Financial Review

Back-to-Back Hat Trick

Sinclair Noe — September 13, 2017

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

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DOW + 39 = 22,158
SPX + 1 = 2498
NAS + 5 = 6460
RUT + 2 = 1426
10 Y + .02 = 2.19%
OIL + 1.16 = 49.39
GOLD – 8.90 = 1323.50

Top Cryptocurrencies

	Name	Symbol	Price USD	Market Cap	Vol.	Total Vol. %	Price BTC	Chg. % 1D	Chg. % 7D
	Bitcoin	BTC	3,902.2	$64.61B	$2.21B	41.76%	1	+1.36%	-14.17%
	Ethereum	ETH	279.47	$26.37B	$909.52M	17.21%	0.0714781	+1.45%	-14.93%
	Bitcoin Cash	BCH	514.71	$8.39B	$339.79M	6.43%	0.129744	+1.73%	-19.26%
	Ripple	XRP	0.19988	$7.71B	$101.57M	1.92%	0.0000515	+0.95%	-9.81%
	Litecoin	LTC	62.510	$3.28B	$494.06M	9.35%	0.01587	+1.13%	-20.89%
	Dash	DASH	301.50	$2.28B	$27.52M	0.52%	0.0773939	+1.25%	-11.71%
	NEM	XEM	0.23201	$2.10B	$9.07M	0.17%	0.00005972	+0.52%	-21.64%
	Monero	XMR	115.00	$1.73B	$102.05M	1.93%	0.0294635	+4.65%	-3.81%
	IOTA	MIOTA	0.55283	$1.53B	$31.14M	0.59%	0.00014149	-2.31%	-22.97%
	Ethereum Classic	ETC	14.3866	$1.35B	$100.72M	1.91%	0.00363666	+2.64%	-22.47%

Stocks closed near session highs. Most of the day the S&P and Nasdaq traded in negative territory, while the Dow Industrials flipped from positive to negative in a tight range. And the S&P 500 is now pushing 2500. That seems pretty high; some might say overvalued.

Although the dollar index is up for the past 3 days, since the start of the year, the Dollar Index is down about 11%, so from an international investors view, investing in the S&P 500 has been a losing proposition.

In real numbers, stocks are rising, which is what matters most. Going back to the lows of 2009, the S&P 500 is now up 269%, surpassing the 266% advance notched during the 1949 to 1956 bull market, and that means the current bull market is the third strongest in US history.

At 8 1/2 years, the bull market is already the second longest ever, trailing only the 1990-2000 run during the dot-com era. If you look at annualized returns, the market has been running at a less-than red hot 17%.

Trump kicked off his morning with a pair of tweets urging lawmakers to pass tax cuts and reform. Trump hosted a bipartisan round table with lawmakers at the White House to discuss big issues including tax reform and infrastructure.

It’s mid-September and Republicans still can’t pass a budget. That’s because the budget fight is really about tax reform: a clash between Republican leadership and a caucus of arch-conservatives who see this moment — months before any major tax bill is likely to come before the full House — as their best chance to force deep cuts to both tax rates and social welfare spending.

The only way to get any deal passed is through reconciliation. In budget reconciliation, each committee is instructed on how much savings it must produce to pass a “reconciliation bill.” So, how do you solve a problem like cutting taxes without blowing up the deficit? In any scenario, Republicans are relying on projections of increased economic growth from tax cuts to offset the revenue losses from those cuts.

But under most projections, growth alone won’t be enough to offset the full losses from the deepest tax cuts, and that leaves spending cuts. But Republican leadership has promised an increase in defense spending, so that means big spending cuts elsewhere. Democrats and Republicans are unlikely to work together, and the Republican Party is polarized between its own moderates and conservatives.

No budget resolution means no tax reform. Do you know the tax reform plan? No, and you are not alone. The tax reform plan has not seen the light of day. House Speaker Paul Ryan said a tax-reform “outline” will be released the week of Sept. 25 that reflects the consensus of the two congressional tax committees and the Trump administration. Ryan said the House Ways and Means Committee and the Senate Finance Committee would take input after the outline is released and produce bills “in the weeks ahead.”

Congress won’t vote again this year to raise the debt ceiling, Senate Majority Leader Mitch McConnell says. He said the deal passed by Congress to extend the borrowing limit to December 8 doesn’t eliminate the so-called “extraordinary measures” the Treasury secretary can use to keep borrowing.

Meanwhile, the Treasury Department reported this morning that the federal government ran a budget deficit of $108 billion in August, just slightly more than in the same month a year ago. For the fiscal year to date, however, the shortfall is running well ahead of where it was in August of last year. Through this August, the deficit is $674 billion, up 9% from the year-ago period. So far, this fiscal year, spending is up 3% compared to a year ago, and receipts are up 2%.

A handful of Republican senators will fight to repeal Obamacare until the last possible moment. They have less than three weeks. Sens. Bill Cassidy and Lindsey Graham have unveiled the latest version of their health care bill to repeal and replace Obamacare; they have until the end of September to pass the bill using the special budget procedure that allows the legislation to advance without any Democratic votes.

The bottom line is cuts to federal health care spending, in the name of more state flexibility. On its face, this new legislation would encounter many of the same problems that earlier Republican health care bills did: Medicaid cuts and coverage losses. Meanwhile, bipartisan talks have gotten underway for a narrow bill to help stabilize, not roll back, the health care law.

Senator Bernie Sanders unveiled the 2017 version of his “Medicare-for-all” legislation, shifting talk of single payer on Capitol Hill from an abstract conversation over whether the government should provide universal health coverage to a concrete discussion of a specific bill.

Everything from primary care to hospital stays would be covered under the plan without a requirement for out-of-pocket spending on deductibles and co-payments. And patients could still use private insurance programs to cover services deemed not medically necessary by doctors, like cosmetic surgery.

With Republicans in control of Congress, single payer won’t pass, but the idea of single-payer universal health care is gaining popular approval, a recent poll from the Kaiser Family Foundation finds 53% of Americans support the idea.

Inflation at the wholesale level rebounded toward the end of summer, but most of the increase reflected higher gasoline prices. The producer price index, or PPI, rose 0.2% last month. A nearly 10% jump in the cost of gas accounted for most of the increase in wholesale inflation last month. Wholesale food costs, on the other hand, posted the biggest decline in more than two years.

The latest snapshot on wholesale prices, however, indicated that inflation is still muted. Aside from fuel, prices of most other goods and services were little changed. The price of fuel could remain elevated for a while after all the damage caused to refining operations in the Houston area after Hurricane Harvey.

