Walmart, Tech Stocks Lead Wall Street Gains

Wall Street's main indexes saw big gains on Thursday, November 17th drive by Walmart and technology shares. Walmart surged 9.10 percent to hit a record high of $98.01 and Cisco rose 6.3 percent after the company's profit forecast came in above estimates. This puts the S&P and Dow on course for the biggest percentage rise in over two months.

A different article I read discussed that the gains made by Walmart has Amazon and Target sweating from the pressure. With the holidays around the corner, Walmart beat the forecasts for sales and profits and the stock rose to an all time high. Walmart is seeing such growth through its online shopping sales and by acquiring many online shopping sites such as Jet.com, ModCloth, and Moosejaw. Its digital sales rose 50% in the third quarter and that's more than double the growth rate that Target posted for online sales. Walmart shares are way up while other major retailers like Target, Macy's, and Sears are plunging.

https://www.nytimes.com/reuters/2017/11/16/business/16reuters-usa-stocks.html?rref=collection%2Fsectioncollection%2Fbusiness&action=click&contentCollection=business&region=rank&module=package&version=highlights&contentPlacement=14&pgtype=sectionfront

http://money.cnn.com/2017/11/16/investing/walmart-earnings-digital-jet/index.html?iid=hp-stack-dom

China has the capability of being a global super power and if the United States does not improve or follow their lead they will be surpassed. China has a larger population and is going to invest billions in their infrastructure to reach their goal of being at the top.

China is currently allocating their markets worldwide and are having a huge success being the number one trader for many countries. The United States needs to soon act upon these actions and replicate them. If the U.S. does not act quick China can be a threat in many ways including its military.


http://thehill.com/opinion/international/359652-united-states-has-to-keep-pace-with-china-and-its-economic-power-plans

Goldman Sachs CEO: China's economy will surpass the US

Lloyd Blankfein, well known CEO of Goldman Sachs made this statement when asked about the relationship between the economy of China surpassing the U.S economy,  "It's just a question of timing. Eventually, it will. But you have to keep in mind their population is four times the population of the United States."
His main point in making this statement is the population disparity between the two.  In terms of GDP he noted that the U.S. GDP was 18.5 trillion compared to China's 11.4 trillion.  He doesn't see an increase topping the U.S. for quite some time, but said that it's inevitable for the two numbers to meet and eventually have China surpass.  Do you agree with his statements or no?  If so when do you see China surpassing the U.S.?   





https://www.cnbc.com/2017/11/09/goldman-sachs-ceo-lloyd-blankfein-chinese-economy-will-surpass-the-us.html

HARKER EYES INFLATION

source: https://www.cnbc.com/2017/11/12/harker-eyes-inflation-stands-by-fed-rate-hike-next-month.html

This article speaks heavily on the expectation of an interest rate increase. However, Fed officials are worried about the below average inflation. People worry that raising interest will actually cause inflation to go lower then it already is.

One argument is from Patrick Harker, president of the Philadelphia Federal Reserve Bank, he believes that the country must be prepared for a future economic shock and by raising interest rates, we start to constrict the economy a little. He believes that the economy is basically at full strength and the labor market is going strong, however, as we have seen in the past, we could sense a correction or recession in the economy in the coming years. Harker is worried about the low inflation, as it has been a cautionary measure in the past.

It will be really interesting to see if these interest rate hikes will have any effect on inflation. Theoretically, interest rate hikes should decrease inflation. I wonder how well theoretics will match up to reality. I expect the Fed may have to make some changes when it comes to monetary policy as this low inflation could cause the economy and the labor market a problem in the coming years. They may have to take a different approach and figure out other ways to bump inflation up to their target level of 2%.

Americans Feel Like It’s a Better Time to Sell Than to Buy a Home

For the first time in more than a decade, Americans are feeling better about selling a home than buying one.Overall, Americans’ optimism toward selling a house has risen sharply since the Great Recession, while their view toward buying has stagnated over the course of the expansion and dipped 11.69% in September from an index level of 77 in January.Americans’ growing confidence in selling points to underlying trends in the housing market, such as fast-rising prices and tight inventory.In addition to rising home prices and tight inventory, a demographic element also underpins Americans’ positive outlook toward selling, as a large share of homes in the U.S. are owned by those over age 55.As that cohort ages, seniors probably more likely thinking about selling their house.

https://blogs.wsj.com/economics/2017/11/07/americans-feel-like-its-a-better-time-to-sell-than-to-buy-a-home/

WHY LONDON’S HOUSE PRICES ARE FALLING

London’s house prices are currently going through hard times. However, this issue is something that has been occurring in recent years. London has been having issues with house pricing since a couple of decades ago, since then prices have been bubbly. During the 1990’s the price of an average house was tripled. This growth in prices shows pretty much what has been going on in Britain. Until the most recent year in 2014, when house prices were going up by 20%.

