Financial Review

Roll a Grenade onto the Dance Floor

Sinclair Noe — November 15, 2017

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

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DOW – 138 = 23,271
SPX – 14 = 2564
NAS – 31 = 6706
RUT – 7 = 1464
10 Y – .05 = 2.34%
OIL – .41 = 55.29
GOLD – 2.20 = 1278.60

Cryptocurrency

• Number of Currencies: 903
• Total Market Cap: $217,644,126,481
• 24H Volume: $8,010,823,675

Top Cryptocurrencies

	Name	Symbol	Price USD	Market Cap	Vol.	Total Vol. %	Price BTC	Chg. % 1D	Chg. % 7D
	Bitcoin	BTC	7,213.1	$121.02B	$3.82B	47.72%	1	-0.83%	-1.47%
	Ethereum	ETH	327.51	$31.52B	$646.25M	8.07%	0.0455803	-1.02%	+5.52%
	Bitcoin Cash	BCH	1,082.90	$18.53B	$1.32B	16.49%	0.152684	-8.53%	+75.34%
	Ripple	XRP	0.20900	$8.18B	$128.81M	1.61%	0.00002934	+0.10%	-3.20%
	Litecoin	LTC	63.660	$3.44B	$191.03M	2.38%	0.00883695	+0.57%	+1.18%
	Dash	DASH	423.00	$3.26B	$99.83M	1.25%	0.0587124	+0.48%	+31.52%
	IOTA	MIOTA	0.76800	$2.13B	$96.90M	1.21%	0.00010624	-2.41%	+52.56%
	NEO	NEO	29.497	$1.91B	$41.67M	0.52%	0.00407884	+0.70%	-6.79%
	Monero	XMR	123.76	$1.90B	$53.22M	0.66%	0.0171033	+2.29%	+7.67%
	NEM	XEM	0.20218	$1.75B	$6.76M	0.08%	0.00002697	-0.06%	-1.63%

The Dow industrials are now down for the month of November. The S&P and Nasdaq are also in the red for the month. Oil prices fell for a fourth session after data showed an increase in crude and gasoline stockpiles. The S&P 500 energy sector notched a four-day decline of 4 percent, its weakest such period in 14 months.

Since the third-quarter reporting season began a month ago, companies saying earnings will beat analyst estimates have outnumbered those predicting they will miss by a ratio of 1.2-to-1. That’s the highest for any similar stretch since 2010. And the S&P 500 is down about 1.5% from its record high on Nov. 7. Even with the pullback, the S&P 500 is up a healthy 14.5 percent this year.

Unlike October’s broad market rally, fewer stocks and sectors have been notching gains this month, and the latest market decline reflects that. Equity bulls says there’s more to come if you can ride out the current storm. Bears say this could be an early indicator of an even bigger drop. The truth is probably somewhere in between.

The gap between two- and 10-year Treasury yields shrunk to a new low for the year on Wednesday at 64 basis points, which is down from 136 basis points at the end of last year and the smallest difference since 2007. This move is important because a narrowing yield curve is typically associated with slower economic growth, and a full-on inversion is a sign that a recession is on the horizon.

The other big concern in markets right is junk bonds. The market has also suffered a swift and sharp selloff in the last week. Investors are now demanding an extra 4.06 percentage points in yield to own U.S. dollar-denominated corporate debt rather than Treasuries.

The tax bill working its way through Congress just gets worse and worse. We keep hearing that this is a tax cuts for middle class America but that’s just temporary. Tax cuts for individuals would expire in a few years under the Senate plan, which means tax cuts today would end up being tax hikes tomorrow. Cuts in business taxes, however, would remain permanent.

The tweaks by Senate Finance Committee Chairman Orrin Hatch on Tuesday largely move to make the bill comply with Senate budget rules. Major analyses so far have estimated that versions of the Senate bill would cut the tax burden on most Americans. However, millions of middle-income people could end up seeing a tax increase, due to the plan’s elimination of provisions like state and local tax deductions.

Also, yesterday, the Senate tossed in the idea of repealing the individual mandate in the Affordable Care Act, eliminating the requirement that people have insurance coverage. They tried this with the skinny repeal over the summer, and it did not pass. Now they are bringing back the failed idea, and they still don’t have anything to replace Obamacare, just sort of repeal it, or kill it off. Obamacare has many moving parts that interact with each other. The individual mandate has a particularly strong tie to the law’s protections for people with pre-existing conditions.

The rationale is that if the government is going to force insurance companies to cover everyone, then it must deliver a big insurance pool with a lot of healthy people in it. About 70% of people support the idea of having protections for pre-existing conditions. The individual mandate is a little less popular; about 50% supported that piece of the puzzle and 47% oppose – call it an even split.

In August 2017, pollsters framed the issue in terms of “President Trump taking actions to make the law (Obamacare) fail.” Put that way, only one-third, 31 percent, said they wanted Trump to stop enforcing the mandate, and two-thirds said it should be enforced.

The idea behind eliminating the individual mandate in tax legislation is that it would save the federal government about $338 billion over 10 years – and the tax cut writers need to find some more money because the tax plan as written blows a “too big” hole in the deficit – even if 13 million people would lose insurance coverage, and premiums for insurance coverage go up 10% for those remaining.

Just a side note – this is Obamacare open enrollment season and Americans enrolled in almost 1.5 million Affordable Care Act health plans on healthcare.gov in the first 11 days of the open enrollment period, a 47 percent increase over a similar period last year.

Then today, they toss in the idea of making individual taxpayers cuts temporary. Federal debt as a percentage of GDP is only going up, and at some point, Congress will no longer be able to keep putting off the day of reckoning. Meanwhile, hardly any taxpayers are going to put money aside in anticipation of higher taxes in 2026, setting the stage for a national financial shock.

