Financial Review

August Out

…A solid August for stocks. NAFTA on hold. Arizona Supreme Court kills Invest in Ed and Outlaw Dirty Money. California moves to 100 % Clean Energy. McCain’s message from beyond.

Financial Review by Sinclair Noe for 08-31-2018

DOW – 22 = 25,964
SPX + 0.39 = 2901
NAS + 21 = 8109
RUT + 8 = 1740
10 Y – .01 = 2.85%
OIL – .35 = 69.90
GOLD + 1.20 = 1201.80


Today was a mixed session on Wall Street but August was positive, with the S&P 500 posting a 3% monthly rise, the Dow advancing 2.2% and the Nasdaq rallying 5.7%.


Canada and the United States ended talks to update NAFTA. The mood soured following Trump’s comments that a pact would be on US terms while Ottawa stood firm against signing “just any deal.” Trump confirmed off-the-record remarks he made to Bloomberg News this week that any trade deal with Canada would be “totally on our terms”. The Toronto Star first reported on the remarks citing remarks it had obtained. There was supposedly a Friday deadline to cut a deal with Canada, but that deadline was just made up from thin air. Trump notified Congress he intends to sign a trade deal with Mexico 90 days from now, and will include Canada “if it is willing,” according to a statement from the U.S. Trade Representative. The statement came after talks concluded between the U.S. and Canada. Mexico’s government will change hands by December 1, when the newly elected president Andrés Manuel López Obrador takes over. Trump doesn’t want to risk losing the deal he made with the current Mexican administration, so he would prefer to get a new NAFTA deal locked down sooner rather than later. And any US-Mexico deal Trump sends to Congress would probably not be subject to fast track voting. So, for now, Trudeau called the bluff.


Ford just announced that it is abandoning plans to sell the Focus Active in the United States because of tariffs imposed by the Trump administration.  Ford makes the car in China. The car was supposed to be one of two models that Ford planned to sell in the US going forward as it shifts its lineup to be almost exclusively SUVs and trucks. Now, the only car Ford will sell in the US is the Mustang.


Coca-Cola has agreed to buy coffee chain Costa for $5.1 billion. Costa has about 4,000 coffee outlets worldwide. Coke already sells some coffee, such as the Georgia brand in Japan, but lacks a global offering. Coke would face strong competition from Starbucks and Nestle, however if Coke were to roll out canned or bottled Costa coffee drinks through its U.S. bottling system, that could upset the status quo around the coffee table.


Arizona voters went to the polls on Tuesday to pick candidates and issues that will make it to the general election ballot in November. However, Arizonans will not get a chance to decide in the November election whether to hike taxes on the rich to generate more money for education.


In an order Wednesday, the Arizona Supreme Court said initiative petition signers were not informed that the measure would do more than increase the tax rate on people earning more than $250,000 a year. It also would eliminate the indexing of income tax brackets to account for inflation. The main provision of the measure would have imposed an 8 percent state income tax on earnings of more than $250,000 for individuals and $500,000 for couples. That compares with the current 4.54 percent rate. It also would have put a 9 percent tax rate on income over $500,000 for individuals and $1 million for married couples filing jointly. Proponents estimated that the additional taxes would generate about $690 million a year for public education.


The initiative wording inadvertently reset the cut points between brackets to where they were in 2014, before the Republican-controlled Legislature voted to index the brackets each year to ensure that Arizonans whose income went up no faster than inflation did not end up in higher tax brackets. For example, in 2014 the break point between the 3.36 percent and 4.24 percent tax rate was $50,000; for 2017 the indexing moved that up to $51,721. Potentially more significant, the language might have eliminated future indexing and the inflation protection that is supposed to come with that. The announcement is a blow to teachers and public school advocates in Arizona, not only because of the removal of the initiative, but because of the possibility that voters inclined toward supporting public schools in general would be more likely to stay home on Election Day.


