Financial Review

The Parade Passing By

Sinclair Noe — October 26, 2017

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

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DOW + 71 = 23,400
SPX + 3 = 2560
NAS – 7 = 6556
RUT + 3 = 1497
10 Y + .01 = 2.45%
OIL + .63 = 52.81
GOLD – 11.00 = 1267.20

Cryptocurrency 

• Number of Currencies: 879
• Total Market Cap: $172,874,344,662
• 24H Volume: $3,346,529,813

Top Cryptocurrencies

	Name	Symbol	Price USD	Market Cap	Vol.	Total Vol. %	Price BTC	Chg. % 1D	Chg. % 7D
	Bitcoin	BTC	5,991.9	$99.63B	$1.94B	57.98%	1	+1.73%	+5.04%
	Ethereum	ETH	298.18	$28.44B	$265.63M	7.94%	0.0500608	+1.04%	-3.22%
	Ripple	XRP	0.20235	$7.88B	$37.75M	1.13%	0.0000341	+0.17%	-5.97%
	Bitcoin Cash	BCH	339.20	$5.69B	$238.21M	7.12%	0.0571329	+0.96%	+2.97%
	Litecoin	LTC	55.840	$3.00B	$79.47M	2.37%	0.00935417	+0.59%	-6.11%
	Dash	DASH	285.57	$2.20B	$49.83M	1.49%	0.0483665	+0.47%	-2.46%
	NEM	XEM	0.20044	$1.80B	$4.71M	0.14%	0.00003352	+0.74%	-10.18%
	BitConnect	BCC	219.37	$1.60B	$15.80M	0.47%	0.0368101	+5.91%	+9.88%
	NEO	NEO	28.500	$1.42B	$35.29M	1.05%	0.00475357	+0.28%	-1.88%
	Monero	XMR	88.80	$1.36B	$22.90M	0.68%	0.0148741	0.00%	-0.39%

Up 100, down 100, up 100 then drifting lower. The Dow and the S&P moved higher today. The Nasdaq closed in the red as biotech took a beating. Welcome to earnings reporting season. After the closing bell, we watched a parade of the biggest tech companies report better than expected earnings. Tomorrow, Apple launches iPhone X.

Also, tomorrow the Commerce Department releases its first look at gross domestic product for the third quarter. The consensus is that the economy likely expanded at a 2.6 percent annualized rate in the three months ended Sept. 30, which is in-line with recent history.

Republicans pushed a $4 trillion budget through the House today by a thin margin. For now, Republicans sidestepped divisions within the party by voting 216-212 to permit them to begin work on a $1.5 trillion tax cut without fear of a filibuster by Democrats.

This is just a first step, GOP tax-writers pick winners and losers among interest groups, business sectors and rank-and-file voters. The goal is a full rewrite of the inefficient, loophole-laden tax code in hopes of lower rates for corporations and other businesses and a burst of economic growth.

But evidence is growing that some of their steps — such as eliminating the deduction for state and local taxes or eliminating 401K retirement plans – will face opposition from both sides of the aisle. For the most part, plans for ending various tax breaks — which are key to helping to offset the deep tax-rate cuts that Trump and congressional leaders want to achieve — have been kept under wraps.

Now that the budget blueprint has been adopted, a hard reality will set in as the business community and others realize how much of the tax bill will involve closing loopholes and changing their credits and deductions. In the absence of details on how to pay for those rate reductions, the fight over the SALT deduction is instructive. Repealing the tax break would generate an estimated $1.3 trillion over 10 years. If it’s not fully repealed, lawmakers will have another revenue hole to fill.

Republican Sen. Bob Corker said today that some of the items in the GOP tax reform discussion are just “buying off” special interests and serve no other purpose. Corker said: “Some of the things we’re doing, I’m sorry, are ridiculous,” though he did not mention any specifics.

Corker, a member on the Senate Budget and Banking committees said those things are “not going to drive 1 ounce of economic growth. But it’s what you have to do to pass a tax bill. It’s buying off of people to pass tax reform. … We could take a lot of this off in the trash can and make it easier and actually do something that grows our economy and increases our wages.”

Meanwhile, Democrats united against the plan, arguing its tax cuts will pad the bank accounts of the wealthy and the balance sheets of corporations, while delivering modest relief — or none — to middle-income taxpayers.

Ways and Means Committee Chairman Kevin Brady, R-Texas, said immediately after the vote that he’ll release the tax measure on Nov. 1 and that a panel vote is expected the week of Nov. 6. House and Senate leaders want to pass companion measures before Thanksgiving with a final compromise coming before year’s end. But there are lots of details between now and then.

This afternoon, Trump declared the opioid crisis a public health emergency, stopping short of a national emergency declaration he promised months ago that would have freed up more federal money. The declaration will redirect federal resources and loosen regulations to combat opioid abuse, but it does not mean there will be more money to combat the crisis.

Apparently, it is tough to find money for the opioid crisis and cut corporate taxes at the same time. The Centers for Disease Control and Prevention report more than 54,000 deaths last year attributed to opioid abuse.

European Central Bank President Mario Draghi managed to avoid roiling markets when he detailed the central bank’s plan to cut its monthly bond purchases in half. In fact, bonds and stocks soared while the euro weakened – a perfect outcome for the ECB. Draghi added a bit of a surprise to the plan to pull back from the markets.

Yes, the ECB will cut in half its monthly bond purchases to 30 billion euros from 60 billion euros starting in January, but the bank’s president also indicated that zero percent interest rates could remain at current levels until “well past” whenever it finally decides to end its quantitative easing measures. Maybe 2019, maybe 2020.

