DIASTOLE ECONOMIC AND MARKET COMMENT
August 27, 2018
Markets are up today on the news that Mexico and the U.S. have reached a preliminary agreement on important areas of the NAFTA renegotiation. Canada has not been a party to the talks, and must still weigh in. We love trade agreements, even when we don’t have the details yet. So much better than trade disagreements!
And the Standard & Poor’s 500, which reached a new high of 2,874 on Friday, is still rising today. So far. I can’t make any promises about the afternoon.
And making no promises is what Elon Musk has done. First he’s taking Tesla private, now he’s not. He says he’s listening to his shareholders, but in fact his stock fell on the announcement that he was just kidding last week. Tesla short-sellers have paid a price for the whiplash, which is probably exactly what Musk intended. He hates short sellers.
The U.S. trade talks with China, which resumed to much fanfare last week, have already adjourned without making progress. Let the tariff war continue!
Saudi Arabia, which has been floating the idea of an initial public offering of its sovereign oil company Saudi Aramco (or at least 5% of the company, which is still worth many many billions) has now said nope, not gonna. But then they said, maybe soon. Or maybe later. And first we’re going to diversify our holdings out of just oil, and maybe sell a private stake in the company to Russia or China. You know, in addition to that IPO that probably is coming. Or not.
Lucy, would you please hold the football for me?
Is this the longest bull market in history? Apparently yes. The S&P is up fourfold since it hit bottom at 666 (insert devil joke here) in March of 2009. That means that the market has been rising steadily for more than 3,453 days without a major correction. And with 80% of S&P companies beating their earnings expectations for the second quarter, and the tax cuts still helping corporations, we hope this bull keeps raging.
Do you know that 66% of American homes (85 million) have pets? There are more pets than people in the U.S. (393 million). We spent $17 billion in veterinary care in 2017, along with more than $1 billion in pet health insurance premiums. What is the most common pet? Wait for it… fish! But if cats were two inches long and lived in little glass houses, we bet there would more of them.
Walmart has filed a patent for a virtual store. In theory, it would allow an online shopper to roam the aisles of an imaginary big box, look at all of the goods, and impulse shop like crazy. And so the last bridge falls! The whole point of Walmart is that you go in needing one thing and come out with 17 items that somehow cost $272.68. TMI?
And speaking of online shopping, the non-profit organization New Food Economy has analyzed state government data and determined that one third of Amazon employees in Arizona and one tenth in Ohio are on food stamps. Bernie Sanders is planning to propose legislation that would tax companies when their employees are on government assistance. What are your thoughts on this?
Maersk, the world’s largest shipping company, is blazing a new sea trail. It is sending a 3,600-container ship from Vladivostok to St. Petersburg via the Arctic. For those of you who are geography-challenged, Vladivostok is on the east coast of Siberia, across the Sea of Japan from Sapporo, while St. Petersburg is in Europe, across the Gulf of Finland from Helsinki. In the olden days (like last week) that ship would have had to travel through the Suez Canal, currently backlogged with other ships carrying goods trying to beat tariffs. But thanks to global warming, the northern route is now navigable. This is not good news for the planet, although it is certainly good for Maersk.
Russia, on whom we are levering sanctions, is fighting back by selling U.S. Treasury bonds. In March, Russia owned $96 billion worth of U.S. debt, but by May that figure was down to $14 billion. What are they doing with the money? They’re buying gold. Russia’s gold reserves grew by 26 tons in July to a total of 2,170 tons in reserve. That’s worth about $86 billion dollars at today’s price. Gold is a traditional safe-harbor investment, but is it going to rise in value with inflation around the globe (not you, Venezuela) so low?
Have you tried to cross the Brooklyn Bridge lately? Are you on the Brooklyn Bridge right now? If you’re lucky, today is NOT a day that infamous Mexican drug lord El Chapo needs to go to court. He is currently awaiting trial in Manhattan, but the courthouse is in Brooklyn, so every time he has to show up, the police close the bridge completely in order to transport him securely. You’ll remember the escape he made through his prison bathroom in 2015 - well, officials don’t want him tunneling off the bridge(?). Expect things to get worse once the trial starts, or perhaps the drug lord will be moved to a Brooklyn prison by then.
Apple CEO Tim Cook earned 560,000 Apple shares on Friday as part of his compensation deal. That’s more than $120 million. Just on Friday. His pay is tied to the performance of Apple stock, which of late has been stellar.
A 1962 Ferrari 250 GTO just sold for $48.4 million. That’s a new record for any car sold at auction. And I don’t want to brag about my personal life or anything, but, hey, lunch is on me!
Oh, and West Virginia’s lower house just impeached the entire Supreme Court of West Virginia for overspending on office decorations and other forms of corruption. Now the W.V. Senate must vote on whether the justices will all be removed from their jobs. If they are, governor Jim Justice will name their replacements. The governor owns the Greenbrier resort and is the state’s richest person. Just thought it was interesting.
For the week ending August 24th, the S&P 500 finished at 2,874, the Dow Jones Industrials at 25,790, and the Nasdaq Composite Index at 7,945. The yield on the ten-year U.S. Treasury Note was 2.81%. Crude oil cost $68.72 per barrel, gold was lower at $1,206.30 (sorry, Russia), and one Euro cost $1.1626.
Elizabeth E. Cook
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