US Stocks performance was erratic yesterday with some wide divergences seen across sectors despite a market(s&p500) that did nothing for the whole day as international equity markets and currencies outperformed for a third day. While the Nasdaq, and Russell indexes (small caps) declined (as did major style ETF’s), the stock du jour was Tilray, a Canadian pot company with a low float that was initiated at 17 in July and which traded yesterday at 230 after jumping 50% in one day, giving it a value superior to American airlines and whose main beneficiary is no other than P. Thiel who ambitions to distribute “medicinal marijuana” in 12 countries over 5 continents… The pitch looked even better than bitcoins… “Our long-term vision is if a patient walks into any pharmacy in any country in the world that has legalized cannabis that patient should be able to obtain a Tilray product. That’s our global goal,” Kennedy said in an interview this week from New York. Tilray is investing in production capacity in Portugal so it can supply products to the EU from within Europe, he said. The company also has its High Park brand for the recreational market in Canada, which has secured supply agreements with seven provinces and territories, Kennedy said. The company also has a deal to develop medicinal cannabis with the Canadian division of Novartis AG of Switzerland.” Amen to that…the same people who were aggressively advertising through on-line trading platforms and to gullible investors to trade bitcoins (with the success that we know) are now advertising trading pot related themes… More than the anecdote itself, it shows how mad, rogue and deregulated the financial system has become, another consequence of zero or negative interest rates, I suppose. Weakness in the US bond market remained (10Y US Treasuries and 10 Y Bunds ). We see this pattern as likely to continue as deflation has become the deflationary story of yesteryears, courtesy of soaring oil prices and tariffs, the latter of which is a conveyor of bad (stagflationary) inflation. Stocks may not necessarily start to feel the pain just yet, especially not international ones that have been battered to a certain extent already but raising rates is what will prick the bubble of debt and credit. It was also a fourth day in a row that a stock and bond portfolio lost money, meaning risk parity portfolios, a popular investment strategy are being hurt. In our view, bond duration is a no go for now. Precious metals( IAU SLV GDX ) are showing an improving picture as well with gold mines shining for a bouncing trade from the bottom of its Bollinger band to the near top. The dollar zig and zagged finishing lower for the most part. EM currencies rallied strongly (BRL USDINR RUB CNH ZAR ARS and TRY). After suffering its longest Emerging-Market rout since 2008 and after losing some 25% of its assets earlier this year the largest EM local currency bonds witnessed a large intake, suggesting that for the trade at least, some investors are also putting their toes back in the water. We would prefer EM FX to EM bonds and EM stocks to EM bonds as well. EURCHF gained as risk appetite healed and after the Swiss Government raised its 2018 GDP forecast to 2.9% (strongest since 2010) -- from 2.4%, still warning one day before today’s SNB will meet that its positive near-term outlook could be imperiled by excessive CHF strength (and worsening trade tensions). Crude gained after the inventory draw (and a lower USD). 

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