Morning in Arizona

Morning in Arizona
Rainbows over Canyonlands - Dave Stoker

The Headline Animator

Tuesday, October 31, 2017

Opening Salvo

Financial Review

Opening Salvo

DOW – 85 = 23,348
SPX – 9 = 2571
NAS – 11 = 6690
RUT – 21 = 1487
10 Y – .06 = 2.37%
OIL + .22 = 54.12
GOLD + 2.80 = 1277.00


  • Number of Currencies: 885
  • Total Market Cap: $178,391,795,510
  • 24H Volume: $3,327,521,130

Top Cryptocurrencies

  Name Symbol Price USD Market Cap Vol. Total Vol. % Price BTC Chg. % 1D Chg. % 7D
  Bitcoin BTC 6,122.1 $101.99B $1.63B 49.12% 1 -0.13% +7.48%
  Ethereum ETH 307.99 $29.46B $309.75M 9.31% 0.0504066 +0.32% +0.34%
  Ripple XRP 0.20140 $7.81B $30.98M 0.93% 0.00003311 -0.29% -1.85%
  Bitcoin Cash BCH 447.47 $7.55B $476.38M 14.32% 0.0736137 +0.42% +36.61%
  Litecoin LTC 56.140 $3.02B $90.39M 2.72% 0.00919394 -0.12% -2.68%
  Dash DASH 282.00 $2.16B $39.11M 1.18% 0.0461344 -1.50% -4.50%
  NEO NEO 28.940 $1.87B $31.60M 0.95% 0.00469823 +0.50% -6.48%
  NEM XEM 0.19904 $1.79B $3.74M 0.11% 0.00003251 -1.10% -5.39%
  BitConnect BCC 228.053 $1.67B $21.31M 0.64% 0.0372403 +0.41% +16.19%
  Monero XMR 87.79 $1.35B $26.19M 0.79% 0.0143796 -1.24% -1.31%

Paul Manafort, the former campaign chairman for the Trump campaign, and Manafort’s former business associate Rick Gates surrendered to federal authorities this morning, part of what appeared to be the first charges in a special counsel investigation.

Manafort and Gates were indicted on 12 counts, including false statements to the government, failing to register as a foreign agent, money laundering, failing to report foreign income, and conspiracy against the United States. Their indictment describes a conspiracy to evade taxes and launder at least $75 million of foreign income into the United States from offshore accounts.

Manafort and Gates appeared in the Federal District Court in Washington and pleaded not guilty to all charges; they were released to house arrest. The indictment of Manafort and Gates makes no mention of Trump or election meddling, but the 31-page indictment essentially alleged that the president’s onetime top lieutenant was secretly a highly paid agent for pro-Russian foreign interests.

Manafort has expected charges since this summer, when F.B.I. agents raided his home and prosecutors warned him that they planned to indict him. That speculation intensified late Friday when it was reported that Mueller’s team had an indictment, which remained sealed over the weekend.

Meanwhile, former Trump foreign policy adviser George Papadopoulos, admitted making a false statement to FBI investigators who asked about his contacts with a foreigner who claimed to have high-level Russian connections. The agreement was unsealed Monday. Papadopoulos was arrested in July and entered a guilty plea about 3 weeks ago, and reportedly has been providing information and evidence to investigators for several months.

Papadopoulos’s indictment doesn’t directly prove collusion on its own, but it undermines the Trump White House’s claims of ignorance on behalf of the president and his inner circle. Documents released today said that several senior campaign officials knew about, and encouraged some of Papadopoulos’s interactions with the Russians.

It is widely believed that Mueller is hoping to pressure Manafort into providing information about the central subject of his investigation. As part of the pressure Mueller and his team will seek to seize various properties or any other assets Manafort may have. This gives Manafort an additional incentive to cooperate as part of a plea deal.

And while there is always a presumption of innocence, the reality is that federal prosecutors have a more than 98% conviction rate on cases that go to trial; and it is a safe bet that Mueller’s team has an iron clad case this time. The only serious question is whether Manafort and/or Gates turn evidence or spend the rest of their lives in prison and die penniless.

The threat of long prison sentences allows investigators to extract plea deals from potential witnesses, which can then be used to bring charges against more significant targets. This is also not the end of the Mueller investigation, it is still in the early stages, with a strong probability of more indictments to come.

On Wall Street, investors digested the new of the indictments and the conviction and largely moved on to the issue of tax cuts. According to a report by Bloomberg, lawmakers who are drafting the House’s tax-reform plan are discussing gradually phasing in a corporate tax-rate cut that would bring the corporate rate down to 20 percent in 2022.

The phase-in proposal would reduce the rate from its current 35 percent rate by three percentage points a year starting in 2018. If adopted, it would delay some of the economic effects Trump and his advisers have sought to emphasize from their tax cuts. The White House denied it supports a phased-in tax cut.

