Financial Review

Happy Day

Sinclair Noe — March 20, 2017

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

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DOW – 8 = 20,905
SPX – 4 = 2373
NAS + 0.53 = 5901
RUT – 7 = 1384
10 Y – .03 = 2.47%
OIL – .55 = 48,23
GOLD + 5.10 = 1234.90

The directors of the FBI and NSA appeared before a rare open congressional intelligence committee hearing today.

FBI Director James Comey confirmed the FBI is investigating Russia’s interference in the US election and investigating possible links between the Trump campaign and the Russian government. Comey said the FBI has “no information” to support President Trump’s allegation that Barack Obama wiretapped him.

NSA chief, Admiral Mike Rogers, weighed in as well, saying that he had no knowledge of anyone asking the British or any other ally to wiretap Trump. That seemed to refute another claim made by the White House.

Confirmation hearings for Trump’s Supreme Court nominee kicked off today. Trump nominated Neil Gorsuch, 49, to replace conservative Justice Antonin Scalia, who died in February 2016.

Meanwhile, Wall Street also braced for a contentious House vote on the GOP health care bill slated for Thursday. The bill’s passage is considered a first step toward enacting tax reform, but it has faced criticism from both sides of the aisle.

The Trump administration appealed Friday a temporary restraining order against its revised travel ban policy. The reworked executive order (which halts the issuance of visas to six majority-Muslim countries for 90 days and suspends the refugee resettlement program for 120 days) was set to go into effect on March 16, but federal judges and Hawaii and Maryland blocked it from going forward.

The Justice Department filed an appeal in the Maryland case, which will take that fight to the Fourth Circuit, based in Richmond, Va. Meanwhile, a federal judge in Hawaii declined a request from the Justice Department to narrow the injunction. That ruling clears the way for the Trump administration to appeal the judge’s initial decision to the 9th Circuit Court of Appeals.

Bill Gates met with Donald Trump today.  An agenda wasn’t released, but a statement from the Gates Foundation said it has “a long history of working with officials” on issues like domestic education and global health and development. Gates and Trump also met in December to discuss innovation.

On March 16, the Gates Foundation said that it was “deeply troubled” by the president’s 2018 budget request, released that morning. The proposal included deep cuts to both the EPA and non-military overseas aid. The next day, Gates responded with an article on the Gates Notes blog, “How Foreign Aid Helps Americans.”

The meeting of the Group of 20 in Germany over the weekend featured an apparent win for the US after the communique produced by the talks omitted warnings about protectionism. One thing that was repeated was the pledge to overhaul bank-capital rules, with the statement urging the Basel Committee on Banking Supervision to finalize the Basel III reforms.

Away from the G-20, German Chancellor Angela Merkel joined Japanese Prime Minister Shinzo Abe in calling for a concerted effort to defend free trade.

Nine months after Britain voted to leave the European Union, Prime Minister Theresa May is planning to open divorce proceedings on March 29.  May will trigger Article 50 of the Lisbon Treaty, the EU’s guiding document, which details how a country leaves the bloc. It’s never been activated and is only about 260 words long. It gives the departing country up to two years to negotiate “its future relationship with the Union.” If May has her way, the actual split will occur around April 2019.

Greece missed another deadline for unlocking bailout funds today, edging closer to a repeat of the 2015 drama that pushed Europe’s most indebted nation to the edge of economic collapse. Prime Minister Alexis Tsipras had promised the latest bailout’s long delayed review would be completed by March 20, but many see that reaching an agreement even in April is now considered a long shot.

Deutsche Bank will issue 687 million new shares at a 35 percent discount to Friday’s closing price — to raise €8-billion-euros of fresh capital. In its annual report published today the bank said it expected revenue to remain broadly unchanged this year, while revealing that the bonus pool was slashed to €500-million-euros in 2016.

Britain’s Vodafone Group and Idea Cellular agreed to merge their Indian operations in a $23 billion deal. The combined entity would have almost 400 million customers, accounting for 35% of the market share.

Albertsons, the grocery-chain operator backed by Cerberus Capital Management, has held preliminary talks to merge with Sprouts Farmers Market. Bloomberg reports the discussions, which took place in recent weeks, are at an early stage and may not lead to a deal. The talks have involved a plan to take organic grocer Sprouts private and add it to Albertsons’ portfolio, which includes the Safeway store brand.

Unilever is preparing a $7.4 billion sale of some of its food brands, British newspapers reported on Saturday. The British-Dutch company is planning to sell Flora margarine and Stork butter brands. Unilever rebuffed a surprise $143 billion takeover offer from Kraft Heinz last month, saying the bid undervalued the company.

Pressure is growing on Twitter CEO Jack Dorsey to step down, per the Sunday Times, after a report from the University of Southern California and the University of Indiana alleged that up to 48 million of its accounts – equal to 15% of its users – were robots not people (that’s nearly twice the company’s own estimate).

The number of executive departures from Uber is growing. President Jeff Jones is quitting the company, citing “incompatibility with leadership,” while Brian McClendon, a VP responsible for the company’s mapping program, is leaving to return to his home town in Kansas. Uber has been recently plagued by allegations of sexual harassment and the combative behavior of CEO Travis Kalanick.

Bullish bets on West Texas Intermediate crude prices fell by a record amount in the week ending March 14, with wagers on further price falls doubling. Energy lender Arab Petroleum Investment Corp. sees oil prices remaining below $60 a barrel for the rest of the year.

Bank of America Merrill Lynch has published a giant list of asset class returns for the year so far. Here’s a quick rundown. Looking at global asset classes, the Pacific Rim, excluding Japan is up 9.6%, matched by Emerging Market equities, Industrial metals up 7.6%, US equites (7.2%), global equities (up 6.7%) And Euro stocks (up 4.9%).

By country; Russia’s stock market is the laggard this year after being one of the best performers in the world in 2016. India is the leader, year-to-date, up 14.5%, followed by South Korea (up 13.3%) and Brazil (up 12.8%). China and Hong Kong round out the Top Five. Russia is down 9%.

By sector, Biotech is the leader (up 11.9%), followed by information technology (up 11.6%), healthcare (up 9.3%), banks (up 7%), with consumer discretionary and financials both up 6%.

The strongest currencies against the US dollar are the Mexican peso, which took a hit following the US election in November, but has gained 7.8% against the dollar since the start of the year; followed by the South African rand, and the Australian dollar.

Natural gas prices have tumbled amid unseasonably warm weather, which implies weaker demand for heating. The US had its second-warmest February ever on record, per to the National Centers for Environmental Information.

Crude oil is also a big loser, likely to the dismay of the Organization of Petroleum Exporting Countries. The top gainers among commodities include iron ore (up 15.3%), lead (up 12%), aluminum (up 11.1%) and cotton (up 10.5%). Nat gas is down 20% and WTI crude is down 9%.

Or, if you want to keep it simple, Apple hit a record high today, and it is up about 23% from the start of the year. Of course, you still must decide if you want to run with the bulls or buy the dips.

