Financial Review

Cookies, Milk, Cannoli

…..Record high close for the Dow, again. Oil bounces despite glut. Retail sales up. Import prices up. Paris agreement “unstoppable”. UK has no plan for Brexit. Google and Facebook close the gate on fake news. Buffett buys airlines. Soros buys GOOG and NFLX.

Financial Review by Sinclair Noe for 11-15-2016

DOW + 54 = 18,923
SPX + 16 = 2180
NAS + 57 = 5275
10 Y + .02 = 2.24%
OIL + 2.51 = 46.45
GOLD + 6.50 = 1228.50


Another record high for the Dow.


The dollar pulled back from close to 14-year highs, euro zone government bond yields fell and the price of copper tumbled as traders cashed in recent gains. US Treasury yields fell slightly; the carnage in bonds placed on temporary pause but it didn’t last.


Oil prices, which hit three-month lows on Monday, rose after the U.S. Energy Information Administration said U.S. shale oil production was expected to fall in December for the 12th month in 13. Still, the US has more gasoline than it knows what to do with. Exports have risen above imports for three consecutive weeks as recurring pipeline outages and higher production levels by refiners caused Gulf Coast inventories to grow. The abundance of gasoline pushed Gulf Coast gasoline prices to an eight-month low last week and spurred the longest losing streak since 2012 in futures, making U.S. gasoline an affordable buy. Valero Energy shipped excess supplies to Canada instead of Colombia and Phillips 66 sent the first gasoline shipment in 16 months to Egypt. Oil trader Mercuria Energy Group is said to be storing a 60,000-ton parcel of gasoline blending components produced in India at an offshore site in the Bahamas. U.S. gasoline exports reached 1.07 million barrels a day in the week ended Nov. 4, the first time the figure has topped 1 million in U.S. Energy Information Administration data going back to 2010.


Retail sales increased 0.8 percent last month, as households bought cars and a wide range of other goods, including building materials – as households cleaned up and made repairs in the wake of Hurricane Matthew. Adding to the report’s bullish tone, September retail sales were revised up to show a 1.0 percent increase instead of the previously reported 0.6 percent rise. The combined September and October sales gain was the largest two-month rise since early 2014. Sales were up 4.3 percent from a year ago. The strong retail sales suggests that third quarter GDP estimates could be revised higher. It also reinforced views that the Federal Reserve will raise interest rates at its Dec. 13-14 policy meeting.


Manufacturing in New York State improved more than expected in November. The Empire manufacturing index came in at 1.50, above economists’ expectations of -2.50. This was the first time the headline number pulled out of negative territory in four months.


U.S. import prices rose for a second straight month in October as the cost of oil and automobiles increased, but a strong dollar continued to keep underlying imported inflation subdued. The Labor Department said import prices increased 0.5 percent last month after an upwardly revised 0.2 percent gain in September. It was the second straight month of gains. In the 12 months through October, import prices fell 0.2 percent, the smallest decrease since July 2014, after declining 1.0 percent in September. The strong dollar has resulted in the country importing deflation, helping to hold inflation persistently below the Federal Reserve’s 2 percent target.


At a meeting of almost 200 nations in Morocco to work out ways to implement the 2015 Paris agreement to limit greenhouse gas emissions, U.N. Secretary-General Ban Ki-moon said action on climate change has become “unstoppable” and predicted that President-elect Donald Trump would drop plans to quit the global accord. China worked closely with the US to build momentum ahead of the 2015 Paris Agreement on climate change. The partnership of the two biggest greenhouse gas emitters helped get nearly 200 countries to support the pact at the historic meet in France’s capital. Trump has called global warming a hoax created by China to give the country an economic advantage, and said he plans to remove the United States from the historic climate agreement; he has appointed noted climate change skeptic Myron Ebell to help lead transition planning for the Environmental Protection Agency. Beijing is poised to cash in on the goodwill it could earn by taking on leadership in dealing with what for many other governments is one of the most urgent issues on their agenda. Zou Ji, deputy director of the National Centre for Climate Change Strategy and a senior Chinese climate talks negotiator, told Reuters: “China’s influence and voice are likely to increase in global climate governance, which will then spill over into other areas of global governance and increase China’s global standing, power and leadership.”


