Financial Review

Watch and Wait

Sinclair Noe — March 8, 2017

Podcast: Play in new window | Download (Duration: 12:12 — 7.0MB)

Subscribe: iTunes | Android | RSS

DOW – 69 = 20,855
SPX – 5 = 2362
NAS + 3 = 5837
RUT – 8 = 1366
10Y + .04 = 2.55%
OIL – 2.95 = 50.19
GOLD – 7.70 = 1208.90

The S&P and Dow are down for 3 straight sessions. Oil closed at a 3-month low. Eight years ago, the Dow Industrial average was barely holding on at the 6,500 level. The S&P 500 index had dropped to 666. Since those dark days in the Spring of 2009, the Dow has climbed over 320%. The S&P is up 354%.

If you had purchased Apple 8 years ago, you would have a 1,000% gain. Home Depot delivered a 608% gain. Not very likely you were buying stocks 10 years ago, this week; a lottery ticket would have been an easier play.

Payrolls processor ADP reports the US economy added 298,000 private-sector jobs in February, the most since April 2014. ADP’s report wasn’t just strong at the headline—it also suggested growth in well-paying fields, as construction and professional & business sectors each added 66,000 jobs.

While the relatively lower-paid education & health and leisure & hospitality each added another 40,000 jobs, manufacturers added 32,000 jobs. The ADP report suggests the official non-farm payrolls report from the Labor Department, which also covers government jobs, might come in well ahead of the current 200,000 consensus estimate.

Productivity increased 1.3% in the fourth quarter. Even with a healthy fourth-quarter boost, productivity only rose 0.2% in 2016. That’s the smallest gain since 2011 and maintains a post-recession trend of extremely weak increases in productivity.

The government’s first revision of fourth-quarter productivity showed little change in output, hours worked or labor costs. Productivity has averaged 1% growth per year since 2007, compared to a 2.6% rate from 2000 to 2007.

The European Central Bank meets tomorrow to announce its latest call on rates and stimulus measures. Eurozone Inflation is finally back at the ECB’s target of around 2% for the first time since 2013. Inflation is one of the key measures the central bank uses to decide on interest rates and other stimulus measures.

And the Eurozone purchasing managers’ index jump to a 70-month high and gross domestic product growth is outpacing that of the US. But that doesn’t mean the ECB will raise rates; most analysts think they will only make adjustments to forward guidance.

The Federal Reserve meets next week to announce monetary policy. Yesterday, Jeffrey Gundlach, chief executive officer at DoubleLine Capital, said he expects the Federal Reserve to begin a campaign this month of “old school” sequential interest rate hikes until “something breaks,” such as a US recession.

Japan’s economy gets an upgrade. The Final GDP reading for the fourth quarter showed the Japanese economy grew at a 0.3% clip, ahead of the 0.2% that was previously recorded. Private business investment grew by 2% in the quarter, making for the fastest growth since the first quarter of 2014.

China reported a rare trade deficit in February equal to about $9 billion. However, the country’s trade data are frequently distorted this time of year, because of the celebration of the Chinese New Year. Still, it’s the first monthly trade deficit China has reported in three years.

An indicator of the health of the global economy grew at its fastest pace in 6 years. Data released by the International Air Transport Association showed that revenue passenger kilometers grew by 9.6% compared with a year earlier, making for the fastest growth since April 2011.

OPEC and non-OPEC producing countries have reiterated their pledge to uphold the terms of the production cut agreement reached late last year; top energy ministers said they were committed to removing 1.8 million barrels from the market. So far, it hasn’t happened.

This morning, the American Petroleum Institute reported oil stocks rose by 11.6 million barrels last week. US crude production is projected to surge to a record 9.7 million barrels a day next year, per the EIA’s monthly Short-Term Energy Outlook released Tuesday.

The US Energy Information Administration on Wednesday reported an 8.2 million-barrel climb in domestic crude supplies for last week, lifting total commercial inventories to a new record weekly level of 528.4 million. That marked a ninth straight weekly increase.

Mexico has canceled existing sugar export permits to the United States in a dispute over the pace of shipments. Reuters report a letter sent by Mexico’s sugar chamber to mills partly blamed the situation on unfilled positions at the US Department of Commerce, which it said has led to a “legalistic” interpretation of rules with no US counterparts in place in Washington for Mexican officials to negotiate with. Mexico is the top foreign supplier of sugar to the US.

