President-elect Donald Trump
The big investment news for the week was the end in the global stock rally, partially caused by the election of Donald Trump in the United States. A number of markets in Asia, Europe and the United States, surpassed a 16 month high, but are now leveling off or beginning a reversal.
All four main indices in the United States were at or near new lifetime highs earlier this week. Now they are flat or somewhat heading downward in valuation. The main index the Dow Jones Industrials (Dow), almost hit 20,000 before retreating.
As a whole, the American stock market has seen the addition of $1.6 trillion USD (United States Dollar) since the election of Mr. Trump. Investors poured money into equities on the belief that the President-elect Trump will push for deregulation of business, massive infrastructure spending and tax cuts both on individuals and corporations.
The American dollar is continuing to climb in value among the major world currencies. It reached a 14 year high already last week. The Euro at $1.05 USD last Friday, dipped to a low of $1.04 USD this week. Financial analysts continue to expect parity between the two currencies in 2017.
The USD index peaked at 103.65 this week, the rising level will bring more foreign investment to markets in the United States.
The other major news for the week was the terrorist attacks in Germany, Turkey and Switzerland. These incidences created more uncertainty in the markets and had the Euro drop below $1.04 USD earlier in the week, a new recent low.
Christine Lagarde
The Managing Director of the IMF (International Monetary Fund) Christine Lagarde was convicted on charges of negligence while she was the French Finance Minister but, will keep her present position.
President-elect Trump insists the United States must greatly strengthen and expand its nuclear capability, until the rest of the world comes to its senses.
Banking shares in Italy stabilized this week, after the government received parliamentary approval to shore up the Italian banks, with a loan of 20 billion Euros. The first likely bailout will be the world’s oldest bank and the third largest in Italy, Monte dei Paschi.
The price of Bitcoin an internet currency has topped $900 USD. This equates to a gain of 107% this year, beating every other major currency, stock index, or commodity exchange for 2016.
International Commodity News
The agreement among a number of the non-OPEC (Organization of the Petroleum Exporting Nations) nations to reduce their oil output by 588,000 barrels a day in addition to the 1.2 million cut agreed upon by the 13 member nation OPEC, is beginning to take effect which explains the recent rise in oil prices. This is all in anticipation by investors of lower overall oil supplies, the actual global glut in crude still exists.
Members nations of OPEC
Crude oil prices climbed over 10% last week on the OPEC output agreement. Oil remains close $52 USD in the United States and above $55 USD in Asia and Europe.
International oil prices are edging closer to a new 17 month high, as producers shows more signs that they will adhere to OPEC deal to reduce output.
Another ongoing event is the ongoing drop in precious metals, over the last couple of months. The underlining cause for this has been the rising valuation of the American dollar and the investor money now going back into equities.
Gold had been slowly dropping in price, since reaching a high of $1,370.80 USD last August. It reached its lowest price level this week since February.
Gold has been dropping in price for 7 consecutive weeks. The present downward trend is being caused by a rate increase in the United States and greater investor enthusiasm, for future economic policies of incoming President Trump.
This is the longest downward streak for gold prices in 12 years.
Last week gold was being sold for $1,135.60 USD, this week the price fell further to $1,133.20 USD a negligible decline. The total decline is near 21.00%, since the summer.
Gold prices are still up about +8.5% in 2016.
The price for silver has dropped from $19.43 USD from over 2 months ago, to $15.78 USD reported today. This indicates a decline of 23.13%. for the period. It is now officially in bear territory. The decline in price from last week is 2.47%.
Silver is still up over 7% for the year.
United States
Electoral College Map for 2016
On Monday the 538 member electoral college met to certify the election of President elect Donald Trump. Usually just a formality, there was more controversy this year. This was due to allegations of Russian hacking as well as attempt to get some of the participants to withdraw their support for Trump. The next step in the process, will be his inauguration on January 20, 2017.
At least four electors abandoned their support for Hillary Clinton and two electors did not vote for Donald Trump, as they were originally slotted to do.
President Obama will use a 1953 law, to block the sale of new offshore drilling rights in parts of the Atlantic Ocean and much of the remaining United States territory in the Arctic Ocean. Until now, the law had been used infrequently and in small areas for specific purposes.
U.S. bond yields are near 14 year records, as investors calculate that inflation and interest rates are heading higher.
The 10 year U.S. Treasury yield is at 2.54%.
All 4 market exchanges in the United States (U.S.) rose this week. The Dow Jones Industrial Averages is now between 19,900 and almost 20,000 from 18,000 six weeks ago. The Dow, the Standard & Poor 500,the NASDAQ and the Russell 2000 composites are all still near life time highs this week.
The highs on Friday were 19,929.11 for the Dow, 2,262.99 for the S&P 500, the NASDAQ was at 5,461.29 and the Russell 2000 Index for firms with smaller capitalization was at 1,369.82.
From last week, the Dow is up a mere 0.03%, the S&P 500 is down -0.22%, the NASDAQ is down -0.24% and the Russell 2000 is down -0.67%.
Year to date, the major indexes have advanced the following. The Dow Jones Industrial Averages is up about 14%, the Standard & Poor 500 has increased near 12%, the tech heavy NASDAQ has advanced near 10%.
Canada
Fairfax Financial based in Canada, has agree to buy Allied World Assurance located in Switzerland. The $4.9 billion USD cash and stock deal, will create an insurance and investment giant.
German based Volkswagen has agreed to spend up to $2.1 billion USD, to either buy back or repair over 100,000 diesel polluting vehicles in Canada.
Europe
United States based Apple is challenging the 13 billion Euro additional tax bill determined by the European Commission. The company is being assisted by the host nation of Ireland, also disputing the decision claiming it is a violation of sovereignty.
