Financial Review

Carving a Turkey

Sinclair Noe — November 8, 2017

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DOW + 6 = 23,563 (Record)
SPX + 3 = 2594 (Record)
NAS + 21 = 6789 (Record)
RUT + 2 = 1481
10 Y + .02 = 2.33%
OIL – .38 = 56.82
GOLD + 6.00 = 1281.80

Cryptocurrency

• Number of Currencies: 903
• Total Market Cap: $205,794,764,215
• 24H Volume: $9,066,047,752

Top Cryptocurrencies

	Name	Symbol	Price USD	Market Cap	Vol.	Total Vol. %	Price BTC	Chg. % 1D	Chg. % 7D
	Bitcoin	BTC	7,356.5	$122.81B	$4.59B	50.65%	1	-1.22%	+8.30%
	Ethereum	ETH	310.87	$29.81B	$994.05M	10.96%	0.0425565	+1.13%	+7.00%
	Bitcoin Cash	BCH	636.99	$10.66B	$889.93M	9.82%	0.0867183	+2.43%	+20.78%
	Ripple	XRP	0.21847	$8.40B	$161.55M	1.78%	0.00002976	+1.12%	+12.71%
	Litecoin	LTC	62.660	$3.36B	$321.17M	3.54%	0.00853435	+0.30%	+17.37%
	Dash	DASH	313.43	$2.40B	$102.65M	1.13%	0.0427506	-0.50%	+16.34%
	NEO	NEO	31.589	$2.04B	$126.94M	1.40%	0.00428639	+3.81%	+21.15%
	Monero	XMR	116.60	$1.78B	$87.91M	0.97%	0.0158386	+3.74%	+37.89%
	NEM	XEM	0.19280	$1.71B	$6.41M	0.07%	0.00002599	+0.33%	+12.06%
	Ethereum Classic	ETC	14.0500	$1.37B	$123.11M	1.36%	0.0019165	+2.09%	+36.30%

The Dow Industrial Average carved out yet another record high close – not a big gain at all but any gain adds to the record. The S&P 500 also closed at a record high. And a record high for the Nasdaq – All three at records. In hockey parlance that’s a hat trick; bowlers might call it a turkey.

On the one-year anniversary of Trump’s win in the presidential race, the Dow Jones Industrial Average is showing its biggest post-Election Day gain in more than 70 years. The Dow has advanced 28.50% since Nov. 8, 2016. That represents its best performance after a White House contest since 1945, when the blue-chip gauge was up 29.83% in a year following the election of Franklin D. Roosevelt.

The S&P 500 is up 21% over the past 12 months. Trump has taken full credit for the equities rally, offering this assessment this week: “The reason our stock market is so successful is because of me.”

There may have been a few other factors involved: strong corporate earnings, historically low interest rates, solid job growth, a surging global economy, and an established bull market that saw the S&P nearly quadruple since its financial crisis low in March 2009. You can place credit wherever you wish, just remember the market can be a fickle mistress.

The gains in the past 12 months have been primarily concentrated within two sectors: technology stocks, up 42.2% over the past 12 months, and financials, up 37.5%. You can narrow it down even further, and look at the crazy good performance of the FAANG stocks.

Maybe the real credit should go to Tim Cook. Last week, Apple earnings crushed Wall Street estimates with Chief Executive Tim Cook saying he expected this to be “the best holiday season yet.” Apple share are up more than 52% year to date.

Today, Apple closed up 0.8% at a record $176.21 today, its fourth consecutive record close, passing the $175.29 mark needed to hit $900 billion in market capitalization based on 5,134,312,000 shares outstanding. At the close, Apple is now valued at just over $904 billion. For Apple to reach the $1 trillion mark, shares need to trade above $194.77

Democrats claimed big gains in Virginia’s statehouse and flipped Republican-held seats in other local races across the United States on Tuesday, in the party’s first big wave of victories since Republican Donald Trump’s surprise White House win a year ago.

A ticket filled with candidates making their first bids for elected office propelled the party to a 16-seat gain in the Virginia House of Delegates, the state party said, its largest pickup in at least a century. There are still 5 seats where the race is tight enough to trigger recounts.

In the governor’s race, Democratic Lieutenant Governor Ralph Northam defeated Republican Ed Gillespie. Voters also replaced a Republican governor in New Jersey with a Democrat and increased the party’s majorities in the state legislature. In Georgia, Democrats picked up three seats in special state legislative elections. Republicans still hold majorities in the legislature.

In Washington state, one race was enough to flip the state Senate blue, giving Democrats full control over state government. Further down the ballot, Democrats captured the mayor’s office in New Hampshire’s largest city, Manchester, while the Democratic mayor of St. Petersburg, Florida, beat a former Republican mayor.

Democrats also notched a win in Maine, where voters approved a referendum to expand Medicaid coverage for the poor and disabled under the Affordable Care Act, rebuking Republican Governor Paul LePage, who had vetoed similar measures.

House Speaker Paul Ryan left the door open to a possible delay in implementing a huge corporate tax cut, following a media report that his fellow Republicans in the Senate are exploring the option. Republicans in Congress are working on separate tax plans.

The latest version of the House Republicans’ tax bill would add $1.7 trillion to the federal budget deficit over 10 years, more than the $1.5 trillion they initially announced, according to the nonpartisan Congressional Budget Office. The threshold for the process known as reconciliation is $1.5 trillion. The CBO’s assessment gives more impetus to the Senate’s bill.

The Senate could include a one-year delay in its version of the bill to make it easier to comply with the chamber’s rules that aim to limit any legislation’s impact on the deficit. Ryan said both chambers of Congress would work on their own tax cut package and iron out the differences in a conference committee. But for now – based on the CBO assessment – lawmakers will need to significantly scale back their tax plan.

Also today, analysis from the Urban Institute and Brookings Institution’s Tax Policy Center found that the Tax Cuts and Jobs Act (TCJA) would result in higher taxes for around 7% of Americans in 2018 and 25% of people in 2027.