What’s more, Hurricane Irma caused widespread fuel shortages in Florida that could keep pressure on fuel costs nationwide as supplies are rushed to the state. The increase in prices in August pushed the 12-month rate of wholesale inflation to 2.4% from 1.9%, just a tick below a five-year high. The yearly change in the so-called core rate of inflation, however, was unchanged at 1.9%.

Gasoline prices nationwide have surged to $2.65 a gallon from $2.34 in mid-August as flooding from Harvey disrupted fuel supplies, according to American Automobile Association data. The rise in gasoline prices is one reason why bond markets are starting to price in faster inflation.

Hurricane Irma just went from bad to worse. Eight people are dead and more than 100 have been evacuated to hospitals from a nursing home that had no air conditioning. The nursing home, the Rehabilitation Center at Hollywood Hills, had electricity but the transformer that powered the air conditioning failed. The police and state authorities were conducting a criminal investigation into the deaths. Florida Power and Light was alerted to the power outage on Tuesday but they did not send help.

An apology from Equifax CEO in USA Today about the company’s massive cybersecurity breach wasn’t enough. Shares dropped 15% today. Equifax’s stock is now down 30% since the company first revealed the data breach, which exposed sensitive personal information of 143 million Americans, last Friday.

Equifax CEO Richard Smith wrote in an op-ed piece in USA Today  that Equifax is “devoting extraordinary resources to make sure this kind of incident doesn’t happen again.” But Smith did not address the fact that three Equifax executives, including its chief financial officer, sold nearly $2 million in shares in August — just after Equifax learned of the security breach but weeks before it decided to tell consumers and investors.

Financial Review

Carry On

Sinclair Noe — September 6, 2017

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

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DOW + 54 = 21,807
SPX + 7 = 2465
NAS + 17 = 6393
RUT + 2 = 1402
10 Y + .04 = 2.11
OIL + .55 = 49.17
GOLD – 5.90 = 1334.50

Top Cryptocurrencies

	Name	Symbol	Price USD	Market Cap	Vol.	Total Vol. %	Price BTC	Chg. % 1D	Chg. % 7D
	Bitcoin	BTC	4,535.4	$74.84B	$2.01B	33.87%	1	-1.17%	-1.56%
	Ethereum	ETH	326.69	$30.59B	$925.72M	15.61%	0.0713257	-3.16%	-14.52%
	Bitcoin Cash	BCH	626.82	$10.25B	$735.94M	12.41%	0.136414	-3.34%	6.35%
	Ripple	XRP	0.22301	$8.48B	$146.48M	2.47%	0.00004871	-3.23%	-2.85%
	Litecoin	LTC	78.720	$4.09B	$735.92M	12.41%	0.0170777	-3.38%	20.23%
	NEM	XEM	0.29171	$2.63B	$3.85M	0.06%	0.0000645	-3.47%	-6.32%
	Dash	DASH	339.22	$2.55B	$33.61M	0.57%	0.0745771	-3.04%	-8.44%
	IOTA	MIOTA	0.70690	$1.95B	$33.70M	0.57%	0.00015468	-4.40%	-20.62%
	Monero	XMR	118.70	$1.77B	$58.20M	0.98%	0.0259621	-3.50%	-13.37%
	Ethereum Classic	ETC	18.4400	$1.72B	$193.02M	3.25%	0.00397381	-4.45%	14.47%

The major stock indices did what they have been doing all year – shrugged off worries and continued the trend. In the background, the economy continues to slog along with good, not great growth. Companies continue to report good earnings.

Expectations for tax reform and infrastructure spending are diminishing but on the bright side we are not engaged in a nuclear war with North Korea, so it all kind of balances out. Bank of America Merrill Lynch, for one, thinks investors should be more confident on equities. The firm said in a research note that it recommends being bullish given that the first synchronized upswing in the global economy since 2007 is a strong tailwind for earnings.

By its reckoning, the firm figures that global corporate profits are running 13.5 percent higher than last year. That’s in line with the gain in the benchmark MSCI All-World Country Index, suggesting stock prices have not gotten ahead of themselves. To be sure, there are plenty of other issues on the horizon to worry about, but for now the trend is in place until something blows up.

In a rebuke to Republican leaders, Trump backed Democrats’ plan to support a deal that would fund Hurricane Harvey aid but only raise the debt ceiling for three months. Those two items would also be tied to a measure to keep the government open through the end of December, setting up a hugely complicated year end crush of must-pass items. Republicans would have preferred a longer extension to avoid another fight in December.

Democrats could use the opportunity as leverage to attach a provision aimed at codifying into law the Deferred Action for Childhood Arrivals program. Nothing signed yet, but it looks like the debt ceiling crisis has been kicked down the road for now. I’m not sure we can call it bipartisanship but it’s not a debt default.

Debt ceiling jitters were particularly high Tuesday when the Treasury Department auctioned $20 billion of one-month bills at a rate of 1.30 percent, which was higher than the 1.23 percent yield on two-year Treasury notes. Those who were brave enough to buy at those rates saw the value of the bills soar today as the rate dropped to 1.02 percent.

On the stump for tax reform in North Dakota this afternoon, Trump repeated one of his favorite campaign claims: that Americans pay more in taxes than any other country. Except that’s not true.

In fact, the US ranks in the middle of the pack when compared with the roughly three dozen developed countries tracked by the Paris-based Organization for Economic Cooperation and Development. And our tax rate, is ranked fourth from the bottom, among the very lowest.

Stanley Fischer, the vice chairman of the Federal Reserve, announced today that he would resign in mid-October. Fischer joined the Fed’s board in 2014 after a distinguished career as an academic economist and an international policy maker.

Fischer brought a hawkish voice to Fed deliberations on monetary policy, arguing that the Fed should be raising interest rates more quickly, sparring with Janet Yellen, the Fed chair. But he provided reliable support for measures strengthening financial regulation.

Trump has not been in a rush to refill the Fed’s board. There were two vacancies when he took office, and a third seat opened in the spring. So far, the White House has put forward only one candidate, Randal Quarles, a Utah investor who was nominated in July.

Fischer’s departure is unlikely to shift monetary policy in the near term. The Fed is widely expected to announce after its next meeting in mid-September that it will begin to reduce its holdings of Treasuries and mortgage-backed securities.

The Federal Reserve’s latest Beige Book report, which collects and presents anecdotes on economic trends from policy makers’ business contacts around the country. All 12 Fed districts reported moderate to modest economic growth. Companies aren’t passing along higher input costs to consumers in the form of more expensive products and services. Instead, they’re accepting lower profit margins.