Italy is ranked the healthiest country on Earth in the Bloomberg Global Health Index of 163 countries. A baby born in Italy can expect to live to be an octogenarian.

Even though economic growth in Italy has stagnated for decades, and almost 40 percent of its youngsters are out of jobs and it’s saddled with one of the world’s highest debt loads relative to the size of its economy; Italians are in way better shape than Americans, Canadians and Brits, who all suffer from higher blood pressure and cholesterol and poorer mental health.

Italy also has “an excess of doctors.” Then there is the diet, rich in vegetables and drizzled with extra virgin olive oil. Each country in the index was graded based on variables such as life expectancy, causes of death and health risks ranging from high blood pressure and tobacco use to malnutrition and the availability of clean water.

Iceland, Switzerland, Singapore and Australia rounded out the top five most-healthy countries in the index. The U.S. placed No. 34 with a health grade of 73.05 out of 100. It’s ranking for prevalence of overweight people is 67.3 — tipping the scale as one of the world’s heaviest nations.

Norway is now the world’s happiest country, per the 2017 World Happiness Report. The Central African Republic was the least happy of 155 countries. The report was prepared by the Sustainable Development Solutions Network, an international panel of social scientists convened by the United Nations.

Researchers used a scale of zero to 10, covering six areas: gross domestic product per capita, life expectancy, support from relatives or friends, charitable giving, freedom to make life choices, and perceived levels of government and corporate corruption. Norway and several other Nordic countries dominated the top of the list.

America’s rank on the happiness scale is falling.

Even as the country pulled off an economic turnaround, with increases in income and unemployment falling to historic lows, Americans are becoming less happy. When it comes to happiness, the US ranked 19th among the 34 countries in the Organization for Economic Cooperation & Development in 2016, down from third among 24 countries on a similar measure in 2007.

And today is the first day of Spring. Enjoy.

Financial Review

Double Hat Trick

Sinclair Noe — February 10, 2017

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

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DOW + 96 = 20,269
SPX + 8 = 2316
NAS + 18 = 5734
RUT + 10 = 1388
10 Y + .01 = 2.41%
OIL + .81 = 53.81
GOLD + 5.70 = 1234.50

Reckitt Benckiser has agreed to buy Mead Johnson Nutrition for $90 a share, or $16.6 billion, taking the UK consumer-products group into the infant food market. Including debt, the deal is valued at $17.9 billion. The transaction will add to Reckitt’s per-share earnings in the first full year.

Blackstone has agreed to acquire insurance broker AON’s employee benefits outsourcing unit for $4.3 billion in cash, giving Blackstone ownership of a business that processes work benefits for 15% of the U.S. population. It will also allow Aon to exit the capital-intensive business, allowing it to invest in growth areas beyond its core insurance brokerage operations.

The University of Michigan preliminary February consumer sentiment index fell to 95.7 from January’s final reading of 98.5. The most marked decline was in a forward-looking part of the survey, down 5.1% from January.

Oil is rallying on OPEC. West Texas Intermediate crude oil is higher after data released by the International Energy Agency showed a record-high 90% compliance to the OPEC output deal in the first month.

The IEA, which advises industrial nations on energy policy, said that if current compliance levels are maintained, the global oil stocks overhang that has weighed on prices should fall by about 600,000 barrels per day in the next six months.

But this may be as good as it gets for OPEC; participation in production cuts has been uneven among OPEC members, with Saudi Arabia shouldering the cuts to compensate for other countries which continue to pump – a situation that won’t continue indefinitely.

The Labor Department says import prices increased 0.4 % last month after an upwardly revised 0.5 % rise in December. In the 12 months through January, import prices jumped 3.7 %, the largest gain since February 2012, after advancing 2.0 % in December.

Import prices are rising as firming global demand lifts prices for oil and other commodities, but the spillover to a broader increase in inflation is being limited by dollar strength. Prices for imported fuels increased 5.8 % last month. Import prices excluding fuels fell 0.2 %. The report also showed export prices edged up 0.1 % in January.

Iron ore futures surged past $100 a ton, while spot ore rose to $83.84 a dry ton, the highest since October 2014. The rise came after official data showed that China’s exports surged 7.9% from a year earlier in dollar terms, leaving the country with a trade surplus of $51.4 billion.

In a shift, President Trump agreed to honor the “one China” policy during a phone call with China’s leader Xi Jinping. Trump angered Beijing in December by talking to the president of Taiwan and saying that the United States did not have to stick to the policy.

Trump held a news conference today with Japanese Prime Minister Shinzo Abe at the White House. The US and Japan account for nearly a third of the global economy. Trade in goods and services between the world’s No.1 and No. 3 economies was worth nearly $268 billion in 2015.

Trump vowed that the currencies of the US, China and Japan would soon be on “a level playing field.” Trump did not explain how the three countries would reach a level playing field, or what he meant by the phrase. Trump also said he will make a fresh policy announcement next week in response to the court ruling blocking his travel ban. Again, no details.

$21.6 billion. That’s how much an internal Department of Homeland Security report says Trump’s “wall” along the U.S.-Mexico border would cost. The report’s estimated price tag is much higher than a $12 billion figure cited by Trump during his campaign and the $15 billion estimate from top Republican leaders in Congress.

Meanwhile, the European Union is struggling with a familiar problem – Greece. The country could soon run out of cash and would not be able to make crucial debt repayments. Greece is currently on a third bailout program worth €86 billion euros ($92 billion); that bailout program still has more than a year to go, but the IMF is worried that Greece’s debt is not sustainable.

If indeed European creditors recognize next week that Greece has completed all the agreed measures for the second bailout review, then this would pave the way for new disbursements. With fresh funds, Greece should be in condition to meet deadline payments next summer and avoid a financial collapse.

But the view among creditors is that such a deal next week is “unlikely”. Even as Greece has shown some economic growth, 0.4% last year with 2.7% forecast for 2017, and the Greeks have managed to build a small budget surplus; the Greeks debt load continues to increase, yields on government bonds has climbed into double digits and debt has increased to an expected 183% of the country’s total economy from 159%.

And the main reason is that the Greeks are not eligible to participate in the European Central Bank’s Quantitative Easing program. And right now, the ECB is the only buyer of Euro bonds.

The IMF weighed in this week, publishing its analysis of the challenges to the Greek economy. The IMF says that in addition to needed reforms, European governments need to provide debt relief to Greece. The IMF analysis is that Greece represents a real problem without debt relief; Euro creditors believe they can present a unified front to break the deadlock. Eurozone governments, and especially Germany, are opposed to debt relief.

Today, Greece’s creditors called for more reforms in the form of more austerity measures. The additional austerity dose would hardly be accepted by the government led by Alexis Tsipras. The leftwing Greek leader promised not to impose further cuts or tax raises after almost seven years of painful measures adopted in exchange for the lenders’ money.

