Mars Looks Pretty Good
……The Ubiquitous debate. Register to vote before the government shuts down. Iran won’t freeze. WTO slashes global growth forecast. Growth cools for existing home sales. Consumer confidence is high (taken before the debate). Amex forbids merchants to recommend lower price alternatives. Clean Power Plan goes to court. Elon Musk is my favorite Martian.
Financial Review by Sinclair Noe for 09-27-2016
DOW + 133 = 18,228
SPX + 13 = 2159
NAS + 48 = 5305
10 Y – .03 = 1.56%
OIL – 1.00 = 44.93
GOLD – 10.90 = 1328.00
A CNN poll showed that 62 percent of voters who watched last night’s presidential candidate’s debate felt that Democratic nominee, Hillary Clinton, won. In markets, the Mexican peso seems to agree, with the currency rallying as much as 2 percent after the head-to-head concluded, any other correlations to the markets are hypothetical.
Last night’s debate was all over the place. That’s not a commentary on the candidates, rather on the broadcast itself. Unlike the primaries, the networks do not take turns running the general election debates. Instead, the non-partisan, non-profit Commission on Presidential Debates runs the show and hands out sets of keys to whoever wants them. That means in addition to every major network, other platforms like Facebook, Twitter, and Yahoo were able to broadcast their own streams. The early estimates are that 81 million people watched the debate on one of the 12 TV networks and about 2.5 million watched live streaming. Although about 90% of the people probably tuned in just to see if the roof would collapse.
Top social media platforms steered hundreds of thousands of users to voter registration websites over the weekend in an effort several states said set new records for registration activity. Facebook, Instagram, Snapchat and other social media networks began reminding users over the age of 18 to register to vote. Users on Facebook were directed to a federal website that would then direct them to sites in their home states. Today is National Voter Registration Day; it is not the last day you can register to vote, just a day to encourage everyone to register. In Arizona, you have until October 8 to register by mail, or October 10 to register online.
Before we get to the actual election, the government might shut down. The federal budget runs through Friday. We need a new budget to keep running; that is not going to happen. Typically, the politicians come up with a continuing resolution, an extension on the deadline for a budget; that might not happen either. The stopgap funding bill under consideration would keep the federal government running through Dec. 9, as well as provide funds to combat the Zika virus. It also includes disaster-relief aid for flooding in Louisiana and other states. Senate Democrats are demanding federal aid for residents of Flint, Michigan to deal with their poisonous water problem. Senate majority leader Mitch McConnell is talking about removing aid to flood victims in Louisiana in exchange for aid to Flint. That deal may or may not fly. But then there is another rider on the stop gap budget, the inclusion of a poison pill policy rider to keep political money from big corporations a secret. The rider would block the Securities and Exchange Commission (SEC) from working on a rule to require publicly traded companies to disclose their political spending. This rider is one of the main sticking points standing in the way of a deal to keep the government open. The deadline for a budget deal is Friday.
Iran is unwilling to freeze its oil production at current levels. The nation’s oil minister also said the country doesn’t intend to strike an agreement with other crude producers in Algiers this week. Iran will increase output from 3.6 million barrels per day to 4 million. OPEC’s decision to hold informal talks this week has fanned speculation that it might be about to deviate from a two-year-old policy of pumping without limits, which succeeded in hurting rival suppliers but also sent prices into free-fall. Energy Ministers are now calling the gathering a “consultative meeting,” saying “it wasn’t time for decision-making.” A formal OPEC meeting will take place in Vienna on Nov. 30, when a supply agreement may be reached.
The World Trade Organization has cut its forecast for global trade growth this year by more than a third. The new figure of 1.7%, down from its April estimate of 2.8%, would be the slowest pace of trade and output growth since the 2009 financial crisis. It is also the first time in 15 years that international commerce has been left trailing behind the world economy. The downturn reflects the slowdown in countries such as China and Brazil and lower levels of imports into the US. Trade has grown 1.5 times faster than gross domestic product over the long term – but the WTO say it will only grow 80% as fast this year. That would be the first reversal of globalization since 2001 and only the second time this has happened since 1982.