Markets seemed to focus on the idea of “lower for longer”. Bonds across Europe rallied hard, with yields on 10-year German bunds tumbling almost 7 basis points to 0.42 percent. The STOXX Europe 600 Index promptly rose the most since August.

Pending home sales showed a decline to a 2½ year low in September, missing consensus estimates for a rise of 0.4%, as the housing market is buffeted by lean supply and strong demand. Meanwhile, the advanced U.S. trade deficit widened by 1.3% in September.

Amazon reported net income of $256 million, or 52 cents per share, for the three months ending Sept. 30. That easily beat the 2 cents per share analysts had expected. Amazon has long been known for investing the money it makes back into its businesses, such as opening new warehouses to fulfill orders.

Many seemed to expect that again. And Amazon did reinvest in the business. It paid nearly $14 billion this summer for organic grocer Whole Foods; announced a series of new voice-activated Echo devices; and kicked off a public hunt for a place to build its second headquarters.

Revenue rose 34 percent to $43.4 billion, beating the $41.5 billion analysts expected. Amazon reported after the bell and shares were up about 8% in after-hours trade. Rite Aid, Express Scripts Holding and Walgreens Boots Alliance all fell sharply after Amazon secured a wholesale pharmacy license.

UPS reported earnings per share of $1.45 for the third quarter. Revenue increased 7%. International profit was up 8.9%; currency neutral profit was up 20%. And they raised guidance for full year 2017. The upcoming holiday period is shaping up to be another record-breaking shipping season. Earlier in the week we told you that online purchases are expected to pass brick and mortar retail purchases this season.

In fact, United Parcel Service (UPS) forecasts 750 million packages will be delivered between Black Friday and New Year’s Eve, a 5% increase from last year. Despite the expected increase in volume, UPS expects to hire the same number of temporary seasonal workers as last year (95,000). The difference is UPS will be using more technology to streamline operations.

Alphabet beat projections for third-quarter sales and earnings after a surge in Google ad volume helped the web-search giant shrug off concerns about regulatory scrutiny and an expensive foray into hardware. Sales for the quarter rose 24% to $22.2 billion and profit was $9.57 a share, beating estimates of $8.34.

In September, the deadline arrived for Google to meet demands for the European Union antitrust case on shopping ads. Google agreed to tweak its paid search results for products in the continent, although it’s still appealing the charges. These product ads have helped drive sales and profit growth, but Google investors are more concerned about a probe into Google’s Android software on mobile devices, where Google’s ads are growing.

Also in September, Google agreed to pay $1.1 billion for about 2,000 engineers from HTC Corp, in effect an acquisition of skilled hands to expand Google’s line of Pixel smartphones. The new hardware business is a pillar of Google’s fight against Apple. Revenue from a segment labeled Other Revenue, which includes hardware, was up 39%. Alphabet share gained about 3% in after-hours trade.

Intel beat Wall Street estimates for the quarter and raised its outlook for the year. Intel reported third-quarter net income of $4.5 billion, or 94 cents a share, beating estimates of 80 cents per share. Revenue rose to $16.1 billion from $15.7 billion. Intel was up about 1.6% in after-hours.

Microsoft posted better-than-expected quarterly results. The company reported its fiscal first-quarter earnings rose to $6.5 billion, or 84 cents a share – topping estimates of 71 cents per share. Revenue grew 12% to $24.5 billion, beating estimates. Microsoft up about 4.5% in after-hours, trading at all-time highs.

Ford Motor rose 1.9% after the auto maker beat profit and revenue estimates.

Bristol-Myers Squibb shares fell 4.8% after the company missed on profit and revenue and changed its 2017 guidance.

Nutrisystem  continued to slide, falling 10.5%, despite turning in better-than-expected quarterly earnings.

Celgene plummeted 16.4% after the company reported a third-quarter profit beat and revenue miss and lowered its 2017 profit and revenue outlook. The stock pressured the overall biotech and health-care sectors.

The $9.5 billion iShares Nasdaq Biotechnology ETF tumbled as much as 2.9 percent. The biggest exchange-traded fund tracking the biotech industry is headed toward its longest losing streak since September 2015, falling for seven days in a row. Just a reminder, biotechs led a market selloff about 2 years ago.

Tenet Healthcare shares tanked 9.2% following a Reuters report that the hospital operator has ended its plan to sell itself after its chief executive abruptly left ahead of schedule.

The Wall Street Journal reports CVS Health has made a proposal to buy Aetna for more than $200 per share, a deal that could value the health insurer at upward of $66 billion.

Financial Review

Wipe Out

Sinclair Noe — October 4, 2017

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

Subscribe: Android | RSS

DOW + 19 = 22,661 (Record)
SPX + 3 = 2537 (Record)
NAS + 2 = 6534 (Record)
RUT – 4 = 1507
10 y un= 2.33%
OIL – .52 = 49.90
GOLD + 3.50 = 1275.60

Cryptocurrency

• Number of Currencies: 882
• Total Market Cap: $141,383,357,373
• 24H Volume: $2,829,934,428