The Greeks have also opposed further pension adjustments, as it has adopted 11 cuts since 2010. There is a possibility of snap elections, which would add a new layer of uncertainty. And if things go wrong with Greece, Italy is next in line, with the second highest debt burden among Eurozone nations, plus a dangerously weakened banking system.

The Greek debt crisis seems like the never-ending economic story but that doesn’t mean the problem has been resolved. It doesn’t mean there is an imminent collapse, but consider this – Germany has been repatriating its gold. Germany has been bringing gold home from New York and Paris since 2013.

So far, 642 tons has been transferred. They just expedited a transfer of 330 tons stored with the New York Federal Reserve. They still have about 100 tons in a vault in Paris. Why the rush? The German central bank says it is bringing the gold home to help build public “trust and confidence.”

Sears Holdings reported a 10.3% drop in comparable store sales for the holiday quarter, and said it would cut debt and pension obligations by at least $1.5 billion this year. Sears also announced a new plan to cut costs by at least $1 billion in 2017 by reducing overhead, improving merchandise at its stores and through better inventory management.

Renault peddled SUVs to Europeans and it worked. The French car company’s 2016 profit surged 38% to $3.4 billion from the year before thanks to the popularity of its new SUVs among Europeans. CEO Carlos Ghosn said the automaker would be open to a merger with Nissan if the French government would sell its stake in Renault.

Sweden’s SAAB  has offered to build the world’s most modern fighter aircraft factory in India, it said on Friday, as it goes head-to-head with US rival Lockheed Martin to supply hundreds of locally produced planes to India’s military.

Danish wind turbine maker Vestas Wind Systems has jumped to the top of the U.S. wind market, overtaking General Electric in new capacity installed last year. Vestas, the world’s biggest wind turbine maker, supplied 43% of the 8.2 gigawatts of wind power capacity connected to the US power grid last year; GE supplied 42%.

The Galaxy S8 will be unveiled in New York next month, per the Wall Street Journal, and Samsung is ready to display a whole host of new features. While the physical home button will be stripped away and the fingerprint scanner moved to the back of the device, and only curved-screen versions will be released. The company will also showcase its new virtual assistant called Bixby, and possibly its recently trademarked “Samsung Hello.” And yes, it will have a headphone jack.

For many liquors, aging is the key to their distinct flavors. Brandy is no exception, with top-shelf labels spending years in casks. But chemists think they have discovered a shortcut—ultrasound. Spanish researchers blasted ultrasound through a barrel of brandy for 3 days and the results were close to 2 years of aging.

Now, if they can just figure out a way to reverse the aging process. Still, something to keep in mind as we head into the weekend –  if you are clever, you can get a lot done in just a couple of days.

Financial Review

Hat Trick

Sinclair Noe — February 9, 2017

Podcast: Play in new window | Download (Duration: 12:08 — 6.9MB)

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DOW + 118 = 20,172
SPX + 13 = 2307
NAS + 32 = 5715
RUT + 19 = 1378
10 Y + .05 = 2.40%
OIL + .71 = 53.05
GOLD – 12.40 = 1229.60

We have new record high closes for the Dow, S&P, and Nasdaq. It’s a hat trick.

The chief executives of several airlines, as well as executives from air cargo companies, were invited to a breakfast meeting at the White House this morning. Trump called the air-traffic control system “outdated” and he told the execs: “We have an obsolete plane system, we have obsolete trains, we have obsolete airports, we have bad roads. And we’re going to change all that.”

Trump also said: “We’re going to be announcing something I would say over the two or three weeks that will be phenomenal in terms of tax and developing our aviation infrastructure.” He gave no indication of what the announcement might entail. Presumably the “phenomenal” tax and infrastructure plan does not apply solely to the airline industry, and Wall Street lapped it up. He went on to say: “Lowering the overall tax burden on American business is big league.”

The rally had stagnated in recent days as investors sought details about Trump’s policy agenda. Financials, which have soared since the election, were the best-performing group, up 1.4 percent after three sessions of declines, while energy shares gained 0.9 percent. Those sectors stand to benefit should lower taxes spur economic activity as interest rates and the demand for energy would presumably rise.

After 18 months of courtship and court cases, two massive deals that would have reshaped the U.S. health insurance industry have both been declared dead. Anthem’s $48 billion deal to buy Cigna was blocked by a federal judge late Wednesday, weeks after another judge halted Aetna’s bid for Humana. Reasons given: The mergers would have led to less competition and higher prices for Americans.

Applications for unemployment benefits in the U.S. unexpectedly declined last week to an almost three-month low. Jobless claims fell by 12,000 to 234,000 in the week ended Feb. 4. The latest results extend a trend of historically low claims, with applications staying below 300,000 in the longest streak since 1970. A shortage of skilled workers is prompting companies to hold on to existing employees while continuing to add more workers to help fulfill demand.

The Senate has confirmed Jeff Sessions as attorney general largely along party lines. The 52-47 vote capped weeks of divisive battles over Sessions, an early supporter of President Trump. Next up is Representative Tom Price, Trump’s pick for health secretary and a staunch advocate of repealing Obamacare. A vote come could come later tonight.

Secretary of State Rex Tillerson met his Canadian counterpart for the first time on Wednesday for talks that touched on NAFTA, the trade agreement President Trump has pledged to renegotiate. The top US diplomat also met with Mexico’s foreign minister to discuss collaboration on law enforcement, migration and security, and agreed to visit the country in the coming weeks.

A US court of appeals is reviewing arguments on whether to reinstate the Trump administration’s temporary ban on immigration, with the outcome likely to be appealed to the Supreme Court.

Meanwhile, Trump’s first executive order, signed January 25, entitled: “Border Security and Immigration Enforcement Improvements” resurrects some of the most controversial immigration enforcement programs of recent years, seeks to deputize state and local law enforcement as immigration officials across the country, and threatens major cuts to federal funding for cities that fail to fall in line with the administration’s vision.

Trump has called for the construction of new immigrant detention facilities along the U.S. border with Mexico – including through private contracts – as quickly as possible, and there have been requests for additional asylum officers at 2 for-profit Detention Centers in Arizona.

A Dallas federal judge has upheld the Labor Department’s fiduciary rule, dealing a setback to the financial industry’s attempts to kill the measure. But the legal move may not mean much for the regulation’s fate. Last Friday, President Trump issued a memorandum to study the rule’s impact and rescind or revise it if it isn’t consistent with his administration’s regulatory principles. A status report will be published on March 10.

Boeing won orders for 39 wide-body aircraft from Singapore Airlines; a deal worth about $14 billion, as Southeast Asia’s biggest long-distance carrier upgrades its fleet over the next decade with more fuel-efficient models to cut costs.  The airline agreed to buy 20 777-9s, which are set to debut at the decade’s end, and 19 787-10s, the longest Dreamliner model.

There’s a good chance you can’t get there from here. More than 2,700 flights were canceled and all public schools in New York City, Boston and Philadelphia will be closed today as the region braced for a winter storm that could dump a foot of snow or more.

