1. A Quiet Spike For Financial Stocks

    Little things sometimes mean a lot. Take the case of financial sector stocks. On Friday August 25th the S&P 500 Financial Index (SPSY) out performed the overall market. It wasn’t all that much to make it a headline-grabbing event. Most Wall Street types probably were more concerned about traffic congestion to the Hamptons on a Friday afternoon than boring financial stocks.

    You can’t blame them; the SPSY has provided a measly 6% return this year that is just a little over half the market rate of return. Financial stocks have not only been duds, they are one of the more boring groups to begin with.

    But that could be changing. The tectonic plates of the financial world are shifting and the shift could allow financial stocks enjoy better times.

    Politicizing The Fed

    Today, banks are stronger than ever, ten years after the crisis that brought down Bear Streans and Lehman Brothers and threatened the global financial system. Vast sums of additional capital has been raised by issuing equity or low rate long-term debt that their so-called “Capital Position” has improved sharply.

    Of course, none of these were voluntary. It took the embarrassment of 2008, the TARP program and the passage of heavy new regulation under the Dodd-Frank Act to force the change.

    After a sight of relief that the system did not collapse, money lending went deep into a shell. The mortgage industry all but disappeared, as did small business lending. About the only people that could get a loan were rich folks and they didn’t need the money. In fact, the rich became the biggest source of private lending.

    Now the debate begins. Are current-banking regulations restricting the already anemic growth of the US economy? By anemic we are talking about 2% while the Trump White House has promised 3%.

    So from a political point of view, the Donald is likely to use whatever excuse is available to blame. With the Chair of the Fed up for grabs in a few months, there is one big duck sitting on the pond: Janet Yellen.

    Yellen’s Swan Song

    On the very same Friday, those financial stocks outshined the market; Jane Yellen made what amounted to her farewell speech to the annual Fed monetary policy conference at Gran Teton, Wyoming.

    In her speech, Yellen lauded the benefits of the Dodd-Frank Act pointing out how increases in bank capital had significantly improved the resilience of the financial system. The media treated her speech as a warning sign to the Trump administration. So far into this administration, POTUS has not reacted positively to things like warnings, suggestions or constructive criticism.

    Reading between her lines, Janet Yellen made the statement; it is time for the prisoners to escape from the asylum. I want out of here before having to listen to a bombardment of Trump Tweets and I am going to take the first step.

    Climbing Into The Breach

    If you are holding financial stocks or thinking about moving your portfolio in that direction, Gary Cohn will help you make that decision. With Goldman Sachs as his financial birth place and President of GS as his last post, you could not find a more idea candidate for Fed chief.

    In addition to all of his skills and financial experience, the truth is, Cohn, the current White House chief economic advisor, wants out of his job. News headlines following the Charlottesville debacle point to considerable pressure from Jewish Organizations for Cohn to resign. He even penned a letter of resignation.

    As Chair of the Fed, Cohn gains his release from under the thumb of Trump while still having Trumps ear. Once appointed, he can not be fired. It is the ideal solution, Gary is happy, Jewish Organizations are mollified, and Trump avoids another potentially embarrassing resignation.

    All of this is not going to happen until Yellen’s current term ends in February. Given the daily turmoil at the White House, many things can happen between now and then.

    Frustrated with healthcare and tax reform in Congress, Trump has been a toothless tiger so far in his first year in office. Other than his nomination of Supreme Court Justice Merrick Garland, the post of Fed Chair represents Trumps biggest source of executive power. Reappointing Yellen will never look like a power move. February is just about six months away within focus for even short-term investors.

  2. Narcissism: Expecting The Unexpected

    This has been another winning year for the financial markets. Stock prices keep making new records. Markets outside the US are following along with America. Inflation continues tepid, job growth is steady, the prospects of the Fed taking away the punch bowl with higher rates is diminishing. Perhaps best of all consumer confidence is solid.

    There are several things that make today’s investment environment differ from the past. There is a growing and healthy amount of skepticism on the part of Wall Street Economists, investment strategists and other talking heads. Without going into all the boring detail, each presents a well reasoned cause(s) why the market is in store for a significant correction.