Top Cryptocurrencies

	Name	Symbol	Price USD	Market Cap	Vol.	Total Vol. %	Price BTC	Chg. % 1D	Chg. % 7D
	Bitcoin	BTC	4,160.0	$69.41B	$1.16B	40.99%	1	-1.33%	-0.63%
	Ethereum	ETH	288.28	$27.52B	$275.44M	9.73%	0.0695521	-1.07%	-4.57%
	Ripple	XRP	0.21870	$8.49B	$307.66M	10.87%	0.00005313	+2.28%	+10.83%
	Bitcoin Cash	BCH	350.26	$5.88B	$304.62M	10.76%	0.0846327	-1.57%	-22.15%
	Litecoin	LTC	50.560	$2.70B	$80.31M	2.84%	0.0121508	-1.31%	-9.12%
	Dash	DASH	295.00	$2.27B	$42.78M	1.51%	0.0717433	-2.26%	-12.56%
	NEM	XEM	0.21516	$1.88B	$3.00M	0.11%	0.00005023	+1.30%	-13.41%
	NEO	NEO	29.589	$1.48B	$60.65M	2.14%	0.00710292	-5.17%	-2.88%
	IOTA	MIOTA	0.52500	$1.47B	$8.71M	0.31%	0.00012679	-3.62%	-3.07%
	Monero	XMR	88.00	$1.35B	$26.69M	0.94%	0.0213148	-2.18%	-10.66%

The Institute for Supply Management’s index of service-oriented companies  jumped to a 12-year high of 59.8% in September from 55.3%. The last time the index was higher was in August 2005. Numbers over 50% are viewed as positive for the economy and anything over 55% is considered exceptional.

ADP reports private-sector employment slowed in September as firms added 135,000 jobs. The ADP data, produced in conjunction with Moody’s Analytics, may be more important than usual this month as it should be much less affected by hurricanes than the government data.

Workers are included in ADP payrolls even if they are not paid due to bad weather. Still, Moody’s Analytics’ Chief Economist Mark Zandi said hurricanes Harvey and Irma cut job gains by 50,000-60,000 jobs, mainly by forcing smaller “mom-and-pop” retailers to close.

Friday’s Nonfarm Payroll report will be a little crazy, with estimates all over the place due to the hurricanes. The number I’m hearing is 100,000 jobs, which would be very weak, but not enough to change the Fed’s outlook since it will be just a one-month blip in the data. This could provide a nice setup for dollar bulls. We have strong economic data but a weak jobs number could offer a minor, fleeting dip.

In a bizarre moment on Tuesday, Trump told Fox News that he was “gonna have to wipe out” Puerto Rico’s debt. Trump said: “We are going to work something out. We have to look at their whole debt structure. You know they owe a lot of money to your friends on Wall Street. We’re gonna have to wipe that out. That’s gonna have to be — you know, you can say goodbye to that. I don’t know if it’s Goldman Sachs but whoever it is, you can wave goodbye to that.”

It isn’t clear how Puerto Rico’s debt could just be made to disappear outside bankruptcy court. Still, to “wipe out” $74 billion in municipal debt, billions of which are guaranteed by the island’s constitution, would shake investor faith in a market long considered one of the safest of havens.

Lower-rated municipal borrowers would almost certainly see their borrowing costs rise to account for the added risk. The debt is widely held, by hedge funds, pensions and residents of the territory. Many of the hedge funds could be considered vulture investors who swooped in after Puerto Rico was already in trouble, buying up debt for pennies on the dollar and hoping to force payment at full par. But the biggest chunk of Puerto Rico’s debt is pension obligations.

The commonwealth’s budget is under the control of a federally appointed oversight board mandated as part of the bankruptcy legislation. Created by Congress to wield broad sway over the territory’s finances, the panel approves the island’s budget and is meant to help make unpalatable decisions such as closing schools and cracking down on tax evasion.

In addition to the existing debt, damages from Hurricanes Irma and Maria are expected to run about $35 billion, or a per capita cost of about $10,000 per citizen of Puerto Rico. The power grid is destroyed and it might be 6 months or more to have electric service restored; the tourism industry is in dire straits and the economy is a mess. Puerto Rico doesn’t have money to repair the hurricane damage, much less to pay off its earlier debt.

After Trump’s remarks, a shudder went through the $3.8 trillion muni bond market and Puerto Rican bondholders freaked. Puerto Rico’s beaten-down benchmark bonds plummeted from an already unprecedented 44 cents on the dollar to as little as 30 cents.

If Puerto Rico’s $74 billion in debt can just be wiped away, what does that mean for the rest of the muni bond market. That doomsday scenario, of course, is contingent upon Trump’s being able to cancel all the commonwealth’s debt, amassed over decades and enabled by a yield-hungry Wall Street.

There’s no indication he has a plan to do so. Administration officials, as they’ve done throughout his presidency, quickly walked his comments back. Soon after, Trump’s budget head Mick Mulvaney told CNN not to take the president “word for word”.

On Monday, Catalonian politicians will try to hold a parliamentary session to evaluate the October 1 vote to secede from Spain. Then they are expected to declare their independence. What happens after that remains a mystery. Spain and the EU say the independence vote was illegal. Spain’s High Court launched an investigation against top Catalan police and organizers on suspicion of inciting rebellion against the state, just hours after the Spanish king charged that the Barcelona separatists were acting “outside the law and outside democracy.”

As the king addressed the nation, trade unions in Catalonia led a powerful general strike that shut down businesses, highways and schools in a mass protest against police violence. Protesters took to the streets. Stay tuned.

Richard Smith, the recently-former CEO of Equifax testified before the Senate Judiciary subcommittee today. Smith said the Equifax data breach happened because of a breakdown in communication at the company. They knew their software was vulnerable and needed to be fixed but the tech guy never patched the glitch.

Smith didn’t say who the tech guy was but said he has since been fired. Senator Al Franken gave the unknown tech guy a name – Gus; saying, “Why is the security of 145 million people all in the hands of one guy? Why is it all up to Gus?”

