Financial Review

Running On 

…This bull market now the longest in US history. Manafort guilty. Cohen pleads guilty and implicates Trump in election violations and obstruction. Microsoft says Russians continue to hack.

Financial Review by Sinclair Noe for 08-21-2018

DOW + 63 = 25,822
SPX + 5 = 2862
NAS + 38 = 7859
RUT + 19 = 1718
10 Y + .02 = 2.84%
OIL + .89 = 67.32
GOLD + 5.40 = 1196.50

 

New intraday record highs for the S&P 500, the Dow transports, and the Russell 2000. The S&P 500 hit an intraday high of 2873. The record closing high for the S&P is 2872. The Russell 2000 rallied to an intraday record of 1,722. The Dow Jones Transportation Average hit an intraday peak at 11,475, marking the transport gauge’s first high since Jan. 16. The Dow industrials and the Nasdaq Composite are getting closer to record highs.

 

Since March 9, 2009, which marked the low of the financial crisis and which many consider the birth date of the current bull market, the S&P 500 has advanced 320%, the Dow Jones Industrial Average has risen 286% and the Nasdaq Composite has gained 521%. This bull market is 3,453 days old – the longest running bull in US history. Age isn’t very relevant when trying to anticipate what lies ahead. More relevant are things like valuation, the health of the economy, the geopolitical landscape, and the mood of consumers and investors. The best performing stocks of the bull market are small, sort of boring companies that you might not know – think about a small company that was nearly destroyed in 2009 but managed to hold on and thrive. Patrick Industries, a small company out of Indiana leads the list, up 39,800% since March 9, 2009 – They make panels and furniture used in manufactured homes.

 

According to a recent analysis by Morningstar, only one tech stock actually ranks among the Top 10 equities since this bull market began on March 9, 2009 – GTT Communications. Netflix cracked the Top 20 but not the Top 10. Other top performers in this bull market include Sleep Number – they make mattresses; also, Avis – the car rental company; and Dana Auto Parts – all up more than 10,000% since the market bottom more than 9 years ago. Nothing against the tech high flyers. The PowerShares Nasdaq Internet Portfolio has jumped more than 900% since the market’s bottom, while the First Trust Dow Jones Internet Index Fund  is up more than 850%. The top holdings of both feature a lot of familiar names – so familiar they go by the acronym FAANG. Even as Apple was the first to top $1 trillion in markets cap, the percentage leader among the FAANGs is Netflix, up 5825% from 2009 lows. It all requires some intestinal fortitude. Netflix shares dropped 20 percent since hitting a 52-week high two months ago, putting the stock in correction territory.

 

The verdict is in, and Paul Manafort — Trump’s former campaign chair — has been found guilty on eight counts. The jury could not reach a unanimous verdict on the other 10 counts. Manafort was guilty of five counts of subscribing to false income tax returns, one count of failing to report his foreign accounts, and two counts of bank fraud. However, the jury deadlocked on the other 10 charges brought against Manafort in Virginia — and so Judge T.S. Ellis declared a mistrial on just those counts. It is not yet clear whether this is because of one or two holdout jurors (since a verdict on any count must be unanimous) or because the jury was deeply split. Prosecutors are able to try Manafort again on those counts if they so choose but haven’t yet said whether they will. Manafort, who has been jailed since mid-June, will now face a possible prison sentence. And his legal woes aren’t over, since he faces another trial in September on seven separate charges in Washington, DC.

 

 

Manafort is the fourth former Trump aide to be convicted of crimes charged by special counsel Robert Mueller — and, amazingly enough, his verdict came down just minutes after another former Trump aide, Michael Cohen, pleaded guilty to charges in a separate investigation Mueller had handed off to the Southern District of New York. Manafort, however, is the only one of these whose case actually went to trial rather than ending in a guilty plea. So the verdict marks a major milestone in the probe into Russian interference in the 2016 election — even though the trial itself wasn’t actually about Russian interference. What this means for Mueller’s larger Russia investigation remains unclear. The combined charges carry a sentence of up to 240 years, with more to come if special counsel Robert Mueller tries Manafort again on the 10 counts on which the jury deadlocked. Manafort has shown no sign of flipping and providing information on Russian interference or even Trump himself. It looks like Manafort is hoping for a pardon, which is certainly a possibility. There are many reasons why pardoning Manafort would be a disaster. For one thing, he could still be subpoenaed to testify and be subject to perjury charges if he lies under oath. (You cannot pardon someone prospectively.) Once pardoned, Manafort would lose the Fifth Amendment right to refuse to testify on the grounds it would incriminate him. Moreover, a Manafort pardon would cement in the minds of many Americans — including the prosecutors — that Trump is bent on covering up something relating to Russia. If Trump tried to do this before the midterms, there could be voter backlash.

