Wednesday, January 6, 2016
Buenos Dias and happy 2016! We know that it seems like it's been going on forever, but here's your official welcome to Election Year. In California, that's going to mean increased attention to the open U.S. Senate race to replace retiring Barbara Boxer, the #CD17 Dem-on-Dem contest between Rep. Mike Honda and challenger Ro Khanna and lots of fundraising by the presidentials, starting with Hillary Clinton later this week in LA and SF.
Some see 2015 as a year full of bad omens. Oil prices capped a second year as one of the worst-performing commodities. U.S. stocks had their worst annual performance since 2008. As the disappointment extended to emerging markets and junk bonds, investors are approaching 2016 with low expectations. While large gains were common as markets recovered in the years after the 2008 financial crisis, many investors say such returns are growing harder to come by, and expect slim gains at best this year. And things are off to a bad start this morning. Asian markets tumbled on the first day of action in 2016, with declines so steep in mainland China that authorities halted trading for the rest of the day. European shares also fell sharply, led by the basic resources and auto sectors, both of which are sensitive to Chinese demand.
HOW WILL THE ECONOMY PLAY IN 2016? – Rink Rats offers a round-up from top economists. Tyler Cowen, professor of economics at George Mason University: "I believe China is currently in the range of 3 to 5 percent growth, and headed rapidly to zero. ... The United States will chug along at 2 percent growth, and mostly ignore what could be the beginnings of a major global recession. We are about the most insulated from this of just about anybody.
Larry Summers for Premise: "I predict that interest rates in the US will remain lower than the Fed expects, and that the idea of a new era of low real interest rates, which may or may not be called secular stagnation, will come to be widely accepted."
Goldman Sachs : "While we are banking on a sharp cut in US shale production to help the market regain balance by late 2016 and push prices moderately higher, the risk that cutbacks prove too little, too late, to avoid breaching storage capacity suggests oil prices could be heading much lower - to cash costs of around $20/bbl - before they head higher ... [W]e expect the Fed to hike ¼ pp every quarter in 2016, about twice the pace that the market is currently discounting.
Wells Capital's Jim Paulsen : "While reaching full employment does not necessarily suggest an imminent end to the current bull market, it does suggest investors should anticipate significantly smaller future returns. Moreover, it has often led to much wider return dispersions favoring stock pickers over asset allocators, and finally, it has typically produced a major leadership change away from consumer toward industrial sectors."
BEIJING’S RECKONING - China’s economy seems headed for more turbulence in 2016 and beyond. The Chinese leadership is once again committing to a radical economic-reform program that aims to set the country on course for sustainable long-term growth at the potential cost of serious short-term weakness. The blueprint focuses on reducing industrial overcapacity, slashing costs for businesses, cutting unsold property inventory and fending off financial risks. The renewed pledges come after China’s yearlong effort to stoke demand through interest-rate reductions and government spending yielded little fruit. “The economy will follow an L-shaped path, and it won’t be a V-shaped path going forward,” an official said at the annual year-end meeting of China’s top economic mandarins, while ruling out any chances of China launching another round of aggressive stimulus measures such as the one initiated in late 2008. Meanwhile, worries about economic growth are fraying the social compact that makes limits on personal freedoms worthwhile for many Chinese.
STRETCH RUN - STRETCH RUN - Obama's 2016 world tour: The president is planning to travel the globe to seal his foreign policy legacy. POTUS has asked aides to set a busy international travel schedule for him in his final year, with 'half a dozen' trips already in the works and more potentially coming together. The travel will be aimed at cementing a foreign policy legacy he hopes will include the Trans Pacific Partnership, increased attention to Asia, an opening of Latin America, progress on ISIL and significant global movement on climate change. ... The only continents the White House is ruling out ... are Australia and Antarctica. ...
Another multi-stop trip to Africa is ... off the table (after a visit to Kenya and Ethiopia in 2015), ... [but] a single stop there tacked onto another trip, perhaps one to Europe, is still possible. They're also looking at a stop in the Middle East ... How little time Obama has left is part of nearly every conversation. 'You'll see the president spending a lot of time driving to the finish line, obviously with the counter-ISIL campaign, but also with respect to affirmative elements of his presidency,' deputy national security adviser Ben Rhodes said in an interview.
"Four trips already have their main stops set: Obama will be in Japan for a G7 meeting in June, in Poland for the NATO summit in July, in China for the G20 meeting in September, and likely in Peru for the Asia-Pacific Economic Cooperation summit in November, after the presidential election." Other possibilities: Vietnam, Brazil for the Olympics in August, Argentina, Colombia.
