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The Best of What They Said and I Read Week ending 10/21/18

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 – October 19, 2018 – Stocks Post Mixed Results After Huge Moves – by Ben Levisohn

  • “…the Dow Jones Industrial Average gained 104.35 points, or 0.4%, to 25444.34 last week, while the S&P 500 squeaked out a 0.65 point rise to 2767.78, and even the Nasdaq Composite finished off just 0.6%, to 7449.03.”
  • “But the final tallies belie the volatility that challenged investors all week. The Dow started the week lower, rallied 548 points, or 2.2%, on Tuesday, dropped 327 points on Thursday, and couldn’t hold on to a 200-point-plus gain on Friday. There were many reasons for the wild ride, ranging from Italy’s standoff with the European Union over its budget to China’s slowing economy and a slumping stock market to concerns about higher rates.”
  • “…The good news, however, is that earnings are still growing, something that could help the S&P 500 find a bottom, at least in the short-term. Even with earnings growth slowing, the S&P 500 still trades at 15.9 times 12-month forward earnings, down from 16.9 times just on Sept. 21. That’s getting close to its long-term average of 15 times, which means stocks could be nearing a valuation floor, for now.”

U.S. Global Investors Investor Alert– October 19, 2018 – Frank Holmes

  • “…The 10-year Treasury bond yield rose 3 basis points to 3.195 percent…Investors are worried that the Federal Reserve could raise borrowing rates at a pace that may become restrictive in attempt to keep inflation in check and the economy from overheating. The central bank signaled in minutes out on Wednesday that it was on track to gradually continue tightening, with one more hike this year and around three in 2019.”
  • “…According to a model tracked by JPMorgan Chase & Co., the probability of a U.S. recession within one year is almost 28 percent, while there is a 60 percent chance of a recession in the next two years. Bloomberg reports that fund managers surveyed by Bank of America Merrill Lynch this month are the most bearish on global activity in 10 years, with 85 percent saying that the global economy is in late cycle.”
  • “…Chinese President Xi Jinping and his U.S. counterpart Donald Trump have tentatively agreed to meet on the sidelines of the G20 leaders’ summit in Buenos Aires next month. If confirmed, it would be the first face-to-face meeting between the two leaders in nearly a year and suggest both Washington and Beijing were ready to de-escalate the trade tensions.”
  • “…China’s economic growth cooled to its weakest pace since the global financial crisis in the third quarter, raising pressure on Beijing to step up policy support as the trade war with the U.S. begins to bite. The economy grew 6.5 percent, lower than economists’ expectations for a 6.6 percent advance. The measure was dragged lower by weaker factory output and weaker infrastructure investments.”

The Kiplinger Letter – October 19, 2018

  • “…To meet its lofty shipping needs, Amazon is mulling buying a fleet of planes.  The question is, can it pull it off?  Amazon now pays to operate 40 aircraft from Atlas Air and Air Transport Services Group, but it would need 100 to 150 more to match its plans of expanding shipments 30% to 40% per year.  UPS and FedEx are balking at giving he e-commerce giant more capacity for low-margin business. 
  • The needed planes and logistics network could cost Amazon $100 billion.  Boeing, the likely seller, has a long backlog of plane orders and finding enough pilots would be a daunting task, as would finding the runway time and warehouse space.But without its own aircraft, Amazon’s growth could eventually take a hit.  It’s no surprise that the rise of e-commerce keeps lifting air freight demand.Expect air freight rates to rise 5% to 6% yearly for years, the same pace as the past five years.” 

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