Oct 5-9: Earnings Season Opens, Debt Dries Up

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Alcoa kicked off the Q3 earnings season with, as many expected, some pretty dismal numbers: for the second quarter in a row, the aluminium manufacturer missed sales and earnings estimates. Contributing factors cited were a slowdown in Chinese demand and a supply and energy glut. Alcoa has recently announced it will be splitting apart its Upstream and Value-Add businesses. (Zacks.com)

36x

The number of times larger that US student lending debt ($1.2 trillion) is than debt (bonds) issued by schools themselves ($32.7 billion) (WSJ)

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EQUITIES:

Demotion on Wall Street: Bond Traders Take a Back Seat, WSJ

"For the first time in at least half a decade, head count of traders and salespeople on equity desks in the first half of the year topped head count on bond-trading desks 17,300 to 17,100, according to research firm Coalition Ltd ... Overall revenue in fixed income remains larger, with $39 billion in fixed income traded by 10 of the biggest global banks over the first six months of the year, compared with $24.6 billion for equities."

CREDIT & GOVERNMENT DEBT

Central Banks Dump US Debt, WSJ

"In a dramatic shift in the $12.8 trillion US Treasury market, foreign official net sales of US Treasury debt maturing in at least a year hit $123 billion in the 12 months ended in July .. It was the biggest decline since data started being collected in 1978. A year earlier, foreign central banks had purchased $27 billion of US notes and bonds."

INDICATORS

Economists See US on Cusp of Full Employment, WSJ

"The US will be in a state of full employment within the first half of 2015, according to 56% of economists surveyed by the Wall Street Journal .. 'Full employment' is a term economists use to signify an economy in balance, where there is no longer cyclical economic weakness, but also no pressure pushing the inflation rate higher. The term doesn't signify an economy in which everyone has a job, let alone a good one ... Even as the unemployment rate has fallen in recent years, other signs of weakness have lingered. In particular, the share of Americans participating in the workforce declined. The rate declined in September to 62.4%, the lowest share since 1977."

M&A

Debt Markets Hold Key to Dell's Bold EMC Bid, WSJ

"Michael Dell is pressing ahead on a $50 billion-plus acquisition of data-storage giant EMC ... Following record or near-record debt issuance in recent years that supported the M&A surge, credit investors have lately become more fickle. In late September, JP Morgan cut a planned high-yield bond sale backing Altice's purchase of Cablevision for $1.5 billion, making up the difference by selling more debt on the loan market. Leveraged loans are viewed as safer than bonds because they are secured by corporate assets."

Vocabulary, People & Companies:

• EMC Corporation
• Going private
• Leveraged loans
• Full employment

Upcoming Calendar:

• Mo Oct 11: Columbus Day - equity market open, bond market closed; INFY 
• Tu Oct 12: NFIB Small Business Optimism index; CSX, JPM, JNJ
• We Oct 13: PPI-FD, Retail sales; BAC, DAL, NFLX
• Th Oct 14: Consumer price index, Jobless claims; UNH, MAT, GS
• Fr Oct 15: Industrial production, Consumer sentiment; GE, HON

Predictions from last time: 1/3 All-Time: 26/51

• $25B merger: CORRECT
• Oil falls: WRONG
• Bitcoin $242-238: WRONG

Weekly Predictions:

1. Honeywell beats
2. CPI falls
3. Another $25B merger

Sept 28-Oct 2: M&A Boom Showing Less Energy

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Northeastern US pipeline owner and manager Williams Companies agreed to be acquired by Energy Transfer Equity for $37.7 billion including debt and other liabilities, creating one of the largest energy companies in the world.

$13,600,000,000

Energy Partners' decline in price offered to William Companies between August and this past week, a 28% discount. Both companies have been affected by squeezed margins as a result of falling oil prices.

NOTE: If article is paywalled, use Google to search for the title or try accessing via mobile

M&A

Energy Transfer and Williams Cos. to Merge, MarketWatch

The deal will exchange ETE stock for shares of WMB at a price of $43.50, valuing WMB at around $32.6 billion not including debt. Williams had rejected a bid of approximately $50 billion early this summer, when oil was $60 a barrel. The deal unites two regional pipeline supervisors--ETE in central US, and WMB out of the northeastern Marcellus deposits.

BANKS & ASIA SLOWDOWN

Standard Chartered, Credit Suisse Face Equity-Raising Dilemma, WSJ

Both banks, heavily invested in Asian growth and the connected commodities boom, have drastically fallen in price as China rebalances its economy away from resource-heavy manufacturing. To meet requirements for minimum capital ratios, they are now faced with the decision to either issue new shares--heavily diluting existing shareholders--or selling off parts of the business.

INDICATORS

US Jobless Claims are Near Record Lows, Bloomberg

Jobless claims climbed 10,000 to 277,000 in the week ended Sept 27. This remains below the 300,000 level taken by some economists to indicate an improving job market. The four-week moving average, which smooths out fluctuations and considered a less volatile measure, decreased to 270,750, its lowest level since early August.

CREDIT

Investors Pul Back from Junk Bonds, WSJ

Expectations of a Fed rate hike in coming months is driving up the returns investors are demanding for corporate credit, threatening to derail the merger boom happening throughout 2015. Recent shortfalls in demand for bonds from Euro cable company Altice and chemical producer Olin will be supplemented by corporate loans, which require less spending and collateral from borrowers.

BEHAVIORAL FINANCE

Paying CEOs Big Bonuses for Stock Performance Doesn't Work: Cornell, Yahoo Finance

Total shareholder return (TSR) connects stock price gains and dividends paid to shareholders to CEO reimbursement. in 2004, 17% of S&P 500 companies had such plans in place; today, 50% have TSR plans. Yet a Cornell study says returns over the past 10 years does not demonstrate strong correlation between companies with TSR plans and outsized shareholder returns they're intended to encourage.

Vocabulary, People & Companies:

• junk bonds
• Marcellus shale
• Altice
• Williams Companies

Upcoming Calendar:

• Mo Oct 5: ISM non-manufacturing index; 3-, 6-month bill auction
• Tu Oct 6: International trade; Gallup US ECI
• We Oct 7: EIA petroleum status report; Consumer credit
• Th Oct 8: Jobless claims: FOMC minutes
• Fr Oct 9: Import/export prices; Baker Hughes rig count

Predictions from last time: 1/3 All-Time: 25/48

• 10-year yield rises: WRONG
• CARZ ETF falls: WRONG
• $25B+ merger announced: CORRECT

Weekly Predictions:

1. Another $25 billion+ merger
2. Oil prices fall
3. Bitcoin price within $2 of $240

Sept 21-25: Ruh-Roh for Das Auto

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Martin Winterkorn resigned as the CEO of Volkswagen after revelations last week by the EPA that the company had installed software in VW and Audi models designed to falsify emissions standards.