The Tax Policy Center found that much of the TCJA’s benefits would go toward wealthier Americans; 76% of people would get a tax cut, 7% would see a tax increase, and 13% would see little change. A cut of $700 for the average American, increasing after-tax income by an average of 0.7%.

A $10 cut for people in the lowest quintile, increasing average incomes by less than 0.1%. A $320 cut for people in the middle quintile, increasing average incomes by 0.4%. An average $52,780 cut for people in the top 1%, increasing average incomes by 2.2%. Nearly 50% of the bill’s total benefits would go to the 1% in 2027.

The findings are similar to those from the nonpartisan Joint Committee on Taxation, a nonpartisan congressional committee, that found roughly 20% of people would pay more in 2027.

The Saudi purge continues. Saudi Arabian authorities have made further arrests and frozen more bank accounts in an expanding anti-corruption crackdown on the kingdom’s political and business elite. Saudi Arabian authorities have made further arrests and frozen more bank accounts in an expanding anti-corruption crackdown on the kingdom’s political and business elite.

Today, there were even more arrests. The number of people targeted by the crackdown was expected eventually to rise into the hundreds. The number of domestic bank accounts frozen because of  the purge is over 1,700 and rising, up from 1,200 reported on Tuesday.

Marriott International reported a 43% increase in third quarter revenue. Net income rose to from $392 million, or $1.04 per share, in the quarter, from $70 million, or 26 cents per share. Marriott became the world’s largest hotel company after it completed the acquisition of Starwood Hotels & Resorts in September last year.

Take-Two Interactive Software jumped 10.8 percent after the videogame maker offered a stronger-than-expected revenue forecast for the holiday quarter. That sparked a rally among its competitors, with Activision Blizzard surging 5.80 percent and Electronic Arts adding 1.9 percent.

Snapchat-owner Snap fell 16.6 percent a day after reporting much-slower-than expected advertising revenue and user growth. Snap said China’s Tencent bought a 12-percent stake in the company.

The fast food chain Wendy’s shares fell 1.6% after the fast-food chain reported third-quarter earnings and revenue that came in weaker than consensus.

Shares in peer-to-peer lending company LendingClub tumbled 19% after reporting a disappointing full-year earnings outlook late Tuesday.

Fossil Group shares tumbled 15% after the accessories seller gave a disappointing outlook.

Health insurer Humana said third-quarter revenue fell 3.0, missing estimates. Shares of health-care company were down 5%.

Regeneron Pharmaceuticals rose 2.6% after the biotechnology company reported third-quarter profit and revenue that rose above expectations.

MGM Resorts added 5% even as the company reported third-quarter profit that was below Wall Street expectations.

iHeartMedia, the biggest operator of radio stations in the U.S., reiterated doubts about its ability to remain a “going concern” in its latest filing with the Securities and Exchange Commission. Its shares were down 2.3%.

The Department of Justice is pushing AT&T to sell Turner Broadcasting, parent of CNN cable network, or its DirecTV satellite television unit to satisfy antitrust concerns over its purchase of Time Warner. AT&T is reportedly prepared to fight any divestitures required to win regulatory approval of the $85 billion deal.

The development was a surprise to investors. Shares of Time Warner fell 6.5 percent, while AT&T shares were down 0.2 percent.

Financial Review

Big Tech Rolls

Sinclair Noe — October 27, 2017

Podcast: Play in new window | Download (Duration: 13:15 — 7.6MB)

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DOW + 33 = 23,434
SPX + 20 = 2581
NAS + 144 = 6701 (record)
RUT + 10 = 1508
10 Y – .02 = 2.43%
OIL + 1.39 = 54.03
GOLD + 7.00 = 1274.20

Cryptocurrency

• Number of Currencies: 881
• Total Market Cap: $169,584,853,512
• 24H Volume: $3,030,726,031

Top Cryptocurrencies

	Name	Symbol	Price USD	Market Cap	Vol.	Total Vol. %	Price BTC	Chg. % 1D	Chg. % 7D
	Bitcoin	BTC	5,763.0	$96.48B	$1.38B	45.66%	1	+0.06%	-4.89%
	Ethereum	ETH	294.13	$28.39B	$260.01M	8.58%	0.0515573	-0.63%	-0.26%
	Ripple	XRP	0.19869	$7.78B	$26.00M	0.86%	0.00003499	-0.41%	-1.55%
	Bitcoin Cash	BCH	389.71	$6.62B	$642.56M	21.20%	0.0684542	+6.64%	+22.31%
	Litecoin	LTC	54.550	$2.94B	$69.39M	2.29%	0.00950861	-1.27%	-5.37%
	Dash	DASH	270.00	$2.09B	$44.65M	1.47%	0.0474148	-3.66%	-2.04%
	NEM	XEM	0.19693	$1.79B	$4.75M	0.16%	0.0000344	+0.48%	-4.75%
	BitConnect	BCC	213.397	$1.56B	$11.33M	0.37%	0.0369607	+0.59%	+0.95%
	NEO	NEO	27.740	$1.38B	$22.50M	0.74%	0.00477785	-3.95%	+1.75%
	Monero	XMR	85.71	$1.32B	$24.67M	0.81%	0.014969	-0.45%	-1.82%

For the week, the Dow rose 0.5%, the S&P 500 gained 0.2% and the Nasdaq advanced 1.1%. The S&P has notched gains for seven straight weeks, its longest weekly winning streak in three years. The Russell 2000 index was down 0.1% for the week. Who needs small caps, when the big tech stocks are going crazy?

For the year to date: The S&P 500 is up 342.24 points, or 15.3%. The Dow is up 3,671.59 points, or 18.6%. The Nasdaq is up 1,318.15 points, or 24.5%. The Russell 2000 is up 151.19 points, or 11.1%.

