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Market Commentary

Dovish signals out of Washington and Beijing last week gave investors hope for a limited trade deal ahead of a planned October summit. Attempting to bifurcate trade issues and national security concerns, Chinese negotiators are seeking to prop up their nation’s sluggish economy after industrial growth dropped this month to a 17-year low. Skeptical minds may recall that such a limited trade deal has been floated multiple times over the past two years, only for it to be struck down abruptly after months of supposed progress. Expect the trade war, and the corresponding opacity, to continue through at least the 2020 election.

 Saturday’s airstrikes on Saudi Arabia’s largest petroleum processing facilities caused a 12% spike in oil prices as officials acknowledge it will take weeks, not days, to bring the damaged refineries back online. With national output cut by 5.7M barrels a day (itself some 6% of global production), the dawn attacks have stymied the Kingdom’s efforts to list state-owned Aramco on an international exchange. The planned IPO will provide billions in liquidity for the gulf state, which seeks a $2 trillion valuation for the nation’s crown jewel. Investors may apply a steeper discount to its share price upon fully appreciating the geopolitical risk associated with the asset. Sustained cashflow might prove aspirational in the case of regional war.

 Elsewhere in IPO world, traders bear witness to ritualized Unicorn slaughter. WeWork, the real estate company whose mission statement is to “elevate the world’s consciousness” (read: offer overpriced office space with the added benefit of free beer), struggles in its efforts to go public. Last valued privately at $47 billion, the company can expect a 60-70% haircut from public investors, largely due to governance concerns. Among other issues, its founder and CEO, Adam Neumann, owns several of the buildings the company currently leases, and until recently, provisions were made for his wife to personally choose his successor if ever he were incapacitated. WeWork is only the latest in a line of money-losing, venture-funded firms to go public amidst a turbulence of public scrutiny at their sky-high valuations and myriad governance structures. But hey, free beer!

 Market Strikes as of 9/13/2019 Close:

 10-Year Treasury:               1.904
 S&P 500:                            3,007.01
 Fn 3.5:                                102.1406
 Fncl Par :                             2.819

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