European stocks climbed to an 11 month high last week. This as the result of a number of mergers and acquisitions in Europe. There was renewed confidence in Europe. This week the gains in most markets were more muted.
Growth for the third quarter in the United Kingdom, was revised upwards from 0.5% to 0.6%. On an annualized basis that brings it to 2.3%, up from 2% previously.
Prime Minister Theresa May plans to negotiate both Brexit and the United Kingdom’s future relationship with the European Union by 2019. She is now cautioning a transitional period may well be needed, after deals are made.
The debating chamber within the Scottish Parliament Building
Scotland introduced a number of proposals this week on how the country can remain part of the European Union single market as the United Kingdom as a whole leaves through the Brexit process. It would necessitate, a further devolution of power from the central government.
The free movement of goods, services and most notably people into Scotland, will be difficult to achieve while remaining as part of the United Kingdom.
Ukraine has declared its largest financial institution PrivatBank to be insolvent. The state will assume ownership to stop any further banking instability. This will protect the 20 million customer accounts. The Ukrainian government claims there will be little impact on the currency markets.
The legislature in Ukraine has approved a budget for 2017, with a deficit of 3% of GDP (Gross Domestic Product). The action will be helpful in securing more aid from the IMF under a $17.5 billion USD loan package.
Volkswagen will likely add an additional $1 billion USD to wrap up claims associated with the emissions scandal. This will be on top of the $10 billion already negotiated with the United States government.
German based Linde and American based Praxair agree to merge their operations, bringing together two of the world’s largest suppliers of industrial gases. If it goes through, the deal could be worth in excess of $65 billion USD.
The United States Department of Justice (DOJ) is insisting on a payment of $5.3 billion USD from Credit Suisse, a Swiss based financial services and banking company. This will settle an ongoing probe of the sale by the firm of toxic mortgages, ahead of the financial crisis of 2008 and 2009.
In related news, the DOJ has reached a provisional deal in a similar case against Deutsche Bank for $7.2 billion USD.
Russia
Russian President
Vladimir Putin
Russian President Putin at an end of the year news conference, insisted the economic contraction within Russia is slowing. The flight of capital is less of a problem according to Putin and real wages are starting to recover. He says Russia should be part of the global economy.
Middle East
Iran has finalized a deal with European based Airbus for purchasing 100 jetliners, worth near $10 billion USD.
Aleppo the second largest city in Syria is back under the control of President Assad. The regime is now in charge of the four largest cities in the country. Yet, a number of rebel groups, Kurds, ISIS (Islamic State of Iraq and Syria) and even Turkey, together still control major areas of the country.
The United Nations Security Council passed a resolution, that demands an end to the building of settlements by Israel in the occupied territories.
Saudi Arabia plan to gradually raise domestic energy prices to match international ones over the next few years. This will be done as part of ongoing economic reforms and to help balance looming budget deficits.
Asia
The central bank in Indonesia is considering a revival of the plan to shave three zeros off the notes in circulation. This is to be done for greater financial efficiency and simplification.
In South Korea, the Constitutional Court began hearings on the motion to impeach President Park Geun-Hye. The process could take up to six months.
President Rodrigo Duterte of the Philippines, orders the closure of all online gaming.
China
Last week, the Chinese yuan was at its weakest level in 8 years.
PLAN sailors at the Qingdao, North Sea Fleet headquarters parading with Type-56 carbines
China has been dealing with extensive air pollution that brought about a red alert. It is the highest level in the warning system. Some 400 million people were effected by the governmental action.
The American reaction to the seizure by China of an unmanned underwater United States navy vessel in international waters although restrained, made it quite clear there was an expectation that it would be returned, which it subsequently was.
Australia and New Zealand
Australia has gone for 25 years without an economic recession, largely thanks to an investment boom in mining.
Australia is now downgrading economic growth forecasts for 2017. There is also a projection of larger than expected budget deficits for the next four years. The economy which is resource driven, will now have to transition away from mining and towards other types of development.
Energy News
American West Texas Intermediate (WTI) last Friday was listed for $51.90 USD, this week oil is selling for $53.03 USD, an increase of 2.18%.
International Brent last Friday went for $55.21 USD. This week oil is being sold for $55.16 USD, a negligible difference.
U.S. weekly oil inventories were up by 4.68 million barrels, instead of an expected draw down of 1.5 million barrels.
American priced and Brent crude oil are both up about +42% in 2016.
The Investment Newsletter had 7 target fills to report this week, and 0 early stock target fills.
Nintendo $NTDOY Bought as a short on 10/26/16 at $31.99. Long Term Target Fill on 12/19/16 at $26.65, a 20.04% return for investors.
Wins Finance Holdings $WINS Bought on 12/16/16 for $149.99. Short Term Target Fill on 12/19/16 at $136.36, a 10% return for investors.
Sears $SHLD Bought short on 10/20/16 at $11.99. Long Term Target Fill on 12/20/16 at $9.99, a 20.02% return for investors.
Kirkland’s $KIRK Bought short on 12/19/16 for $17.31. Short Term Target Fill on 12/20/16 at $15.73, a 10.04% return for investors.
Kirkland’s $KIRK Bought short on 12/19/16 for $17.31. Medium Term Target Fill on 12/20/16 at $15.05, a 15.02% return for investors.
Dicks Sporting Goods $DKS Bought short on 11/28/16 for $60.09. Short Term Target Fill on 12/20/16 at $54.62, a 10.01% return for investors.
Dicks Sporting Goods $DKS Bought short on 11/28/16 for $60.09. Medium Term Target Fill on 12/23/16 at $52.25, a 15.00% return for investors.