    It could be interest rates shooting up, wage stagnation, global warming, the North Korean thing, or a number of visible well identified issues. There are plenty to choose from. But sharp corrections are always caused by surprise events. The big issues of today are so well known and thoroughly documented, how could any of these surprise investors. Let’s look elsewhere.

    The Market Enigma

    It doesn’t take much research to document that market corrections are virtually always created by some surprise event. Hence by this very definition, market corrections cannot be predicted. At best you can only prepare for an unknown future.

    The Trump Enigma

    There are plenty of mental health professionals with far greater skills than I have pronouncing POTUS as a full-blown narcissist. This is the guy that a minority of America voted into office knowing his personal flaws fully.

    Trump is a quirky cannonball loaded with surprises.

    In the beginning, his quirks were so amusing that comedians all over were licking their comedic chops looking forward to eight years of fresh material. That day is over.

    Since Inauguration Day, I have read several books about narcissistic personality types. There are at least a dozen available online so there must be lots of interest in the topic.

    There are several traits about narcissists that stand out. According to psychiatric studies, 75% of cases are men. There is a constant need to create tension and anxiety with the people in their inner circle.

    They are easily offended and have perfected the art of blaming literally everyone (except themselves) for causing trouble. The absolute inability to take responsibility for their actions makes it impossible for anyone to bring about a change in their behavior.

    Could Charlottesville Be The Surprise

    How could a small little Virginia town of about 49,000 people shake the world? It could happen. The events of August 12th represent the most severe test. The White House response was not the first time they bungled the job of communicating with the public. However, given the emotional nature of events, this is where Trumps narcissism gets really costly.

    Even if you are a life long Trump fan, you must admit he screwed up in as big a way as possible. Then came the Intel and Merck CEO resignations from the Business Council followed by the dissolution of the entire Council.

    The Trump response was pure and predictable narcissism, blame, insult, and diminish. Now in addition to a verbal war with North Korea, there is an exploding war with corporate America. A narcissist thrives on tension.

    Now the media headlines are shifting to an even wider focus. Has the mess in handling Charlottesville become so bad, it is driving White House advisors to the brink of resigning? Names like Gary Cohn and recently appointed Chief of Staff John Kelly are bellwethers. Without Cohn, the Presidents tax reform legislation is crippled and without Kelly, the White House continues to be dysfunctional.

    There are calls from all over the business and political community from Ken Langone, founder of The Home Despot to Mitt Romney and throughout Congress for Trump to acknowledge his mistake and to apologize to the American people for the mistake. The odds of this happening are extremely low. Mental health experts say the more the narcissist feels attacked, the stronger their reaction.

  3. Presidential Hopefuls: Get On Your Marks

    Once again the New York Times has used their omnipotence to do battle with our beloved president Donald Trump. In an article in the Sunday August 6th Edition, they ran a story titled, Republican Shadow Campaign for 2020 Takes Shape as Trump Doubts Grow. The shadow they were referring to was Vice President Pense.

    Based on the full pace of his schedule and the people his is cozying up to, The Times has concluded his is getting ready for a run at the Oval Office, just in case something happens to POTUS. Isn’t that what a VP is suppose to do?

    Pense isn’t the only Republican schmoozing their way to 2020. Ohio governor and 2016 Presidential candidate John Kasich was identified as another schmoozer. And there were fresh-faced new comers to the schmooze that included Senators Tom Cotton and Ben Sasse. Both were reported by NYT to have made trips to Iowa.

    NYT Lets The Genie Is Out of The Bottle

    The first thing to happen on Monday August 7 was the expected round of denials from all parties starting with VP Mike Pense referring to the article as “disgraceful and offensive”. His reference to the article even included use of the term “fake news”.

    But no matter if it was real or fake, The New York Times did something that no social media force could hope to accomplish. The officially started the 2020 race for the Presidency of The United States.

    The Sunday article was the equivalent of yelling fire in a movie theatre. Once the alarm goes out, everybody scrambles to protect their interests. In a town like Washington where everybody is out for themselves, The Times article was like yelling “FIRE”.

