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The Best of What I Read and They Said Week Ending 8/5/2018

Short excerpts from articles I found interesting.

I may not agree with the author and the following material is not intended as investment advice.

Barron’s  – August 3, 2018 – Apple’s $1 Trillion Wasn’t the Week’s Only Telling Number – by Randall W. Forsyth

“One trillion dollars is a big number. It seemingly so transfixed the financial markets last week that it obscured other numbers that weren’t quite as big, but arguably more important. That figure, of course, was the milestone that Apple passed in stock market capitalization on Thursday…

Among other, not-quite-so-big numbers were $60 billion, the amount of U.S. exports on which China says it would slap tariffs if the U.S. goes ahead with levies on $200 billion of Chinese exports, maybe at a rate of 25%, rather than the 10% initially floated by the Trump administration…Then there were 157,000 and 3.9%—respectively, the rise in nonfarm payrolls and the unemployment rate—the high points of the July jobs report released on Friday. And behind the numbers were signs that employers are hiring more people who hadn’t previously fully participated in the labor market, which has helped to keep a lid on wage increases.

“…The U.S. stock market so far is showing few, if any, persistent ill effects from trade concerns, with one day’s negative headlines seemingly forgotten the next. The S&P 500 posted its fifth consecutive weekly gain, rising 0.76% to end on Friday just 1.13% shy of its record touched on Jan. 26. The Dow Jones Industrial Average also notched its fifth straight weekly advance, if only by 0.05%, while the Nasdaq Composite snapped a two-week losing streak by moving up 0.96%. But if risk markets’ equanimity were to be upset, Morgan Stanley economists suggest, that would trigger a “circuit breaker” in the trade disputes.”

The Economist – July 28, 2018 – The Taxes of Sin

“Tobacco was new to England in the 17th century, but even then, smoking had plenty of critics.  The most famous was King James I, who in 1604 described smoking as “a custome loathsome to the eye, hatefull to the Nose, harmful to the braine, dangerous to the Lungs, and in the blacke and stinking fume thereof, nearest resembling the Stigina smoke of the pit that is bottomless.”  The king increased the import tax on the “noxious week” by 4,000%.”

 “…Governments hope that just as taxes on alcohol and tobacco both generate revenue and reduce smoking and drinking, so sugar taxes will help curb obesity.  Hungary, which as the highest rate of obesity in Europe, imposed a tax on food with high levels of sugar and salt in 2011.  France did the same for sugary drinks in 2012.  Several American cities, Thailand, Britain, Ireland, South Africa and other countries have since followed suit.  Sin taxes do change behavior…economists find on average, a 1% increase in price is associated with a decline of around 0.5% in sales of both alcohol and tobacco.”

 “…Sin taxes can make people healthier.  But since most of the damage smokers, drinkers, and the obese do is to themselves, rather than to others, governments need to think carefully about much they want to interfere.  Moreover, any cost-benefit analysis on the social impact of these vices needs to take into account that people do find them enjoyable.  There is more to life than living longer.”

Morningstar FundInvestor – July, 2018 – Final Nail in the Fiduciary Duty Coffin

“The 5th U.S. Circuit Court of Appeals confirmed a March decision to strike down the Department of Labor’s fiduciary rule in late June.  The court maintained that the DOL exceeded its authority by putting the law into effect.  The end of the rule means brokers, who primarily make their money through commissions from selling funds and 12b-1 fees, do not have to act in the best interests of their clients when dealing with retirement accounts.  Instead they merely need to select suitable investments.  The SEC has put forward a proposal that would strengthen the current suitability standard they are held to when recommending funds for retirement plans, but it stops short of a fiduciary standard.


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