President Trump has written a letter to China’s President Xi Jinping in his first direct communication with the leader of the world’s second-biggest economy since he took office. With currency wars threatening to raise their head again, China has managed to get the yuan exactly where it wants it.

The nation’s authorities have let the currency rise against the dollar, making it harder for the U.S. administration to accuse it of undervaluing the exchange rate, while at the same letting the yuan weaken against a trade-weighted basket of currencies.

Greece’s two-year bond yield climbed above 10 percent as negotiations to release further IMF funds remained deadlocked. The International Monetary Fund weighed in this week, publishing a long-awaited analysis of the challenges the Greek economy still faces. The report has been the focal point of heated disagreement between the fund and Europe in terms of what Greece needs to do to get back on track.

The fund has argued that, in addition to needed reforms, European governments must provide debt relief to Greece for the country’s economy to recover fully. Meanwhile, Astellon Capital, a hedge fund based in London, published analysis saying that some form of restructuring is essential for Italy, given the inability of the country’s economy to grow.

The Astellon report also notes that the E.C.B. and sickly Italian banks have been the main buyers of Italian government bonds over the past three years. Also, Mediobanca, the Italian investment bank published a report which highlights just how little Italy has benefited from being in the euro: Growth has been literally zero, and the economy’s competitiveness as an exporter has deteriorated.

Twitter reported fourth-quarter revenue was $717 million, missing the $740 million average analyst estimate. Sales growth of 1 percent slowed dramatically in the period from the 48 percent gain a year earlier. Twitter added 2 million new users, bringing the total number of people who log in monthly to 319 million. Twitter has had trouble persuading advertisers to spend more money on its social-media platform as fewer people join.

Coca-Cola offered up a flat earnings report. Excluding items, the company earned 37 cents per share, in line with estimates. Net operating revenue fell about 6 percent to $9.41 billion, the seventh straight drop, but slightly ahead of estimates. The company forecast 2017 adjusted earnings to fall 1-4 percent from 2016. Coca-Cola has been offloading much of its bottling business to cope with falling demand for carbonated beverages in North America. Coke said it was on track to complete re-franchising of its US bottling operations by the end of this year.

Whole Foods is shrinking its store count for the first time since the recession. After reporting disappointing earnings, the upscale grocer says it will close 9 stores; including one in Prescott.

With about 70 percent of the S&P 500 having reported results, fourth-quarter earnings are on track to have climbed 8.5 percent, which would be the best performance since the third quarter of 2014, according to Thomson Reuters.

Financial Review

Split

Sinclair Noe — February 7, 2017

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

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DOW + 37 = 20,090
SPX + 0.52 = 2293
NAS + 10 = 5674 (record high close)
RUT – 5 = 1361
10 Y – .02 = 2.39%
OIL – .75 = 52.88
GOLD – 1.80 = 1234.40

The dollar, recovering from its worst start to a year in three decades, gained against a basket of other currencies. The euro is on the defensive, with markets nervous about elections in the Netherlands, Germany and possibly Italy, plus more wrangling over Greece’s bailout and an upcoming reduction in the European Central Bank’s monthly bond-buying.

The head of the German Bundesbank responded to accusations from the Trump administration that Germany was manipulating the euro lower. Jens Wiedmann said the dollar strength was “triggered by the political announcement s of the new government.” The pound was among the biggest losers today, falling to a two-week low as Brexit and economic growth concerns return to put pressure on sterling.

Yields on two-year Greek bonds are up 9 basis points and are at their highest level since the middle of last year, as a rare split at the International Monetary Fund puts the country’s bailout at risk. The IMF says that Greece won’t meet targets set by Europe for the country to run a budget surplus. The fund also reiterated its view that Greece’s debt levels are unsustainable.

The fund’s annual review of the Greek economy showed they disagree over the austerity measures imposed on Athens and the need for further economic reforms. The split decision fueled fears the fund might pull out of the rescue plan for the country.

China’s foreign exchange reserves have dropped below the $3-trillion level for the first time since 2011, marking the seventh straight monthly decline as capital continues to flow out of the world’s second-largest economy. Data from the People’s Bank of China showed reserves falling by over $12 billion in January, despite government efforts to tighten capital movement controls and stabilize the yuan’s exchange rate.

The US trade deficit rose slightly in 2016 to $502.3 billion, marking the highest level in four years. The trade gap widened last year because exports fell faster than imports, the result of a weak global economy and a stronger dollar that made American products more expensive to foreign buyers. The gap with China is by far the largest among the major U.S. trading partners.

Although the deficit dropped 5.5% in 2016, it still totaled $347 billion. That’s more than three-fifths of the overall U.S. trade deficit. The deficit with Mexico rose 4.2% to $63.2 billion in 2016 to mark a five-year high. Exports rose 2.7% $190.7 billion, led by higher shipments of passenger planes and parts.

Imports increased a smaller 1.5% to $235 billion as demand for pharmaceutical drugs, cell phones and televisions declined.

The Federal Reserve reports total consumer credit increased $14.2 billion in December to a seasonally adjusted $3.76 trillion, posting an annual growth rate of 4.5%, The increase was below estimates for a $20 billion gain. Revolving credit, which is mostly made up of credit card loans, slowed to a gain of $2.3 billion or an annual rate of 2.9%.

Non-revolving credit, which covers loans for education and cars, increased $11.8 billion in December, or at a 5.1% annual rate. For all of 2016, total consumer credit rose at a 6.4% rate, down from a 7% rate in the prior year.

Data provider CoreLogic said its home price index was up 0.8% during December, and 7.2% compared to a year ago. That’s the fifth straight month in which the yearly price increase was higher, including during months that saw mortgage rates jump nearly a full percentage point.

Low supply is boosting home prices higher and higher, and CoreLogic expects that prices will rise 4.7% during 2017. That would take its national index – now 3.9% below the high last set in 2006 – to a fresh high sometime this year. Arizona prices were up 0.6% for the month and 6.8% for the past year. Home prices in Arizona are still 21.4% below the peak.

The Labor Department’s JOLT survey, or Job Openings and Labor Turnover, shows there were 5.5 million job openings on the last day of December. That was essentially flat compared to November. But 5.3 million people were hired during the month, up from 5.2 million in November. Fewer people quit jobs voluntarily in December: 3 million compared to 3.1 million in November. “Quits” are tracked as a signal of how confident workers are in their ability to secure another job elsewhere.

Philadelphia Fed President Patrick Harker said he could support raising interest rates at the central bank’s March meeting if job market momentum holds up, growth continues and wages rise. John Williams, President of the San Francisco Fed, said last week that he sees the March policy meeting as a possible rate-hike candidate.

And on the flip side, Minneapolis Fed President Neel Kashkari published a blog post today stating the economy has not reached the point in terms of inflation and employment that would necessitate aggressive monetary policy. Kashkari wrote: “From a risk management perspective, we have stronger tools to deal with high inflation than low inflation.” Investors give roughly a one in four chance of a quarter-point increase in March, per federal fund futures.