$7,270,000,000

Amount set aside by VW for charges connected to emissions scandal, which is said to affect as many as 11 million vehicles.

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VW CEO Resigns As Carmaker Races to Stem Emissions Scandal, WSJ

Volkswagen, which has 300,000 employees and 29 plants in Germany alone, is Europe's biggest automaker and an institution in German society--where every seventh job is connected to the auto industry. Volkswagen has lost almost 30% of its market value in the past week.

Janet Yellen Say Fed Is Likely to Raise Rates This Year, NY Times

Fed chair Janet Yellen's speech this week at the University of Massachusetts-Amherst revealed, through a series of graphs and diagrams, her perspective that various indicators of slack in the economy are tightening and that inflation should gradually return to trend over time at 2%.

Diageo: What Could the SABMiller-InBev Deal Mean?, Forbes

Following news of a $100 billion dollar merger between the world's 2 biggest brewers, some wondered how Diageo, the world's biggest distiller, would jump into the deal flow. With the deal set to take years to clear antitrust hurdles, Diageo is very excited about growth markets in Africa.

Vocabulary & People:

• S&P Case Schiller HPI
• ADP Employment Report
• Factory Orders
• Martin Winterkorn

Calendar:

• Mo Sep 28: Pending home sales index; Dallas Fed survey
• Tu Sep 29: S&P Case Schiller HPI; Consumer confidence
• We Sep 30: Chicago PMI; EIA petroleum status report; ADP employment report
• Th Oct 1: PMI manufacturing index; Construction spending
• Fr Oct 2: Employment situation; Factory orders

Predictions from last time: 1/3 All-Time: 24/45

• Industrial production up: WRONG
• MANU beats: CORRECT
• MTU misses: WRONG

Weekly Predictions:

1. 10-yr yield rises on Yellen's forecast
2. CARZ ETF declines on VW news
3. Another $25 billion+ merger is announced

May 4-8: Activists Abound

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Dan Loeb, founder of Third Point Management, took a swipe a Warren Buffett at the SALT Conference in Las Vegas last week. Activists have been in the news with two big conferences: SALT in Las Vegas last Wednesday and the Sohn Conference last Monday in Lincoln Center, Manhattan.

$112,000,000,000

Total amount of assets under management controlled by activist hedge funds as of 2014, according to JP Morgan

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Hedge fund star Dan Loeb trashes Warren Buffett, CNN Money 

"I love how he criticizes hedge funds, but he really had the first hedge fund. I love how he criticizes activist investors, yet he was the first activist," said Dan Loeb to the sound of applause. "He thinks we should all pay more taxes but he loves avoiding them himself."

Factories sluggish but orders signal stronger outlook, Investor's Business Daily

"2015 had a rocky start: a soaring dollar shrank exports, a West Coast ports work stoppage snarled supply chains, and plunging oil prices dented energy firms' capital budgets. Yet key ISM indicators suggest that some headwinds are receding."

Europe: There's plenty of good news, and then there's Greece, CNN Money

"The quarterly growth rate of the 19 countries in the eurozone was stronger than either the US or UK managed in the first quarter. France outpaced Germany, Spain is on a roll, but Greece saw its economy shrink for the second consecutive quarter."

Vocabulary & People:

• hedge fund
• ISM
• activist
• Dan Loeb

Calendar:

• Mo May 11: Labor market conditions, 3-month bill auction; ACT, DISH, MBLY
• Tu May 12: NFIB Small biz optimism, Treasury budget; Z, GDDY 
• We May 13: Retail sales, Import export prices, Biz inventories; CSCO, M, SHAK
• Th May 14: Jobless claims, PPI; WB, SINA, MANU
• Fr May 15: Industrial production, Consumer sentiment; MTU

Predictions from last week: 3/3 All-Time: 23/42

• High consumer sentiment: CORRECT
• NFLX beats: CORRECT
• GS beats: CORRECT

Weekly Predictions:

1. Industrial production up
2. MANU beats on rising international popularity
3. MTU misses

Apr 6-10: The Mania Continues; Effects of Regulation

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Andrew Gould of BP and Jorma Ollila of Shell shake hands during a news conference announcing their companies' merger. Shell is offering $70 billion for BP in the biggest deal so far in 2015 and would create the world's largest independent producer of liquified natural gas (LNG).

$3,700,000,000,000

Highest annual M&A deal volume on record, which occurred in 2007. So far, this year is on pace to surpass the record

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M&A:

Rising Optimism Fuels Deal Rebound, WSJ

"The two latest megadeals involving Mylan and Shell underscore the forces behind the M&A surge. Boardroom confidence is a crucial ingredient for deal-making and has bounced back after the economic crisis; rock-bottom interest rates make it cheap for companies to borrow money for takeover; and the dollar's strength is suggesting to some that deals in Europe denominated in a comparatively-cheap currency are increasingly appealing."

HIGH-FREQUENCY TRADING:

Virtu restarts IPO with plan to raise up to $314 million, Bloomberg

Virtu Financial had its IPO shelved earlier in 2014 amid the furor against high-frequency traders triggered by publication of Michael Lewis' Flash Boys. Now, shares are scheduled to price on April 15 at around $17 to $19 apiece on 16.5 million shares. At the high end of the price range, the company may be worth as much as $2.5 billion.

SHADOW BANKING:

Post-crisis risk casts a darkening shadow, WSJ

Shadow banking, an umbrella term for institutions that provide credit without being subject to the same reserve requirements and regulations of other banks, has risen in popularity since the financial crisis. The situation is eerily similar to before the financial crisis, when lightly regulated lenders became a key feature of risky lending practices that led to economic overextension and collapse.

INTERNATIONAL:

Swiss, Mexican bond deals represent milestones for debt, WSJ

Two unprecedented events occurred last week: Switzerland issued bonds that buyers are actually paying to hold, and Mexico issued bonds maturing in 100 years--paying a yield of 4.2%. The two events are being seen as harbingers of an era of extremely easy money that has a lot of assumptions of capital markets being turned on their heads.

MONEY MARKETS:

Repo market sees a lending shift as rules bite, WSJ
Just as is happening in other forms of credit provision, alternative lenders are stepping into the $2.6 trillion repo market, which provides short-term, "overnight" loans and liquidity to companies. Lendees are turning from traditional lenders to alternatives like pension funds and other money managers, who are disintermediating from banks and issuing loans directly to a new stream of clients.

