Saturday, December 31, 2016
It was an interesting year to say the least. As in every family we lost some loved ones, we gained new members to the family, and hopefully we became a bit wiser.
SO LONG, 2016 - Welcome to the final Rink Rats of the year. And what a crazy year it was. We've already apologized for basically getting Donald Trump wrong at nearly every turn (though we did suggest he was closing the gap late!) so we won't go through all of that again. Credit the President-elect for running a tireless campaign and drawing an inside straight that allowed him to pick off just enough states to win the Electoral College while dropping the popular vote by nearly 3 million.
In the lessons learned category, RR regrets not focusing more on the difficulty of an incumbent party hanging onto the White House for a third consecutive term, even with an economy at nearly full employment and trending in the right direction. Clinton's weakness at connecting with younger voters and working class whites also could have used more examination. And never again will we believe that [insert outrageous gaffe here] will finish a political candidate. Trump blew that all away. Not that anyone not named Trump could pull it off. But still ...
In the spirit of the season, we here at RR are hoping for the best for an incoming administration that will face enormous challenges in actually delivering on the promise of a manufacturing renaissance in the industrial Midwest and more broadly shared growth. Best of luck also in reducing the trade deficit in the face of a surging dollar. But those are stories for next year. For now, thanks for allowing us into your inbox this year and we hope you will be kind enough to do so again in 2017.
See you back here next year! RR will be back on January 9th.
COLLEGE CHRONICLES 2016 - Flawed Forgiveness: The federal government is on track to forgive at least $108 billion in student debt in coming years, as more borrowers seek help in paying down their loans, leading to lower revenues for the nation’s program to finance higher education. The Government Accountability Office disclosed the sum in a report to Congress which for the first time projected the full costs of programs that set borrowers’ monthly payments as a share of their earnings and eventually forgive portions of their debt. The GAO report also sharply criticized the government’s accounting methods for its $1.26 trillion student-loan portfolio, pointing to flaws that have led it to alter projected revenues significantly over the years. The government says it still expects the program to generate a profit over the long term, but it has repeatedly trimmed expectations for revenues.
COLLEGE ENROLLMENT CONTINUES DOWNWARD SPIRAL: The National Student Clearinghouse Research Center says in a new estimate, released last month, that fall enrollment fell nationally by more than 270,000 students compared with a year earlier. The declines were heavily concentrated in the Northeast and Midwest, with 39 states seeing enrollment drops. Also of note: nearly 165,000 fewer students enrolled in four-year, for-profit colleges. Overall, it said there were 19 million students enrolled in all types of institutions. "The trends of a declining adult student enrollment and the shrinking for-profit sector are now joined by stagnating numbers of new high school graduates," says Doug Shapiro, the center's executive research director. "These forces show no sign of slowing and will continue to challenge institutions in their planning."
- Top 5 states with the largest enrollment decreases: New York (30,695); Illinois (26,089); Michigan (25,841); Pennsylvania (18,390); and Virginia (15,613).
- Top 5 states with the largest enrollment gains: New Hampshire (21,413); Utah (20,498); Florida (16,989); Georgia (10,607); and Arizona (5,655).
MORTGAGE RATES HEAD HIGHER - The era of ultralow mortgage rates is over. The Federal Reserve's decision to raise the federal-funds target rate by a quarter of a percentage point last week means borrowing is about to get more expensive for consumers.
Some homeowners also will feel the pain, in particular those who signed up for home-equity lines of credit, adjustable-rate mortgages ..and other variable-rate loans. Interest rates on these loans tend to rise after rate increases, resulting in larger payments for borrowers ... Rates on plain-vanilla, 30-year fixed-rate mortgages have surged since Election Day by 0.76 percentage point, bringing them to an average of 4.38 percent on Thursday - their highest rate since April 2014.