In a word, this idea is just stupid. If tax cuts aren’t permanent, they shouldn’t be there.

White House economic advisor Gary Cohn was a guest speaker at the Wall Street Journal’s CEO Council. Republicans and the Trump administration have argued that tax cuts for businesses would lead companies to investment more and raise wages for workers. The moderator then asked those in attendance whether they were planning to increase their business investment if the tax bill became law. A few hands were raised, but most – the clear majority –  stayed down.

Today, Senator Ron Johnson of Wisconsin said he won’t vote for the current tax plan. Johnson, a businessman before he became senator, contends the current plan helps big corporations more than smaller companies. He said he’s also frustrated by the rushed process to pass tax legislation.

Johnson is a Republican. There are 52 Republican senators. If 2 more oppose the legislation – it is dead on the vine. A final vote on the House’s version of the tax-overhaul is expected on Thursday. The senate plans to vote before Thanksgiving – if they can whip the votes.

Retail sales slowed in October after a sharp gain in the prior month. Sales rose 0.2% in October. Sales rose a revised 1.9% in September, up from the prior estimate of a 1.6% gain, boosted by post-hurricane spending.

Excluding autos, sales rose 0.1% after a 1.2% gain in September. Economists were expecting a 0.2% gain. Sales excluding autos and gasoline climbed 0.3%. Growth in consumer spending has been healthy, with retail sales up 4.6% over the past year. Today’s retail numbers, although down from the previous month, still look positive for the economy heading into the holiday shopping season.

The consumer price index, or prices at the retail level, rose 0.1% in October, held down by falling energy prices, the Labor Department said. This was in line with forecasts. If food and energy are stripped out, core CPI rose a slightly larger 0.2%.

The drop in energy prices in the CPI pushed the yearly rate of inflation down to 2% from 2.2% in September. Yet the more closely followed core rate rose at a 1.8% annual rate, up from 1.7% in September and the fastest pace since April.

Adjusted for inflation, hourly wages fell 0.1%. Over the past year “real” wages have risen just 0.4%. The producer price index, a measure of inflation at the wholesale level, increased 0.4 percent last month after a similar gain in September. That lifted the year-on-year increase in the PPI to 2.8 percent, the largest rise since February 2012.

Inflation by the Fed’s preferred measure, core personal consumption expenditures (PCE), was just 1.6 percent in September. Wages are rising slightly, American consumers are spending their money and prices are following suit in signs that a continued economic recovery sets the stage for a Federal Reserve rate rise in December and the cycle beyond that, despite concerns over low levels of inflation.

Cisco Systems reported a 3.1 percent rise in quarterly profit, driven by growth in its newer areas, such as security, and lower expenses. Net income rose to $2.39 billion, or 48 cents per share, in the first quarter ended Oct. 28, from $2.32 billion, or 46 cents per share, a year earlier. Total revenue fell to $12.14 billion from $12.35 billion.

Mattel has rebuffed Hasbro’s latest takeover approach. Mattel has informed Hasbro its proposal undervalues the company and does not take sufficiently into account the potential for regulators to reject the deal based on antitrust concerns. The terms of any possible deal have not been revealed and it is not clear whether negotiations between the two companies will continue.

Target earned a profit of 91 cents per share in the third quarter, beating the average estimate of 86 cents. Sales rose 1.4 percent to $16.67 billion, topping the average estimate $16.61 billion. Third-quarter same-store sales topped estimates, rising 0.9 percent in the quarter, and price cuts drove a 24 percent jump in comparable online sales. Shares dropped about 10% today.

Target’s holiday-quarter profit forecast fell short of analyst expectations. Target has missed Wall Street’s fourth-quarter profit expectations for the past two years. It is gearing up for the holidays by cutting prices and introducing delivery options to compete with Wal-Mart and online sellers, moves that can lure customers but crimp margins.

Wal-Mart reports earnings tomorrow.

Financial Review

Pottery Barn Rules

Sinclair Noe — October 13, 2017

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

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DOW + 30 = 22,871
SPX + 2 = 2553
NAS + 14 = 6605 (Record)
RUT – 2 = 1502
10 Y – .04 = 2.28%
OIL + .80 = 51.40
GOLD + 10.20 = 1304.30

Cryptocurrency

• Number of Currencies: 878
• Total Market Cap: $174,223,159,809
• 24H Volume: $6,182,297,096

Top Cryptocurrencies

	Name	Symbol	Price USD	Market Cap	Vol.	Total Vol. %	Price BTC	Chg. % 1D	Chg. % 7D
	Bitcoin	BTC	5,691.3	$94.45B	$2.96B	47.93%	1	+0.97%	+30.33%
	Ethereum	ETH	339.63	$32.22B	$1.21B	19.62%	0.059464	+0.64%	+9.88%
	Ripple	XRP	0.26146	$10.11B	$349.29M	5.65%	0.00004604	+0.43%	+11.40%
	Bitcoin Cash	BCH	325.94	$5.45B	$264.35M	4.28%	0.057233	+1.68%	-10.28%
	Litecoin	LTC	59.220	$3.17B	$249.71M	4.04%	0.0104192	+0.54%	+14.35%
	Dash	DASH	311.77	$2.37B	$67.24M	1.09%	0.0546181	+1.06%	+1.04%
	NEM	XEM	0.20990	$1.88B	$5.16M	0.08%	0.00003664	-1.15%	-0.03%
	NEO	NEO	29.105	$1.46B	$67.41M	1.09%	0.00513938	-1.00%	-13.10%
	Monero	XMR	94.67	$1.43B	$59.07M	0.96%	0.0165036	-0.19%	+3.51%
	BitConnect	BCC	198.286	$1.42B	$17.34M	0.28%	0.0348017	-0.24%	+40.39%

The Dow Industrials hit an intraday high but then faded to close just below Wednesday record closing high. The Nasdaq closed at a record high.