If Smith knows Gus’s real name, he kept it to himself. But Gus may not be entirely at fault. Smith said it’s possible “this one guy” didn’t know all of Equifax’s various business portals were using the faulty software. Later security scans didn’t detect the vulnerability either. Equifax made more missteps after it publicly disclosed the hack Sept. 7.

A customer service representative – let’s call this one Sam – tasked with responding to customers’ Tweets sent out incorrect links to the website the company created to help consumers sign up for credit monitoring. Instead, that person was tweeting out links to a phishing website with a similar name. Sam, the customer service representative is no longer with the company.

Richard Smith resigned with a multi-million-dollar golden parachute and still refuses to accept responsibility. The hearing drew a silent protester dressed like the Monopoly man character, (you know – Rich Uncle Pennybags in top hat, monocle) who sat in the audience behind Smith but in the range of the video camera. She was there to protest forced arbitration.

Equifax’s initial offer of free credit monitoring after the hack would have made consumers accept arbitration to settle disputes with the company, something Smith has said was a mistake and has since been removed.

Google held a splashy press event in San Francisco today. They showed off the second generation of various Google devises, including: two new versions of its Pixel smartphone; a new premium laptop; a cheaper, smaller model of its Home speaker and a larger version designed for music. All the products go head-on with recent offerings from Apple and Amazon. Those two rivals are aggressively shipping devices with built-in features, like voice-assistance and augmented reality, that could upend how people access information — Google’s main business.

Google’s latest device refresh is all about making sure it can claim a lead in that next era of computing, and keep its services front-and-center in people’s lives – and that means a sharp focus on its artificial intelligence software. Google owns Android, the software behind most smartphones, but it has long struggled with ways to tame its many hardware partners and make them competitive with Apple’s iPhones.

Apple tightly controls hardware and software, and has lured consumers with mobile payments, its voice-based Siri assistant and initial forays into augmented reality, technology that splices the digital and physical worlds. Amazon, meanwhile, has emerged as a viable contender in the smart home market with its assistant, Alexa, and a seemingly unending suite of Echo gadgets.

Samsung, which makes Android phones has tried to push its own, new voice assistant – Bixby – which is still light years behind Google assistant. My pick for the coolest gadget unveiled go to Google Pixel Buds – wireless headphones or earbuds, which can be paired with Google Assistant and can provide live translation of up to 40 languages.

The International Energy Agency reports solar power grew faster than any other source of fuel for the first time in 2016. The IEA says 165 gigawatts of renewables were completed last year, which was two-thirds of the net expansion in electricity supply. Solar powered by photovoltaics, or PVs, grew by 50 percent, with almost half of new plants built in China. Solar PV capacity growth will be higher than any other renewable technology through 2022.

This marks the sixth consecutive year that clean energy has set records for installations. The IEA expects about 1,000 gigawatts of renewables will be installed in the next five years. China is the undisputed leader in renewables and solar, installing more than 2 times the gigawatt capacity of the US, and accounting for close to half of the global market.

On Monday, the US Supreme Court threw out an appeal in a trademark suit brought by Louis Vuitton against a California company that makes tote bags featuring cartoon drawings of … Louis Vuitton bags. (“Permissible parody,” the court ruled.)

Financial Review

Aggressive Spacing and Large Fonts

Sinclair Noe — September 27, 2017

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

Subscribe: Android | RSS

DOW + 56 = 22,340
SPX + 10 = 2507
NAS + 73 = 6453
RUT + 28 = 1485 (record)
10 Y + .08 = 2.31%
OIL + .18 = 52.06
GOLD – 11.20 = 1283.40

The Russell 2000 Index hit a new record high. The S&P 500 index hit an intraday record high but could not take out last week’s closing high.

The Trump Administration finally unveiled their tax cut plan, 9 pages of it (click here for full text). Trump spoke in Indiana today. The framework shrinks the number of tax rates to just three from seven today. The proposed rates are 12%, 25% and 35%. But it will be up to the tax committees to assign income ranges to each rate. The 12% bottom rate is higher than today’s lowest rate of 10%.

The plan doubles the standard deduction, to $24,000 for married couples and $12,000 for single filers. The framework proposes the elimination of most itemized deductions, including the state and local tax deduction. It also eliminates personal exemptions, worth $4,050 per person. So, a family of four could no longer reduce their taxable income by more than $16,000. Now this bears a closer look.

Here’s the important fine print, the plan states: “To simplify the tax rules, the additional standard deduction and the personal exemptions for taxpayer and spouse are consolidated into this larger standard deduction.” Here’s how that math works. Let’s say you are single with no dependents, and you have a moderate income. Currently, you get to take the standard deduction ($6,350) and one personal exemption ($4,050).

If you are 65 or older, you also get to take an additional standard deduction ($1,250). That adds to $10,400, or $11,650 if you’re a senior citizen. The Republican plan would replace all these provisions with a single deduction of $12,000 ($24,000 for married couples.) That’s a 15% increase — except for seniors, who get a 3% increase. Not a doubling, not even close. And then your first dollar of taxable income would be subjected to a 12% tax rate, instead of the current 10%.

Currently, you get to take the personal exemption even if you also itemize deductions, but you only get to take the standard deduction if you forego itemized deductions. Combining these provisions into a single, standard deduction would mean itemizers lose their personal exemption and get nothing back — meaning they’ll typically pay tax on an extra $4,050 of income if they’re single, or $8,100 if they’re married.

The plan does not address the prospects for repeal of popular deductions – the tax breaks for mortgage interest, charitable donations. What happens to other popular deductions is less clear.  The plan would eliminate deductions for state and local tax expenses. States are going to go crazy over that loss.

