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The Best of What They Said and I Read Week Ending 3/25/2018

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 – March 24, 2018 – Why Did Dow Drop 1,400?  Pick Your Poison – by Ben Levisohn

“…Last week, the Dow dropped 1,413.31 points, or 5.7%, to 23,533.20, its largest weekly decline since January 2016. The Standard & Poor’s 500 index slumped 6%, to 2588.26, and the Nasdaq Composite tumbled 6.5%, to 6992.67.”

“We dare you to find just one reason for the drop. There was Facebook’s failure to protect customer data, which not only shaved 14% off its stock price last week, but also contributed to the S&P 500 Information Technology Index’s 7.9% slump. On Wednesday, the Federal Reserve raised its expectations for the number of rate hikes in 2019. And then, of course, there were the Trump administration’s decision to levy tariffs on $60 billion worth of Chinese goods—and even some concerns about slowing economic data…”

The Wall Street Journal – March 18, 2018 – Should the U.S. Retire the Penny and Nickel

"Our coins with the lowest value do seem to get the least amount of love. It’s hard to find even a gumball dispenser these days that accepts a penny or nickel.  It famously costs the U.S. Mint more to make each one- and five-cent piece than the coins themselves are worth. And yet, shipments of pennies by the Mint, in response to demand from commercial banks and other financial institutions, grew to 59.9% of total coin shipments in fiscal 2017, up from 55.9% in the previous fiscal year. The banks base their orders for coins on the perceived needs of regional merchants and businesses to keep the wheels of the local cash economy turning. So someone is using them."

“…Pennies and nickels are a nuisance. They cost more to mint than they are worth, thus wasting labor, capital and otherwise perfectly useful metals—zinc, copper and nickel. No U.S. coin has ever been as worthless as today’s penny or nickel. Until 1950, the penny had a purchasing power greater than today’s dime. Until 1974, the nickel had purchasing power greater than the quarter does today.  Why not save the U.S. taxpayer the millions of dollars wasted on producing pocket ballast of no practical use? It’s simple to do. The government could buy back all outstanding pennies and nickels at face value. Retailers could quote dollar prices to one decimal place rather than two. Presto: more room in pockets for truly useful things like smartphones and credit cards, and government deficits would be reduced as well…”

U.S. Global Investors – March 23, 2018 – Investor Alert – by Frank Holmes

“…S&P 500 dividend yield, for the first time in nearly a decade, is now below the yield on the two-year Treasury. Historically, the economy has slowed around six months after dividends stopped paying as much as short-dated government paper. This could spur some stock investors to trim their exposure and rotate into other asset classes, including not just bonds but also precious metals, which I believe might help gold revisit resistance from its 2016 high of $1,374 an ounce.”

“…Amazon is now the second most valuable company in the U.S. The company finished the week with a market capitalization near $725 billion, trailing only Apple as the most valuable company. Amazon took the number-two spot from Alphabet.…The Dow Jones fell more than 700 points, or nearly 3 percent, Thursday after President Donald Trump announced tariffs on $50 billion worth of Chinese exports.…Shares of Facebook fell more than 13 percent this week on news that the research firm Cambridge Analytica accessed data from 50 million users without their permission…Boeing looked headed for its biggest monthly drop in two years as of Thursday amid concerns that U.S.-China tensions over tariffs would ignite a wider trade war and stifle demand for its airliners…”

“…The first FOMC meeting under new Federal Reserve Chairman Jerome Powell showed important signals of continuity with the Janet Yellen-led Fed. Powell approved the widely expected quarter-point hike that puts the new benchmark funds rate at a target of 1.5 percent to 1.75 percent. It was the sixth rate hike since the FOMC began raising rates off near-zero in December 2015. The outlook showed Fed officials are opting to do more tightening in future years rather than accelerate the pace in 2018 in order to avoid the risk of stifling potential economic gains from tax reform and to avert excessive flattening of the yield curve. Policy makers acknowledged the soft patch in the economy at the start of the year, but signaled little concern of a lasting slowdown by emphasizing that the “economic outlook has strengthened in recent months.”


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