Financial Review

Back-to-Back Hat Trick

Sinclair Noe — September 13, 2017

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DOW + 39 = 22,158
SPX + 1 = 2498
NAS + 5 = 6460
RUT + 2 = 1426
10 Y + .02 = 2.19%
OIL + 1.16 = 49.39
GOLD – 8.90 = 1323.50

Top Cryptocurrencies

	Name	Symbol	Price USD	Market Cap	Vol.	Total Vol. %	Price BTC	Chg. % 1D	Chg. % 7D
	Bitcoin	BTC	3,902.2	$64.61B	$2.21B	41.76%	1	+1.36%	-14.17%
	Ethereum	ETH	279.47	$26.37B	$909.52M	17.21%	0.0714781	+1.45%	-14.93%
	Bitcoin Cash	BCH	514.71	$8.39B	$339.79M	6.43%	0.129744	+1.73%	-19.26%
	Ripple	XRP	0.19988	$7.71B	$101.57M	1.92%	0.0000515	+0.95%	-9.81%
	Litecoin	LTC	62.510	$3.28B	$494.06M	9.35%	0.01587	+1.13%	-20.89%
	Dash	DASH	301.50	$2.28B	$27.52M	0.52%	0.0773939	+1.25%	-11.71%
	NEM	XEM	0.23201	$2.10B	$9.07M	0.17%	0.00005972	+0.52%	-21.64%
	Monero	XMR	115.00	$1.73B	$102.05M	1.93%	0.0294635	+4.65%	-3.81%
	IOTA	MIOTA	0.55283	$1.53B	$31.14M	0.59%	0.00014149	-2.31%	-22.97%
	Ethereum Classic	ETC	14.3866	$1.35B	$100.72M	1.91%	0.00363666	+2.64%	-22.47%

Stocks closed near session highs. Most of the day the S&P and Nasdaq traded in negative territory, while the Dow Industrials flipped from positive to negative in a tight range. And the S&P 500 is now pushing 2500. That seems pretty high; some might say overvalued.

Although the dollar index is up for the past 3 days, since the start of the year, the Dollar Index is down about 11%, so from an international investors view, investing in the S&P 500 has been a losing proposition.

In real numbers, stocks are rising, which is what matters most. Going back to the lows of 2009, the S&P 500 is now up 269%, surpassing the 266% advance notched during the 1949 to 1956 bull market, and that means the current bull market is the third strongest in US history.

At 8 1/2 years, the bull market is already the second longest ever, trailing only the 1990-2000 run during the dot-com era. If you look at annualized returns, the market has been running at a less-than red hot 17%.

Trump kicked off his morning with a pair of tweets urging lawmakers to pass tax cuts and reform. Trump hosted a bipartisan round table with lawmakers at the White House to discuss big issues including tax reform and infrastructure.

It’s mid-September and Republicans still can’t pass a budget. That’s because the budget fight is really about tax reform: a clash between Republican leadership and a caucus of arch-conservatives who see this moment — months before any major tax bill is likely to come before the full House — as their best chance to force deep cuts to both tax rates and social welfare spending.

The only way to get any deal passed is through reconciliation. In budget reconciliation, each committee is instructed on how much savings it must produce to pass a “reconciliation bill.” So, how do you solve a problem like cutting taxes without blowing up the deficit? In any scenario, Republicans are relying on projections of increased economic growth from tax cuts to offset the revenue losses from those cuts.

But under most projections, growth alone won’t be enough to offset the full losses from the deepest tax cuts, and that leaves spending cuts. But Republican leadership has promised an increase in defense spending, so that means big spending cuts elsewhere. Democrats and Republicans are unlikely to work together, and the Republican Party is polarized between its own moderates and conservatives.

No budget resolution means no tax reform. Do you know the tax reform plan? No, and you are not alone. The tax reform plan has not seen the light of day. House Speaker Paul Ryan said a tax-reform “outline” will be released the week of Sept. 25 that reflects the consensus of the two congressional tax committees and the Trump administration. Ryan said the House Ways and Means Committee and the Senate Finance Committee would take input after the outline is released and produce bills “in the weeks ahead.”