The National Conference of State Legislatures says the deduction has existed in the federal tax code since its inception. The group says, “tens of millions of middle-class taxpayers of every political affiliation” would experience a greater tax burden if the deduction were eliminated. The group says the deduction’s elimination will also impede states in their efforts to invest in education and other public services.

The plan called for a repeal of the alternative minimum tax, a provision originally intended to tax wealthy households that now reaches well into the middle class. And the plan also calls for eliminating the estate tax.

The document also outlined various provisions for businesses, including a cut in the corporate tax rate to 20 percent, or 25% for small and family-owned businesses conducted as sole proprietorships, partnerships and S corps. But while promising to “modernize” the dozens of tax breaks that favor specific companies and industries, those details remain to be spelled out. It talks about repatriating corporate capital held offshore, but it doesn’t provide any guidance or detail on what rate of tax or any conditions for repatriation.

How to pay for all this without an explosion in the debt and deficit? Animal spirits will lift the economy to tremendous growth – at least that is the argument we are going to here. Cut taxes for corporations and the wealthy, which will shower great jobs on the rabble, which will not only not increase the deficit, it will cut it because so much new revenue will pour in.

More likely, if you get a fiscal boost and tax reform this late in the cycle where most of the slack in the market is eroded, you’re not going to get a lot of bang for your buck. While the rhetoric of cutting taxes sounds good, don’t expect much popular support for specifics. Expect a whole bunch of opposition from various groups who are going to have their specific oxen gored.

The big disappointment is that this whole tax cut plan really doesn’t look serious. It’s 9 pages, and most of those pages have a whole lot of white space and large fonts; the plan has some flowery promises and almost no math. More generally, the plan has so many holes — left for Congress to fill in — that a full picture of who gains the most cannot be drawn at the outset.

The plan could well benefit both the rich and the middle class, at the cost of national debt, but that remains to be seen. If the proposal follows any kind of order, as Senator John McCain has called for, don’t expect anything of substance any time soon. If Republicans thought health care was tough, just wait until they try to tackle tax reform. In that sense, today’s gains on Wall Street can be called a relief rally – a relief that any type of plan was presented, albeit without many details.

The market for Treasury securities experienced one of its worst days of the year, as yields soared. It’s bad enough that the federal budget deficit has already widened, but what’s concerning now is that the government is likely to ramp up bond sales to pay for tax cuts at a time when the Federal Reserve is planning to reinvest less of the maturing proceeds from its bond holdings back into the market.

The amount of marketable US debt outstanding has already increased to $14 trillion from less than $5 trillion the past decade. And don’t forget the repatriated corporate cash isn’t really cash, it is equivalents, meaning a whole bunch is held in US Treasuries.

The pollsters at Gallup periodically ask people what they think is the most important problem in America. Taxes don’t make the top 10 list. Why? Because most Americans don’t pay much of anything in federal taxes.  In an NBC/ Wall Street Journal poll, 62% of those polled said taxes should go up on the wealthy, and 55% said taxes should rise for corporations.

The biggest threat to the U.S. economy over the next 6 months: North Korea? Rising interest rates? Terrorism? A stock market drop? Nope. Thirty-six percent of Americans chose “the political environment in Washington” as the biggest threat to the economy, according to a new survey by personal finance website Bankrate.com. That easily beat out the next four choices: the threat posed by North Korea (24%), rising interest rates (10%), terrorism (10%) and a decline in the stock market (8%).

Orders for durable or long-lasting goods such as passenger planes rose 1.7% last month. The increase stemmed mainly from a big batch of orders for commercial aircraft. Bookings surged 45%. Demand was higher for most other manufactured goods, but bookings grew at a slower pace. Orders minus transportation edged up 0.2%. The government said Hurricane Harvey appeared to have little effect. The storm slammed the Houston area hard late in the month, but probably too late to reduce orders.

The Commerce Department on Tuesday slapped preliminary anti-subsidy duties of 220 percent on Bombardier jets, which could effectively shut Bombardier out of the US market if upheld, after rival Boeing launched a trade challenge accusing Canada of unfairly subsidizing the aircraft. The dispute could spill into talks between Canada, the United States and Mexico to update the North American Free Trade Agreement. Negotiators are meeting in Ottawa.

Americans signed fewer contracts to buy homes in August, the fifth month of declines in the last six. The National Association of Realtors’ pending home sales index fell 2.6% to 106.3. That was the lowest reading since January 2016 and put the index 2.6% lower than its level a year ago. There is a supply-demand imbalance with very tight inventories.

Here we go again: Sonic may be the latest company to face a cybersecurity breach. The drive-in restaurant chain — which has 3,500 locations across the United States — said that a credit card processing company noticed peculiar activity on some Sonic customers’ cards. That’s a telltale sign that hackers targeted Sonic. The company said it’s not yet clear how many restaurants or customers may be impacted.

Amazon announced a bunch of new hardware today. Amazon introduced 5 new Echo hardware products. The big difference seems to be better speakers. Also, they announced their voice assistant, Alexa, will be available in BMW cars. Amazon also unveiled tiny “Echo Button” devices that can be configured to work and control an Amazon Echo. In one instance, Amazon showed how a family might play a game like “Trivial Pursuit” using the buttons to chime in for answers.

The Echo Connect is a $35 box that will allow you to place phone calls to landlines using your existing Amazon Echo units. The Echo already supports calling between Echos, but that acts more like an intercom system. Amazon also unveiled a new Fire TV dongle that plugs into the back of a TV (it uses HDMI). It will support 4K content. Resistance is futile.