For the week, the Dow was up 0.4 percent and the S&P 500 was up 0.2 percent, pushing the Dow and the S&P 500 to a fifth straight week of gains. The Nasdaq rose 0.2 percent for the week, registering a third week of gains.

The consumer price index rose 0.5% in September, the second big increase in a row and the largest in eight months. Three-fourths of the increase in the cost of living stemmed from higher prices at the gas pump as Hurricane Harvey knocked refineries off line. If food and energy are stripped out, core CPI rose a much smaller 0.1%.

The recent energy-driven rise in CPI pushed the yearly rate of inflation to 2.2% from 1.9% to match a six-month high. Yet the more closely followed core rate was unchanged at 1.7% for the fifth month in a row. Adjusted for inflation, hourly wages fell 0.1%. Over the past year “real” wages have risen just 0.7%.

The Social Security Administration announced today that more than 65 million recipients will get a 2% cost-of-living adjustment (COLA) in 2018, after receiving a measly 0.3% boost in 2017 and no increase for inflation in 2016. That means the average benefit for a retired worker will rise by $27 a month to $1,404 in 2018 while the average benefit per retired couple will grow $46 a month to $2,340.

But many recipients will find most or all of that increase eaten up by a jump in the Medicare Part B premiums deducted from their monthly Social Security checks. The COLA affects benefits for more than 70 million U.S. residents, including Social Security recipients, disabled veterans and federal retirees. That’s about one in five Americans.

Retail sales in the U.S. leapt 1.6% in September—the largest increase in 2½ years. The boost came from new autos and trucks. Excluding autos, sales rose 1%. And sales excluding autos and gasoline climbed a smaller but still robust 0.5%. Sales of cars and trucks surged last month after a disappointing August.

Part of the rebound reflected the purchase of replacement vehicles after many were damaged by hurricane-related flooding in Texas and Florida. Home-supply stores also got a bump in the cleanup that followed the storms. Higher gasoline prices lifted sales at gas stations dealers as well. We weren’t buying more gas, just paying more.

The University of Michigan said its consumer sentiment index climbed to a 13-year high of 101.1 in October from 95.1 in September. There were big gains in both the index for current economic conditions, which rose to 116.4 from 111.7, and expectations, which rose to 91.3 from 84.4.

Yesterday we told you that Trump had signed an executive order that makes it easier for individuals and small businesses to buy alternative types of health insurance with lower prices, fewer benefits and weaker government protections.

Yes, the policies would cost less, but they are basically don’t get sick plans. Still, these junk plans sold through associations could siphon young and healthy patients out of the ACA’s exchanges and create an individual-market death spiral. But the order is vague and subject to likely legal challenges.

The administration announced late last night that Trump will immediately halt cost-sharing reductions. These $7 billion in annual subsidies to health insurers allow around 7 million low-income Americans to afford coverage. The ACA requires that insurers subsidize the out-of-pocket health-care costs of some low-income patients, and the government reimburses them — until now. You might think that ending the subsidies to insurers would cut costs, but no.

The move could force the government to dole out almost $200 billion more on health insurance over the next decade. Here’s why: The insurer payouts Trump cut off aren’t the only government funds financing the program. Consumers also can get help with their insurance premiums.

When the insurer subsidies are discontinued, those premiums are pushed higher — and because the consumer subsidies are far bigger than those given to insurers, that’s a costly trade. More than eight in ten individuals who buy Obamacare plans get help paying their premiums directly from the federal government. Those subsidies effectively cap how much people must pay for insurance as a percentage of their income.

Even if premiums climb, people who receive those benefits won’t pay more out of their own pockets. The subsidies are available to people making as much as four times the federal poverty level, or just over $97,000 for a family of four. That means that those most likely to be hurt by the president’s action aren’t low-income people who will still get help with their costs.

Instead, consumers who make too much money to qualify for subsidies will now have to pay a much higher price for their health plans. It all adds up to a hefty bill for taxpayers for as long as the Affordable Care Act is the law of the land. The Congressional Budget Office estimated that ending the cost-sharing payments would increase the U.S. fiscal shortfall by $194 billion over the next decade as subsidy outlays jump.

The uncertainty about what Trump would do has already driven premium prices higher for 2018. Now it’s going to get worse. The fifth year’s open-enrollment season for consumers to buy coverage through ACA exchanges will start in less than three weeks, and insurers have said that stopping the cost-sharing payments would be the single greatest step the Trump administration could take to damage the marketplaces.

Ending the payments is grounds for any insurer to back out of its federal contract to sell health plans for 2018. After the failure to repeal and replace Obamacare, there was some talk about trying to find ways to make the ACA better, but instead, this is intentionally destroying the marketplace. Obamacare had its problems but it was working and he had a chance to fix those problems. Yes, this is a bargaining tactic to try to revive repeal and replace – the problem is the GOP has not been able to come up with a better replacement.

And as a bargaining position, it might not work. The Congressional Budget Office ran projections for just such a possibility. They figure about one million people could lose insurance coverage and the price hikes will be passed along to the federal government. But they also calculate that individual states will figure out schemes to overcome the loss of subsidies.

An unusually broad alliance of interests has urged Congress to appropriate the money, signaling just how disruptive their loss could be. Or Congress could decide to just pay the subsidies. Trump tried to shift blame, tweeting that the Democrats Obamacare is imploding. Not true. Remember the Pottery Barn rules: Yes, the plate you just shattered had some cracks in it. But if you throw it on the ground, the store is going to blame you. You break it, you own it.

