DHUnplugged Podcast

What is China up to? Seems like they are destroying their own economy.

If you are wondering about natural gas prices and the potential of a run on electricity – listen in.

Are you ready for gas and bread lines?

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Warm Up
- September history, living up the the Hype
- Something is not quite right....China direction is starting to get very concerning - seems like they are destroying their own economy.
- Fed Chair pacifies markets on Wednesday = Liquidity Wins the Day!
- Let's admit inflation is here and not so transitory
- MASSIVE Bubbles popping - creating blackholes
- Don't you dare tell us that there in no inflation! Stop using old tools
- Shifty Boys retirement early.....Not good enough

Market Update
- Massive moves in commodities - coal prices on parabolic run
- End of month upcoming - earning season right around the corner
- Power cuts and supply chain disruptions in China - getting worse
- Evergrande still a potential problem - missed payment of $87 million last week (30 day delay ??)
- BUT VIX, from 28 - 18 in a week
--- Observation - not  about fundamentals right now (DUH) as all about central bank actions
--Meanwhile, Congress has head up ass as usual, debt ceiling and govy budget - Need by Sept 30th or Shutdown

Quick scheduling note - No Show on October 18 - mark your calendars

Government Default/Shutdown?
- Suspension of Social Security checks—which might not be the ideal political message for Senators and Representatives to send to their retired voters.
- Nonessential government agencies would be shut down, including National Parks and the economists who collect government statistics. Government employees would be furloughed.
- WORSE - US Default or debt downgrade? That would be a real problem
- LEFT LEFT Tieing budget and debt ceiling to the passage of the 3.5 TRILLION

What is Going On - China
- Recap of all the recent items|
-- For Profit Education, gambling, online gaming, crypto currency, now coal/power use
- Latest issue is slowing use of energy as China looking to hit climate goals..
-- China has vowed to cut energy intensity by around 3% in 2021 to meet its climate goals and provincial authorities have stepped up the enforcement of emissions curbs in recent months after only 10 of 30 mainland regions managed to achieve their energy goals in the first half of the year.
--- Several Apple Inc  and Tesla Inc suppliers have suspended production at some Chinese factories for a number of days to comply with tighter energy consumption policies, putting supply chains at risk in the peak season for electronics goods.
---- Apple and Tesla (TSLA) suppliers halt production due to China's new energy consumption policy, according to Nikkei
------Potential related stocks: SWKS, CRUS, AVGO, QRVO, TSM, QCOM, SMH, SSNLF, LPL, LITE, IIVI
-------- CRYPTO China's central bank vowed on Friday to crack down on illegal activities of cryptocurrency trading, banning overseas exchanges from providing services to mainland investors via Internet.
--------The People's Bank of China also said it will bar financial institutions, payment companies and Internet firms from facilitating cryptocurrency trading, and will strengthen monitoring of risks from such activities.
- CRYPTO is essentially illegal in China

- WHAT IS REALLY GOING ON - DEEPER THAN HEADLINES?
---- Supply chain will crumble and force prices higher.
--- Energy prices for LNG/Nat gas and Coal flying to decade/historical highs
---- THINK ABOUT THE GLOBAL IMPLICATIONS
- Already seeing warnings (not that anyone seems to care - probably nothing) from Nike and Fedex (margin pressures and outlook came in weak whacking stocks) -!-!-!- UPDATE - Guide downs from Sherwin Williams and Micron tonight

HOW MUCH ARE COAL PRICES UP IN PAST YEAR? (240%)
- Energy analysts cited a variety of reasons for thermal coal's breakneck rally. These included rebounding power demand in China, Beijing's informal ban on coal imports from Australia, supply disruptions in Australia, South Africa and Colombia, and rising global gas prices.
- It is the perfect storm, prices are galloping due to China's heatwave, shortages with Coal India and power plants, high freight rates, increased appetite in the rest of Asia, tightness due to Indonesian rains, Hurricane Ida in the U.S., and in general a supply crunch," Puneet Gupta, founder of Indian coal marketplace

COAL Prices

If that's not enough - England
- Massive driver shortage
- Thousands of British gas stations ran dry Sunday, an industry group said, as motorists scrambled to fill up amid a supply disruption from a shortage of truck drivers.
- The Petrol Retailers Assn., which represents almost 5,500 independent outlets, said about two-thirds of its members were reporting that they had sold out their fuel, with the rest “partly dry and running out soon.”
- It is not a shortage of gas/oil, just can't get it to the pumps and now panic buying added to the problems
- With all of the electric and alt energy - will we start to see major price hikes on electric bills?

