Financial Review

Bull About Nothing

….Dow record again. Tax reform details – not now. DACA deal or not. Oil pushes against resistance. CPI shows inflation – really. AZ unemployment dips with government jobs added. Motel 6 – they’ll shine a light on you. Equifax outrage.

Financial Review by Sinclair Noe for 09-14-2017

 

DOW + 45 = 22,203
SPX – 2 = 2495
NAS – 31 = 6429
RUT – 1 = 1425
10 Y + .01 = 2.20%
OIL + .44 = 49.74
GOLD + 6.50 = 1330.00

 

The Dow Industrial average hit another record high close – 3 in a row, and the fifth consecutive session of gains in the Dow. And a tip of the hat to Ed Yardeni, president of Yardeni Research for describing this bull market as “Seinfeld market,” referring to the TV show that was “mostly about nothing.” “During every episode, investors are watching for something to happen. When nothing happens, especially nothing bad, investors are bemused and show their appreciation by throwing more money at the bull.”

 

This has been a remarkably easy time to be a bull. September is set to be the 11th straight month in which the S&P 500 has either risen, or has fallen by less than 0.1 percent. If stocks continue to act well in the second half of the month, that will make this the longest such streak for stocks in 58 years. Going back to 1928, the S&P has only seen four prior streaks in which the index avoided posting a monthly drop of more than 0.1 percent in 11 or more straight months. The most recent run was the longest ever, stretching from March 1958 to May 1959. It’s like the market is on auto-pilot.

 

Treasury Secretary Steven Mnuchin and House Ways and Means Chairman Kevin Brady appeared at a tax event sponsored by Politico Pro and they will have something to say about a proposal to create a new framework for tax reform later in the month – not now. Meanwhile, Trump traveled to Florida to view hurricane damage and thank first responders. Trump said he was close to a DACA deal with Democratic congressional leaders on protections for illegal immigrants brought to the United States as children. Trump said any final agreement must include border security measures including surveillance systems but would not include funding for his planned wall along the border. Either that or Trump doesn’t have a deal with Democrats, a path to citizenship is not part of that non-deal, and the wall is definitely happening. Nancy Pelosi and Chuck Schumer left a dinner with President Trump on Wednesday night insinuating they had struck a deal on the future of DACA. Then shortly after, the White House disputed the story — at least in part. Press secretary Sarah Huckabee Sanders tweeted that “excluding the wall was certainly not agreed to.” Trump managed to sow more confusion, tweeting that “no deal” had been made. Earlier today, Trump tweeted: “Does anybody really want to throw out good, educated and accomplished young people who have jobs, some serving in the military?” (Wait. Remind me again who decided to end DACA…)

 

Oil prices are once again pushing at resistance at the $50 a barrel level. Part of the recent increase in prices is fallout from the hurricanes, but part of the reason is just a story of supply and demand. Global economies are humming and today the International Energy Agency and OPEC nudged their demand forecasts higher. IEA says oil demand for 2017 will expand by the most in two years, the Paris-based IEA. OPEC increased its estimate for how much crude buyers will seek from the cartel next year, driven by rising consumption in Europe and China.

 

Economists have long debated whether higher energy prices are inflationary or a drag on the economy. The answer seems to lie in what’s happening at the time. If rising prices come during a healthy economy, then it’s inflationary. If not, then it tends to curb growth. Right now, bond traders are betting on the inflationary impact. The Consumer Price Index, or CPI, which measures inflation at the retail level – jumped 0.4% month over month and 1.9% year over year. Excluding food and energy, the core CPI rose 0.2% in August; up 1.7% year over year. The 0.2 percent rise in the core gauge ends a five-month streak of weaker-than-expected readings. Energy prices rose 2.8%, the most since January; food costs advanced 0.1 percent. Lodging away from home rose by a record 4.4 percent; hotel costs jumped 5.1%, the most since 1991. Broader shelter costs rose 0.5 percent.  The CPI for new vehicles was unchanged, the first month without a decline since January, while prices of used cars and trucks fell 0.2 percent; air fares dropped 1 percent. Wireless-phone services fell 0.1 percent. Expenses for medical care rose 0.1 percent from the previous month. Hourly earnings adjusted for inflation rose 0.6 percent from August 2016, after a 0.7 percent gain. This is just one month’s data. If it holds, it would make it easier for the Fed to raise interest rates.

 

Arizona’s seasonally adjusted unemployment rate decreased from 5.1% in July to 5.0% in August. The national unemployment rate increased from 4.3% in July to 4.4% in August. A year ago, the Arizona unemployment rate was 5.1% and the U.S. rate was 4.9%. Arizona gained 41,900 Nonfarm jobs in August. The Private Sector gained 9,700 and government added 32,200 jobs. That is a big turnaround in government jobs and a disappointment in private sector jobs.

 

Motel 6 – they’ll leave the light on for you, and then they’ll turn over personal information to ICE – immigration and Customs Enforcement.  According to the New Times, clerks at “multiple” Motel 6 properties around Phoenix said they regularly share customer information with federal immigration authorities. A front-desk clerk told the newspaper that they send a report every morning to ICE with all “the names of everybody that comes in.” At least 20 undocumented people were arrested at two Motel 6 locations between February and August. Innkeepers routinely comply with search warrants and other court orders when law enforcement agents seek customer data and may reveal customer information when police are summoned to a property for an emergency or other public-safety situation. But most lodging companies prohibit the voluntary offer of such data. Legally, there could be constitutional violations if ICE agents enlisted the help of Motel 6 operators, effectively making them agents of the government. Additionally, state privacy laws could mean civil or criminal penalties for motels who disclose customer information.

 

Three female former employees of Alphabet/Google filed a lawsuit accusing the tech company of discriminating against women in pay and promotions. The proposed class action lawsuit comes as Google faces an investigation by the Department of Labor into sex bias in pay practices. The lawsuit appears to be the first to make class action sex bias claims against Google, but is only the latest instance of a major tech company being accused of discriminating against women.

 

Nestle has acquired a majority stake in premium coffee company Blue Bottle Coffee. Nestle already owns brands such as Nespresso, Nescafe and creamer brand Coffeemate. Blue Bottle opened its first coffee shop in Oakland, California, 15 years ago. Many of its shops are in the Bay Area, but it has expanded to cities such as New York and Tokyo.

 

The Federal Trade Commission says it is investigating the Equifax data breach. Equifax last week reported a massive data breach, saying hackers may have accessed the personal details, including names and Social Security numbers, of more than 143 million consumers from mid-May to July. Equifax, which said it learned of the breach in late July, said credit card numbers for about 209,000 people and certain documents for another 182,000 were also accessed.

 

The disclosure was swiftly met with criticism because of the delay in alerting the public to the hack, as well as problems with the website Equifax set up for people to check whether their details were at risk. You should probably check your credit report and maybe even freeze your credit but you can’t because the website keeps freezing. Three senior executives dumped almost $2 million worth of stock days after the company learned of the breach. An emailed statement from the credit-monitoring agency said the executives “had no knowledge” of the breach beforehand. Sure, it wasn’t even a topic of conversation in the C Suite.  So, lots of outrage. And we can bet dimes to donuts nothing more severe than a slap on the wrist.

 

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