A new report commissioned by the federal government accuses Caterpillar of using tax and accounting fraud to prop up its stock price. The New York Times reports no charges have been filed, and it is not clear whether investigators agree with the findings or intend to act on them.

The report, which has not been made public or made available to Caterpillar, outlines a company strategy for bringing home billions of dollars from offshore affiliates while avoiding federal income taxes on those earnings. Last week, federal agents raided three Caterpillar buildings near its headquarters in Peoria, Ill., as part of the investigation.

The company’s tax practices have been a focus of government investigators since a 2014 Senate hearing found that the company cut its tax bill by $2.4 billion over 13 years, moving earnings out of the United States and into a Swiss subsidiary, despite internal company warnings that the strategy lacked a business purpose, other than tax avoidance.

The CIA faces what could potentially be the biggest ever leak of its secrets, after Wikileaks published thousands of documents claiming to show how the agency uses cyber espionage tactics to hack into smartphones and other devices. The leak, named “Vault 7” by WikiLeaks, will once again raise questions about the inability of US spy agencies to protect secret documents in the digital age.

The methods could reportedly capture text and voice messages on iOS, Android and Whatsapp before they were encrypted, and could hack Microsoft software and Samsung TVs. Apple released a statement saying they have already dealt with some of the issues raised in the leaks. Microsoft is reportedly considering the issue.

Microsoft says it is committing to use chips based on ARM Holdings technology in the machines that run its cloud services, potentially imperiling Intel’s longtime dominance in the profitable market for data-center processors. Microsoft has developed a version of its Windows operating system for servers using ARM processors, working with Qualcomm and Cavium.

In Hawaii, the Kauai Island Utility Cooperative is now drawing energy from 272 Tesla power packs to provide electricity after dark. While the island previously relied on solar and other renewable energy during the day, it had no way to store the sun’s power after it went down.

Using stored energy from Tesla’s power packs is expected to save KIUC 1.6 million gallons of diesel fuel annually, which has traditionally been the way the utility generates power after dark. Tesla says the power packs will cut KIUC costs per kilowatt hour from 15.5 cents down to 13.9 cents. The 13.9 cents is a fixed price for the next 20 years.

The West Virginia Gazette-Mail obtained previously confidential drug shipping sales records sent by the US Drug Enforcement Administration to West Virginia Attorney General’s office. The records disclose the number of pills sold to every pharmacy in the state and the drug companies’ shipments to all 55 counties in West Virginia between 2007 and 2012.

In six years, drug wholesalers showered the state with 780 million hydrocodone and oxycodone pills, while 1,728 West Virginians fatally overdosed on those two painkillers. The unfettered shipments amount to 433 pain pills for every man, woman and child in West Virginia.

The nation’s three largest prescription drug wholesalers -McKesson, Cardinal Health and AmerisourceBergen – supplied more than half of all pain pills statewide.

Urban Outfitters CEO Richard Hayne does not have comforting words for the retail industry. Hayne said on the company’s earnings conference call on Tuesday: “Our industry, not unlike the housing industry, saw too much square footage capacity added in the 1990s and early 2000s,” “Thousands of new doors opened and rents soared. This created a bubble, and like housing, that bubble has now burst. We are seeing the results, doors shuttering and rents retreating. This trend will continue for the foreseeable future, and may even accelerate.”

Shares in H&R Block were higher after the company reported results that beat Wall Street expectations.

German sportswear giant Adidas reported its 2016 full-year earnings on Tuesday, and its revenue of 19.3 billion euros was slightly below analyst expectations, but they raised guidance for 2017 and beyond. Adidas’s overall sneaker sales jumped 80% in 2016; a substantially larger spike than any major competitor saw.

Wall Street firm, State Street Corp., has put up a statue of a girl in front of Lower Manhattan’s well-known bronze charging bull, as if to fearlessly stare it down. Placing the diminutive, grade school-aged girl in front of the massive bull on the eve of International Women’s Day was a way of calling attention to the lack of gender diversity on corporate boards and the pay gap of women working in financial services.

State Street said one out of four of the companies that make up the Russell 3000 Index still have no female representation on their boards.

