News for the Week of September 6-9, 2016

News for the Week of 09/06/2016 – 09/09/2016

 

by David Abuaf, CFA

Investment Manager, RJFS

 

I hope everyone’s Labor Day was fun and spent wisely. Preferably not with anything laborious! 

Government / Political / non-Economic

 

1.     ITT – that school you see on daytime television - has shut amid a US crackdown on for profit colleges. That’s horrible, at least you learn an identifiable and transferable skill from them

2.     Blah…blah…blah, political news – in other words, nothing new this week domestically. This is good, I think we all know the closer we get to election day, the more politics I’ll write about L

3.     Immigrants to the US from China and India are outpacing Mexican arrivals in most regions; a marked reversal from a decade ago

4.     North Korea fired three ballistic missiles that landed in the Sea of Japan. At least it wasn’t the Pacific or Indian Ocean – so, I highly doubt it’s an intercontinental ballistic missile!

·       They appeared to conduct a fifth nuclear test

5.     House Democrats revealed emails from Colin Powell to Clinton on how to avoid State Department computer systems, because if you don’t like the topic, change it

6.     Do you not like either Hillary or Donald? Well, the Libertarian option, Gary Johnson, is unfamiliar with Aleppo and Syria!

 

 

General Markets / Economic

 

1.     The European Central bank policy is now so aggressive that even corporate bonds are trading for negative yields (that means you pay the company to lend them money!)

·       Some economists are saying the ECB should invest in stocks, arguing that the central bank may run out of bonds to buy if it raises its stimulus

2.     OPEC is unlikely to make aggressive efforts to curb output when it meets in Algiers later this month: now you can keep your big family road trip as originally scheduled!

3.     Britain’s services sector returned to growth in August, a sign the economy is rebounding after Brexit

4.     Competition among retailers and delivery companies to recruit holiday-season logistics workers is already heating up

5.     Japan’s central bank could run out of bonds to buy as it snaps up government debt to spur inflation and growth

6.     The ECB left its stimulus unchanged, brushing off concerns about fallout from the UK’s Brexit vote

7.     Two US regulators pressed for new limits on banks’ involvement in commodities and other areas outside traditional lending

 

 

Company News

 

1.     Bayer raised its offer for Monsanto, though it said the higher price depended on achieving a “negotiated transaction”

2.     Apple unveiled improvements to the iPhone that stopped short of a major overhaul, hoping the upgrades will revive sagging sales – a phone withOUT a headphone jack!

3.     Liberty Media agreed to buy Formula One in a deal that values the auto-racing franchise at $4.4B

 

 

Interesting News

 

1.     Federal authorities arrested a woman who allegedly set two blankets ablaze on a JetBlue flight to Puerto Rico. She had brought aboard with her a lighter. See, this is why I need my bottled water, to be the hero

2.     The giant pandas are no longer classified as “endangered”

3.     The richest man in India is providing everyone in his country free access to 4G internet for the remainder of 2016

 

 

Commentary for the Week of 09/06/2016 – 09/09/2016

 

by David Abuaf, CFA

Investment Manager, RJFS

Chart from Barrons

Chart from Barrons

 

Wall Street was rocked on Friday in the steepest slide since the drop following the United Kingdom vote to leave the EU in late June.  Shares fells after a Fed official spoke in favor of an interest-rate hike. Until his comments, equities were up on the week. Investors were also rattled by a nuclear test by North Korea and a drop in oil prices on Friday.

 

Early on Friday, Boston Fed President Eric Rosengren, said there is a reasonable case for a gradual rise in rates, to avoid overheating the economy. In recent weeks we have seen similar comments – though more implicit – from Fed officials.

 

That said, the market was primed for a pullback, given the uninterrupted, nearly 10% jump since Brexit, says Timothy Ghriskey, at Solaris Asset Management. Christopher Zook at CAZ investments adds that, “complacency, poor earnings growth, and high valuations made the market vulnerable.”

 

A more optimistic James McDonald, at Northern Trust, says the global rates picture has investors fretful. And when investors are fretful, markets get soft, and that makes central bankers take monetary easing policy off the table.