Betsy DeVos was confirmed by the U.S. Senate to be education secretary, but only after Vice President Mike Pence was called in to break a tie that threatened to defeat her. It’s the first time in US history that a vice president has needed to intervene in a cabinet nominee’s confirmation.

The Department of the Army announced today that it has completed a presidential-directed review of the remaining easement request for the Dakota Access pipeline, and has notified Congress that it intends to grant an easement. Thousands of predominately Native Americans protesters boycotted the $3.8 billion pipeline’s construction in the state of North Dakota last year. The Standing Rock Tribe have said that they will fight the decision in court.

Last week President Trump signed an executive order to roll back the Dodd-Frank Act – the 2010 legislation meant to help protect taxpayers from another financial crisis. And Congress has acted, by getting rid of the Dodd-Frank rule that forces huge oil and gas companies to disclose how much they pay foreign governments while they’re doing business abroad.

Three federal judges on the Ninth Circuit Court of Appeals are set to hear oral arguments this evening on whether Trump’s travel ban will remain suspended for now; the court is not expected to decide on the constitutionality of the ban. The central question for the appellate court is whether US District Judge Robart abused his discretion by putting a temporary hold on the travel ban.

Oil prices slipped as lower production by OPEC and other exporters was undermined by growing evidence of a revival in U.S. shale production and sluggish demand. Prices have been supported over the last two months by efforts by the Organization of the Petroleum Exporting Countries and other exporters to cut output by almost 1.8 million barrels per day in the first half of 2017.

But while OPEC and Russia have together cut at least 1.1 million barrels per day so far, rising U.S. production is compensating for the shortfall. After the close, the American Petroleum Institute estimated that U.S. crude stockpiles had surged 14.2 million barrels last week.

BP’s fourth quarter earnings came in below analyst expectations, with the company saying that its cash flow won’t cover spending and dividends until Brent crude rises above $60 a barrel.

Statoil, Norway’s biggest oil company, said that it is targeting another $1 billion in cost savings after reporting an unexpected loss in the fourth quarter.

General Motors said fourth-quarter net income fell partly because of $500 million in foreign exchange losses, while the automaker forecast 2017 profit per share would be flat to slightly up from 2016. Excluding one-time items, GM earned $2.4 billion, or $1.28 a share, in the latest quarter, down 14 percent from a year earlier. The adjusted result beat analysts’ expectations of $1.17 per share.

Hourly workers for General Motors will get record bonus checks of up to $12,000 after the company reported booming sales in North America. The profit-sharing checks owed to GM’s 52,000 United Auto Workers-represented workers are based on a simple formula. They get about $1,000 for every $1 billion in annual pre-tax North American profit, according to a formula adopted as part of contract negotiations in 2011. Record U.S. industry vehicle sales powered GM to a $12 billion North American profit in 2016, up from $11 billion a year earlier.

After the closing bell, Disney reported quarterly earnings that beat expectations, but revenue fell short of estimates. The company posted first-quarter earnings per share of $1.55 on $14.78 billion in revenue.

Michael Kors Holdings reported a bigger-than-expected drop in comparable sales for the holiday quarter and forecast current-quarter profit well below estimates. Sales at stores open for more than a year fell 6.9 percent in the quarter ended Dec. 31, falling for the seventh time in eight quarters. Kors is trying to regain its brand value by reducing supplies to department stores, which have been heavily discounting its products to drive traffic.

Gap raised its profit outlook for the fourth quarter after reporting better-than-expected sales for the holiday shopping period; sales improved at its Gap and Old Navy stores.

21st Century Fox reported adjusted quarterly profit of 53 cents per share, 4 cents a share above estimates. Revenue was just slightly below estimates. Profit was up 27 percent over a year earlier, as ad sales and affiliate fees increased.

Apple pulled ahead of Samsung in smartphone shipments. Apple shipped 78.3 million units in the fourth quarter, surpassing Samsung for the first time in five years. Samsung shipped 77.5 million units, a number that was affected by its exploding-battery problem, which cost it $3 billion in lost sales.

Financial Review

Dominoes on Edge

Sinclair Noe — December 6, 2016

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

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DOW + 35 = 19,251
SPX + 7 = 2212
NAS + 24 = 5333
RUT + 14 = 1352
10 Y + .01 = 2.40%
OIL – .95 = 51.88
GOLD – .80 = 1170.20

Another record high for the Dow industrial average. This is starting to be old hat. Also, a record high for the Russell 2000 –  close but no cigar for the S&P. Still, it looks like the stock market, at least the US stock market loves the idea of Trumponomics, at least for now.

The rest of the financial world – not so much.

The bond market certainly has not been happy. Government bond prices have unraveled. The yield on the benchmark 10-year Treasury note for example, surged from 1.6% at the end of September to 2.40% today. And there is the inverse relationship to price and yield; as yield moves higher prices moves lower, or in this case prices have cratered.

So, is the stock market or the bond market smarter when it comes to predicting what’s next for broader financial markets and the economy? Will inflation sour the growth outlook, and which market will reflect that sooner? Perhaps the biggest threat to financial markets right now is a sense of complacency.

The U.S. trade deficit jumped almost 18% in October as imports rose to the highest level in 14 months. The nation’s trade gap climbed to a four-month high of $42.6 billion. October imports increased 1.3% to $229 billion, marking the highest level since August 2015. The U.S. imported more drugs, computer accessories, cell phones and other consumer goods.

Exports, meanwhile, slipped 1.8% to $186.4 billion in October. That’s the smallest amount in three months. The decline in exports was largely related to fewer shipments of farm products such as soybeans and corn as well as petroleum and other industrial supplies.

Bankers are running out of private sector solutions for Banca Monte dei Paschi and have told the Italian lender to prepare for a state bailout this weekend after Matteo Renzi suffered a referendum defeat. Renzi will remain in his job as Prime Minister for at least a week; snap elections have not yet been called.

While financial markets responded relatively calmly, sources told the Financial Times that the political upheaval made it “more difficult” to secure a €1-billion-euro investment from Qatar on which Monte de Paschi’s €5-billion-euro capital-raising plan hinges. Shares in the bank have lost more than 85% in value this year. Plans by leading Italian banks to raise billions of euros from investors to boost their financial strength have been damaged by the outcome of Sunday’s referendum, a leading ratings agency said on Tuesday as it downgraded its outlook for the sector.

Fitch – which said it had a negative outlook on the Italian banking industry for 2017 – said profitability in the sector was already frail before the referendum. So, why no bank run in Rome? Well, Eurozone rules come into effect: first the shareholders lose, then bondholders get bailed in and their bonds are exchanged for stock, and then depositors above the deposit insurance level of €100,000 are forcibly converted to equity. Only then can the government step in with bailouts.

