Financial Review

23K(ish)

Sinclair Noe — October 17, 2017

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DOW + 40 = 22,997 (Record)
SPX + 1 = 2559 (Record)
NAS – 0.35 = 6623
RUT – 5 = 1497
10 Y – .01 = 2.30%
OIL + .14 = 52.01
GOLD – 9.70 = 1285.80

Cryptocurrency

• Number of Currencies: 881
• Total Market Cap: $164,018,283,218
• 24H Volume: $4,954,812,161

Top Cryptocurrencies

	Name	Symbol	Price USD	Market Cap	Vol.	Total Vol. %	Price BTC	Chg. % 1D	Chg. % 7D
	Bitcoin	BTC	5,358.1	$89.65B	$1.86B	37.48%	1	-4.27%	+12.45%
	Ethereum	ETH	304.46	$29.07B	$530.61M	10.71%	0.0568999	-3.54%	+1.24%
	Ripple	XRP	0.22479	$8.75B	$412.24M	8.32%	0.00004228	-1.92%	-13.77%
	Bitcoin Cash	BCH	345.00	$5.95B	$942.47M	19.02%	0.0663392	-6.41%	+12.14%
	Litecoin	LTC	56.180	$3.01B	$208.32M	4.20%	0.0105002	-5.10%	+11.48%
	Dash	DASH	287.68	$2.21B	$41.24M	0.83%	0.0538494	-3.45%	-0.64%
	NEM	XEM	0.21036	$1.89B	$3.05M	0.06%	0.00003909	-5.30%	-2.68%
	NEO	NEO	29.112	$1.45B	$78.17M	1.58%	0.00540911	-8.06%	-4.17%
	Monero	XMR	89.19	$1.36B	$44.46M	0.90%	0.016648	-1.85%	+2.95%
	BitConnect	BCC	186.401	$1.34B	$13.34M	0.27%	0.0347181	-4.43%	+14.14%

The Dow Industrials and the S&P 500 hit another record high close. The Nasdaq Composite barely missed. The Dow briefly moved above 23,000 intraday – for the first time ever. Wait for 24,000 before you buy a hat.

It took 53 trading days for the Dow industrials to move from 22,000 to the 23,000 mark. Don’t know how long you might have to wait. Valuations seem a bit high at these levels. But a 1,000-point move isn’t what it used to be. If the Dow picks up another 1,000 points to reach 24,000, that will represent a 4.3% advance from the 23,000 mark.

Two senators announced a bipartisan breakthrough to shore up Obamacare, a least for the short-term. The agreement worked out by Republican Senator Lamar Alexander and Democratic Senator Patty Murray would meet some Democratic, including a revival of the subsidies for Obamacare and restoring $106 million in funding for a federal program that helps people enroll in insurance plans.

In exchange, Republicans would get more flexibility for states to offer a wider variety of health insurance plans while maintaining the requirement that sick and healthy people be charged the same rates for coverage. The deal still has to make it through both houses of Congress and be signed by Trump.

If it becomes law, it could end a chaotic situation for insurers after the White House moved last week to dismantle parts of the Affordable Care Act. Shares of U.S. hospital operators moved higher after news of the deal. Tenet shares were up 4 percent, while HCA was 2.3 percent higher. Shares of some health insurers also extended their gains on the day, with Anthem up 2.5 percent and Centene rising 2.8 percent.

UnitedHealth, the largest US health insurer, is the first health insurer to report and its third-quarter net earnings rose 26.3 percent, beating analysts’ expectations. Its shares rose more than 5 percent

Trade ministers from the United States, Canada and Mexico wrapped up a contentious round of NAFTA negotiations. The three sides agreed to carry on with talks and said they would negotiate into the first quarter of 2018, beyond the end-year framework initially envisaged to complete the negotiations.

Canada and Mexico have rejected U.S. proposals involving the dairy and auto sectors, dispute resolution, government procurement and a sunset clause that would effectively end NAFTA after five years unless all parties agree to extend it.

A federal judge in Hawaii on Tuesday granted a temporary restraining order against Trump’s third travel ban, just hours before it was set to take effect at midnight. Trump issued a proclamation last month restricting travel to the US from nationals of eight countries, including Iran, Syria, Yemen, Somalia, Venezuela, Chad, Libya, and North Korea.

Those restrictions came after the first two iterations of the travel ban, which targeted majority-Muslim nations, faced court challenges. Trump’s second travel ban was partly implemented, and the Supreme Court was scheduled to hear arguments on its constitutionality in October. But the justices removed oral arguments from the schedule after part of the second ban expired and Trump issued the third ban as a replacement in September.

The third ban will likely make its way to the Supreme Court, as well, though it must go through the appellate court system first. Another federal court is also expected to rule on the ban in a separate legal challenge. Almost immediately, the Department of Justice announced it would appeal the ruling.

Morgan Stanley and Goldman Sachs reported earnings and they followed a pattern of weak results due to calm markets. Like JPMorgan Chase and Citigroup, the firms that reported today showed a decline in fixed-income trading revenue. Low volatility has been problematic for Wall Street, especially compared with what was an active trading environment in the third quarter of 2016.

Goldman’s fixed-income trading revenue dropped 26 percent from a year ago, while Morgan Stanley posted a 21 percent decline. Still, both banks’ debt trading units slightly beat analyst expectations for the quarter. Morgan Stanley, Wells Fargo and JPMorgan all posted record revenue from their wealth- and asset-management units as stock markets hit records and after the Federal Reserve hiked interest rates three times in the past year.

Goldman Sachs also gained from rising markets, as its revenue from equity investments climbed to the highest in almost four years. JPMorgan, Citigroup, Bank of America and Wells Fargo boosted provisions for consumer loan losses from the previous quarter, which could be a leading indicator of a turn in the credit cycle. Goldman Sachs reported earnings of $5.02 per share vs. $4.17 expected.

Also, revenue of $8.33 billion also easily beat expectations of $7.54 billion. Goldman Sachs was down 2.6%. Morgan Stanley posted earnings of 93 cents a share – topping estimates of 81 cents. Morgan Stanley was up slightly.

IBM reported third-quarter net income of $2.7 billion, or $2.92 a share, compared to $3.2 billion, or $2.98 a share, in the year-ago period – still, that beat estimates. Revenue fell slightly to $19.1 billion from $19.2 billion in the year-ago period, marking the 22-consecutive quarter of revenue declines. IBM shares popped 4% in after-hours trade.