Most districts reported limited wage pressures and modest to moderate wage growth. The Fed said that consumer spending increased in most districts and that many contacts were becoming worried about a prolonged slowdown in the auto industry.

The Beige Book, based on information collected on or before August 28, said there was not enough time to gauge the full extent of the flooding from Hurricane Harvey.  The Atlanta and Dallas Fed banks reported the storm created broad disruptions to economic activity along the Gulf Coast.

Economic reports today show the trade deficit rose slightly in July, keeping the U.S. on track to post a larger gap in 2017 than in 2016. The deficit edged up to $43.7 billion in July from $43.5 billion in June.

A reading on services activity, meanwhile, came in better than expected, providing an added lift to the outlook for the health of the U.S. economy. ISM services were at 55.3 in August, compared with 53.9 in the prior period. A reading of at least 50 indicates expansion.

Hurricane Irma has hit a few islands in the Caribbean – including St. Martins and St. Thomas – and is now closing in on Puerto Rico. The imminent threat of a natural disaster comes as the territory deals with a massive economic disaster.

In May the commonwealth filed the biggest municipal bankruptcy in US history. Puerto Rico has $74 billion in debt, and another $50 billion in pension obligations on the books.

The Federal Emergency Management Agency already has about 400 people in Puerto Rico and the U.S. Virgin Islands to help with hurricane preparation and response. Puerto Rico will surely need and get federal assistance. A severe disaster could exacerbate some of the commonwealth’s adverse economic trends, including migration to the U.S. mainland.

The official forecast path shows that Irma’s center could track along or either side of the Florida peninsula. Where Irma turns north will be critical for determining what part of Florida experiences the most dangerous impacts from Irma. Regardless, conditions in South Florida may go downhill as soon as midday Saturday.

Irma is a Category 5 and it is a very large hurricane, wider than the state of Florida; so, despite the uncertainty in its track, there is a threat of rainfall flooding and strong winds capable of triggering power outages, downing trees and perhaps some structural damage will likely occur to some degree well inland from wherever Irma makes landfall into a swath of the Southeast early next week.

And just a side note; the NFL season kicks off Thursday night but I would like to nominate J.J. Watt as the league MVP. The Houston Texan defensive player put together a fund-raising effort for Hurricane Harvey relief, and he has already raised $27 million.

And while we’re at it, a tip of the hat to Oklahoma. The Sooner state has offered aid to burnt orange country. Volunteers from agencies in Oklahoma, such as the American Red Cross, Children’s Disaster Services, Convoy of Hope, Mercy Chefs, the Salvation Army, Southern Baptist Disaster Relief and Operation BBQ will be going to Texas.

Just in case you’re wondering – Operation BBQ is a real thing. It started in 2011, when Joplin Missouri was hit by a tornado.  Volunteers from competition BBQ teams from eight states answered the need to help feed displaced families, police, fire, National Guard and emergency personnel. They served over 120,000 meals over 13 days. Operation BBQ – you may know it by its other name: Ribs Sans Frontieres.

The Gap plans to close about 200 “underperforming” Gap and Banana Republic locations. There are currently about 2,000 Gap and Banana Republic stores worldwide, so the closures would likely impact about 10% of them. Gap declined to specify how many of each brands’ stores will close or where the soon-to-be shuttered stores are located.

One bright spot for Gap has been Old Navy – its less expensive clothing brand. When Gap reported earnings last month, Old Navy outperformed the other brands once again. While comparable sales at Gap fell by 1% and Banana Republic’s sales were down 5%, Old Navy saw a 5% increase.

The company added that it plans to continue making “significant” investments in its online operations, including in artificial intelligence technology. Shares of The Gap were up 7.4% today. Closing 200 stores and the stock jumps higher – no, it doesn’t make sense.

Restoration Hardware announced a forecast for third-quarter and full year adjusted earnings that flew past its previous expectations, sending its shares 30% higher in extended trading. The stock is heavily shorted and the big move looks like a short squeeze.

Intel has won a point in its antitrust battle with the European Commission — and the American technology industry may be feeling a little victorious as well. The Court of Justice of the European Union ordered a lower court on Wednesday to re-examine the 1.6 billion euro, or nearly $1.3 billion, fine imposed on Intel in 2009 for abuse of its dominant position in the computer chip market.

This does not mean Intel is in the clear, just getting a second chance to present their side of the case. The decision is considered a setback for the European Union antitrust authorities who have been investigating American tech giants like Google and Qualcomm.

T-Mobile upped the mobile phone carrier war on Wednesday, announcing an exclusive partnership to offer free Netflix Inc. subscriptions to T-Mobile One family plan customers.

The best selling electric car is the Nissan Leaf, and today, Nissan announced it has updated the car for the first time since it was introduced in 2010. The biggest change – a 200-mile range.

Financial Review

Buckle Up

Sinclair Noe — September 5, 2017

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

Subscribe: Android | RSS

DOW – 234 = 21,753
SPX – 18 = 2457
NAS – 59 = 6375
RUT – 13 = 1399
10 Y – .09 = 2.07%
OIL + 1.33 = 48.62
GOLD + 5.60 = 1340.40

Top Cryptocurrencies

	Name	Symbol	Market Cap	Vol.	Total Vol. %	Price USD	Price BTC	Chg. % 1D	Chg. % 7D
	Bitcoin	BTC	$74.02B	$2.53B	34.53%	$4,473.09	1	9.96%	-2.61%
	Ethereum	ETH	$30.80B	$1.45B	19.87%	$326.11	0.0723002	17.46%	-13.15%
	Bitcoin Cash	BCH	$9.22B	$301.69M	4.12%	$556.93	0.123474	16.29%	1.71%
	Ripple	XRP	$8.50B	$224.64M	3.07%	$0.22	0.00004916	13.04%	0.95%
	Litecoin	LTC	$3.92B	$1.02B	13.97%	$74.33	0.0164803	20.61%	18.46%
	NEM	XEM	$2.67B	$7.12M	0.10%	$0.30	0.00006579	15.05%	3.75%
	Dash	DASH	$2.53B	$50.39M	0.69%	$335.99	0.0744907	16.05%	-7.81%
	Monero	XMR	$1.79B	$107.32M	1.47%	$119.10	0.0264057	20.18%	-8.73%
	IOTA	MIOTA	$1.75B	$38.18M	0.52%	$0.63	0.00013958	23.10%	-23.10%
	Ethereum Classic	ETC	$1.69B	$241.48M	3.30%	$17.78	0.00394118	19.44%	12.06%

Well, this is a rough start to a new month. It will be a wild September on Capitol Hill as Congress faces a massive number of legislative deadlines and initiative launches.