Meanwhile, Google celebrates its 19^th anniversary today. I have no idea how we found anything 20 years ago.

Financial Review

Bull About Nothing

Sinclair Noe — September 14, 2017

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

Subscribe: Android | RSS

DOW + 45 = 22,203
SPX – 2 = 2495
NAS – 31 = 6429
RUT – 1 = 1425
10 Y + .01 = 2.20%
OIL + .44 = 49.74
GOLD + 6.50 = 1330.00

Top Cryptocurrencies

	Name	Symbol	Price USD	Market Cap	Vol.	Total Vol. %	Price BTC	Chg. % 1D	Chg. % 7D
	Bitcoin	BTC	3,315.2	$54.60B	$2.92B	41.14%	1	+2.38%	-28.28%
	Ethereum	ETH	229.38	$21.46B	$1.30B	18.31%	0.0672749	+2.82%	-30.80%
	Ripple	XRP	0.17636	$6.72B	$179.25M	2.52%	0.00005236	+3.01%	-21.46%
	Bitcoin Cash	BCH	392.11	$6.46B	$291.83M	4.11%	0.115601	+1.06%	-40.60%
	Litecoin	LTC	46.840	$2.35B	$836.80M	11.77%	0.0132326	+3.13%	-43.53%
	Dash	DASH	246.10	$1.88B	$38.24M	0.54%	0.0741691	+2.89%	-27.61%
	NEM	XEM	0.19307	$1.81B	$10.16M	0.14%	0.00005967	+9.91%	-31.50%
	Monero	XMR	88.75	$1.36B	$146.58M	2.06%	0.0268882	+3.64%	-25.26%
	IOTA	MIOTA	0.46000	$1.27B	$26.98M	0.38%	0.0001359	+2.36%	-27.95%
	Ethereum Classic	ETC	10.6945	$944.51M	$245.14M	3.45%	0.00293293	+5.16%	-44.50%

The Dow Industrial average hit another record high close – 3 in a row, and the fifth consecutive session of gains in the Dow. And a tip of the hat to Ed Yardeni, president of Yardeni Research for describing this bull market as “Seinfeld market,” referring to the TV show that was “mostly about nothing.” “During every episode, investors are watching for something to happen. When nothing happens, especially nothing bad, investors are bemused and show their appreciation by throwing more money at the bull.”

This has been a remarkably easy time to be a bull. September is set to be the 11th straight month in which the S&P 500 has either risen, or has fallen by less than 0.1 percent. If stocks continue to act well in the second half of the month, that will make this the longest such streak for stocks in 58 years.

Going back to 1928, the S&P has only seen four prior streaks in which the index avoided posting a monthly drop of more than 0.1 percent in 11 or more straight months. The most recent run was the longest ever, stretching from March 1958 to May 1959. It’s like the market is on auto-pilot.

Treasury Secretary Steven Mnuchin and House Ways and Means Chairman Kevin Brady appeared at a tax event sponsored by Politico Pro and they will have something to say about a proposal to create a new framework for tax reform later in the month – not now.

Meanwhile, Trump traveled to Florida to view hurricane damage and thank first responders. Trump said he was close to a DACA deal with Democratic congressional leaders on protections for illegal immigrants brought to the United States as children. Trump said any final agreement must include border security measures including surveillance systems but would not include funding for his planned wall along the border.

Either that or Trump doesn’t have a deal with Democrats, a path to citizenship is not part of that non-deal, and the wall is definitely happening.

Nancy Pelosi and Chuck Schumer left a dinner with President Trump on Wednesday night insinuating they had struck a deal on the future of DACA. Then shortly after, the White House disputed the story — at least in part. Press secretary Sarah Huckabee Sanders tweeted that “excluding the wall was certainly not agreed to.”

Trump managed to sow more confusion, tweeting that “no deal” had been made. Earlier today, Trump tweeted: “Does anybody really want to throw out good, educated and accomplished young people who have jobs, some serving in the military?” (Wait. Remind me again who decided to end DACA…)

Oil prices are once again pushing at resistance at the $50 a barrel level. Part of the recent increase in prices is fallout from the hurricanes, but part of the reason is just a story of supply and demand. Global economies are humming and today the International Energy Agency and OPEC nudged their demand forecasts higher. IEA says oil demand for 2017 will expand by the most in two years, the Paris-based IEA. OPEC increased its estimate for how much crude buyers will seek from the cartel next year, driven by rising consumption in Europe and China.

Economists have long debated whether higher energy prices are inflationary or a drag on the economy. The answer seems to lie in what’s happening at the time. If rising prices come during a healthy economy, then it’s inflationary. If not, then it tends to curb growth. Right now, bond traders are betting on the inflationary impact.

The Consumer Price Index, or CPI, which measures inflation at the retail level – jumped 0.4% month over month and 1.9% year over year. Excluding food and energy, the core CPI rose 0.2% in August; up 1.7% year over year. The 0.2 percent rise in the core gauge ends a five-month streak of weaker-than-expected readings.

Energy prices rose 2.8%, the most since January; food costs advanced 0.1 percent. Lodging away from home rose by a record 4.4 percent; hotel costs jumped 5.1%, the most since 1991. Broader shelter costs rose 0.5 percent.

The CPI for new vehicles was unchanged, the first month without a decline since January, while prices of used cars and trucks fell 0.2 percent; air fares dropped 1 percent. Wireless-phone services fell 0.1 percent. Expenses for medical care rose 0.1 percent from the previous month.