Vocabulary & People:

• repo
• shadow banking
• beige book
• consumer price index

Calendar:

• Mo Apr 13: Treasury budget; PBY, PSG
• Tu Apr 14: PPI, Retail sales; CSX, INTC
• We Apr 15: Industrial production, Beige book; BAC, DAL, NFLX
• Th Apr 16: Housing starts, Jobless claims; AMD, AXP, GS, SLB
• Fr Apr 17: CPI, Consumeer sentiment; GE, HON, SYF

Predictions from last week: 1/3 All-Time: 20/39

• Chinese yuan strengthens: WRONG
• AA misses: WRONG
• Another candidate: CORRECT

Weekly Predictions: gathered at conclusion of weekly meeting

1. Higher consumer sentiment
2. NFLX beats estimates on higher subscriptions
3. GS beats estimates on trading revenue

Mar 30-Apr 3: More Merger Mania

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US courier service FedEx agreed to by Holland-based TNT for $4.8 billion, signaling their interest in competing with UPS in a market that the Brown Uniform Guys previously dominated. A merger between UPS and TNT was actually blocked in 2013 by antitrust regulators. FedEx is a more acceptable partner as it is stronger in air-based business, complimentary to TNT's core business on the ground.

269,000,000

The number of cases of Bud Light sold in the United States in 2012. Revenues totaled $4.45 billion, making it America's most popular beer by volume. The next most popular beer was a tie between Budweiser ("Bud Heavy") and Coors Light,each selling 102 million cases. Happy National Beer Day!

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FedEx to buy TNT Express for $4.8B, WSJ

"FedEx already has a sizable air-delivery business in Europe, but it lags in ground deliveries. Executives declare that the deal is 'much better and much simpler' than the doomed merger between UPS and TNT in 2013."

Virtu restarts IPO with plan to raise up to $314 million, Bloomberg

Virtu Financial had its IPO shelved earlier in 2014 amid the furor against high-frequency traders triggered by publication of Michael Lewis' Flash Boys. Now, shares are scheduled to price on April 15 at around $17 to $19 apiece on 16.5 million shares. At the high end of the price range, the compay may be worth as much as $2.5 billion.

How the Vise on US Wages Tightened, WSJ op-ed

"US automakers used to manufacture nearly all of the 15,000 parts necessary to make a car. Today, they purchase around 70% of the value-added from independent manufacturers. A battle is being staged in Washington around whether an open US market, or some kind of alternative, is the best way to bring US workers in high-paying manufacturing jobs the wage increases they've been waiting for."

Want to Reduce Inequality? Consult China, India, and Vietnam, WSJ op-ed

"The past three decades have seen a dramatic improvement in the situation for the world's poor, most noticeably in China and India. This change is the result of a move by these countries and others to the markets from a government-managed system."

BlackRock to close or combine some money-market funds, Reuters via Yahoo Finance
"BlackRock, the world's largest money manager, is considering changing its funds lineup to comply with new SEC regulations issued in July. The reforms will require "prime" money funds used by institutional investors to float their values, instead of maintaining a stable value of $1 per share. The goal is prevent investors from getting spooked by the fund breaking the buck, where net asset value falls below $1 per share."

Vocabulary & People:

• breaking the buck
• BlackRock
• money market funds
• liquid alternatives
• Michael Lewis

Calendar:

• Mo Apr 6: Bill Dudley speaks, ISM non-mfg index
• Tu Apr 7: Gallup US ECI, JOLTS
• We Apr 8: Mortgage apps, FOMC minutes; AA, BBBY, FDO, WDFC
• Th Apr 9: Jobless claims, Wholesale trade; WBA
• Fr Apr 10: Import export prices, Treasury budget

Predictions from last week: 1/3 All-Time: 19/36

• Increasing trade imbalance: WRONG
• Rising consumer confidence: CORRECT
• Strong employment numbers: WRONG

Weekly Predictions: gathered at conclusion of weekly meeting

1. Chinese yuan strengthens against dollar
2. AA misses earnings
3. Another presidential candidate declares

Participants: R. Niu, C. Cooper, J. LaSala, S. Ballantyne, K. Meenan

Mar 23-27: Merger mania

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Products from Kraft Foods, above, and Heinz sauces, below. With price being kept down as Kraft executives fight lower margins and flat sales amid changing tastes of consumers, 3G Capital and Berkshire Hathaway saw value to unlock in combining the two historic companies.

$28 billion

Approximate annual sales of a merged Heinz and Kraft foods company. With a market valuation north of $80 billion, the new company will be one of the largest standalone food companies in the world. Eight brands in the combined company have +$1 billion in sales, while 5 others have between $500 million and $1 billion in sales.

NOTE: If paywalled, search article title and access from Google

Kraft and Heinz to merge in deal backed by Buffett and 3G Capital, NYT Dealbook

Jorge Paulo Lemann and Warren Buffett have come together on yet another food & beverage deal, creating one of the world's biggest F&B companies with the merger of Kraft and Heinz--this year's largest merger so far. With complimentary product lines--imagine Heinz mustard and Oscar Meyer hot dogs--analysts expect the company to use Heinz's global footprint to expand Kraft sales beyond North America.

Dow Chemical (DOW) to separate chlor-alkali unit, merge it with Olin (OLN), Street Insider

Divesting itself of a chlor-alkali business that many analysts suggest was making performance track very closely with that of oil's in recent months, Dow is streamlining itself from a strategic and tax standpoint while Olin projects being able to unlock $200 million in synergies from the merger in the next 36 months.

Oil prices rise as dollar weakens, WSJ

An industry newsletter attributed 87% of the move in US oil prices since Thanksgiving to the move in the dollar, noting "the Federal Reserve will have as much of a role as Tehran and Riyadh" in determining oil prices. Oil is traded in dollars, so a drop in the dollar's value makes oil less expensive to buyers using foreign currencies.

Bank of China posts slower profit growth amid rising bad loans, WSJ
Bank of China's net profit rose 8% in 2014, to 169 billion yuan ($27 billion), thanks to higher interest and fee income. As compared to global growth numbers, these relatively-robust metrics represent the slowest annual growth BOC has experienced since going public in 2006. China Agricultural Bank also listed its lowest numbers since going public in 2010. Allowances for nonperforming loans was 187% of total loan losses in 2014, down from 229% a year earlier.

Google hies Morgan Stanley's Ruth Porat as new CFO, TechCrunch
Behind David Viniar at Goldman Sachs, Ruth Porat is one of the longest-standing big bank executives remaining at the same firm, having worked at MS continuously since 1987. The former head of Technology Investment Banking and California native's defection to the tech ranks is yet another suggestion of the rising significance of the technology sector in the modern US economy.