There’s must-pass legislation — like raising the debt ceiling and a bill to fund the government — and some long-gestating projects like the Republican plan to overhaul the tax code and a bipartisan effort to stabilize the individual health-insurance exchanges.

Throw in unexpected issues like funding for the Hurricane Harvey recovery effort, plus re-writing immigration policy with DACA rescinded, plus trying to avoid nuclear winter with North Korea and you might want to keep your seat belt buckled for the remainder of September.

A week after Hurricane Harvey made landfall, devastating Texas with torrential flooding, meteorologists are now intently focused on Hurricane Irma’s dangerous growth and projected path. The storm formed off the coast of western Africa last week and almost immediately started barreling toward the Caribbean Sea.

It has now metastasized into a Category 5 hurricane with winds up to 185 mph and possible storm surge of 11 feet. It is expected to hit or possibly just graze the US Virgin Islands and Puerto Rico tomorrow. It might hit southern Florida by Sunday, or it might skirt to the south of mainland Florida and move into the Gulf of Mexico.

Insurance stocks were the biggest decliners in the S&P 500 Index, with Barclays estimating insured losses in a worst-case scenario at $130 billion. Shares in Carnival, Royal Caribbean Cruises and Norwegian Cruise Line Holdings tumbled as Irma aimed at the South Florida hub for cruise-line operators. Orange juice futures for November jumped over 6% today. Category 5 is the top of the scale.

As of this morning, FEMA’s Disaster Relief Fund, which pays for the agency’s disaster response and recovery activity, had just $1 billion on hand. And of that, just $541 million was “immediately available” for response and recovery efforts related to Hurricane Harvey.

Republicans are planning to attach a provision to raise the debt ceiling to their initial Hurricane Harvey relief package, a move that could limit resistance to the effort to increase caps on government borrowing.

The $7.85 billion aid package to help re-fill FEMA’s coffers is scheduled to be taken up by the House tomorrow and will likely have a debt ceiling increase added when it makes it to the Senate. If the combined bill passes the Senate, it would then be sent back to the House for consideration.

The move is favored by the Republican leadership as a way to gain broader support for the debt ceiling increase, which must be raised by the end of the month to avoid an economic disaster. A bigger question is whether other stuff will be added to the debt ceiling increase. The more that is tacked on, the greater the chance of failure.

By the end of September, Congress must pass a bill to keep the government funded, or it risks a shutdown of nonessential functions. It must also raise the debt ceiling by early October to prevent breaching it and to avoid a default.

The bond market continues to reflect fears that the US government may soon run out of funding. A $20 billion auction on Tuesday for Treasury bills that expire in four weeks — just after the deadline for a bill to fund the government — drew the highest yield since the 2008 financial crisis.

This indicates that bond traders want a premium in return for expecting the government to repay them just as it may be running out of funding. For some perspective, the high yield, at 1.30%, was higher than when the government shut down in 2013.

Deferred Action for Childhood Arrivals or DACA, will end in 6 months. Attorney General Jeff Sessions announced the end of the program this morning, leaving almost 900,000 Dreamers in legal limbo.

No new DACA applications will be accepted after Tuesday. People already enrolled in DACA will continue to be protected until their permits expire, and those whose permits expire before March 5, 2018 can apply to renew for as long as two years.

Renewal applications must be received by October 5 of this year. People whose permits expire after March 5 cannot renew them. Sessions gave no details on how the program would be wound down, but a press release from the Department of Homeland Security — first reported by the news website Axios — said the program would be phased out over six months.

DHS did not rule out that anyone with expired DACA would then be subject to deportation. There will be no formal guidance that former DACA recipients are not eligible for deportation, and ICE officers in the field who encounter them will be making a case-by-case judgment as to whether to arrest that individual and process them for deportation.

The president’s statement makes it sound like Dreamers are often violent members of society who, even when they’re not committing crimes, are busy stealing native-born Americans’ jobs and draining scarce government resources.

The facts, however, paint a different picture.  According to an analysis by the Cato Institute, the typical Dreamer is young and employed at a job that earns about $17 per hour, 95% are either employed or in school, and they pay taxes but they are not eligible for federal welfare.

More than 70 percent of them are pursuing (or have attained) a bachelor’s degree. Dreamers over the age of 25 are more than twice as likely to start a new business than the national average. Cato estimates that ending DACA could cost nearly $280 billion in lost tax revenue over the next decade.

Business leaders and lawmakers from both parties have warned the president that ending the program would have economic and social consequences. Some Republicans, including House Speaker Paul Ryan of Wisconsin, said while they don’t agree with the executive action that began the policy five years ago, it should be up to Congress to come up with a more permanent solution.

The delayed repeal effectively kicks the issue to Congress for a resolution. There are a few legislative possibilities, including two bills introduced by Republican senators. The Dream Act of 2017 would codify parts of the DACA program, and the Bridge Act would extend those same protections for three years to give lawmakers more time to work out a more permanent solution.

So, now the question is whether Congress can get the job done. They still must deal with legislation to fund the government, raise the nation’s borrowing authority and increase disaster relief for victims of Hurricane Harvey and possibly Irma.

Now add in immigration reform – and if they try to tack DACA onto spending or debt ceiling legislation, or if they try to add building the wall onto immigration reform, it will be like throwing a monkey wrench in the sprocket.

What about tax reform legislation? Yea, not this month.

And remember, over the weekend North Korea exploded a test nuclear bomb. South Korea’s Asia Business Daily reported that North Korea had moved what looked like an intercontinental ballistic missile toward its west coast, possibly in preparation for a launch.

There are no good options for dealing with North Korea. The administration had threatened fire and fury, but no fire or fury – just a speech to by Nickie Haley before the UN. The administration wants China to impose economic muscle on North Korea, even threatening to retaliate against Chinese steel dumping and intellectual-property infringements, and vowing an implausible trade war with the U.S.’s largest trading partner.

Even less rationally, the administration has dropped hints it’s about to scrap a free-trade agreement with ally South Korea. The two main proposals put forward so far are tougher international sanctions, an idea promoted by the U.S., and the so-called “freeze for freeze,” favored by China, in which the U.S. freezes military exercises with South Korea in exchange for the North freezing its missile and nuclear tests.

Meanwhile, there are ongoing talks to renegotiate Nafta, so Mexican President Enrique Peña Nieto was in China to pursue his country’s Plan B. Rumblings of a free-trade deal between the two nations have grown since President Trump took office this year, but they’ve mostly been seen as political posturing.