    From this moment forward until November 2020, the media will scrutinize every visit to Iowa by every politician. Republican politicians are special targets. If only Iowa had some other reason to visit it might be different. Iowa has no national parks, no Disney attractions, and almost no natural beauty. The only excuse for being anywhere near Iowa is political.

    Handicapping The Horses
    Every presidential election cycle, it seems, starts earlier and earlier. As soon as some long shot candidate declares their White House ambitions, the whole distasteful, elongated process begins once again. The early start is one reason for the record high $7 billion spent in 2012.

    But this time is different. This time we have a campaign with no candidates, just shadows. The whole idea harkens back to 1968 when the renegade slogan of the Hippies was, “Vote for Nobody Because Nobody Has All The Answers”.

    Something Good Could Come of All This

    Some leaders like JFK were strong figures that drew followers who were drawn together by lofty goals like the Peace Corps and going to the moon. Trump is at the other end of the spectrum. His approval ratings tell the whole story.

    There is plenty of disaffection within the Republican Party among middle of the road members of Congress. There is a growing movement on the Democratic side to work with Republicans. Otherwise there is little consensus within either party.

    The question is this: within all the shadows of the new presidential election campaign, could there be a ticket of two candidates from different parties?

    After all Bernie Sanders was not a Democrat until 2016. Connecticut Senator Joe Liebermann ran with Al Gore in 2000. Liebermann was a closet independent but that didn’t eliminate him.

    The idea may strike many as absurd. Perhaps so, but it is the perfect time for a new political force to emerge. Never has the US been more diverse, which is a nice word for divided. Never have either of the two major parties been more divided.

    The first Obama election proved that enough money could be raised though social media to make a difference. Bernie Sanders 2016 campaign confirmed the possibilities. This means that the richest 1% of the population that financed the vast majority of the $7 billion spent in 2012 can be challenged.

    These realities have to sink into even the most political traditionalists. The campaign slogan of a ticket shared by a Republican and Democrat could logically be: Working Together To Finally Get Something Done.

  4. Democratic Do Gooders

    Everybody is feuding in Washington. Now is the time for the biggest organization of disorganized people to get their act together. We are talking about the Democratic Party. They behave like passengers on a Carnival Cruise ship. Each member may be on the same boat, but once in harbor, they all go in different directions. There is about as much unity here as there was in the closing moments of the Titanic.

    Now the Democrats are poised, practically by default to become the next leader of the United States Congress. Election Day 2018 is only 15 months away. That means, another glorious election campaign will begin even sooner. Oh goody, can’t wait.

    Trump Is Getting Squeezed From All Sides

    These days’ news organizations just about everywhere are ganging up on POTUS. FOX may still be in Trumps corner but the wounds to DT’s good buddies are pretty evident. The President is not only digging his own grave, he is paying for the funeral. Whoever was the last person to accuse him of being brilliant, hasn’t been heard from recently.

    The really smart move here would be to fire Tom Price, Secretary of Health and Human Services and hire Dr. Phil.

    The more Trump tries to wiggle out of tight situations with such tactics as the Self Pardon, I will fire Robert Mueller, I will hire Rudy Giuliani for Attorney General, if I had known Sessions was going to be disloyal, I never would have hired him, the more he exposes himself less as a leader of a moral nation and more like a Latin American Dictator.

    The Presidents approval ratings translate into a forgone conclusion. If an election were held today, unless Trump was running against OJ Simpson, he would loose by a big margin. The challenge for the Democrats is to make sure they don’t nominate OJ.

    But the important election is over three years off so unless something ominous happens to The Donald in the meantime, the Dems have to build their next move in Congress.

    New Noise: Old Ideas

    Lately there are rustlings coming for people like Senate Minority Leader Chuck Schumer about a new economic plan. Instead of calling a “New Deal” a la Franklin Roosevelt, it is being called a “better deal”.

    First, compliments to the leadership for the intelligent decision not reusing the FDR era term “New”. As the headlines show, there is nothing whatsoever new.