We knew this was going to be a big day for the tech sector after several companies reported strong earnings after the closing bell yesterday. The S&P technology index led the way higher, up 2.9%. The index notched its best day since March 1, 2016 and is up nearly 35% on the year versus the 15-percent gain in the S&P 500.

Google-parent Alphabet gained 4.2% as its revenue got a boost from advertising sales. Microsoft jumped 6.4% after the world’s largest software company reported further gains from its cloud computing services.

Apple rose 3.5% after the company allayed concerns of muted demand for its 10th anniversary phone. The iPhone X, unsurprisingly, sold out of its pre-orders within ten minutes. Or, at least, the pre-orders it allocated to its website. Likely pre-orders are also sold out at its retail operations at this point, too.

Intel soared 7.3% after its quarterly results topped estimates and the chipmaker raised its full-year forecasts. And Amazon, gained 13.2% after reporting a quarterly sales surge and better than expected earnings. Amazon of course is already ubiquitous—an estimated two-third of US households subscribe to its Prime membership program.

But aside from the packages that come to your door and a few forays into hardware, the company can still grow sales by 35% in North America and their cloud business saw sales jump 42%. For Jeff Bezos, this was about a $7 billion day, meaning he may now be the world’s richest man.

Both Amazon and Google now trade above $1,000. Apple, Amazon, Alphabet, Microsoft; these are the new blue chips. Maybe toss in Facebook, Netflix, and Nvidia.

Today, the FAANG stocks added $181 billion in market capitalization in just a few hours of trading. For the sake of comparison, Goldman Sachs has a market cap of $93 billion. This year so far has been a big one for these companies, which have added nearly $1 trillion in value. They might top that mark next week, when Facebook and Apple report earnings.

If you own at least a few of these stocks, and you have just been holding, you have been rewarded. Even as these stocks have grown massively they can still deliver growth that seems more like a small cap stock sprinting out the gate. That does not mean they will continue to go up in a nearly straight line – they all face certain challenges but they all remain innovative and profitable until further notice.

Trump likes to claim credit for the record highs on Wall Street, even though we have been in a bull market for more than 8 years. And what he doesn’t mention is that the rest of the world has gotten richer, faster at the same time. American equities are now worth $28.4 trillion, having swelled by almost $3 trillion since he took office in January. But they’ve lost ground against the rest of the world.

All stocks across the globe are valued at $89.9 trillion. US shares make up only 31.6 percent of that total. That’s the lowest proportion since November 2011, or a few months after the U.S. flirted with default. And it’s sunk from the 11-year high of 38.3 percent set in December under then-President Obama.

Earnings growth for the third quarter is now 6.7 percent, according to Thomson Reuters data. Of the 273 companies that have posted earnings, 74 percent have topped expectations, compared with the 72 percent beat rate over the past four quarters. Not all earnings were positive, however. Chevron’s 4.14 percent fall weighed on the S&P and the Dow after the oil company’s profit missed estimates.

The nation’s gross domestic product expanded at an annual rate of 3 percent in the third quarter, according to the Commerce Department’s first estimates. Economists initially expected that Hurricanes Harvey and Irma would deal a blow to the country’s steady growth, but destruction wrought by the storms was outweighed by the continued spending of consumers and businesses.

The economy is experiencing its fastest growth spurt in two consecutive quarters since 2014, but it is highly unlikely that growth for the year will reach 3 percent. The first quarter was tepid, and projections for the current quarter hover around 2.8 percent.

Personal consumption, although down from the previous quarter, grew at a 2.4 percent rate, and nonresidential fixed investment, a measure of business spending, expanded at a robust rate of 3.9 percent.

Spending on equipment increased at a rate of 8.6 percent, as companies poured money into capital improvements. Businesses may be investing in computers and industrial equipment in response to a tight labor market.

It can be hard to accurately measure the full effect of a natural disaster immediately after it occurs. Hurricanes Harvey and Irma left 600,000 to one million vehicles needing replacement. Car sales spiked in September, reaching their highest level since 2005.

Those car purchases are counted toward GDP growth, but the destruction of all those cars is not subtracted. The 3% GDP growth figure released was the government’s first estimate of economic output for the quarter, and it will be revised twice.

The government in Madrid, Spain sacked Catalonia’s president and dismissed its parliament, hours after the region declared itself an independent nation. A new regional election will be held in Catalonia on Dec. 21.

As well as removing Carles Puigdemont as head of the autonomous region, Prime Minister Mariano Rajoy also fired its police chief and said central government ministries would take over the Catalan administration. Several European countries, including France and Germany, and the United States also rejected the independence declaration and said they supported efforts to preserve Spain’s unity.

The crisis has now reached a new and possibly dangerous level as independence supporters have called for a campaign of disobedience. The main secessionist group, the Catalan National Assembly, called on civil servants not to follow orders from the Spanish government and urged them to follow “peaceful resistance”.

CVS Health has made an offer to acquire Aetna for more than $200 per share, or over $66 billion, making it the biggest deal of the year. Yesterday Amazon.com has received wholesale pharmacy licenses in several states and is planning to move into online prescription drug sales, potentially posing an existential threat to brick-and-mortar pharmacies.

That possibility has hit shares of most drugstore operators on fears that the online retailer would leverage its vast ecommerce platform in prescription drug sales. A CVS-Aetna deal could create a one-stop shop for customers’ health care needs – ranging from employer healthcare and government plans to managing benefits and running drug stores.

This has not been an easy year for brick and mortar retailers and today, JC Penney took a hard hit, down 15% after warning of a deeper-than-expected loss in the third quarter. The retailer is trying to revamp its apparel inventory by liquidating less popular items. While the effort will lead to a comparable-store sales gain, it was a costly endeavor, resulting in a loss last quarter.

The move spotlighted key problems for the department-store field: hard-to-sell inventory and a reliance on deep discounts to move stock. J.C. Penney also has been shuttering poor-performing stores in a bid to better match supply with demand.