Financial Review

Pick a Lane

Sinclair Noe — November 17, 2015

Podcast: Play in new window | Download (Duration: 13:17 — 6.1MB)

Subscribe: iTunes | Android | RSS

DOW + 6 = 17,489
SPX – 2 = 2050
NAS + 1 = 4986
10 YR YLD – .01 = 2.26%
OIL – .95 = 40.79
GOLD – 12.30 = 1070.80
SILV – .06 = 14.29

Global equity markets moved higher today, following the rally yesterday on Wall Street and brushed off concerns related to Friday’s terror attacks in Paris. In their final communique from a summit in Turkey, the leaders of the world’s largest economies stuck to a goal of lifting their collective output by an extra 2% by 2018, even though growth remains uneven and weaker than expected globally. G20 leaders also endorsed plans to address Syria’s refugee crisis, taxation, climate change, cyber security and inequality.

France launched another set of airstrikes on the ISIS stronghold of Raqqa in Syria early Tuesday as the country steps up its response to last week’s deadly attacks. The bombings follow a second night of home searches in France and Belgium to catch those responsible and linked to the killings. President Francois Hollande is now looking to expand his powers under France’s state-of-emergency statute and has called on the U.S. and Russia to form a “big unified coalition” to destroy ISIS.

Meanwhile, Russian officials said they had found evidence that the passenger jet that crashed in Egypt last month was downed by a bomb, the first time those investigating the crash have cited proof of a terrorist attack. Russia’s military doubled its attacks in Syria on Tuesday. President Putin ordered Russian naval forces in the Mediterranean to work as allies with French warships in attacking ISIS targets in Syria; not necessarily a France-Russia alliance, but certainly greater military coordination.

The consumer price index increased by a seasonally adjusted 0.2% in October. The CPI measures prices at the retail level and is used to determine cost of living adjustments. The cost of housing and medical care, two of the biggest expenses for most families, climbed again and are running above a 3% annual rate. Rents rose 0.3% in October and medical care jumped 0.7%, the biggest increase in five months. Food prices, meanwhile, rose just 0.1%, marking the smallest gain in five months. Energy prices advanced 0.3%, even though the price of gasoline was down last month. The discrepancy comes from seasonal adjustments. Overall inflation is up 0.2% in the past year. Core prices, excluding food and energy, are up 1.9% in the past 12 months.

Separately, a new report from Aon Hewitt shows health insurance costs for employees of midsize and large companies averaged $4,700 in 2015; that’s up 130% from $2,001 in 2005. The report shows 38% of employers have increased their participants’ deductibles and/or copays in the last year, and another 46% may do so in the future. Employers are making cutbacks in health coverage in other ways, too. Some 18% of companies are reducing subsidies for covered dependents, and 17% are adding a surcharge for adult dependents who have access to other health coverage. Plus, 43% of companies are considering using unitized pricing, in which employees pay per person instead of individual versus family.

So there are some signs of inflation in some areas but no indication that inflation is overheating, at least according to the headline inflation numbers. Still, for most of us, it seems like there is inflation; housing and rents have increased, health care, education, and food prices seem to be on the rise. Even wages are starting to show gains. The economy has added jobs at a rapid pace over the past few years, putting some upward pressure on wages and reducing the unemployment rate to 5%. The government said real, or inflation-adjusted, hourly wages advanced 0.2% in October. Real wages have climbed 2.4% in the past 12 months.

You’re not just imagining it. Prices are going up, except for commodities. And the price of energy has an oversized influence on the annual inflation rate. The Federal Reserve’s preferred measure of inflation is the Personal Consumption Expenditures index, or PCE, which is running at a 1.3% annualized pace; still below the Fed’s target of 2% inflation but likely to rise quickly with expected increases to health care premiums over the next few months.

Now add fiscal policy to the mix. After years of gridlock the government has finally approved a 2 year budget, and it actually includes some spending; it will likely add 0.3% to gross domestic product, rather than subtracting 2% from growth; it might even result in a few government jobs, rather than cutting government jobs. And those government workers will go out and spend their paychecks on Main Street, adding to demand and circulating money through the economy. Next year will be the first since 2010 that fiscal policy adds to growth. For years, Fed Chair Bernanke (and more recently Chair Yellen) complained about headwinds from fiscal policy, or the lack thereof. Now we are about to see a shift from monetary policy alone to fiscal policy – a passing of the baton, which is always the most perilous part of a relay; too early or too late, and the race comes to a grinding halt.