Meanwhile, Trump’s campaign against the Iran nuclear deal came to a head today, when he refused to certify that Iran was in compliance with the agreement. Trump stopped short of withdrawing from the deal or of reimposing sanctions on Iran himself, instead sending the deal back to Congress, which will have 60 days to decide whether to re-implement sanctions or alter legislation that covers US participation in the accord.

Bank of America picked up where JPMorgan Chase and Citigroup left off on Thursday when it reported strong core banking numbers and lackluster trading revenue. Bank of America reported earnings per share of 48 cents on revenue of $22.07 billion.

Both numbers topped consensus analyst estimates of 45 cents and $21.97 billion, respectively. BAC also reported a 22 percent decline in fixed-income trading revenue, which dropped to $2.152 billion. Bank trading revenues have suffered in 2017 thanks to historically low volatility in global financial markets.

Wells Fargo reported third quarter revenue that missed expectations Friday. The bank reported: Earnings per share of $1.04, ex-items, vs. the $1.03 a share expected by analysts. Revenue of $21.93 billion, vs. $22.4 billion expected. Revenue fell 2 percent from the same quarter last year. Shares fell more than 3 percent in trading Friday.

The adjusted earnings per share excludes 20 cents of charges related to litigation for a mortgage-related regulatory case from before the financial crisis – not related to the fake account schedule. The litigation cost of $1 billion contributed to an operating loss of $1.3 billion in the third quarter.

BASF has agreed to buy seed and herbicide businesses from Bayer for $7 billion in cash, as Bayer tries to convince competition authorities to approve its planned acquisition of Monsanto. BASF, the world’s third-largest maker of crop chemicals, has so far avoided seed assets and instead pursued research into plant characteristics such as drought tolerance, which it sells or licenses out to seed developers. But Bayer’s $66 billion deal to buy Monsanto, announced in September 2016, has created opportunities for rivals to snatch up assets that need to be sold to satisfy competition authorities.

And finally, for triskaidekaphobics, we finish with a story from Finland, where FinnAir – the airline of Finland – has been routinely flying for several years from Copenhagen Denmark to Helsinki Finland. The one-hour flight had somehow been assigned the Flight number 666. The airport code for Helsinki is HEL.

Well, that left a more than a few travelers nervous, and so FinnAir is changing the Flight number to AY954. Today, Friday the 13^th was the last time to catch flight 666 to HEL

Financial Review

2500

Sinclair Noe — September 15, 2017

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

Subscribe: Android | RSS

DOW + 64 = 22,268
SPX + 4 = 2500
NAS + 19 = 6448
RUT + 6 = 1431
10 Y +0.005 = 2.20%
OIL – .06 = 49.83
GOLD – 9.80 = 1320.20

Top Cryptocurrencies

	Name	Symbol	Price USD	Market Cap	Vol.	Total Vol. %	Price BTC	Chg. % 1D	Chg. % 7D
	Bitcoin	BTC	3,689.4	$60.27B	$4.15B	37.92%	1	-0.21%	-13.21%
	Ethereum	ETH	257.83	$23.70B	$1.94B	17.69%	0.0673473	-0.33%	-14.46%
	Bitcoin Cash	BCH	432.00	$7.04B	$705.39M	6.45%	0.11414	+0.91%	-26.06%
	Ripple	XRP	0.18480	$6.98B	$289.31M	2.64%	0.00004905	+0.33%	-13.27%
	Litecoin	LTC	52.090	$2.55B	$1.55B	14.16%	0.0129764	-0.38%	-27.30%
	Dash	DASH	287.80	$2.15B	$72.67M	0.66%	0.0767005	+20.32%	-12.96%
	NEM	XEM	0.22458	$1.91B	$13.23M	0.12%	0.00005694	-0.01%	-19.81%
	Monero	XMR	100.13	$1.51B	$176.06M	1.61%	0.0269888	-0.00%	-14.16%
	IOTA	MIOTA	0.47700	$1.34B	$41.98M	0.38%	0.0001292	-0.56%	-9.95%
	OmiseGO	OMG	9.8760	$978.29M	$156.53M	1.43%	0.00267568	-1.19%	-11.09%

The Standard & Poor’s 500 index closed above 2,500 for the first time. The S&P is up 12% since the start of the year.

The Dow Industrials posted their fourth consecutive record high close. The Dow gained 2.2% for the week, the best weekly gain since December 9. The S&P was up 1.5% for the week.

The Nasdaq hit an intraday high but trended down to miss a record close. The Nasdaq registered a weekly advance of 1.4%.

Exactly nine years ago, on September 15, 2008, Lehman Brothers became the largest bankruptcy in US history.

For the second time in less than a month, Pyongyang has fired a ballistic missile that flew over Japan, prompting the UN Security Council to call an emergency meeting for today. Arms race? South Korea responded by conducting live fire drills that mimicked attacking Pyongyang’s launch site, and completed its own ballistic missile test into the sea.  Wall Street seems inured.

Prime Minister Theresa May announced the U.K. terror threat level has been raised to critical, its highest level, as police hunt for a suspect who set off an improvised bomb on a packed London commuter train. At least 22 people were injured in the blast.

Brazilian President Michel Temer has been charged with obstruction of justice and racketeering, related to the plea-bargain testimony by executives at JBS, the world’s largest meat-packer. It will now be up to the lower house of Congress to vote on whether the president should stand trial before the Supreme Court.

Retail sales dropped 0.2% last month after a 0.3% gain in July. It was the biggest one-month decline since a 0.2% decline in February. Auto sales sank 1.6% in August, the most in seven months.

Excluding autos and gas, which tend to be volatile from month to month, sales dipped 0.1% in August after having risen 0.5% in July.

Sales rose last month at general merchandise stores, a category that includes big-box retailers such as Target.

For August, gasoline sales were up 2.5%, the biggest jump since last December; we weren’t buying more gasoline, just paying more.

