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What Bolton’s exit means for the oil market

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New National Security Adviser John Bolton listens as U.S. President Donald Trump holds a cabinet meeting at the White House in Washington, April 9, 2018.

Kevin Lamarque | Reuters

The exit of National Security Advisor John Bolton from the White House makes it less likely the situation between the U.S. and Iran will escalate to a military conflict, analysts said.

Oil prices traded lower after President Donald Trump tweeted Tuesday that he asked Bolton to resign. Seen as the most hawkish member of the president’s cabinet, Bolton told NBC News that he was resigning on his own volition and that Trump had not asked him to leave. The White House said there were several reasons for Bolton’s departure and said it was not due tot he recent leaks about disagreement within the administration about a failed idea to hold talks with the Taliban at Camp David.

“This dials back fears of an attack on Iran,” said John Kilduff, partner of Again Capital. “His desire to attack Iran goes back to George W. Bush. The oil market was always on tenter hooks with him on the scene.”

Trump last year withdrew the U.S. from a nuclear deal between Iran, the U.S. and five other countries that removed sanctions from the country in return for its commitment to end its nuclear. Trump had said the agreement was one sided and too short term. both the president and Bolton had said the deal would still allow Iran to acquire a nuclear weapon.

The White House resumed sanctions on Iran, and has succeeded in forcing most of its oil exports off the market. Other members of the agreement have tried to keep Iran in the deal and France most recently offered to provide a credit line to Iran of $15 billion if it would end its uranium enrichment and recommit to the nuclear deal. Under that proposal, Iran would be allowed to resume export of 700,000 barrels a day of oil.

“Obviously, this increases the likelihood that Macron’s proposal will be accepted and the $15 billion credit line backed by 700,000 barrels a day is accepted,” noted Helima Croft, head of global commodities research at RBC. She said she does not see the proposal gaining acceptance as her base case, but a deal is certainly more “likely than it was yesterday.”

Bolton had opposed the deal, suggested by French President Emanuel Macron, as had Israeli Prime Minister Benjamin Netanyahu. Just Monday, Netanyahu reported a recent finding by Israel of a secret Iranian nuclear facility, which he said Iran destroyed this past summer.

Since sanctions began to squeeze Iran, tensions in the Gulf have increased, with Iranian proxies in Yemen sending missiles and armed drones into Saudi Arabia. Iran has also seized a U.K. tanker in the Strait of Hormuz and allegedly mined several others in the Gulf.

Iran also downed a U.S. drone fired a drone at a U.S. in June, which nearly triggered U.S. military action.

President George W. Bush (R) and Ambassador to the UN John Bolton (L) meet in the Oval Office of the White House December 4, 2006 in Washington, DC. Bush accepted Bolton’s resignation as Ambassador to the United Nations when his term is up in January 2007.

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“Bolton pressed to attack Iran militarily at almost every turn,” said Kilduff. “I think in the aftermath of that drone attack he almost prevailed but President Trump pulled back at the last minute.”

West Texas Intermediate crude futures were slightly lower, and well off its highs of the day, after news of Bolton’s exit. WTI was at $57.76 per barrel, while Brent futures were up 0.3% at $62.77 per barrel.

“There’s actually now a heightened downside risk in oil prices because it makes a meeting between President Trump and [Iranian President Hassan] Rouhani more likely this month at the U.N. General Assembly,” said Kilduff.

Secretary of State Michael Pompeo, at a press briefing later in the day, said he could imagine Trump meeting with Rouhani later in the month, in response to a question.

“The president has made it clear. He’s prepared to meet with no pre-conditions,” said Treasury Secretary Steven Mnuchin, during the briefing. He also said the administration is committed to maintaining the maximum pressure on Iran.

Bolton served in the Reagan administration, and Bush named him undersecretary of state for arms control and international security.

Bush also appointed him as his representative to the U.N., which Bolton called irrelevant. Ultimately, Congress blocked his confirmation and he had to step down from that role.

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Roku could fall another 30% before finding a bottom, chart suggests

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The streaming wars may have claimed a new victim.

Roku shares plummeted nearly 30% last week, its worst weekly performance stretching to its 2017 IPO.

The streaming platform stock was pummeled Friday after Pivotal Research slapped a sell rating and $60 price target on it, fearing a rush of competition in the space. It was crushed days earlier after CNBC owner Comcast announced it would offer a free streaming box to its internet customers.

It could get even worse, according to Craig Johnson, chief market technician at Piper Jaffray.

Roku has “violated the uptrend support line off those April lows of this year. You’ve got some support that comes in at $113. But purely based upon the charts, your best support comes in all the way back down at the 200-day moving average. So you can see the stock trade back down to $81, maybe even $75,” Johnson said Friday on CNBC’s “Trading Nation.”

A move down to $75 marks 30% downside from current levels. It has not traded at that price since May.

“The risk/reward isn’t favorable. Even though the stock is up, it has sold off quite a bit in here recently. I still think you got about 30% downside and maybe a relief rally of 7% upside, so I’d be selling into this move,” said Johnson.