Vocabulary & People:

• NPLs
• CFO
• David Viniar
• Ruth Porat
• Jorge Paolo Lemann

Calendar:

• Mo Mar 30: Pending home sales, Fed mfg survey
• Tu Mar 31: S&P Case-Shiller EPI, Consumer confidence
• We Apr 1: ADP employment, PMI Mfg, Construction spending
• Th Apr 2: International trade, Jobless claims
• Fr Apr 3: Employment situation

Predictions from last week: 1/3 All-Time: 18/33

• Lululemon misses: WRONG
• Another president candidate: WRONG
• Consumer confidence up: CORRECT

Weekly Predictions: gathered at conclusion of weekly meeting

1. Increasing trade imbalance
2. Rising consumer confidence
3. Strong employment numbers Friday

Participants: J. O'Brien, R. Niu, S. Shah, K. Meenan

Mar 16-20: Fedspeak reigns

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Fed chair Janet Yellen spoke last week, removing the "patience" wording from FOMC minutes, but remaining cagey about specifics of when the Fed might raise the target rate. Markets interpreted the report bullishly, sending stocks skyrocketing.

5132.52

Highest-ever level of the Nasdaq, set on March 10, 2000 during the "Tech Bubble." The tech-heavy index has seen a tremendous run-up recently to within several percent of its all-time high, attributed to lower borrowing rates and the renaissance of the technology sector in the US.

Some incredible facts about the Nasdaq's latest run, Yahoo Finance

Despite having a down day on Wednesday, the Nasdaq Composite is still thisclose to breaking 5,000 and ever nearer to breaking its Tech Bubble record

Dollar bulls take it on the chin as Yellen says Fed won't rush to raise rates, Forbes

If there's been one bet on Wall Street that seems common of late, its putting money on continued strength of the US dollar. That presumption got turned upside down last Wednesday, when the Fed issued its latest policy statement and tempered expectations about US growth.

Starbuck's CEO Howard Schultz says Race Together "the right thing to do", CNN Money
Starbuck's CEO is not one to back down about an issue he cares about and last Wednesday he staunchly defended the company's much lampooned effort to improve race relations.

Problem: the bond "conundrum" is back, CNN Money
The 10-year Treasury started last week at 2.11% and tumbled to 1.94% during Janet Yellen's comments, as bond prices (inversely related to yields) we pushed up. But as the Fed move towards raising rates, bond yields should be moving up. What gives?

Vocabulary & People:

• derivatives
• greenback
• Janet Yellen
• Jan Hatzuis
• Jeffrey Gundlach
• CPI

Calendar: 

• M 3/23: Chicago Fed, Existing home sales
• T 3/24: CPI, PMI Manufacturing, New home sales, Richmond Fed
• W 3/25: Durable goods orders, EIA petroleum status
• T 3/26: Jobless claims, PMI services, Kansas City Fed
• F 3/27: GDP, Consumer sentiment

Predictions from last week: 2/3 All-Time: 17/30

• "Patient" removed: CORRECT
• Euro slide against dollar: WRONG
• Oil back above $45: CORRECT

Weekly Predictions:

1. Lululemon misses earnings
2. Another US presidential candidate declares
3. Consumer sentiment positive

Mar 9-13: Happy St. Patrick's Day

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Calendar: 

• Mo Mar 16: Industrial production, Housing market index
• Tu Mar 17: FOMC meeting begins, Housing starts
• We Mar 18: FOMC meeting announcement, forecasts, chair conference
• Th Mar 19: Jobless claims, Leading indicators
• Fr Mar 20: Atlanta Fed business inflation

Predictions from last week: 0/3 All-Time: 15/27

• Stock market drops: WRONG
• AAPL shares up: WRONG
• Dollar General beats: WRONG

Weekly Predictions: gathered at conclusion of weekly meeting

1. Yellen removes "patient" wording from Fed report
2. Euro continues slide against dollar
3. Oil moves back above $45

Mar 2-6: Bulls and bonds

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The Federal Reserve (whose headquarters, called the Eccles Building in Washington DC, is pictured here) just finished its annual stress tests designed to assess the strength of the US banking system. The Fed was founded in 1913 after the Panic of 1907 demonstrated a need for a government financial entity to preserve market liquidity. The Fed has 3 primary goals: maximize employment, stabilize prices, and and moderate long-term interest rates.

676

The value of the S&P 500 index exactly 6 years ago--the lowest level that it hit during the bear market associated with the financial crisis. The index has rebounded by several hundred percent since then, hitting record highs over the past several trading sessions.

The bull market is 6 years old, now what? CNN Money

After hitting a bottom of 676 exactly 6 years ago this Monday, the S&P has returned more than 200% amid the 4th-longest bull market in history. Two market analysts made names for themselves by "calling the bottom," citing that the market losses in 2009 exceeded even the market turmoil from the 1929 market crash. Soon afterwards, the central government and Federal Reserve took emphatic steps to reassure investors, triggering the beginning of the bull market.

Fed stress tests find banks adequately capitalized, WSJ

The Fed's annual stress test of financial health confirmed that all 31 banks tested had resources available to continue lending in the midst of economic shock. This is the first time all 31 banks passed, although it noted Goldman Sachs and Zions Bancorp had certain capital ratios that approached minimum required levels. Banks who pass the test are now permitted to return value to shareholders in the form of dividends and share buybacks.

Faith falters in S&P 500 as $17 billion outflow precedes selloff, Bloomberg
Despite hitting 50 record highs in the past year, investors in 2015 have pulled $17 billion from the S&P index and devoted that money to investments in fixed income and bonds. That change in investment represents the biggest quarterly divergence since 2000. The movement of funds is being attributed to talks that, following continued strong employment numbers, the Federal Reserve will begin raising rates later this summer.



European stimulus sparks bond blitz, WSJ
With rates in Europe being kept low and even negative as the economy continues to recover, some European firms are taking advantage by issuing bonds paying zero interest. The purchase of zero interest bonds indicates that investors believe capital gains--an appreciation in the price of the bond itself--will provide gains. American companies such as Berkshire Hathaway and Coca Cola have issued $26 billion of euro bonds so far this year.

Foreign takeovers see US losing tax revenue, WSJ
Recent government outrage pushed regulators to limit "tax inversions," when US companies purchased companies abroad in order to capture reduced tax in foreign countries. But the law doesn't regulate the opposite: foreign countries purchasing US companies. For example, instead of acting as a predator, Salix Pharmaceuticals has chosen to be the prey in a recent deal to be acquired by Valeant, a competing pharmaceutical firm.

