Financial Review

The Streak

Sinclair Noe — September 18, 2017

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DOW + 63 = 22,331 (record)
SPX + 3 = 2503 (record)
NAS + 6 = 6454
RUT + 9 = 1441
10 Y + .03 = 2.23%
OIL + .05 = 49.94
GOLD – 12.10 = 1308.10

Top Cryptocurrencies

	Name	Symbol	Price USD	Market Cap	Vol.	Total Vol. %	Price BTC	Chg. % 1D	Chg. % 7D
	Bitcoin	BTC	3,996.0	$66.00B	$1.91B	38.60%	1	-2.16%	-6.17%
	Ethereum	ETH	289.40	$27.17B	$959.96M	19.36%	0.0719694	-2.49%	-4.60%
	Bitcoin Cash	BCH	480.38	$7.86B	$474.39M	9.57%	0.118807	-1.49%	-13.34%
	Ripple	XRP	0.18800	$7.13B	$84.20M	1.70%	0.0000466	-2.68%	-14.53%
	Litecoin	LTC	54.660	$2.87B	$411.13M	8.29%	0.0135419	-2.96%	-20.48%
	Dash	DASH	326.15	$2.45B	$47.40M	0.96%	0.0810799	-2.85%	0.25%
	NEM	XEM	0.23864	$2.18B	$6.46M	0.13%	0.00006056	-4.42%	-5.82%
	IOTA	MIOTA	0.58250	$1.60B	$24.99M	0.50%	0.00014478	-4.11%	-3.93%
	Monero	XMR	98.50	$1.48B	$60.96M	1.23%	0.0245064	-3.15%	-13.95%
	Ethereum Classic	ETC	11.8487	$1.12B	$123.42M	2.49%	0.00292943	-2.72%	-22.35%

The Dow and the S&P 500 hit record highs. The Dow has posted gains for 7 consecutive sessions and 5 consecutive record high closes. The was the 40^th record high for the Dow this year.

The S&P 500 topped 2500 Friday and held that milestone level today. At the start of the year, bullish analysts were anticipating S&P 2500 by the end of the year, so take the next 3 months off, go home and relax.

Assuming nothing explodes, the big economic event this week will be the Fed FOMC meeting. The Fed is expected to begin Quantitative Tightening by beginning to sell off some of its $4.5 trillion dollar in Treasuries and mortgage backed securities.

On Wednesday, the Fed will wrap up its 2-day meeting on monetary policy and likely announce that it will start selling in October – just a little bit, at first. You’ll hardly notice – they say – or at least they hope you won’t notice. Fed policymakers hope the sell-off will be like watching paint dry.

The central bank is trying to avoid a repeat “taper tantrum,” the swift run up of nearly 1 percentage point on the yield of the 10-year Treasury in 2013 after then-Chairman Ben Bernanke discussed the tapering of bond purchases for the first time. And so, the Yellen-led Fed has been extremely transparent about its plans to start selling some of those bonds.

It seems inevitable that such a big seller will push down prices, which would, in turn, push yields higher. And yet, that has not been the bond market response. The Fed announced plans for a sell-off in July, and since then, yields on the 10-year Treasury note have sunk from 2.28% to a low of 2.04% before bouncing back up to 2.23% today. The 2-year note remained flat during that same time.

The plan that has been laid out calls for the balance sheet to initially shrink by only $10 billion per month. The pace of the run-down would then increase by $10 billion every quarter, up to a maximum of $50 billion per month. And the Fed is expected to keep a very sizeable balance sheet.

And other central banks around the world are still buying, so there are plenty of buyers to soak up the excess. There’s momentum in the market. There’s lots of cash. Even though the Fed’s about to reduce their balance sheet, you continue to have aggressive global monetary policy.

Defense contractor Northrop Grumman said it would buy the missile and rocket maker Orbital for about $7.8 billion in cash, with plans to establish a new, fourth business sector. Orbital has billion-dollar contracts with NASA as well as the US Army.

The deal, expected to close in the first half of 2018, comes as the firing of missiles by North Korea in recent months has focused attention on missile-defense systems. Northrop’s offer price of $134.50 an Orbital share represents a premium of 22% over the stock’s Friday close.