Non-store retail spending dropped 1.1% in August after a 1.6% gain in July – this is the category that includes internet purchases. You will recall that Amazon Prime Day was July 11, so it looks like shoppers bought the deals, then took a break.

Industrial production in the U.S. fell 0.9 percent in August, the biggest drop in eight years, as Harvey knocked numerous oil refining, plastics and chemicals factories out of business for a time. Many of those factories are based in the Gulf Coast region that Harvey hit. The Federal Reserve said the weather and flooding was responsible for almost all the loss.

Oracle shares had their roughest day in more than four years following the company’s earnings report, and the kicker is that earnings were better than expected. The problem was worse-than-expected outlook for the coming quarter. Shares dropped 7.7%

Amazon Web Services, the cloud computing unit of Amazon, has a new market for its analytics and storage services. This week, the U.S. Defense Department granted the company a provisional authorization to host Impact Level 5 workloads, which are the military and Pentagon’s most sensitive, unclassified information. Only two other companies, IBM and Microsoft, can store the material.

Equifax said two of its senior executives are leaving. The firm’s chief information and chief security officers are retiring immediately. Equifax “Chief Security Officer” Susan Mauldin has a bachelor’s degree and a master of fine arts degree in music composition from the University of Georgia.

Her LinkedIn professional profile lists no education related to technology or security. This is the person who oversaw keeping your personal and financial data safe — and whose apparent failings have put 143 million of us at risk from identity theft and fraud. The credit reporting industry behaves as a governor of our credit relations, reputations and identities.

In the late 1960s and early 1970s, Congress recognized that power embedded in data is a political matter and created a regulatory regime for these bureaus. What we are seeing now is that this regulatory regime is inadequate and that the regulators ― like the Federal Trade Commission and the Consumer Financial Protection Bureau ― are weak.

So, the credit-reporting regime to which we’ve entrusted our identities and our commercial lives remains opaque and vulnerable to abuse. Senator Elizabeth Warren has begun an investigation into Equifax’s massive data breach, and along with 11 other Democratic senators, introduced a bill to allow consumers to freeze their credit for free.

A credit freeze restricts access to an individual’s credit report, which prevents thieves from applying for credit using another person’s information. Connecticut Attorney General George Jepsen and more than 30 others in a state group investigating the breach said that while Equifax has agreed to give free credit monitoring to hack victims, they asked Equifax to stop collecting any money to monitor or freeze credit.

There was good news in the Census Bureau’s poverty report for most age groups in America. The national poverty rate declined by 0.8 percentage points to 12.7%. Poverty rates, while still the highest among wealthy nations, fell across the board for groups including whites, blacks, Hispanics, males, females, children, American citizens, and immigrants.

Individuals ages 65 and older had the unique distinction of being the only population segment to experience a significant increase in the number of individuals in poverty, with 367,000 more older Americans in poverty in 2016.

Airline seats are too small, and the problem is not that it is uncomfortable – it is dangerous. This summer a federal court ordered the Federal Aviation Administration (FAA) to consider shrinking seat sizes in coach on airline carriers and determine its effect on passenger safety. In the court case, a judge called the situation “a plausible life-and-death safety concern.”

The FAA requires that an airplane, regardless of size, can be evacuated in 90 seconds or less with at least half of the exits blocked. Besides limiting egress, another concern of tight airplane seats is the risk of head trauma in the event of a crash or hard landing.

The space between rows has shrunk from 35 inches to between 28 and 31 inches. The DOT requires at least 35 inches for flight attendants, but no airline offers any more than 32 inches for passengers. The FAA has until December 28th to respond to the court’s ruling.

You could take the train instead. Amtrak has launched a new advertising campaign focused heavily on why so many airlines have been despised by so many for so very long. From free Wi-Fi to the absence of middle seats to the two bags you may check for free, Amtrak is pitching itself as a more comfortable, civilized travel alternative to an airline. A coach seat on a train is more comfortable than a first-class seat on a domestic flight.

The Yellow Pages will be ceasing its 50-year print run in January 2019. Launched in 1966, the Yellow Pages is perhaps the best known classified business directory. The most recent version stretches from abattoirs to yoga, covering everything from taxidermists to graffiti removal.

Inevitably the rise of the internet has led to a dwindling interest in artifacts of a slower age. The comparative slimness of the recent editions is testament to this: the book is getting smaller with each passing year.

What will you use as a door stop now? Check Google for ideas.

Stocks Stretch Record Runs Despite Data

Charles Schwab: On the Market

Posted: 9/15/2017 4:15 PM ET

Stocks Stretch Record Runs Despite Data

U.S. stocks added to strong weekly gains after shrugging off softer-than-expected retail sales and industrial production reports and showing some resiliency in the face of a terror attack in London and another North Korean missile test. Quadruple witching likely added to the day's volatility and volume. Treasury yields modestly extended their weekly advance and the U.S. dollar pared its weekly gain as the euro and British pound extended recent gains. Crude oil was little changed and gold was lower.

The Dow Jones Industrial Average (DJIA) increased 65 points (0.3%) to 22,268, the S&P 500 Index gained 5 points (0.2%) to 2,500, and the Nasdaq Composite increased 19 points (0.3%) to 6,448. In heavy volume, 2.1 billion shares were traded on the NYSE and 2.7 billion shares changed hands on the Nasdaq. WTI crude oil was flat at $49.89 per barrel and wholesale gasoline moved $0.03 higher to $1.66 per gallon. Elsewhere, the Bloomberg gold spot price declined $8.67 to $1,321.07 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.3% lower at 91.87. Markets were nicely higher for the week, as the DJIA rallied 2.2%, the S&P 500 Index jumped 1.6% and the Nasdaq Composite gained 1.4%.