The Arizona Supreme Court also upheld a lower court decision that found the “Outlaw Dirty Money” initiative didn’t have enough valid signatures to qualify for the ballot. Organizers of the initiative said they submitted more than 285,000 signatures. But the initiative found its way into court when opponents challenged the validity of the signatures. In 2014, lawmakers passed a law aimed at making it easier for judges to ignore what voters want. In fact, requiring judges to ignore what voters want. That law requires that every signature on every petition be thrown out if the person who circulated the petition doesn’t show up in court when subpoenaed.  It doesn’t matter if the signatures collected are from valid Arizona voters exercising their constitutional right to put something on the ballot. It doesn’t even matter if the petition circulators were qualified to carry a clipboard. A trio of “dark money” groups subpoenaed a dozen or so Outlaw Dirty Money circulators to appear in court and they were no-shows. Under that 2014 law, there is no need, apparently, for a judge to actually look at the evidence to determine whether each petition circulator was qualified or whether the people who signed the petitions were qualified. No need, apparently, for a judge at all. It is said that sunshine is the best disinfectant, but that will not be the case for Arizona voters. This ruling means big money can still secretly buy off politicians in Arizona. And this week’s rulings show once again that big money determines what can be placed on the ballot.


Meanwhile, the Clean Energy Initiative will be on the ballot in November. This initiative would require Arizona utilities to get 50 percent of their energy from renewable sources by 2030. Arizona Public Service used its monopoly power and money to oppose the measure, and California billionaire Tom Steyer used his piles of cash to support it.  The APS side would have won if Steyer’s millions weren’t pushing the initiative to the finish line. By flooding the state with yellow-shirted circulators, the campaign more than doubled the number of signatures needed to get on the ballot, with 480,000. And when the APS side subpoenaed circulators, the Clean Energy campaign was able to produce almost 900 of them, buy them lunch, and otherwise ensure that the circulators’ signatures were verified. That took money. And remember, this is all just to decide whether we get a chance to vote on these ideas.


California is one signature away from committing to 100 percent clean electricity. When this gets signed it means that California, the 5th largest economy in the world, will become the most significant political jurisdiction in the world to take that step, by a wide margin.  The bill, SB100, would set a target of 100 percent carbon-free electricity by 2045. It passed the California Senate last year, passed the state Assembly on Tuesday, and was reconciled by the Senate on Thursday. All that remains is a signature from Gov. Jerry Brown, which is expected soon…, although Gov. Brown is threatening to veto SB 100 if legislators don’t also pass AB 813, a bill that would set California on the path to joining a larger regional Western power market. More than likely, Brown will sign off on SB 100. California’s transition to clean energy has been careful and deliberate. SB 100 actually sets three targets for California: 50 percent renewables by 2026; 60 percent renewables by 2030; 100 percent carbon-free energy by 2045.

California has systematically and deliberately bet on renewable energy, and that bet has paid off for its economy, making it home to a dizzying diversity of clean energy businesses and jobs. In 2017, $2.5 billion was invested in clean energy technology in the United States, with 57.2 percent ($1.4 billion) going to California companies. And it is already responsible for about 47 percent of all electric vehicles ever sold in the US. Meanwhile, the state’s cap-and-trade system is chugging away in the background, working toward its long-term carbon reduction goals.


An associate of Paul Manafort today pleaded guilty to illegally acting as a foreign agent for a pro-Russia Ukrainian political party in the U.S. Samuel Patten admitted to failing to register as a foreign agent while lobbying on behalf of the Opposition Bloc political formation for the past four years and agreed to cooperate in exchange for leniency in his sentencing. Patten agreed to cooperate with federal prosecutors. Patten has also done work for Cambridge Analytica, the data-gathering company that worked on the Trump campaign and shuttered following allegations that it violated the privacy of 87 million Facebook users.


Apparently there are 15 named pallbearers for John McCain. One name stands out: Vladimir Kara-Murza. And yes, he is a Russian. Vladimir Kara-Murza is not just anti-Putin; he’s also survived two near-fatal attempts on his life via the Kremlin’s favorite method, i.e. poisoning. McCain and Kara-Murza, who had known each other since 2010, had denounced Putin for years. McCain asked Kara-Murza in April, nine months after the Arizona senator had been diagnosed with an aggressive form of brain cancer, to help carry his coffin at his funeral, which will be held Saturday at Washington National Cathedral. Few people get to make a statement after they’re dead but John McCain pulled it off magnificently!

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