Vocabulary:

• market bottom
• tax inversion
• stress test
• zero coupon bonds
• JOLTS
• bear market

Calendar Mar 9-13

• Mn Mar 9: Labor market conditions; URBN
• Tu Mar 10: NFIB small business index, JOLTS; BKS, HABT
• We Mar 11: EIA petroleum status, Treasury budget; BOX, KKD, SHAK
• Th Mar 12: Retail sales, Import prices, Inventories; DG, TKMR, MTN
• Fr Mar 13: PPI, Consumer sentiment

Predictions from last week: 2/3 All-Time: 15/24

• Costco beats estimates: CORRECT
• Trade gap widens: WRONG
• Caesars Entertainment misses: CORRECT

Weekly Predictions:

1. Stock market drops as Fed signals summertime rate hike
2. Apple shares spike on enthusiasm for Apple Watch
3. Dollar General (DG) beats earnings forecast

Feb 23-27: Riding the bull

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After flip flopping for months on  whether or not additional internet regulation will hamper or speed innovation, regulators last week decided to manage "equal access" to the internet, acknowledging the importance of a platform previously thought of as a frontier territory but which has now become part of the fabric of the modern US economy.

34%

Netflix's share of overall internet downloads during peak evening times in May 2014, up 32% from 2013.

Top News (click on article titles for links; if paywalled, copy article title into Google)

FCC adopts net neutrality rules to ban internet discrimination, Yahoo Finance

After months of debate, on Thursday the FCC moved forward with plans to regulate the internet as a utility much in the same way other telecommunications networks are now controlled. That means Netflix and Google won't have to pay extra fees to assure streaming video quality, but it also means they may be susceptible to connection speed slowdowns as more space is reserved for competitors.

Stock markets all around the world break records, CNN Money
Investors, made giddy by central banks' easing of lending rates, have driven stock market indices worldwide to some of their highest levels since the recession, with some indices hitting all-time highs. The Dow Jones average broke 18,200 for the first time. However, Nobel Prize winner Robert Schiller warns that price/earnings multiples are now around the same level they were before the bubble burst in 2008.

Janet Yellen puts Fed on path to lift rates, WSJ
Citing rates of employment, production, and spending improving at a "solid rate," the Fed plans "at some point" to consider raising the federal funds rate. The cost of credit is considered extremely important to the economy because it determines the cost of home and auto loans for consumers (who constitute around 70% of US GDP) as well as corporate debt for companies, and also plays an important role in valuation.

JP Morgan to start charging big clients fees on some deposits, WSJ
New regulations and low interest rates are pushing bigger banks toward considering charges for larger corporate clients including financial service providers such as hedge funds and PE firms. Retail customers should not be affected by the fees. Traditionally one of banks' most attractive and stable forms of funding, it has become increasingly expensive to maintain profits on deposits amidst newly mandated capital and liquidity requirements.

RadioShack to sell name with $20 million opening bid, CNN Money
Radioshack's largest shareholder agreed to bid $20 million for the consumer electronics brand name in court last Wednesday. After being in business for 94 years, the chain is now liquidating its brand and store leases through bankruptcy proceedings. Despite a financial downtown, RadioShack's name recognition could help save another company a tremendous amount of cost in new branding.

Vocabulary (click to open link)

• FCC
• P/E 10 (Schiller P/E) ratio
• Federal funds rate
• Liquidity
• Private equity

Calendar:

• Mon Mar 2: Personal income and outlays, PMI Mftg, ISM Mftg; CZR, NTRI, PANW, STNG
• Tue Mar 3: Motor vehicle sales, Janet Yellen speaks; AMBA, AZO, BCS, BBY, JD, KATE, TIVO
• Wed Mar 4: ADP employment, ISM Non-mftg, EIA petrol; ANF, AEO, BREW, PETM, TST
• Thu Mar 5: Jobless claims, Productivity, Factory orders; CSIQ, COST, DMND, KR
• Fri Mar 6: Employment situation, International trade; SPLS

Predictions from last week: 1 / 3 All-Time: 13 / 21

• Yellen keeps "patience" wording: CORRECT
• CPI comes in at 0.0%: WRONG
• GDP annualized rate of 3.5%: WRONG

Weekly Predictions:

1. Costco beats estimates after rejecting AmEx's bid
2. Trade gap continues to widen in face of strengthening dollar
3. Caesars misses estimates amidst weakness in China

Feb 23-27: And the award goes to...

DJIA 18068 // S&P 2103 // NASDAQ 4439 // 10-YR TRE 2.09% //

EURO 1.133 // OIL 49.14 // GOLD 1198 // BIT 236

Applicants at a recent job fair. The US economy has added 3.2 million jobs in the past year, helping to drop the unemployment rate to 5.7%.

283,000

Applications last week for unemployment aid. A drop in applications for aid is a positive sign that the economy is absorbing job seekers. Although more and more Americans are finding jobs, economists are arguing about the indicator's significance for the health of the overall economy.

Applications for US unemployment aid plummet to 283,000, AP via Yahoo Finance

Weekly applications for unemployment aid dropped by 21,000 last week to their lowest level since last October. The drop could be attributed in part to the economy adding 3.2 million jobs in the past year, helping to lower unemployment to 5.7% in January from 6.6% twelve months before. Number of people quitting jobs increased by 2.1, generally seen as a strong sign of job alternatives.

Walmart Raises Wages as Market Gets Tighter, WSJ

Following the lead of Gap and others, Walmart announced last Wednesday that it would raise associates' salary to $9 by this April and $10 by next year. The market responded by pushing WMT shares lower amid wage expense concerns. Investors are taking this as a sign that employment, at least at the lower end of the market, is tightening noticeably in recent weeks.

Economy's Supply Side Splutters, WSJ

Complicating bullishness associated with recent rates of employment is the fact that, at 3.6%, job vacancies in December were at their highest rate since 2001--well before the recession. Analysts are taking this as a sign that many employees are not well matched to the jobs currently available. Productivity has grown at just 1.3% per year since 2007, the slowest rate of increase since 1970.

Lenders Step Up Financing to Subprime Borrowers, WSJ

Almost four out of every 10 loans for cars, credit cards, and personal borrowing in the first 11 months of 2014 went to borrowers with FICO credit scores of 650 or less, or "subprime borrowers." These loans carry higher returns for investors, but also a greater chance of default. Autos, as opposed to credit cards or personal loans, are easier to cover because vehicles can be repossessed by lenders.

