News for the Week of March 13–17, 2017

News for the Week of March 13 – March 17, 2017

 

by David Abuaf, CFA

Investment Manager, RJFS

 

Government / Political / non-Economic

 

  1. The Congressional Budget Office said the Republican plan to replace the ACA would leave 24m people uninsured
    1. Further analysis indicates that it will hurt poor and older people the worst
    2. What’s truly key to understand about this is that the ACA was a healthcare LAW, what the GOP is proposing is a budget, something that requires a different set of rules to pass!
  2. Scotland’s chief minister said she plans to seek a second referendum on independence within two years. This is so that Scotland can stay part of the EU. The first referendum was to determine whether to stay part of Britain, prior to the British referendum on the EU
  3. The administration is weighing tougher penalties on Chinese firms amid evidence they aided North Korea’s weapons programs
  4. A federal judge in Hawaii issued a nationwide temporary restraining order blocking Trumps revised travel ban hours before it was set to go into effect
  5. The DoJ announced Russian spies were behind Yahoo’s massive 2014 security breach as it announced indictments
  6. Trump’s budget will call for deep cuts to foreign aid, the arts, the EPA and public broadcasting, while boosting military spending. What I’m most curious about is the next administration’s budget emphasis on those very groups

 

General Markets / Economic

 

  1. Raphael Bostic was named head of the Atlanta Fed, the first African-American to lead one of the 12 regional banks
  2. Credit reporting firms plan to remove tax lien and civil judgement data from consumers’ reports
  3. Surprising nobody, the Fed raised rates by a quarter point and said it would keep lifting them this year, citing confidence in the US economy
  4. Auto executives say they can adapt to taxes or other import curbs, even as industry advocates insist such moves would dent results
  5. The WSJ is reporting that optimism is giving way to impatience among heavy-equipment firms hoping to benefit from an anticipated infrastructure boom

 

Company News

  1. Intel is paying $15.3B for Israeli car-camera firm Mobileye, in one of the chip maker’s biggest deals and Silicon Valley’s latest bet on self-driving cars. Mobileye is important because it’s their camera that is used in almost every car’s “reverse” function – so you can see what’s behind you
  2. Neiman Marcus is in talks to sell itself to Saks parent Hudson’s Bay, as the chain struggles with shifts in retail

 

 

Interesting News

 

  1. Gold Ridge Elementary School in Folsom California has banned tag; “My principal, he doesn’t’ want us to have tag at school because people, they touch too hard, sometimes they push people over and my principal doesn’t want anyone getting hurt.” says a school child.
  2. A vexing issue for vexillologists indeed. For 27 years Chad has been complaining that Bucharest ripped off its flag – and Bucharest isn’t sorry at all!  Romanians say “why should we care, Chad is too far away”. Ah, this reminds me of the Ostrich – what you can’t see won’t hurt you
  3. This is what my daughter has to look forward to. A substitute teacher was arrested for drinking boxed wine and vomiting during class. I don’t know what’s worse, the wine or the fact that it was box wine.

 

Commentary for the Week of March 13 – March 17, 2017

 

by David Abuaf, CFA

Investment Manager, RJFS

Chart from Barrons

 

Well, that was an uninspired Federal Reserve interest-rate hike; instead of causing the markets to tumble, it fueled their rise. The S&P 500 posted its seventh weekly gain during the past eight weeks! In fact, the Fed did nothing to cloud the long-term outlook.

 

Heading into the meeting, the market was not only expecting a rate hike, but also dreading the possibility that the Fed would plan to do more to slow the US economy, especially given the recent rise in inflation. So, when Yellen and her cohorts left their forecast for future rate hikes unchanged, investors took it as their cue to start buying stocks and start selling dollars. “The worry, of course, was that the Fed was willing to slow economic growth to avert potential inflation fears,” says Dennis DeBusschere at Evercore ISI.

 

In fact, the opposite appears to be true. While everyone was focused on the Fed, February’s inflation data was released. The CPI rose 2.7% last month, so even real rates remained firmly in negative territory – real rates are nominal interest rates, what you see quoted in the paper, minus inflation (so 1%-2.7% is negative); we don’t often talk about real versus nominal here, but over the near and mid-term nominal rates are most important, while over the longer term real rates are the most important figure regarding economic growth and sustainability. With the 30-year bond yields falling on the Fed news (so did 10 year rates), “monetary conditions are loosening, not tightening, which is good news for risk appetite,” says Sean Darby of Jeffries.

 

 

 

All opinions presented are those of David Abuaf, and not of Raymond James or Forman Investment Services. 