The next concern is whether fiscal policy is capable of running with the baton (to extend the analogy), and staying in the correct lane. If government spending goes to projects that improve productivity – things like infrastructure and education – then it will likely improve growth. French President Francois Hollande said he will step up spending on security in the wake of the terrorist attacks in Paris, but this type of spending is not likely to result in economic growth. So, it’s not just a matter of changing from monetary policy to fiscal policy, it is important that something is actually accomplished with the stimulus. This has been the big drawback of monetary policy; the Fed dropped money on Wall Street but it never made it to Main Street.

A new Reuters analysis shows that corporate spending on buybacks and dividends has surged relative to investment in long-term growth through R&D and other forms of capital spending, in a troubling sign that corporate America may be undermining itself. Almost 60% of the 3,297 publicly traded non-financial U.S. companies examined bought back their shares since 2010. In fiscal 2014 alone, the total amount returned to shareholders (including share repurchases and dividends) reached $885 billion, way more than the companies’ combined net income of $847 billion. And the spending on buybacks, or financial engineering squeezes out investments in R&D, which has dropped.

Industrial production fell 0.2% in October but manufacturing output advanced 0.4% in October. Overall production was held down by a drop in mining and utility output. In addition, the Fed revised August production higher to a 0.1% gain from previous estimate of a 0.1% drop. As a result, industrial production was up at a 2.6% annual rate in the third quarter.

The National Association of Home Builders/Wells Fargo housing market index pulled back 3 points to 62, slightly below expectations but up from 58 a year ago. A reading over 50 signals improvement. Builders have reported strong results in the most recent earnings season. D.R. Horton, the largest US homebuilder, reported a 44% jump in profit in the most recent quarter, with orders up 19%. Lennar, the number-two builder by volume, also reported profit and revenue that were better than expected. Orders rose more than 10%.

Greece has reached a preliminary deal with its international lenders on home foreclosures reform, removing a major obstacle holding up fresh bailout loans for the debt-laden country. The changes will see Athens qualify for a €2-billion-euro sub-tranche of new financial aid to pay off state arrears and €10-billion-euro in funds to help recapitalize the country’s four main banks.

Walmart beats. Walmart earned $1.03 per share from continuing operations in the third quarter, but $0.99 excluding adjustments to its leases. Still, that was marginally higher than the $0.98 expected by analysts. Comparable-store sales, or sales at stores open at least a year, at Walmart’s US stores were up 1.5%. E-commerce sales were up by 10%.

Home Depot beats. The do-it-yourself home-improvement chain earned $1.36 per share in third quarter, beating expectations for $1.32. This was driven by a healthy 5.1% gain in comparable-store sales, which was better than the 4.6% expected by analysts.

Urban Outfitters missed. Urban Outfitters reported record third quarter sales that missed estimates, and earnings per share matched estimates, but comparable-store sales climbed by just 1% during the period, missing expectations for 3.4% growth. The news came after shares dropped 7.4% following the company’s announcement that it acquired a group of restaurants including the fast-casual chain Pizzeria Vetri. Apparently I’m not the only one who fails to see the synergy between retail clothing and pizza.

Shares of Dick’s Sporting Goods are getting clobbered. Dick’s reported third quarter adjusted earnings of $0.45 per share, missing expectations by a penny. Same-store sales, or sales at stores open at least a year, were up 0.4% in the quarter across the company, less than the 1.9% increase that was expected. And then the salt on the wound: the company lowered fourth quarter guidance.

A New York state judge denied a temporary restraining order sought by daily fantasy sports companies DraftKings and FanDuel in an effort to keep operating in the state after NY Attorney General Eric Schneiderman deemed the games to be illegal gambling. The government will now move for an injunction against the companies which will be heard in court on Nov. 25. DraftKings continues to operate as usual in New York despite the pressure from Schneiderman’s office, but FanDuel stopped taking new deposits from state players on Friday.

A US House of Representatives investigative panel plans to hold a 2016 hearing on skyrocketing drug costs. Earlier this month, the U.S. Senate Special Committee on Aging launched a probe into drug pricing at Valeant and Turing, signaling growing bipartisan agreement over the need to review prescription medicine costs across the nation.