And then there's the possibility of a trip to Cuba, widely expected but so far still tentative. Obama has said openly that he wants to go, and the White House is working behind the scenes to make it happen. Aides say that Cuba wouldn't be a one-off destination, more likely combined a longer trip to several Central and South American countries.
HAPPY 400th - In 2016 the world celebrates the 400th anniversary of William Shakespeare's death . ... Stratford-upon-Avon ... is restoring the house in which he wrote 26 [plays] ... Chicago promises ... a year-long festival of 850 events spanning dance, literature, music and even cuisine; and the Folger Shakespeare Library in Washington ... will take its First Folio (dated 1623) on tour to all 50 ... states," starting Wednesday in Notre Dame, Indiana.
EL NINO - California ends 2015 changed by drought, anxious for El Nino: Water news changed the relationship between Californians and water, inculcating permanent cultural shifts....So now what? The drought of 2011-2015 may be in the rear-view mirror if the largest El Niño since the last largest El Niño in 1997-1998 hits Southern California with the same ferocity. The next three months may be the most important time period in the history of Southern California droughts.
CLICKERS - "Behind the Lens: 2015 Year in Photographs," by Pete Souza, Chief Official White House Photographer, on Medium - 113 pics on 1 page: http://bit.ly/1mqTfXi
"15 Ways to Be a Better Person in 2016" - NYT: "A year's worth of tips from the Styles archive." http://nyti.ms/1NWwmlH
BIRTHDAYS THIS WEEK – Birthday wishes and thoughts this week to: Robert Duvall (85) Austin, TX. Mel Gibson (60) Melbourne, Australia. Doris Kearns Goodwin (73) Boston, Mass. Sir Anthony Hopkins (78) London, England. Diane Keaton (70) Woodland Hills, CA. Walter Mondale (88) St. Paul, MN. Victoria Principal (66) Dallas, TX. Don Shula (86) Boca Raton, FL.
COLLEGE CHRONICLES - The National Association of Independent Colleges and Universities said recently that it found "problematic" a new provision in the year-end tax-and-spending package that would force more information reporting out of schools. Karin Johns of NAICU said the provision would force colleges to report actual payments of tuition and expenses, not just the amounts billed. One of the problems with that, Johns said, is that the software colleges have been using is set up to process the amount billed. Johns added that the timing of when a family pays tuition would also make it more difficult for colleges to track. NAICU says it wants to work with lawmakers to address its concerns, and Johns said advocates have worked with Congress before to make reporting requirements easier on colleges. But the new provision is meant to help combat fraud connected to the American Opportunity Tax Credit, the incentive for education championed by Sen. Chuck Schumer and other Democrats that was made permanent in the agreement. Democrats and Republicans butted heads quite a bit over those so-called integrity provisions.
POLITICS 101 - TRUMP TAKES TO THE AIR - Donald Trump's provocative first TV ad raises the temperature of the GOP race: Donald Trump has vowed to spend $2 million a week on TV ads in the runup to the Iowa caucuses, and his first ad debuts Monday. It "begins with a shot of President Obama and Hillary Clinton. Then comes a U.S. battleship launching a cruise-missile strike. From there it moves swiftly through an explosive montage: The suspects in the recent California terrorist attack. Shadowy figures racing across the U.S.-Mexico border. Islamic State militants. The narrator, a deep-voiced man, speaks ominously: 'That's why he's calling for a temporary shutdown of Muslims entering the United States, until we can figure out what's going on. He'll quickly cut the head off ISIS and take their oil. And he'll stop illegal immigration by building a wall on our southern border that Mexico will pay for.
Days until the 2016 election: 307.
ALLIED VAN LINES - Another California company to expand bigtime in Texas: Oracle Corp. will build a huge, new corporate campus on 27 acres in Austin. With the new campus, Oracle plans to grow its Austin workforce by 50 percent over the next few years. The move expands the presence of another rapidly growing California-based technology giant in Central Texas, as companies including Apple Inc., Google and Facebook are aggressively ramping up their workforces there.
SPORTS BLINK - Already a rough year for the Worldwide Leader (ESPN) -- Moving [college football] semifinals to New Year's Eve a total flop: The semifinal games should move back to New Year's Day. The other major bowls should serve as worthy prelims, not meaningless consolations. Of course, the powers-that-be are refusing to acknowledge the obvious. This is, after all, the sport that nonsensically resisted a playoff until last season. ... The Orange Bowl [on ESPN] got a 9.1 rating, a plunge of 38.5 percent from last year's Rose Bowl (14.8) held in the same afternoon time slot but on Jan. 1.