No idea who would buy all the newly converted stock, and without buyers, you have a bank run of sorts. And if you have a bank run of sorts in Italy, the German banks (specifically Deutsche Bank) start looking very, very dangerous. So, the idea that Italian banks are having a hard time finding private recapitalization brings up visions of dominoes on edge.

Despite approving a set of “short-term” debt relief measures, talks between Eurozone ministers and the IMF broke down on Monday with little headway having been made in resolving splits over Greece’s €86-billion-euro bailout. And it looks like the International Monetary Fund has abandoned the bailout program, at least until the Eurozone gives Athens more debt relief or Greece legislates more spending cuts.  The Greek government, facing a population worn down by years of austerity, has warned creditors not to push it too far.

Reaching a deal to cut production is one thing; getting an actual reduction in global output is another. Crude production from OPEC members is likely to have risen to a record 34.16 million barrels a day in November, with African members leading the gains.

Federal and Los Angeles officials said they had been alerted by authorities in another country to a “specific” threat against the city’s Red Line commuter rail system, prompting them to beef up security and alert the public. Los Angeles Police Chief Charlie Beck told a news conference, “This threat is imminent, … it is very specific, but the credibility still needs to be vetted.”

Amazon wants to automate grocery shopping. Amazon is testing a grocery store in downtown Seattle that lets customers walk in, grab food from the shelves and walk out again, without ever having to stand in a checkout line. Customers tap their cellphones on a turnstile as they walk into the store, which logs them into the store’s network and connects to their Amazon account through an app.

The service is called Amazon Go. It uses machine learning, sensors and artificial intelligence to track items customers pick up. These are then added to the virtual cart on their app. If they pick up an item they later decide they don’t want, putting it back on the shelf removes it from their cart. Amazon envisions opening more than 2,000 brick-and-mortar grocery stores under its name, depending on the success of the new test locations. Target and Walmart plan to expand a service that lets shoppers order online and pickup curbside to 1,000 stores by the end of next year.

The Supreme Court ruled that Samsung’s violation of Apple’s smartphone design patents may involve only a component, rather than the entire product – a decision that means Samsung might not have to pay penalties reaching into the hundreds of millions of dollars. The justices reasoned that the patent infringement could affect just a component of the phones, such as their appearance, rather than all their capabilities.

The legal battle between the two tech giants represented the first design patent case to reach the high court in more than a century. A jury in 2012 had ruled that because Samsung infringed on three of Apple’s iPhone design patents, it must fork over the entire profits from the phones in question. Now the case will return to the U.S. Court of Appeals for the Federal Circuit to determine what portion of its profits Samsung must pay – a process several justices predicted will be difficult.

In a separate case, the Supreme Court sought to crack down on insider trading, ruling unanimously that tips passed between relatives and friends are illegal even if the corporate insider receives no financial benefit.

The decision marked the first time the high court had clarified what constitutes insider trading in nearly two decades, and it upended a legal standard set by a New York-based federal appeals court in 2014 that had made prosecutions more difficult. The decision was written by Justice Samuel Alito, saying: “Giving a gift of trading information is the same thing as trading by the tipper followed by a gift of the proceeds.”

Wall Street has been watching the case carefully for a sign of where the justices stand on the issue. The earlier case, which the high court refused to hear, made it almost impossible to obtain convictions unless prosecutors presented evidence showing the tipster received a direct benefit. The high court called that decision “inconsistent” with its precedents.

Requiring that insiders get rewarded didn’t sit well with most of the justices during oral argument in October. In some instances, Justice Stephen Breyer said, “to help a close family member is like helping yourself.” Federal prosecutors have used a 1983 rule, like the one agreed upon by the justices, to convict both corporate insiders and the people they tip off. Maintaining such a rule, Justice Elena Kagan said last month, was important to maintain “the integrity of the markets.”

A group effort? YouTube, Facebook, Twitter and Microsoft are stepping up efforts to remove extremist content from their websites by creating a common database that will be up and running in early 2017. The web giants will share “hashes” – unique digital fingerprints they automatically assign to videos or photos – of terrorist material to enable their peers to identify the same content on their platforms.

5G and its multi-gigabit cellular speeds probably won’t hit the market until 2020, but AT&T has started testing the technology inside of one of Intel’s offices in Austin, TX. The company is particularly interested in how the new network will stand up to streaming 4K video, but will also test a wide variety of uses, including VPN, VoIP, “unified communications applications” and good old internet access.

Financial Review

Libor Antitrust Claims Revived

Sinclair Noe — May 23, 2016

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

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DOW – 8 = 17,492
SPX – 4 = 2048
NAS – 3 = 4765
10 Y – .01 = 1.84%
OIL – .33 = 48.08
GOLD – 3.70 = 1249.20

If you were actively trading the markets today – well, you were probably falling asleep. It was like watching paint dry. The S&P 500 index traded in an 8-point range for the session, drifting from positive to negative without conviction.

Including today, we’ve had 98 trading days this year. On 20 of these days, the S&P moved 0.1% or less. That’s just over 20% of the time. In the prior 10 years, there was a total of 2517 trading days. And the S&P had a total of 288 moves of 0.1% or less. That’s just over 11% of the time. There has been plenty of volatility but it has been interspersed with indecision.

John Williams, president of the Federal Reserve Bank of San Francisco, said Sunday the presidential election wouldn’t prevent the central bank from raising interest rates later this year. Mr. Williams has said that he favors raising rates two or three times this year.

St. Louis Fed President James Bullard said today that the strength of the U.S. labor market, inflation levels that are closer to the Federal Reserve’s target of 2% and easing international pressures are three factors that support the Federal Open Market Committee’s aim for a slow normalization of interest rates. According to FOMC member and Boston Fed President Eric Rosengren the U.S. is on the verge of meeting most of the economic conditions the Fed has set to increase interest rates next month.

The market is trying to digest last week’s Fed minutes and the jawboning from policymakers. Everyone will be following the economic data closely over the next 3 weeks. Meanwhile, the bond market has done some of the work for the Fed; since last Wednesday’s release of FOMC minutes yields have jumped, but the Fed can’t just talk about raising rates and then fail to do the deed without a severe loss of credibility.

Bayer has confirmed its offer to acquire Monsanto with a $122 per share all-cash bid that values the U.S. agribusiness at $62 billion. The drug and chemicals giant anticipates annual earnings contributions from synergies of around $1.5 billion after three years, and said it would finance the deal through a combination of debt and equity.

Bayer said a deal would boost earnings per share by a “mid-single-digit percentage” in the first full year after completion, and by more than 10 percent thereafter. Bayer would likely abandon the Monsanto name following the purchase, which would help distance Bayer from Monsanto’s link to genetically modified foods.

The kind of genetically modified seeds that Monsanto started to sell two decades ago now account for the majority of corn and soybeans grown in the US. But that doesn’t mean you want to bet the farm on GMOs. In the United States organic food sales have grown steadily at around 10 percent a year since the Great Recession (and at higher rates before that), which puts the stock market to shame.

