Financial Review

Quickly Dying Here

Financial Review by Sinclair Noe for 11-03-2015

DOW + 89 = 17,918
SPX + 5 = 2109
NAS + 17 = 5145
10 YR YLD + .03 = 2.22%
OIL + 1.73 = 47.87
GOLD – 16.90 = 1117.50
SILV – .22 = 15.29
New orders for factory goods fell for a second consecutive month in September as the manufacturing industry continues to struggle under the weight of a strong dollar and deep spending cuts by energy companies. The Commerce Department said new orders for manufactured goods declined 1 percent in September after a downwardly revised 2.1 percent drop in August. Motor vehicle production, however, remains a bright spot as orders surged in September.

 

Fiat Chrysler reported its 67th straight month of year-over-year gains, selling 195,545 vehicles in the month of October, up 14.7% from a year earlier. Toyota said it sold more than 200,000 vehicles, which would be a double-digit rise from last October’s 180,580 vehicles. Toyota did not give a specific sales figure.   General Motors, the nation’s largest automaker, said it sold 262,000 vehicles during the month, a 15.9 percent increase from a year ago. Ford Motor said it sold 205,000 vehicles in October, a 13.4 percent increase over a year ago. Ford’s F-Series pickup continued to be the country’s best-selling vehicle with sales of 65,000 during the month. The US auto industry’s October sales are now expected to top 18 million on an annualized basis.

 

Federal regulators levied a penalty of up to $200 million on Takata, the maker of millions of faulty airbags, for failing to disclose the defect to regulators in a timely manner. Takata is being fined $70 million, and could face an additional $130 million penalty if it fails to abide by its consent order with the National Highway Traffic Safety Administration, which includes the appointment of an independent safety monitor.

 

TransCanada has asked the U.S. State Department to suspend its permit application for the Keystone XL pipeline while it works through a review process in Nebraska. It was not immediately clear whether the administration would grant the request. The Nebraska Public Service Commission is reviewing the pipeline’s route in the state after residents there challenged the state’s approval process for the project, and TransCanada argued in a letter to Secretary of State John F. Kerry that it would be “appropriate” to delay any federal decision until the Nebraska route is settled. At issue is the northern leg of the pipeline, which would stretch 1,179 miles between Alberta and Nebraska. The administration has approved the project’s southern leg. How much of this is due to the 2016 US elections or the 2015 Canadian elections – remember Trudeau just ousted Harper – well that is so much speculation. More likely, it just doesn’t make sense with oil prices under $50 a barrel. Also, remember that last week, Shell said it would take a $2 billion write-off for its Carmon Creek oil-sands project in Alberta. For now, and at least for the next year and a half, Keystone is dead.

 

More than 40 environmental and social justice groups demanded a federal investigation of Exxon Mobil. In a letter to Attorney General Loretta Lynch, the groups, citing recent news reports, accuse Exxon of intentionally deceiving the public about the risks of climate change to protect its profits; and suggested that Exxon Mobil might be guilty of the same kind of fraud that the tobacco companies were found to have perpetrated when they hid the risks of smoking. For at least a couple of decades, Exxon provided funding to organizations that mounted attacks on climate science, even though the company’s own scientists briefed management about the dangers of global warming.

 

Bank of America has agreed to sell responsibility for about $87 billion in money-market funds and other products it manages to BlackRock, in one of the money market industry’s largest deals ever. Blackrock manages mutual funds, exchange-traded funds, private equity pools and other investment products. Blackrock is already the world’s largest money manager, with $4.5 trillion in assets. Mergers and acquisitions have trimmed the money funds industry from 75 providers in the U.S. last summer to just 67 this year, according to Crane Data. Terms of the transaction were not disclosed.

 

Standard Chartered plans to cut 15,000 jobs and raise $5.1 billion by selling new shares as its new chief executive set out a plan to restore profitability after three years of falling profits and strategic mistakes.

 

Meanwhile, net income at UBS Group came in at $2.1 billion in the three months through September.

 

 Freddie Mac, the mortgage buyer under government conservatorship, said it lost $475 million in the third quarter, its first loss in four years, after earning $4.1 billion in the prior-year quarter.

