Financial Review

Suicide is Painless

…..Eight years since S&P 666. North Korea acting badly and bad actors accommodate. Trump signs immigration ban, again. Cancel the reservations. GM sells Opel to Peugeot. Deutsche Bank scraping together cash. Standard-Aberdeen? Wells Fargo under further investigation. Greek austerity fails, again. Did Uber steal from Alphabet? Oh, Snap! TG Therapeutic doubles. Bird flu, again. Arizona minimum wage challenge, again.

Financial Review by Sinclair Noe for 03-06-2017

 

DOW – 51 = 20,954
SPX – 7 = 2375
NAS – 21 = 5849
RUT – 9 = 1384
10 Y flat = 2.49%
OIL – .12 = 53.21
GOLD – 8.80 = 1226.50
On this date in 2009, the S&P 500 hit an intraday low of 666; the closing low was 3 days later but the intraday low was 8 years ago. On Friday, Fed chair Janet Yellen signaled that an interest rate hike would likely come when Fed leaders meet next week. A March rate hike is now being priced into the markets. About the only thing that could change the Fed’s plan is weak economic data, giving extra significance to Friday’s jobs report. In January, according to DOL’s Bureau of Labor Statistics, the economy added 227,000 jobs; unemployment was at 4.8 percent; and hourly earnings rose 0.1%. The US probably created a healthy 200,000 new jobs last month, keeping the unemployment rate below 5%.

 

North Korea fired four ballistic missiles early today. Three landed within a couple hundred miles of Japan, in what Japan considers an exclusive economic zone. The United States has about 28,500 troops and equipment stationed in the South, and plans to roll out the Terminal High Altitude Area Defense anti-missile defense system by the end of the year. And the ongoing provocative actions by North Korea insinuate that somehow that country is skirting sanctions. The United Nations Security council recently issued a report claiming Malaysian companies are acting as a front in an arms sales operation, and requesting suspect companies’ assets be frozen. Malaysia has denied the claims but otherwise not responded to the UN claims.

 

China recently announced it would stop all imports of coal from North Korea but the UN report raises concerns about front companies operating in China continuing to do business with North Korea. As early as December 2016, China had blown past a UN-imposed ceiling of 1 million metric tons on coal imports, purchasing twice that amount. China then shrugged off a requirement to report its North Korean coal imports to the UN Security Council sanctions committee. North Korean banks and firms, meanwhile, have maintained access to international financial markets through a vast network of Chinese-based front companies, enabling Pyongyang to evade sanctions.

 

President Trump signed a revised executive order today banning citizens from six Muslim-majority nations from traveling to the United States but removing Iraq from the list, after his first attempt was blocked in the courts. The new order keeps a 90-day ban on travel to the United States by citizens of Iran, Libya, Syria, Somalia, Sudan and Yemen. Iraq was taken off the banned list because the Iraqi government has imposed new vetting procedures, such as heightened visa screening and data sharing, and because of its work with the United States in countering ISIS militants. Secretary of State Rex Tillerson told reporters after Trump signed the new order that, “It is the president’s solemn duty to protect the American people.” The new order spells out detailed categories of people eligible to enter the United States, such as for business or medical travel, or people with family connections or who support the United States. Trump’s original ban resulted in more than two dozen lawsuits in US courts. Today’s revised order is likely to face legal challenges as well.

Demand for travel to the United States over the coming months has flattened out following a positive start to the year, with uncertainty over a possible new travel order likely deterring visitors, according to ForwardKeys, a travel analysis company which analyses 16 million flight reservations a day from major global reservation systems. Overall, bookings for travel to the United States over the next three months are 0.4 percent down on last year, whereas they had been 3.4 percent ahead the day before the travel restrictions were imposed. According to travel search site Kayak, searches from Europe for flights to the U.S. are down by 12 percent since the elections. However, Germans, some of the world’s biggest spenders on travel, have not been deterred, with searches up 10 percent in that period.

 

General Motors has agreed to sell its European division to Peugeot. The deal will total $2.3 billion and consist of GM’s sales of its unit containing Opel and Vauxhall for $1.3 billion and its European GM Financial arm for $1 billion. GM will take a $4 billion charge on the sale. The Opel deal continues a business theme for GM. Earlier, the company had pulled out of Russia and discontinued its Chevrolet brand in Europe. It had also ended auto manufacturing in Australia.

