By: Kent Engelke | Capitol Securities

Bloomberg writes the Dow has had its largest advance under a new president since LBJ. Many are suggesting the market is priced to perfection and if Trump stumbles, so will the markets. I ask however, based upon many press accounts, Trump is already stumbling badly with the worst approval ratings of any early presidency.

Perhaps there is a different reason, one alluded to Friday and one that is perhaps difficult to quantify or give attribution. Last week the WSJ reported the cross correlated trade that has worked for the last 8-10 years has collapsed. There is attribution for this view, thus this statement should not be viewed as rhetoric or conjecture.

The question that cannot be definitively answered is why it has collapsed. Consensus declaratively stated a Trump victory would be horrific to the markets. I vividly recall futures plunging over 10% late in the evening of November 8th when it was all but assured Clinton lost.

Many times I have commented about the impact of algorithmic and cross correlated trading which represents about 90% of the volume according to the SEC. I also referenced an SEC study that stated 96% of all orders entered were never executed. I further stated there are about 10-12 electronic firms that have replaced the hundreds of “specialist firms,” electronic firms that use the same rules of the hundreds of former specialist firms to maintain market order.

Specialist firms are permitted to take naked short positions to maintain market integrity. Twenty years ago it would be close to impossible for one firm to dominate the market. Today there are 10-12 trading firms, replacing the hundreds of specialist firms, that can take naked short positions, thus suggesting the market “can be prone to market manipulation and imbalances,” quoting a late 2015 SEC study.

Can I suggest the reason for such a strong advance in the face of “accepted turmoil” of the Trump administration is that these naked shorts are now being covered because of economic necessity? Is this the reason why cross correlated trading strategy that has worked almost flawlessly for the past 8-10 years has completely collapsed?

Perhaps. About 14 months ago, I referenced a Federal Reserve report that contained a question that is now asked by regulators about the loan portfolios of the largest money center banks. Does your institution lend money to algorithmic or electronic trading firms?

It was against this backdrop last January that Barclays Bank wrote perhaps one of the greatest risks to the markets is a potential “melt up” because of unreported naked shorts that creates a liquidity crisis for a mega-sized financial firm.

I will readily acknowledge this is very Michael Moorish, perhaps stretching for a reason to explain why “the fail-safe” cross correlated trade has collapsed and to explain the strongest equity advance since LBJ as the Establishment has declared the Administration is operating in total chaos. Uncertainty and chaos normally creates negative market volatility.

Returning back to information that is quantifiable to explain the advance, data that I have already discussed at length, both business and consumer confidence is surging, optimism on earnings calls is high, growth proxies are humming, all of which has already caused a jump in retail sales and rising inflationary expectations.

In my view there is no question the political environment comes up in every discussion and to ignore such is equivalent to ignoring the impact of interest rates to valuation formulas.

What will happen this week?

Last night the foreign markets were mixed. London was down 0.18%, Paris up 0.36% and Frankfurt up 0.62%. China was up 0.41%, Japan up 0.68% and Hang Sang down 0.76%.

The Dow should open nominally higher on economic optimism as the economic activity in the euro area unexpectedly rose to an almost six-year high. The 10-year is down 10/32 to yield 2.46%.


Rep. Karen Bass Admits to Communist Party Mentor

By: Trevor Loudon | New Zeal

Los Angeles Congresswoman Karen Bass owes her career to a Communist Party USA mentor.

Rep. Karen Bass, second from left

According to the Congressional Record:


Ms. BASS. Mr. Speaker, I would like to honor the life and memory of my friend and mentor, Oneil COneil Marion Cannon]], who passed away on January 20, days before his 100th birthday….

“Oneil was instrumental in supporting my own work as a community organizer early in my life, and without his help my life would have taken a very different path…

I would like to salute Oneil Cannon for his longstanding commitment to serving and uplifting others, and for a century of fighting to make the world a better place.”

Oneil Cannon

The late Oneil Cannon in question was a fixture of the Los Angeles left.

According to the Peoples World:

As a member of the Communist Party, he became the education director in the Southern California District, and a member of the Party’s Southern California and National Central Committees…

Oneil was committed to electing Black and Latino representatives at all levels of government. He helped to elect Augustus Hawkins, Tom Bradley, Ed Roybal, Diane Watson, Maxine Waters, and Karen Bass.

Cannon campaigned for Barack Obama in 2008, and wept with joy along with millions of others when he was elected. He died peacefully, wearing one of his Obama T-shirts.

With decades of communist activity under her belt, Karen Bass would fail an FBI background check to work as a realtor or a school bus driver.

But that’s okay, there are no security checks to serve on any Congressional Committee: not the Armed Services, not Homeland Security, not even the Intelligence Committee.

If American voters understood how bad the infiltration is they would be horrified. There are many, many more like Karen Bass, trashing your Constitution every day.

To really understand how bad the problem is, check out my movie The Enemies Within.


Confirmed! Trevor Loudon speaking at CPAC 2017!

New Zeal

Trevor will be speaking on the main stage at CPAC 2017, during a panel discussion moderated by Ginni Thomas and featuring Sheriff David Clarke, Clare Lopez of the Center for Security Policy and Maureen Ohlhausen, as the Federal Trade Commission’s acting chairwoman.

Thursday February 23, 2017 at 12:10 pm – I hope to see many of you there.