 

This information is not a complete description of the securities, markets, or developments discussed and has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation.  This information is not intended as a solicitation or an offer to buy or sell any security referred to herein.

 

The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. The Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stock of companies maintained and reviewed by the editors of the Wall Street Journal. NASDAQ composite is an unmanaged index of securities traded on the NASDAQ system. Index performance does not include transaction costs or other fees, which will affect actual investment performance.  Individual investor’s results will vary. Commodities’ investing is generally considered speculative because of the significant potential for investment loss.  Their markets are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising.  Inclusion of these indexes is for illustrative purposes only. Keep in mind that individuals cannot invest directly in any index. Individual investor's results will vary. Past performance does not guarantee future results.

 

 Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members. 

 

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News for the Week of March 6-10, 2017

News for the Week of March 6 – March 10, 2017

 

by David Abuaf, CFA

Investment Manager, RJFS

 

 

Government / Political / non-Economic

 

  1. Islamic State is using car bombs and human shields to fight Iraqi troops, as government forces advance deeper into Mosul
  2. The EPA plans to undo an Obama administration decision to lock in fuel-economy and emissions rules after auto-industry lobbying
  3. Want to know why I still distrust the PLO and Hezbollah, etc.? The PLO just named a youth summer camp after a terrorist who slaughtered 37 people – 12 of which were children
  4. Canada said it would extend its military mission in Ukraine in response to Russian aggression
  5. WikiLeaks released a trove of documents and files that it said exposes how the CIA hacks smartphones, computer operating systems, message applications, and internet connected TVs
  6. An array of conservative lawmakers and activist groups attacked a freshly delivered proposal by House GOP leaders to overturn the 2010 health law.
    • I don’t get it. I honestly don’t. GOP, you had 8 years with a majority in Congress and a sitting president and you didn’t create a health care plan. Then a HC plan is created and you immediately bash it. You lost in the Supreme Court. Just make amendments to the thing!
  7. Trump’s nominee for the No. 2 post at the Justice departments wouldn’t commit to appointing a special prosecutor to probe any Russian interference in the 2016 presidential election
  8. North Korea tried to sell a form of lithium metal to unidentified international buyers last year, fueling proliferation worries
  9. South Korea’s president was ejected from office by the country’s Constitutional Court, following her impeachment and suspension over a corruption scandal. So, South Korea’s first female president was also the first to be impeached!

 

 

General Markets / Economic

 

  1. Central banks around the world are increasing foreign currency reserves, highlighting the fragile underpinnings of the global economic recovery. However, an accelerating European economy has rekindled a war of words between top monetary officials
  2. The US posted its biggest monthly trade deficit in nearly five years in January
  3. Household net worth in the US climbed to a record $92.8T in the fourth quarter, aided by the end of year sure in stocks
  4. Corporate insiders are buying stock at the slowest pace in at least 29 years, a sign of uncertainty about the bull market
  5. The ECB hinted at the beginning of the end of its massive monetary stimulus, but stopped short of a significant move to rein it in

 

 

Company News

 

  1. GM’s sale of Opel to France’s Peugeot likely eliminates a source of low-cost funding for the US firm’s car-lending business
  2. Bird flu hit a Tyson linked chicken farm, the first strike on a commercial poultry flock in over a year
  3. IBM and Salesforce agreed to mingle artificial-intelligence technologies
  4. Shell is selling nearly all of its Canadian oil-sands developments in deals worth $7.25B, another step in a bid to cut debt and streamline
  5. AIG’s chief quit at a board meeting where his future was being discussed, apparently having lost the faith of the insurer’s directors

 

 

Interesting News

 

  1. Authorities in NJ arrested a man who is wanted for $51,000 in unpaid tolls and fees. A rather mundane story. Here’s the messed-up bit: only $10,850 is for tolls, $40,100 is in fees!!
  2. IMDB is now adding a rating of “F” to identify films that are feminist friendly

 

 

 

 

Commentary for the Week of March 6 – March 10, 2017

 

by David Abuaf, CFA

Investment Manager, RJFS

Chart from Barrons

 

 

The S&P 500 ended a six-week winning streak as tumbling oil prices and a looming Federal Reserve rate hike caused stocks to stumble. All three major indices fell this week, though only slightly (Nasdaq at 0.2%, Dow at 0.5% and the S&P 500 at 0.4%), but it’s a wonder the losses weren’t any bigger. The week started with the release of the widely criticized Republican plan to repeal and replace Obamacare and ended with a jobs report that has increased the likelyhood a rate hike at the next Federal Open Market Committee meeting along with oil dropping below $50 a barrel.

