PLEASE NOTE: The stories reported below are for informational purposes only to educate our clients on the weekly news stories; real, funny, educational, and otherwise. The source of most news will stem from the Wall Street Journal (WSJ), Financial Times (FT), Barrons (B), Business Week (BW), and Bloomberg (Bbg). The purpose of this is NOT to solicit any offers to buy or sell stocks, mutual funds, commodities, or other financial assets – merely to report the news. Please call us to discuss any investment questions you may have. Additionally, we will not take sides in any political or religious news that we report, we will only present the objective facts, and perhaps opine on them from a neutral perspective. Finally, the opinions represented are those of David Abuaf, and not necessarily of Forman Investment Services or Raymond James or its affiliates.
A quick list of shortcuts: DoJ (Dep’t of Justice), ECB (European Central Bank), EZ (Euro Zone), EU (European Union), BoE (Bank of England), BoJ (Bank of Japan), CB (Central Bank) example: BoX (Bank of X country), SCOTUS (Supreme Court), Ccy (Currency), WH (White House), HY (high yield – bonds), IG (investment grade – high quality bonds), OECD (Org for Economic Cooperation & Dev), IMF (Int’l Monetary Fund)
News for the Week of 8/10/2015 – 8/14/2015
by David Abuaf
Government / Political / Economic
1. EPA rules requiring sharp cuts in power-plant carbon emissions face a legal challenge from industry representatives and some states.
2. Iran’s conservative media has grown bolder in its criticism of the nuclear deal, reflecting a rift in the country.
· Quick question, is there a single liberal media outlet in Iran?
3. Japan restarted a nuclear reactor for the first time since new rules were introduced after the Fukushima accident (that was in March of 2011).
4. It emerged last week that President Clinton had a telephone chat with Trump before he declared his nomination. According to Brent Budowsky, in an opinion in The Hill, “Of course the grand slam for Hillary Clinton would be if Donald Trump were to run as a third-party candidate in 2016” – conspiracy theories are both really dumb, and sometimes entertaining. This is both.
5. Greece and its creditors agreed on terms of a new bailout deal that could unlock up to $95B in financing over the next three years. See what happens when you play ball instead of HardBall, Greece!?
6. Iraq’s parliament approved a package of anticorruption measures proposed by the PM.
7. Biden is sounding out allies about a presidential bid, amid concerns among some Democrats have over controversies involving Hillary Clinton.
· As a kid, I took it for granted that the VP would run for office, as an adult, I look at Biden and have categorically no idea what his plan/ideology is, and he’s been #2 for 7 years!
General Markets / Economic
1. Read a., then b. Now, pretend you’re Janet Yellen in front of Congress or the American people. With both a. and b. being true (they are), take a single firm stand as to how to manage the economy and interest rates and…well, anything financial/economic with these two conflicting reports. The truth is, there are many more conflicting ones!
a. US worker productivity is advancing at one of its worst rates on record.
b. US retail sales shot up 0.6% in July and jobless claims touched a 15-year low.
2. Commercial real-estate prices are hitting record levels world-wide and deal activity is soaring, fueling concerns that the market is overheating.
3. September oil futures are nearing six year low as contracts for later delivery take an even bigger hit, a sign prices could stay down for longer.
4. China’s CB devalued its tightly controlled currency, causing its biggest one-day loss in two decades, as the world’s second largest economy continues to sputter.
· This will pressure direct trade rivals to follow suit and might complicate the Fed’s decision on when to raise rates.
5. US car loans topped $1T for the first time. About $119B were originated last quarter, a 10 year high.
1. I figured I would use the beginning of this section to give a recent example of how markets over-react and to reaffirm that we should never judge anything off any one specific event.
· On a recent earnings call, Disney said cable operating income was likely to grow in the “mid-single digits” annually versus a “high-single digit forecast” 16 months ago. Pretty non-specific, eh? Citigroup analyst Jason Bazinet said, “You can drive a truck through that in terms of what it means for the health of the ecosystem,” that could be from 9% to 4% or from 7% to 6%. “So what does the market do? It assumes the worst.” It fell more than 9% that day on the news of that statement!!!!
2. GE agreed to sell a health-care financing business and a package of loans to Capital One for about $9B.
3. Dr Pepper Snapple is paying $20m for an 11.7% stake in BodyArmor as it takes aim at the $7B US sports drink market.
4. Symantec agreed to sell its Veritas data storage and recovery business to a Carlyle-led group for $8B.
5. Berkshire Hathaway announced a deal to buy Precision Castparts for $32.4B, the largest acquisition in their history.
6. The chairman of Dean Foods resigned over the weekend, casting uncertainty over the country’s largest milk processor!
7. Google unveiled a reorganization that separates its highly profitable search and advertising business from fledgling efforts in an array of so-called moonshots. The holding company is rumored to be called Alphabet.
· I think this is good news, typically in large companies that have multiple very distinct lines of business there’s a theory of valuation called “Sum of the Parts,” which in theory says the value of the company is the sum of all the parts put together. However, in practice that value is not often seen because of how complex the company’s structure is, so separating out all the businesses could be very fruitful to Google shareholders.
8. Fidelity National agreed to buy financial software company SunGuard for $5.1B.
9. Kraft Heinz is cutting 2,500 jobs in North America as it aims to slash at least $1.5B.
1. A Seattle woman has filed a “wrongful life” lawsuit over a federally funded health clinic’s alleged negligence. The lady was to receive birth control injections every three months, instead, in September 2011, she received a flu shot and subsequently got pregnant! That said, DMPA (the implied drug she was seeking) is only 99.7% effective and the pill is 99.9%.
2. A 30 year old mother of one has died after complications from surgery to put silicon padding into her backside – she died from thrombophlebitis (typically causes DVT) 20 days after the operation. This happens to be the 5th recorded case of a woman dying after undergoing surgery this year in Cali, Colombia!
3. I’ve read too many academic papers in my life, and I’m not even in academia. A Frenchman, Georges Aad, appeared as the lead author on 458 papers in the past decade, however, he was ALSO the lead author on a physics paper earlier this year, clocking in 24 pages of authors alone, that’s 5,154 authors! Because all papers just state the first author, then “et al.,” Vincent Lariviere of the University of Montreal said “Basically [Aad] has won the academic lottery” given the spelling of his last name!
4. Hoping to promote Latin – seriously, the Vatican is translating the kid’s book series, Wimpy Kid, into Latin!
5. It was a strange week in the news for Alabama!
· A state senator tried to balance the state’s budget with a GoFundMe page.
· On Saturday the mayor of Talladega was beaten up by his 71 year old former radio co-host, allegedly over a sex tape.
· Scientists at the University of Alabama-Birmingham found that the Southern diet increases heart attack risk.
6. Some people are just…well, you be the judge. On Tuesday, uninvited members of the Oath Keepers appeared carrying assault rifles in response to the violence in Ferguson, MO.
7. A flight from Oslo to Crete on Latvian airline airBaltic was delayed on Saturday because the flight crew was drunk. Four of the five crew members, including both pilots, failed breath tests administered by suspicious authorities! In the US, the FAA mandates a minimum of “8 hours from bottle to throttle” OR over 0.04%.
8. An entrepreneur wants to clear Canada’s capital of Canadian goose, by creating a squadron of drones. Maybe I should have said an aspiring entrepreneur.
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