Hurricane Maria is rapidly intensifying in the Caribbean and is likely to hit some of the same areas recently devastated by Hurricane Irma. Puerto Rico appears to be directly in Maria’s path, with the Virgin Islands also projected to be near the storm’s eye.

Maria is now a Category 4 as it moves closer to the islands over the next 48 hours. It is still too early to predict if Maria will hit the US mainland. Meanwhile, Hurricane Jose is traveling up the East Coast of the US and could affect an area from North Carolina to New England. The National Hurricane Center has issued a tropical storm warning for parts of New England.

The National Association of Home Builders’ index for September showed that builder confidence in the market for newly built single-family homes dropped during the month on worries that the recent hurricanes will make it difficult to find workers and materials. The NAHB/Wells Fargo housing-market index fell 3 points to 64, and August’s reading was cut by a point to 67.

Obamacare repeal is on the brink of coming back from the dead. Senate Majority Leader Mitch McConnell and his leadership team are considering voting on a bill that gets rid of the individual and employer mandates and the 2.3% tax on medical devices, and block-grants money to states, leaving reform up to governors.

It would be a last-ditch attempt to repeal Obamacare before the GOP’s power to pass health care legislation through a party-line vote in the Senate expires on Sept. 30. No final decision has been made, but the GOP leader has told his caucus that if the bill written by Sens. Lindsey Graham and Bill Cassidy has the support of at least 50 of the 52 GOP senators, he will bring it to the floor – and once again the fate of repeal may rest with Arizona Senator John McCain.

Democrats are demanding a Congressional Budget Office score on the latest Obamacare repeal plan. The CBO, a non-partisan fiscal analysis unit of Congress, said it will make a preliminary assessment of the bill’s impact next week. But it said it won’t be able to estimate the impact on the deficit or changes in insurance coverage or premiums for several weeks.

The Justice Department is investigating whether Equifax executives violated insider-trading laws when they sold Equifax shares before the company disclosed the hack. The three senior executives dumped almost $2 million worth of stock days after the company learned of the breach.

The company’s first order of business ought to have been to create a simple way for people to figure out if their data was potentially compromised. On this count, Equifax failed and continues to fail.

If you have tried to go on the Equifax site to see if your data has been compromised, you have probably been bounced from here to kingdom come and arrived at the idea that Equifax has no idea who or what has been compromised. By the way, the FTC has issued a scam alert – if someone calls you on the phone and says they are from Equifax, they are not, it is a scam, hang up.

The Consumer Financial Protection Bureau has ordered National Collegiate Student Loan Trusts and their debt collector, Transworld Systems to pay at least $21.6 million in penalties and restitution for illegally filing debt collection lawsuits.

According to the agency, the companies allegedly sued borrowers without being able to prove the debt was owed or pursued collection on loans that were too old to sue over, and relied on false and misleading legal documents. A federal judge must still sign off on the judgments against the National Collegiate Student Loan Trusts, a collection of 15 trusts that own more than 800,000 private student loans.

Toys R Us, the largest toy retailer in the country is expected to file for Chapter 11 bankruptcy protection today. The timing is unusual, just before the start of the holiday shopping season. Toys R Us vendors fell on the news: Mattel dropped 6.2%, Hasbro down 1.7%. While this bankruptcy might be considered just another brick and mortar firm falling to online sales, the reality has more to do with private equity firms, KKR and Bain, loading up a successful firm with debt.

Last week, Chase Bank CEO Jamie Dimon recently rejected Bitcoin as a ‘fraud,” likely causing additional sell offs after the news of the Chinese exchange ban was released. Dimon commented that Bitcoin was in a bubble not unlike the famous Tulip bubble during the 17th century. However, in a somewhat surprising move, JP Morgan purchased a large block of Bitcoins just after the CEO’s harsh criticisms.

