News for the Week of 1/11/2016 – 1/15/2016
by David Abuaf Investment Manager, RJFS
Government / Political / Economic
1. Merkel’s refugee policy is facing its biggest challenge amid aftershocks from allegations of assaults by migrants in German cities.
2. Trump is stepping up his attacks on Cruz, questioning the Texas senator’s eligibility to be president.
a. For those interested, Article II: Section 1 of the Constitution
· “No Person except a natural born Citizen, or a Citizen of the United States, at the time of the Adoption of this Constitution, shall be eligible to the Office of President; neither shall any person be eligible to that Office who shall not have attained to the Age of thirty five Years, and been fourteen Years a Resident within the United States”.
b. Cruz was born in Canada.
3. The US flew a B-52 bomber near North Korea in a bid to pressure Pyongyang after its nuclear test.
4. Republicans are pushing to mobilize churchgoing voters in New Hampshire, in a move that could prove a primary boost Cruz.
· Talk about the obvious. That’s like Democrats saying they’re pushing to mobilize Hollywood actors or young people at Liberal Arts colleges!
5. Trump vowed to cut funding for the EPA and the Education Department and end Common Core if elected.
6. SCOTUS appeared ready to end the power of public-sector unions to require workers to pay a fee even if they don’t join.
7. Iran detained two small US Navy boats and was holding 10 crew members.
a. The news emerged around 4-5 p.m Central on Tuesday. As of 4 a.m. central on Wednesday they were released.
b. The US sailors likely entered Iranian waters because of a navigational error, Defense Secretary Carter said. I’m a very skeptical individual, maybe this is true, but I also know that the type of ship the US used which entered Iranian waters was one typically used in combat or that contained classified material. I honestly wonder what the real story is; if we have sailors who mess up based on navigational errors, then our military has real problems. I’m quite sure navigational abilities on a ship can be determined from more than one manner; did they all have errors?
8. An Islamic State suicide bomber struck Istanbul’s historic district, killing at least 10 people, in a blow to Turkey’s tourism industry.
· The US is weighing a Turkish request to help train and equip Sunni Arab fighters in Syria to help secure Turkey’s southern border.
9. SCOTUS struck down Florida’s death-sentencing system, saying juries, not judges, must decide if a criminal should die.
10. Multiple explosions and gunfire erupted in Indonesia’s capital Thursday. At least one person was killed.
11. I wouldn’t have believed it if I hadn’t read it, then again, don’t believe everything you read! Israel is pursuing improved ties with Sunni Arab states, based on their shared animosity toward Iran.
12. And some people want to vote for Marco Rubio? He and Texas Governor Greg Abbott repeated calls this week for a special convention to overhaul the Constitution. The nine proposed amendments include eye-openers such as allowing states to override federal laws or Supreme Court decisions. I get that the GOP is state-focused and against federal meddling, but there comes a point in which you have to say “we are one country, we can’t have a plethora of rules changing from one state to the next!”
General Markets / Economic
1. The Fed is moving forward with plans to alter margin rules for securities-financing transactions under a recent global accord.
2. US public pension plans and mutual funds are holding more cash than they have in years amid concern about volatile markets.
3. Proxy access is being embraced by more US companies, giving shareholders more power to oust directors and influence strategy.
4. Oh no! A Chinese official said bets that the yuan will slump 10% or more against the dollar “ridiculous,” and that Beijing can defend its currency. Why oh no? Last country to make that bet was the United Kingdom and the pound against George Soros. Question: who won? Hint: it’s a person
· Beijing escalated a battle over the yuan, effectively shuttling down the offshore market where traders had been betting on its decline
5. Global auto sales likely will grow 1%-2% this year, Renault and Nissan CEO Ghosn forecast.
6. Auto shares are dropping on concern about the effect of rising rates and the slowdown in China.
7. China’s CB has purposely made its currency policy unpredictable, people close to the PBOC said. This is terrible, a fundamental theorem in economics (central banks run on economics not on finance) is that predictable policy yields the best outcomes because the information was known in advance – this is true both positively and negatively.
· So, a negative economic event, if known in advance, would cause people to not immediately sell on the news, but rather have time to digest it. A positive economic event, if known in advance, would cause people to digest the news and instead of saving an additional kickback (think tax break) they would instead invest it!
1. The banks have been reporting stronger than expected revenues and earnings (Citigroup, Wells Fargo, JP Morgan, etc.) which is very good news in this markets as the banking system is typically one of the first to falter in a down economy.
2. Drug makers have raised US prices for dozens of branded drugs since late December, with many increases between 9% and 10%.
3. Kohl’s is debating whether to pursue steps such as taking itself private or breaking up the company.
4. Citigroup is pushing to ramp up stock trading amid a slump in its traditional engines of trading revenue.
5. Alcoa plans to announce a $1.5B billion long-term supply contract with GE’s aviation unit.
6. Shire and Baxalta unveiled a $32B deal that they said would create the world’s biggest rare-disease drug maker.
7. Big oil firms deepened their cutbacks to staff and investment as oil prices briefly slipped below $30 a barrel for the first time since December 2003.
8. The EU opened an antitrust probe into Halliburton’s deal for Baker Hughes.
9. GE is moving its headquarters to Boston from Connecticut.
10. Al Jazeera is shutting its US cable channel. The channel, backed by Qatar cited economic factors.
11. GE is near a deal to sell its appliance business to China’s Haier for over $4 B.
1. Don’t mess with Falcons in Morocco! Falcons in Morocco’s’ Essaouira archipelago have been observed imprisoning other birds and holding them for several days before feeding them to their young. These falcon colonies tend to synchronize their chick-rearing with the height of the annual migration, in order to ensure that prey is at a maximum when their young hatch. They begin feeding on birds prior to their offspring hatching. However, killing their food so early they risk it drying out or rotting before it can be eaten, so they keep them alive! How? They do two things: 1) stuff the small birds into crevices 2) actually pull out / remove a number of feathers making flight impossible!
2. Ah crazies, if it wasn’t for them, I’d have nothing to write about. A suspect, claiming his name to be Jesus Christ, was arrested after Secret Service agents found unregistered firearms in his truck. He is originally from North Dakota and was arrested after driving a pickup truck across the country with the plans to kidnap the Obamas’ dog. No word if it was to be Sunny or Bo. Some questions will forever be unanswered in time L
3. LIGO, an observatory operated by MIT and CalTech made a groundbreaking cosmic discovery; they detected gravitational waves! LIGO stands for Laser Interferometer Gravitational-Wave Observatory
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.