It has been a very bad week for General Electric. GE cut cash and profit forecasts while reporting earnings that fell well short of Wall Street estimates. Investors are also bracing for a possible dividend cut. Shares dropped every day this week pushing the stock down 13% on the week. That was GE’s worst weekly drop since March 2009. With about $26 billion of market value wiped out over the past five days, the loss for GE shareholders this year has now reached $100 billion

Volkswagen reported net profit in the third quarter fell about 50 percent, to 1.1 billion euros, or $1.3 billion, after the company set aside €2.6 billion to cover the unexpectedly high cost of repairing diesel cars in the United States that contained illegal, emissions-cheating software. VW had warned last month that the emissions scandal would cut into earnings.

After VW admitted to the scandal, the company vowed it will make electric cars affordable for the masses. One way that Volkswagen was able to still report a profit in the quarter, though, was by cutting spending on research and development. So, in a twisted sort of way, the cost of the scandal is hurting the transition to clean electric cars.

National monuments in Utah are shrinking. The Trump administration has decided to reduce the size of the Bears Ears National Monument and Grand Staircase-Escalante National to make way for more industrial activity on the land they occupy. A coal deposit lies beneath Grand Staircase, but an archeological site where two dozen new species of dinosaurs have been discovered is located there, too, and paleontologists are now worried it could be destroyed if the monument’s size is reduced.

Navajo Nation Attorney General Ethel Branch, said: “The Navajo Nation stands ready to defend the Bears Ears National Monument. We have a complaint ready to file upon official action by the President.”

Financial Review

Falling Leaves

Sinclair Noe — September 25, 2017

Podcast: Play in new window | Download (Duration: 13:16 — 7.6MB)

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DOW – 53 = 22,296
SPX – 5 = 2496
NAS – 56 = 6370
RUT + 1 = 1451
10 Y – .04 = 2.22%
OIL + 1.43 = 52.09
GOLD + 13.20 = 1311.30

Top Cryptocurrencies

	Name	Symbol	Price USD	Market Cap	Vol.	Total Vol. %	Price BTC	Chg. % 1D	Chg. % 7D
	Bitcoin	BTC	3,946.1	$65.48B	$1.37B	42.06%	1	+0.41%	-0.96%
	Ethereum	ETH	295.46	$27.84B	$461.77M	14.14%	0.0743875	+0.09%	2.49%
	Bitcoin Cash	BCH	463.90	$7.59B	$319.61M	9.79%	0.115731	+2.79%	-2.86%
	Ripple	XRP	0.18620	$7.02B	$35.87M	1.10%	0.00004642	+1.30%	-1.61%
	Litecoin	LTC	52.580	$2.77B	$214.73M	6.58%	0.013211	+0.75%	-3.52%
	Dash	DASH	343.33	$2.60B	$60.08M	1.84%	0.0870719	-1.12%	5.57%
	NEM	XEM	0.23614	$2.09B	$2.84M	0.09%	0.00005895	+1.14%	-3.66%
	IOTA	MIOTA	0.54778	$1.53B	$10.26M	0.31%	0.00013932	-1.48%	-6.10%
	Monero	XMR	94.33	$1.41B	$28.15M	0.86%	0.0236862	+0.26%	-4.71%
	NEO	NEO	26.999	$1.33B	$91.78M	2.81%	0.00675399	+3.88%	32.73%

North Korea’s foreign minister said Trump has “declared war” on his country and threatened to shoot down US jets in international airspace. Ri Yong Ho said the “declaration of war” meant North Korea could target US bombers. He said: “The question of who won’t be around much longer will be answered then.”

That was a reference to Trump’s recent tweet that the North Korean foreign minister, and leader Kim Jong-un “won’t be around much longer”.

Maybe the North Koreans are good market timers and they timed their rhetoric for maximum market impact. So far, no weapons have been fired but it offers a good excuse for selling stocks, if you were looking for an excuse.  A better justification is that stocks have been on a record-setting run and we are now heading into the end of the month and the end of the quarter, so it’s a good time to make the ledger look pretty.

Yet another justification is that the bull market is getting long in the tooth. This can’t go on forever, can it? And the answer is no, it can’t last forever, but that doesn’t mean the bull can’t keep running a bit longer.

One of the more nettlesome concerns is that the bull market is not very broad – mostly wrapped up in the fortunes of the FAANG stocks. And even if you suppose the FAANGs will continue to dominate, they are getting a bit too big to expect exponential growth rates, and that means valuations ranging around 18-time forward earnings are a bit on the rich side. It just doesn’t seem realistic to expect the next 5 years to be as strong as the last 5.

Today’s case in point – Apple, flirting with correction territory as Digitimes reported that Apple suppliers were shipping just 40 percent of the components originally ordered for the premium phone, which goes on sale in early November. Apple is still going to sell a whole bunch of phones but maybe not the phenomenal growth we’ve come to anticipate.

Meanwhile, Facebook dropped 4.6% today – that’s $20 billion market cap evaporating. Facebook dropped its plans to issue a new class of non-voting shares. A special committee of the company’s board previously approved the plan to issue the shares, but a class action lawsuit was filed to block the share issuance.

Facebook is also dealing with investigatory pressure from US lawmakers. The company announced it would cooperate with regulators as they investigate Facebook’s role in the 2016 election.  Of course, Apple and Facebook aren’t going away anytime soon, so maybe you buy the dips.

Toss in a Federal Reserve that seems intent on tightening accommodation and the growth story looks even more implausible. The Federal Reserve is on track to sell some of its bond holding and gradually raise interest rates. We know this from last week’s FOMC statement.

New York Fed President William Dudley said today that he expects inflation will pick up, citing the soft dollar and strong overseas growth among the reasons he expects slightly above-average U.S. economic activity and a long-sought rise in wages.

Dudley said: “With a firmer import price trend and the fading of effects from a number of temporary, idiosyncratic factors, I expect inflation will rise and stabilize around the 2 percent objective over the medium term,” adding, “In response, the Federal Reserve will likely continue to remove monetary policy accommodation gradually.”