Global bonds moved higher as renewed concerns over Europe’s banks spur demand for safe assets. Germany’s 10-year yield fell to the lowest since July and Finland’s dropped below zero for the first time. Spain’s 10-year yield dropped to a record low. The outlook may be different for Treasuries, as Blackrock, the world’s biggest money manager, warned of the risks of holding Treasuries as the Federal Reserve moves towards raising rates.
Single-family home prices rose slightly less than expected on an annual basis in July, and the year-over-year gain was smaller than in the prior month. The S&P CoreLogic Case-Shiller composite index of 20 metropolitan areas rose 5 percent in July on a year-over-year basis, down from 5.1% in June. In Phoenix, existing home prices were up 0.8% from June to July, and up 5.2% over the past 12 months.
A key measure of consumers’ attitudes increased in September, to its highest level since the recession. The Consumer Confidence Index hit 104.1 in September, up from August’s revised reading of 101.8. The survey measures confidence toward business conditions, short-term outlook, personal finances and jobs.
A federal appeals court has ruled that American Express could stop merchants that accept its cards from encouraging customers to use rival payment cards that charge the stores lower transaction fees. The decision reversed a lower court’s 2015 ruling that such restrictions violated federal antitrust law. The decision is a major victory for American Express, which wants to ensure that its customers, who pay higher-than-average membership fees, do not encounter any barriers to use. The ruling means that American Express can continue to enforce provisions in its contracts with merchants that prohibit them from steering customers toward other forms of payment. Credit card costs are largely invisible to consumers, but retailers pay a fee each time a credit or debit card is used. Amex charges higher so-called swipe fees, or interchange fees, than Visa or MasterCard, and some consumer advocates argue that those costs can get unfairly passed on to shoppers in the form of higher prices.
Samsung Electronics has recovered more than 60% of all recalled Galaxy Note 7 smartphones sold in South Korea and the US. Samsung announced on Sept. 2 a global recall of at least 2.5 million Note 7s in 10 markets due to faulty batteries causing some phones to catch fire.
Caesars and its creditors have agreed on a restructuring to get the casino’s operating unit out of bankruptcy. Creditors will receive about 70% of the fully diluted equity in the new structure, while second lien noteholders and unsecured creditors will get paid $0.66 on the dollar.
Walt Disney is working with a financial adviser to evaluate a possible bid for Twitter. Twitter has started a process to evaluate a potential sale. Salesforce.com is also considering a bid and is working with Bank of America on the process. No deal yet, just speculation.
Last year, the Environmental Protection Agency finalized a far-reaching rule that would, for the first time ever, regulate carbon dioxide emissions from America’s existing coal- and gas-fired power plants, which are a major source of pollution. The Clean Power Plan set specific emissions targets for each state and gives them plenty of flexibility in deciding on how to meet the goals. If all goes as intended, the plan would reduce power plant emissions roughly 30 percent below 2005 levels by 2030. Various oil and coal companies, along with 27 states led by West Virginia, have sued to overturn the Clean Power Plan. Many of these states could meet the plan’s targets fairly easily, but they are opposed to any expansion of EPA powers. In response, the Supreme Court halted implementation of the Clean Power Plan until the court challenges were finished. Today the litigants presented oral arguments to the DC Circuit Court. A ruling is expected in either late 2016 or early 2017. Whatever the outcome, the next stop for this case is the Supreme Court, which has been split 4-4 between conservatives and liberals ever since Justice Antonin Scalia’s death this year. If there’s a 4-4 SCOTUS split on this case, then whatever the DC Circuit Court rules will stand.
SpaceX has successfully tested a new rocket engine it plans to use to take people to Mars within the next 10 years. CEO Elon Musk tweeted about the successful first firing of the Raptor engine and included photos. Musk said he expects SpaceX to make an unmanned mission to Mars by 2018, using existing technology. He plans to use the Raptor engine for a manned Mars mission by 2025. SpaceX has yet to carry humans into outer space, but it has won a contract from NASA to carry U.S. astronauts to the International Space Station as soon as next year. Today Musk laid out his plans for Mars colonization. The idea is reusable rockets, somehow making fuel on Mars, refueling stations in space, spaceships carrying about 100 passengers per flight to Mars to inhabit a city of 1 million. All this within the next 10 years.