 

In the short run, this may not change much. Manafort is scheduled to begin another trial in September on matters hitting rather close to home — the White House — for Trump. Whereas the judge in Virginia essentially barred any mention of Russia or the Trump campaign, Manafort’s attachments and work for Russian-connected Ukranian oligarchs will be front and center in the next trial. The notion that no one on the campaign had connections to any Russia-related figures likely will be thoroughly debunked.

 

Trump’s former personal lawyer and “fixer,” Michael Cohen, has pleaded guilty to charges including campaign finance fraud stemming from hush money payments to porn actress Stormy Daniels and ex-Playboy model Karen McDougal. Cohen said in federal court in New York that he made the payments in coordination with Trump, who wasn’t named, to influence the election. Both women claimed Trump had affairs with them, which he denies. The other charges Cohen pleaded guilty to involve bank fraud and income tax evasion. As part of his plea agreement, Cohen agreed not to challenge any sentence from 46 to 63 months. A sentencing date for Cohen was set for December 12. It does not appear the plea agreement compels Cohen to cooperate with the Mueller investigation. Cohen was part of Trump’s inner circle for more than a decade, working as his personal attorney at the Trump Organization and continuing to advise Trump after the election. It’s not clear how any plea deal with Cohen might affect other entities that have been under scrutiny by federal prosecutors as part of the Cohen investigation, including the publisher of the National Enquirer, American Media Inc., which gave a $150,000 contract during the 2016 election cycle to another woman who alleged an affair with Trump. The Cohen plea may implicate Trump in illegal campaign violations, and possible obstruction charges.

 

According to a report from Microsoft, the Russian military intelligence unit that sought to influence the 2016 election appears to have a new target: conservative American think tanks that have broken with Trump and are seeking continued sanctions against Moscow, exposing oligarchs or pressing for human rights. Microsoft said that it detected and seized websites that were created in recent weeks by hackers linked to the Russian unit formerly known as the G.R.U. The sites appeared meant to trick people into thinking they were clicking through links managed by the Hudson Institute and the International Republican Institute, but were secretly redirected to web pages created by the hackers to steal passwords and other credentials. Microsoft also found websites imitating the United States Senate, but not specific Senate offices or political campaigns.

 

Faced with new evidence that Russian hackers are targeting conservative American research groups and the Senate’s own web pages, lawmakers from both parties signaled that they were ready to move forward with new sanctions legislation against Russia. And in three separate hearings on Capitol Hill, senators prodded the Trump administration to do more with its existing authorities to deter Russia and protect American political infrastructure.  Administration officials aggressively pushed back and argued that the current sanctions regime provided all the authority they need, and they dismissed concerns that President Trump’s equivocation on questions of Russian interference had harmed their efforts.

 

Toll Brothers shares jumped 13.8 percent after the homebuilder reported better-than-expected quarterly results. Shares of its industry peers PulteGroup, Lennar and D.R. Horton also rose between 3.8 percent and 5.5 percent.

 

TJX shares climbed 4.7 percent, ending the session at a record closing high, after the retailer topped quarterly comparable-store sales estimates and raised its full-year earnings forecast.

 

But shares of Coty tumbled 7.1 percent after the beauty products maker missed sales estimates for the first time in six quarters.

 

American Airlines is cutting some of its international flights, including some money-losing service to China, as the world’s largest airline faces a profit-crimping surge in fuel prices. The airline is ending a Chicago-to-Shanghai flight this October along with a previously announced cut of Chicago-to-Beijing service. American is also reducing its daily flight from Chicago to Tokyo.

 

 

Red Robin Gourmet Burgers fell nearly 3 percent after the closing bell after the company reported earnings and revenue that missed Wall Street expectations.

 

Urban Outfitters said that same-store sales of 13 percent helped drive record second-quarter sales and earnings per share. Shares gained 4% in after hours trade.

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