Financial Review

London Calling

Sinclair Noe — March 29, 2017

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DOW – 42 = 20,659
SPX + 2 = 2361
NAS + 22 = 5897
RUT + 4 = 1371
10 Y – .02 = 2.39%
OIL + 1.23 = 49.60
GOLD + 2.10 = 1254.40

Brexit is Brexit. Prime Minister Theresa May formally began Britain’s divorce from the European Union today, declaring there was no turning back. With the simple hand-off of a letter in Brussels, the British government became the first to trigger Article 50 — the mechanism for nations to exit the European Union.

The UK now has two years to negotiate the terms of the exit before it comes into effect in late March 2019. Over the next 2 years, the Brits will negotiate with 27 other EU states on finance, trade, security and other complex issues.

As the BBC points out: “Unpicking 43 years of treaties and agreements covering thousands of different subjects was never going to be a straightforward task. It is further complicated by the fact that it has never been done before and negotiators will, to some extent, be making it up as they go along.

The post-Brexit trade deal is likely to be the most complex part of the negotiation because it needs the unanimous approval of more than 30 national and regional parliaments across Europe, some of whom may want to hold referendums.” The outcome of the negotiations will shape the future of Britain’s $2.6 trillion economy, the world’s fifth biggest, and determine whether London can keep its place as one of the top two global financial centers.

For the EU, already reeling from successive crises over debt and refugees, the loss of Britain is the biggest blow yet to 60 years of efforts to forge European unity in the wake of two world wars. Its leaders say they do not want to punish Britain.

But they are expected to take a hard stand, in hopes of discouraging other member states possibly considering a similar break away. German Chancellor Angela Merkel has rejected one of Theresa May’s key Brexit demands, insisting negotiations on Britain’s exit from the European Union cannot run in parallel with talks on the future UK-EU relationship.

Meanwhile, Prime Minister May is trying to hold the UK together. Nicola Sturgeon has pledged to press on with a fresh independence referendum after dismissing Theresa May’s promise of substantial new powers for Scotland after Brexit. The first minister said May’s decision to trigger article 50, was one of the most destructive acts by a British leader in modern history, threatening hundreds of thousands of jobs across the UK.

Donald Tusk, the president of the European council, warned after receiving May’s letter that there would be “no winners” from Brexit, and the next two years would be a matter of “damage control”.

Is right now as good as it gets for the US economy? San Francisco Fed President John Williams seems to be saying we’re getting pretty darn close. Williams said that the economy was “in a good place,” and that the Fed’s job has now changed from getting the economy back on track to keeping the economy on track.

It’s an important distinction. As the economy has recovered from the Great Recession of 2009 when the unemployment rate hit 10%, the Fed has moved from stabilizing the US economy and bringing it back to life, to now keeping an eye on making sure it doesn’t overheat as the rate of unemployment has dropped to 4.7%. And right now, we basically have a Goldilocks economy – not too hot, not too cold. Williams said he “would not rule out more than three increases total for this year.”

Meanwhile, Federal Reserve Bank of Boston President Eric Rosengren argued today that four hikes in 2017 may be needed to guard against economic overheating. Rosengren said, “The economy is in a much better spot. We’re basically where we want to be, and we don’t want to grow so much faster than potential at this point that we end up getting to an unsustainable unemployment rate that would be reflected either in inflation or in higher asset prices.”

Chicago Fed President Charles Evans filled out the trio of Fedspeakers today, saying the fundamentals of the US economy are good and calling for another one or two increases in short-term interest rates this year. Evans cast doubt on the Trump administration’s stated intention to boost the growth rate to a 3% to 4% range. The Chicago Fed president said sustainable growth at that level would require “some truly astounding turnarounds in demographic and technological trends,” and the odds of this occurring “seem to be pretty low.”

Contract signings for home sales boomed in February to the second-highest level in a decade. The National Association of Realtors reported pending home sales rose 5.5% in February after falling 2.8% in January. A sale is listed as pending when the contract has been signed but the transaction has not closed. The NAR said the rising stock market and steady hiring helped, as did fears from home buyers of rising interest rates.

Well, that didn’t take long. Yesterday, President Trump signed an executive order, repealing the Clean Power Act. Already, the lawsuits are flying. The Northern Cheyenne Tribe, located in southern Montana, said the administration lifted a moratorium on coal leases on public land without first consulting with tribal leaders about the impact the coal-leasing program has on the tribe, its members and lands.

