The first couple of weeks of 2016 yielded a slew of
interesting developments worth watching, particularly so with global central
banks in such sharp focus:
1. Bad
banks: Financials in general but banks in particular have helped lead the
S&P 500 (down 4.7 percent) to ugly early returns. The industry was down
nearly 8 percent by midday Friday, with some big names accounting for the most
damage as the group gets set to report fourth-quarter earnings next week.
JPMorgan Chase has tumbled 9.3 percent, Citigroup was off close to 9 percent
and Bank of America fell 8.6 percent. These stocks were supposed to outperform
as the Fed raises rates — which it did in December for the first time in more
than nine years — but are getting clobbered so far.
2. Utilities:
It could just be a basic safety trade, but utilities, among the
worst-performing sectors last year, have proven to be the best of a bad bunch
so far in 2016. The group is down just narrowly so far, with companies like
Consolidated Edison (up 3.3 percent) and Dominion Resources (a 2.6 percent
rise) providing rare gainers for an index where just more than 40 stocks are
positive.
3. Gold
looking good: A global deflationary environment doesn't make much of a case for gold, but worries over central bank currency manipulation does. China's
bungling of its yuan depreciation coupled with fears of a policy mistake from
the Fed and the massive equity market sell-offs around the world sent investors
running to the yellow metal. Gold is up about 4 percent year to date, and
traders have poured $4.4 billion into the Market Vectors Gold Miners
exchange-traded fund, the second-biggest fund flow of any ETF in 2016.
4. Contrarian
tides: Despite the whipsaw moves in the market, there are plenty of folks out
there looking for things to change. One of the more interesting bets has been
on oil, which has tumbled 12 percent so far as it continues its free fall.
Traders, however, have been piling into the United States Oil ETF, pushing more
than $3 billion into the fund that is generally regarded as a trading vehicle
more than a long-term investment. Also, the Wall Street turmoil hasn't deterred
companies from looking to jump into the market. U.S. initial public offerings
and other equity capital markets activity stands at $3.5 billion on 16 deals so
far, the highest number of deals ever and the biggest dollar volume in 13
years, with all but one coming from health care, according to Dealogic.
5. No one is
panicking (yet): Despite the barrage of selling, outflows from equity funds for
the week did not reflect a stampede for the exits. To be sure, equity funds saw
$8.8 billion in outflows, which was the largest in 17 weeks, while bond funds
took in $3.3 billion, which was the largest in 11 weeks, according to Bank of
America Merrill Lynch. However, Michael Hartnett, BofAML's chief investment
strategist, noted that while "redemption pressures continue and are
broadening, too," the pace does "not indicate mass investor
capitulation." In fact, BofAML said its "Global Breadth Rule" is
showing a contrarian "buy" signal as more than 88 percent of all
global equity markets are trading below both their 200-day and 50-day moving
averages.
CUTTING
TO THE CHASE - J.P. Morgan’s annual earnings were just shy of
the biggest ever on Wall Street. But CEO James Dimon said some of the bank’s
lending businesses are “obviously” going to get worse. The New York bank has
built up its reserves for bad loans, a shift that spotlights Wall Street’s
mounting concerns about the fate of oil and gas companies. Worries among
investors and policy makers are also mounting over whether the U.S. economy and
financial markets can remain upright while so much of the world teeters. Global
stocks have been falling again today despite a relief rally on Wall Street, as
steep declines in oil prices and Chinese stocks renewed anxieties.
SOMETHING
STINKS - The nonprofit watchdog group Public Accountability
Initiative first reported on Kathleen Brown's role at Sempra. She also holds
$400,000 in stock and last year received a $188,380 salary, the Associated
Press reported. Campaign finance records show that Brown has received tens of
thousands of dollars in campaign contributions from Sempra and Sempra employees
going back to at least 2006.
Gov. Jerry Brown now needs to "get in front of
this" and divulge any possible conflicts of interest: For a governor who
wants his legacy to be fighting greenhouse gases, it's really the gas at Porter
Ranch -- and the problems with fracking -- which could really really be the
sinkhole for his legacy.
The remedy is for the governor to come clean about any
contacts his sister has with his administration....and to fully disclose any
emails, correspondence or phone calls between his sister an any state agency
over which he has control -- get in front of this.
