Morning in Arizona

Morning in Arizona

The Headline Animator

Friday, December 30, 2016

2016 Review

Financial Review

2016 Review


DOW – 57 = 19,762
SPX – 10 = 2238
NAS – 48 = 5383
RUT – 6 = 1357
10 Y – .04 = 2.44%
OIL + .15 = 53.92
GOLD – 6.80 = 1151.90

It has been a good year for Wall Street. The Dow, S&P and Nasdaq partied like it was 1999 – the three markets all closed at historic highs for the first time in 17 years. The Dow Industrial Average gained 13.4% for the year, its best annual percentage gain since 2013.  The S&P advance is about 10%. The Nasdaq posted an annual gain of 8.5%.

Global markets have fared surprisingly well in a year marked by major political shocks. Britain’s blue-chip FTSE 100 index is up 23% from lows hit immediately after the June 23 Brexit vote to leave the European Union. MSCI’s world index, which tracks shares in 46 countries, has gained 13% since the end of June.

Oil prices posted their biggest yearly percentage gain since 2009, up 45%. The S&P energy sector was a market leader, up 23.7%

The U.S. dollar index remains near 14 year highs. The main trend for the greenback is higher and is likely to continue to be supported by a hawkish Federal Reserve. Of the major central banks, only the Fed is on track to increase interest rates in 2017.

The probability that the Federal Open Market Committee will increase its fed funds rate at its May 2017 meeting is 36%, and the probability of a rate hike at the June meeting is 75%.

The year is also notable for the growing chorus of voices calling an end to the three-decade bond bull run. With inflation on the rise, U.S. 10-year yields have hit two-year highs and the European Central Bank has signaled it will start trimming bond purchases.

Some of the highlights, or lowlights, from 2016 would have to include: Brexit, Donald, Dilma, the Panama Papers, Volkswagen’s Dieselgate settlement, Takata’s exploding airbags, Samsung’s exploding phones, the Italian referendum, the deadly spread of the Zika virus, the megabrew merger of AB InBev and SAB MiIller, the rise and fall of Theranos, the EpiPen price gouge, and of course, Pokemon Go transformed billons of people into mindless zombies.

We are still trying to figure out the Brexit vote, and the British politicians are still trying to figure it out as well. In Brazil, the President, Dilma Rousseff was impeached for corruption; her successor is also under investigation for corruption. In the US, we had our worst presidential election ever; that sounds like hyperbole but it isn’t; we ended up with two candidates that were the most flawed and disliked in our history – and then we picked one.

But 2016 was not just about politics – it was a banner year for terrorism as well. There were terrorist attacks in Brussels, killing dozens, wounding hundreds; a hijacked truck plowed through a Bastille Day celebration in France; a gunman shot up a gay nightclub in Orlando. Terrorist shot up the Istanbul airport. Another hijacked truck shredded a Christmas display in Germany. And then there was Syria and the indelible images of bleeding children pulled from the rubble, or the lifeless body on the beach.

The Justice Department battled Apple in court over access to its customers’ locked, encrypted iPhones. Microsoft sued the U.S. government over its access to customers’ emails and files without their knowledge.

Yahoo confirmed that over half a billion user accounts had been hacked. Police departments across the country continued to use Stingray devices to collect cellphone data in real time, often without a warrant.

A six-hour system shutdown resulted in hundreds of Delta flights being cancelled and thousands of people stranded. Doctors announced the birth of the first healthy three-parent baby created with DNA from three separate people.

Elon Musk outlined his plan to populate Mars. Cars started to drive themselves. Google’s artificial intelligence program, AlphaGo, defeated its human opponent in a DeepMind Challenge Match. So, this was the year when the robots finally began to assert their dominion over mere humans.

We lost some bright stars this past year; a few dark stars as well. Among the ranks of the notable deceased: Fidel Castro, Supreme Court Justice Antonin Scalia, Israel’s former president Shimon Peres, the first female Attorney General Janet Reno, and Arizona’s first female governor Rose Mofford, and former first lady Nancy Reagan.

Phoenix lost its most famous resident – Muhammad Ali, whose fast fists and outspoken personality made him one of the most recognizable people in the world. Other sports figures included: golf great Arnold Palmer, Gordie ‘‘Mr. Hockey’’ Howe, basketball players Dwayne ‘‘Pearl’’ Washington and Nate Thurmond, and coach Pat Summitt.