Financial Review

Anticipation of Consequences

Sinclair Noe — October 8, 2015

Podcast: Play in new window | Download (Duration: 13:16 — 6.1MB)

Subscribe: iTunes | Android | RSS

DOW + 138 = 17,050
SPX + 17 = 2013
NAS + 19 = 4810
10 YR YLD + .05 = 2.11%
OIL + 1.86 = 49.67
GOLD – 6.80 – 1140.00
SILV – .39 = 15.77

This morning was full of anticipation: earnings season scheduled to kick off after the closing bell, the FOMC scheduled to release minutes from their September policy meeting, the House of Representatives scheduled to select a new Speaker of the House. Wisdom consists of the anticipation of consequences.

Earnings season is underway; the unofficial start is when Alcoa reports; ticker symbol AA, they lead the pack alphabetically, and then it just became tradition. The company reported adjusted third-quarter earnings of 7 cents a share on revenue of $5.57 billion. Analysts surveyed by FactSet had estimated earnings of 13 cents a share on revenue of $5.66 billion. Alcoa indicated that China’s industrial economy is slowing more rapidly than expected, as the aluminum producer slashed its production outlook for the country for cars, trucks and construction. And just like that, we have a trend.

Short interest has hit a peak. Short interest on companies listed on the New York Stock Exchange (NYSE) just hit a seven-year high, going back to the 2008 financial crisis. Short interest, or a bet that prices will drop, tends to increase as stocks are falling, and peak when they’ve bottomed; and so a peak in short interest is often seen as a contrarian indicator. Of course, short interest could still increase from these levels.

The Fed published the minutes of its September FOMC meeting. Most Federal Open Market Committee members still think an interest rate hike is possible this year. According to the Minutes from the September meeting, the Fed decided to wait on concerns about sluggish inflation and global economic growth, particularly in China. It also did not want to hike rates with inflation below its 2% target, as this could have hurt its credibility. The Fed remarked that the pullback in equities in August was likely because investors believed stocks were expensive.

Most thought that their goal of healthy labor market had been met or would be met by the end of the year. That view may be different now that the September jobs report, released after the Fed meeting, showed slowing growth. Fed officials decided it would be “prudent” to wait for more data to confirm the economy was growing at a moderate rate and labor market conditions had improved further.

House Republicans were scheduled to gather today to elect a new Speaker after John Boehner abruptly announced two weeks ago that he plans to retire from Congress at the end of October. House Majority Leader Kevin McCarthy was expected to be the front-runner for the Speaker’s job, but before the vote this morning, McCarthy dropped out of the race.

Yesterday  the Freedom Caucus, a group of about 40 of the House’s most conservative members announced it was throwing its support behind Rep. Daniel Webster, a Florida sophomore considered a longshot challenger to McCarthy. That comes three days after Jason Chaffetz, a three-term Utah Republican and Chair of the Oversight Committee announced he, too, was challenging McCarthy. A full House vote is scheduled for the end of the month. House Republicans tweeted that the leadership election would be postponed.

As the politicians sort through the chaos, there is still work to be done.  The Treasury Department has said it will exhaust its authority to borrow money to fund the government on Nov. 5. If Congress does not raise or suspend the government’s statutory borrowing limit, the government would default on its debt days later, risking economic chaos, soaring interest rates and plunging stock prices. Then, on Dec. 11, a stopgap spending bill expires. Without congressional action, much of the government will shut down. And don’t forget an October 29 deadline to replenish the Highway Trust Fund, which funds many construction projects across the country. With leadership elections occupying much attention, the window to get something done grows smaller.

Brazil is facing political and economic crisis; Brazil’s Federal Accounts Court has ruled President Dilma Rousseff manipulated government budget figures in 2014, and the nation’s highest court permitted a lawsuit to annul last year’s presidential election. The move paves the way for a possible impeachment, although any ouster would likely take months and has no guarantee of succeeding.

Jobless claims fell by 13,000 to 263,000 in the week ended Oct. 3, the fewest since July 18. The four-week average of claims, a less-volatile measure than the weekly figure, dropped to 267,500.

Revolving credit continues to show life, up a solid $4.0 billion in August for a sixth straight gain. Gains in this reading, which have been scarce this recovery, perhaps suggest that consumers are growing less reluctant to run up their credit cards.