Yesterday, after the closing bell, Netflix reported earnings – a modest beat, but they added a whole bunch of subscribers. And one of the major reasons they keep adding subscribers is because they keep adding movies. Netflix has released at least 34 original movies so far in 2017. It plans to release 80 next year. That’s more titles than most movie studios release in a year.

Disney—which also owns Pixar, Marvel Studios, and Lucasfilm—released 13 movies in the US in 2016; Time Warner’s Warner Bros., New Line, Fine Line, Warner Independent, and Picturehouse studios released a combined 23 films; and Sony, which released the most, put out 38 movies throughout its studio portfolio last year, less than half of what Netflix is proposing.

Netflix is padding its already massive content budget to support the ambitious movie-release schedule it has planned. It expects to spend between $7-8 billion on content overall next year, up from $6 billion in 2017. Even with a recently announced hike in subscription fees, you have to wonder if Netflix is experiencing a bit of cash burn. Netflix shares dropped about $3 today.

Volvo and Chinese parent company Geely unveiled the first model of its new Polestar electric brand, and announced a more than $750 million investment to develop the brand further. It is the first step to developing high-performance electric cars that are aimed at some of the same customers targeted by makers such as Tesla.

The first production car will be the Polestar 1, a hybrid 600-horsepower two-door, four-seater hybrid coupe, with just above 90 miles of pure electric range. That car will go into production in 2019. It will be followed soon by an all-electric car aptly named the Polestar 2.

Industrial production in the U.S. rebounded in September after two straight declines, rising 0.3% in September. Capacity utilization rose to 76% from 75.8% but remained below summer levels.

Production for July, meanwhile, was revised to show a small decline instead of a 0.4% gain. The decline in August lowered to 0.7% from 0.9%. Most industries boosted output in September, led by construction and utilities.

Manufacturing production edged up 0.1%. The most notable decline was in chemicals, an industry concentrated in the South. A pair of major storms that swept through the region from Texas to Florida held down U.S. production by about 0.25 percentage points.

Industrial production fell at a 1.5% annual rate in the third quarter, but the Fed said its index would have risen at least 0.5% if not for the hurricanes. Other indicators of heavy industry points to steadily rising sales and production and that’s likely to help keep the U.S. on its current 2% annual growth path.

The cost of imported goods jumped 0.7% in September in the biggest gain in more than a year, led by fuel prices and industrial supplies. Excluding fuel, import prices rose a smaller 0.3%.

Sentiment among home builders spiked in October after faltering over the summer. The National Association of Home Builder’s monthly confidence gauge jumped four points to a reading of 68, the highest reading since May. The NAHB warned that builders need to be mindful of long-term repercussions from the recent hurricanes, such as intensified material price increases and labor shortages.

And a final note, if you follow the metals markets you may have noticed that palladium is now trading around $980, while platinum is just $938 an ounce. That reverses long-term price trends.

Financial Review

Heading into the Holiday

Sinclair Noe — June 29, 2017

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

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DOW – 167 = 21,287
SPX – 20 = 2419
NAS – 90 = 6144
RUT – 9 = 1416
10 Y + .05 = 2.27%
OIL + .12 = 44.86
GOLD – 3.40 = 1246.40
BITCOIN – 0.21% = 2556.09 USD
ETHEREUM – 4.42% = 289.77

We had a nice trend so far, this year. The stock market has been moving forward in small, steady gains. Volatility has been low, almost imperceptible. The markets just kept moving higher. When we have had a pullback, it was followed the next day by a rally, even if there was no conviction.

That was the case this week. Down on Tuesday, back up on Wednesday. Today throws a wrench in the pattern, with the S&P 500 and the Dow industrials suffering their worst daily percentage drops in about six weeks. The tech sector was the worst performing group today. There’s a lot more volatility in tech this month and that’s in part due to stretched P/Es.

At this point, it’s just a couple of down days, and we are heading into a long holiday weekend, a good time to take profits off the table and enjoy a barbeque without worries. Still, valuations are high and it’s one of the longest bull markets in history. Bull markets don’t last forever.

June has not been kind to the FAANG stocks, – Facebook, Apple, Amazon, Netflix, and Google, which were market leaders and then hit a down draft. There is no question the FAANGs have become pricey. The market caps are so huge they dominate the indexes. But markets can stay exuberant and irrational for a very long time. And this is not the first time we have seen a sell-off in the FAANGs, only to watch them move higher.

Today, money was rotating from tech and into the financials after the big banks passed the Fed stress tests and now can offer bigger dividends and buybacks. JPMorgan, the nation’s largest lender, said it’s boosting its quarterly dividend 12 percent and may increase share repurchases to $19.4 billion over the next 12 months — roughly 90 percent more than in the prior year.

Citigroup plans to double its dividend and may purchase up to $15.6 billion. Bank of America hiked its dividend 60 percent and will buy back up to $12 billion. Shares of all three rose at least 2 percent in early trading in New York. They, along with Wells Fargo and Morgan Stanley, may collectively buy as much as $64 billion in stock. Goldman Sachs has yet to make an announcement.

The Commerce Department posted its third and sort of final revision to first quarter Gross Domestic Product, and the revision came in higher; up 0.2% to 1.4%, instead of the 1.2% reported last month. The government had pegged first-quarter growth at a paltry 0.7% in its first estimate in April.

First-quarter economic growth was boosted by an upward revision to consumer spending, which accounts for more than two-thirds of U.S. economic activity. Consumer spending rose at a 1.1 percent pace, the weakest reading since the second quarter of 2013 but almost double the 0.6 percent reported last month. A sustained average growth rate of 3 percent has not been achieved in the United States since the 1990s.

The U.S. economy has grown an average 2 percent since 2000 and it expanded only 1.6 percent in 2016, which was the weakest growth in five years. Initial signs that economic growth re-accelerated sharply in the second quarter have also faltered in the face of recent disappointing data on retail sales, manufacturing production and inflation. Housing data has also been mixed.

Exports for the period were revised to show a 7.0 percent rate of growth from the previously reported 5.8 percent. Exports in the fourth quarter fell at a rate of 4.5 percent. Business spending on equipment was revised to show it increasing at a rate of 7.8 percent in the January-March period rather than the 7.2 percent previously estimated.

