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The Best of What They Said and I Read Week Ending 10/7/18

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 5, 2018 – Rising Treasury Yields Batter Stocks – by Randall W. Forsyth

  • “Who said Octobers in midterm years were good for the stock market?  Just one week into the new month, stocks were defying the history cited here recently, slumping sharply in the final two sessions of the week.  Bonds took the blame for stocks’ slump, as longer-term Treasury yields rose above their previous 2018 peaks to their highest levels in seven years, pressuring equities’ valuations. Strong U.S. economic data underpinned expectations for continued Federal Reserve interest-rate increases…While interest rates garnered most of the market coverage, it wasn’t the only story behind the retreat in stocks. JPMorgan ’s cross-asset strategy team called Fed policy mere “ambient noise” compared with what it saw as the bigger factors: Italy, oil, and, especially, China.”
  •  “…China, however, raises the greatest risks. As our colleague Matt Klein writes, China has turned more belligerent, most shockingly in the alleged planting of tiny spy chips on computer motherboards, as reported by Bloomberg Businessweek. The tensions between Washington and Beijing also were evident in the near-collision between a U.S. Navy destroyer and a Chinese warship making aggressive maneuvers. Vice President Mike Pence last week delivered a sharp speech on China, saying that the U.S. “will not stand down” from what he charged were, among other things, China’s interference in U.S. domestic politics.”
  • “As ever, Ed Hyman, Evercore ISI’s boss, sees a bright side in the backup in bond yields. Stocks will “weaken a touch,” which should tamp down “animal spirits” that might get too feisty, he contends. That, in turn, will stave off an overheating in the economy in a virtuous, self-correcting process. Readers will recall that Hyman, Wall Street’s almost perennially top-rated economist, insisted last year that the economy was booming in America’s smaller cities, contrary to the downbeat assessments of coastal elites.”

U.S. Global Investors – October 5, 2018 – Frank Holmes

  • “…The major market indices finished down this week. The Dow Jones Industrial Average lost 0.04 percent. The S&P 500 Stock Index fell 0.97 percent, while the Nasdaq Composite fell 3.21 percent. The Russell 2000 small capitalization index lost 3.80 percent this week...The 10-year Treasury bond yield rose 17 basis points to 3.232 percent.”
  • “…The unemployment rate dropped to a level not seen in nearly 50 years, according to Labor Department figures released Friday. The rate fell two-tenths of a percentage point to 3.7 percent, the lowest level since December 1969 and one-tenth of a percentage point below expectations.  Last month, the U.S. services sector expanded at its fastest pace on record, according to data released Wednesday by the Institute for Supply Management. The ISM non-manufacturing index rose to 61.6 in September, the highest level since the index was created in 2008. Economists had only expected the index to hit 58 according to CNBC.

Bloomberg BusinessWeek – September 27, 2018 – Crypto and Cannabis Are the Perfect Post-Crisis Bubbles - by Joe Weisenthal

  • “…There are some general rules of bubbles:  You need a fantastic story, which both crypto and cannabis have.  One is disrupting finance; the other is a new market becoming legal around the world.You also need the supply of investable assets to be small so there’s a mismatch between the wide appeal of the story and and what investors can buy.  In the dot-com frenzy, shares of K-Tel International Inc., a maker of corny compilation albums, rose tenfold in 1998 just because the company said it was going to start sellng its CDs online.  Eventually there was a tidal wave of initial public offerings, supply caught up with demand, and the bubble soon came to an end.  Similarly, in 2017 the initial explosion of coin offerings may have helped kill the crypto bubble.”
  • “With cannabis, there are only a handful of companies to invest in.  If the market stays hot, there’s no doubt we’ll see a wave of IPO’s…” 

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