But with Trump threatening regularly to dump the deal—even taking time last Sunday, during Hurricane Harvey, to say he “may have to terminate” NAFTA—the possibility of Mexico opening up to China seems ever more real. Trump’s stated goal to end NAFTA is to raise tariffs and incentivize U.S. companies to stop outsourcing jobs.

Whether that will work is a separate matter, but what he has done is to push Mexico, which counts the U.S. as its largest trading partner by far, into pursuing other options.

The Dow Jones Industrial Average lost 234 points, with the bulk of that downturn driven by declines in shares of Goldman Sachs and United Technologies. United Tech’s stock lost about 5.7%, after the industrial conglomerate said it had reached a deal to buy airplane-parts maker Rockwell Collins for $23 billion. The acquisition would be the largest in aerospace history.

The Commerce Department reports factory goods orders tumbled 3.3 percent with a slump in demand for transportation equipment. That was the biggest drop since August 2014 and followed a 3.2 percent surge in June.

Two weeks ago, Federal Reserve Governor Jerome Powell said low inflation allowed the Fed to be patient on a hike. Today, Fed Governor Lael Brainard said the U.S. central bank should go so far as to make clear it is comfortable pushing prices modestly above the Fed’s 2 percent target. The Fed’s preferred gauge stands at 1.4 percent.

Financial Review

Non-Freak

Sinclair Noe — August 24, 2017

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

Subscribe: Android | RSS

DOW – 28 = 21,783
SPX – 5 = 2438
NAS – 7 = 6271
RUT + 4 = 1373
10 Y + .02 = 2.19%
OIL + .24 = 47.64
GOLD – 4.50 = 1286.80
BITCOIN + 0.99% = 4405.76 USD
ETHEREUM + 0.10% = 326.24

Stocks drifted in an aimless manner today, meandering from positive to negative and back and forth again. The good news is that the market has made it through most of August without freaking out – and there have been a few opportunities for a freak. But the markets have been well behaved and orderly, with a slight downward bias.

Soon, August will end and Congress will return and they will have a plate full of issues including the debt ceiling and tax reform. Trump picked a new fight today with fellow Republicans over the debt ceiling, blaming congressional leaders for not including funding for veterans’ affairs as part of the debt ceiling package. Trump tweeted that debt ceiling approval is now a mess.

Earlier in the week, Senate Majority Leader McConnell said the debt ceiling would be raised. Today at a town hall meeting in Washington state, House Speaker Paul Ryan confirmed debt ceiling legislation would be passed in time. And it probably will. It is not complicated. Write a clean bill, no amendments, and it will pass. It should be easy, but…

On the tax reform side, Republican congressional leaders don’t expect to release a joint tax plan with the White House next month, and they’ll rely instead on House and Senate tax-writing committees to solve the big tax questions that remain unanswered.

White House officials and congressional leaders involved in tax negotiations, jointly released a two-page statement in July that outlined a broad set of agreed-upon tax principles.That statement was short on specifics, including such basic matters as where to set the corporate tax rate and how to set up individual tax brackets.

Back in March, White House press secretary Sean Spicer’s said the Trump administration would be “driving the train” on efforts to rewrite the tax code. So far, the train hasn’t left the station. Chief economic advisor Gary Cohn had said previously that a tax framework would be released after Labor Day. More recently, he indicated the White House was pushing tax efforts back to the hill.

House Ways and Means Chair Kevin Brady has said he expects hearings and markups on tax legislation this fall. The Senate Finance Committee is planning to do the same. It might be possible to get tax reform this year but don’t hold your breath.

Tomorrow, Janet Yellen will be giving what could be her last speech Friday as Fed chair at the annual gathering in Jackson Hole, Wyoming. Yellen’s term as Fed chair expires in February and Trump does not seem inclined to re-appoint her.

Yellen has brushed aside questions about her future. She professes to be focused on the job at hand, which is a significant one — namely, guiding the Fed from a path of the ultra-accommodative crisis-era policies to a more normalized stance. That includes higher – though still low – rates and the first steps toward unwinding the $4.5 trillion balance sheet of bonds the Fed accrued during its economic stimulus efforts.

With all that in play, Fed watchers expect Yellen’s speech to be less a valedictory look at the past and more a course-charting path for her successor. Yellen’s speech comes nearly a full decade after the Fed began cutting its benchmark funds rate, in September 2007 in the face of the unfolding financial crisis that threatened the nation’s banking system and ultimately pulled the economy into recession.

By December 2008, the funds rate had been sliced to near zero and the Fed began buying bonds to generate liquidity and keep interest rates low to spur the housing industry. By the time Yellen took over in February 2014, the Fed was still at zero but had pumped up its balance sheet with trillions of bonds.

Stocks were on their way to the second-longest bull market in history, but the rest of the economy remained in question. The Yellen Fed has begun the process of normalization, raising rates 4 times, even though the inflation rate remains stubbornly south of 2%.

In the next few years, the Fed will continue dealing with the low-interest-rate world the financial crisis ushered in, plus the unwinding of the balance sheet, plus a raft of economic challenges to economic growth. Maybe Yellen will offer some advice tomorrow.

Yellen’s remarks are entitled “Financial Stability,” and therefore could skirt direct discussion of monetary policy. But given the nature of the forum and its high-profile audience — academic economists, top central bankers, and a handful of market participants — that is unlikely.

Rather than focusing on monetary policy directly, Yellen is likely to discuss how the Fed is supposed to manage its mandate of maintaining a stable financial system even as it stimulates economic growth to a level that is strong but does not generate undue inflation — or credit bubbles.

In a way, market expectations that the Fed will leave interest rates on hold at its next meeting in September, waiting until at least December to make another move, provide Yellen some breathing room.

Look for Yellen to maintain a slightly dovish tone, but mainly look for her to say nothing that would freak the markets. Nothing to rock the boat. She only must keep the markets and the economy steady and calm for 6 more months, and then it’s someone else’s problem.

Hurricane Harvey is headed for Texas. The hurricane has been gaining strength in the Gulf of Mexico. Only a few oil and natural gas platforms in the storm’s path have been shut, so they are still producing but rainfall threatens to flood refineries in Corpus Christi and Houston. Winds up to 75 mph and as much as 15 inches of rain were forecast. Flooding will be a big problem as the storm hits the Texas coast.

The National Association of Realtors reports sales of previously-owned homes slid to their lowest level of the year in July as the familiar dynamics of tight supply and strong demand continue to strain the housing market.

