Monday, January 9, 2017

2017, The Year of the Rooster

In the Chinese calendar, 2017 marks the Year of the Rooster.

According to the Chinese calendar, 2017 is the Year of the Rooster. To be more accurate, it is the Year of the Fire Rooster as fire is the governing element of the two year-period corresponding to the year 4715 within the chronology of the Chinese calendar. The last Year of the Fire Rooster occurred in 1957.

Within the Chinese Zodiac, the Rooster occupies the 10th position and symbolizes a confident, motivated and, at times, pompous character. Those born under the Zodiac sign of the Rooster are confident, courageous and active individuals. Despite being rather blunt when offering an opinion, people with the Zodiac sign of the Rooster are loyal, proud and trustworthy, expecting the same benevolent honesty from friends. According to the Chinese calendar, the Rooster is very sociable and likes to be the center of attention in a social environment. In their continual search for attention from others, they sometimes run the risk of being considered annoying.

Can someone say, “Paul Gallagher”.

The Year of the Fire Rooster will begin on 28th January 2017 and finish on 15th February 2018, marking the beginning of the Year of the Dog.

It is a particularly special year as it has one month more (13 months in total) than the rest of the years. This month (闰月, rùnyuè) was added to the Chinese calendar to balance the lunar months with the annual solar calendar.

LOOKING AHEAD TO 2017 – Rink Rats predictions for the year ahead what to expect in 2017: If left only to domestic drivers, the US economy would likely experience a pickup in both growth and inflation in 2017, together with further job creation and broader and higher wage growth. In the process, the policy stance would pivot from excessive reliance on monetary policy to include greater use of fiscal measures and structural reforms.

But for these domestic developments to prevail and also lead to genuine financial stability, it also matters what other countries do - particularly, China, Germany and Japan. Absent concurrent pro-growth policy adjustments there, the prospects for better US economic performance and higher Fed interest rates would lead to further dollar strengthening, and this from a level that is already at 2003 highs. Such excessive dollar appreciation would risk undermining growth while increasing the risk of protectionism.

The United States Presidency, though I am sorry to say this, will become a joke in 2017, leading to an impeachment trial in late 2018.

The business model of higher education will continue to collapse, with rising costs, strategies that are twenty years old, and debt limits of consumers reaching their limits.

The Detroit Red Wings will not make the playoffs, the Toronto Maple Leafs will make the playoffs, and the Pittsburgh Penguins will repeat as Stanley Cup Champs.

IT'S A NEW YEAR, STATES EDITION: For Pennsylvanians and Michiganders, 2017 means a higher gas tax. (Floridians now face a very slight gas tax increase, stemming from an automatic cost-of-living adjustment.) New Jersey's gas tax hike last year will mean a larger tax exemption for retirement income for Garden State seniors, a more robust Earned Income Tax Credit, a lower sales tax and a phasing out of the estate tax, starting this year. And while California's reputation might be for high taxes, Golden State residents actually got themselves a tax cut for 2017: a 0.25 percent decrease in the sales tax.

Finally, don't forget this: That Philadelphia soda tax, which even became an issue in last year's Democratic presidential primary, went live on Sunday, too.

NEW YEAR'S RESOLUTIONS: Pet more dogs ... To help promote a renewed respect for evidence and facts - and accept those that might not be in sync with my own world view. ... Find time for more recreational reading and travel to a new state and/or country ... Allocate a limited amount of time per day to social media so it does not demand too much time…Change all my passwords... A healthy and happy family. Finally, to do what I can to rid the world of two things: reply all email and me, myself, and I social media hype.

BIRTHDAYS THIS WEEK – Birthday wishes and thoughts this week to Jimmy Buffett (70) Key Largo, FL.; Robert Duvall (86) Austin, TX.; January Jones (39) Malibu, CA.; Nigella Lawson (57) London, England; Nancy Lopez (60) Orlando, FL.; Walter Mondale (89) Scottsdale, AZ.; Charlie Rose (75) New York, NY.

WHAT TO FREAK OUT ABOUT IN 2017 - Geopolitics tops the list including the rise of Donald Trump and a weakened German Chancellor Angela Merkel: This year marks the most volatile political risk environment in the postwar period, at least as important to global markets as the economic recession of 2008.

The world's sole superpower was once the international trump card, imposing order to force compromise and head off conflict. Now it's a wildcard. Instead of creating policies designed to bolster global stability, President-elect Donald Trump will use US power overwhelmingly to advance US interests, with little concern for the broader impact ... Rivals like Russia and China will test. US-led institutions will lose more of their international clout.

