Monday – September 16, 2019

By September 16, 2019 Dark and Early

Market opens lower in the wake of the attack on the Saudi oil system Saturday. Crude prices are jumping, with WTI back at $60. Houthi rebels in Yemen claimed responsibility. They are backed by Iran. Many believe it was in fact Iran who did this directly, that the Houthi’s lack the firepower and sophistication to carry this out. It is the largest oil supply disruption in history. Is it a mere coincidence that this happened just days after John Bolton, a hawk on Iran, was fired from his National Security post? The Saudi kingdom has been very quiet in response. Perhaps they are concerned how much the United States has its back, after President Trump has said he would be willing to meet with Iran with no preconditions. Perhaps that has changed now. Trump said the US is “locked and loaded” and waiting for Riyadh’s response. There are so many moving parts in place. This is a big, big deal. How the Saudi’s respond is anyone’s guess. These two countries do not like each other. They really, really don’t like each other. It also shows how vulnerable institutions are to attacks these days. President Trump authorized the release of the Strategic Petroleum Reserve if necessary to keep the Global Market supplied. China and Japan are amongst the largest importers of Saudi oil. China has been a big importer of Iranian oil too. The outage could last far longer than the mere days they are guiding to. This is happening at a time where the global economy has been slowing, and recessing in some regions. China continues to struggle, reporting its weakest industrial output growth in 17 years. Boris Johnson keeps pushing for a Halloween Brexit. He is prepared to go to court to fight against any delay. Kim Jong Un invited Preisdent Trump back to North Korea for a visit to seemingly revive talks. The yield on the 10-year Treasury note rose 0.349% last week to 1.901%, its largest weekly advance since June 2013. That is being reversed a bit this morning. Stocks are lower while Bonds are higher, as money is seeking some safety. WTI is up 10%, at $60. Gold is higher too as is the Dollar. I just cannot believe this Stock Market is not down more. Risks are sky high, and have been for so long. One of the heightened risks has been realized over the weekend, with no clarity on where this is headed. Geopolitics are like a tinder box, particularly in the Middle East. This can’t be good. It isn’t good. The Market is shaking it off as no big deal. That won’t last. I doesn’t make any sense. We are staying disciplined and vigilant in defense of client life savings in these dangerous times.

Have a great morning,

Mike Frazier