 

Deutsche Bank is raising cashShares of the German investment bank are down by more than 6% after the company announced it would tap the markets for $8.5 billion to help improve its financial health after two years of heavy losses. Germany’s biggest bank announced plans for the huge share sale on Sunday along with another overhaul of its strategy. CEO John Cryan said in a release: “The new three-pillar structure of our operating business should position us for significant growth, both in revenues and earnings.” This marks the fourth time Deutsche has raised capital since 2010. The four add up to a total of about $32 billion, more than the bank’s current market value.

 

Standard Life and Aberdeen Asset Management are mergingThe deal to combine the two investment firms values the combined entity at about $13.4 billion. The merger will create the largest asset manager in Britain.

 

Wells Fargo execs may face criminal charges(don’t hold your breath); but Reuters reports the US Department of Justice is investigating whether Wells Fargo executives hid details of the company’s recent scandal from the company’s board and regulators. Wells Fargo disclosed in a $190 million settlement with regulators in September that staff opened as many as 2.1 million checking, savings and credit card accounts without customer consent over several years to satisfy management’s sales quotas. Officials are seeking to find out if executives shared everything they knew about the phony accounts to the Wells Fargo board of directors and the Office of the Comptroller of the Currency, the lead regulator for national banks.

 

Greece’s economy suffers a setbackGreece’s economy shrank by 1.2% in the fourth quarter of 2016, according to the latest data from the country’s statistical service Elstat. That was worse than the previous estimate of a 0.4% contraction.

 

Alphabet, Google’s parent company, is suing Uber for theft of trade secrets, alleging that one of the top engineers in its self-driving car program decamped with thousands of confidential files, including designs that helped him start self-driving truck company Otto and then quickly sell it to Uber. Uber denies those claims.

 

Hope you enjoyed yourself with that Snapchat IPO, because the fun’s just about over, at least for now, according to a weekend feature on Barron’s .  You can start by trying to justify this crazy number: A market cap that surged at one point to $37.8 billion means 93 times its 2016 revenue of $405 million, with no profits expected until at least 2019. Several analysts initiated coverage of Snap as a “sell.” And many shareholders apparently felt it was a good time to pocket profits, as shares slid 7% today.

 

TG Therapeutics said a late-stage study testing a combination of its experimental cancer drug, in combination with an existing drug from AbbVie proved superior in high-risk patients with a common form of leukemia. The trial involved adult patients with high-risk chronic lymphocytic leukemia, who had undergone at least one prior therapy. TG Therapeutics more than double in share price intraday.

 

A strain of bird flu has been detected in a chicken breeder flock on a Tennessee farm contracted to Tyson Foods. Tyson, the biggest chicken meat producer in the United States, said in a statement it was working with state and federal officials to contain the virus by euthanizing 73,500 birds on the contract farm. In 2014 and 2015, during a widespread outbreak of bird flu, the United States killed nearly 50 million birds, mostly egg-laying hens.

 

The Arizona state Supreme Court is scheduled to hold a hearing Thursday on a challenge to a minimum wage increase. Last year, voters passed a measure to raise the state’s hourly minimum to $12 by 2020, up from $8.05. Under the measure, the minimum increased to $10 in January. In a court order issued last month, Chief Justice Scott Bales said “the court will limit arguments to whether [the measure] violated a state constitutional provision that requires ballot measures to identify a funding source.” Even though the state is exempted from the measure, the Arizona Chamber of Commerce and other business interests argue it will be impacted because of increased wages for private sector employees under state contracts. Any relief from the court would appear to be limited to state contractors and not private employers, unless the court agrees with the business groups’ arguments that the entire measure is unconstitutional. The chamber and other business interests went to court after Prop. 206 passed with support from 58 percent of voters. The measure gradually raises the state’s minimum wage to $12 an hour by 2020 and requires employers to provide paid sick leave. The first step — an increase to $10 per hour — took effect Jan. 1. The sick-leave provision is scheduled to begin July 1.

 

Just 6% of U.S. adults who expect to receive a tax refund this year plan to splurge on something such as a vacation or shopping spree. According to a new Bankrate.com report, the most popular uses for the money are much more practical: save or invest it (34%), spend it on necessities such as food or utility bills (29%) and pay down debt (27%). Approximately 47% of all taxpayers anticipate a refund this year. Millennials are the most likely to receive refunds, the most likely to save/invest them and the most likely to have filed early.

 

 

 

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