The Government shut down takes a break as Facebook is under fire again.

The dispute over the border wall in the US is tearing the government apart. The debate continues as Trump orders Federal workers to go back for the next three weeks. As of yet we have minimal affects of the shutdown in markets, or the stopgap that was signed this past week.

The Fed got a new addition this past week, new head economist Stacey Tevlin was hired, her actions will be crucial at this time of slowing economic growth all over the world.

This upcoming week, 125 companies listed on the S&P 500 are reporting earnings, including big tech companies, Facebook and Apple being among the FAANG stocks reporting.

Here is a look of last week’s stock market on a daily basis (red vertical lines split days).

Stock Market and Sector Overview

Here is a break down of the weekly performance in various stock market sectors (top chart):

  • Energy stocks down 1.44%
  • Technology up 0.95%
  • Financials down 0.04%
  • Retail down 0.42%
  • Utilities up 0.36%

Overview of key markets last week (bottom chart):

  • Crude oil down 0.26%
  • S&P500 down 0.28%
  • Silver was up 2.64%
  • Gold up 1.73%
  • US dollar down 0.63%

The Government shutdown ends?

In the 35th day of the government shutdown, a stopgap was called. For the next three weeks or 21 days, the government is back and federal workers are back in hopes of reaching a deal.

However Trump has made it very clear that this is not a case of him giving in, its a case of taking care of his people. The ones who were getting affected by the length government shutdown. He tweeted that if no deal was reached within the three weeks he was going to take more drastic measures and hinted at his “powerful alternative”.

Trump’s tweet regarding the stopgap.

This bill allowed 800 000 federal employees to come back to work, but this joyous moment could be short-lived if a deal is not reached in 21 days. Trump plans on declaring a national emerging for the funding for his wall. This will call got funding from future military funds to build his boarder wall. So much for Mexico paying for it.

Pelosi and Schumer were seen together in a press conference on Friday, where they were seen “bragging” about Trump’s caving to the Democrats proposal. Both members said they were “optimistic” that the government would not shut down after the allotted 21 days. While the democrats were rejoicing, Trumps supporters were enraged by the signing of the bill to stopgap the partial shutdown without having a deal for the wall.

On another note, Trump proclaimed that the wall he was going to throw up would be a “smart wall” not a “medieval wall”. He also mentioned that “We do not need 2,000 miles of concrete wall, we never did, we never proposed that we wanted that”. But I thought his whole platform was based on a concrete wall. Interesting

Trumps motto: “build a wall and crime will fall”

The “smart wall” would be equipped with motion sensors and drones, prevalent with technology at the most “dangerous” areas of the border. The proposed wall is set to cost $5.7 billion while the shut down is estimated to cost $6 billion. Let that sink in…

Prior to this, Obama’s shut down cost $1.2 billion.

Surprisingly the news did not stir up stocks that much, if anything a slight sell off came in equities on the news. No real upside was seen throughout the news releases of the stopgap. Equities ripped higher leading up to the news announcmenet but movement died out at the actual news release.

ES Futures On Friday, Jan 25th 2018.

The image above outlines two areas, a green box and a purple box. the green box was the morning of the US session, led from the open. A clear move higher on decent volatility and opportunity. The purple box outlines the beginning of the presidents press conference and the announcement of the stop gap. Little to no reaction, and actual bearishness comes out. Add the crazy bullishness we saw in gold and it seems the equity market is foreshadowing some downside.

Now we wait and keep our eyes and ears pealed on the news. What will happen in the following three weeks? The progression to a potential deal will surely affect markets.

Facebook in the news for the bad reasons… again!

Facebook’s past seems to be catching up to it. Or shall I saw Zuckerberg’s past is catching up to the company. Earlier this week a huge article came out that exposed everything Zuckerberg went through to get Facebook out as a leading social media platform. This was among the claim that roughly 50% of the users on Facebook were fake!

This was not the end of it all, the original conversation between Zuckerberg and the original creator of Facebook was uncovered. This was before the Winklevoss twins. It was with an unnamed individual, in which Zuckerberg’s famously quoted “they “trust me”, dumb f****” emerged.

In the preliminary stages of operation Facebook, Divya Narendra had created something similar, with the same name, the Facebook. In which Zuckerberg wanted a part of, but this is when betrayal began. Zuckerberg slowly began to steal the premise of the whole idea, buying the domain and extending deadlines for his work due.

This was just a portion of the news that came out this week in regards to Facebook who is currently trying to combine the Messenger platform with that of Instagram and Whatsapp.

Facebook slides on news, 50% of users are fake.

The image above outlines, in a red box the $4.00 slide that was caused by the announcement that 50% of its users were fake. Facebook slide 43% from its highs, dropping just over 18% during an earnings season. Since that drop, the stock has risen just over 21% from lows. As it is still 30% down from its peak, at $218.62.

Later in the week, Facebook was under fire for discretely putting in game purchases in their games, in which many kids were racking up crazy credit card bills on their parents cards. It does not end there, Facebook then refused to refund the mistaken charges. These kids did not even know that they were making in game purchases.

A case in which a 15-year old teen racked up a $6,545 credit card bill in a Facebook game surfaced. The charges were not refunded. One could make the case that this was irresponsible by the user and a 15-year old should know better. However it is pretty clear that the parents were not aware of the use of their credit card.

Here is a screenshot of the conversation between Facebook employees in relation to the matter.

Tara Stewart, Facebook employee had a very intelligent suggestion as a solution to this issue. As many parents seem to have unknown Facebook charges on their cards, meaning this was not a freak one time thing.

She suggested that kids should enter the first six digits of the credit card when making an in-game purchase each time they make an in-game purchase. Because, as it stands, to use a credit card in-game on Facebook you do not have to enter the card number each time, one simply has to be logged into their account. The card is associated with the account that initially used the card. However, this brutally honest solution will affect Facebook’s revenue adversely.

In the case of Angry Birds, on Facebook, 93% of the time, the charge-backs were due to a parent that was unaware that their card was being charge. In this same case, the average age for kids playing the game, making the purchases is 5-years old.

Weekly Economic Calendar

The first month of the new year comes to an end with a week full of high impact news hitting markets. The weak begins strongly out of Europe in terms of news. This leads to the most important event of the week, the FOMC statement. The week ends off on more high impact data out of the US, the non-farm payroll numbers on the first day of the new month.

Monday, two big events out of Europe. ECB’s Draghi goes on the wire, watch the Euro carefully and BOE Carney speaks. With recent Brexit volatiltiy the pound will be listening to Carney’s speak carefully.

Tuesday, consumer confidence out of the US which has the possibility of impacting US equities. CPI data and trimmed mean CPI out of Australia in the evening.

Wednesday, big news hits the wire as all eyes will be on Jerome Powell in the midst of the FOMC statement and Fed Funds Rate decision. The odds of not rate change is 99%, so its unlikely we see a hike. But the language that Powell uses will be well observed during the press conference.

Thursday, pre market news out of Canada, GDP.

Friday, another big impact day in markets, Non-farm numbers out pre market. This is going to be an interesting number amid the government shutdown. ISM manufacturing data comes out later that morning.

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