News for the Week of January 23-27, 2017

by David Abuaf, CFA

Investment Manager, RJFS



Government / Political / non-Economic


  1. President Trump pulled out of the 12-nation Pacific trade deal and promised to impose a border tax on companies that move some operations overseas
  2. Trump took steps to revive the Keystone XL and Dakota access pipeline projects that were rejected under Obama
  3. Trump was set to expedite plans for a border wall, temporarily ban entry to the US of people from some countries deemed a terror risk, and suspend the refugee program
  4. Trump plans to nominate a Supreme Court justice next week
  5. California’s Jerry Brown swore to protect the state’s liberal policies and will seek to find common ground with the new administration
  6. Britain’s Supreme Court ruled that Theresa May must seek approval from Parliament before formally triggering the country’s withdrawal from the EU
  7. Japan’s parliament was given the green light to let Emperor Akihito step down, the first abdication in the nation’s modern history
  8. Trump called for a probe into whether US elections are tainted by fraud
  9. Chicago officials said they would welcome more federal help in addressing the city’s violence, but ruled out measures such as sending in the National Guard
  10. The Pentagon said Secretary of Defense James Mattis’ position on the use of banned interrogation techniques remains unchanged, indicating the defense chief is opposed to their reinstatement
  11. Trump took a step toward a House Republican tax plan as it tentatively endorsed a proposal to tax US imports and exempt exports from taxation
  • That doesn’t mean foreign countries won’t impose a tax on our exports!




General Markets / Economic


  1. OPEC and Russia said they were making progress on pledges to cut back output and raise oil prices
  2. China’s spotty record on open markets will test its efforts to seize global economic leadership after the US withdrawal from TPP
  3. The Dow closed above 20,000 for the first time. Do you know what the means? NOTHING, ABSOLUTELY NOTHING. I was being interviewed on Fox Business News back in 2012 when the Dow hit 15,000 for the first time ever, and the reporter looked at me and asked what it means. I gave her the most derogatory look I could imagine – on live TV!
    • The price of an index means nothing, it never does! In fact the price of anything always means nothing – in the investment side of the world. All that ever matters is the value of that product – namely how much are you paying for given its earnings or sales or other fundamental metric. The second is how has the price changed over time? Here’s an example: Portfolio A is up $100 on the year, and Portfolio B is up $50. Which one did better? This is a misleading question. The only way to answer that is by return, so how much money did each portfolio start with? If portfolio A and B both started with $1,000, then of course portfolio A did better. However, if Portfolio A started with $1,000 and Portfolio B started with $200, then Portfolio B did better. Their returns would be: 10% and 25%, respectively. Please, always remember this fact, only returns and fundamental value ever matter when assessing the meaning of prices of indices or stocks or bonds!
  4. China acknowledged it has demographic challenges, saying its population will peak in 2030, but offered little hope for further easing of birth restrictions
    • I’m putting this in economic news because China is a country that is still developing, as such their ability to grow economically has more emphasis on the growth of labor productivity (more laborers = more growth), versus developed countries wherein their growth is more dependent on capital productivity (increased efficiency/utilization = more growth). For additional insight, read into Total Factor Productivity, specifically the Cobb-Douglas form
    • Birth restrictions are only placed on those who are genetically Chinese; minority “races” are actually not limited due to the birth restriction laws
  5. US new home sales posted a steep drop in December, an indication affordability challenges are beginning to cut into demand




Company News


  1. Wells Fargo bank branches were given a heads-up before internal monitors landed for inspections, allowing time to cover up improper practices
  2. Apple is nearing a deal to manufacture its products in India, as the company seeks to boost its sales there
  3. Facebook is overhauling its “trending topics” box, part of an effort to curb fake news and expose users to a broader range of information
  4. A judge blocked the merger of Aetna and Humana on antitrust grounds, a potentially fatal blow to the $34B deal. 
  5. Spring will buy one third of music streaming service Tidal, the latest content deal secured by a network provider
  6. Foxconn is considering building a flat-panel screen factor in the US. Oh please don’t. I like my TVs at low prices
  7. Verizon is exploring a combinationwith cable firm Charter Communications
  8. J&J agreed to acquire Actelion for $30B in an unusual deal that will spin out the Swiss biotech’s drug discovery operations



Interesting News


  1. Astronomers captured what they say are the first images showing an early stage of the formation of large galaxies
  2. A Chinese man cycling from his home to his relatives had spent 30 days cycling IN THE WRONG DIRECTION. He had traveled 500KM by that point. Police helped pay for him to get a train in the right direction. And this is a country that is vying for economic supremacy with the major global powers!?
  3. What would you do for a Klondike bar? A thief in Germany drove a tractor through a wall in order to steal a safe (fine, not exactly a Klondike bar, but certainly more valuable).






Commentary for the Week of 01-23-2017 – 01-27-2017


by David Abuaf, CFA

Investment Manager, RJFS

Chart from Barrons




Wow, it took just 24 trading days to go from 19,000 on the Dow to 20,000 (5.2%) – second only to the Dow’s 24-day spring from 10,000 to 11,000 (10%). As I’ve said earlier, this is not a big deal at all, nothing more than just a random round number, one that is important thanks to an accident of history – namely that we humans developed a base-10 number system!


Still, Dow 20,000 comes at an interesting time for the markets. Since a 6.4% rise in the S&P 500 after Trump’s election, it stalled in January, raising concerns that it would repeat last January’s tumble. While the rally has alleviated those concerns for now, the possibility of less regulation and lower taxes has spurred talk of animal spirits. But it’s also a strange time for the market to rally, if only because so little has been resolved. Last week brought talk of tariffs but also deregulation, and the ultimate mix is still largely unknown.


Nitin Saksena, of Bank of America, notes that the Economic Policy Uncertainty Index – a measure of uncertainty as reflect in the in the media – has been rising. But, unlike the uncertainty that comes from being able to see everything that could go wrong and little that could go right, this time the uncertainty could go either way. Investors also tend to sit on their hands when they can’t pinpoint exactly how to price the new risks. Saksena notes, “it isn’t necessarily bearish for investors!”


That doesn’t mean volatility can’t rear its ugly head. This coming week the Federal Reserve is meeting. According to Tony Dwyer of Canaccord Genuity, everything that has kept the Fed on hold – deflation fears, risks to the global economy, and tepid government spending – have all reversed, and that means the central bankers could be surprisingly hawkish, even if they don’t necessarily raise rates. “the initial shock could be nasty,” Dwyer says.




All opinions presented are those of David Abuaf, and not of Raymond James or Forman Investment Services. 


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.


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