But before we deal with meaty issues such as the environment or the global supply chain, the Trump Transition team has to get through the actual transition. Former congressman Mike Rogers announced in a statement today he parted ways with President-elect Donald Trump’s transition team. Rogers, who had been working on the transition team for months under Chris Christie, was sidelined as the campaign and transitions merged into one presidential team. Meanwhile, Paul Ryan unanimously won the nomination of his House Republican colleagues to continue as speaker. Ahead of the vote, Ryan told reporters, “Welcome to the dawn of a new unified Republican government.”


Britain has no overall plan for Brexit and the strategy for leaving the EU might not be agreed for six months due to divisions in Theresa May’s government, that according to a leaked memo seen by BBC and The Times. The document, apparently an internal report by the consultant firm Deloitte – not commissioned by the government, said government departments were discussing more than 500 Brexit-related projects and might require an additional 30,000 civil servants to cope with the immense workload. The report detailed what is widely understood: The government has not yet finished its internal debate on what kind of relationship it wants with the European Union, nor has it set its priorities for any negotiation; and the cabinet remains divided between those favoring as clean a break with Brussels as possible and those who want to preserve duty-free access to the huge European market.


Alphabet’s Google and Facebook have announced measures aimed at halting the spread of “fake news” on the internet by targeting how some purveyors of phony content make money: advertising. Google said it is working on a policy change to prevent websites that misrepresent content from using its AdSense advertising network, while Facebook updated its advertising policies to spell out that its ban on deceptive and misleading content applies to fake news.


WhatsApp is finally launching video calling for all of its one billion users (the service will be fully encrypted). It’s pretty simple – just click the call icon to make a voice call then select “video call” to activate it. A major plus for WhatsApp’s video calling is cross-platform support, unlike FaceTime, which only works with Apple devices, and Google Duo, which isn’t compatible with older versions of iOS.


Close but no cigar… Reynolds American has rejected British American Tobacco’s $47 billion takeover bid, but B.A.T. may be willing to up its offer. More M&A? Estee Lauder is buying millennials-focused makeup brand Too Faced for $1.45 billion and Regency Centers has agreed to acquire Equity One for about $5 billion, creating the largest shopping center REIT by market cap. General Electric said its software unit bought ServiceMax, a cloud-based provider of software used in inventory and workforce management, for $915 million. GE said the deal was part of GE Digital’s strategy to advance its “Industrial Internet” vision.


Warren Buffett is loading up on airlines. A 13-F filed on Monday showed Buffett’s Berkshire Hathaway amassed holdings in American Airlines, Delta Air Lines, Southwest, and United Continental. Buffett wouldn’t say why he’s now investing in a sector that in the past he’s labeled a “death trap” for investors. He’s been down on airlines since getting burned on a USAir Group investment in 1989. But Warren has always been a fan of buying at “stupid cheap” levels, and that probably explains the purchases.


George Soros’s hedge fund Soros Fund Management bought stakes in Google’s holding company Alphabet and Netflix in the third quarter, according to a regulatory filing on Monday. The hedge fund also reported ownership of Biogen, Hewlett Packard Enterprise and Priceline Group at the end of September. During the same period, Soros liquidated its shares of Disney, General Motors, Hershey, Anthem, Delta Airlines, Monsanto, and Pandora.


David Einhorn’s Greenlight Capital bought Calpine and US Steel, and trimmed stakes in Apple and GM. David Tepper’s Appaloosa hedge fund took new stakes in Apple, Yahoo, Bank of America and Facebook, while dumping shares of 21st Century Fox.


The head of the SEC is stepping down. Securities and Exchange Commission Chair Mary Jo White announced that she will leave her post at the end of the Obama administration.


Home Depot reported third-quarter profit and sales that beat analysts’ estimates. Home Depot said the number of customer transactions rose 2.4 percent in the third quarter. Customers also spent 3 percent more on average per transaction, which was the strongest in two years. The company also raised its full-year earnings forecast. Housing data for September had also suggested that overall residential construction may rise again in the current quarter.



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