Offshore oil drilling banned by President Obama, invoking a 1953 law

President Obama invoked the 1953 Outer Continental Shelf Lands Act to "permanently" ban drilling along the Arctic and Atlantic seaboards. The sudden move ahead of Donald Trump's assumption of the role of President cannot be easily undone without Republicans amending the 1953 Act. While this Act does give the President the power to make decisions unilaterally, it has only ever been invoked for temporary matters and may not stand should it be challenged in court.

https://www.nytimes.com/2016/12/20/us/obama-drilling-ban-arctic-atlantic.html

21st Century Cures Act signed into law by President Obama

Yesterday, President Obama signed into law the 21st Century Cures Act that was recently passed by Congress. About 1,000 pages long, the act will increase funding for the National Institutes of Health and the Food and Drug Administration (FDA) while also include some measure of deregulation.

Although potentially helpful, the changes in the law may have limited effect on the FDA approval process. Currently, drugs that come before the FDA's Division of Neurological Products (DNP) have a more difficult path to approval than drugs that come under the FDA's Division of Psychiatry Products (DPP).



https://www.cbsnews.com/news/working-president-obama-signs-the-21st-century-cures-act/

Barron's suggestions for 2017

It's that time of year again! Time to evaluate the effectiveness of 2016's strategies and rebalance portfolios, positioning for the 2017 fiscal year. Barrons has some potential stock picks that may just fit your needs.

www.barrons.com/articles/top-10-stock-picks-for-2017-1480748688

OPEC agrees on oil production cut

Chicken! OPEC has indeed blinked first - if with a partner, Russia - and what was merely rumor last month has come to pass in the form of a formal agreement for the cartel to cap production at 32.6 million barrels per day. This is a bit lower than current production numbers, and Saudi Arabia will bear the brunt of the reduction. Consensus could only be reached with some concessions to Iran and Russian cooperation with their own production cut of -300,000 barrels per day.

While this may merely look like a kernal of corn in a sack of chicken feed, it is a positive for an overwhelmed and oversupplied oil market, although it remains to be seen if USA oil producers simply use this opportunity to take market share from OPEC and Russia. Drill, frackers, drill.

http://fortune.com/2016/11/30/oil-prices-opec-meeting/

Danger, Danger, UWTI holders!

Among the muddied waters of exchange-traded products lie the highly leveraged exchange traded notes (ETNs). UWTI, the 3x leveraged long crude oil product offered by Credit Suisse AG is finally reaching its demise and is to be delisted December 9, 2016. UWTI will be sorely missed among “moms and millennials", who loved trading this vehicle.

UWTI is a probable casualty of the SEC's increased scrutiny of the shadowy world of leveraged investment vehicles and may be a move by Credite Suisse to forestall action which may have been taken by the regulator. The problem with investment vehicles like UWTI is that the high cost of front-month futures contracts destroys the underlying value of the product over time, which makes this type of vehicle only appropriate for VERY short holding periods. Plenty of alternative leveraged notes still exist for gamblers - erm, traders - to play around with.


https://www.prnewswire.com/news-releases/credit-suisse-ag-announces-its-intent-to-delist-and-suspend-further-issuances-of-its-dwti-and-uwti-etns-300364595.html

S&P 500 posts fourth-largest reversal in USA history

Bulls vs Bears: this time, the Bears lose!

What happened? Analysts projected around -6% in market declines if Trump unexpectedly defeated Clinton. During overnight hours, the latter definitely happened, and sparsely-traded S&P 500 futures did indeed fall to the circuit breaker of -5% (since only professional investors can trade futures at those terrible hours, who in their right mind would sell at -5% in the S&P 500 futures market is another question). In any case, smarter professional investors took over from the circuit-breaker, effectively forming a market bottom. By the end of the NYSE trading day, the S&P 500 had risen more than a percent, for a total market move from bottom to top of about +6.1% for the fourth largest S&P 500 reversal in USA history.

With uncertainty gone, investors were jumping into the markets, shorts were forced to cover their bets, and possibly a whole lot of money sitting on the sidelines decided that Trump would actually have an overall positive effect on the economy (see my last post). Far more sectors may benefit from his policies than suffer from them. Momentum has shifted and some analysts now expect markets to move higher.

And what of the currency markets? The US dollar / Mexican peso trading activity rose 63x normal rates and hit a historic low of 20.77 / USD overnight before giving up some of that weakness into market open.


https://www.bloomberg.com/news/articles/2016-11-09/s-p-500-reversal-is-the-biggest-since-crisis-days-of-2008-chart

Donald Trump elected President of the United States

In an incredible political feat, Donald Trump emerged as the winner of the USA presidential election. In a continuation of popular repudiation of democratic establishments worldwide (think Brexit), Donald Trump defeated first the Republican establishment and then the Democratic candidate with a message of economic protectionism and strong border controls.

