• May 24, 2020

ELAM: Social mood goes ballistic - Odessa American: Dennis Elam

ELAM: Social mood goes ballistic

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Posted: Sunday, December 1, 2019 5:00 am

Charles Schwab to acquire Ameritrade for $26,000,000,000 ($26Billion)

Schwab’s deal to acquire Ameritrade comes four months after snatching USAA’s Investment Management Company for $1.8 billion. Expansive social mood is inclusionary. It brings a desire to come together and attempt feats never before considered. My winner of the week is surely Ameritrade for cashing out near what will surely be some kind of market top within the next eighteen months. One has to wonder just what Charles thinks the markets are going to do over the next five years to justify such a purchase.

To put the purchase further in the ballistic mood mode, consider these factors. Charles waited until he and other discount firms have been forced to cut many trades to zero commissions, due to competition from the toll-free Robin Hood trading platform. Historically, brokerage firms made interest income by banking customer cash and securities. But with rates at near zero for overnight deposit, that avenue does not look attractive. As a result broker margin rates, the cost of borrowing to buy stock, have soared to eight percent.

Art, real estate, and automobiles are all second derivative beneficiaries of the ‘what me worry, anything goes’ expansive stock market attitude.

Today’s Wall Street Journal describes a 23 year old who has taken delivery of his $4 million Koenigsegg Agera RSes Final Edition (yes that is a car). The 1,360 horsepower ‘car’ is the world’s fastest street machine reaching 277.9 mph (you gotta love the .9) on a closed course. Apparently his money came from the hard work of creating MyDailyLive.com. Sigh…

The market capitalization of Apple, just one firm, is now more than the combined worth of all the energy firms in the S&P 500. This is another example of expansive mood valuation at a $1.2 trillion market cap.

A unicorn is an initial public offering that nets over one billion dollars. This year unicorns have lost some $100 billion since going public. Uber, electric scooters, and WeWork have not proven to be big winners.

I continue to believe lows are or have been set in energy share prices. Tax loss selling is driving prices a bit lower now. A lengthy article in the WSJ suggests Natural Gas Heads for a Spring Fall. Such negative articles are typical at major market lows.

Crude Oil is off a smidge today(Wednesday) but still higher lately at $58.06.

Last week we mentioned a Dow Theory buy signal with both Industrials and Transports posting new highs. Higher prices this week confirm that signal. Expect higher prices in to the November election. As always we have a mix of mood, high stock, real estate, and auto prices while other sectors like unicorns disappoint.

Happy Thanksgiving


  • Crude Oil: 33.25   (-0.67).
  • Nymex MTD AVG:  27.2736.
  • Natural Gas: 1.731   (+0.021).
  • Gasoline: 1.0382   (-0.0069).
  • Spreads: July/August   (-0.40)   August/September   (-0.49).
  • Plains WTI Posting: 29.75   (-0.75).
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