GOP tax writers are looking for ways to limit their bill’s net revenue loss to $1.5 trillion to satisfy the parameters of the budget resolution that the House and Senate have adopted. The Ways and Means panel plans to release the text of a bill on Wednesday, ending a secretive drafting process. And then lawmakers will have to operate at a break-neck pace to get a bill passed before the end of the year.

Meanwhile, the National Association of Home Builders has said that it cannot support the proposal in what appears to be its current form after Republicans said they wouldn’t accept the idea of replacing deductions for mortgage interest and property taxes with a new tax credit.

Several states have complained about the proposal to eliminate deductions for state and local taxes. And there are even reports of some Republicans who still claim to be deficit hawks. In short, tax cuts could be difficult.

We are in a market that has just been on an absolute low-volatility, steady climb for quite a while, so you don’t need much of a reason for it to take a periodic step back, particularly a small step back. The thing about stock traders is that they have no patience. They want it all and they want it now.

The potential for a phase-in period for corporate tax cuts has implications beyond the stock market. The Dollar Index fell the most in almost three weeks, while yields on benchmark 10-year Treasuries notes dropped. In both cases, the thinking is that phased-in corporate tax cuts would have less of a positive impact on the economy than if the reductions came all at once.

Trump is expected to nominate Jerome Powell as the next chair of the Federal Reserve. The White House intends to announce the Fed chair selection on Thursday. If confirmed by the Senate, Powell would begin serving as chair in February, replacing Janet Yellen. Powell is widely viewed as a safe pick who is unlikely to make any dramatic changes to Fed’s handling of the economy.

Unlike some of the other candidates Trump considered, Powell has been supportive of Yellen’s policy of slowly raising interest rates, which have been at historic lows for nearly a decade as the Fed looked to help the economy recover from a massive recession. Powell has served as a Fed governor, a top leadership role within the central bank, since 2012.

Powell’s ideology may diverge from Yellen on a key issue for Republicans: the stringency of financial regulations. Yellen has largely maintained support for the regulations put in place after the crisis, saying that they have made the economy stronger and cautioning that any changes should be “modest.” Powell, for his part, has seemed a bit more skeptical when it comes to those regulations, noting that some are perhaps too onerous and need to be pared back.

Another option that’s been floated is Kevin Warsh, a professor at Stanford and a Wall Street veteran who also worked for the Fed under George W. Bush. Finally, there’s Jonathan Taylor, an economist who is also a professor at Stanford, and Warsh’s mentor.

There are seven seats on the Federal Reserve’s Board of Governors—the group of people who make the most consequential decisions about American monetary policy. The Federal Reserve will likely be completely different within the next year.

The Commerce Department said consumer spending jumped 1.0 percent last month the biggest one-month gain in more than 8 years. The increase, which also included a boost from higher household spending on utilities, was the largest since August 2009. The Commerce Department said September data reflected the effects of Hurricanes Harvey and Irma, but said it could not quantify the total impact of the storms on consumer spending and personal income.

Consumer spending in September was buoyed by purchases of motor vehicles, probably as drivers in Texas and Florida replaced automobiles that were destroyed when Harvey and Irma slammed the states in late August and early September. Spending on long-lasting goods like autos surged 3.2 percent last month. Outlays on services rose 0.5 percent.

The Federal Reserve’s preferred inflation measure, the personal consumption expenditures (PCE) price index excluding food and energy, edged up 0.1 percent in September. The so-called core PCE has now increased by 0.1 percent for five straight months.

The core PCE increased 1.3 percent in the 12 months through September after a similar gain in August. The core PCE has undershot the Fed’s 2 percent target for nearly 5-1/2 years. When adjusted for inflation, consumer spending increased 0.6 percent in September after slipping 0.1 percent in August.

Personal income rose 0.4 percent last month after increasing 0.2 percent in August. Wages advanced 0.4 percent. Savings fell to $441 billion in September from $521 billion in the prior month.

Homes are sitting on the market for the shortest time in 30 years, according to an annual report on home-buyers and sellers published today by the National Association of Realtors. The typical home spent just three weeks on the market

Spain’s state prosecutor accused sacked Catalan leader Carles Puigdemont of rebellion and sedition, as the former regional president traveled to Belgium with other members of his ousted administration and hired a lawyer there. The Oct. 1 vote in for Catalonian secession has triggered Spain’s biggest crisis in decades.

On Friday, Spanish Prime Minister Mariano Rajoy sacked Catalonia’s secessionist government and called a snap regional election for Dec. 21, and said the central government would take direct control.

The Ibex 35 Index of equities surged 2.44 percent to close at its highest level since mid-August. Yields on Spanish 10-year government bonds dropped 9 basis points to 1.495 percent, matching their lowest levels since mid-August. Geopolitical turmoil in the world these days seems to have a very short shelf life.

Facebook, Apple, Starbucks, and Tesla are just a few of the companies reporting earnings this week, and expectations are high for positive surprises. Which probably means anything less than great won’t be good.

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