Trump's economic policies are generally considered to be supportive of:

• Tax reform
• Energy, including coal
• Investment in infrastructure
• American-made products (economic protectionism)
• Deregulation

This would potentially be of most benefit to small companies, the energy sector, infrastructure-related sectors, and the financial sector. To a lesser extent, this may also benefit healthcare companies with less regulatory scrutiny. Benefit to large corporations with international holdings and sales may be limited (little effect from tax reform, risk from Trump's protectionist policies). Effect on the Discretionary sector at high risk from Trump's protectionist policies since most goods manufactured oversees and then shipped to the United States.

https://www.nytimes.com/2016/11/09/us/politics/hillary-clinton-donald-trump-president.html

Earthquake strikes Cushing, Oklahoma

Over the weekend, a 5.0 Moment Magnitude quake hit Oklahoma and originated just outside the town of Cushing, Oklahoma. Cushing is a key storage facility for commercial crude oil and is the destination terminus for many oil pipelines. Any effect on this storage facility impacts crude prices worldwide. This time, however, the damage appeared to be minimal.

https://www.npr.org/sections/thetwo-way/2016/11/07/500998673/earthquake-shakes-oklahoma-oil-storage-hub

Presidential Election: Anthony Weiner causes more trouble

FBI Director Comey announced that law enforcement officials had found emails related to the close investigation into Hillary Clinton's private email server on a computer belonging to Anthony Weiner. In response to the discovery, the FBI is reopening the Clinton case to review these emails.

The timing of this announcement will cause consternation to the Clinton election team and supporters since the presidential election will be held in less than two weeks, on Tuesday, November 8th.

https://www.nytimes.com/2016/10/29/us/politics/fbi-hillary-clinton-email.html

Wallonia, population 3.5 million, just blocked an EU/Canadian trade deal that affects 535 million people

Wallonia Coat of Arms

European Union credibility was challenged over the weekend after Wallonia, a region of Belgium with population of 3.5 million, managed to block the signing of a EU - Canadian trade deal that affected the entirety of continental Europe and Canada, with a combined population of 535 million.

Belgium holds the odd-law that ALL five regional constituents must vote their assent before the Federal Belgium government can vote approval with the European Union. The Walloons appeared to disagree with the desire to afford legal protections to investors.



https://www.economist.com/news/europe/21709145-grumpy-insular-mood-european-union

Bitcoin and the Winklevoss Twins

This author has a very sad story to tell. Back in 2011, he was told of this weird digital currency called bitcoin. He then pursued a course of action to acquire some and even went as far as to get a digital wallet. But now, the areas of the web he went to in order to acquire some bitcoin became very sketchy, and so he backed off - and regretted it ever since!

Bitcoin is NOT an investment and is commonly derided in investment circles as purely a "gamble" or at best "speculation". Indeed, it probably is little more. But Tyler Winklevoss and Cameron Winklevoss of Facebook fame (infamy?) feel differently, and have been working with the SEC in a bid to launch an ETF that would deal exclusively in bitcoin.

The SEC effectively delayed the project by stating more public feedback is required, as the digital currency - which is notoriously volatile - lacks the stability of more traditional investments. Perhaps this is the best move. ETFs and the world of highly leveraged ETFs (also under SEC scrutiny) are already the wild, wild west of investment strategies, frequently played by retail investors acting as if they were in a casino.

https://www.marketwatch.com/story/sec-kicks-the-bitcoin-etf-approval-decision-down-the-road-2016-10-13

What was the cause of the British pound's flash crash?

Last Friday, the British Pound fell -6% in less than 2 minutes, approximately completing a move that some market forecasters had predicted would happen over a period of six months. What was possibly initial human error, reacting to a new story, was most likely compounded by machine trading at a time of low market liquidity, causing a massive move in the British Pound.

The attached article is quite informative and contains a timeline of similar flash crashes that have occurred in recent history.

http://www.telegraph.co.uk/business/2016/10/07/what-caused-the-sterling-flash-crash-overnight/

Deutsche bank comes under intense market scrutiny

Deutsche Bank's US equity shares hit an all-time low at the end of September after it was reported that ten hedge funds were looking to reduce exposure to the bank, in a sort of run on the bank from an equity point-of-view. Counterparties appeared concerned on conducting business with the bank. This corresponds to the time that a massive fine is expected from the USA in connection with Deutsche Bank's activities leading up to the 2008 financial crisis. Analysts now are working with the thesis that fears regarding the bank may be overblown.

https://www.nytimes.com/2016/10/01/business/dealbook/deutsche-bank-stock-bailout.html

Surprise! OPEC agrees that an output cut is in order

In the game of chicken between OPEC, Russia, and USA shale producers, it appears that OPEC has blinked first. The Organization of the Petroleum Exporting Countries agreed to cap production in the  range of 32.5-33.0 million barrels per day. Saudi Arabia would bear the brunt of output cuts from current levels of production.