Existing-home sales ran at a seasonally adjusted annual rate of 5.44 million in July. That was down 1.3% from a downwardly-revised June pace. While July’s pace was 2.1% higher than a year ago, it was the lowest since last August.

Inventory dropped 9% from year ago levels. Strong demand meant listings went into contract in under 30 days. It also pushed prices higher. The median sales price in July was $258,300, a 6.2% increase compared to a year ago.

Amazon.com’s acquisition of Whole Foods will close on Monday, and they are going to make changes from Day One. The biggest of the changes seemed aimed at changing the store’s reputation as “Whole Paycheck” — a seller of food that might be wholesome for customers but also devastating to their pocket books.

No more. Amazon said it would offer lower prices on a “selection of best-selling staples across its stores, with much more to come.” Amazon also said that its Prime membership program, which costs $99 a year, will eventually become Whole Foods’ customer rewards program, providing members with further savings in stores. It did not provide any other details about those plans.

Shares of some of the country’s biggest grocery companies fell sharply after Amazon’s announcement. Kroger fell more than 6.5 percent, and Walmart, the nation’s biggest grocer, fell about 2 percent.

The collateral damage among grocers is just the latest example of Amazon imposing its will on an entire industry with a simple corporate announcement, leaving billions of dollars of erased market value in its wake. And there’s nothing to suggest this dynamic will slow down anytime soon. Retailers are being forced into a new reality where the specter of Amazon lurks at every turn.

Abercrombie & Fitch posted a smaller-than-expected loss in the second quarter, thanks to strength from its Hollister brand. The teen retailer said same-store sales fell 1%, better than the expected drop of 2.1%.

Revenue topped analysts’ forecasts at $779.3 million. The adjusted loss of 16 cents a share was better than forecasts for a loss of 33 cents. Sales at its Hollister brand rose 5% during the quarter.

Abercrombie shares jumped by 17% today, which seems like an over-reaction.

Sears recorded a smaller-than-expected loss in the second quarter while its revenue beat Wall Street expectations. Sears recorded an adjusted loss of $1.16 a share on revenue of $4.3 billion. Analysts were expecting a loss of $2.48 a share and sales of $4.2 billion.

Even though the department store topped expectations, it’s still struggling to lure shoppers through its doors. Sears announced it plans to close 28 more Kmart stores this year, which is in addition to the 150 Sears and Kmart stores it’s closing by the end of the current quarter.

Sears shares have fallen 39% over the past year.

Tiffany reported revenue of $959.7 million, boosted by growth in its fashion and design jewelry, and its profit topped expectations at 92 cents a share.

But it wasn’t all good news for Tiffany, same-store sales fell for the seventh quarter in a row, down 2% worldwide, which is a bigger drop than the 1% decline analysts were expecting.

Tiffany shares have jumped nearly 14% since the start of the year.

Dollar Tree advanced 5.6 as one of the best performers on the S&P 500 after the retailer’s profit and comparable sales beat estimates.

Signet Jewelers surged 16.7 percent after the company issued results and said it would buy an online jeweler.

Financial Review

Insert Clever Eclipse Headline

Sinclair Noe — August 21, 2017

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DOW + 29 = 21,703
SPX + 2 = 2428
NAS – 3 = 6213
RUT – 0.89 = 1356
10 Y – .01 = 2.18%
OIL – 1.11 = 47.40
GOLD + 7.10 = 1292.30
BITCOIN – 2.81% = 3940.88 USD
ETHEREUM – 2.52% = 315.65

Since August 7, the Dow Industrials have given back 397 points or 1.7%. The S&P 500 has slipped 0.08%, and the technology-weighted Nasdaq has led the way lower with a 2.6% move. Second-quarter results from S&P 500 reporting companies have been solid with 65% beating expectations. Guidance has largely also been quite positive.

The recent price action in equities has left the uptrend under pressure but at this point it doesn’t look like anything more than a pause – at least for the big Blue-Chip names. Small caps are having a tougher time. The Russell 2000 index of small and mid-cap companies moved into negative territory year-to-date.

Most recent economic data suggest the US economy is on better footing that it was in the first half of the year; which seems to be part of a trend for the past few years. This week, the markets are waiting to hear from Fed chair Janet Yellen; she delivers a speech at the Jackson Hole Economic Summit on Friday.

We know that the Fed has been raising rates and plans to trim holdings on its balance sheet, but last week’s minutes paint a picture of a cautious Fed. European Central Bank President Mario Draghi will also speak Friday. Don’t expect any big news on central bank policy.

The central bankers will be talking about economic growth and there will be plenty of discussions about low inflation. US inflation fell to 1.4 percent in June, based on the Fed’s preferred gauge, and consumer prices in the euro area – currently at 1.3 percent – have wavered since the start of the year.

Today, the Federal Reserve published a new survey providing extra detail on the labor market. The survey will be published 3 times a year. Survey says, workers see little hope for higher paychecks, and while they are increasingly searching for new jobs, they expect fewer offers to fall into their laps.

Survey respondents on average said in July that the lowest annual salary they would accept in a new job would be $57,960, down from $59,660 only four months earlier. This measure has declined since November, with most of the changes coming from older and higher-income Americans.

Asked what salary they expected in job offers over the next four months, the average response declined to $50,790 from $54,590 when the last survey was taken in March. The survey, conducted since early 2014 but published for the first time on today, also showed 22.7 percent of respondents searched for a job in the last four weeks, up from 19.4 percent in the previous report. Young people accounted for most of the increase.

The respondents saw a 22 percent likelihood of receiving at least one job offer in the next four months, down from an average response of 25 percent eight months ago.

Trump will speak this evening at 6 p.m. about “the path forward” for US strategy in Afghanistan and South Asia. He is expected to authorize about 4,000 more U.S. troops for counter-terrorism missions as part of a new military strategy in Afghanistan. After 16 years of stuttering war in Afghanistan, the Taliban has returned to its strongest level since 2001.

His plan comes just days after he fired his chief strategist, Steve Bannon, a vehement voice against sending more troops to Afghanistan, and the architect of Trump’s “America First” policy of limiting foreign engagement to situations where the US can benefit directly.

Tomorrow, Trump travels to Phoenix for a campaign rally at the Civic Center. Trump has said he is seriously considering a pardon for former Maricopa County Sheriff Joe Arpaio, who was found guilty of criminal contempt for defying a judge’s order in a racial profiling case.