    The preliminary headline reads, “Democrats to rollout new economic plan that takes aim at big biz and drug prices”. These are the same things that the party of donkeys has been attacking for decades.

    We will be forces to wait to see details. But unless you have something in common with a donkey, there won’t be any surprises. There is only one exception. It would be a surprise if the new economic plan resulted in more efficient and lower cost government. Correction: it would be a shock.

    Old Ideas Old Leaders

    The Democratic Party has long enjoyed the support of young voters. This goes back over 50 years to JFK. Young idealistic voters have yet to realize that ideas being promoted by the party of FDR have been tried without great success for generations.

    Democratic stump speeches are peppered with phrases like, we have made much progress but there is much more to be done. Democrats and Dermatologists have much in common.

    For all the noise about better ideas, it is time for the youth imbued Democratic Party to find a new face with some new ideas before 2020. So far names being whispered like HRC and JBJ translate into SOS (Same Old Stiffs).

    To paraphrase FDR, the only thing we have to fear is that the Democratic party members forget to get back on the Carnival Cruse ship before it leaves the dock.

  5. Team Trump Punts

    With football season just around the corner, it is time to dust off some seasonal metaphors. And the way team Trump has taken a beating lately football seems like the appropriate sport. Concussion protocols may be necessary to apply.

    The White House legislative agenda is pivoting away for health care reform toward the always-controversial topic of tax reform. If the Donald had no idea that healthcare could be so complicated, just wait for his next epiphany, it is coming soon.

    Why Ditch Healthcare Reform?

    Healthcare reform is a disaster. Polls done by Bloomberg showing that this is a huge issue but one where almost two-thirds of Americans don’t like the way the President is handling it. Presumably those people not only didn’t like Trumps first attempt or the one that is currently dancing around the halls of Congress.

    The latest version was stalled by Senator John McCain’s eye surgery. Several democrats have suggested the surgery was made necessary by McCain excessive hood winks over the course of a long political career.

    What an awful thing to say about a decorated Vietnam War hero.

    Either way Republican support for the latest version appears tepid at best with as many as 10 Senators are getting cold feet. McCain’s eye surgery could turn out to be the best thing for Senate Majority Leader Mitch McConnell.

    Now if McConnell can just talk Richard Lugar into getting a hip replaced or perhaps something simple like a face-lift, the Republicans could be off the hook well into the fall.

    But proceeding without dealing with healthcare reform, the much-disliked Affordable Care Act will remain. Repealing it is a political joke. The ACA will be with us at least through the next election. We know how uncertain that is going to be.

    Proceeding with Tax Reform otherwise makes for an even more complicated situation. Team Trump needs to do something to make the American public feel he has their back.

    But it is football season, and team Trump is punting the ball. It is only the first quarter so, always remember, there is lots of football left to be played.

    Time For A Field Goal?

    If you can’t score a touchdown with healthcare reform, how about a least a field goal with tax reform? Chances are that both are going to fail. Sorry folks but here are some of the reasons why.

    Tax reform is nothing more than a euphemism for tax reduction for corporations and the rich. This is the Republican legacy of trickle down economics of the Reagan era. Whether it works or not, it lowers tax revenues at the outset in hopes of stimulating business investment and eventually collecting more money from faster economic growth. That is the business philosophy.

    As for helping rich individuals, lowering taxes is simply a payback for all of the political contributions made to get Trump and other Republicans elected.
    After all, the top 10% of Americans already pay 93% of all taxes paid to the IRS.

    But Healthcare Costs Remain A Big Unknown

    No matter how tax reform proceeds, how is the Congressional Budget Office going to review and opine to anything related to lower tax revenues when the cost of healthcare is so uncertain. Remember next to Defense, Healthcare is the biggest item in the Federal Spending budget.

    Will Trump Bend?

    The Trump presidency may still be in the first quarter, but half time is coming up in 2018. Approval ratings for POTUS right now are awful. Support from his own party is shaky. As the 2018 Congressional elections approach, look for more Republicans to distance themselves from White House policies.

    If The Affordable Care Act is repealed without a better plan in place and tax reform is viewed as benefitting only the rich, look out. This will give the Democrats a legitimate shot at regaining control of Congress in 2018 and the White House in 2020.