In 2015 organic product sales revenue grew 11 percent, while the rest of the food market grew at a rate of 3 percent, according to the Organic Trade Association’s annual survey of the industry. Total sales reached $43.3 billion, which makes the organic industry a force to be reckoned with. For comparison, Monsanto brought in just under $15 billion in revenue last year.

Anthem and Cigna are quarreling and could delay their merger. The Wall Street Journal reported that disagreements could delay antitrust approvals, which would make the $48 billion deal possible. The report said the two health insurers accused each other of violating the terms of their agreement announced last July. A deal would create America’s largest health insurer by members.

Tribune Publishing rejected Gannett’s latest $864 million takeover offer, saying the$15 per share in cash was inadequate, and they have a turnaround plan in place. Tribune Publishing, the owner of the Los Angeles Times and the Chicago Tribune, said billionaire Patrick Soon-Shiong invested $70 million in the company, becoming its second largest shareholder. Still, Tribune said it had invited Gannett to an agreement under which the companies could engage in discussions to see whether a transaction was in the best interests of Tribune and Gannett shareholders.

Ares Capital Corp, an investment and finance company focused on mid-sized firms, is buying smaller rival American Capital Ltd in a cash-and-stock deal valued at $3.4 billion to better fill the credit gap created as big banks turn cautious. The deal, which does not include American Capital’s mortgage management unit, comes about five months after American Capital said it would solicit offers. Ares is the biggest BDC, or Business Development Company, in the United States by assets while American Capital, in addition to operating as a BDC, has a large asset management business.

Due to the U.S. crackdown on tax inversions, CF Industries is calling off an $8 billion deal to acquire several European and North American operations from OCI of the Netherlands. The two said that they were unable to restructure the acquisition, which would have created the world’s largest publicly traded nitrogen company, in a way that would be attractive to their shareholders.

Sixteen of the world’s largest banks must face antitrust lawsuits accusing them of harming investors who bought securities tied to Libor by rigging the interest-rate benchmark, a ruling that an appeals court warned could devastate them.

The appellate judges reversed a lower-court ruling on one issue, whether the investors had adequately claimed in their complaints to have been harmed, while sending the cases back for the judge to consider another issue: whether the plaintiffs are the proper parties to sue, in part because their claims, if successful, provide for triple damages that could overwhelm the banks.

About a dozen firms have paid almost $9 billion in fines to resolve government investigations around the world into rigging of the key benchmark. The ruling by a three-judge panel opens the possibility the banks may have to pay billions more. Libor, or the London Interbank Offered Rate, underpins hundreds of trillions of dollars of transactions and is used to set rates on credit cards, student loans and mortgages. It is calculated based on submissions by banks.

In their lawsuits, the plaintiffs claim that beginning in 2007 the banks colluded to depress the Libor rate to minimize the amount they had to pay out on investments linked to the benchmark. The Libor-tied investments included asset swaps, collateralized debt obligations and forward rate agreements. The appeals court overturned a 2013 ruling which said the investors had failed to show that they were harmed in a way that would permit them to sue under U.S. antitrust law. Last year, the U.S. Supreme Court permitted the bondholders to appeal the dismissal of their antitrust claim.

The Second Circuit reinstated the lawsuit today, ruling that the alleged horizontal price-fixing constitutes an antitrust violation, basically the district judge got it wrong by adopting a categorical rule that because the banks were cooperating in setting Libor they could not be violating antitrust rules. That argument is that since banks operate as both borrower and lender in Libor transactions, any conspiracy to gain as a borrower would be offset by losses as a lender. However, there might be another argument: that the banks suppressed Libor during the financial crisis to boost earnings or make their finances appear healthier.

The New York-based appeals court remanded the case so that the lower court could reach the second component of standing for asserting an antitrust injury – whether the bondholders are efficient enforcers of antitrust law; in other words, the lower court could dismiss the case again, for new reasons.

Greece’s parliament has approved a raft of fresh taxes and austerity measures needed to unlock further rescue loans, as the country’s most influential creditors – Germany and the IMF – remain deadlocked over debt relief. “Greeks have already paid a lot, but this is probably the first time that the possibility of these sacrifices being the last is so evident,” Prime Minister Alexis Tsipras told lawmakers. Athens hopes the measures will bolster sentiment ahead of tomorrow’s key Eurozone finance ministers meeting.

Holders of bonds from Puerto Rico’s Government Development Bank are suing to challenge aspects of a debt-moratorium law that island officials say is crucial to maintaining essential services. The federal lawsuit names Puerto Rico’s Governor and Treasury Secretary as well as an unidentified bank receiver. It argues that amendments give preferential treatment to local creditors at the expense of others in violation of American and Puerto Rican law.

The U.S. will fully lift the decades long ban on sales of lethal arms to Vietnam. Speaking in Hanoi, President Obama said lifting the arms embargo would remove one of the last vestiges of the Cold War, it also opens up non-military markets. Vietnam’s VietJet has agreed to order 100 Boeing 737 MAX 200 airplanes, in a deal worth $11.3 billion based on list prices. Delivery of the planes will run for four years beginning in 2019, and will make the airline one of the fastest growing low-cost carriers in the region.

More than 38 million Americans—the most since 2005—are expected to travel during this year’s Memorial Day holiday period, May 26 through Monday, May 30 – and about 90% are expected to drive.  AAA reports gasoline prices are the lowest they’ve been this time of year since 2005. The national average price is $2.26 for a gallon of gasoline; that’s up significantly from the $1.70 a gallon that regular grade gas hit in February but down 40-cents from the average price last Memorial Day. Prices are expected to inch higher over the next few days, heading into the holiday. Meanwhile, truckers will pay about 50-cents per gallon less for diesel versus last year.

Financial Review

Illusion of Growth

Sinclair Noe — May 17, 2016

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

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DOW – 180 = 17,529
SPX – 19 = 2047
NAS – 59 = 4715
10 Y + .01 = 1.76%
OIL + .78 = 48.50
GOLD + 5.10 = 1280.10

One day up, one day down. If you can spot a trend, give yourself a pat on the back.

Prices at the retail level increased in April at the fast pace in more than 3 years.  The CPI, or consumer price index, rose a seasonally adjusted 0.4% last month. Americans paid more for medical care, food, recreation, tobacco, motor vehicle insurance, airline fares and grooming. Much of the recent increase has been driven by higher oil prices.

A spike in gas pushed the energy index up by 3.4% in April. Food prices also rose 0.2% last month, though the cost of groceries has fallen in the past year. Stripping out food and energy, so-called core consumer prices rose 0.2% in April. The CPI has risen just 1.1% in the past 12 months. The core CPI increased 2.1% in the 12 months ending in April.

