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Allen's Analysis Blog

Weekly Market Comment

September 06, 2019

“It is never too late to be what you might have been.” – Mary Ann Evans “George Elliot”

The TSX Composite gained 0.6% while the S&P 500 rose 1.8%.

The latest round of American tariffs on Chinese goods went live last weekend despite attempts by the Chinese to have them delayed. The Chinese and American negotiators were struggling just to decide on a meeting schedule which they finally set for early next month. The stock market celebrated this despite all of the previous meetings that resulted in nothing.

Just as Boris Johnson stunned the British Parliament and the world with effectively shutting down democratic debate, Johnson’s own Conservative party helped hand him a stunning loss for his first vote in parliament. Even his brother, a fellow Conservative and an MP, quit in protest against his brother (he previously voted Remain while his brash brother led the Brexit campaign).

To emphasize how politically unusual Boris’ loss is, a PM losing his first parliamentary vote hasn’t happened since William Pitt the Younger in 1793. While plenty of question marks remain, we can safely assume the Oct 31st Brexit deadline is effectively delayed. Most likely, Britain will see new elections for a PM and who wins is anybody’s guess at this point. Brexit just got a whole lot more confusing but the good news for markets is the conundrum has likely been kicked down the road.

In the meantime, more evidence of a factory slowdown emerged as America’s ISM manufacturing data - considered a leading economic indicator – surprised the market by declining below the crucial 50 mark at 49.1 in August. That was worse than any economic forecast was calling for, helping send in lower stock prices, lower Treasury yields and lower USD (though not against the Chinese renminbi, which continues to decline against the USD).

What’s bad for the global economy is probably good for safe-haven investments such as our gold and silver ETFs. Silver was trading at a steep historic discount to gold and is the main reason why we elected to invest in it instead of just buying more gold. Besides, both are up 16-17% on the year despite being defensive investments (they tend to do well when the broader stock market is doing poorly). Silver has another advantage in that 60% of its demand is to feed industrial production consumption while mine output contracted by 2% last year and is expected to contract the same this year.

Apple’s new phone will get released next week. If you aren’t convinced it’s time for a phone update just yet, you’ll probably want to wait until next year when the 5G enabled, completely redesigned models are released. But for those who are excited to buy a new toy, the biggest change is probably going to be the camera. It will sport three lenses (up from two) and should continue its dominance on the photography front. We’re talking telephoto, wide-angle, and super-wide-angle capabilities, folks. Heck, they may as well rename them iCamera, that’s how good these things are getting. For more colour on what to expect, click here.

And if you do have a modern iPhone, don’t forget to use “portrait” mode when photographing people or objects. The foreground is crisp while the background is beautifully blurred.

Now, if someone could just un-blur the world’s geo-political tensions, that would be nice.

Notable reads:

Musings Beyond The Market

As discussed in this Bloomberg op-ed, a new World Health Organization’s report concluded that alcohol has killed more Europeans – who drink more than any other continent on earth – than traffic accidents (10 times more) and opioid related death (4 times more).

But among European countries, the death rates vary even more widely than the level of consumption. Yes, over consumption is bad for one’s health but the type of drink one imbibes plays an even larger role. Countries who’s citizens prefer beer and wine (Belgium, France) show dramatically lower alcohol-related mortality rates than do distilled spirit loving nations like Estonia.

distilled death

drinking dying

In Greece was one of the rare European countries where mortality rates rose between 2010 and 2016, not because citizens drank more but because they tended to drink more illegal homemade hooch.

What does that mean for those of us who enjoy alcohol? Ease off the tumbler and focus on mugs and stemmed glasses.

Word of the Week

supplicant (n.) – a fervently religious person who prays to God for help with a problem; someone who begs earnestly for something he or she wants. “I am very glad that Paul Ryan left the government as a capitulating supplicant to this president while the government was shut down, while the debt hit record levels, right? Every single thing Paul Ryan claimed to care about.” – Jon Lovett

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