Fed Tiptoes into Rate Hike Debate, WSJ
The debate about when the Fed will raise interest rates continues, as Janet Yellen and her advisors remain extremely cagey about changing the wording used in FOMC minutes to give indications to markets either way--about a nearer-term or longer-term increase. One thing is clear--despite strong growth in jobs numbers, inflation is not yet at a level that the Fed would like it to be.

Vocabulary:

• Unemployment rate
• FOMC
• Labor productivity
• Janet Yellen

Economic Calendar:

• Mn Feb 23: Existing home sales, Dallas Fed Mfg survey; CHGG, HSBC, SF
• Tu Feb 24: Case-Shiller HPI, Consumer confidence; ; SAM, FSLR, FLTX, HD, ODP
• We Feb 25: New home sales, Janet Yellen speaks; CVC, CPB, DLTR, LOW, PLKI, TGT
• Th Feb 26: CPI, Durable goods, Jobless claims; BUD, GPS, JCP, LYV, RBS, SRE
• Fr Feb 27: GDP, Chicago PMI, Pending home sales

Predictions from last week: 2 / 3   All-Time: 12 / 18

• Chinese yuan weakens: WRONG
• Dow, S&P continue record highs :CORRECT
• Manufacturing expands: CORRECT

Weekly Predictions:

1. Yellen keeps "patient" wording in FOMC dialogue
2. CPI less food and energy at 0.0%, below consensus
3. GDP on Friday indicates annualized rate of over 3.5% economic growth

Participants: J. O'Brien, K. Meenan

Feb 16-20: DuPont getting peltzed

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EURO 1.139 // OIL 51.27 // GOLD 1205 // BIT 240

Trian Fund Management founding partner Nelson Peltz is accusing DuPont CEO Ellen Kullman and her staff of not doing enough internally to better unlock value for shareholders.

67%

Percent over and above S&P 500 returns that DuPont stock has returned to shareholders since 2009.

Peltz's Firm, DuPont Trade Salvos, WSJ

Nelson Peltz's activist hedge fund, Trian, which already owns a 2.7% stake in DuPont, is pursuing 4 seats on DuPont's board. The US-based materials and chemicals company has been doing well recently, but Peltz insists that Trian's guidance is the leadership for outperformance--not the leadership of CEO Ellen Kullman. Peltz insists there is yet more value to unlock for shareholders.

Currency Wars: Pandering to Debase, Seeking Alpha

Tim Edwards walks through the decision-making of fictional country Atlantis: should they or should they not debase their currency? On the one hand, austerity measures aren't popular with their citizens, and stimulus would be exciting for equity investors while debt should become suddenly cheaper (in dollar terms). On the downside is the specter of inflation. What to do?

Aggregate Income Shows Consumers Ready To Take Growth Baton, Bloomberg Briefs

Economist Carl Riccadonna looks at last week's employment report and more specifically aggregate income to see if US consumers are ready to keep spending. While some pundits cite manufacturing and industrial production specifically in energy as the reason for the US' gradual recovery from crisis, there are signs that a consumption-driven surge may be on the way--or is already here.

Apple: $710 Billion and Counting, WSJ
The eye-catching graphic on the article's front page pretty much sums up the buzz: AAPL's market price is now 2 times Google's, 2.5 times Walmart's, 4 times Bank of America's, 8 times McDonald's, 12 times GM's, and 24 times Twitter's. Tim Cook cited high demand for iPhones in China as one reason for the explosion in value. Carl Icahn is calling for a valuation in excess of $1 trillion.

Convertibles Stay Hot, WSJ
US-listed convertible bond deal volume has jumped 49% since this time last year, totaling $5.7 billion. Convertible bonds get their name from paying their investors interest, like a bond, until they are converted into the company's stock at a certain predetermined strike price--much like an option. The spike in volume is attributed to low interest rates and bullishness in stocks.

Vocabulary: gathered throughout meeting, definitions from www.investopedia.com

• Convertible bond http://www.investopedia.com/terms/c/convertiblebond.asp
• Delinquent http://www.investopedia.com/terms/d/delinquent.asp
• Volatility http://www.investopedia.com/terms/v/volatility.asp
• PMI Manufacturing index http://www.investopedia.com/terms/p/pmi.asp

Calendar: from Barron's, Nasdaq Economic Calendar

• Monday: (President's Day)
• Tuesday: Empire State manufacturing survey, Housing market index; FOSL, FDP, JACK, TAXI, GT, VNO, WM
• Wednesday: Housing starts, PPI, Industrial production, FOMC minutes; ACT, ANGI, CAR, DENN, HLT, MAR
• Thursday: Jobless claims, Philly Fed survey; DTV, EQIX, INTU, LLC, PSA, TMUS, TRUE, WMT
• Friday: PMI Manufacturing index; DE

Predictions from last week: 3/3 All-Time: 10/15

• US import prices fall: CORRECT
• Zoetis beats: CORRECT
• Oil rallies: CORRECT

Weekly Predictions: gathered at conclusion of weekly meeting

1. Chinese yuan will weaken against the US dollar
2. Dow & S&P will continue record highs as Greece signals acceptance of some of EU's austerity program
3. PMI Manufacturing will indicate expansion (score of 50 or more)

Participants: T. Aygun, K. Meenan

Feb 9-13: Earnings parade and a Grexit

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EURO 1.13 // OIL 52.28 // GOLD 1241 // BIT 219

Alexei Tsipras and the Syriza party have rebuffed 5 years of austerity imposed on Greece but intend to steer a course that keeps the country in the Eurozone. The ECB's decision to no longer accept Greek sovereign debt as collateral on loans sent returns on the Greek 10-year to over 11%. Three-year Greek notes now yield over 19%.

24.3%

South Africa's unemployment rate, which dropped this Tuesday to a 1-year low

*NOTE: For paywalled articles, unlock by copying article title into Google Search

Earnings Whiplash Slams GoPro, Pandora, Yelp, Stratasys, Barron's

Tech companies that were wrecked last week after just slight deviations from analyst expectations include Yelp, GoPro, Pandora, and Stratasys. Earnings day darlings included data-enriching software maker Tableau Software, VoIP consultants RingCentral, food delivery providers GrubHub, and mobile video game maker Glu Mobile. Forward prices to earnings multiple for these companies average out to about 70 times 2015 earnings.

ECB: Banks can't use Greek debt as collateral, CNBC via Yahoo Finance

The European Central Bank has revoked a waiver that allowed banks to use Greek government debt as collateral. The implications of this move are profound, including a risk of systemic counterparty risk throughout the Eurosystem. After US markets responded with a drop, it was announced later that Greek would still have access to the ECB's "emergency liquidity assistance" program, retaining a backstop for the beleaguered economy.