Oracle Corp. (ORCL $49) reported fiscal Q1 earnings-per-share (EPS) of $0.52, or $0.62 ex-items, versus the $0.60 FactSet estimate, as revenues grew 7.0% year-over-year (y/y) to $9.2 billion, above the projected $9.0 billion. The company noted that the sustained "hyper-growth" of its cloud business continued to drive increased revenue and earnings. However, the company's Q2 guidance missed expectations. Shares fell solidly.

Retail sales miss to kick off heavy day of data

Advance retail sales (chart) for August declined 0.2% month-over-month (m/m), compared to the Bloomberg forecast of a 0.1% gain and compared to July's downwardly revised 0.3% gain. Last month's sales ex-autos grew by 0.2% m/m, versus expectations of a 0.5% gain, and following the negatively revised 0.4% increase seen in the previous month. Sales ex-autos and gas were down 0.1% m/m, compared to estimates of a 0.3% rise, and versus July's unrevised 0.5% rise. The retail sales control group, a figure used to help calculate GDP, decreased 0.2%, compared to the projected 0.2% rise, and the prior month's figure was unrevised at a 0.6% rise.

Auto activity fell solidly, along with clothing and online sales, while electronics and appliances, and building materials were also lower. Sales of furniture, and at restaurants, food and beverage stores and gas stations all moved higher. Commenting on the potential impact of Hurricanes Harvey and Irma on the data, the U.S. Census Bureau said overall response was within the range of the past 12 months even though collection in the impacted areas lagged behind recent months.

The preliminary University of Michigan Consumer Sentiment Index (chart) dipped to 95.3 in September from the prior month's 96.8 level, and compared to expectations for it to decline to 95.0. The current economic conditions component improved m/m, while the expectations measure dropped. The 1-year inflation forecast ticked higher to 2.7% from August's 2.6% rate, while the 5-10 year inflation outlook rose to 2.6% from 2.5%.

Schwab's Director of Market and Sector Analysis, Brad Sorensen, CFA, notes in his article, Consumer Discretionary Sector Rating: Marketperform, the status of the all-important U.S. consumer looks to us to be solid and hasn't shown signs of diminishing to any great degree at this point, but the retail sector faces challenges that warrant our rating. We view the retail sector is "right sizing," which could ultimately help the group down the road. Read more on the Markets & Economy page and follow us on Twitter: @schwabresearch.

Industrial production (chart) fell 0.9% m/m in August—after six-straight monthly gains—versus estimates calling for a 0.1% gain, and compared to July's upwardly revised 0.4% increase. Manufacturing and mining production both declined, while utilities output fell sharply. Capacity utilization declined to 76.1% from July's upwardly revised 76.9% rate, and compared to forecasts of a 76.7% rate. Capacity utilization is 3.8 percentage points below its long-run average. The Federal Reserve noted that Hurricane Harvey is estimated to have reduced the rate of change in total output by roughly ¾ percentage point.

The Empire Manufacturing Index showed output from the New York region remained solidly at a level depicting expansion (a reading above zero) for September. The index dipped to 24.4 from August's unrevised 25.2 level, with forecasts calling for a reading of 18.0.

Business inventories (chart) rose 0.2% m/m in July, matching forecasts, and versus June's unrevised 0.5% increase.

The impact of the hurricanes on incoming data will likely cloud the economic picture in coming months, but as Schwab's Chief Investment Strategist Liz Ann Sonders notes in her article, Trying to Reason with Hurricane Season: The Aftermath of "Harma", we expect to see a dip in economic activity in the short-term, followed by a boost associated with the recovery/rebuilding efforts, and the impact will unlikely dent the Fed's plans to continue monetary policy normalization. Read more on the Markets & Economy page at www.schwab.com and follow Liz Ann on Twitter: @lizannsonders.

Treasuries finished lower, with the yields on the 2-year and 10-year notes rising 2 basis points (bps) to 1.38% and 2.20%, respectively, while the 30-year bond rate was flat at 2.77%.

Bond yields are modestly extending this week's sharp rebound from a recent drop back to November lows that came despite upbeat economic data. Yesterday's acceleration in consumer price inflation appeared to bring the Fed back into focus, with expectations of a December rate hike nudging higher, per data compiled by Bloomberg. Schwab's Chief Fixed Income Strategist, Kathy Jones, and Vice President of Trading and Derivatives, Randy Frederick, provide analysis of the bond markets in the video, The Economy is Picking Up, But Bond Yields Are Falling—What's That About?, with Kathy noting that the disconnect between the fixed income markets and the economy is about inflation. Read more on the Insights & Ideas page and follow Kathy and Randy on Twitter: @kathyjones and @randyafrederick.

The U.S. dollar pared its weekly gain, amid flared-up North Korean tensions and another terrorist attack in London. Also, the British pound extended a jump that came from boosted U.K. rate hike expectations. Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, notes in his article, Missiles and Markets: An investor guide to geopolitical risks, investors should avoid overreacting to geopolitical developments and stick to their long-term financial plans. Read more on the International Investing page at www.schwab.com.

Europe lower as pound and euro rally

European equity markets finished lower, with the euro trading higher versus the U.S. dollar, while the British pound extended its surge to levels not seen in over a year. The pound has jumped on increased rate hike expectations in the wake of yesterday's Bank of England (BoE) monetary policy decision and bolstered hawkish commentary today from a BoE member that had been labeled as dovish. Another missile test over Japan by North Korea and another reported terrorist attack in London likely hampered sentiment, but the reaction appeared limited. Bond yields moved higher, led by the U.K., amid the heightened BoE expectations. In economic news, the eurozone trade surplus narrowed more than expected in July and the region's wage growth posted the fastest pace in two years.

For a look at global investing, see Schwab's Jeffrey Kleintop's, CFA, article, U.S. vs international: what do earnings tell us about what may be ahead?, on the Markets & Economy page at www.schwab.com, and his video with Randy Frederick, Is An Optimistic Outlook for Global Equities Warranted?, on the Insights & Ideas page.

