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The Best of What They Said and I Read week ending 12/18/16

Short excerpts from articles I found interesting. I may not agree with the author and the following material is not intended as investment advice.

Money Magazine – Game Changers – The Chase Sapphire Reserve Card – January 2017

“…So many people applied for a Sapphire Reserve card within days of its August launch that Chase literally ran out of the metallic card blanks and had to send temporary plastic ones instead. Why the stampede? The rewards are far better than any other card: three points per dollar spent on restaurants and travel, one point on everything else, and a 100,000-point sign-up bonus if users spend $4,000 within three months. Even the hefty $450 annual fee is mitigated by $300 worth of credits...The Reward Wars rage on.”

Barron’s – Bonds and Stocks: Potential Double Trouble – December 17, 2016 by Kopin Tan

“…Bond investors have seen benchmarks like the iShares Core US Aggregate Bond exchange-traded fund shrivel 3.4% since the election and 5.2% since July…and a conventionally balanced portfolio with roughly 60% stocks and 40% bonds has gained just 2.3% since the election, compared with, say, 14% for the Russell 2000 index of small stocks.

“…Could the recent pummeling of bonds let up soon? China has already pared its U.S. Treasuries stash 10% since June to the lowest level since 2010. Many investors were caught off-guard by Trump’s election, and the flight from Treasuries toward stocks has been fast and furious. By now, however, expectations for debt-fueled spending and rising rates have become consensus.”

“…Treasury yields could well be higher a few years from now, but likely not by much, says Ramin Arani, portfolio manager of the Fidelity Puritan Fund... With government bond yields still depressed in Europe and nuzzling zero in Japan, rising U.S. yields will lure foreign buyers and help cap runaway rates, Arani says. For what it’s worth, the 10 firms surveyed in our Outlook 2017 see the 10-year yield at 2.69% late next year, just a tad above today’s level.”

U.S. Global Investors – Investor Alert – December 16, 2016 by Frank Holmes

“…For only the second time since 2008, the Federal Reserve raised interest rates this week, surprising no one. Although the 25 basis point lift was in line with expectations, markets took some time to digest the news that three rate hikes—not two, as was earlier expected—were likely to happen in 2017…The two-year Treasury yield immediately jumped to a nominal 1.27 percent after averaging 0.80 percent for most of 2016, an increase of 58 percent. In real, or inflation-adjusted, terms, the yield is still in negative territory, but it’s clearly heading up following the U.S. election and rate hike. Thirty-year mortgage rates, meanwhile, hit a two-year high.

“…Again, as many as three rate hikes are expected in 2017—unlike the one this year—with Fed Chair Janet Yellen commenting that economic conditions have improved well enough to warrant a more aggressive policy. If true, this should accelerate upward momentum of Treasury yields and the U.S. dollar—currently at a 14-year high.”

“…The major market indices finished mixed this week. The Dow Jones Industrial Average gained 0.44 percent. The S&P 500 Stock Index fell 0.06 percent, while the Nasdaq Composite fell 0.13 percent. The Russell 2000 small capitalization index lost 1.71 percent this week…The 10-year Treasury bond yield gained 13 basis points to 2.60 percent.”

“…The Federal Reserve hiked its key interest rate by 25 basis points to a range of 0.50 percent to 0.75 percent at Wednesday's meeting and upgraded its forecast to three rate hikes in 2017 versus its prior forecast of two based on the view of a stronger economy…The dollar is on fire. The U.S. dollar index is at an almost 14-year high. The index strengthened in the aftermath of the Fed’s decision to raise rates for the second time this decade. A strong dollar makes American exports uncompetitive.”

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