Great Stuff 9-09-2019

JPMorgan’s Steaming Cup of Volfefe

It was only a matter of time.

President Donald Trump’s tweets have become a market force all on their own. So, it was only natural for some industrious soul to find a way to index the impact of those tweets.

Enter JPMorgan’s Volfefe Index — a Great Stuff-worthy mashup of Trump’s “covfefe” tweet and volatility.

According to JPMorgan, the index is designed to track the impact of Trump’s tweets on U.S. interest rates:

The subject of these tweets has increasingly turned toward market-moving topics, most prominently trade and monetary policy. And we find strong evidence that tweets have increasingly moved U.S. rates markets immediately after publication.

Now, JPMorgan didn’t go as far as to identify any specific tweets, but did note some keywords involved in creating the index, including “products,” “China” and “billion.” Trump’s market-moving tweets ramped up significantly in August, which is when the trade war with China ramped up alongside Trump’s increased targeting of the Federal Reserve.

The Takeaway:

There are, essentially, two ways to deal with Trump’s market-moving tweets: ignore them or obsess over them.

Chinese markets have increasingly taken the former track … which is a no-brainer. For one, Twitter is banned in China, so traders don’t see the tweets until the financial media report them. Secondly, Trump typically tweets outside of regular Chinese trading hours.

Stateside, however, we get blasted full force. Traders regularly follow Trump’s Twitter feed, and the president typically tweets between noon and 2 p.m. What’s more, CNBC reports that Trump also has a penchant for tweeting at 3 a.m., which has an outsized effect on U.S. markets in overnight trading due to thin activity at the time.

But even U.S. traders are becoming numb to the president’s tweets. CNBC notes that those tweets are getting increasingly fewer “likes” and “retweets” than before.

Banyan Hill expert Ted Bauman, editor of The Bauman Letter, had this to say on the matter:

A customary objection to Democratic policy activism is that “markets prefer certainty.” I haven’t heard anybody say this about President Trump’s tweeting habits, but we now have empirical proof that the “tweeter-in-chief” moves markets.

Alas, like the boy who cried wolf, the president’s tweets are having less and less of an effect as time goes by. Perhaps markets have achieved Buddhist enlightenment: The only thing that never changes is the president’s Twitter account.

In the end, the arrival of JPMorgan’s Volfefe Index may be a contrarian indicator for Trump tweets.

It seems we’ve all become … uncomfortably numb.

Great Stuff Good Better Best

Good: “T” Time for Elliott

Great Stuff 9-09-2019

AT&T Inc.’s (NYSE: T) ball of confusion has not gone unnoticed.

New York hedge fund Elliott Management Corp. — which is run by activist billionaire Paul Singer — has taken a $3.2 billion stake in the struggling telecom-media conglomerate.

As I noted on Friday: “AT&T has the power to become one of the major players in online streaming … but that’s only if it finds some sanity in its own little ball of confusion.”

Elliott apparently agrees and is working toward that end. In a move to help right AT&T’s ship, Elliott sent a four-part plan to board members.

The plan calls for divesting assets, including DirecTV, landline businesses and Mexican wireless units, among others. Specifically, Elliott calls out AT&T’s serious missteps, including buying DirecTV and Time Warner and the botched $39 billion T-Mobile US Inc. (Nasdaq: TMUS) takeover. “AT&T’s failed takeover capitalized a viable competitor for years to come,” Elliott said.

Before you get too giddy over the possibilities, know that Elliott’s $3.2 billion stake only represents about 1.2% of AT&T’s market cap. In other words, the hedge fund needs to make enough noise to sway others to its side.

This is a step in the right direction. But if no one else joins in, it’s business as usual at AT&T.

Better: Apple Hype! Apple Hype!

Great Stuff 9-09-2019

Are you ready for the most overhyped event of the year?

Apple Inc. (Nasdaq: AAPL) is reportedly unveiling its new iPhone this week. CEO Tim Cook and crew will take the stage at Steve Jobs Theater on Apple’s Cupertino campus to detail the latest and greatest (your results may vary) Apple products.

What can we expect at this year’s Apple event?

A new iPhone with a triple-lens camera for photos with a wider field of view, just like the Samsung Galaxy S10. (Ooooh!)

A new Apple Watch with new finishes and a sleep-tracking feature, just like the Fitbit. (Aaaaah!)

More details on already-announced services such as Apple TV+ and Apple Arcade … including how much they’ll cost and what content they’ll have. (Stop, you’re killing me!)

And — get ready for this — details on the availability of the new software updates announced in June. (Mind. Blown.)

I, for one, am completely whelmed. I also expect AAPL shares to receive a slight boost on the news, just because traders love Apple announcements.

Best: Mac the Knife

Great Stuff 9-09-2019

Fannie Mae (OTC: FNMA) and Freddie Mac (OTC: FMCKM) are on fire today. No, not that kind of fire … the good kind.

According to Treasury Secretary Steven Mnuchin, the Treasury is “in the process of negotiating with” the Federal Housing Finance Agency, the duo’s regulator, to allow them to retain their earnings.

Currently, under an Obama-era rule, both Fannie and Freddie must turn over nearly all of their profits to the Treasury.

Mnuchin told Fox Business that his goal is for Fannie and Freddie to begin retaining profits this month.

Shares of both FNMA and FMCKM soared more than 20% on the news.

Great Stuff Chart of the Week

Great Stuff 9-09-2019

Your Honor, I’d like to present “Exhibit 7.” It is an index of the more than 14,000 presidential tweets Donald Trump has made since taking office. That’s more than 10 tweets per day.

As you can see from the chart, the number of market-moving tweets increased dramatically in August.

According to chart preparer JPMorgan: “We can move toward a rough estimate of how much these market-moving tweets have pushed up volatility pricing in the swaptions market. This index can explain a measurable fraction of moves in implieds, particularly in shorter tails (two-year rates and five-year rates, as opposed to 10-year rates).”

If tweets weren’t enough, now we have “swaptions” and “implieds.”

Stay frosty, Great Stuff readers, and don’t panic.

Great Stuff: Right Place, Right Time — Big Gains!

Banyan Hill’s Total Wealth Symposium is sold out.

That means no flying to Amelia Island, Florida, for you. Well, you can fly there — you just won’t be able to attend the symposium, you stalker.

You also won’t get to rub elbows with Banyan Hill experts Paul , Jeff Yastine, Ted Bauman, Chad Shoop or Matt Badiali … just to name a few.

However, that doesn’t mean you can’t reap some of the conference’s rewards.

You can still watch all of our experts’ presentations from the comfort of your own home!

Here are two reasons why you should seriously consider signing up to watch now:

  1. At a conference, Banyan Hill experts can be spontaneous and make quick recommendations on news that’s happening now.
  2. There are so few people at the conference, experts can recommend stocks that are smaller than those they would normally write about.

This is the good stuff that can virtually pay for the cost of attending (or streaming, in this case).

Matt Badiali recently wrote about a pair of such experiences over on the website that provided attendees gains of 190% and 100%. Click here to read Matt’s takeaway.

Or, click here to sign up to live-stream the Total Wealth Symposium now!

If you’re one of the lucky few who are attending this year’s symposium, I’ll see you there. Stop by and say hi!

If you’re live-streaming, I’ll try to give you a wave.

Until next time, good trading!


Joseph Hargett

Great Stuff Managing Editor, Banyan Hill Publishing