Hourly earnings adjusted for inflation rose 0.6 percent from August 2016, after a 0.7 percent gain. This is just one month’s data. If it holds, it would make it easier for the Fed to raise interest rates.

Arizona’s seasonally adjusted unemployment rate decreased from 5.1% in July to 5.0% in August. The national unemployment rate increased from 4.3% in July to 4.4% in August. A year ago, the Arizona unemployment rate was 5.1% and the U.S. rate was 4.9%. Arizona gained 41,900 Nonfarm jobs in August. The Private Sector gained 9,700 and government added 32,200 jobs. That is a big turnaround in government jobs and a disappointment in private sector jobs.

Motel 6 – they’ll leave the light on for you, and then they’ll turn over personal information to ICE – immigration and Customs Enforcement.  According to the New Times, clerks at “multiple” Motel 6 properties around Phoenix said they regularly share customer information with federal immigration authorities.

A front-desk clerk told the newspaper that they send a report every morning to ICE with all “the names of everybody that comes in.” At least 20 undocumented people were arrested at two Motel 6 locations between February and August. Innkeepers routinely comply with search warrants and other court orders when law enforcement agents seek customer data and may reveal customer information when police are summoned to a property for an emergency or other public-safety situation.

But most lodging companies prohibit the voluntary offer of such data. Legally, there could be constitutional violations if ICE agents enlisted the help of Motel 6 operators, effectively making them agents of the government. Additionally, state privacy laws could mean civil or criminal penalties for motels who disclose customer information.

Three female former employees of Alphabet/Google filed a lawsuit accusing the tech company of discriminating against women in pay and promotions. The proposed class action lawsuit comes as Google faces an investigation by the Department of Labor into sex bias in pay practices. The lawsuit appears to be the first to make class action sex bias claims against Google, but is only the latest instance of a major tech company being accused of discriminating against women.

Nestle has acquired a majority stake in premium coffee company Blue Bottle Coffee. Nestle already owns brands such as Nespresso, Nescafe and creamer brand Coffee-Mate. Blue Bottle opened its first coffee shop in Oakland, California, 15 years ago. Many of its shops are in the Bay Area, but it has expanded to cities such as New York and Tokyo.

The Federal Trade Commission says it is investigating the Equifax data breach. Equifax last week reported a massive data breach, saying hackers may have accessed the personal details, including names and Social Security numbers, of more than 143 million consumers from mid-May to July. Equifax, which said it learned of the breach in late July, said credit card numbers for about 209,000 people and certain documents for another 182,000 were also accessed.

The disclosure was swiftly met with criticism because of the delay in alerting the public to the hack, as well as problems with the website Equifax set up for people to check whether their details were at risk. You should probably check your credit report and maybe even freeze your credit but you can’t because the website keeps freezing.

Three senior executives dumped almost $2 million worth of stock days after the company learned of the breach. An emailed statement from the credit-monitoring agency said the executives “had no knowledge” of the breach beforehand. Sure, it wasn’t even a topic of conversation in the C Suite.

So, lots of outrage. And we can bet dimes to donuts nothing more severe than a slap on the wrist.

Financial Review

Good Luck

Sinclair Noe — August 23, 2017

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

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DOW – 87 = 21,812
SPX – 8 = 2444
NAS – 19 = 6278
RUT – 1 = 1369
10 Y – .04 = 2.17%
OIL – .06 = 48.35
GOLD + 5.90 = 1291.30
BITCOIN + 0.29% = 4203.23 USD
ETHEREUM – 1.81% = 318.06

Stocks fell for the first time in three days, the dollar slumped and Treasuries gained.

So, Trump was in Phoenix yesterday. Maybe you heard about that. He spoke for a little over an hour at a campaign rally at the Civic Center. We won’t try to recap everything he said (full transcript here), but there were a couple of important lines that have received particular attention.

First, in what almost seemed like an aside, Trump said, “If we have to close down our government, we’re building that wall. One way or the other, we’re going to get that wall.” That’s not what markets wanted to hear.

Congress needs to pass a spending measure by September 30 to keep the government open —the same time it’s facing a deadline to raise the nation’s debt limit. Failure to do so could cause a multitude of problems, as we have seen in the past. Fitch Ratings  warned the country risks a review of its sovereign rating if it fails to raise the limit next month.

Yesterday, Senate Majority Leader Mitch McConnell said there was zero chance of a government default on its debts; today the chance of a default is significantly higher than zero. Whether it was just a bluff or not, one thing is clear – it doesn’t look like Mexico will pay for the wall.

Trump also spoke about the difficulty in trying to negotiate a better trade agreement with Canada and Mexico, saying: “So I think we’ll end up probably terminating NAFTA at some point, OK? Probably.”

There were no details on what a post-NAFTA world might look like or how it might affect American business.  There was a brief mention of tax reform but absolutely no details of an actual plan.  The Dollar Index dropped .039% today, continuing a sharp downtrend for the year as investors have been looking for alternative safe havens in other markets, from Switzerland to Japan.

Trump spent about half the speech blasting the media and denying he is a racist, while recapping his response to Charlottesville and completely omitting his remarks of Tuesday, August 15. He went on to suggest that he would pardon convicted former Maricopa County Sheriff Joe Arpaio but did not make a formal pardon.

Then he ripped into Arizona’s two Republican senators, without naming names. However, it was clear he was talking about Senator Jeff Flake when he said, “nobody wants me to talk about your other senator, who’s weak on borders, weak on crime.” Last week Trump tweeted: “Great to see that Dr. Kelli Ward is running against Flake Jeff Flake.”

