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The Best of What They Said and I Read Week Ending 6/23/2019

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 – June 21, 2019 – The S&P 500 Hit a New High.  Start Worrying. – Ben Levisohn

  • “…the S&P 500 index rose 2.2%, to 2950.46, this past week and even hit a new high on Thursday. The Dow Jones Industrial Average, meanwhile, gained 629.52 points, or 2.4%, to 26719.13, and the Nasdaq Composite climbed 3%, to 8031.71—just 0.4% and 1.6%, respectively, away from notching new highs of their own.”
  • “…The Federal Reserve suggested strongly to investors that it could cut rates as early as its next meeting, in July. That’s usually great news for the stock market because lower rates generally mean higher valuations for equities, all else being equal.  At the same time, tensions between the U.S. and China appear to be ebbing, and prospects for some sort of trade deal—or at least no new tariffs—look better than they have since early May. Not even a flare-up in tensions between the U.S. and Iran could dampen the fun all that much.”
  • “…Though the Fed could cut interest rates as soon as July, there’s evidence that the stock market already reflects that possibility, argues UBS strategist Keith Parker. The S&P 500, after all, now trades at 17.3 times 12-month forward earnings forecasts, according to Bloomberg data, not far off its September peak of 17.34 times.  “U.S. valuations have moved back to the highs of last fall, suggesting lower rates are priced [in],” Parker writes.

U.S. Global Investors - Investor Alert – June 21, 2019 – Frank Holmes 

  • “…After breaking out of a five-year trading range this week, the price of gold surged above $1,400 an ounce for the first time since 2013 on expectations of a U.S. rate cut. The 10-year Treasury yield fell to around 2 percent, its lowest level since November 2016…Gold stocks also rallied this week, with the FTSE Gold Mines Index advancing more than 5.3 percent on Thursday, its best one-day gain since January 2017. The group is now beating the market for 2019, as of June 21.
  • “…Fed Chairman Jerome Powell regularly receives attacks from President Donald Trump on interest rates and Fed policy. The President has now threated to remove Powell as chair. Even though many think the president cannot outright fire Powell, White House lawyers have put together a framework for the president to demote Powell and leave him as just a governor.
  • …A threat for consumers in general, politicians and analysts are waking up and noticing the negative effect that big tech has on everyday Americans. Representative David Cicilline of Rhode Island, who opened an investigation into competition in the tech industry, said that big tech companies like Facebook and Google have had “devastating effects” on everyday Americans due to them having much of users’ private information and selling to the highest bidders.  Should the government pursue antitrust to its logical conclusion that “Big Tech” gets turned into regulated utilities they would no longer be able to own their own platform and participate in it. New regulation is coming for the tech giants as the government realizes the monetization of your privacy is wrong.
  • “…A gauge of U.S. factories fell in June to its lowest level since late 2009 and hovered just above the threshold between expansion and contraction. This is just the latest signal that the American industrial sector is losing momentum amid rising uncertainty. The IHS Markit Manufacturing Purchasing Managers’ Index (PMI) slipped to 50.1 from 50.5, according to a preliminary report Friday that trailed most estimates in Bloomberg’s survey of economists. A separate gauge for service providers edged down to a three-year low of 50.7, also falling short of projections…Tariffs on Chinese goods have cost U.S. consumers at least $22 billion since the trade war began, according to a report by free-trade group Tariffs Hurt the Heartland. Senator Chuck Grassley’s office has given a similar figure. The estimate doesn't account for Trump's latest tariff hikes on $200 billion Chinese goods in May, so the current total is likely to be much higher.

The Kiplinger Letter – June 21, 2019

  • “…More manufacturers are eyeing U.S. facilities as tariffs hit Chinese imports. While most firms that are relocating to dodge Washington’s duties are moving to other Asian countries or to Mexico, a handful are choosing America.  For example, toolmaker Stanley Black & Decker is investing $90 million in a plant near Dallas…Expect more companies to “reshore” some manufacturing…the possibility of more tariffs in the future makes domestic production look like a safer alternative.  But don’t count on a surge in factory jobs.  One reason that more companies are able to produce in the U.S. is advanced automation, which saves labor costs.”

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