    The Democrats may be disorganized, directionless and in need of a better quarterback. But Trump is making it difficult for Minority Leader Chuck Schumer to loose his starting job.

  6. Politics of The Absurd

    Before getting started, I have an important confession to make.

    I am politically agnostic. I have responsibly taken my citizenship obligations and voted every Election Day since turning 18. But lately my heart has begun to follow the Hippie Party campaign slogan of 1968: Vote For Nobody, because nobody has ALL the answers!

    While others are passionate about their political beliefs, my passion tends to run to the absurdity of the political process. Take for example the Democratic Party. Unquestionably this group is in the worst shape in decades. Consider their situation.

    Identity Crisis

    To be a Democrat is to be a person favoring social justice, helping your fellow citizen looking out for the environment, protecting the rain forests and smoking a little weed. All of these have their virtues.

    Today the political map in America is bifurcated. More baby boomers are retiring everyday while more millennials make up the lower end of the age spectrum.

    These two groups represent over 90 million Americans. This may not sound like much compared to 320 million in the US population. But remember, only about 130 million voted in the 2016 election, so 90 million is potentially a powerful block.

    It combines the idealism of youth with the aches and pains of old age reality. These two groups have been the core of the Democratic Party for decades. Now this voting block is bigger than anytime in history.

    Unfortunately the Democrats are nowhere to be found. They control neither houses of Congress. Only 13 states are under Democratic governorship. The Party is so bad off these days the even Hilary Clinton is being accused of disserting the ship.

    Clinton to the DNC: Your Ship Has A Hole In It

    In a recent interview at the 2017 high tech Code Conference she claimed the Democratic National Committee is nearly bankrupt and that she, single handedly, had to bail them out. She claimed the DNC had nothing that could help her campaign, no data, nada. This makes the Russians look really stupid for hacking into the DNC data bank in the first place. What a waste of money. Cyber hackers don’t come cheap.

    Cheep Sports Metaphor To The Rescue

    In situations like this a sports metaphor always comes in handy.

    We are now in the bottom of the ninth inning with two outs, nobody on base. Attempting to tie the score with one swing comes the proposal for single payer health care!

    Nationalized Healthcare: Avoiding Solutions When Ever Possible

    The idea of a single payer healthcare system was one of Bernie Sanders favorite campaign issues. It sounded so appealing when The Bern talked about it. His passion made him a popular figure.

    But The Burn didn’t even get nominated. (Maybe those Russian had something to do with it.)

    When you are down 37 Statehouses in the bottom of the ninth inning, there is nothing like taking a loosing idea from 2016 and making it the centerpiece of the party’s first attempt to get back in power.

    Desperation Is Gaining Momentum

    Single payer bills are being proposed in several states: New York, New Jersey, Rhode Island, Massachusetts and, of course, California. As you might imagine, each of these states are Democratic strongholds.

    California is the state with the highest chance to get any traction. State Senator Ricardo Lara is the author of the bill that would mandate much more comprehensive access and no out-of-pocket costs.

    There are only a few small issues to be addressed. A single payer system will cost $400 billion just for California: a tidy little sum. Half of this will come from taking away existing public healthcare programs. (Always a risky move) The rest will require $200 million in higher taxes (everybody loves more taxes).

    Good luck with the first $200 million of the plan. Donald Trump knows what it is like messing with exiting programs under the Affordable Care Act. And then there is the issue of the added taxes.

    Is it truly a zero out of pocket healthcare plan if you must pay $200 million more in taxes? California recently legalized weed. Perhaps politicians are depending on that to get voters to buy into the plan. Inhale the burn.

  7. Thoughts on Trump Proofing Your Portfolio

    To paraphrase Forrest Gump, the Donald Trump presidency is like a box of chocolates, you never know what you are going to get! But with the stock market recording ever-new highs, it’s time to get going.  Protecting yourself means, you have to accept there will be surprises and surprises sometimes can be humbling.