Emails: on average an American office worker sends and receives roughly 120 emails per day, a number that grows each passing year. The ubiquity and utility of email has turned it into a fine-grained record of our day-to-day lives, rich with mundane and potentially embarrassing details, stored in a perpetual archive, accessible from anywhere on earth and protected, in some cases, by nothing more than a single password. Just ask the Democrats.

DRIVING THE YEAR - The WSJ has a handy full-year calendar for big economic events coming in 2017.

TRUMP CORRECTION AHEAD? - Some market watchers are getting worried that the post-election market rally may be coming to a close. The Dow's failure to break the 20,000 mark to close the year at first sparked the concern. Stocks opened 2017 on a positive note but the Dow once again closed well short of 20K.

A late 2016 increase in volatility - may presage a significant market decline of seven to 10 percent early this year. The last three years all saw tough starts followed by recoveries later as U.S. growth improved.

The uncertainty in the market on the opening day of this year is higher than it was in either 2015 or 2016 especially given the geopolitical risks with a Trump presidency. We haven't seen an incoming president this detached from political experience before particularly on the global stage. ... There is also the prospect of the politicization of monetary policy. And the domestic political impact of Trump's policy is yet to be seen, how it's really going to work. ... So we have a pause here based on those things. ...

Why I am concerned is because I've looked at how we've historically closed out and began recent years ... And this is sort of a similar situation with fear jumping into market at the last minute after the Trump rally. ... And we have more uncertainty now than last year or the year before.

3 ways to prime a portfolio with ETFs for 2017

Building a portfolio can be a daunting task,  especially at an economic and political turning point like now. Here are three things that investors can consider doing to start the new year.

The swirl around the U.S. election pulled the markets sharply into its vortex. The surprise came in the intensity, scope and direction of the trading activity. Most notably, the weeks following the election saw the birth of the “Trump put,” in which economic optimism buoyed U.S. stocks to record highs, while taking down once-loved sectors like bonds and emerging markets.

As we’ve seen in previous periods of intense trading, exchange traded funds (ETFs) once again stepped in to provide investors with orderly, efficient portfolio repositioning. On November 9, the day following the election, ETF trading volume doubled, to 3.2 billion shares, according to Bloomberg; that week, U.S. stock ETFs absorbed flows of $27 billion, a record.

Given this past year’s tumult, what should investors look for in the months ahead? The recent market frenzies, while dramatic, have simply brought to the surface investment themes that have been percolating for some time—around global growth, interest rates, corporate earnings and ultimately how much return you should expect for your risk.

We can’t know exactly how and when these themes will play out, but there are steps you can consider to potentially position yourself for success. Here are three investment ideas and ways to consider when executing with ETFs:

1. Welcome back, inflation

The ongoing trend toward reflation—rising wages, higher core inflation, a strengthening dollar and stabilizing oil prices—may be accelerated by Trump’s win.

Investment Idea: Think about hedging across asset classes, including Treasury Inflation Protected Securities (TIPS), real estate and cyclical stock sectors that may benefit from potential economic growth and a steeper yield curve. Consider iShares TIPS Bond ETF (TIP), iShares Core U.S. REIT ETF (USRT), and iShares Mortgage Real Estate Capped ETF (REM).

2. Get granular with your emerging markets

Despite the post-election volatility in emerging markets (EMs), a strategic weighting to the overall asset class may make sense both as a diversifier and a potential return enhancer. However, there’s increasing divergence among emerging economies, which can get lost in the China-heavy broad EM index.

Investment Idea: Single country ETFs can complement a broader allocation by helping to pinpoint specific opportunities; we currently favor EM Asia, for example. You might also look at Saudi Arabia, which is implementing market reforms and targeting inclusion in the MSCI EM Index in 2017. Consider iShares MSCI India ETF (INDA), iShares MSCI Indonesia ETF (EIDO) and iShares MSCI Saudi Arabia Capped ETF (KSA).

3. Reduce “bad” taxes as close to zero as possible

We believe stock markets are in for an extended period of subpar returns, even with the recent rally. That means minimizing costs is more important than ever. Make this the year to be tax-smart by aiming to reduce capital gain distributions that are triggered when fund managers realize a profit on the sale of a security. Regardless of your fund’s return, you can owe taxes on it.