AND....
- Britain warned its food producers to prepare for a 500% rise in carbon dioxide prices on Wednesday after extending emergency state support to avert a shortage of poultry and meat triggered by soaring costs of wholesale natural gas.
- This has forced some plants to shut in recent weeks, leading to a shortage of the gas used to put the fizz into beer and sodas and stun poultry and pigs before slaughter.

INFLATION IS REAL AND SHOULD NOT BE TRACKED WITH OLD TOOLS
- The Excess from Fed is distorting markets - Most Afraid of Black Swan events - these are Black Hole Events

The Correlation is Back!
- Value and Yields aligned
- Monday - great example as yields touched 1.5% for the 10-Yr Treasury

Yields and Stocks

Fed Got Mud on Face
- On the same day (Monday) the two Fed Presidents that were found to have futures and stock trades, resigned / announced earlier retirement plans than originally planned
- This is what happens when they are above the law
- Going to be an groundswell on this...Resigning is not going to cut it - people want answers

Rolex Statement on Global Scarcity
- “The scarcity of our products is not a strategy on our part. Our current production cannot meet the existing demand in an exhaustive way, at least not without reducing the quality of our watches – something we refuse to do as the quality of our products must never be compromised. This level of excellence requires time, and as we have always done, we will continue to take the necessary time to ensure that all our watches not only comply with our standards of excellence, but also meet the expectations of our customers in terms of quality, reliability and robustness. Rolex does not compromise on what it takes to produce exceptional watches.”
- Patek Phillipe frustrated with inability to keep up with demand
----- What happened to the Watches are Dead thesis?

Toilet Paper Scarcity
- Costco Chief Financial Officer Richard Galanti said the retailer is bringing back purchase limits on household essentials such as toilet paper, bottled water and cleaning supplies.
- PEOPLE - Buy Bidets!

Perfect Storm
- This is a new phrase you are start hearing more often
- Perfect Storm in shutdown, reopen, shortages of labor, shortages of materials, price escalation, delta variant, climate change shutdown

PG&E - Guilty
- Prosecutors in Northern California on Friday charged power utility Pacific Gas & Electric with four counts of manslaughter and other felonies, alleging it failed to cut down a sickly tree that fell onto power lines and sparked a deadly wildfire. (Zogg Fire)
- The company was charged with 31 counts in all, including 11 felonies, the latest in a series of criminal accusations in recent years.
- Pay the fine - raise rates

More Bad Actors
- World Bank - "Doing Business" rankings discontinued
- The World Bank on Thursday said it would cancel the "Doing Business" series on country business climates, citing internal audits and an independent probe that found senior World Bank leaders, including Kristalina Georgieva, who now heads the International Monetary Fund, pressured staff to alter data to favor China during her time as World Bank CEO

WHY????
- Wells Fargo paid $37 million to settle a government lawsuit accusing the bank of defrauding hundreds of commercial customers.
- The bank allegedly overcharged 771 businesses on foreign-exchange transactions from 2010 through 2017, according to the U.S. Justice Department lawsuit filed Monday.

Facebook - Pulling the Plug
- Instagram has hit pause on a new app that it is creating for kids
- Instagram Kids was touted to require parental permission to join, and provide ad-free, age-appropriate content, but U.S. lawmakers and advocacy groups alike have urged the social media giant to drop its launch plans, citing safety concerns.

420 Stocks ...

CLICK for list of "Pot Stocks"

Stocks to watch: CGC, STZ, TLRY, CRON, MJ, NBEV

 

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UPDATE - NEW ETF - Global X Millennials Thematic ETF Challenge!

The top holdings of Global X Millennials Thematic ETF (MILN) include stocks many investors would expect, such as Facebook, LinkedIn and Amazon, which take advantage of the tech tendencies of millennials. But some names might be more surprising like real estate investment trusts AvalonBay Communities and Equity Residential, and Home Depot, which could benefit from millennials moving out of the home of their parents.

We are creating the DH Old Codger Index Portfolio to compete against this new ETF to see how "old school" stocks do in comparison. Companies in our index will include: (updated names as of 8/29/16)

We have the performance summary running (daily and since inception of 5/6/16) - DHOCI vs. Millennials ETF Battle

Is Amazon the Good Guy?
- Everyone loves to hat on Amazon
- Amazon.com Inc recently  hiked its average starting wage to $18 per hour and said it plans to hire more than 125,000 warehouse and transportation workers in the United States.

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See this week’s stock picks HERE

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