News for the Week of 3/28/2016 – 4/1/2016
by David Abuaf, CFA
Investment Manager, RJFS
Government / Political / Economic
1. Pan European efforts to crack the Islamic State network behind the Paris and Brussels attacks have found a web of interlocking terrorist cells
2. A policy to fast track death penalty appeals is closer to taking effect following a recent federal appeals court ruling
3. Belgium released a man who had been suspected in last week’s Brussels attacks and asked for US help in its probe
4. US Capitol Police shot a man after he drew what appeared to be a weapon and pointed it at officers
5. Fidel Castro slammed Obama’s visit to Cuba in a newspaper column
6. SCOTUS deadlocked over a lawsuit involving government-employee unions and took an extraordinary step in a contraceptive-coverage case, highlighting the new dynamic of the divided court.
7. Malaysian investigation documents in a 1MDB probe show accounts of the Prime Minister paid out $15m for clothes, jewelry and a car
8. Hollande abandoned a plan to amend France’s constitution to strengthen his hand in fighting terrorism
9. Belgium’s interior minister said that the nation had been cutting its security budget for too long
10. More than 70 people were killed in an Easter bombing in Lahore, Pakistan, that happened next to a playground. Most victims were mothers and children.
General Markets / Economic
1. Law school graduates who file for bankruptcy protection can cancel debt they racked up studying for the bar exam, a judge ruled. Talk about small wins…like REALLY small
2. Lenders are betting offers for home-equity lines of credit will resonate with many borrowers whose home values have climbed and who need cash
3. Consumer spending rose modestly in February, by 0.1%
4. Yellen said global economic and financial uncertainty justifies a slower path for US rate increases
a. Look, I don’t disagree with her, I’m a classically trained economist (both BA and MA), but still it’s rather frustrating that the US managed to get away from the global recession in 2007 very quickly while the rest of the world suffered through tremendously poor central bank management decisions! That said, the world today is vastly different than 30 years ago; we are much more of a global marketplace, so even if the US improves, as long the world doesn’t improve, there is concern. However, this brings up, brace yourselves, my biggest ever mental/academic mistake. My senior thesis was that the EU would have been a good thing because it would have brought together typically weaker CBs to interact with stronger ones (Germany, UK…honestly, no-one else) and would have increased the collective economic intellect of the EZ and after 20-30 years the Euro would have gone away. I couldn’t have been more wrong, on everything. The EU has done nothing but set random benchmarks while creating more bureaucracy and slowing any real economic change in necessary times – oh, and it will likely persist for 50+ more years!
b. So, why do I bring this up and what does it have to do with the above? Well, the US should be pushing up interest rates, we need to slowdown the growth in stock prices and valuations (that would actually help minimize any 10% 2 month corrections in the market because stocks would be much slower to gain in price), and we need to encourage more people to actually buy US treasuries – the only ones now are investment banks and China. However, the Fed cannot do this because doing so would just increase the level of concern amongst foreign CBs and markets, and as I said earlier, we truly are a MUCH more global marketplace today than even 10 years ago (let alone 30)!
5. China’s biggest banks posted their lowest profit growth in a decade
6. Two gauges of Chinese factory output registered a pickup in March
7. FCC approved a plan to expand a phone subsidy for low-income people to include Internet service
1. Yahoo is giving potential suitors two weeks to submit preliminary bids for the firm’s core Web business and Asian assets
2. Marriott and Anbang are going at it for Starwood hotels. The bid is now more than $14B
· Anbang is walking away
3. Virgin America may soon have a new owner as JetBlue and Alaska Air weigh bids
4. Foxconn will buy Sharp for an initial payment of $3.5B, nearly $2.5B lower than its original proposal
5. Google has been reportedly ordered to help US agents open cellphones, according to court records
1. Everyone reading this, and even myself, we all remember the good-ol-days of REAL MAPS, and actual research. A house last week in Rowlett, Texas was demolished accidentally due to an address glitch in Google Maps
2. Russian scientists say they have found a Siberian unicorn – from about 29,000 years ago.
3. Marathoners in Qingyuan, China celebrated the end of a race last week by eating bars of soap, mistaken due to their fruit scent!