Stocks in Asia finished mixed after overcoming a brief bout of risk aversion as North Korea conducted another missile test over Japan. The yen reversed to the downside after an early boost on the North Korean missile launch news, helping Japanese equities gain ground, while South Korean stocks also advanced to display some resiliency. Shares trading in India and Hong Kong ticked higher. Mainland Chinese stocks declined on the heels of yesterday's disappointing retail sales and industrial production reports, which continued to weigh on materials issues, leading to a move to the downside for Australian securities. However, after the closing bell, China reported stronger-than-expected lending statistics for August. Amid the backdrop of the resiliency in the global markets, check out Schwab's Jeffrey Kleintop's, CFA, article, What are fund flows telling us about trends and risks in the global stock market?, as well as his commentary, An important benefit to global investors is back after 20 years, on the Markets & Economy page at www.schwab.com.

Stocks back on the weekly winning track

U.S. stocks got back to their weekly winning ways, rallying to fresh record highs amid reversals in the currency and bond markets, which contributed to last week's snapped winning streak. Early estimates suggesting Hurricane Irma's economic cost impact could be less than feared underpinned sentiment. Texas refining activity recovered from Hurricane Harvey's blow to boost crude oil prices to the best weekly performance since late July, per Bloomberg. The energy sector led the equity market's weekly jump. Tech stocks posted a respectable gain, bolstered by a rally leading up to Dow member Apple Inc's(AAPL $160) new iPhone unveiling. Consumer price inflation showed signs of accelerating against the favorable economic backdrop—small business optimism unexpectedly improved and the JOLTS' job openings surprisingly posted a record high—to appear to bring the Fed back in focus. The U.S. dollar rebounded from levels not seen in well over two years—though it pared gains on the pound's surge—and Treasury yields jumped off of multi-month lows to boost the financial sector.

This sets the stage for next week's economic calendar that will bring the Federal Open Market Committee's (FOMC) monetary policy decision, which is not expected to deliver a rate hike but could bring the commencement of the slow winding down of the Fed's behemoth $4.5 trillion balance sheet. Housing data will also be in focus, with the releases of the NAHB Housing Market Index, housing starts and building permits and existing home sales. Markit's September preliminary business activity reports and the Leading Index will round out the docket.

As noted in the latest Schwab Market Perspective: A Cat and Mouse Fall, U.S. stocks remain near all-time highs, but we expect some continued churn as fall is shaping up to bring a series of political, geopolitical and monetary policy conflicts which could contribute to greater volatility. Ample global liquidity, healthy economic growth combined with a solid earnings outlook should ultimately allow the bull market to continue. Global economic growth is looking good and is helping to fuel investor optimism over further gains in international stock markets. Read more on the Markets & Economy page at www.schwab.com.

International reports due out next week that deserve a mention include: China—property prices. Japan—trade balance and the Bank of Japan monetary policy decision. Eurozone—Consumer Price Index and Markit's September business activity reports, as well as German investor confidence. U.K.—retail sales.

Financial Review

About Face

Sinclair Noe — August 15, 2017

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

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DOW + 5 = 21,998
SPX – 1 = 2464
NAS – 7 = 6333
RUT – 11 = 1383
10 Y + .05 = 2.27%
OIL + .13 = 47.72
GOLD – 10.50 = 1272.10
BITCOIN + 0.72% = 4174.04 USD
ETHEREUM – 1.28% = 286.10

Several members of President Trump’s manufacturing jobs council resigned following what was widely considered an inadequate response from the president to violence in Charlottesville, Va. over the weekend that led to three deaths.

The executives that have resigned include: Ken Frazier – CEO of Merck, Brian Krzanich of Intel, Kevin Plank of Under Armour, and Scott Paul – President of the Alliance for American Manufacturing. That makes 7 CEOs who have resigned from Trump’s councils this year.

The AFL-CIO, a federation of labor unions that represent 12.5 million workers, said it was considering pulling its representative on the committee. AFL-CIO President Richard Trumka said the council “has yet to hold any real meeting,” and “there are real questions” about its effectiveness.

Several other members of the council issued statements denouncing racism and bigotry. Walmart CEO Doug McMillon issued a statement saying the president “missed a critical opportunity to help bring out country together.” McMillon remains on the council for now.

Trump tweeted a response, “For every CEO that drops out of the Manufacturing Council, I have many to take their place.” Although so far there have been no new additions to the council. That was followed by a tone-deaf tweet storm and a press conference in New York, where Trump said, “I think there’s blame on both sides.” Prompting a thank you tweet from David Duke.

CEOs are loath to alienate customers through politics and never want to be the target of a tweet storm from Trump. But corporate leaders who were once eager for a seat at the Trump table are increasingly deciding the costs outweigh the benefits. There is a herd effect. With each CEO’s announcement, it becomes easier for the next CEO to take a stand — and the pressure goes up to do so.

The Congressional Budget Office says ending government payments that help low-income people afford to use their Obamacare plans would raise total federal spending by billions of dollars over the next decade.

Halting the payments to insurers, known as cost-sharing reductions, would boost Obamacare premiums for mid-level Obamacare plans by 20 percent next year, and by about 25 percent in 2020, as insurers raise their charges to make up for the lack of payment.

Since Obamacare provides separate subsidies to individuals to help them cover the cost of premiums, the overall effect would be to boost government spending, to the tune of $194 billion over the next decade. President Donald Trump has threatened to cut off the payments to force Democrats to negotiate changes to the program.

Without the payments, insurers have said they may drop out of the Affordable Care Act’s exchanges or substantially raise premiums. Already, insurers have said uncertainty over how the Trump administration plans to run the law is contributing to large requested premium increases for next year.