    Having made that disclaimer, lets start with a few obvious things.  Investor confidence is brimming that the Presidents pro business policies will be successful.  Of course, why else would the market be at these levels?  But, there is absolutely no guarantee this will happen either in whole or in part.

    We began by realizing investors are abnormally calm.  Look at the markets volatility index or VIX and you will find a near 45% drop in the index since just before last November’s election. In fact, the index is near a 10 year low.  This doesn’t make sense.

    If there was serious doubt about President Trumps policies or if his image of crazed despot portrayed in the media, the VIX would be fluttering well above 20 rather than closer to 10-12 where it has been hovering lately. During the 2008 financial crisis, the VIX hit 60.

    This lack of volatility has direct implications for one of the ways professionals often choose to protect their portfolios: with options.  In this case we are talking about owning Put Options on the S&P 500 or the Nasdaq.

    Options are not for everyone, but they are an efficient mechanism.  In one single transaction you protect your entire portfolio.

    Right now is a good time because when volatility is low, often option premiums are at a low.  In addition, option prices are fundamentally tied to interest rates.  If interest rates increase this year the price of Puts will rise also.  So now may be a good time to get started.

    For those uncomfortable or simply prefer a sector strategy consider several options.

    The President has made it clear, he wants to boost military spending $54 billion by cutting regulations and other items.  So the defense industry is a natural beneficiary with traditional names like Boeing and Lockheed.  There are many more names to consider.  The caveat here of course relates to Trump getting his military budget through Congress. That‘s a pretty big if.

    Before considering purchase or sale of securities related to any of these companies, check with your advisor.  He/she is whom you are paying for advice.

    Another area could be robotics companies.  Finding a pure play in a public vehicle is challenging but #5 Bosh and #6 Google top the public list.

    The President has had multiple meetings at the White House with the CEO’s of Americas manufacturing biggies.  There seems to be lots of smiling faces around the table at that means good things for bring work back to this country.  But work does not automatically spell jobs. The hourly rate differential in many cases is still to great for this to happen.  In addition there is the question of job training and retraining.  That means demand for robots while the demand for labor most likely will be for building, programming and maintaining the machines.

    Finally, we are willing to bet that healthcare turns out to be way too big a problem to solve even for The Donald.  As he recently was quoted, “Nobody new that healthcare could be so complicated”.  He is now learning that this is one campaign promise he won’t be able to keep.  The natural tendency would be to lean toward the healthcare insurers like United Healthcare, WellPoint and Aetna.  But there is uncertainty over what form the new version of the Affordable Care Act will look like.  The safer bet might just be those damn prescription drug companies where demand growth and pricing power combine to produce above average growth.

    These are only two strategies and clearly not the only options. Of the two, we favor the overall approach offered by options in partial because it takes a global approach to uncertainty.  President Trump starts his term in office with the lowest approval rating ever recorded.  If the suspicions of almost two-thirds of American voters prove accurate, the price of lots of stocks will suffer.

    Up to now those who support Trump accept his brash off the wall style in return for the promise of strong leadership and fundamental improvement in government. His approval ratings may be low but distrust in government is America’s most important domestic issue.  As time goes if the President is unable to deliver, the crowd noise could get very loud and that would not be good for the market.

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  8. U.S. Stocks Riding Record Highs on Trump Tax Talk

    U.S. stocks set multiple record highs this week, as investors continued to rally behind President Trump’s promise of “phenomenal” tax cuts in the not-too-distant future.

    All of Wall Street’s major stock indexes settled at all-time highs on Friday. The S&P 500 Index rose 0.2% to close at 2,351.16, having gained 1.5% during the week. Eight of 11 S&P 500 sectors finished in positive territory, led by a 0.9% gain in telecommunications services and a 0.7% advance in consumer staples. The consumer discretionary sector also added 0.3%, while information technology rose by a similar amount.

    The Dow Jones Industrial Average closed at 20,624.05, having added 1.8% over the previous five days. Th technology-heavy Nasdaq Composite climbed 0.4% on Friday and 1.8% during the week to close at 5,838.58.

