News Summary: August 21, 2015

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 8/17/2015 – 8/21/2015

by David Abuaf

In light of recent market activity, below are a few thoughts:

It doesn’t change anything…yet, it’s only been a few days of poor performance. But, why? China, China, China, oh, and China. Long story short on China: their stock market was in free fall, they needed to sell US bonds and German bonds, etc, all to pump money into their stock market. So, who cares, why does this affect the US and the rest of the world!? Because we live in a very global economic environment. If Chinese stocks are falling, then Chinese consumers have less money to spend (income effect), forcing companies that do business with China or internationally to fall because of expectations of reduced consumer spending in China.

Well, why does this effect ABC company in America that only sells Widgets X to New Jersey and nothing else. Easy, Beta.  Obviously ABC company won’t fall as much as Yum Foods (KFC) or McDonalds, or Polo Ralph Lauren who all have a huge distribution in China, but it will fall precisely because companies, both domestically, and internationally, and intricately linked to each other (suppliers, producers, etc.)

a.         I know, the markets have been free-falling. I know why it’s happening, but I can’t tell you why it has the severity it does. Long story short, I hope all of you are not worried, and merely disappointed. Investing is NOT a short term gain, it takes time, this is just one example.

b.         From October 7 to October 15 of 2014, the S&P 500 fell 6.7%.  Through December 15th of 2014 the S&P 500 rose 12.9%.

c.         Please also note, we are in the midst of Summer, where the markets (all of them) are notoriously low on volume because everyone is on vacation. While this stinks, it doesn’t mean that stocks are now terrible! 

Government / Political / nEconomic

1.         The NLRB declined to weigh in on a unionization bid by Northwestern University football players.

2.         EPA will propose first ever federal regulations to cut methane emissions from the nation’s oil and natural gas industry.

3.         Talk about wasted money. A study found that ninth-graders who used e-cigarettes were more likely to smoke than peers who never did. A) obviously. B) I challenge anyone to say smoking e-cigarettes is not smoking.

4.         They call Warren Buffett the Oracle of Omaha. I believe I too am very good in selecting investments. But this is the political section, so call me the Political Prophetic (of common sense). I’ve been saying for months (like 8 or 9) that something drastic will occur with various Greek ministers resigning, etc. because of all the bad work they’ve done with their financial crisis. First came the Finance minister, and now Tsipras – the Prime Minister – is resigning in order to keep the bailout in check.

General Markets / Economic

1.         US oil prices slid toward $40 a barrel, and an increasing number of analysts and traders are saying crude could drop into the $30s. Can you imagine that!? That’s back to 2003 numbers. But apparently the gas pump prices aren’t reflecting them. Where’s $1.49 a gallon for premium? L

2.         Existing home sales rose in July to their prerecession pace, but lower inventory and higher prices loom as headwinds. That most likely means we’ll see a huge pickup in new home sales.

3.         An influential law firm called on the SEC to consider allowing US companies to end quarterly earnings reports.

·             The argument is that quarterly numbers force management to be too near sighted. While correct, it also allows for management to give guidance to the street, allowing – in theory – for the street to have more transparency for those companies that give guidance.

Company News

1.         WuXi PharmaTech agreed to a management buyout of $3.3B, a sign of life in the trend of buyouts among US traded Chinese firms.

2.         Zulilly agreed to be acquired by Liberty Interactive in a deal that values the Internet retailer at $2.4B.

3.         United Technologies is in talks to acquire Nortek, a maker of home-security and ventilation systems.

4.         Comcast’s NBCUniversal agreed to invest $200m in BuzzFeed, increasing its bet on new media. I’ve looked at BuzzFeed articles in the past; in my opinion, they categorically stink, and provide zero substance.

5.         BNY Mellon agreed to settle civil charges that it violated foreign-bribery laws in the hiring of some interns.

6.         Hackers posted customer data from Ashley Madison.

Interesting Stories

1.         Hahaha! For those that read MMQB (Monday Morning Quarter Back), I’m sorry to repeat this; it was too funny. Fantastic headline from the New York Daily News on Saturday 8/15, atop a story describing how a Chinese-food delivery man on a motor scooter bizarrely made a wrong turn and tried to go the wrong way through the Holland Tunnel toward New Jersey to delivery his food: “Wonton disregard for Holland traffic.”

2.         I read a fantastic quote about Donald J Trump. “He’s the only 69 year old white guy who lives like a rap-star!” While it is most-likely incorrect, it is awfully funny, and apolitical.

3.         According to researchers at UT-Austin, mass extinctions may accelerate evolution! Notably, these catastrophic events may actually speed up evolution by unleashing new creativity in adaptations, as these extinctions promote the lineages of animals that are most evolvable given a now greater area in which said animal could exist.

4.         Idaho, in order to prevent stoners from stealing the state’s 420 highway mile marker, have decided to relabel it 419.9!  Too funny!

5.         A self-published book about a rabbit became a surprise best-seller this week, since it claims to use foolproof psychological tricks to get kids to fall asleep. For the parents and soon-to-be parents: The Rabbit Who Wants to Fall Asleep by Carl-Johan Forssen Ehrlin.

 

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.

International investing involves additional risks such as currency fluctuations, differing financial accounting standards, and possible political and economic instability. These risks are greater in emerging markets. Past performance may not be indicative of future results. It is not possible to invest directly in an index. The S&P 500 is an unmanaged index of 500 widely held stocks.

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