Meanwhile, Chicago Fed President Charles Evans delivered a speech today entitled: “the puzzle of low inflation”. Whatever the Fed does, it will be slow and incremental. Imagine the Fed’s balance sheet as a lawn full of autumn leaves. Dudley wants to use a rake. Evans wants to pick up each leaf individually. Nobody is even thinking about using the leaf blower.

Still the Fed is in tightening mode. Federal Reserve economists worry that the central bank may have a hard time lowering interest rates when future economic crises arise. The reason is simple: Demographics. San Francisco Fed economists believe that the aging population in the U.S. is putting long-term downward pressure on rates, a phenomenon that won’t allow a lot of room to provide stimulus through rate cuts.

Sen. Rand Paul reiterated his opposition to the Graham-Cassidy health care bill, despite revisions. Sen. John McCain of Arizona has opposed the bill’s initial version and Texas Republican Sen. Ted Cruz said Sunday he was against it. Maine Republican Sen. Susan Collins seems likely to do the same.

Alaska Sen. Lisa Murkowski is undecided but had opposed earlier GOP bills to repeal Obamacare that the Senate rejected in July. Republican leadership is using a tried-and-true method to get wavering colleagues to vote yes: money. Lots of it. An extra $14 billion in aid for Maine, Texas, Kentucky, Arizona, and Alaska. So, Senate Majority Leader Mitch McConnell believes he knows who he’s dealing with, now he’s just negotiating the price.

Germans voted over the weekend. Chancellor Angela Merkel’s party remained the biggest parliamentary bloc, but only pulled about 33% of the vote, meaning Merkel will have to build a coalition. Voters flocked to the anti-immigration Alternative for Germany (AfD); the first far-right party to enter the German parliament in more than half a century pulled about 13% of the vote.

Japan’s Prime Minister Shinzo Abe said he will dissolve the Lower House for a snap election when the Diet convenes for an extraordinary session Thursday, in a high-stakes political gamble that observers say could determine whether he survives as Japan’s leader. There are several issues at stake, including a 2019 planned tax hike needed to fund education and social security; also, Abe’s authority to act in the event of North Korean aggression by amending Japan’s pacifist Constitution.

Voting stations set up for the referendum on Kurdish independence from Iraq have closed their doors and counting of ballots has begun. Turnout was near 80%. The referendum is opposed by the Iraqi central government in Baghdad as well as the neighboring countries of Turkey and Iran, besides major international powers.

The Kurds are likely to approve the referendum, but they are not expected to result in any immediate declaration of independence. While the result is non-binding for the Iraqi government, it is binding for the Kurdish leadership to follow the will of the people.

Brent crude surged to its highest in more than two years as Turkey threatened to shut down Kurdish oil shipments through its territory. Crude has risen more than 9 percent this month in New York, as U.S. refiners recovered from Hurricane Harvey and both OPEC and the International Energy Agency sweetened their worldwide demand forecasts. Oil should start to level off near these levels, unless the bulls get greedy.

One of the world’s “big four” accountancy firms – Deloitte – has been hacked. The hackers compromised confidential emails and plans of some blue-chip clients. In addition to emails, the hackers had potential access to usernames, passwords, IP addresses, architectural diagrams for businesses and health information.

Some emails had attachments with sensitive security and design details. The breach is believed to have been US-focused and was regarded as so sensitive that only a handful of Deloitte’s most senior partners and lawyers were informed. It is possible the hack compromised data for 6 months or more.

Deloitte says only a small number of its clients had been “impacted”. Deloitte provides auditing, tax consultancy and high-end cyber-security advice to some of the world’s biggest banks, multinational companies, media enterprises, pharmaceutical firms and government agencies. Another day, another hack. I think we are seeing a trend here.

Intel unveiled its latest Core desktop processors today, proclaiming up to 25 percent frame-rate improvements for PC gaming versus the previous models. The processors will be available for sale on Oct. 5. It wasn’t enough to lift Intel shares today, but it did help push competitors AMD and Nvidia sharply lower.

Target is raising the minimum hourly wage for its workers to $11 starting next month and then increasing it to $15 by the end of 2020. The retailer said the move will help it better recruit and retain top-quality staff and provide a better shopping experience for its customers. Target quietly raised entry-level hourly wages to $10 last year, from $9 from the previous year, following initiatives by Wal-Mart and others to hike wages.

But Target’s hike to $15 per hour far exceeds not only the federal minimum of $7.25 per hour but the hourly base pay at Wal-Mart and plenty of its other retail peers whose minimum hourly pay now hovers around $10. Target said the pay hike will affect thousands of its more than 300,000 workers, but it declined to quantify the percentage of its workforce. It said the increase to $11 per hour will apply to the more than 100,000 hourly workers that Target will be hiring for the holiday season.

Brown University has initiated a $120 million campaign to drop all loans from financial aid packages awarded to their undergraduates. Student debt is at an all-time high — the average outstanding balance is $34,144, up 62 percent over the last 10 years — and Brown will become the sixteenth U.S. institution, and the sixth in the Ivy League (excluding Cornell and Dartmouth), to offer all its undergraduates a loan-free education.

In 2016, the average Brown student graduated with a debt of $23,810, compared with $8,908 for Princeton, which adopted the no-loans policy in 2001. The plan aims to replace financial aid packages with grants that do not have to be repaid.