The number of viewers fell even more - dropping from 28,164,000 for the Rose to just 15,640,000 for the Orange, a staggering decline for such a high-profile event. The Cotton Bowl [also on ESPN] ... 9.6 rating was down a whopping 36.8 percent from last year's 15.2 for the Sugar Bowl in the same time slot, while the total viewership crashed 34.4 percent, going from 28,271,000 to 18,552,000. Of course, neither game was competitive, and that didn't help. But there's no way to sugarcoat this debacle.
LA RAIDERS?? – NFL Oakland Raiders are staying put? That's the take of former SF Chron's columnist former Mayor Willie Brown: "Raiders fans take heart. My sources in pro sports tell me the team is staying in Oakland. The reason is simple. Ultimately, it can't get a better deal elsewhere. With owner Mark Davis' limited finances, the team is destined to be on the losing end of any deal to share a stadium in Los Angeles with the much-wealthier San Diego Chargers.
NFL WILD CARD ROUND PLAYOFF SET - AFC: Kanas City vs. Houston on Saturday at 4:35 p.m. on ABC; Pittsburgh at Cincinnati at 8:15 p.m. Saturday on CBS; Seattle at Minnesota Sunday at 1:05 p.m. on NBC; Green Bay at Washington on 4:40 p.m. Sunday on FOX.
NFL PICK OF THE WEEK – Sunday 1/10, 1:00 PM ET NBC; Seattle Seahawks (10-6) at Minnesota Vikings (11-5), Seahawks at their best this time of year: Seattle wins 21 - 17. Season to date (9-8)
COLLEGE FOOTBALL PICK OF THE WEEK – National Championship Game will be posted in the next RR Monday January 11 Season to date (11-7)
COLLEGE HOCKEY GAME OF THE WEEK – Saturday 1/9, 7:00 PM ET, OSN; #7 Boston College Eagles (13-4-1) at #3 Providence Friars (13-2-3). Friars having a great season, they take BC 3 – 2. Season to date (2-4).
THE SWAMI’S WEEK TOP PICKS –
(NFL Jan. 10) Green Bay Packers (10-6) at Washington Redskins (9-7), Washington ends a dismal run by The Pack 24 – 20.
(NHL, Jan. 10) St. Louis Blues (23-14-5) at Los Angeles Kings (25-12-2). Kings dominant 5 – 2.
(NBA, Jan. 10) Miami Heat (21-13) at Utah Jazz (15-18). Why the Jazz name in Utah has always bugged me…Heat win 94 – 84.
Final 2015 Season to date (114-72) Not Bad Swami!
MARKET WEEK - Wall Street was on track to start off the New Year sharply lower, after the Dow broke a six-year winning streak in 2015. The S&P 500 snapped a three-year winning streak. The Nasdaq, however, posted its fourth straight positive year.
Asian shares and currencies fell on Monday on the first day of trading in 2016 after China factory activity contracted and the yuan weakened, while oil prices jumped as much as 3 percent on rising tensions in the Middle East. ... U.S. stock futures dipped ... Adding to worries about China, its central bank fixed the yuan at a 4-1/2-year low, while manufacturing surveys showed any hopes for a recovery in that sector were premature.
The Dow Jones Industrial Average began 2016 with its biggest opening-day loss since 2008, as financial markets struggled with the same problems that disrupted them last year. Fast-trading individual investors dumped shares in China on further evidence that its economy was slowing and that Beijing was weakening the country’s currency. Global stocks stabilized this morning as China’s markets appeared to steady, with shares in Europe flat in early trade. But the drop in emerging-market currencies reflected renewed fears that an economic slowdown in the world’s most populous nation will further depress struggling developing economies. And what concerns U.S. investors isn’t just China. It is the spreading signs that weak global growth and a rising U.S. dollar are harming U.S. corporate earnings and economic output, and could continue to do so this year.
The annual tech trade show CES kicks off this week out in Las Vegas, the big-ticket items at CES this year include "drones, robotics, healthcare, 3-D printing [and] automobiles." The show will have more than 200,000 square feet devoted specifically to self-driving car technology.
DRIVING THE WEEK – President Obama on Monday meets with senior officials "to discuss what executive actions he can take to curb gun violence" ... Treasury Secretary Jack Lew is in California on Monday for economy events ... Obama hosts a gun control town hall on CNN on Thursday ... ISM Manufacturing Monday at expected to rise to 49 from 48.6 ... ISM Non-manufacturing on Wednesday at 10:00 a.m. expected to rise to 56.0 rom 55.9 ... Fed releases minutes from its last meeting on Wednesday afternoon ... December jobs report at 8:30 a.m. Friday expected to show a gain of 200K and no change to the 5.0 percent unemployment rate.
Next week: New Year Jack Ass of the Month and Dear Rink Rats.
Until Next Monday, Adios.
January 6, 2016
CARTOON OF THE WEEK – “Bird of Paradise”