 

The downward pressure on the market was limited, in part because of the strength of the employment data, which was neither too hot nor too cold. However, the data is showing what we’ve all known and suspected for a while – “the economy is growing and one rate hike is unlikely to do much damage,” says Michael Darda at MKM Partners, he also called the coming Fed meeting as “largely irrelevant.” I always love it when other folks in finance are as cynical as I am!

 

There’s still a strong likelihood of some sort of economic stimulus plan from the Trump administration sometime this year. According to Richard Bernstein of the eponymously named company, “the fact that tax cuts and infrastructure spending are even being considered at a time when the US economy is adding 200,000 plus jobs a month is unprecedented; we’re going to add more stimulus on top of this!”

 

Still, a sense of unease hangs over the market, especially after the price of oil fell 9.1% last week, sinking to its lowest level since November. Binky Chadha at Deutsche Bank believes the market is due for a 3-5% sell off shortly, but just because it is due for a correction doesn’t mean we’ll get one. According to Chadha, “just because sentiment has played a big part in the rally, so has the fact that investors didn’t appreciate recent economic strength. As long as that continues, bouts of weakness should remain relatively muted as consensus forecasts have underestimated the recent rebound in growth and remain subdued, suggesting positive surprises are likely to continue in the very near term.”

 

 

All opinions presented are those of David Abuaf, and not of Raymond James or Forman Investment Services. 

 

This information is not a complete description of the securities, markets, or developments discussed and has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation.  This information is not intended as a solicitation or an offer to buy or sell any security referred to herein.

 

The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. The Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stock of companies maintained and reviewed by the editors of the Wall Street Journal. NASDAQ composite is an unmanaged index of securities traded on the NASDAQ system. Index performance does not include transaction costs or other fees, which will affect actual investment performance.  Individual investor’s results will vary. Commodities’ investing is generally considered speculative because of the significant potential for investment loss.  Their markets are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising.  Inclusion of these indexes is for illustrative purposes only. Keep in mind that individuals cannot invest directly in any index. Individual investor's results will vary. Past performance does not guarantee future results.

 

 

To opt out of receiving future emails from us, please reply to this email with the word “Unsubscribe” in the subject line. 

 

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News for the Week of February 21-24, 2017

News for the Week of February 21 – February 24, 2017

 

by David Abuaf, CFA

Investment Manager, RJFS

 

Government / Political / non-Economic

 

  1. The administration set sweeping changes on immigration enforcement, making clear that people in the US illegally who have committed crimes are now subject to deportation
  2. A former CIA agent living in Portugal lost her final appeal to avoid prison in Italy for her role in the kidnapping of suspected terrorists. 
  3. South Sudan declared a famine, saying more than 100,000 people were at risk of starvation and death
  4. Top US officials arrived for talks in Mexico and found a government refusing to accept Trump’s immigration and deportation policies. Well, is that really surprising!?
    1. To those that don’t know the details…Trump’s immigration plan, whether you agree or disagree, has one glaring problem; it says that all illegal immigrants will be deported to Mexico, regardless of their nationality! The real question is how will Trump make Mexico take in all the illegals?
    2. Trump cabinet members tried to soften the message on expanded US immigration enforcement during talks in Mexico, but officials there signaled little progress had been made on differences. In other obvious news, water and oil still don’t mix

 

 

General Markets / Economic

 

  1. Auto makers asked the EPA to undo the Obama administration’s decision to lock in future stringent fuel-economy standards
  2. Car insurance rates in the US are climbing as smartphone use by drivers leads to more accidents
  3. The administration is considering changing how it calculates US trade deficits, a shift economists say would inflate the numbers 
  4. Lawmakers are mounting efforts to bolster government scrutiny of Chinese investment in the US
  5. Treasury chief Mnuchin laid out ambitious goals for a tax-code overhaul by August and economic growth not seen in over a decade. 
  6. Greece must embrace further structural overhauls before the IMF can provide aid, says the IMF chief
  7. The aviation industry is heaving under the strain of building new jetliners after years of surging orders

 

 

Company News

 

  1. Carl Icahn has taken a stake in Bristol-Myers, fueling speculation the firm could soon be put on the block. The news came as the drug maker shook up its board to satisfy activist investor Jana
  2. Verizon and Yahoo agreed to shave $350m off the purchase price of Yahoo’s internet business and share data-breach costs
  3. Nissan CEO Ghosen ruled out a merger of Nissan and Renault as long as Paris holds a stake in the French car maker
  4. Boston Scientific recalled its Lotus Valve heart devices from sites in Europe because of manufacturing defects

 

 

Interesting News

 