Job market looks ripe for liftoff, WSJ

US non-farm payrolls continued their hot streak, as the economy continued to add jobs with a consistency not seen since 1997. Average hourly earnings ($24.75) was up 0.5% last month and 2.2% over the past year. While the labor market still has room for improvement--as it moves closer to the 5.2-5.5% target--some economists argue that slews of retiring baby boomers mean we are closer to full labor participation than some may think.

Treasuries fall as US readies auctions, Microsoft sells bonds, Bloomberg
The combined effect of Microsoft's sale of $10.75 billion of bonds--the biggest issuance so far in 2015--more than Merck's $8 billion issue and Apple's $6.5 billion issue--and the US government's sale of up to $30 billion of 1-month Treasuries accounted for an influx of supply that pushed up yields across different bond markets. Cash-rich corporations are using the exceptionally low rate environment to lock in debt issues with maturities as long as decades into the future.

Vocabulary:

• Grexit http://en.wikipedia.org/wiki/Greek_withdrawal_from_the_eurozone
• Non-farm payrolls http://www.investopedia.com/terms/n/nonfarmpayroll.asp
• JOLTS http://www.investopedia.com/terms/j/jolts.asp

Calendar: check Nasdaq Economic Calendar

• Mon Feb 9: Labor market conditions index; HAS, L, SOHU
• Tue Feb 10: Labor Dept JOLTS;  KO, CVS, TAP, SAVE, HOT
• Wed Feb 11: EIA Petroleum status report, Treasury budget; BIDU, FEYE, NVDA, PEP, TSLA, TRI, TWX, ZTS
• Thu Feb 12: Jobless claims, Retail sales; AIG, APA, DPS, GRPN, HSP, K, MANU, ZNGA
• Fri Feb 13: Import and export prices, Consumer sentiment; RRGB, SJM

Predictions from last week: score: 2/3 All-Time: 7/12

• Chipotle beats: CORRECT (on bottom line, missed on top line)
• Buffalo Wild Wings beats: WRONG (on bottom line, exceeded top line)
• Non-farm payrolls increase: CORRECT (by 250k+, Dec 2014 revised upwards)

Weekly Predictions: gathered at conclusion of weekly meeting

1. US import prices fall amid the strengthening dollar and stagnant global demand
2. Zoetis beats estimates on continued strength in pet and pet products
3. Oil prices rally against a new $50 resistance zone

Participants: R. Niu, S. Shah, K. Meenan, J. O'Brien

Feb 2-6: I'm lovin' it

DJIA 17327 // S&P 2021 // NASDAQ 4189 // 10-YR TRE 1.673% //

EURO 1.138 // OIL 50.85 // GOLD 1271 // BIT 240

With Seattle driving for a game-winning touchdown, New England cornerback Malcolm Butler (21) comes up with perhaps the greatest plays in Patriots history, securing the win with an interception. The thrilling Super Bowl ended up being the most watched television event in history, with a record 114.4 million people tuning in.

$18,000

Current price of a 500ml bottle of McDonald's Big Mac Special Sauce, being auctioned on eBay by McDonald's Australia. This is equivalent to about $23,000 Australian dollars. There are still 8 days left in the auction.

Super Bowl breaks record for US TV viewing, WSJ
Nielsen has reported that this year's Super Bowl, a nail-biter that saw the New England Patriots defeat the Seattle Seahawks with less than a minute left, was the most watched US television event ever, attracting 114.4 million viewers. Super Bowl XLIX is the seventh straight Super Bowl to draw over 100 million viewers, and the 4th bowl game in 5 years to set an all-time record.

Shake Shack more than doubles its IPO price in market debut, DealBook
Shake Shack's IPO, with a stock price that more than doubled on it's first trading day from $21 to more than $45, revealed tremendous excitement for the current trend in investment in "fast casual" restaurants, including Zoe's Kitchen, El Pollo Loco, Chipotle, and Habit Restaurants. The public offering expanded the wealth of famous New York restauranteur Danny Meyer to $340 million. Meyer helped start Shake Shack to provide extra jobs to employees outside nightly work hours.

McDonalds will now accept selfies and hugs as payment, Business Insider
Starting on February 2nd and running until the 14th, McDonalds will allow customers to "pay with lovin'" (expressions of love including selfies and hugs) during predetermined times at certain stores. The company announced the Valentine's Day ad campaign during a commercial spot on the Super Bowl.

Chipotle is an expensive burrito, WSJ
Chipotle, which has provided a 632% return to investors since its IPO nine years ago, is set to report earnings on Tuesday amid a torrent of news and investment in other food chains. Chipotle, which was once almost entirely owned by McDonalds, stopped selling carnitas for a time after poor treatment of pigs by a supplier was revealed. Among other things, McDonald's is currently reeling from a beef scandal in China, which it said played a part in in EPS falling by 1% last quarter.

Why food prices won't fall as fast as gas prices, MarketWatch

Commodities traders are anticipating that lower fuel prices spell a continued fall in food commodity prices including fruits and meats. Oil prices have plummeted this summer, with other commodities struggling to keep up with the fall. Falling input costs could mean continued high margins at restaurant chains including Shake Shack and Habit Restaurants, both of which recently started trading publicly.

Vocabulary:
Fast casual
Nielsen
Danny Meyer
Malcolm Butler

Calendar, Dates: (Nasdaq Economic Calendar)

• Mon Feb 2: PMI Manufacturing, Construction spending; FLWS, RCII
• Tues Feb 3: Factory orders; ADM, AN, BP, CMG, NYT
• Weds Feb 4: ADP Employment, ISM Non-manufacturing index; UHAL, CLX, EVR, GM
• Thur Feb 5: International trade, Jobless claims, Productivity and costs; ATVI, BEBE, BWLD
• Fri Feb 6: Employment situation; MCO, MSG, WETF

Predictions from Jan 26-30: 1 / 3   All-Time: 5 / 9

• AAL beats: CORRECT
• CVX misses: WRONG
• Bitcoin up: WRONG

Predictions for Feb 2-6:

• Chipotle (NYSE: CMG) misses earnings on pork supplier problems
• Buffalo Wild Wings (NYSE: BWLD) beats forecasts on falling commodity prices
• Non-farm payrolls continue to increase as US economy improves

Participants: K. Meenan

Jan 26-30: Gyros and bits

DJIA 17560 // S&P 2041 // NASDAQ 4267 // 10-YR TRE 1.814% //

EURO 1.1270 // OIL 47.51 // GOLD 1286 // BIT 301.61

Global leaders from industry and government gathered this week in Davos,  Switzerland to discuss policy, problems, and possible solutions. Reports note a special focus on topics like "shared value," "creative capitalism," and "compassionate capitalism," perhaps suggesting CEOs' desire to improve the negative image of business around the world.