Congress won’t vote again this year to raise the debt ceiling, Senate Majority Leader Mitch McConnell says. He said the deal passed by Congress to extend the borrowing limit to December 8 doesn’t eliminate the so-called “extraordinary measures” the Treasury secretary can use to keep borrowing.

Meanwhile, the Treasury Department reported this morning that the federal government ran a budget deficit of $108 billion in August, just slightly more than in the same month a year ago. For the fiscal year to date, however, the shortfall is running well ahead of where it was in August of last year. Through this August, the deficit is $674 billion, up 9% from the year-ago period. So far, this fiscal year, spending is up 3% compared to a year ago, and receipts are up 2%.

A handful of Republican senators will fight to repeal Obamacare until the last possible moment. They have less than three weeks. Sens. Bill Cassidy and Lindsey Graham have unveiled the latest version of their health care bill to repeal and replace Obamacare; they have until the end of September to pass the bill using the special budget procedure that allows the legislation to advance without any Democratic votes.

The bottom line is cuts to federal health care spending, in the name of more state flexibility. On its face, this new legislation would encounter many of the same problems that earlier Republican health care bills did: Medicaid cuts and coverage losses. Meanwhile, bipartisan talks have gotten underway for a narrow bill to help stabilize, not roll back, the health care law.

Senator Bernie Sanders unveiled the 2017 version of his “Medicare-for-all” legislation, shifting talk of single payer on Capitol Hill from an abstract conversation over whether the government should provide universal health coverage to a concrete discussion of a specific bill.

Everything from primary care to hospital stays would be covered under the plan without a requirement for out-of-pocket spending on deductibles and co-payments. And patients could still use private insurance programs to cover services deemed not medically necessary by doctors, like cosmetic surgery.

With Republicans in control of Congress, single payer won’t pass, but the idea of single-payer universal health care is gaining popular approval, a recent poll from the Kaiser Family Foundation finds 53% of Americans support the idea.

Inflation at the wholesale level rebounded toward the end of summer, but most of the increase reflected higher gasoline prices. The producer price index, or PPI, rose 0.2% last month. A nearly 10% jump in the cost of gas accounted for most of the increase in wholesale inflation last month. Wholesale food costs, on the other hand, posted the biggest decline in more than two years.

The latest snapshot on wholesale prices, however, indicated that inflation is still muted. Aside from fuel, prices of most other goods and services were little changed. The price of fuel could remain elevated for a while after all the damage caused to refining operations in the Houston area after Hurricane Harvey.

What’s more, Hurricane Irma caused widespread fuel shortages in Florida that could keep pressure on fuel costs nationwide as supplies are rushed to the state. The increase in prices in August pushed the 12-month rate of wholesale inflation to 2.4% from 1.9%, just a tick below a five-year high. The yearly change in the so-called core rate of inflation, however, was unchanged at 1.9%.

Gasoline prices nationwide have surged to $2.65 a gallon from $2.34 in mid-August as flooding from Harvey disrupted fuel supplies, according to American Automobile Association data. The rise in gasoline prices is one reason why bond markets are starting to price in faster inflation.

Hurricane Irma just went from bad to worse. Eight people are dead and more than 100 have been evacuated to hospitals from a nursing home that had no air conditioning. The nursing home, the Rehabilitation Center at Hollywood Hills, had electricity but the transformer that powered the air conditioning failed. The police and state authorities were conducting a criminal investigation into the deaths. Florida Power and Light was alerted to the power outage on Tuesday but they did not send help.

An apology from Equifax CEO in USA Today about the company’s massive cybersecurity breach wasn’t enough. Shares dropped 15% today. Equifax’s stock is now down 30% since the company first revealed the data breach, which exposed sensitive personal information of 143 million Americans, last Friday.

Equifax CEO Richard Smith wrote in an op-ed piece in USA Today  that Equifax is “devoting extraordinary resources to make sure this kind of incident doesn’t happen again.” But Smith did not address the fact that three Equifax executives, including its chief financial officer, sold nearly $2 million in shares in August — just after Equifax learned of the security breach but weeks before it decided to tell consumers and investors.