Even without an announcement of a pardon, the visit could roil grievances and rallying cries after a week of protests in major cities across the country. Both Trump supporters and opponents are planning to demonstrate outside the rally, fueling police concerns about potential clashes.

The Washington Post reports the Trump administration has decided to disband the federal advisory panel for the National Climate Assessment, a group aimed at helping policy makers and private-sector officials incorporate the government’s climate analysis into long-term planning.

The Post said the charter for the 15-person Advisory Committee for the Sustained National Climate Assessment was due to expire Sunday. On Friday, National Oceanic and Atmospheric Administration acting administrator informed the committee’s leader that the agency wouldn’t renew the panel. The next National Climate Assessment is due for release next year.

A bit of hopeful news out of Washington today. Senate Majority Leader Mitch McConnell insisted the government will raise the debt ceiling and avoid defaulting on its debt. Treasury Secretary Steven Mnuchin has called for Congress to pass a bill to increase the borrowing limit by the end of September.

By then, the Treasury will have exhausted its so-called extraordinary measures to continue its borrowing authority and risks defaulting on its debt. The Treasury secretary has called for a “clean” debt-ceiling increase, meaning lawmakers would not attach spending cuts or other provisions to it.

Some conservatives, particularly in the House, have previously tried to pair measures to raise the debt ceiling with spending cuts. Mnuchin said the debt ceiling was his top priority when lawmakers return from recess next month.

Sempra Energy has placed a bid to buy Oncor for $9.45 billion in cash after majority owner Energy Future Holdings abandoned a deal to sell the Texas-based power transmission company to Warren Buffett’s Berkshire Hathaway. This represents a rare blow to Buffett, who avoids bidding wars for companies and had swooped in two months ago to buy Oncor after Texas regulators blocked two previous attempts by Energy Future to sell it.

Energy Future, which has been in bankruptcy since 2014, had initially planned to seek court approval today for the sale of Oncor to Berkshire for $9 billion over opposition from its biggest creditor, hedge fund Elliott Management. Instead, Energy Future will go with Sempra because of the value of the bid, a lower break-up fee and, most importantly, support from Elliott.

San Diego-based Sempra said it expected to own about 60 percent of a reorganized Oncor after it completes the transaction, which is valued at $18.8 billion, including debt. Energy Future owns 80 percent, but Sempra plans to sell some of that equity to other outside investors. A hearing on the revised reorganization plan and creditor support agreement was set for Sept. 6.

Total is buying Maersk’s oil and gas business in a $7.45 billion deal which the French energy major said would strengthen its operations in the North Sea and boost earnings and cash flow. For Danish company A.P. Moller Maersk, the sale of Maersk Oil, with reserves equivalent to around 1 billion barrels of oil, fits with a strategy of focusing on its shipping business.

Fiat Chrysler shares jumped almost 7% today after Great Wall Motors confirmed that it is interested in acquiring at least part of the company. The interest focuses on Fiat’s Jeep and Ram brands of off-road vehicles and trucks. Reports surfaced recently that a Chinese automaker was interested in placing a bid for the brands. Fiat Chrysler said in a statement it has not yet been approached by the Chinese automaker.

Johnson & Johnson was ordered by a California jury to pay $417 million to a woman who claimed she developed ovarian cancer after using the company’s talc-based Baby Powder. The Los Angeles Superior Court jury’s verdict is the largest to date in lawsuits alleging J&J failed to adequately warn consumers about the cancer risks of talc-based products.

The verdict included $70 million in compensatory damages and $347 million in punitive damages. It followed 5 trials in Missouri state court; Johnson and Johnson lost 4 of those trials, resulting in more than $300 million in verdicts against J&J. The company says it will appeal today’s verdict.

Today was the big solar eclipse. And it was probably a grand experience for people in the path of totality. Not such a big deal in Arizona, where we just had a partial eclipse. Hopefully, you did not try to look directly at the sun, unless you had special eyewear.

The pictures of the eclipse were great. My favorite is a picture taken in Wyoming, showing the moon covering about half the sun, and if you look closely, perfectly timed images show a tiny International Space Station passing in front of the sun. That must be one of the all-time great photobombs.

Many people did try to take pictures. And you may have noticed something strange. Your photos probably show the sun blown out in a blaze of light — not the crescent shape of a partial eclipse. But in some photos, a crescent did appear; it was just far from the actual sun and maybe looked blue. The effect is called a “lens flare,” which happens when a camera is exposed to a bright light.

In response, the lens captures some of the light as a reflection. Lens flares generally show up as little dots or circles, but during an eclipse they appear as small crescents. If you were hoping to capture what the eclipse looked like from your location, the crescent reflections that come out as lens flares are actually a pretty good representation. They are similar to the projections you might have seen through leaves or pinhole cameras.

And if you missed this eclipse or can’t wait to do it again, don’t worry. The next one is only 2,422 days away, April 8, 2024.

Financial Review

Double Dog Dare

Sinclair Noe — August 10, 2017

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DOW – 204 = 21,844
SPX – 35 = 2438
NAS – 135 = 6216
RUT – 24 = 1372
10 Y – .03 = 2.21%
OIL – 1.00 = 48.56
GOLD + 8.90 = 1286.80
BITCOIN – 0.11% = 3441.49 USD
ETHEREUM + 0.43% = 301.57

The S&P 500 declined 1.45 percent, the worst decline since May. The Nasdaq composite dropped 2.1 percent, with Apple, Alphabet, Amazon and Netflix all trading lower. It was a broad-based decline on Wall Street. The CBOE Volatility Index (VIX), a gauge of fear in the market, soared more than 40 percent to trade at 15.98. It also hit its highest level since May.

President Trump said North Korea would face “fire and fury” if it threatened the United States. North Korea dismissed the warnings as a “load of nonsense”, and outlined plans for a missile strike near the Pacific territory of Guam.

And today, Trump ratcheted up his rhetoric, saying his “fire and fury” comments may not have been tough enough, and North Korea should be “very, very nervous”. China is the largest trading partner with North Korea and China has called for dialogue to end the crisis but has otherwise been quiet.

China’s interests do not include a unified Korean Peninsula.  When it comes to assessing global geopolitics like the situation with North Korea, we don’t know how this will play out. It could be a brilliant bluff or it could be very dangerous bravado.

Here’s what we might see in the marketplace: stocks tend to react badly to the prospect of war but the exact reaction varies significantly, Treasuries generally move higher – pushing yields lower (The yield on the benchmark 10-year note touched 2.20 percent Thursday, its lowest level since June, although it is worth noting that junk bonds have taken a hit recently – and that may be separate from concerns about war; the cost of protecting high-yield bonds against default in the credit-default swap market has climbed to the highest since mid-July), oil and other commodities tend to jump ahead of a geopolitical event and sell off afterwards.