We lost many celebrities, including: authors Harper Lee and Umberto Eco and Edwar Albee, actors Gene Wilder, Abe Vigoda, Florence Henderson, Alan Rickman, Robert Vaughn, Garry Shandling, Doris Roberts, Alan Thicke, George Kennedy, Patty Duke, Gloria Dehaven, Carrie Fisher – followed by her mom, Debbie Reynolds.

And it seemed to be a particularly fatal year for musicians: David Bowie, Prince, Leonard Cohen, George Michael, Merle Haggard, Glen Frey, Paul Kantner, Gato Barbieri, Pete Fountain, Leon Russell, Mose Allison, and Buckwheat Zydeco.

The business world lost Andy Grove, a refugee from postwar Europe who started Intel; Forrest Mars Jr., the billionaire co-owner of candy maker Mars; Dwayne Andreas, who built Archer-Daniels-Midland into the world’s largest processor of agricultural products; and Roger Enrico, who led PepsiCo in its battle against Coca-Cola.

Financial leaders who died included ex-Salomon Brothers executive John Gutfreund, known as the King of Wall Street; Thomas Perkins, the venture capitalist who helped finance Amazon.com and Google; Robert H.B. Baldwin, who led Morgan Stanley during a period of rapid growth; and E. Lee Hennessee, who started a hedge-fund advisory firm when few women worked in that part of the industry.

Futurist Alvin Toffler, journalists Morley Safer and John Mclaughlin; pollster Luis Harris. Reinhard Selten, who won the Nobel for his work on game theory; Also, Nobel Peace Prize winner and historian Elie Weisel; astronaut Edgar Mitchell – Apollo 14, and the first American in space – John Glenn.

That’s just a partial list of those we lost this year, with no disrespect intended for those not mentioned here.

Through all the changes of the past year, there was one constant – bankers behaving badly. And that brings us to our annual Worst Bankster of the Year Award. We start with a couple of runners-up: Deutsche Bank, which remains on top of the IMF’s list of the most systemically dangerous financial institutions in the world – if any bank can meltdown the global financial system in 2017, look for Deutsche; next on the list is Banca Monte dei Paschi, the world’s oldest continuously operating bank is now in the process of being bailed out by the Italian government – this is a bank that survived world wars and the plague and it is now on the edge of the abyss.

The winner, or the loser, of the Worst Bankster of the Year Award goes to Wells Fargo, which over a several years’ period managed to open more than 2 million customer accounts and credit card accounts – only problem – they were all fake.

CEO John Stumpf groveled before congressional investigators and said he would take full responsibility and then he blamed 5,000 rank and file employees who were fired for going rogue trying to fill their sales quotas. Whistleblowers were also fired. Customers credit was destroyed. It was ugly, and stupid, and greedy. In other words, the epitome of Banksterism.

2016 will go down as the hottest year on record; breaking the record set in 2015; which broke the record set in 2014. The last 10 years are the hottest ever recorded, breaking the record set 10 years prior.

In September, a month in which atmospheric carbon dioxide — a heat-trapping greenhouse gas —is usually at its lowest, the monthly value failed to drop below 400 parts per million. The 400 ppm mark has sad significance in the climate community, as it has long been considered a point of no return for the atmosphere by scientists.

Temperatures in parts of the Arctic were 36 degrees F above normal in November, according the US National Snow and Ice Data Center. Sea ice in the Arctic and Antarctica is at record lows. Climate scientists say that a portion of sea ice approximately the size of India melted in 2016 due to a worldwide increase in temperatures.

Deforestation in the Amazon increased over 29% from 2015 to 2016. Australia’s Great Barrier Reef, a 1,430-mile-long world heritage site visible from space, suffered the largest loss of corals ever recorded this year.

Preliminary data through October shows that global average temperatures are 2.2 degrees F (1.2 degrees C) above pre-industrial levels, driven by the El Niño phenomenon. That is perilously close to the limit adopted in the Paris Agreement, which calls for limited temperature rise since the industrial revolution to 2 degrees C.

Half the planet must endure 2016 for an extra moment. On Dec. 31, the world will experience its 28th “leap second.” That means that after 4:59:59 pm on December 31, the clock will not tick to 5:00:00 pm on December 31.

Instead, time will officially read 4:59:60 before incrementing to 5:00:00, the result of a quirk in global timekeeping that’s more useful to astronomers than everyday people. We call it the leap second. The reason is that there are not exactly 24 hours in a day, and an occasional small adjustment keeps the clocks aligned with the position of the Sun.

2016 was not all hot and horrible, sometimes it was just weird – that’s the only way to explain Bob Dylan winning the Nobel Prize for Literature and the Chicago Cubs winning the World Series.

Shakespeare said the past is prologue. Wishing you the very best for 2017.

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