Financial Review

No Reason Not To

…..Stocks hit records. Irma not quite catastrophic. OJ, cotton tumble. Yes, talk about climate change. Reporters in floodwaters. Dollar bounces. $1,000 phones. Equifax – no excuse. China goes EV.

Financial Review by Sinclair Noe for 09-11-2017

 

DOW + 259 = 22,057
SPX + 26 = 2488
NAS + 72 = 6432
RUT + 15 = 1414
10 Y + .06 = 2.13%
OIL + .02 = 48.09
GOLD – 19.00 = 1328.00

 

The S&P 500 climbed to a record high close. North Korea did not test nuclear weapons over the weekend. Hurricane Irma did not destroy Florida. So, there is that.

 

Irma caused severe flooding in many Florida cities and left more than 6 million homes and businesses without power, but damage appeared to be less than expected. Shares of U.S. and European insurers jumped. Shares of Florida insurers Heritage Insurance Holdings, HCI Group and Universal Insurance Holdings all rose about 15 percent, while property and casualty insurer United Insurance Holdings gained 10 percent. Shares of larger insurers Travelers and Chubb rose about 3 percent. Shares of reinsurers Swiss Re and Scor rose more than 3 percent. Aspen Insurance Holdings shares rose 9.8 percent while Everest Re and XL Group were up more than 5 percent.  Preliminary industry losses were estimated at $15 billion to $50 billion in the United States, and $5 billion to $15 billion in the Caribbean. Irma was bad but not as bad as first feared.

 

Irma roiled the markets for orange juice and cotton. Prices rose steeply last week on concern crops in Florida, the nation’s biggest citrus grower, would be destroyed while cotton areas in Georgia and South Carolina faced strong winds and flooding. With the damage being assessed, orange juice dropped as much as 5.8 percent today after reaching a four-month high last week. Cotton dropped by the exchange limit of 3 cents. Irma may have damaged 10 percent to 20 percent of Florida’s orange crop. The storm’s swerve toward the state’s west coast was enough to save the crop from “potentially catastrophic” damage.

 

There’s a modern question that emerges when a massive storm makes its way towards a highly populated area: Is this the right moment to talk about climate change? Let’s settle that debate with a simple answer: Yes. It’s the right time to discuss climate change and how we’re going to adapt to it because we’re witnessing, firsthand, what could be the new normal. And because, for the most part, we completely ignore the threats posed by climate change when there isn’t a big storm approaching. And the talk should include not just how to stop climate change – because we may be too late, but we can certainly adapt. Look at the destruction in Barbuda compared to Naples Florida – the difference – building codes. And just a quick thought about the non-stop hurricane coverage – is it really smart to have reporters standing out in hurricane force winds telling us they are standing in hurricane force winds? Do we really need that? The tradition of television crews standing in the middle of a dangerous storm goes back decades, reflecting the hunger to be on the scene for a nationally significant event. But the news value of dangerous stand-ups — in which a correspondent is seen in the field talking to the camera — is increasingly being questioned. Even with all the photos of flooding and damage, many of the most indelible images from Harvey and Irma will be those of people helping people.

 

Now that Q2 earnings season has wound down, markets are increasingly more susceptible to forces that tend to be less directly connected to corporate results and guidance. And for now, the market is playing a game of “risk-on” and risk-off”. A broader perspective shows a weak dollar aiding an already strong economy, and the Federal Reserve continuing to juice the works with low rates, even as they plan to slowly unwind their balance sheet. And since Irma did not flatten Florida, the Fed may feel inclined to raise rates before the end of the year, but just sticking to the slow, incremental increases – meaning we are still in historically low interest rate environment. Notwithstanding all the discussion of balance sheet reduction and tapering, the developed market central banks in aggregate are still very much in expansionary mode, with the G4 balance sheets still growing by more than $1 trillion per year on an annualized pace.

 

The dollar index, which tracks the greenback against a basket of six major currencies, was 0.56 percent higher at 91.8. The index had hit a more than 2-1/2-year low on Friday. A monthly survey of 73 economists conducted by Bloomberg News from Sept. 1 to Sept. 7 found that the median third-quarter growth estimate rose to 2.6 percent from 2.5 percent in the prior poll. So, strong earnings, weak dollar offering an edge to US businesses, ultra-low rates; toss in stable and low energy prices – and there really is no reason why the stock market should not be strong. It’s been 14 months since the S&P 500 has seen a 5% sell-off and 19 months since a full-blown 10% correction.