And of course, gold has started to shine again.

Pimco told investors to pare U.S. equities and junk bonds, but keep exposure to real assets, such as inflation-linked debt, commodities and gold. T. Rowe Price cut its stock allocation to the lowest level since 2000. Morgan Stanley strategists said investors should consider betting against U.S. junk-bonds as recent price weakness may be the beginning of a correction.

Geopolitical turmoil tends to drive volatility but not necessarily trends. In other words, the contrarian play usually works. Warren Buffett has described the strategy as “stay calm when all hell breaks loose.”

Meanwhile, it is a big distraction from other issues such as tax reform, the debt ceiling and healthcare – which you probably thought was a moot point by now. Senate Majority Leader Mitch McConnell is refusing to sign-up for an ambitious White House timeline on tax reform that calls for legislation to sail through by fall.

And he’s now engaged in an extraordinary war of words with the Trump White House. McConnell said he thought Trump “had excessive expectations about how quickly things happen in the democratic process …” This drew a sharp rebuke from Trump and his senior aide Dan Scavino.

The White House is going to need good will from McConnell on tax reform. And they’ve already blown through the initial, absurd, August deadline. Increasing pressure and publicly ripping McConnell is going to make tax reform and the rest of Trump’s agenda even harder to pass.

Meanwhile, there is a very real deadline for a deal on the debt ceiling. Mark your calendar. You can see this one coming: The government will run out of cash on Sept. 29 and cannot borrow more money unless Congress raises the debt ceiling.

This is a perennial crisis, and markets have a well-rehearsed pattern of worry followed by relief. Lawmakers are on recess until Sept. 5, and they plan to take a week off in September. So that leaves 12 working days for Congress to raise the borrowing limit. It’s difficult to give Congress the benefit of the doubt on getting this done.

The White House is usually focused on this priority, but in the wake of the health-care defeat in the Senate, White House budget director Mick Mulvaney initially said that Congress should hold off on all other issues, including the debt ceiling, until it went back to health care. He later changed his position and said Congress should raise the debt ceiling.

McConnell and House Speaker Paul Ryan will push for a clean debt ceiling increase, but some number of more conservative members will vote against that, meaning Democrats will need to provide votes to ensure a successful vote. But it’s not clear what conditions Democrats will demand in exchange for their votes.

Senate Minority Leader Chuck Schumer said earlier this summer that Democratic votes may be hard to come by if Republicans insist on passing a large tax cut for the wealthy. And the White House is pushing for funding for a border wall with Mexico to be included in a debt bill, in exchange for lifting spending caps.

PredictIt has become the go-to prediction market for observing U.S. political events. PredictIt offers weekly debt ceiling markets through the end of October, and at the time of this writing, its participants give less than a 5 percent chance of the debt ceiling being raised by Sept. 15, and less than a 15 percent chance of it being raised by Sept. 22.

If the Trump administration’s Sept. 29 estimate is right, then we could be looking at another tense period for markets like we had in the summer of 2011, when the debt ceiling standoff caused Standard and Poor’s to lower the U.S. credit rating.

Of course, it’s possible the real deadline will be a week earlier or a couple weeks later, given volatility in tax receipts. So, if you mark your calendar, be sure to use a pencil.

Also, today, Trump declared the opioid epidemic a national emergency and said his administration was drafting papers to make it official – this comes about a week after a White House commission on the opioid crisis led by New Jersey Governor Chris Christie recommended the president declare it a national emergency.

The declaration could help unlock more support and resources to address the drug overdose epidemic, such as additional funding and expanded access to various forms of treatment, and it gives the government more flexibility in waiving rules and restrictions to expedite action.

National emergencies are typically declared for short-term crises, such as the Zika virus outbreak or a natural disaster. It is unclear what Trump’s declaration will mean for a complex, long-term public health problem.

Producer prices fell in July, recording their biggest drop in nearly a year and pointing to a further moderation in inflation that could delay a Federal Reserve interest rate hike. The Labor Department said its producer price index for final demand slipped 0.1 percent last month, weighed by decreasing costs for services. That was the largest decline since August 2016 and reversed June’s 0.1 percent gain.

In the 12 months through July, the PPI increased 1.9 percent after rising 2.0 percent in the year through June. Core PPI, which excludes food, energy and trade services was unchanged last month. The core PPI increased 1.9 percent in the 12 months through July.

Shares of retailers Macy’s and Kohl’s declined after quarterly results failed to assure investors that a comeback was taking hold. Same-store sales dropped 2.5 percent at Macy’s and 0.4 percent at Kohl’s. Dillard’s sank as much as 16 percent to $61.50 after posting a surprise loss in its second quarter.

Lots of people like to talk these days about how the retail industry is undergoing a structural shift due to changes in how consumers like to shop. But weakness in the retail sector is probably being impacted by consumer debt as well.

Household debt outstanding — everything from mortgages to credit cards to car loans — reached $12.7 trillion in the first quarter. Household net worth stands at a record $94.8 trillion, thanks to rebounding home values and soaring stock portfolios. But that increase has primarily benefited the nation’s wealthiest.

For most Americans, whose median household income, adjusted for inflation, is lower than it was at its peak in 1999, borrowing has been the answer to maintaining their standard of living. The average family of four is living paycheck to paycheck.

And just when you think you’ve got it all figured out. Nordstrom reported second-quarter earnings and sales that topped analysts’ expectations, sending shares of the stock higher after market close. Same-store sales were also positive, a rare outcome among department stores of late. Nordstrom said its results this period was fueled by more customers ringing up purchases online.

Nordstrom’s stock was last climbing more than 3 percent higher in after-hours trading on the news.

Graphics chipmaker Nvidia saw its stock fall more than 7 percent after it reported stronger-than-expected earnings for the second quarter. Earnings came in at $1.01 per share, topping estimates of 70 cents. Revenue was up 56 percent year over year and beat estimates. They raised guidance slightly.

A new international report has confirmed that 2016 was the hottest year for the planet in 137 years of record keeping. It was the third year in a row to break the record. The report was released by the American Meteorological Society.

Almost 500 scientists from more than 60 countries participated in the project. Global sea surface temperatures reached a new record high, and Arctic sea ice extent at the end of its annual growth season was at its lowest maximum level in the nearly 40 years of satellite records.

Every month, at least 12 percent of land surfaces were in severe drought conditions or worse — a record long stretch.