The United Auto Workers union has reached a tentative deal with Fiat Chrysler Automobiles on a new four-year contract, averting a strike of the automaker’s U.S. operations. Local UAW leaders will gather in Detroit on Friday to hear details of the deal, while Fiat Chrysler’s 40,000 union workers will have to vote again to finalize the agreement. If the pact is ratified, the UAW will likely use it as a template for negotiations with General Motors and Ford.

A Congressional hearing into the Volkswagen emissions cheating scandal continued today. Volkswagen’s top U.S. executive, Michael Horn, repeatedly apologized but didn’t reveal details of who was behind the scam or who knew what, when.  Horn was grilled on questions he claimed to not have answers to and the lawmakers didn’t get the answers they were looking for. In Germany, police and prosecutors swooped in on Volkswagen factories and employees’ private homes in an early morning raid to gather evidence about who was behind the carmaker’s decision to cheat on diesel emissions tests.

Doubts have been raised over the level of Volkswagen reported death and injury claims in the U.S. over the last decade as the numbers have been so good as to make some industry experts question their validity. Already this year, Honda has been fined in the U.S. for underreporting claims and Volkswagen’s reported claims are significantly below the number Honda was fined for.

Dell, the world’s third largest PC maker, and the cloud storage company EMC Corp. are in discussions about a potential merger, for what could be one of the biggest technology deals in history. An agreement could be reached within a week, according to the New York Times. Of course, it’s also possible the talks won’t lead to any deal at all. It remains unclear if the two companies are discussing a full or partial takeover. EMC has a market capitalization of $50 billion, and it owns the software-development company Pivotal and enterprise-security firm RSA, as well as 80% of the virtualization company VMware.

After triggering a buy-sell clause in a deal with Michael Jackson’s estate, Sony appears ready to sell its half of the world’s biggest music publisher – Sony/ATV Music Publishing (a company worth about $2 billion). Sony and Jackson – and after his 2009 death, his estate – have jointly owned the company since 1995, each with a 50% stake. The publisher has a catalog that has copyrights to most of the Beatles’ songs, among many others including those by the Rolling Stones and Taylor Swift.

Just a few days after Google officially became a subsidiary of Alphabet, its new holding company, Alphabet has acquired the domain name abcdefghijklmnopqrstuvwxyz.com. Google announced its restructuring in August. At the time, Google unveiled its website with a URL of abc.xyz. A Google spokesperson said, “We realized we missed a few letters in abc.xyz, so we’re just being thorough.” The purpose of the new domain is unclear given that the page did not load on this morning.

Netflix is raising prices for the second time in two years. The company’s “standard” tier of service will increase by $1, to $9.99 a month, starting November 18. Prices for its “basic” and “premium” tiers remain the same.

Remember Etsy, the online site for handcrafted stuff? Amazon is looking to crush Etsy by announcing its own marketplace specifically targeted at factory free, handmade goods.

Urban Outfitters has asked salaried workers at the company’s home office to “volunteer” for extra weekend shifts at a new fulfillment center. The picking, packing and preparing that’s required of voluntary workers are, in fact, jobs that normally pay wages. Urban Outfitters says many wage employees offered to pitch in, but hourly-wage workers were excluded from the voluntary work because it might violate labor laws.

Bill Gross sued his former employer, Pimco, for improperly firing him. Gross says his ouster was driven by greed. Gross, a billionaire, is demanding a jury trial and damages of no less than $200 million.

Belarusian writer Svetlana Alexievich won the Nobel Prize in literature. Swedish scientist Tomas Lindahl, American Paul Modrich and U.S.-Turkish national Aziz Sancar won the Nobel Prize in chemistry on Wednesday for showing how cells repair damaged DNA, work that can be used to develop new cancer treatments. The Nobel Prize in medicine was awarded to Irish-born William Campbell, Satoshi Omura of Japan and Tu Youyou – the first-ever Chinese medicine laureate for discovering drugs against malaria and other parasitic diseases that affect hundreds of millions of people every year.

Takaaki Kajita of Japan and Arthur McDonald of Canada won the Nobel Prize in physics on Tuesday for discovering that tiny particles called neutrinos change identities as they whiz through the universe, proving that they have mass; by uncovering the “chameleon-like” nature of neutrinos, the laureates had solved a long-standing puzzle in particle physics that could alter our grasp of the cosmos. Tomorrow, the Nobel Peace Prize will be announced. Anticipation builds.