Investment Idea: ETFs in general are structurally tax-efficient and have lower turnover than actively managed mutual funds. (iShares is especially tax-conscious: just 3% of our ETFs distributed cap gains over the past five years, according to Morningstar data as of 11/12/2015. Past distributions are not indicative of future distributions.) Accentuate “good” taxes instead, namely those with a cash benefit to you. Think potentially higher-yielding ETFs such as dividend growth and preferred stocks. Consider iShares U.S. Preferred Stock ETF (PFF) and iShares Core Dividend Growth ETF (DGRO).

If one thing is certain right now, it’s that we’re truly at an economic and political turning point. In the face of such major change, building a portfolio may feel daunting—like dressing in the dark and hoping you come out reasonably put together. Fortunately, there are things investors can do to shed some light on the markets and start the year buttoned-up.

5 most important things for stocks in 2017:

1. Earnings
2. Guidance
3. Trump / GOP Plans (taxes, etc)
4. Oil
5. Fed

NYT's "52 Places to Go in 2017: 1. Canada ... 2. Atacama Desert, Chile ... 3. Agra, India ... 4. Zermatt, Switzerland ... 5. Botswana."

GOOD READS - "1999 Was The Last Time Everything Was Fine," by BuzzFeed's Doree Shafrir: "When I moved to New York City after college in 1999, it felt like anything was possible. But things were about to change more quickly than anyone knew."

"How to Sleep," by James Hamblin in the Jan/Feb issue of The Atlantic: "Should you drink more coffee? Should you take melatonin? Can you train yourself to need less sleep? A physician's guide to sleep in a stressful age."

POTUS WEEK AHEAD -- On Monday, the President will attend meetings at the White House. On Tuesday, the President will travel to Chicago, Illinois to deliver his farewell address to the American people, where he will thank his supporters, celebrate the ways we have changed this country for the better these past eight years, and offer some thoughts on where we all go from here. The First Lady, the Vice President and Dr. Biden will also attend. On Wednesday, Thursday and Friday, the President will attend meetings at the White House.

ALUMNI - Martha MacCallum (St. Lawrence ’86) will succeed Tucker Carlson at 7 p.m., per Fox. MacCallum will anchor a program called "The First 100 Days," chronicling the first 100 days of the Trump administration. She will also co-anchor inauguration coverage for Fox. Shannon Bream will succeed MacCallum as co-anchor of "Happening Now," alongside Bill Hemmer.

NFL GAME OF THE WEEK – Sunday 1/15, 4:40 PM ET, Fox: Green Bay Packers (10-6) vs. Dallas Cowboys (13-3), upset of the weekend, maybe not but we think Packers will win in Dallas, 32 – 24. Season to date (14-3)

COLLEGE FOOTBALL BOWL PICK OF THE WEEK – Monday 1/9, 8:00 PM ET, ESPN; National Championship Game - #2 Clemson Tigers (13-1) vs. #1 Alabama Crimson Tide (14-0). Tide rule again, a true dynasty, 34 – 22. Season to date (12-5)


(NFL, Jan. 14) Seattle Seahawks (11-5-1) at Atlanta Falcons (11-5), Falcons win this divisional playoff game, 24 – 21.

(NFL, Jan. 14) Houston Texans (10-7) at New England Patriots (14-2), not much to say, Pats win 30 – 10.

(NFL, Jan. 15) Pittsburgh Steelers (12-5) at Kansas City Chiefs (12-4), Steelers in an upset, 27 – 21.

Season to Date (7 – 1)

DRIVING THE WEEK - Confirmation festivities kick off Tuesday with Jeff Sessions for Attorney General and Gen. John F. Kelly for Homeland Security. Wednesday will feature as many as five including Elaine Chao (Transportation), Rex Tillerson (State), Betsy DeVos (Education) and Rep. Mike Pompeo (CIA). Carson (HUD), Wilbur Ross (Commerce) and Andrew Puzder (Labor) are scheduled for Thursday.

House Rules Committee on Monday at 5:00 p.m. is scheduled to make a rule on H.R.5, the "Regulatory Accountability Act of 2017" and H.R.79, the "Helping Angels Lead Our Startups Act." ... JOLTS Report on Tuesday at 10:00 a.m. expected to show dip to 5,500K from 5,534K ... Retail Sales at 8:30 a.m. Friday expected to rise 0.6 percent headline and 0.5 percent ex-autos ... Univ. Michigan Consumer Sentiment at 10:00 a.m. Friday expected to dip to 98.0 from 98.5.

Next Blog: Ten Questions.

Until Next Time, Adios.

Claremont, California
January 9, 2017

CARTOON OF THE WEEK –The New Yorker, Paul Noth

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