The government also reported that corporate profits after tax with inventory valuation and capital consumption adjustments fell at an annual rate of 2.7 percent in the first quarter after rising at a 2.3 percent pace in the prior three months.

The Bank of International Settlements, or BIS, is the central bank for the central bankers of the world. According the BIS’s annual report, the global economy faces four risks, “(i) financial cycle risks for financial stability; (ii) risks to consumption growth from household debt; (iii) risks to investment from weak productivity growth and high corporate debt; and (iv) risks from rising protectionism.”

From the report:
“These risks may appear independent, but they are not. For instance, policy tightening to contain an inflation spurt could trigger, or amplify, a financial bust in the more vulnerable countries… Indeed, an overarching issue is the global economy’s sensitivity to higher interest rates given the continued accumulation of debt in relation to GDP, complicating the policy normalization process.

“As another example, a withdrawal into trade protectionism could spark financial strains and make higher inflation more likely. And the emergence of systemic financial strains yet again, or simply much slower growth, could heighten the protectionist threat beyond critical levels.”

Of all those risks, protectionism is the only one a government can fully control. A government can choose to engage in global free market capitalism, or it can aggressively try to distort the market by blocking competing goods and services. It can either work amicably with neighbors and allies, or it can create tension felt across the globe.

A revised version of President Trump’s travel ban approved by the Supreme Court is set to take effect at 8:00 p.m. ET on Thursday. The justices implemented an exemption for travelers from six-Muslim majority countries with a “bona fide relationship” to people or entities in the US.

The Trump administration has adopted a narrow definition of “bona fide relationship.” According to guidelines the Trump administration has sent to US embassies and consulates, only a family member who is a parent, spouse, child, adult son or daughter, son-in-law, daughter-in-law, or sibling of US residents will be allowed to enter the country.

Fiancées, grandparents, grandchildren, aunts, uncles, nieces, nephews, cousins, and other extended family members are not considered to have “close familial ties”. And if you think this might lead to mass confusion, well…

The Congressional Budget Office has come out with a long-term analysis of Senate Republicans’ health-care legislation found that the bill would slash spending on Medicaid by about 35 percent over the next 20 years. The analysis follows a 10-year look by the agency released earlier this week.

The new CBO estimate doesn’t include a projection of how many people would be covered under the Republican bill. The CBO estimate shows that states would be forced to make trade-offs in how to allocate their far more limited funds.

Drugstore chain Walgreens Boots Alliance scrapped its deal to buy Rite Aid after failing to win antitrust approval, but said it would instead buy nearly half of the smaller rival’s U.S. stores for $5.18 billion. Rite Aid’s shares plunged about 28 percent to $2.85, while Walgreens shares were up 1 percent at $77.97.

Walgreens also ended a related deal to sell as many as 1,200 Rite Aid stores to Fred’s, sending Fred’s shares down 19 percent. Walgreens’ plan to buy 2,186 Rite Aid stores accomplishes many of the same goals as the merger – including eliminating Rite Aid as a rival – but does so in a way that makes it harder for the FTC to take the companies to court to stop the transaction.

The FTC will review the new deal. Walgreens also reported better-than-expected profit and sales for the third quarter, helped by a rise in prescription volumes in its U.S. pharmacy business. The company also authorized a $5 billion buyback program and raised the lower end of its full-year profit forecast.

Nike reported quarterly revenue and profit that topped Street estimates as the company kept a lid on costs and saw greater demand in Western Europe, China and emerging markets. Shares of the Dow component were up nearly 3 percent.

Britain intends to subject Rupert Murdoch’s takeover of European pay-TV group Sky to a lengthy in-depth investigation after finding that Twenty-First Century Fox’s $15 billion deal risks giving the media mogul too much power over the news agenda.

The proposed entity would have the third largest total reach of any news provider – lower only than the BBC and ITN – and would, uniquely, span news coverage on television, radio, in newspapers and online. Regulators will make a final decision on July 14, giving Fox two weeks to address concerns.

Blue Apron shares debuted today. The IPO stumbled but did not fall. Blue Apron’s 30-million share offering was priced at $10 per share late on Wednesday, after the company slashed its valuation expectations by a third. Shares gained 1% in the first day of trading.

Blue Apron spent roughly 18 percent of its $795 million revenue in 2016 on marketing, posting a net loss of $54 million. It has also faced steep costs of building out delivery infrastructure for fresh food. The biggest problem for Blue Apron might be Amazon-Whole Foods, which looks well-positioned to offer competition.

This should be a very interesting Fourth of July celebration in Las Vegas. Recreational marijuana becomes legal to buy Saturday in Nevada. That doesn’t mean it can be smoked everywhere only in private homes, yards or porches.

It’s prohibited in casinos, bars, restaurants, parks, concerts and on any federal property. You can’t walk down the street, or the Strip, smoking a joint. Also, prohibited in all forms at airports. No driving while stoned. And what’s smoked in Vegas stays in Vegas.

Financial Review

Scored

Sinclair Noe — June 26, 2017

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

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DOW + 14 = 21,409
SPX +0.77 = 2439
NAS – 18 = 6247
RUT + 1 = 1416
10 Y UN = 2.14%
OIL + .42 = 43.43
GOLD – 12.10 = 1245.50

Another quiet day on Wall Street. That is the new normal. The S&P 500 this year has been more likely to move less than 0.1 percent than to move more than 0.5 percent in a trading session. The index has closed at least 1 percent higher or lower a mere four times this year.

The CBOE volatility index has fallen to 23-year lows. And still the market keeps inching higher. The market is still hovering near record highs.

The non-partisan Congressional Budget Office has released its score of the Better Care Reconciliation Act, this is the Senate version of legislation to repeal and replace Obamacare. The Senate Republican health care bill would leave 22 million fewer Americans with health insurance by 2026 than under Obamacare.

And while that is a slight improvement on 23 million that would lose insurance under the House version, it is still a dreadful number. Next year, 15 million more people would be uninsured compared with current law. Like the House bill, the Senate’s version would end enhanced funding for Medicaid expansion, though at a slower pace, while overhauling the entire Medicaid program.

It would eliminate the mandates that require nearly all Americans to have coverage and companies with more than 50 workers to provide health benefits. And it would jettison Obamacare’s taxes on the wealthy, insurers and others, while allowing insurers to charge more to older policyholders.