Analysts seem unsure of whether this "understanding" will be effectively enforced across member countries.

https://www.bloomberg.com/news/articles/2016-09-28/opec-said-to-agree-on-first-oil-output-cut-in-eight-years

Sarepta Pharmaceuticals: FDA drug approval amid panel protest

Absolutely on-point article regarding the recent approval of Sarepta Pharmaceutical's DMD drug Exondys 51 (eteplirsen). There is no doubt that DMD is a horrible disease and any potential treatment of that disease must be expedited. However, the efficacy of Sarepta's drug was questioned by the FDA's own medical panel.

Amid prior mistakes and botched FDA submissions, Sarepta launched a public relations coup, with many parents of children with DMD traveling to Washington DC to lobby the FDA directly to approve etepirsen. Ultimately, the FDA's head of drug review division approved the medication, overruling the FDA's own medical panel amid some bitter intra-agency dissent.

The FDA has struggled recently with bureaucratic processes that would bring badly-needed drugs to the market faster, while trying to maintain the same strict efficacy requirements that have been in place for decades.

Amid pressing news in other sectors, this approval stands out as very unusual and quite news worthy. Statnews does an excellent job covering the topic in the article hyperlinked below.

https://www.statnews.com/pharmalot/2016/09/19/sarepta-fda-duchenne-behind-the-decision/

The election race between Trump and Clinton has surprisingly tightened

We find ourselves with the unexpected situation where Donald Trump, having emerged as the Republican contender for the office of President, is facing off against Hillary Clinton.

Initially, this was forecast to be an easy victory for Clinton, but like the Brexit vote several months back, perhaps analysts are in for further surprises down the road as polls indicate the two are locked in a tight race nationally.

This has a direct impact on equity markets since the approach of the two candidates are decidedly different, with Trump assumed to hold to the Republican plank for less taxes and less business regulation (the financial sector - banks in particular - would appear to be most sensitive to this election).

https://www.cbsnews.com/news/donald-trump-and-hillary-clinton-locked-in-tight-race-nationally-cbsnyt-poll/

Energy M&A: Canada's Enbridge buying Houston's Spectra Energy for $28 BILLION

This is a BIG deal. On top of the massive price tag (and netting bankers about $100M in fees alone), this is the largest M&A deal to be completed since 2014, when oil prices collapsed. If the deal is completed, the emerging entity will be the largest North American energy infrastructure company.

However, it should be noted that both of these companies are operating more in the midstream segment, and upstream producers aren't out of the woods yet. However, crude prices have recovered significantly from the lows seen on August 1st. High margin, low cost producers seem to be on the hunt for well-valued companies, with EOG Resources announcing that it will acquire privately-held Yates Petroleum Corp for $2.5 billion.

https://www.reuters.com/article/us-spectra-energy-m-a-enbridge-inc/enbridge-buying-spectra-in-28-billion-deal-idUSKCN11C13H

Oklahoma: Earthquakes, Fracking, and Infrastructure

Oklahoma experienced a 5.6 (Moment) Magnitude earthquake over the weekend, the most powerful recorded in that state. Recent pickup in minor tremor activity around areas near US shale deposits have posed the question of whether fracking could bear some responsibility. Although a proven connection between earthquakes and fracking hasn't yet been made, there does appear to be a strong correlation between the two, which could potentially affect the US fracking industry.

On another note, infrastructure in in the Midwest is sadly unprepared for a potential earthquake in the region. The New Madrid Fault Line isn't a joke. It's time for every state to implement some kind of seismic design requirements.


https://www.theguardian.com/world/2016/sep/03/oklahoma-earthquake-nebraska-north-texas

Recessions can save lives

One of those weird quirks in the data: higher employment is correlated with higher number of auto accident fatalities. Blame it on the morning rush hour?

http://www.bloomberg.com/news/articles/2016-08-25/recessions-have-a-silver-lining-they-keep-dangerous-motorists-off-the-road

World financial leaders are meeting in Jackson Hole

The annual shin-dig with the world's central bankers kicked off to a start on Thursday. Since the 2008-2009 financial ruckus, the central bankers have become more powerful with more direct influence, through quantitative easing, on the real economy. Over the past several years, the US dollar and the equity markets have paid closer and closer attention to what the Fed says, does, and forecasts, and have responded in kind.