    Markets have been on a tear since February 9, when President Donald Trump pledged “big league” tax cuts in the coming weeks to support American businesses. Earlier this month, the President signed an executive order to begin reviewing the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was passed into law in 2010 in response to the financial crisis. Dodd-Frank was responsible for creating stricter financial rules regarding bank capitalization, compliance and mortgage lending. It also created multiple bodies councils and curbed excessive risk-taking in the financial markets.[1]

    Stocks have surged more than 10% since Trump was elected on November 8. After initial hesitation, investors quickly rallied behind Trump’s pro-growth policies, which include massive tax cuts, deregulation of key industries and up to $1 trillion in fiscal stimulus. To date, Trump has announced his intent to cut taxes and deregulate the financial services industry, but has not elaborated on his trillion-dollar infrastructure plan.

    Equity markets proved resilient this week in the face of political turmoil facing the Trump administration over alleged ties to Russia. Trump held a marathon news conference on Thursday, where he criticized the mainstream media of spreading fake news and undermining his administration. Trump’s National Security Adviser Michael Flynn resigned this week after it came to light he had spoken with Russian diplomats about sanctions prior to being appointed.[2] In the United States, it is illegal for private citizens to conduct diplomacy on behalf of the state.

    Despite the latest rally, analysts say political uncertainty in Washington will do little to improve stability in the financial markets. Moving forward, investors will be looking for tangible evidence that the Trump administration is following through on its campaign promises.

    The New York Stock Exchange will be closed on Monday for President’s Day. Markets will resume trading the following day.

    The economic calendar has a light release schedule next week, allowing investors to digest the latest political developments in Washington and elsewhere. With Dutch and French elections fast approaching, investors will become increasingly preoccupied with developments in Europe over the next several weeks. The Dutch general election will take place on March 15, while the first round of France’s presidential vote takes place on April 23.

    [1] Gillian B. White (February 3, 2017). “Trump Begins to Chip Away at Banking Regulations.” The Atlantic.

    [2] Sam Bourgi (February 17, 2017). “Dow Jones (DJIA) Futures Pare Losses, Gain 1.8% For Week.” Economic Calendar.

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  9. Will The Real Donald Please Stand Up

    The Kinder Gentler Side

    We are living in a world of contradictions.  President Trump’s approval ratings are the lowest in the history of the executive office at this early stage.  The stock market is at the highest level for any President at this early stage. In fact is the highest for any president ever.  How does this happen.

    While people are demonstrating in the streets over the divisive mean spirited president that insults races, demines women and attacks the press.  In his recent address to a joint session of Congress, the President’s speech could not have been more gentile, inclusive and supporting of women’s rights and opportunities.  He even appealed for a united spirit in Congress reaching out to work with his opposition.

    About the only thing missing was something nice to say about the media. But then not even a contradiction can be a perfect.

    Donald The Cagey Chameleon

    So where is the true PODUS.  Is he the guy we all grew to be embarrassed by during the many republican primary debates when he insulted Senator Ron Paul and a host of 15 others.  Or is he the PODUS who painted the dark and depressing state of the country during his January inauguration. Or is Mr. T the kinder, gentler united voice of true leadership?

    As much as we would like to know the answer, the simple truth is POTUS is all of the above.  He is what ever he needs to be in whatever the situation demands.  This is what a really good negotiator does. They keep everybody guessing.  That is the art of the deal.

    Dr. Donald

    One of the consistently clear messages from the President is about healthcare and specifically the ills of Obama care.  Once again the skyrocketing cost of premiums was sighted as the mark of failure.  Insurance premiums in the state of Arizona we were told have risen by triple digits and the Governor of Kentucky was noted for having claimed that the states insurance exchange was imploding.  That is never a good sign of government working for the people.

    And what is the biggest cause of premium cost going up at ridiculous rates? Prescription drugs, what else.  Of course, that is a bit unfair because the reality of Obama care is more complex.

    Far to many older citizens enrolled and far to few young healthy people declined to follow the law that said, either sign up for healthcare or face a fine added to your income tax bill.  Anybody young person with an 8th grade education realized that they didn’t need the healthcare coverage and that the cost of the insurance was far greater than the fine.  Bingo, the system got loaded up with drug consuming septuagenarians, octogenarians and a few more old folks.