However, the Senate bill would maintain much of Obamacare’s subsidy structure to help people pay for individual coverage, but make it less generous, particularly for older enrollees. And it would keep more of Obamacare’s insurance regulations than the House legislation. The Senate version also provides funds to stabilize the Obamacare market over the next few years, including money for a key set of subsidies for insurers.

The legislation is wildly unpopular. Before the budget office released its report this afternoon, the American Medical Association officially announced its opposition to the bill, and the National Governors Association urged the Senate to slow down. The AARP slammed the Senate GOP bill, calling efforts to repeal and replace ObamaCare “harmful” and denouncing what it calls an “Age Tax” affecting the nation’s senior citizens.

The GOP plan allows insurance companies to charge older adults up to five times more than younger people, while under ObamaCare older Americans can only be charged three times as much as younger people. The lobbying group for seniors accused Senate GOP leaders of crafting legislation in “secrecy” that “would hit millions of Americans with higher costs and result in less coverage for them.”

Here are a few other key findings from the CBO:
Premiums would increase in 2018 and 2019 compared to the current baseline, but decline thereafter: According to the CBO, premiums would increase 30% more than the current projection in 2018 and 10% higher than the current baseline in 2019. From 2020 and beyond, the change in the risk pool with older and poorer Americans likely priced out would bring these premiums down.

Deductibles and out of pocket costs would increase substantially: The benchmark plan on the individual insurance market would have an actuarial value of 58%, meaning insurance was obligated to cover 58% of the total costs. That is down from the current 70% benchmark value. According to the CBO, that opens the door for higher deductibles and out-of-pocket costs.

Earlier today, Republicans released changes to their healthcare bill, adding a measure that would penalize people who let their insurance coverage lapse. The revised bill would impose a six-month waiting period for anyone who lets their health insurance lapse for over 63 days and then wants to re-enroll in a plan in the individual market.

The legislation would decrease federal deficits by a total of $321 billion over a decade; more than the $119 million in savings in the House bill, between 2017 and 2026. The savings are made possible by cutting $862 billion in spending over that time-frame while also reducing tax revenue by $541 billion. It represents a big tax cut for wealthy taxpayers, but even bigger spending cuts, mainly to Medicaid.

That means the legislation can continue under the budget reconciliation process, which only requires 51 votes to pass. As of today, it does not have enough votes to pass. Five Republican senators have said they would not vote for the BCRA, several others have indicated they are leaning in the direction of a vote against and it doesn’t look like the CBO score will help turn those to support the bill.

Senate Majority Leader Mitch McConnell is insisting on a vote this week before lawmakers leave town for the July 4th recess, but a vote could be delayed, especially if it looks like it will go down in flames. Look for tweaking, name calling, arm twisting and much more over the coming days or weeks.

The Supreme Court will allow most of the Trump administration’s travel ban to go forward before it hears a case on the matter in October. The ruling grants a stay of lower court rulings that had piled up against the administration. The court’s decision found that the lower courts’ preliminary injunctions, which fully halted the key provisions of the executive order, were too broad.

So, the court narrowed these injunctions, ruling that the travel ban “may not be enforced against foreign nationals who have a credible claim of a bona fide relationship with a person or entity in the United States.”

That would apply to people who have family members stateside, those who have been admitted to a college or hired by an employer. However, “all other foreign nationals are still subject to the provisions” of the order.

In practice, the court’s ruling means Trump’s travel ban won’t be able to affect the great majority of foreign nationals who were trying to get to the U.S. from the six countries. It was already extremely difficult to get a visa from these countries unless you had family ties or a specific invitation.

The court also set arguments on the merits of the case for the first day of its next term in early October. The government may now exclude citizens from six Muslim-majority countries from coming into the United States unless they have some meaningful connection with a “person or entity” in the country. The court’s order also allows the government to exclude refugees, even those who are already vetted and poised to resettle here, unless they have the required connections.

SCOTUS agreed to consider whether employees who report misconduct at their companies are entitled to protections as “whistleblowers” if they report the alleged wrongdoing only internally, not to the Securities and Exchange Commission.

The announcement is welcome news for corporate defendants that have lamented the broad way in which the SEC and some federal courts have interpreted the 2010 Dodd-Frank financial overhaul, which is ambiguous about whether employees who only make internal corporate reports of securities fraud are protected under federal law.

The Supreme Court also agreed to consider whether the Constitution’s religion clauses allow a bakery to deny service to gay couples. In a separate ruling, the Supremes ruled that the Constitution requires states to list married same-sex couples on their children’s birth certificate. The decision marks a landmark victory for gay rights, confirming that the court’s decision in Obergefell v. Hodges protects all rights relating to marriage, not simply the recognition of marriage itself.

The Supreme Court ruled that taxpayer-funded grants for playgrounds available to nonprofits under a state program could not be denied to a school run by a church.

The Supreme Court declined to hear a Second Amendment challenge to a California law that places strict limits on carrying guns in public. The California case essentially bans carrying guns openly in public and allows carrying concealed weapons only if applicants can demonstrate good cause.

Orders for durable goods such as planes and computers fell in May for the second month in a row and registered the biggest drop in six months. Durable-goods orders slipped 1.1% last month following a similar decline in April. A key measure of business investment known as core capital-goods orders, meanwhile, fell 0.2% to mark the first decline of 2017. Businesses that were eagerly anticipating tax and regulatory relief may be taking a wait-and-see attitude.

Government websites in Ohio, Maryland and New York have been hacked with what appears to be pro-ISIS propaganda. It was not immediately clear who the group is — or whether it is genuinely affiliated with ISIS. The Ohio sites were back to normal this morning.

Twitter, Facebook, YouTube and Microsoft have formed the Global Internet Forum to Counter Terrorism. The group will share technical tools for combating extremist content, such as violent imagery and terrorist propaganda, and commission research to guide future resources. It’ll also work with academic and policy experts to learn more about terrorism.

Martin Shkreli, the former pharmaceutical executive is going to trial. In 2017, Shkreli sparked outrage in 2015 for increasing the price of Daraprim, a drug used by AIDS patients, by more than 5,000% from $13.50 to $750 a pill while he was CEO of Turing Pharmaceuticals. But the trial deals with charges of securities fraud, wire fraud and conspiracy for allegedly cheating investors out of more than $11 million between 2009 and 2014 in what federal prosecutors called a “Ponzi scheme.”