BIRTHDAYS
THIS WEEK – Birthday wishes and thoughts this week to: Joan Baez (75)
Monterey, CA; Nick Clooney (82) Memphis, TN; Julia Louis-Dreyfus (55) Woodland Hills, CA; Faye Dunaway (75) Santa Barbara, CA; Dick Enberg (81) Del Mar, CA; Stephen Hawking (74) Montclair, NJ; James Earl Jones (85) New York, NY; Bart Starr (82) Green Bay, WI; Howard Stern (62) New York, NY.
HOW BOWIE CHANGED WALL STREET - David
Bowie was known for his ability to reinvent himself. But he also helped inspire
a pocket of Wall Street that tries to create money out of weird things like
billboard rental income, cellphone tower lease payments and literary or film
libraries. ... In 1997, Mr. Bowie bundled up nearly 300 of his existing
recordings and copyrights into a $55 million security that paid the buyer -
Prudential Insurance Company of America - a 7.9 percent annual rate over 10
years, backed by the income from his royalties and record sales, and the
licensing of his songs for films or other uses.
The so-called Bowie bonds were among the first
in what would become a wave of esoteric asset-backed securities deals based on
intellectual property, including a more recent one involving Miramax's film
library (including titles like "Pulp Fiction" and "The English
Patient"). Bankers have also come up with securities backed by franchise
revenue for the restaurant chains Sonic and Church's Chicken, among others. The
buyers in these deals, which are negotiated privately by the banks that put the
transactions together, tend to be specialized hedge funds or big institutions
that can negotiate terms with the bankers.
SCOTUS COULD CRIPPLE UNIONS - The
Supreme Court appeared ready last week to weaken public-sector unions by ending
their power in more than 20 states to require workers to pay a fee for
representation even if they decline to join a union. ... Challengers brought a
case in California asking the court to overrule a 1977 precedent permitting
unions to levy the charges in states that allow it, arguing the First Amendment
prohibits government agencies from requiring employees to help fund a public
union. The issue is of significant importance to government unions in about
half of the states, mostly Democratic-leaning, that allow the fees.
The charges provide a stable source of support
that has braced the labor movement against its losses in the private sector.
The unions largely have supported Democratic candidates sympathetic to their
goals. Earlier high-court decisions have distinguished between the unions'
conventional political and lobbying activity, for which employees who object
can obtain a refund, and collective bargaining over wages, hours and benefits.
COLLEGE
CHRONICLES - MARK YOUR CALENDARS: Jan. 23, is the last day to
take the old SAT. The College Board says the new version debuts March 5.
SERIOUSLY? -- Famed
Ahwahnee hotel to change name in trademark dispute: The names of iconic hotels
and other landmarks in the world-famous Yosemite National Park will soon change
in an ongoing battle over who owns the intellectual property, park officials
said Thursday. The luxurious Ahwahnee Hotel will become the Majestic Yosemite
Hotel, and Curry Village will become Half Dome Village, said park spokesman
Scott Gediman.
HELLO - Jimmy
Fallon, Adele & The Roots Sing "Hello" (w/Classroom Instruments)
NFL
PICK OF THE WEEK – Sunday 1/17, 1:00 PM ET, Fox: Seattle Seahawks
(11-6) vs. Carolina Panthers (15-1). Carolina has too much, 24 – 17. Season to date (10-8)
COLLEGE
FOOTBALL PICK OF THE WEEK – Congratulations to the Alabama Crimson
Tide for the National Championship victory over the Clemson Tigers. Season to date (12-7)
COLLEGE
HOCKEY GAME OF THE WEEK – Sunday 1/17, 5:00 PM ET, FSD: Ohio State
Buckeyes (6-11-2) vs. #6 Michigan Wolverines (13-3-4), Michigan in OT 4 – 3. Season to date (2-5).
THE
SWAMI’S WEEK TOP PICKS –
(NFL Jan. 17) Pittsburgh Steelers (11-6) vs. Denver Broncos
(12-4), Pittsburgh is beat up, Denver wins 20
– 17.
(NHL, Jan. 17) Los Angeles Kings (17-13-3) vs. Anaheim Ducks
(19-17-7), Kings win 4 – 3.
(NBA, Jan. 17) Dallas Mavericks (23-18) vs. San Antonio
Spurs (35-6), Spurs 93 – 80.
Season
to date (6 -6)
Next
week: Jack Ass of the Month, Dear Rink Rats, and Brazil's Olympic
troubles.
Until Next Wednesday, Adios.
Claremont, CA
January 17, 2016
#VI-27-289
CARTOON
OF THE WEEK – “Doonesbury”
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