed as investment advice. Trading and investing involves a degree of risk, and is not suitable to all investors. Please consult with your financial advisor before making any sort of investment decisions.

A1 Trading Company

A1 Trading Company is a financial services and media business founded in Atlanta, USA.
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