POLITICS 101 2016 – The election that was: Hillary Clinton now over 65 million votes. No candidate except Obama ever did that. Not even the great Trump! Clinton 65,001,074 Trump 62,578,111.
INAUGURATION WATCH – Jimmy Carter is only former president to RSVP for Trump's inauguration: One month out, Jimmy Carter is the only former president to RSVP to President-elect Donald Trump's inauguration, while Bill Clinton and George W. Bush are putting off their decision until the New Year. The Clintons have been keeping a low profile since the election, and have made no decisions about whether or not to attend, according to a person familiar with the planning. Angel Urena, a spokesman for Bill Clinton, declined to comment. ... After a particularly personal and vicious presidential contest between Trump and Hillary Clinton, the former president has been leaning toward skipping the inauguration confab, according to a source in the Clinton camp.
DIANE REHM'S LAST SHOW -- Radio icon Diane Rehm signs off after 37 years: 'I've been proud to be your host: It began the way it always has: 'From WAMU in Washington, I'm Diane Rehm,' she said, and then she paused, because this time was different. 'I've said those words for so many years, thousands and thousands of times. I've always been so proud to say them.' Over nearly 40 years on the air, Diane Rehm has hosted writers, artists, philosophers, Hollywood celebrities, foreign leaders and U.S. presidents. But on Friday, during the final airing of NPR's 'The Diane Rehm Show,' she spent most of her time speaking to the loyal fans who have listened to her every week for so many years.
There were, of course, a few high-profile cameos: singer and songwriter Judy Collins called and sang a verse of 'Amazing Grace' at Rehm's request. Isabel Wilkerson, author of 'The Warmth of Other Suns,' also phoned in: 'Oh Diane, you're such a national treasure.' Sen. Cory Booker (D-N.J.) thanked Rehm for her 'incredible service' to the country, and legendary actress Julie Andrews and her daughter gushed their love and gratitude, calling Rehm 'a beacon of light in our lives.'"
MILLENNIALS STUCK AT HOME - Almost 40 percent of young Americans were living with their parents, siblings or other relatives in 2015, the largest percentage since 1940, according to an analysis of census data by real estate tracker Trulia. Despite a rebounding economy and recent job growth, the share of those between the ages of 18 and 34 doubling up with parents or other family members has been rising since 2005.
Back then, before the start of the last recession, roughly one out of three were living with family. The trend runs counter to that of previous economic cycles, when after a recession-related spike, the number of younger Americans living with relatives declined as the economy improved. The result is that there is far less demand for housing than would be expected for the millennial generation, now the largest in U.S. history.
MARKET 2016 IN REVIEW - 2016 started off on a down note, with the oil crisis and fears of a slowdown in China rattling markets. By the 18th of January, U.S. equity markets had shed more than 10 percent on the year; the S&P 500 fell to 1812 from 2038, and the Dow Jones Industrial Average fell 2000 in what looked to be a torrid year for investors.
What a difference eleven and a half months make. As 2016 comes to a close, it has been a year of record high prices in both equities and bonds, further unconventional central bank policy and periods of unprecedented volatility in commodity markets.
Record equity prices: 2016 began with the acceleration of the commodity crisis that sent oil prices to multi-year lows. WTI Crude fell below $27 a barrel, crippling Middle Eastern economies and dragging equity prices with them. All major indices fell by more than 10 percent to begin the year.
After stabilizing in February, U.S. equities began an unprecedented turn north, dodging periods of volatility on their way to all-time highs. In August the three major U.S. indices (S&P 500, Dow Jones and Nasdaq) reached all-time highs, and on November 21, these three indices, plus the Russell 2000 made new all-time highs on the same day. (Further reading: Party Like It's 1999: 4 Stock Indices Hit Simultaneous Highs)
But the record run in equity markets faced some stern tests in 2016, most notably on the political front. In June, the U.K. voted to leave the European Union (Brexit), which sent global equities into free fall. In the 48-hours following the result, $3 trillion was wiped off global markets as investors feared the populist movement in Europe would leave to growing protectionism and trade wars that would dampen growth. However, the falling British pound stabilized European equities as they made it cheaper for foreign investment and markets continued to climb. On October 4 the FTSE 100 rose above 7000 for the first time.