 

Your next phone will probably cost about $1,000. It doesn’t matter whether you go Apple or Android. Tomorrow, Apple will introduce its latest top-of-the-line iPhone, and even the cheapest model is expected to cost about $1,000. A few days later, Samsung’s Galaxy Note 8 goes on sale for a comparable amount. The iPhone is expected to be made from glass and stainless steel, while the Note has an exceptionally large, bright screen with a metal-and-glass case. New features for the iPhone will include upgraded cameras and the ability to unlock your phone with a 3D scan of your face. All that stuff has pushed up prices. Look for trade-in deals on old phones. You could also go the installment payment route. And look for giveaways from the carriers. Free Netflix from T-Mobile.  Verizon is offering free accessories and discounted tablets to customers who choose monthly payment plans and has introduced a reward program that offers such gifts as Starbucks cards or Apple Music discounts to customers who pay their bills on time. Sprint offers a buy-one-get-one-free plan to people on monthly leasing plans who want last year’s iPhone. AT&T is matching that deal if customers also sign up for DirecTV. Bottom line – The phone makers and carriers are going to greater lengths to disguise the rising costs of their phones, which are about to cross a big psychological threshold.

 

The same day Amazon completed its acquisition of Whole Foods, it marked down items by as much as 43 percent. Those deep price cuts did more than bring a surge of publicity to the chain: It boosted customer traffic by 25 percent. The location data from Foursquare, culled from shoppers’ mobile devices, was compared with the same period a week earlier.

 

More than two dozen lawsuits have been filed in the United States against Equifax after the credit reporting company said thieves may have stolen personal information for 143 million Americans in one of the largest hackings ever. don’t brush this data breach off.  We all have credit information maintained by Equifax. Take this seriously. You should probably assume your data at Equifax has been compromised. So, there are some things you should do. Immediately obtain a credit report from one of the three credit bureaus (Trans Union, Experian, Equifax) and review it carefully to see if you have already fallen victim to abuse or ID theft. Resolve to obtain another credit report from a different bureau in 2 months and again in January 2018 (from the third bureau). Consider accept any offer from Equifax to provide a year or two of credit monitoring but do not pay Equifax for costlier services if they try to up-sell you. Also, be aware that if you accept the free credit monitoring, you may not be able to sue Equifax. Place alerts on your credit card accounts so that you are getting routine email updates about credit card balances and transactions.  Read the updates as they come in and follow up if something doesn’t seem quite right. And you can go to the FTC website – consumer.ftc.gov to freeze your credit record and put an alert on your credit record. Do an initial fraud alert with one of the other agencies which will be good for 90 days and they will alert the other two.  If someone is trying to open a credit line in your name, the company opening the line must contact you before opening it.  If you aren’t needing credit for a while you may consider adding freezes to all three agencies. Add security passwords and three factor authentication to all your credit cards, bank accounts, and broker accounts. And file your taxes early, especially if you expect a refund. Also send a nastygram to Equifax. There’s no excuse for this data breach. NO EXCUSE. We’ve entrusted our personal information to these kinds of private concerns, and if they abuse that trust by getting hacked, then they are to blame. And for investors in Equifax, sorry. Equifax lost about 7% today, wiping out about $3.5 billion in market cap.

 

China vowed to end fossil-fuel car sales. The world’s largest auto market is working on a timetable to end sales of vehicles powered by gasoline and diesel. The country’s industry ministry didn’t set a deadline for a complete changeover, but said it plans to strictly enforce rules that require hybrids to make up at least 8% of automakers’ output next year, and at least 12% by 2020. The UK and France have pledged to be fully electric by 2040. The move leaves the US as the last major stronghold for cars powered by gasoline and other fossil fuels. China’s auto market is the largest in the world, with more than 23 million cars sold in 2016, greater than the 17 million sold last year in the US. China already dominates the electric vehicle (EV) market, making more than 40% of EVs worldwide. China’s plan to go fully electric will upend the transportation and petroleum industries worldwide.

 

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