    Donald The Barracuda

    During his speech to Congress, President Trump was clear and empathic about how the prescription drug companies were the enemy. Hooray for you Mr. President, this is just what those thieving drug cartel members need to hear.  It is something we support you on fully.  Go out and bully the daylights out of Pfyzer, JnJ and all the others.  I promise you that your approval ratings will go up.  And anyway, the stock market is at record so investors already believe you will be successful.

    Donald The Apprentice

    But do they really?  What is the truth? Do investors believe The Donald will win the prescription drug battle?  Consider this; since the election the S&P 500 has risen about 9% to around 2333.  The two biggest prescription drug distributors in America are McKesson Corp (MKC) and AmerisourceBergen (ABC).  During this same time MKC ‘s stock price has appreciated 15.0% while ABC has gained an impressive 33.6%.

    The worst of times for these companies is when drug prices are stable.  But they benefit nicely during periods of rising prices.  So when you look at how completely they have outpaced a very strong stock market, it is telling you something.

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  10. U.S. Dollar Hovers Near One-Month High Despite Political Risks

    The U.S. dollar rose against a basket of other major currencies on Friday, as optimism about a stronger domestic economy outweighed political risks concerning the Trump White House.

    The dollar index, a weighted average of the greenback against a basket of six other major currencies, rose 0.5% to 100.95 on February 17. The index reached more than one-month highs earlier in the week after Federal Reserve Chairwoman Janet Yellen signaled that U.S. interest rates would continue to rise gradually throughout the year.

    Higher interest rates make the dollar a more attractive bet for yield-seeking investors. Following its December policy meeting, the Federal Reserve said it expects interest rates to rise three times in 2017[1] – a vote of confidence to an economy that has faced significant obstacles since the financial crisis. However, investors shouldn’t expect the dollar to react much at all to subsequent policy moves by the Fed, since the currency has already gained over 20% since mid-2014. Those gains were largely tied to expectations the Fed would slowly normalize monetary policy.

    The dollar has strung together an impressive rebound since the end of January, including a ten-day winning streak through February 14. Prior to that, the greenback was trading at three-month lows amid tough trade rhetoric from U.S. President Donald Trump. Prior to his inauguration on January 20, Trump told The Wall Street Journal he thought the dollar was “too strong,” especially in relation to the Chinese yuan.[2]

    Trump would further erode confidence in the dollar by signing executive orders to curb immigration and reshape U.S. trade policy. With the stroke of a pen, the President formally withdrew the U.S. from the Trans-Pacific Partnership (TPP), a bilateral trade agreement involving 12 countries. Trump also signed an order calling for the immediate review of the North American Free Trade Agreement (NAFTA), which has governed bilateral trade between the U.S., Canada and Mexico since 1994.

    Although not explicitly stated, the Trump administration clearly favors a weaker dollar. Within the context of global trade, a weaker currency makes a country’s exports cheaper to foreign buyers. This was most recently displayed in Japan, where a weaker yen helped the economy avoid contraction in the fourth quarter. Japanese exports rose 2.6% in October-December, the fastest in two years.[3] The economy expanded 0.2% as a result.

    The dollar strengthened nearly 15% against the Japanese currency in the fourth quarter, reaching a high of 118 yen.

    Despite Trump’s clear opposition to a strong dollar, the U.S. currency is expected to remain strong as the Fed continues to diverge from other central banks on monetary policy. Central banks in Europe, Japan, Canada and Australia are in the process of easing monetary policy or keeping interest rates at record lows in support of economic growth. These efforts are unlikely to let up anytime soon.

    [1] Patti Domm (December 14, 2016). “Fed surprises with three rate hikes next year – and it could need to do more.” CNBC.

    [2] Adam Chandler (January 18, 2017). “Why Would Donald Trump Want a Weaker Dollar?” The Atlantic.

    [3] Tetsushi Kajimoto and Stanley White (February 12, 2016). “Exports prop up Japan fourth quarter GDP growth, U.S. protectionist risks loom.” Reuters.

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