Financial Review

Monday, Monday

Sinclair Noe — June 12, 2017

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

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DOW – 36 = 21,235
SPX – 2 = 2429
NAS – 32 = 6175
RUT – 2 = 1419
10 Y + .01 = 2.21%
OIL + .17 = 46.00
GOLD – .90 = 1266.50
BITCOIN + 0.39% = 2720.80
ETHEREUM + 16.83% = 398.58

The Dow Industrials fell from record highs, with an inside trading session that does not look like a reversal, not yet anyway. The Nasdaq Composite confirmed its sharp downturn on Friday. Really, it was just five mega-tech stocks that accounted for 75% of the Nasdaq’s drop.

Apple, Microsoft and Goggle parent Alphabet account for nearly 30 percent of the index’s weighting, and their outsize impact has driven the gauge lower even though the bulk of the stocks are doing fine. What has sparked the so-called tech wreck isn’t exactly clear, but Goldman Sachs issued a report last Friday entitled, “Is FANG Mispriced?”

More important is whether this is a short-term correction or the sign of something more ominous. One or two days down does not make a trend, but a trend can start with a couple of down days. At this point, most analysts see this as a pause after a very strong and fast rally in the mega-tech names.

The good news is that money is not leaving stocks, just rotating to different sectors. On a net basis, investors sent $1.9 billion to ETFs focused on U.S. equities Friday, five times the money sent to fixed income. While tech ETFs experienced withdrawals of about $510 million (and the Fang stocks lost $126 billion in market cap), financials had inflows of almost $1 billion and energy took in $120 million.

Tomorrow will kick off a busy week for economic data – we’ll get the latest producer price index, which is expected to be flat. Wednesday morning brings the consumer price index and retail sales data. Wednesday afternoon brings a statement from the Federal Reserve on monetary policy.

A federal funds rate increase is widely expected, so the more market-sensitive elements of the Fed’s meeting will relate to signals regarding future policy action — either the path for the rates going forward or plans regarding a reduction in the central bank’s $4.5 trillion balance sheet.

The British pound sterling continued falling today, marking its worst two-day decline since October. Last week’s election saw Prime minister Theresa May’s Tories falling short of a majority in Parliament. While the Tories are expected to cobble a slim coalition, May will now govern from a position of weakness.

Some of May’s most senior ministers are plotting to soften her approach to leaving the bloc, potentially keeping the country in the single-market and customs union. By contrast, hardline Brexit supporters are determined to force through the prime minister’s plans for a clean break.

Treasury Secretary Steven Mnuchin  had previously set an August deadline for the federal government to avoid a default. Mnuchin said he still prefers that Congress increase the government’s authority to borrow before lawmakers leave on a five-week break in August. However, he said he is “comfortable” that the Treasury Department can meet the government’s financial obligations through the start of September.

The 9th US Circuit Court of Appeals panel unanimously upheld an earlier decision by a federal judge in Hawaii to block the government from enforcing Trump’s executive order for a “travel ban” that would restrict refugees and people from six predominantly Muslim countries from entering the US. The Supreme Court asked two groups challenging the travel ban to file legal papers by Monday. Once it receives the briefs it sought, the court could act at any time.

Attorney General Jeff Sessions will testify publicly to a Senate panel tomorrow. It had been unclear whether Sessions would testify in an open or closed setting. Sessions is likely to face tough questioning from Senate Intelligence Committee members over his dealings with Russian officials during the campaign and whether he had a role in the firing of former FBI Director James Comey, who testified last week before the same panel.

Along with testifying before the Senate Intelligence Committee this week, Attorney General Jeff Sessions can expect a subpoena from lawyers for a former Maricopa county Sheriff Joe Arpaio. Arpaio is presently being prosecuted by the U.S. Justice Department for allegedly violating a federal judge’s order to cease immigration enforcement. Arpaio’s trial is scheduled to begin June 26.

Sessions could challenge the subpoena to testify. The defense attorneys hope to use Sessions to underscore the irony of Arpaio being prosecuted by the very entity that is using the threat of pulling federal funds to get cities to do essentially what their client is accused of doing.

The case will be before Judge Susan Bolton, the very one who upheld SB 1070, the Arizona state law that requires cops to act on a “reasonable suspicion” that someone they have detained is in the country illegally. As it now stands, the outcome will be decided solely by Bolton, not by a jury.

Puerto Rico voted overwhelmingly in favor of statehood on Sunday in a referendum that begins the steps toward sending representatives to Washington, DC. It was a landslide, with 97 percent voting for statehood, though turnout was only about 23 percent.

Puerto Rico previously voted in favor of becoming a state in 2012, but statehood opponents said the voter turnout was not high enough to accurately reflect will of the Puerto Rican people. Some fear that they will make the same case this time around.

The Supreme Court cut the time it will take for copycat versions of biologic drugs to get to market. In a unanimous ruling, the justices overturned a lower court’s decision that had prevented Swiss pharmaceutical company Novartis from selling its copycat version of Amgen’s Neupogen until six months after the US Food and Drug Administration approved it.

The decision has major implications for the pharmaceutical industry because it will dictate how long brand-name makers of biologic drugs can keep near-copies, called biosimilars, off the market. Even the six months at issue in the case can mean hundreds of millions of dollars in sales. Health insurers expect biosimilars to be cheaper than original brands, like generics, saving consumers billions of dollars each year.

In a separate case, the Supreme Court ruled in favor of Microsoft in its bid to fend off class action claims by Xbox 360 owners who said the videogame console gouges discs because of a design defect. In an 8-0 ruling, the court overturned a 2015 decision by the 9th US Circuit Court of Appeals that allowed console owners to appeal the dismissal of their class action lawsuit by a federal judge in Seattle in 2012.

Typically, parties cannot appeal a class certification ruling until the entire case has reached a conclusion. But the 9th Circuit allowed the console owners to voluntarily dismiss their lawsuit so they could immediately appeal the denial of a class certification. The court ruled such a move was not permitted because a voluntary dismissal of a lawsuit is not a final decision and thus cannot be appealed.

Jeffrey Immelt is stepping down as chairman and chief executive of General Electric. Amid mounting pressure from activist investor Trian Fund Management for operational changes, GE said Immelt will be replaced by John Flannery, a 30-year company veteran who oversaw a jump in profits at the health-care unit.