  1. A 76-year-old Boston woman was fined $200 for not shoveling her sidewalk. The find could have been $50, however it was $200 because her brother runs an insurance office out of her home. Ya know, I have zero problems with this. As someone who was raised in NYC – the actual city, not a suburb – and who has lived in Chicago since 2006, it is pretty heinous to not shovel your sidewalk. They gave her two weeks, usually you get a ticket after 2 days! While the sidewalks are “public property,” it is common knowledge that they are to be expressly maintained by the owner of the home or building!
  2. Dozens of workers lost their job after participating in “A Day Without Immigrants” across the country. While I support everyone’s right to protest, I do not support stupidity. Folks in Oklahoma were fired because they didn’t tell their boss of their expected absence, “we expected to be reprimanded, but not dismissed.” Really!? If you didn’t show up to work and didn’t let your boss know and then the next day you told him/her that you decided a few weeks ago to protest and not tell them, would you expect your boss to not fire you!? That would be some lenient employment contract!
  3. For the next few months in Nigeria, hundreds of flights a month will be relocated from the capitol to Kaduna because “goats have chewed some holes on the runways”!

 

 

 

 

Commentary for the Week of February 21 – February 24, 2017

 

by David Abuaf, CFA

Investment Manager, RJFS

Chart from Barrons

 

 

11 straight days of gains for the major market indices. Strong economic data and rising doubts about the Federal Reserve’s intentions to lift interest rates next month contributed to the gains, although no single piece of news seemed compelling enough to spark this much bullish activity.

 

Politics did not appear to help. The White House and House Republicans are reportedly at odds on plans to impose a border adjusted tax on imported goods. Infighting could cause a delay in corporate-tax reform, which is the underpinnings of the recent rally.

 

Treasury Secretary Mnuchin said that he expects tax reform to happen by August, but Wall Street does not share his optimism. Not even 25% of fund managers polled by Bank of America think it will get done by Congress’ August break.

 

Nonetheless, economic data indicate that the economy remains relatively strong. Home sales jumped in January, with US manufacturing production also showing continued strength, while the retail sector had a number of companies report better than expected earnings and boosting their dividends. According to Jason pride of Glenmede Trust, “the data are providing more evidence of an economic expansion.” As a reminder, retail spending is huge when assessing the health of an economy. While Government spending most often outweigh consumer spending (almost 2 to 1 in the US), its consumer spending that is significantly more volatile (almost 2 to 1 in the US).

 

All that said, investors are often wary that the Fed could spoil the party. Public prices of US treasury futures show more than half think the central bank will wait to raise rates; just 40% expect a March hike, down slightly from last week. Though, don’t listen to the official word as “many” Fed officials expect a hike “fairly soon,” according to the minutes from January 31st. that said, members don’t seem too concerned about inflation, indicating that they may be in no rush to tighten (raise interest rates) monetary policy. According to Joe Carson at Alliance Bernstein, “the bond market seems to be of the opinion that the Fed is waiting for more evidence of strength before they move,” and to that I ask, “do you wait for the world’s strongest man to bench press 1,000 pounds after he already bench pressed 975 pounds to proclaim the world’s strongest?” 

 

However, according to Carson, there’s not much evidence that the Fed is getting cold feet; “they’ve indicated that if the economy continues to improve along with their expectations, they would consider raising rates relatively soon. They said the exact same thing in November and they raised rates in December. The data since the meeting are much stronger than in the fourth quarter.”

 

But not everyone is so sanguine. David Rosenberg at Gluskin-Sheff writes that other data point to a sluggish economy, including a continuing drop in gasoline consumption (better tell OPEC) and weak earnings reports from consumer staples companies, “the consumer staples can’t raise prices, who can?” – maybe Rosenberg should revisit the definition of an elastic good!

 

 

 

 

 

All opinions presented are those of David Abuaf, and not of Raymond James or Forman Investment Services. 

 

This information is not a complete description of the securities, markets, or developments discussed and has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation.  This information is not intended as a solicitation or an offer to buy or sell any security referred to herein.

 

The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. The Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stock of companies maintained and reviewed by the editors of the Wall Street Journal. NASDAQ composite is an unmanaged index of securities traded on the NASDAQ system. Index performance does not include transaction costs or other fees, which will affect actual investment performance.  Individual investor’s results will vary. Commodities’ investing is generally considered speculative because of the significant potential for investment loss.  Their markets are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising.  Inclusion of these indexes is for illustrative purposes only. Keep in mind that individuals cannot invest directly in any index. Individual investor's results will vary. Past performance does not guarantee future results.

 

 

To opt out of receiving future emails from us, please reply to this email with the word “Unsubscribe” in the subject line. 

 

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