It was a similar scenario in the U.S. after Donald Trump defeated Hillary Clinton in the 2016 Presidential election. Shortly after Clinton conceded, Dow Jones Industrial Average futures fell by more than 600 points as fears of anti-trade and protectionism had investors hitting the flight to quality button. However, once investors assessed Trump's fiscal policy, equity prices, interest rates and the U.S. dollar all turned sharply higher as inflation expectations grew. Less than two weeks after the results the Dow went through 19,000 and the S&P 500 through 2200.
The S&P 500 finished higher 6 of the eleven months ending November and is on track to add December to that list. The best performing month was March where it gained 6.3 percent and the worst performing month for the S&P was January where it finished down 4.8 percent, despite being down 10.5 percent in mid-January.
Unconventional monetary policy hits currencies - As interest rates in the U.S. began to normalize, the next two biggest central banks, Japan's and the ECB, continued to tinker with monetary policy as growth and inflation remained benign throughout the year. In March, the ECB cut the deposit rate to minus 0.4 percent and in September, the Bank of Japan announced it would shift its focus to the yield curve.
After moving the deposit rate further into negative territory in March, the ECB said it is unlikely to reach its 2 percent target rate, and it reduced the 2016 growth forecast from 1.7 percent to 1.4 percent. In its policy statement, ECB President Mario Draghi said that "survey data point to weaker than expected growth momentum at the beginning of this year." Additionally, the ECB increased its monthly bond buying program from €60 billion to €80 billion. In December, the ECB announced it would reduce the amount back to €60 billion a month, but extended it through to the end of 2017. On the back of the news, the
EUR fell towards the key 1.05 level against the U.S. dollar as investors eyed parity. (See also: The European Banking Crisis Explained)
In Japan, the central bank continued to battle in a deflationary environment, and in September the Bank of Japan announced it was to shift its focus to long-term rates in an attempt to manipulate the yield curve. By steepening the yield curve, the BOJ hopes to increase banks profitability by keeping long-term rates above short-term rates. While the bank did say it was not pegging the 10-year yield, most saw the policy as a form of yield pegging. In its policy statement the BOJ said, "the current target level of 10-year JGB yields, which is around 0 percent, is set as an operating target for market operations for the intermeeting period. The Bank does not intend to peg 10-year JGB yields at this level for long in the future. It will examine an appropriate shape of the yield curve at every MPM."
Oil price volatility - Oil prices swayed markets early in 2016 when prices hit multi-year lows. At the beginning of February, crude traded below $30 a barrel for the first time in 12 years as reluctance to cut production flooded the market. The price decline crippled many energy stocks and rig counts in the U.S. plunged to record lows.
The middle part of the year saw oil climb off its lows, trading in a $40 to $50 a barrel range as fears of a fully-fledged crisis were averted, but an end of the supply stand-off remained. Then, in November, the Organization for Petroleum Exporting Countries (OPEC) agreed to cut supply by 1.2 million barrels a day, sending oil through $50 for the first time since mid-2015, and two weeks later non-OPEC nations agreed to a further production cut, which led to more gains in oil prices. By mid December oil prices had doubled of February's lows. (See also: Crude Oil Soars After OPEC and Non-OPEC Countries Agree to Production Cuts)
The bottom line - 2016 was a year defined by a changing political landscape. With the Brexit vote and Donald Trump's Presidential victory, it solidified the growing populism movement. Despite these fears, financial markets shrugged them off, and equities in the U.S. rallied to all-time highs as post-election optimism grew.
However, both Europe and Asia grappled with slowing growth and benign inflation, resulting in continued accommodative monetary policy.