Of all companies that remain in the Dow Jones Industrial Average since Sept. 7, 2001, when Jeffrey Immelt took over as chief executive officer of GE. GE’s stock has been by far the worst performer, and one of only two that have declined. GE’s stock has plunged 29.6% since Immelt took control through Friday.

Meanwhile, GE won US antitrust approval to merge its oil and gas business with Baker Hughes to form a new publicly traded company. GE and Baker Hughes announced the deal in October, months after Halliburton’s effort to buy Baker Hughes collapsed under pressure from the Justice Department.

Under the agreement, GE will combine Baker Hughes with its oil and gas business, creating a company with $23 billion in annual revenue, the companies said. GE will pay existing Baker Hughes shareholders $7.4 billion for a special dividend.

Meanwhile, another CEO with a rocky tenure — Travis Kalanick of Uber — may be taking a leave of absence. Uber’s board of directors met Sunday to mull over how to reverse the ride-hail company’s slow-motion implosion. Board members voted to unanimously adopt all the recommendations from a recent investigation into Uber’s culture of pervasive sexism and harassment.

They also discussed the fate of two of the company’s top executives, CEO Travis Kalanick and senior vice president of business Emil Michael. Michael is out. We’ll learn Kalanick fate tomorrow, maybe.

Time for today’s edition of Retail Armageddon, featuring Gymboree. The children’s clothing retailer announced it was seeking Chapter 11 bankruptcy protection. Gymboree has been in discussions with lenders since the beginning of the year as it grapples with a heavy debt load, much of which stems from Bain Capital’s $1.8 billion leveraged buyout of the retailer in 2010.

In conjunction with the filing, the company said it secured commitments for up to $308 million in additional financing. Public filings show Gymboree has more than $1 billion in outstanding debt, of which about $872 million is due in less than a year.

The U.S. Air Force has temporarily canceled flying operations of Lockheed Martin’s F-35 jets at Luke Air Force base in Arizona. The move comes after a series of five incidents in which pilots experienced hypoxia-like symptoms – in other words, they weren’t getting enough oxygen. Since May 2, pilots of five F-35A Lightning II aircraft assigned to the air force base have reported physiological incidents while flying

Financial Review

Happy Day

Sinclair Noe — March 20, 2017

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

Subscribe: iTunes | Android | RSS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

America’s rank on the happiness scale is falling.

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

And today is the first day of Spring. Enjoy.

Financial Review

Makes You Want to Holler

Sinclair Noe — March 16, 2017

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

Subscribe: iTunes | Android | RSS

DOW – 15 = 20,934
SPX – 3 = 2381
NAS + 0.71 = 5900
RUT + 3 = 1386
10 Y + .01 = 2.52%
OIL – .07 = 48.79
GOLD + 6.10 = 1226.80

President Trump will ask the Congress for cuts to many federal programs, and more money to bulk up defense spending. Trump’s budget outline is a blueprint covering just “discretionary” spending for the 2018 fiscal year starting on October 1.

It boosts spending for defense, homeland security and veterans’ affairs; the Defense Department budget would increase by $54 billion, which will raise defense spending to $639 billion for fiscal year 2018.

The Environmental Protection Agency faces cuts of 31% and the Department of Agriculture would see funding cuts more than 20; State Department 28%; Health and Human Services would be cut 16%; Education faces cuts of 14%.

Trump’s budget proposes eliminating discretionary funding altogether for at least 19 agencies and 61 other programs. Plans for new NASA missions, climate change research, aid for low-income families, funding for commercial flights to rural airports, public broadcasting, and Meals on Wheels would all be on the chopping block.

The spending cuts that Trump proposes come from those agencies that fund education programs, social services, environmental protection, health research, housing and food assistance, national parks, land management, and countless other endeavors. As it is, spending on non-defense discretionary programs is already historically low.

As a share of the economy it’s at its lowest level since 1998 and is well below where it was 50 years ago, per data from the Congressional Budget Office. The net effect is no change in the national deficit. The budget proposal is the first volley in what is expected to be an intense battle over spending in coming months in Congress.

President Trump’s second travel ban was blocked by a federal court in Hawaii hours before it was to go into effect. A federal judge in Maryland also ruled against the ban on the day it was supposed to take effect. The administration has promised to appeal the rulings.

The speaker of the House, Paul Ryan, the Senate Intelligence Committee chairman and the ranking Democrat on the committee all said that they’ve seen no evidence of President Donald Trump’s accusation that he was wiretapped last year by his predecessor.

Senate Intelligence Committee chair Richard Burr and ranking member Mark Warner issued a statement, saying “based on the information available to us, we see no indications that Trump Tower was the subject of surveillance by any element of the United States government either before or after Election Day 2016.”

House Speaker Paul Ryan said that “no such wiretap existed,” citing intelligence reports to House leaders. “We don’t have any evidence,” says the top Republican on the House Intelligence Committee. “No evidence,” says his Democratic counterpart.

The statement from the leaders of the Senate Intelligence Committee marks the clearest and strongest refutation of Trump’s allegations since the President first made them two weeks ago. The senators statement also addresses Trump’s more recent statement that he was not merely speaking about wiretapping specifically.

The leaders of the House Intelligence Committee have said they have yet to see any evidence of wiretapping, but have yet to flatly rule out all surveillance. House Intelligence Chairman Devin Nunes said Wednesday that it was possible that Trump aides were surveilled via “incidental” collection.

Dutch Prime Minister Mark Rutte defeated far-rightist Geert Wilders in the first of a series of European elections this year in which populist insurgent parties are hoping to rock the establishment. The center-right prime minister had trailed in opinion polls for much of the campaign but emerged the clear victor of Wednesday’s election, albeit with fewer seats than before.

It’s rare for a Dutch election to attract international attention, but the performance of Wilders is being seen as a bellwether for the ascent of populism around Europe, particularly with the National Front’s Marine Le Pen set to reach the run-off in the French presidential election late next month. Germans will vote later in the year.

The Bank of Japan is sticking with its ultra-loose monetary policy even as the Federal Reserve tightens. Japan’s economy is recovering with the help of a weaker yen but growth and inflation remain low. The Bank of Japan to keep its target for 10-year Japanese government bond yields at around zero, a policy it calls “yield-curve control.” It left the short-term interest rate on some yen deposits held by commercial banks at minus 0.1%.