$43.50

Reported price of a hot dog at Davos (WSJ). Looks like the de-peg is already reaping some unintended consequences.

Oxfam presses Davos forum with wealth inequality claim, FT

Oxfam, the UK-based anti-poverty non-profit, issued a report last week noting that the richest 1% in the world will soon own more wealth than the rest of the world put together. Conversely, the report noted the "more than 1 billion people" living in absolute poverty with income of less than $1.25 a day.

Greece chooses anti-austerity party in major shift, NYT

The Greek people rejected austerity measures being imposed by the EU on Sunday by electing the leftist Syriza party into power, ousting the centrist New Democracy party. Syriza party leader Alexis Tsipras declared in Athens that "Greece will now move ahead with hope and reach out to Europe, and Europe is going to change." Populist movements on the left and right in France, Spain, and Italy are also expected to gain ground in coming weeks.

Swiss miss, Economist

When the Swiss National Bank (SNB) unpegged the currency from the euro last week, the market looked about as "wrong-footed" as it did in responding to the franc's original peg to the euro back in 2011. Retail brokerages--where mom-and-pop traders speculate on currencies expected to move in price by small fractions of a percent and where only tiny amounts of collateral were previously required--were devastated by the move, as clients trading on margin were forced to call in accounts.

Google wireless services aims to switch between carriers, WSJ

Google is shaking up another industry in aiming to give subscribers choice across a variety of wireless carriers and wifi signals in routing calls to one another. This challenges the current paradigm where contracts are signed between subscribers and service providers who provide reception through their network alone. The program is expected to be rolled out later this year throughout the US.

As commodities fall, some investors see reasons to buy, WSJ

After years of falling markets, some investors are betting we are presently at a price bottom across a variety of commodities markets. Despite record supplies resulting from decreased demand across Europe and developing world, among other reasons, investors perceive an opportunity particularly in agricultural commodities, which can respond faster to supply-demand changes as farmers manage crops on a season to season basis.

Vocabulary:
Contango http://www.investopedia.com/terms/c/contango.asp
Backwardation http://www.investopedia.com/terms/b/backwardation.asp
Bitcoin http://www.investopedia.com/terms/b/bitcoin.asp

Calendar, Jan 26-30: (Nasdaq Economic Calendar)

• Jan 26: MSFT
• Jan 27: Durable goods orders, new home sales, consumer confidence; AAPL, YHOO, MMM, AAL, T, CAT, PFE, PG
• Jan 28: EIA petroleum status report, FOMC meeting announcement; BA, FB
• Jan 29: Jobless claims, pending new home sales index; BABA, AMZN, DOW, F, GOOG, JBLU, TWC
• Jan 30: GDP, PMI, consumer sentiment; CVX, LLY, MAT, XRX

Predictions from last week: 1.5/3 All-Time: 4/6

• NFLX beats: CORRECT
• LUV and UAL beat: CORRECT / WRONG
• ECB doesn't deviate: WRONG

Predictions Jan 26-30:

• AAL will beat estimates and adjust guidance upward based on peer performance
• CVX misses estimates on falling oil prices, declining investment
• Bitcoin price rises on news coverage and extra liquidity from Coinbase

Participants: J. O'Brien, K. Meenan, J. Ayat

Jan 20-23: Global woes and "whoa!"s

DJIA 17516 // S&P 2024 // NASDAQ 4162 // 10-YR TRE 1.815% //

EURO $1.1589 // OIL $47.59 // GOLD 1290

The newly-minted skyline of Shanghai's Pudong central district. China GDP growth of 7.4% beat analyst estimates but represents the country's slowest annual growth rate since 1990.

17 months

Amount of time it took for the Shanghai stock market to reach the volume of margin lending amassed by the NYSE after 13 years of trading (CNBC)

China's Economic Growth is Slowest in Decades, WSJ
China's economic growth slowed to 7.4% in 2014, beating estimates of 7.3% but touching on growth levels not seen since 1990. Beijing notes that 7% growth is the minimum necessary to create jobs given China's population. Slower growth is in-line with Communist leaders aiming for shifting the economy towards a model based on domestic consumption and services industries.

Swiss franc soars, stocks tank as Euro peg scrapped, CNBC
The Swiss National Bank (SNB) shocked the investing world on Thursday by removing its 3-year old peg of 1.20 Swiss francs per euro. The Swiss franc drastically appreciated against global currencies in the span of several hours. Implications of the depegging include a slowdown in the Swiss economy as a result of expensive exports, and problems for currency traders and anyone with bets on stable rates.

QE is coming, but on German terms, Economist
When the European Central Bank (ECB) meets this Thursday January 22, is will have a momentous decision on its hands. Mario Draghi, the ECB's president, seems determined to pursue QE in some form. Whether or not the ECB buys sovereign debt in the weighted fashion economic size it has employed in the past, or if it focuses solely on the debt of ailing nations' economies, is yet to be seen.

Report says richest 1% will control most wealth by 2016, USA Today
According to Oxfam, a British charity dedicated to fighting poverty, the world's richest 1% will control over 50% of the world's wealth by 2016. The 80 richest people in the will own $1.9 trillion in wealth. In 2014, the richest The report was published in advance of this week's World Economic Forum to provoke discussion and change among world leaders.

Vocabulary:
Currency peg http://www.investopedia.com/terms/c/currency-peg.asp
Sovereign debt http://www.investopedia.com/terms/s/sovereign-debt.asp
Covered bonds http://www.investopedia.com/terms/c/coveredbond.asp
Bundesbank http://www.investopedia.com/terms/b/bundesbank.asp
Oxfam http://en.wikipedia.org/wiki/Oxfam

Calendar, Jan 20-23 (Nasdaq Economic Calendar)

• Jan 20: Housing market index; US State of the Union; earnings from JNJ, HAL, NFLX, MS
• Jan 21: Housing starts; AXP, EBAY, KMI, URI
• Jan 22: ECB meeting; PMI Manufacturing index; CP, LUV, SBUX, UAL
• Jan 23: Existing home sales; GE, KMB

Predictions from last week: 2/3 All-Time: 2/3

• Dollar strengthens: CORRECT
• Crude drops: WRONG
• Alcoa beats: CORRECT

Predictions Jan 20-23:

• NFLX beats estimates on strength of picking up Friends catalog
• LUV and UAL beat estimates following strong earnings from DAL
• ECB not deviating from weighted bond-buying approach

Participants: S. Ballantyne, K. Meenan