Quint Tatro, founder of Joule Financial, does not see Pivotal’s note on Roku as the stock’s death knell.

“Obviously, the stock got way overheated, trading 25 times sales, but [Pivotal’s] rationale regarding losing market share I don’t agree with. You have to understand, this is a cord-cutting product so their whole rationale is that the cable companies are going to offer their own device for free in order to compete. I’m a Roku user. I own six of them in our home and office. I have not had cable for years so I would not switch to a cable device,” Tatro said on the show.

Tatro says a pullback in Roku’s share price to 14 to 15 times sales, around $100, would make him a buyer. Roku would need to fall 7% from Friday’s close to get to that level.

Disclosure: Comcast is the owner of NBCUniversal, parent company of CNBC and CNBC.com.

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The market rotation this month may have been driven by a technicality

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A trader works at the New York Stock Exchange in New York.

Wang Ying | Xinhua News Agency | Getty Images

What exactly happened during the “once in a decade” stock market rotation earlier this month that rocked investors? It might’ve just been a one-off technical move and not based on fundamentals.

A huge rotation out of momentum into value names took place suddenly last week. Many read the phenomenon as a warning sign as stocks with superior growth have led the market’s bull run in recent years and said a rebound in interest rates was the catalyst. However, the reversal in momentum, which seemed to abate this week, could be explained by a sudden stop in tax loss harvesting, some on Wall Street said.

The idea is that investors often sell losing stocks to lower their tax bill from the capital increases, a technical move that’s quintessential of a momentum trade — chasing winners and dumping losers. The amount of such activity might have decreased significantly last week due to speculations the Trump administration would pass a bill to reduce capital-gain taxes, therefore reducing the incentive to sell their losers.

“It’s quite possible some of the dominant robo advisors could have assumed that the U.S. administration would indeed follow through with its proposal on Sept. 9, and decided to change their optimization to take this into account,” Barclay’s head of equity derivatives strategy Maneesh Deshpande said in a note on Wednesday.

President Donald Trump earlier this month floated a proposal to tie capital gains taxes to the inflation rate, which could lower the taxes investors pay on profits from selling assets. He eventually ruled out such a plan on Sept. 11. But the discussion around the proposal last week coincided with the change in stock leadership that shocked many investors.

Tax loss harvesters might have stopped selling losers and adding winners on the prospect that capital-gains taxes would go down, which could make tax loss selling less beneficial. Such a change could have caused the downturn in momentum due to less selling of falling stocks and less buying of rising names.

The amount of active tax loss harvesting has ballooned over the years as robo-advisers, which automatically allocate assets in a tax efficient way, gained popularity on Main Street. Robo-advisers now manage about $1 trillion assets, up from $240 billion in 2007, according to Barclays.

“Of course, it is also entirely possible that some other investors would have put on the trade in anticipation of such a proposal,” Deshpande said.

The iShares S&P 500 Value ETF hit its highest level since January 2018 on Sept. 11 as the rotation hit its pinnacle.

Value, cyclical companies with low prices relative to earnings and book values tend to be sensitive to economic growth. However, embracing the group without a material change in the economy doesn’t make a lot of sense, analysts warned.

“Absent an improvement in underlying economics, we believe that the recent shift in leadership is unlikely to persist,” Jonathan Golub, chief U.S. equity strategist at Credit Suisse said in a note Monday.



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‘Game of Thrones’ ends run with best drama award, 59 total Emmy Awards

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D. B. Weiss (C, speaking), David Benioff (3rd L) and cast and crew of ‘Game of Thrones’ accept the Outstanding Drama Series award onstage during the 71st Emmy Awards at Microsoft Theater on September 22, 2019 in Los Angeles, California.

Kevin Winter | Getty Images Entertainment | Getty Images

Despite mixed fan and critic reactions to the final season of “Game of Thrones,” the eight-season epic took home the top prize in the drama category at the Emmy Awards on Sunday.

Closing out the 71st annual television awards ceremony, David Benioff and D.B. Weiss thanked creator George R. R. Martin for entrusting his book series to the young producers more than a decade ago and praised the cast and crew for their work on the program.

Since 2011, HBO’s “Game of Thrones” has garnered 160 Emmy nominations and taken home 59 prizes for everything from acting and editing to special effects and sound mixing.

On Sunday, the program earned two Emmys, one for outstanding supporting actor, which went to Peter Dinklage for his portrayal of Tyrion Lannister, and one for outstanding drama.

Earlier in the month, “Game of Thrones” won 10 additional awards during the Creative Arts Emmy ceremony.

“Game of Thrones” final award tally falls short of the 67 Emmys that “Saturday Night Live” has accrued over its 44 seasons. “SNL” earned two statues on Sunday, one for outstanding variety sketch series and one for outstanding directing.

The final season was widely criticized by fans who felt the pacing and its treatment of previous character developments were not up to par. Still, the show continued to have record-breaking viewership.

Each episode, save for one, topped viewer counts from the season seven finale, which was the series high prior to season eight’s release.

Disclosure: Comcast is the parent company of NBCUniversal and CNBC.



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