https://www.theguardian.com/commentisfree/2016/aug/25/the-guardian-view-on-central-bankers-growing-power-and-limited-success

Amazon's counterfeit problem

The possibilities in eCommerce seems endless. Amazon has for years now served as one of the potential marketplaces for sellers to meet buyers. However, for sellers AND buyers in niche products, counterfeit products from China is causing MAJOR problems.

http://www.cnbc.com/2016/07/08/amazons-chinese-counterfeit-problem-is-getting-worse.html

Hedge funds turn very bearish on crude

July was a horrible month for crude prices, with WTI falling more than -14% to price levels not seen since last year. As is often the case, the positioning of hedge funds towards crude has also accelerated simultaneously, with bearish futures positions rising sharply and bullish futures positions shrinking. Some analysts seem to think that this recent turn of events could actually be a contrarian indicator.

https://www.reuters.com/article/us-oil-global-kemp/hedge-funds-turn-ultra-bearish-on-crude-and-gasoline-kemp-idUSKCN10D03I

The incredible shrinking market of publicly-traded companies

An interesting summary of a secret meeting between corporate giants (Berkshire, Blackrock, GM, GE, etc), arranged by Jamie Dimon of JPMorgan Chase, to discuss the state of public companies, board compensation, and corporate governance. From 1996 to 2012 the number of US-based public companies fell 50% from 8,025 to 4,101. At this secret meeting, participants tried to discuss the potential causes and effects from the phenomenon.

https://www.nytimes.com/2016/07/21/business/dealbook/ceos-meet-in-secret-over-sorry-state-of-public-companies.html

Passive vs active investment

What are the differences between passive and active money management? Should I invest my spare dollars in a mutual fund or one a of myriad of ETFs? A good article mainly promoting the good things of active management, but also has solid info on pros and cons of both investment types.

http://www.businessinsider.com/heres-why-money-managers-still-have-an-edge-2016-9

Brexit and property funds

Investors put money into various types of funds, usually to get exposure to additional asset classes or to some markets that are expected to have decent growth potential. The London property market has been HOT for years now, but with Brexit, the thesis of certain demand underpinned by Russian oligarchs to mainland European CEOs has been thrown into uncertainty. Essentially, a bank run has occurred in property funds, with too many investors simultaneously wanting their money back.

https://www.marketwatch.com/story/3-uk-property-funds-are-frozen-what-you-need-to-know-2016-07-05

2015 had some good news

While deep issues remain that need to be proactively addressed and resolved, it's good to remember that beyond the negative headlines is VERY good news on the progress the world has made over the last several decades, let alone the last 100 years- progress in the fight against famine, disease, crime, and much, much more.

http://www.theatlantic.com/international/archive/2015/12/good-news-in-2015/421200/

Emerging markets have been performing well

Generally speaking, the market is like a ship buffeted by waves; sometimes there are periods of rough seas, and other times when its smooth sailing. A brief hiccup in the markets from an unexpected geopolitical move like Brexit generally shouldn't be enough to move a investor away from his long-term thesis. However, it's always good to look around from time-to-time to see what's been working well for people. For the first half of 2016, Emerging Markets have been crushing the competition!

https://www.marketwatch.com/story/these-stock-markets-left-the-rest-of-the-world-in-their-wake-so-far-this-year-2016-07-01

Britain is exiting the European Union

If certainty is the friend of the investor, uncertainty is definitely the opposite. The surprising Brexit vote caused investors to quickly move towards traditional safe havens. Currency markets experienced very high volatility as the British pound plunged and the Dollar and Yen rose. Perhaps the biggest concern of investors may be what the Brexit vote may foretell about the influence of populist political movements on other democratic governments.

https://www.nytimes.com/2016/06/25/business/international/brexit-financial-economic-impact-leave.html

Switzerland votes against Universal Basic Income

The Ignorant Investor is currently on vacation and touring the literally breathtaking mountains of Switzerland! This picture is from the gorgeous valley of Interlaken. However, some news just came out that was of interest and so the author emerges for a brief post before returning to trekking around the Jungfrau.


Switzerland has voted against Universal Basic Income, the plan that would provide a base income to ALL citizens. The efficacy is widely debated by many, but this time the Swiss decided the risks outweighed the benefits. What would have once been derided as socialism has been picking up more supporters recently, with Bill Gates and others speaking more positively on the subject, especially in the face of rising automation throughout various industries.

http://www.bbc.com/news/world-europe-36454060