Financial Review

Monday, Maybe

Sinclair Noe — September 22, 2017

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SPX + 1 = 2502
NAS + 4 = 6426
RUT + 6 = 1450
10 Y – .02 = 2.26%
OIL + .11 = 50.66
GOLD + 6.50 = 1298.10

Top Cryptocurrencies

	Name	Symbol	Price USD	Market Cap	Vol.	Total Vol. %	Price BTC	Chg. % 1D	Chg. % 7D
	Bitcoin	BTC	3,625.6	$60.47B	$1.18B	42.84%	1	+0.75%	-1.90%
	Ethereum	ETH	263.70	$25.09B	$405.81M	14.78%	0.0730023	+0.58%	3.57%
	Bitcoin Cash	BCH	410.63	$6.85B	$226.51M	8.25%	0.113792	+0.40%	-3.41%
	Ripple	XRP	0.17235	$6.61B	$34.62M	1.26%	0.00004755	-0.35%	-6.26%
	Dash	DASH	345.00	$2.61B	$69.79M	2.54%	0.0951904	+1.07%	17.61%
	Litecoin	LTC	47.230	$2.52B	$216.55M	7.89%	0.0130959	-1.21%	-5.23%
	NEM	XEM	0.20813	$1.89B	$2.88M	0.10%	0.00005792	+1.80%	-3.43%
	IOTA	MIOTA	0.51489	$1.43B	$8.98M	0.33%	0.00014143	+1.96%	3.79%
	Monero	XMR	87.75	$1.33B	$27.17M	0.99%	0.0242851	+0.29%	-13.39%
	Ethereum Classic	ETC	10.2433	$981.34M	$29.54M	1.08%	0.00282523	+0.42%	-3.95%

Is that true? Is it possible that the Dow Industrial Average went down for two consecutive sessions? It has been about a month since we have had back to back loses on the Dow. For the week, the Dow rose 0.4%, the S&P rose 0.1%, and the Nasdaq fell 0.3%.

Sen. John McCain announced today in a statement that he cannot “in good conscience” vote for the GOP’s latest plan to overhaul Obamacare, likely ending Republicans’ latest effort to repeal and replace the Affordable Care Act.

McCain wrote: “I believe we could do better working together, Republicans and Democrats, and have not yet really tried. Nor could I support it without knowing how much it will cost, how it will (affect) insurance premiums, and how many people will be helped or hurt by it. Without a full CBO score, which won’t be available by the end of the month, we won’t have reliable answers to any of those questions.”

McCain’s “no” vote means it is likely Republicans won’t be able to repeal and replace Obamacare before September 30, as Sen. Rand Paul of Kentucky said he would not back Graham-Cassidy and Sen. Susan Collins of Maine has said she is leaning “no” on the proposal. But there are still questions as to where Alaska Sen. Lisa Murkowski now.

Bottom line, 3 no votes kills the Graham-Cassidy bill but it won’t really die – not yet. Republicans can now write and pass another budget for fiscal 2018 that uses the same reconciliation procedure for health care legislation.

The trick would be combining it with a major tax overhaul, since the GOP is aiming to use reconciliation for that as well. Senate Finance Committee Chairman Orrin Hatch said today there’s “a chance” of combining the two efforts in a 2018 budget resolution.

McCain torpedoed the last GOP bill in July, returning to the Senate after being diagnosed with brain cancer only to cast a surprising and dramatic 50th vote against a limited-repeal of Obamacare offered by Majority Leader Mitch McConnell. But until today, he was officially undecided on the Graham-Cassidy proposal, apparently torn between his disgust for the party’s rushed, partisan legislative process and his famously close friendship with Graham, its most vocal salesman.

McCain acknowledged that his friendship with Graham put him in a difficult spot. “I take no pleasure in announcing my opposition. Far from it,” he said. “The bill’s authors are my dear friends, and I think the world of them. I know they are acting consistently with their beliefs and sense of what is best for the country. So am I.”

After the announcement, Graham tweeted: “My friendship with @SenJohnMcCain is not based on how he votes but respect for how he’s lived his life and the person he is.” Absolutely correct.

The latest repeal and replace defeat deepens doubt surrounding the GOP’s ability to get healthy on tax reform. The Senate’s late-July rejection of the initial push to repeal and replace Obamacare gave Republicans a chance to cut their losses. Congress could have begun a limited bipartisan effort to stabilize insurance marketplaces – which have grown in popularity during this year’s repeal battle — while the GOP moved on to the tax debate that unites the party more.

The much-anticipated tax plan crafted by the Trump administration and Republican congressional leadership is expected to be unveiled Wednesday, and that could provide positive momentum for stocks in the final week of the quarter. The S&P 500 is up 3.3 percent for the quarter so far. The Dow is up more than 4.6 percent for the quarter. The Nasdaq is up 4.7 percent for the quarter.

From what we have learned about the Graham-Cassidy bill, it wasn’t any better than earlier repeal efforts, and maybe worse. The ACA has plenty of problems but those problems would not be corrected by Graham-Cassidy. It probably didn’t help that all 50 Medicaid directors – that is every state – opposed the GOP’s latest health care bill, and a Brookings report indicated at least 21 million would lose insurance.

Have you heard that the world will end tomorrow? I am not making this up, someone else is. The Armageddon rumors sparked when a Christian numerologist called David Meade suggested Nibiru would plough into our planet on September 23. It’s all over the inter-webs.

Meade says Arizona is a good place to survive the collision. I don’t really know why that is. But I think, if there was a mystery planet headed for a collision with Earth, we might have seen it by now. So, will the world end tomorrow? Computer says… no.

But the People’s Democratic Republic of Korea might just blow up a hydrogen bomb in the Pacific Ocean. On Tuesday, during his speech at the United Nations, President Trump said his government would “totally destroy North Korea” if necessary to defend the United States or its allies.

On Friday, Kim Jong Un responded, saying North Korea “will consider with seriousness exercising of a corresponding, highest level of hard-line countermeasure in history.” The North Korean leader didn’t elaborate on the nature of this countermeasure, but his foreign minister provided a hint: North Korea might test a hydrogen bomb in the Pacific Ocean.

Atomic weapons are typically tested underground. An explosion on or above water would have nasty repercussions. More than 60 years after the United States tested a series of atomic bombs near Bikini Atoll in the Marshall Islands, the island remains “unlivable”.