In a separate lawsuit filed on yesterday by environmental group Earthjustice, a coalition of conservation groups challenged the administration’s moratorium decision, arguing that it imperils public health for the benefit of coal companies.

And the idea of a clean environment has even attracted some strange bedfellows. Exxon Mobil has written to the Trump administration urging it to keep the US in the 2015 Paris climate agreement. Calling the accord “an effective framework,” Exxon cited several reasons to stay in the pact, including the opportunity to support greater use of natural gas, since it creates lower carbon emissions than coal when used for power generation.

Also, the CEO of ConocoPhillips, is saying that the U.S. should stay in the Paris Climate Agreement. For ConocoPhillips and Exxon – as well the non-US oil and gas heavyweights; BP, Royal Dutch Shell, Eni, Total, and Statoil—backing the Paris Agreement is not just riding the trend of increasingly environmentally-conscious businesses.

Those companies with operations all over the world stand to benefit from the Paris Agreement because the nations’ efforts to cut carbon emissions will lead to transitioning from coal-fired plants to gas-fired plants. And natural gas is quite a substantial portion of all those majors’ businesses, investments and profits.

Meanwhile, the White House and House Republicans have quietly begun new talks on repealing Obamacare.  The New York Times writes, Trump’s chief strategist Stephen Bannon has been meeting with members of two Republican factions that sank the bill last week, the Freedom Caucus and the Tuesday Group. Trump told senators at a White House reception Tuesday night that “we are all going to make a deal on health care.”

Following last week’s vote in the Senate, the US House has voted 215-205 to repeal Obama-era regulations governing consumer privacy protection at Internet service providers. If passed into law, the repeal will again allow ISPs to sell consumer information, including browsing history, without customer consent.

A New York law that barred retailers from charging customers more when they use credit cards instead of cash hit a legal roadblock Wednesday when the Supreme Court sent the law back to a lower court for more review. The justices agreed with merchants in New York state that the law curtailed their free speech by mandating what they say to their customers about the credit card fees.

The lower court had upheld the New York law as a pricing regulation only and not as a matter of free speech. The Supreme Court has a standing belief that money is speech, and therefore protected. Maybe now we’ll find out if credit cards are protected speech.

The evolution of stock picking has taken a toll on jobs and fees at BlackRock, as the world’s biggest money manager said it will increasingly rely on data-mining technology to make investment decisions. Over forty staff will be laid off, including some portfolio managers. The revamp marks BlackRock’s biggest attempt to rejuvenate its actively managed equities business as investors shift to ETFs.

Last year, Samsung received dozens of complaints about the Galaxy Note 7 overheating, and in some cases exploding, the company recalled the phones. But replacement phones continued to catch fire, and the company had to recall the devices a second time before killing the product altogether. Samsung lost billions in revenue.

Today, Samsung unveiled the new Galaxy S8, with a big version and a bigger version; they will arrive in stores next month with a starting price of $750. Perhaps the most curious bit of news, though, isn’t about the phones so much as it is an accessory that supports them: the DeX. Short for “desktop extension,” it’s a little dock that effectively turns the Galaxy S8 or S8 Plus into a desktop computer.

Amazon closed today at $874, a new record high. Amazon’s stock price has rocketed 50% in the past 12 months, adding to the net-worth of its largest shareholder, founder Jeff Bezos. The Amazon founder is now worth $75.6 billion, per Bloomberg, surpassing Berkshire Hathaway CEO Warren Buffet ($75.5 billion) and Amancio Ortega, chairman of Inditex fashion group ($74.1 billion). Bill Gates is still the richest man in the world with a net-worth of $86 billion.

Marijuana will be legal for all Canadians over the age of 18 by July 1, 2018. Prime Minister Justin Trudeau’s Liberal Party will officially announce the plan on April 10. The legislation is expected to easily pass through Parliament, as it holds support from major political parties both to the right, and left of Trudeau’s Liberals. As well, a majority of Canadians support legalizing marijuana.