The Bank of England held interest rates at the record low level of 0.25 percent and maintained asset purchases at £435 billion. The UK economy has shown strength since last June’s Brexit referendum and the government revised its forecasts for domestic growth in 2017 sharply higher. That might be wishful thinking.

The UK has not yet felt the full impact of Brexit, but that doesn’t mean they won’t. The big question is whether London’s financial institutions will lose access to the single market of the Euro Union after the UK leaves the EU.

The main argument is as follows: since London plays a key financial role in Europe, any disruption would endanger the financing of the EU economy and would ultimately pose a threat to financial stability in the bloc.

My guess is that argument plays better in London than Brussels. That’s not just speculation. The number of new available jobs listed in the UK’s financial center fell 17% in February year-on-year to 6,945.  Or simply, Brexit is Brexit.

Yesterday, the Federal Open Market Committee voted to raise the range of the federal funds rate to 0.75% and 1.00%, citing progress in labor market growth, business fixed investment and inflation. The Fed indicated they are still looking at 2 more rate hikes in 2017, which matches the guidance they provided in December.

In a press conference yesterday, Fed Chair Janet Yellen said, “The simple message is, the economy is doing well. We have confidence in the robustness of the economy and its resilience to shocks.”

The labor market has been a strong part of the economic recovery. In the last monthly jobs report, the unemployment rate dropped to 4.7%, but one weak spot was wages, which have flatlined. Once again, adjusted for inflation, there has likely been no growth whatsoever in real wages YoY.

For wages to increase, workers need job mobility, the ability to take a new job for more pay. Each month the Labor Department publishes the JOLT survey, or Job Openings and Labor Turnover; and in January, the number of Americans quitting their jobs rose to a seasonally-adjusted total of 3.22 million, the highest number since February 2001. The quits rate rose in January to 2.2%.

People quitting their jobs in droves is a sign of confidence among workers, as folks are unlikely to quit a job unless they are confident they can get another one. Openings totaled 5.63 million in January, above the prior month’s reading of 5.5 million.

The Labor Department said initial claims for state unemployment benefits dropped 2,000 to a seasonally adjusted 241,000 for the week ended March 11. It was the 106th straight week that claims remained below 300,000, a threshold associated with a healthy labor market. That is the longest stretch since 1970, when the labor market was much smaller.

US home-building jumped in February as unseasonably warm weather helped boost the construction of single-family houses to near a 9-1/2-year high. Housing starts increased 3% to a seasonally adjusted annual rate of 1.29 million units last month.

Home-building was up 6.2 percent compared to February 2016. Single-family home-building, which accounts for the largest share of the residential housing market, surged 6.5%. Starts for the volatile multi-family housing segment fell 3.7%.

The Arizona Supreme Court has upheld the constitutionality of Arizona’s minimum wage increase to $10 an hour. Voters approved the increase in November, and the challenge was brought by the Arizona Chamber of Commerce and Industry and other business groups.

The state Supreme Court unanimously rejected the challenge. Proposition 206 raised the state’s minimum wage to $10 an hour in January 2017. Incremental increases continue until 2020, when it will increase to $12.

Four people have been indicted in a 2014 cyber-attack on Yahoo email accounts. The indictment charges two officers of the FSB, Russia’s Federal Security Service, and two hackers who allegedly worked together with them to crack 500 million Yahoo user accounts.

Cyber security specialists have long said the Kremlin employs criminal hackers for its geostrategic purposes. They say the arrangement offers deniability to Moscow and freedom from legal troubles for the hackers.

3M said it would buy Johnson Controls’ safety gear business, Scott Safety, in deal valued at $2 billion. Scott Safety makes respiratory and protective equipment and other safety products for firefighters, industrial workers, police squads and the US military.

Oracle’s cloud business had a huge quarter. The business-software maker announced better-than-expected adjusted revenue and profit, helped by sales at its cloud business surging 62% to $1.19 billion

Adobe Systems stock jumped after the company delivered earnings and revenue that beat expectations.

Cold weather luxury apparel retailer Canada Goose’s stock rocketed 25 percent in its first day of trading. The stock trades under the ticker GOOS.

Amazon is ready to do to the local liquor store what it did to the local book store. It is rolling out free beer and wine 2-hour delivery and $7.99 1-hour delivery for Prime Now members, starting in Cincinnati and Columbus, Ohio.

Financial Review

Suicide is Painless

Sinclair Noe — March 6, 2017

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

Subscribe: iTunes | Android | RSS

DOW – 51 = 20,954
SPX – 7 = 2375
NAS – 21 = 5849
RUT – 9 = 1384
10 Y flat = 2.49%
OIL – .12 = 53.21
GOLD – 8.80 = 1226.50

On this date in 2009, the S&P 500 hit an intraday low of 666; the closing low was 3 days later but the intraday low was 8 years ago.

On Friday, Fed chair Janet Yellen signaled that an interest rate hike would likely come when Fed leaders meet next week. A March rate hike is now being priced into the markets. About the only thing that could change the Fed’s plan is weak economic data, giving extra significance to Friday’s jobs report.

In January, according to DOL’s Bureau of Labor Statistics, the economy added 227,000 jobs; unemployment was at 4.8 percent; and hourly earnings rose 0.1%. The US probably created a healthy 200,000 new jobs last month, keeping the unemployment rate below 5%.

North Korea fired four ballistic missiles early today. Three landed within a couple hundred miles of Japan, in what Japan considers an exclusive economic zone. The United States has about 28,500 troops and equipment stationed in the South, and plans to roll out the Terminal High Altitude Area Defense anti-missile defense system by the end of the year. And the ongoing provocative actions by North Korea insinuate that somehow that country is skirting sanctions.

The United Nations Security council recently issued a report claiming Malaysian companies are acting as a front in an arms sales operation, and requesting suspect companies’ assets be frozen. Malaysia has denied the claims but otherwise not responded to the UN claims.

China recently announced it would stop all imports of coal from North Korea but the UN report raises concerns about front companies operating in China continuing to do business with North Korea. As early as December 2016, China had blown past a UN-imposed ceiling of 1 million metric tons on coal imports, purchasing twice that amount.

