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Equities advanced on thin holiday trading.  The catalysts, the belief Clinton will win on November 8 and oil.

Commenting on the former, the establishment on both the left and the right has all but abandoned Trump believing as flawed as Clinton may be, she is a known quantity representing the status quo and the establishment.

Four years ago I was consistently writing society is on the verge of a tectonic change.  Little did I know how prophetic my remarks would become.  What are the odds of a Trump presidency?  The market is suggesting around 22%.

Few thought Brexit would occur.  The day before the election the market was suggesting about a 70% chance Brexit would fail.  Brexit passed with overwhelming support.

Is the establishment out of touch with the electorate by the same degree as with Brexit?  I do not know but will write society is exhausted with the status quo where 75% of the country thinks the country is heading in the wrong direction and those who have a favorable view of Washington is in the single digits.  The media is not much higher.

Perhaps the only certainty to write is the next 28 days will be filled with vitriol and animosity but I ask is today’s environment any different than past eras when tectonic change was occurring?  In many ways today is much calmer than years’ of futures’ past because violence has been kept to an absolute minimum.

Regarding oil, Russia announced that it too will support a production cut.  Is this the result it too is facing severe fiscal distress where oil infrastructure investment has been radically reduced because the lack of funds?

Oil is an extremely capital intensive industry.  Russia, Saudi Arabia, et.al. has been pumping at record levels.  As evidenced by a record $1 trillion reduction in global oil infrastructure cuts, little reinvestment is occurring.

Is Russia only stating the obvious that it too does not have the funds for reinvestment but instead of coming from a point of weakness it is trying to come from strength?  Is Russia like OPEC not voluntarily reducing output but is doing out of necessity because of the lack of funds?

Radical thought?  Saudi Arabia is trying to raise money in the international debt market for the first time in history which according to the periodical Foreign Affairs is illegal under Sunni law.

Life is indeed stranger than fiction.  Today’s establishment is championing interdependency and multipolarity. Many periodicals including the WSJ, NYT and WAPO have stated this idealist global cooperation philosophy is breathing its last breadth.

If this is indeed the case, how will S & P 500 earnings suffer given that 55% of its profits and 50% of its revenues are from global trade?

Speaking of earnings, third quarter profit season commences tonight with the release of Alcoa’s results.  I am certain there will be an infinite number of interpretations.

What will happen today?

Last night the foreign markets were up. London was up 0.40%, Paris up 0.47% and Frankfurt up 0.55%.  China was up 0.56%, Japan up 0.98% and Hang Sang down 1.27%.

The Dow should open nominally lower as the odds are rising the central bank will increase interest rates partially predicated upon rising crude prices.  The 10-year is off 12/32 to yield 1.77%.

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Ken Engelke

Chief Economic Strategist Managing Director

The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.