So, we really are pretty close to the Fed’s target of 2%, depending on which numbers you, or the Fed, consider important. And so several Fed officials have been talking up the idea of a June rate hike, which just kills the mood on an otherwise beautiful Tuesday.  Atlanta Fed President Dennis Lockhart and San Francisco Fed President John Williams said the Fed’s decision on whether to hike rates at the June FOMC meeting depends on the data, but June is “certainly” on the table.

The Fed has said that the effect of low oil prices was “transitory” and with a big jump in the CPI last month, it looks like we are seeing the transition. This means expectations for a rate hike are now being pulled forward, which probably means weaker markets. Tomorrow, we get the minutes from the April FOMC meeting. If the policymakers are strategic, they will have been clever enough to have included a serious debate about hiking rates in June.

Construction on new houses rebounded in April after a sharp dip in the prior month. Housing starts climbed 6.6% last month to an annual pace of 1.17 million. Construction on apartments, condos and other buildings with at least five units surged 10.7%. Single-family home starts advanced a smaller 3.3%. Permits are running 5.3% below year-ago levels.

Industrial production grew 0.7% in April – the fastest monthly rate in 17 months, bouncing back after two straight monthly declines as auto production rebounded and cooler temperatures boosted utility output. This was only the second increase in industrial production in eight months. Compared to a year ago, production was down 1.1%.

US companies stepped up big to support their own shares at the start of the year, making the first quarter potentially one of the best ever for share buybacks. Based on preliminary data, share repurchases are 20 per cent higher in the first three months of the year versus the fourth quarter and 31 per cent above the year-ago period. Among the biggest buyers of their own shares were Apple, General Electric, McDonald’s and Boeing, while ExxonMobil has significantly cut back on its share repurchases after falling oil prices have hit the energy industry.

Companies have been big buyers of their own stock for the past few years, helping to boost earnings per share as revenue growth has shriveled.  Activist investors pushed for better returns; over the long-term you improve returns by re-investing in the business, improving innovation and productivity; the quick fix is to buy back shares.

Coming into 2016, rising rates were expected to curtail share repurchases as it would become more expensive to borrow to fund them, and better uses would be found for cash. However, the downturn in the market and expectations for fewer rate rises combined to create a nice scenario for buybacks. The question is, how long can this continue? For the past 7 years, the market has been propped up with easy money from the Fed, the market has grown dependent on finance as an engine of growth, or finance as the illusion of growth.

The IMF is pressing the Eurozone to let Greece skip paying interest or principal on bailout loans until 2040. The IMF is also pressing for Greece’s interest rate on its Eurozone loans to be fixed for 30 to 40 years at its current average level of 1.5%, with all interest payments postponed until loans start falling due. Eurozone governments, led by Germany, are reluctant to make such major concessions on their loans to Athens, which currently total over €200-billion-euro, but they also want the IMF to rejoin the bailout as a lender to boost the program’s credibility.

A compromise between Germany and the IMF is needed by June, when Greece is in danger of running out of money to pay its bills, and definitely by July, when major debts fall due. This is all happening as the UK considers a referendum to exit the Euro Union.

Greece is entering the seventh year of its troubled bailout still struggling to begin a recovery. The country has largely closed the gaping budget deficit that triggered its debt crisis. But the IMF-European bailout—including austerity measures that in total have amounted to more than 30% of GDP so far—contributed to a 25% decline in the country’s economic output since before the debt crisis.

Portions of Hong Kong have been shut down as part of a drastic security increase as the city prepares for a rare visit by National People’s Congress Chairman Zhang Dejiang. He will be the first senior Chinese official to come to Hong Kong since the 2014 Occupy pro-democracy demonstrations which shut down the territory’s financial hub for months. Zhang is scheduled to speak at an economic conference, but will also meet with a small group of pro-democracy legislators' tomorrow evening.

Warren Buffett has several rules for investing. The first rule is don’t lose money. The second rule is don’t forget the first rule. Also, Warren Buffett does not bid in auctions. Warren Buffett does not invest in technology. More like guidelines than hard and fast rules. Buffett announced a nearly $1 billion stake in Apple, and he’s already lost about a $100-million (give or take); he also announced he’s financing a bid for Yahoo!’s internet assets as part of a group along with Quicken Loans founder Dan Gilbert. Refer back to Rule number one.

Jack Dorsey is making it easier for Twitter users to stick more stuff in their tweets. Not by dropping the service’s famous 140-character limit – an idea the company had previously floated – but by expanding it, in a way: Twitter won’t count the characters used to insert photos, links or other media into tweets. The change could happen in the next two weeks.

LendingClub, which plunged 51 percent last week with the surprise departure of its leader and disclosure of faulty internal controls, dropped again this morning following a regulatory filing from the company that said strategies to restore investor confidence and obtain new capital for loans might include equity or debt sales, fee changes or other moves that could be “costly or dilutive” to shareholders. Lending Club has received a subpoena from the DOJ, and says it “intends to cooperate” with the department.

Phone book publisher Dex Media has filed for bankruptcy protection after reaching a restructuring deal with creditors. The Chapter 11 announcement marks the fifth time in seven years the firm or its predecessors have found themselves in a bankruptcy court as yellow-pages companies struggle with the move of advertisers and consumers to the Internet.

Picture an 18-wheel truck barreling down the highway with 80,000 pounds of cargo and no one but a robot at the wheel. A team of former Alphabet executives is launching a start-up called Otto, O-T-T-O, focused on self-driving trucks, in an attempt to improve driverless technologies in the long-haul trucking industry. Otto plans to sell kits to retrofit existing trucks with autonomous platforms, but has not disclosed when they will go on sale. The technology will only work on highways for now, with human drivers required off-highway, potentially allowing the vehicles to travel much greater distances.

The Supreme Court has rejected Exxon Mobil Corp’s appeal of a $236 million judgment against the oil company in a case brought by the state of New Hampshire over groundwater contamination linked to a gasoline additive. The justices left in place the New Hampshire Supreme Court’s 2015 ruling upholding the judgment by a jury that in 2013 rejected Exxon’s claims that the contamination linked to its fuel additive was not its fault but rather the fault of the local gas stations and storage facilities that spilled it.

Exxon argued in its appeal that its due process rights were violated because New Hampshire had not proved the company’s liability for the alleged pollution at each individual site. The additive at the center of the case is called methyl tertiary butyl ether, or MTBE. It is an oxygen-containing substance that was added to gasoline to promote more complete combustion and reduce air pollution. It was one of several additives that had been recommended by regulators to reduce emissions but has now largely been phased out of the U.S. fuel supply because of the hazard it poses to groundwater. New Hampshire officials called the $236 million judgment the largest MTBE-related verdict since states and other agencies began making claims for remediation and other damages.

The court agreed to hear exactly zero new cases, continuing to set a sparse stage for its next term, which may see the lightest caseload in its already-light recent history. So far, only 12 cases are on the court’s docket for the October 2016 term, which runs through June 2017. The most likely reason for the slowdown is that there are now just 8 justices (split 4-4) and the court is reluctant to take on an issue in which it might not be able to provide a clear answer.