There are signs that Mexico and Canada are increasingly less worried by the idea of the North American Free Trade Agreement (NAFTA) falling apart. Mexico’s foreign minister Luis Videgaray says “Mexico is much bigger than NAFTA,” arguing that an average 3% increase in tariffs that he thinks would come if NAFTA ended wouldn’t stop trade with the US. With negotiations among the US, Mexico, and Canada due to resume this weekend, he went further: “If NAFTA goes away…it’s not the end of the world.”

Shares of Sprint gained about 6% and T-Mobile gained about 1%, after Reuters said the companies are close to agreeing to tentative terms on a merger. Japan’s Softbank Group, Sprint’s majority shareholder, will own 40% to 50% of the combined entity. T-Mobile parent Deutsche Telekom will own a majority stake.

Apple launched its new line of smartphones and watches, and turned in their worst weekly performance for the week of a major product launch since the original iPhone was released back in 2007, following less-than-stellar product reviews.

There has been a tendency for Apple to slip after a product launch – buy the hype and sell the reality – but this week was particularly bad as Apple dropped 5%. That’s a loss of $50 billion dollars in market cap – Still, many investors are looking at it as a chance to buy.

On Tuesday, shares barely managed a gain after ho-hum iPhone 8 reviews. On Wednesday, shares dropped 1.7% after a few prominent Apple Watch Series 3 reviews complained about spotty connectivity, an issue Apple acknowledged it was seeking to solve. Thursday’s 1.7% decline followed an announcement that Google is spending $1.1 billion on a cooperation agreement with smartphone manufacturer HTC to produce the Pixel smartphone.

The FAANG companies – Facebook, Apple, Amazon.com, Netflix and Google holding company Alphabet have been able to put up stellar growth numbers for quite some time, without competing very much with each other. That’s starting to change.

Consider the case of Oracle, which announced fairly solid growth in its cloud business but offered up weak guidance – shares were slammed. It looks like Oracle might not have a big slice of the Cloud Pie. That leaves Amazon and Google, and maybe Microsoft to slug it out.

Google is investing in smartphones to battle it out with Apple. Facebook has been vying with Google over ad clicks. Amazon and Google are fighting over which device will power your home – Alexa or Google assistant. And how will you watch TV in the future? On YouTube, Apple TV, Amazon Instant video, or Netflix, which now comes complimentary with a subscription on T-Mobile.

The most amazing thing of all is that it has taken us the better part of two decades to arrive at a moment when tech companies actually see themselves as competitors. It will be very interesting to see how this new-found competition plays out because the future of the FAANGs is going to tell us a lot about the future of Wall Street, considering the FAANGs represent over $3 trillion in market capitalization — roughly 13% of the entire S&P 500.

London is one of Uber’s largest and most lucrative markets, with 40,000 drivers and 3.5 million people who use the app once every 90 days. But that number may soon be reduced to zero. The city’s regulator, Transport for London, said it denied the license because Uber’s “approach and conduct demonstrate a lack of corporate responsibility.”

Its license will expire on Sept. 30, although the company has 21 days to appeal—which it intends to do—and can carry on operating during the appeal process. The move is a win for taxis, but maybe not so much for customers.

The federal government told election officials in 21 states, including Arizona, that hackers targeted their systems last year, although in most cases the systems were not breached.

The government told The Associated Press last year that more than 20 states were targeted by hackers believed to be Russian agents before the 2016 elections. But for many states, the calls Friday from the Department of Homeland Security were the first official confirmation of whether their states were on the list.

Financial Review

Not Happening

Sinclair Noe — July 17, 2017

Podcast: Play in new window | Download (Duration: 13:15 — 7.6MB)

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DOW – 8 = 21,629
SPX – 0.13 = 2459
NAS + 1 = 6314
RUT + 2 = 1431
10 Y – .01 = 2.31%
OIL – .54 = 46.00
GOLD + 5.30 = 1234.70
BITCOIN – 1.51% = 2210.29 USD
ETHEREUM + 6.95% = 187.67

Sen. John McCain revealed over the weekend that he had surgery to remove a blood clot from above his eye. His doctors also said the surgery went “very well,” and the senator is resting at home. As a result, he will not be returning to Washington this week and there is no guarantee he’ll be back after this week, and his absence has suddenly brought consideration of the Senate health care bill to a halt.

Here’s what McCain’s absence does to McConnell’s whip count: There were already two Senate Republicans who have said they would vote “no” on motion to proceed on this bill — Sens. Rand Paul and Susan Collins. McCain’s absence means there is not a Republican majority on the healthcare legislation.

Leadership was pushing for a first procedural vote on the Senate health care bill for as early as Tuesday. That’s no longer happening. We were expecting an updated score from the Congressional Budget Office on the revised Senate bill today. That is also not happening. No guidance from the CBO on when we’ll see that score.

Regardless of the timing, Republicans hope the report will look better than an earlier version, which said the Republican plan would cause 22 million Americans to lose insurance by 2026. It’s not guaranteed, though, that the fresh analysis will show dramatically better effects.

Meanwhile, the delay on healthcare legislation is likely to spill over to tax reform. It would be difficult to address taxes without understanding the potential impact of healthcare.

Before the opening bell, Blackrock, the world’s largest asset manager reported second-quarter adjusted earnings per share of $5.24 on revenue of $2.96 billion, missing estimates on both the top and bottom lines. The firm’s second-quarter assets under management rose 16 percent year over year to $5.689 trillion, topping analyst expectations.

BlackRock also said assets under management for its exchange-traded fund business iShares topped $1.5 trillion, helped by record net inflows of $74 billion.  Blackrock dropped over 3% today.

After the closing bell, Netflix reported earnings – although for Netflix the attention is on subscribers, rather than traditional top line, bottom line numbers. Netflix added more than 5 million subscribers in the June quarter, bringing its total subscriber base to about 104 million. Most new subscribers — more than 4 million — came from its overseas markets.