McCain cast the deciding vote that led to the Senate’s rejection of the “skinny repeal” bill, a watered-down version of a plan to repeal parts of the Affordable Care Act. McCain, who has been diagnosed with brain cancer, was one of three Republican senators who voted against the bill. And Trump decided to blast McCain, the longtime senior senator, former Republican presidential candidate, and war hero who is currently undergoing treatment for brain cancer.

If you thought you would never live long enough to hear a president mock a guy going through chemo for brain cancer, congratulations. You made it.

So, I guess vacation time is over. And after a visit to Reno, it is back to work on tax reform, infrastructure, funding the government, not defaulting on the debt, passing the defense authorization bill, NAFTA and all that.

These are important issues and there is no room for legislative error. Meanwhile, the New York Times reports the relationship between Trump and Senator Mitch McConnell has disintegrated to the point that they have not spoken to each other in weeks, and McConnell has privately expressed uncertainty that Trump will be able to salvage his administration after a series of summer crises.

What was once an uneasy governing alliance has curdled into a feud of mutual resentment and sometimes outright hostility. In a series of tweets this month, Trump criticized McConnell publicly, and berated him in a phone call that quickly devolved into a profane shouting match. A Republican “super PAC” aligned with McConnell released a web ad on Tuesday assailing Kelli Ward as a fringe-dwelling conspiracy theorist.

West Texas Intermediate crude dipped 6 cents to settle at $48.35 a barrel. The EIA reported today that oil stockpiles have dropped every week since late June and gasoline inventories also fell, while crude production climbed for a second week.

Meanwhile, Harvard University researchers have published a study showing Exxon Mobil misled the public about climate change for years even as its research echoed the growing scientific consensus that global warming is real and caused by human activity.

The findings potentially add grist to the mill as several attorneys general continue to investigate whether Exxon misled shareholders. The Securities and Exchange Commission is also probing how the oil major values its fossil fuel reserves considering global warming.

New-home sales tumbled in July. The Commerce Department reports sales of newly-constructed homes were at a seasonally adjusted annual rate of 571,000. That was 9.4% lower than an upwardly-adjusted June rate of 630,000, and 8.9% below the year-ago level.

The median sales price in July was $313,700, 6.3% higher than a year ago. At the current pace of sales, it would take 5.7 months to exhaust all supply, among the highest ratios of the past few years. The median sales price in July was $313,700, 6.3% higher than a year ago. At the current pace of sales, it would take 5.7 months to exhaust all supply, among the highest ratios of the past few years.

Newly built homes are more expensive than they’ve ever been before. They are also more expensive when compared to similar existing homes than they’ve ever been before. So, that’s why.

Lowe’s, the home-improvement retailer, dragged down the S&P 500 after it reported profit and revenue for the latest quarter that were weaker than analysts expected. It gave a profit outlook for the year that fell short of Wall Street’s forecast, and its stock fell 3.7 percent.

WPP is the world’s largest advertising agency and today the company lowered its full year forecast for net sales growth to 1 percent or even less, blaming the pull back on lowered spending by packaged goods companies. The packaged goods sector has become a battleground between online shopping giant Amazon and other e-commerce sites and traditional brick-and-mortar grocery stores and discount retailers.

Price wars and changing consumer tastes have turned some of the once mainstay brands into virtual commodities, with less supermarket shelf space and now less marketing clout. Weakness in advertising spending by major consumer product companies rippled through the global media industry. And WPP shares dropped about 10 percent.

Amazon has become the 800-pound gorilla of online retail, with the spillover effect of shutting down brick and mortar retailers. Who could fight such a behemoth? How about two 800-pound gorillas? Google and Walmart are testing the notion that an enemy’s enemy is a friend.

The two companies said Google would start offering Walmart products to people who shop on Google Express, the company’s online shopping mall. It’s the first time the world’s biggest retailer has made its products available online in the United States outside of its own website. The two companies said the partnership was less about how online shopping is done today, but where it is going in the future.

They said that they foresaw Walmart customers reordering items they purchased in the past by speaking to Google Home, the company’s voice-controlled speaker and an answer to Amazon’s Echo. The eventual plan is for Walmart customers to also shop using the Google Assistant, the artificially intelligent software assistant found in smartphones running Google’s Android software.

Walmart customers can link their accounts to Google, allowing the technology giant to learn their past shopping behavior to better predict what they want in the future. Google said that because more than 20 percent of searches conducted on smartphones these days are done by voice, it expects voice-based shopping to be not far behind.

There are more than 50 retailers on Google Express, including Target and Costco. Walmart is partially repurposing its stores into e-commerce fulfillment centers. Customers can now order their groceries online and then pick them up at hundreds of stores. For some items that they purchase online and pick up in a store, customers receive a discount.

Meanwhile, the Federal Trade Commission said today it’s decided not to pursue an investigation of Amazon’s purchase of Whole Foods – so, no antitrust problem.

Samsung announced the successor to the ill-fated Note 7 smartphone today, an updated phone named the Note 8. The new phone resembles a larger version of Samsung’s flagship devices, the S8 and S8+, but is slightly larger and includes a stylus called an “S pen,” which slips into the device. The Note 8 is big for a phone; it is also important for the success of Samsung.

The most important thing is that it doesn’t explode, hopefully.

The Powerball jackpot for Wednesday’s drawing is up to a little more than $700 million. After taking the lump sum and paying the taxes, you would end up with less than half that amount, but that’s still a lot of money. Even if you had to split the jackpot with another winner, it is still a lot of money.

Your odds of hitting the jackpot are about 292-million to one, so you really don’t have to worry about what to do if you win. Good luck.