MEDIA 2016 - Tom Friedman, op-ed columnist, The New York Times: "This is the year we discovered the fundamental truth of cyber-space: we are all connected there, but no one's charge there. And now that so many of our interactions—commerce, education, friendship and politicking—are moving there, we have a real problem. Unlike the terrestrial world, there is no governing legal authority. So we now have fake news, post-truth, hacking of our election from Russia & friends and Google and Facebook purveying truth and lies and not knowing, or wanting to police, the difference."
Mike Barnicle, longtime Boston columnist and regular on MSNBC's Morning Joe: “This is not meant as criticism or an indictment of our most important business, the news business and the constant objective of delivering truth to the customers who purchase the product or sadly and more often consume it for free. It's simply an observation provoked by 2016: during the epic campaign year just ending we seem to have forgotten to rely on the art of listening. "
"The demands of feeding the beast - a.k.a online editions -, the thinning out of so many newspapers and the loss of talent to buy-outs are just a couple of understandable reasons why that may have happened. But few things are more valuable, more enlightening, more educational and more fun than wandering around the edge of a big story and having a conversation with a stranger about that person’s life, about their fears, their hopes, their dreams, their problems and potential along with their daily existence. No recording device in their face. No notebook and pen deployed. Just a simple, hands-in-the-pocket chat with people who have come to regard too many in the news business as arrogant, elitist, out-of-touch sophisticates who just don’t get it. "
WEST COAST WATCH 2016 -- Mayor Eric Garcetti is trying to strike a balance with Donald Trump. Will it pay off? Before election day, Los Angeles Mayor Eric Garcetti didn't hold back when it came to Donald Trump. 'He's a racist. He's a bigot. He's sexist,' Garcetti told reporters in May, criticizing the Republican presidential hopeful for his views on the economy, immigration and women, among other things. 'What we cannot do with Donald Trump is normalize him as a candidate.' ... But since Trump's victory, Garcetti has adopted a more civil tone. They spoke by phone last week, and Garcetti has expressed his willingness to work with the president-elect on infrastructure and the economy. At the same time, Garcetti has offered assurances that the city won't aid Trump on any widespread crackdown against immigrants who are in the country without authorization.
After 24 years working together, Feinstein and Boxer say goodbye to their 'Thelma and Louise' partnership: In 1992, Dianne Feinstein and Barbara Boxer pitched themselves to California voters as the dynamic duo, as 'Thelma and Louise,' as 'Cagney and Lacey.' They were trying to convince voters to do something no state had ever done: Elect two women to represent them in the U.S. Senate. When they got to Washington, reporters followed the pair, looking for signs of discord. Boxer and Feinstein derided the attention as bizarre and sexist, but they remained conscious of the intense interest in how the nation's first female pair of senators would work together. 'It was ridiculous,' Boxer said. 'We knew there were people who were ready to say two women can't get along. We knew we had that responsibility.' ...
Feinstein, a former mayor of San Francisco, was a consensus builder willing to buck her own party at times to reach a compromise. Boxer, who served 10 years in the House before coming to the Senate, was a bit of a flamethrower, more rigidly ideological and staunchly devoted to the environment and women's healthcare. ... The 76-year-old Boxer is retiring in January, leaving behind a 24-year working relationship with Feinstein that was by all appearances in sync until its last days, when an argument over water policy played out in public. Starting Jan. 3, Feinstein will have a new partner in Kamala Harris, who has a blend of Boxer's progressive ideology and Feinstein's pragmatism.
THE NEW GILDED AGE - As Populists Won 2016 Ballots, World's Richest Made $225 Billion: Triggered by disappointing economic data from China at the beginning, the U.K.'s vote to leave the European Union in the middle and the election of billionaire Donald Trump at the end, the biggest fortunes on the planet whipsawed through $4.8 trillion of daily net worth gains and losses during the year, rising 9995.4 percent to $4.4 trillion by the close of trading Dec. 27, according to the Bloomberg Billionaires Index. ... The gains were led by Warren Buffett, who added $12 billion during the year.
