Sept 21-25: Ruh-Roh for Das Auto

DJIA 16315 // S&P 1931 // NASDAQ 4686 // 10-YR TRE 2.26%
EURO 1.119 // OIL 45.38 // GOLD 1145 // BIT 235

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.

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

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

Mar 16-20: Fedspeak reigns

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EURO 1.092 // OIL 47.69 // GOLD 1191 // BIT 246

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

DJIA 17977 // S&P 2081 // NASDAQ 4929 // 10-YR TRE 2.098% //

EURO 1.057 // OIL 43.68 // GOLD 1154 // BIT 292

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

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