 

Fed Chair Janet Yellen has turned over documents to House investigators related to the continuing probe of a 2012 leak of sensitive policy deliberations. Meanwhile, Yellen prepares to testify on Wednesday about the Fed’s role overseeing the financial industry. However, the Fed leak will likely be the focal point of the hearing for GOP lawmakers, who have attacked central bank officials for the way they handled the breach of confidential information.

 

Two decades after it started selling books online, Amazon launched its first-ever brick-and-mortar retail store, called Amazon Books, in a mall in Seattle. The store will stock about 5,000 titles. Books will be selected based on customer ratings and pre-orders on Amazon.com, and the store will also give the option to test drive devices such as Kindle, Echo, Fire TV and Fire Tablet.

 

Activision Blizzard is buying King Digital Entertainment for $5.9 billion to strengthen its mobile games portfolio. The news comes as Activision posted Q3 results that were an across-the-board beat featuring its highest ever third quarter operating income. Activision is best known for the video game Call of Duty, King Digital is best known for Candy Crush Saga. I’m thinking they want to make a new game: Call of Candy.

 

With its drug partnerships breaking down, Philidor – the specialty pharmacy tied to the Valeant Pharmaceuticals controversy – is shutting down its operations. Valeant funneled 7% of its revenue through Philidor, even as it had an option to buy the specialty pharmacy and was already consolidating its results on its books. And the kicker is that Valeant is not the only pharmaceutical company doing this; it looks like it is an industry-wide practice, in varying degrees.

 

Ohio residents will decide today on whether to become the first Midwestern state to legalize personal and medical use of marijuana for those over 21 years old. If it passes, Ohio would become the fifth, and largest, state to legalize the recreational use of marijuana, following Alaska, Colorado, Washington and Oregon, as well as the District of Columbia.

 

Middle-aged white Americans are dying off. Unlike every other age group, unlike every other racial and ethnic group, unlike their counterparts in other rich countries, death rates in this group have been rising, not falling. That finding was reported by two Princeton economists, Angus Deaton, who last month won the 2015 Nobel Memorial Prize in Economic Science, and Anne Case. Analyzing health and mortality data from the Centers for Disease Control and Prevention and from other sources, they concluded that rising annual death rates among this group are being driven not by the big killers like heart disease and diabetes but by an epidemic of suicides and afflictions stemming from substance abuse, alcoholic liver disease, and overdoses of heroin and prescription opioids. However, the data cannot establish which came first, pain or painkillers.

 

The authors found that from 1999 to 2013, the death rate among non-Hispanic whites aged 45 to 54 with a high school education or less rose, while it fell in other age and ethnic groups. Middle-aged blacks still have a higher mortality rate than whites — 581 per 100,000, compared with 415 for whites — but the gap is closing, and the rate for middle-aged Hispanics is far lower than for middle-aged whites at 262 per 100,000. They concluded that taken together, suicides, drugs and alcohol explained the overall increase in deaths. The effect was largely confined to people with a high school education or less. In that group, death rates rose by 22 percent while they actually fell for those with a college education. Dr. Case, investigating indicators of poor health, discovered that middle-aged people, unlike the young and unlike the elderly, were reporting more pain in recent years than in the past. Those with the least education reported the most pain and the worst general health.

 

Economics may also play a role. The least educated also had the most financial distress. Median household incomes of white non-Hispanics began falling in the late 1990s, and the wage stagnation that began with the economic slowdown of the 1970s continues to hit especially hard those with a high school or less education. Coupled with the changing nature of the financial risk Americans face when saving for retirement as well as the recent financial crisis, economic insecurity may weigh heavily on U.S. workers, and take a toll on their health and health-related behaviors. We have long believed that economic growth leads to longer life spans, and conversely that when there is economic breakdown, such as when the Soviet Union fell, life spans are shortened; in post-USSR countries the life expectancies of adult men fell by about 7 years. The researchers point out that there could be profound implications for Social Security Disability Insurance, as well a Medicare.

 

In terms of lives lost, had the white mortality rate held at its 1998 value, 96,000 lives would have been saved between 1998 and 2013. If it had continued to fall at the rate of decline seen from 1978-1998, 488,500 deaths would have been avoided between 1999 and 2013. In a commentary to the Deaton-Case analysis, two Dartmouth economists, Ellen Meara and Jonathan S. Skinner, wrote: “It is difficult to find modern settings with survival losses of this magnitude.”

 

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