In fact, Netflix’s international subscriber base is now larger than the U.S. for the first time. The strong growth beat Netflix’s own estimates and caused the stock to spike 10% in after-hours trading. Oh yeah, revenue came in at $2.79 billion, a little better than estimates. Earnings were 15 cents per share missing estimates of 16 cents.

A moat is a deep, wide ditch surrounding a castle or fort, typically filled with water and intended as a defense against attack. An economic moat refers to a business’ ability to maintain competitive advantages over its competitors to protect its long-term profits and market share from competing firms.

Blue Apron Holdings does not have a moat. Shares of the meal-kit delivery company sank as low as $6.51, a 35 percent drop since its initial public offering. Amazon filed a July 6 trademark application for “prepared food kits composed of meat, poultry, fish, seafood, fruit and/or vegetables . . . ready for cooking and assembly as a meal.”

Blue Apron has been telling investors that its offering is different than basic grocery delivery. Amazon’s interest in meal kits directly undermines that pitch. The barbarians are at the drawbridge.

A mix of financial services, entertainment, transportation and technology companies are reporting earnings this week. JPMorgan Chase, Citigroup and Wells Fargo all posted higher-than-expected second-quarter earnings on Friday, even though they had weak trading revenue. That trend is expected to continue this week when Bank of America and Goldman Sachs post results.

The FAANG stocks (Facebook, Apple, Amazon, Netflix, and Alphabet-Google) are expected to be an overall drag on second quarter earnings growth despite their stock performance. The FAANG companies’ earnings growth is expected to be 6 percent for the second quarter. But the overall earnings growth for the S&P is expected to be north of 8 percent. The overall earnings growth for FAANG stocks contrasts with their stock performance.

The market cap of the FAANGs increased by $119.85 billion during the second quarter, or about 22.2 percent of the overall increase in market cap of the S&P 500. Each of the FAANG stocks has significantly outperformed the S&P 500 this year.

Business activity grew modestly in New York State. The July 2017 Empire State Manufacturing Survey general business conditions index fell ten points to 9.8. The new orders index moved down to 13.3, and the shipments index fell to 10.5, suggesting that orders and shipments continued to grow, though at a somewhat slower pace than in June.

China’s gross domestic product grew 6.9% in the second quarter, according to government data released Monday, the same figure as the previous quarter and marginally higher than most forecasts. The latest numbers position the economy above Beijing’s stated growth target for 2017. But China’s speedy growth – an uptick from the 6.7% it recorded last year –  will be difficult to sustain in the months to come.

The Chinese government announced last week it would change the way it calculated economic growth for the first time in 15 years, adding healthcare, tourism and the “new economy” to the overall figure. It was not immediately clear whether those additions had an impact on growth.

The latest growth numbers will also likely reinforce skepticism among analysts about the reliability of official statistics. But, there’s a bigger story, which is that emerging-market finances are their best in years, bolstering confidence that they can withstand monetary policy tightening in developed economies.

The 12-largest emerging-markets now have foreign-exchange reserves totaling $3 trillion, up from $2.92 trillion in late 2015 and the most since 2014. Emerging-market stocks posted their best performance in a year last week, gaining 4.45 percent as the MSCI Emerging Markets Index rose for five straight days. So, time for a breather, right? Not exactly. The market for developing-nation stocks plowed ahead again on Monday, bringing its year-to-date gain to 21.9 percent.

Brexit negotiations between the UK and the EU officially kicked off today. Over the course of the next few years the UK’s entire relationship with the rest of Europe is likely to be totally reshaped. Nowhere is that truer than in British industry, where firms are almost certain to have to adjust to life outside the European Single Market and to an entirely new trading relationship with what is for most industries, their biggest trading partner.

The Office for National Statistics dropped a whole heap of data about the British industries that are likely to be most impacted by Brexit, as well as where those industries are clustered. This helps to create a reasonable picture of the parts of the UK where Brexit could have the largest impression.

For example, one of the industries likely to suffer most at the hands of Brexit is the UK’s automobile industry. Financial services are another area where the Brexit negotiations could cause trouble, causing problems for London, where the sector is heavily concentrated.

Tens of thousands of people who took out private loans to pay for college but have not been able to keep up payments may get their debts wiped away because critical paperwork is missing. The troubled loans, which total at least $5 billion, are at the center of a protracted legal dispute between the student borrowers and a group of creditors who have aggressively pursued them in court after they fell behind on payments.

Judges have already dismissed dozens of lawsuits against former students, essentially wiping out their debt, because documents proving who owns the loans are missing. A review of court records by The New York Times shows that many other collection cases are deeply flawed, with incomplete ownership records and mass-produced documentation.

Some of the problems playing out now in the $108 billion private student loan market are reminiscent of those that arose from the subprime mortgage crisis a decade ago, when billions of dollars in subprime mortgage loans were ruled uncollectable by courts because of missing or fake documentation.

And like those troubled mortgages, private student loans — which come with higher interest rates and fewer consumer protections than federal loans — are often targeted at the most vulnerable borrowers, like those attending for-profit schools.

One of the nation’s largest owners of private student loans and one of the most aggressive at collecting delinquent loans, the National Collegiate Student Loan Trusts, is struggling to prove in court that it has the legal paperwork showing ownership of its loans, which were originally made by banks and then sold to investors.

Judges throughout the county, including recently in cases in New Hampshire, Ohio and Texas, have tossed out lawsuits by National Collegiate, ruling that it did not prove it owned the debt on which it was trying to collect.

The White House is highlighting products Made in America. They have compiled a list of products from each state. Some are obvious: wine from California and Stetson cowboy hats from Texas. Other picks were less obvious: North Carolina’s product is Cheerwine soda. I’ve never heard of Cheerwine soda.

Meanwhile, Georgia’s product is Chik-fil-a sandwiches, not Coca-Cola.  So, go figure. Arizona’s Made in America product is Ping golf clubs.