China then shrugged off a requirement to report its North Korean coal imports to the UN Security Council sanctions committee. North Korean banks and firms, meanwhile, have maintained access to international financial markets through a vast network of Chinese-based front companies, enabling Pyongyang to evade sanctions.

President Trump signed a revised executive order today banning citizens from six Muslim-majority nations from traveling to the United States but removing Iraq from the list, after his first attempt was blocked in the courts.

The new order keeps a 90-day ban on travel to the United States by citizens of Iran, Libya, Syria, Somalia, Sudan and Yemen. Iraq was taken off the banned list because the Iraqi government has imposed new vetting procedures, such as heightened visa screening and data sharing, and because of its work with the United States in countering ISIS militants.

Secretary of State Rex Tillerson told reporters after Trump signed the new order that, “It is the president’s solemn duty to protect the American people.” The new order spells out detailed categories of people eligible to enter the United States, such as for business or medical travel, or people with family connections or who support the United States. Trump’s original ban resulted in more than two dozen lawsuits in US courts.

Today’s revised order is likely to face legal challenges as well.

Demand for travel to the United States over the coming months has flattened out following a positive start to the year, with uncertainty over a possible new travel order likely deterring visitors, per ForwardKeys, a travel analysis company which analyses 16 million flight reservations a day from major global reservation systems.

Overall, bookings for travel to the United States over the next three months are 0.4 percent down on last year, whereas they had been 3.4 percent ahead the day before the travel restrictions were imposed. Per travel search site Kayak, searches from Europe for flights to the U.S. are down by 12 percent since the elections.

However, Germans, some of the world’s biggest spenders on travel, have not been deterred, with searches up 10 percent in that period.

General Motors has agreed to sell its European division to Peugeot. The deal will total $2.3 billion and consist of GM’s sales of its unit containing Opel and Vauxhall for $1.3 billion and its European GM Financial arm for $1 billion. GM will take a $4 billion charge on the sale. The Opel deal continues a business theme for GM. Earlier, the company had pulled out of Russia and discontinued its Chevrolet brand in Europe. It had also ended auto manufacturing in Australia.

Deutsche Bank is raising cash. Shares of the German investment bank are down by more than 6% after the company announced it would tap the markets for $8.5 billion to help improve its financial health after two years of heavy losses. Germany’s biggest bank announced plans for the huge share sale on Sunday along with another overhaul of its strategy.

CEO John Cryan said in a release: “The new three-pillar structure of our operating business should position us for significant growth, both in revenues and earnings.” This marks the fourth time Deutsche has raised capital since 2010. The four add up to a total of about $32 billion, more than the bank’s current market value.

Standard Life and Aberdeen Asset Management are merging. The deal to combine the two investment firms values the combined entity at about $13.4 billion. The merger will create the largest asset manager in Britain.

Wells Fargo execs may face criminal charges, (don’t hold your breath); but Reuters reports the US Department of Justice is investigating whether Wells Fargo executives hid details of the company’s recent scandal from the company’s board and regulators.

Wells Fargo disclosed in a $190 million settlement with regulators in September that staff opened as many as 2.1 million checking, savings and credit card accounts without customer consent over several years to satisfy management’s sales quotas.

Officials are seeking to find out if executives shared everything they knew about the phony accounts to the Wells Fargo board of directors and the Office of the Comptroller of the Currency, the lead regulator for national banks.

Greece’s economy suffers a setback. Greece’s economy shrank by 1.2% in the fourth quarter of 2016, per the latest data from the country’s statistical service Elstat. That was worse than the previous estimate of a 0.4% contraction.

Alphabet, Google’s parent company, is suing Uber for theft of trade secrets, alleging that one of the top engineers in its self-driving car program decamped with thousands of confidential files, including designs that helped him start self-driving truck company Otto and then quickly sell it to Uber. Uber denies those claims.

Hope you enjoyed yourself with that Snapchat IPO, because the fun’s just about over, at least for now, according to a weekend feature on Barron’s .  You can start by trying to justify this crazy number: A market cap that surged at one point to $37.8 billion means 93 times its 2016 revenue of $405 million, with no profits expected until at least 2019. Several analysts initiated coverage of Snap as a “sell.” And many shareholders apparently felt it was a good time to pocket profits, as shares slid 7% today.

TG Therapeutics said a late-stage study testing a combination of its experimental cancer drug, in combination with an existing drug from AbbVie proved superior in high-risk patients with a common form of leukemia. The trial involved adult patients with high-risk chronic lymphocytic leukemia, who had undergone at least one prior therapy. TG Therapeutics more than double in share price intraday.

A strain of bird flu has been detected in a chicken breeder flock on a Tennessee farm contracted to Tyson Foods. Tyson, the biggest chicken meat producer in the United States, said in a statement it was working with state and federal officials to contain the virus by euthanizing 73,500 birds on the contract farm. In 2014 and 2015, during a widespread outbreak of bird flu, the United States killed nearly 50 million birds, mostly egg-laying hens.

The Arizona state Supreme Court is scheduled to hold a hearing Thursday on a challenge to a minimum wage increase. Last year, voters passed a measure to raise the state’s hourly minimum to $12 by 2020, up from $8.05. Under the measure, the minimum increased to $10 in January. In a court order issued last month, Chief Justice Scott Bales said “the court will limit arguments to whether [the measure] violated a state constitutional provision that requires ballot measures to identify a funding source.”

Even though the state is exempted from the measure, the Arizona Chamber of Commerce and other business interests argue it will be impacted because of increased wages for private sector employees under state contracts. Any relief from the court would appear to be limited to state contractors and not private employers, unless the court agrees with the business groups’ arguments that the entire measure is unconstitutional.

The chamber and other business interests went to court after Prop. 206 passed with support from 58 percent of voters. The measure gradually raises the state’s minimum wage to $12 an hour by 2020 and requires employers to provide paid sick leave. The first step — an increase to $10 per hour — took effect Jan. 1. The sick-leave provision is scheduled to begin July 1.

Just 6% of U.S. adults who expect to receive a tax refund this year plan to splurge on something such as a vacation or shopping spree. According to a new Bankrate.com report, the most popular uses for the money are much more practical: save or invest it (34%), spend it on necessities such as food or utility bills (29%) and pay down debt (27%). Approximately 47% of all taxpayers anticipate a refund this year. Millennials are the most likely to receive refunds, the most likely to save/invest them and the most likely to have filed early.