GOOD READ -- This coming Sunday's NYT Mag features a big cover story by C.J. Chivers in one of his first major features since being named a writer at large for the magazine -- "The Fighter: The Marine Corps taught Sam Siatta how to shoot. The war in Afghanistan taught him how to kill. Nobody taught him how to come home": "Since leaving the corps in 2012, Siatta had been unable to switch off the habits of war. He was hypervigilant and struggled to relax. He watched people, sizing them up and scanning for threats. In the varying situations of everyday life, he constantly repositioned himself so no one got behind him. Much of this was appropriate for combat patrols. Some of it drew from his training. All of it was mentally and emotionally exhausting, unsuited for a peaceful life. Going to a restaurant, moving through knots of people at a party, visiting the mall, finding a seat in a classroom relative to other people and windows and doors - each was a challenge requiring effort and will." http://nyti.ms/2hMQhe4
NAMES -- The new household names: Garcia is now the sixth-most-common surname in the U.S.: The 2010 [Census] data ... show that six of the 20 most common last names in the U.S. now have Hispanic or Latino origin. In 1990, just 2 of the 20 most common names were Hispanic. ... The Hispanic population in the U.S. grew by 43 percent between 2000 and 2010. That year there were some 50.5 million Hispanic-Americans, or 16 percent of the overall population.
BIRTHDAYS THIS WEEK – Birthday wishes and thoughts this week to Mel Gibson (60) Santa Barbara, CA.; Bobby Hull (77) Scottsdale, AZ.; John Paul Jones (70) London, England; Sandy Koufax (81) Beverly Hills, CA.; Bill Reid ….famous college roommate; Tiger Woods (41) Miami, FL.
WE WILL MISS YOU 2016 – Muhammad Ali (74), Bill Bigglestone, David Bowie (69), Glen Frey (67), John Glenn (95), Boutros Boutros-Ghali (93), Merle Haggard (79), Gordie Howe (88), Arnold Palmer (87), Prince (57), Nancy Reagan (94), Alan Rickman (69).
BEST MOVIES 2016 -
1. “Little Sister” (Zach Clark)
2. “Moonlight” (Barry Jenkins)
3. “Sully” (Clint Eastwood
4. “Hail, Caesar!” (Joel Coen and Ethan Coen)
5. “Love & Friendship” (Whit Stillman)
NFL GAME OF THE WEEK – Sunday 1/1, 8:30 PM ET, ESPN: Green Bay Packers (9-6) vs. Detroit Lions (9-6) vs., for the Norris Division Title, the Lions do it to us every year, blow it! Packers win 32 – 24.Season to date (12-3)
COLLEGE FOOTBALL BOWL PICK OF THE WEEK – Sunday 1/2, 8:00 PM ET, ABC; Rose Bowl: #9 University of Southern California Trojans (9-3) vs. #5 Penn State Nittany Lions (11-2), a blowout USC win 40 – 17.Season to date (11-5)
THE SWAMI’S WEEK TOP PICKS –
(NFL, Jan. 1) Houston Texans (9-6) vs. Tennessee Titans (8-7), the battle for the AFC South, Houston wins 24 – 20.
(NBA, Jan. 1) Detroit Pistons (15-20) at Miami Heat (10-24), thrilling New Years Day contest, Pistons in a barn burner 84 – 80.
(NHL, Jan. 1) Detroit Red Wings (16-16-4) vs. Toronto Maple Leafs (16-12-7), a great game to start out the 100th year of the National Hockey League, Leafs win 4 – 3.
Final 2016 Season to date (126 – 100, 55.7%) Weak at best.
Next Blog: 2017 lots of luck.
Until Next Time, Happy New Year.
December 31, 2016
CARTOON OF THE WEEK –The Cloud