Retail sales recorded their biggest increase in seven months in July as consumers boosted purchases of motor vehicles and raised discretionary spending. Retail sales jumped 0.6 percent last month, the largest gain since December 2016. Retail sales for June and May also were revised higher. Retail sales increased 4.2 percent in July on a year-on-year basis.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased at a 2.8 percent annualized rate in the second quarter after a tepid 1.9 percent pace in the January-March period. That boosted GDP growth to a 2.6 percent rate in the second quarter.

Sales were likely boosted by hefty discounts as auto dealerships try to reduce inventory. Prices for new motor vehicles recorded their biggest drop in nearly eight years in July and have decreased for six straight months.

The retail sales report prompted the Atlanta Fed to raise its third-quarter GDP estimate by two-tenths of a percentage point to a 3.7 percent rate.

Americans are spending more and saving less. The saving rate has dropped to 3.8 percent in the second quarter of this year from a rate of 6.2 percent in the second quarter of 2015. Persistently sluggish wage growth has pushed Americans to dip into their savings to fund spending.

Americans’ debt level notched another record high in the second quarter. According to a Federal Reserve Bank of New York report total U.S. household debt was $12.84 trillion in the three months to June, up $552 billion from a year ago.

The proportion of overall debt that was delinquent, at 4.8 percent, was on par with the previous quarter. However, credit card balances in delinquency “ticked up notably.” Total U.S. indebtedness is about 14 percent above the trough of household deleveraging brought on by the 2007 financial crisis.

Mortgage debt was $8.69 trillion in the second quarter, up $329 billion from last year. Student loan debt was $1.34 trillion, up $85 billion, while auto loan debt came in at $1.19 trillion, up $55 billion.

Analysts have been warning for years that subprime car loans pose a threat to lenders as delinquency rates have edged higher since reaching a post-recession low in 2012. But it wasn’t until last quarter that the least creditworthy borrowers started to show the kinds of late payment profiles that accompanied the start of the financial crisis.

Equifax data show that lenders are extending repayment periods and offering longer terms, with many starting to exceed seven years. There may also be loosening by all lenders on other factors, such as down-payment requirements, lack of third party validation of income and employment.

A second report from the New York Fed showed its Empire State general business conditions index climbed 15.4 points to 25.2 in August, the highest level in nearly three years. Manufacturers in the region reported a jump in new orders and said they were taking longer to deliver goods.

US import prices increased in July after two straight monthly declines, driven by rising costs for petroleum products and food, but underlying imported inflation remained muted. The Labor Department reports import prices edged up 0.1 percent last month after an unrevised 0.2 percent drop in June.

Last month’s increase was in line with economists’ expectations and left the 12-month increase at 1.5 percent. The year-on-year increase in import prices has slowed sharply since hitting 4.7 percent in February, which was the biggest advance in five years.

The report also showed export prices rebounded 0.4 percent in July, the biggest gain since December 2016, after falling 0.2 percent in June.

The Commerce Department that business inventories rose 0.5 percent in June after an unrevised 0.3 percent increase in May. Inventories are a key component of gross domestic product. Retail inventories gained 0.6 percent in June. Motor vehicle inventories increased 0.7 percent. Business sales rose 0.3 percent in June.

At June’s sales pace, it would take 1.38 months for businesses to clear shelves, up from 1.37 months in May.

Home Depot reported a better than expected profit, record quarterly sales and an improved outlook for the full year. This proves two things: The company is still Amazon-proof — and the housing market is still one of the brightest spots of the US economy.

Home Depot said that sales were up 6.6% at U.S. stores open at least a year. Net income jumped 9.5 percent to $2.6 billion, or $2.25 per share. Net sales rose 6.2 percent to $28.1 billion, the highest quarterly sales in company history. Home Depot raised its full-year forecasts but concerns over a looming slowdown in the U.S. housing market due to supply constraints pushed shares down 2.6%.

TJX reported better-than-expected quarterly profit and sales and raised its earnings forecast. As traditional retailers struggle in the face of changing consumer tastes and competition from Amazon, TJX has been posting strong sales for several quarters by offering sharp discounts. TJX said its comparable-store sales rose 3 percent in the second quarter.

Shares of General Electric were down 0.9 percent, at their lowest point since October 2015. While the S&P 500 returned more than 35% to investors over the past three years, GE returned less than 9%. A late Monday quarterly report from Berkshire Hathaway showed Warren Buffet sold his stake in GE.

Without the eye-popping returns of a few high-flying technology stocks, the performance of the market would look very different — and not in a good way; 45 days after the end of a quarter, hedge funds must file 13Fs to disclose their holdings. They are selling the FAANG stocks (Facebook, Amazon, Apple, Netflix, Google).

Between the end of 2016 and July 24, the FAANGs gained some 36 percent as a group, compared with 9.39 percent for the S&P 500 Index. Since then, the FAANGs have under-performed, losing 2.63 percent to the S&P 500’s 0.18 percent decline.

Bill Gates has donated $4.6 billion or 64 million Microsoft shares according to a US Securities & Exchange Commission filing. The recipient of the gift was not specified but it is expected that the money will be directed to the Bill and Melinda Gates Foundation he and his wife set up in 2000 with $5bn funding to improve global healthcare and reduce extreme poverty.

The shares donated represent about 5% of his current $90 billion fortune. The gift reduces Gates’s stake in Microsoft to just 1.3% from 24% in 1996. Bill and Melinda Gates have donated $35 billion since 1994. The Gates Foundation has grown to become the world’s largest private charity with $40.3 billion of funds, before the latest gift.

This latest donation is the biggest charitable gift made anywhere in the world so far, this year, overtaking a $3.2 billion contribution by investor Warren Buffett to the Gates foundation last month.