But, what has made these prices fall? Clearly, one of the most affecting impacts of the Brexit has been this one, the fail of house prices. In 2014, the government made changes to stamp duty, a tax on homebuyers, raising it for those buying houses worth more than about 1,000,000 dlls. Recently stamp duty became heavier still for those purchasing second homes. London is stuffed with luxury pads, and the city has over half the houses sold in Britain that cost more than 1,000,000 dlls.

Now prices are less bubbly than they were a few years ago. One explanation is the significant increase in supply. London’s rate of house-building has had a significant growth. Last year the stock of housing grew faster in London than nowhere else in Britain. Extra supply or the surplus in houses s has put some pressure on house prices, which made them go down. Changes in financial regulations have also had a significant effect such as New rules to intensify Britain’s financial stability, have discouraged banks from giving many loans. Since then the number of mortgages granted to first-time buyers in London has decreased about a 10% but rising in some other places in Brittan.

The growth in property prices may have slowed in London. Some estimates suggest that the rate of the building might decrease. However, housebuilders are worried about Britain’s economic prospects. And even if prices go are steady like now for years, London will still be an extremely expensive market.

https://www.economist.com/blogs/economist-explains/2017/11/economist-explains-6

Alan Greenspan is making the claim that big tax cuts are not what is needed in America right now and I agree with. Although tax cuts sound nice because everyone wants more money, in the long run, these tax cuts could lead to our national debt getting out of hand and hurt America in the future. Greenspan made some key points, one of them being that our economy is doing well right now and argues that the U.S. is currently at full employment. The unemployment rate is at the lowest it has been in seventeen years currently at 4.1 percent, so I don’t believe there need to be tax cuts in order to accelerate wage growth because that will currently happen on its own. The debt-to-GDP ratio is currently at 75 percent and is expected to increase to 97.1 percent by 2027 under the new tax bill. Under the existing tax structure, the debt-to-GDP ratio would only reach about 91.2 percent by 2027.

http://money.cnn.com/2017/11/10/investing/greenspan-tax-cuts-mistake-debt/index.html?iid=Lead

Effects of the new tax system

A big part of the tax reform includes lowering the business tax rate, cutting corporate tax rates. There are mixed opinions on this new reform. But national economic council director Gary Cohn seems to think it will create quite a bit of stimulation into the economy. Gary Cohn has a long history involved in the corporate world. And just last year, he was advocating for businesses to relocate to a place with a more desirable tax system. 

Now he believes that Americans can keep their large companies here at home. This will create jobs because will the lower taxes the companies will be able to afford to pay workers wages. The money will be held here, and part of the profits made will be reinvested into stocks. And any earnings on those stocks will have to pay the 20% tax, making up for the losses in the cuts from the actual business. The increase in the velocity of investment will outweigh the loss of taxes being collected from the businesses themselves.

Now on the contrary, there is a chance that the new profits in the economy will not be invested in the way that we anticipate, and we run the chance of the government running a larger deficit.

https://www.cnbc.com/2017/11/09/gary-cohn-a-year-ago-i-was-advising-companies-to-move-out-of-the-us.html

Target CEO says he still sees many opportunities in retail

Target's CEO Brain Cornell claims he's confident with consumer confidence this holiday season, and believes there's still profit to be made in retail. 

Retailers in general are fighting against making the customer's shopping experience better or different from what they can get by shopping online. 

 Target plans to do this by introducing eight new brands this holiday season. The brands are exclusive to Target. They also are hiring 100,000 more workers than normal this holiday season in order to stock shelves faster or help with online orders. Target has also attempted to create faster shipping options for their customer so they don't loose business from other companies like Amazon who are know for their fast delivery. Target also plans to have each employee specific to a department, where they are knowledgable about all the products offered. For example if you want an employee to help you pick out an outfit then they can do that. 

Target has being seeing positive consumer confidence. They are witnessing more visits to stores and more views to their website. 

Target CEO believes that retail jobs are still a strong way to enter the workforce, but that in the future the jobs offered in retail will be different. 

I believe Target's moves are a head of other retailers. They are thinking of how to make the consumer happy and how to make the consumer's time spent shopping the most effective. By having employees specialize in a department it allows for consumers to understand what they are buying and it lowers their return rates. Also the idea reaches to all types of consumers, by bettering their website they are target the younger buyers, and by bettering customer service and experience they are target older generations who would rather shop in store. 

Overall, I think that their small changes will cause an increase in consumer confidence and consumption. 


http://www.foxbusiness.com/features/2017/11/12/target-ceo-says-still-sees-many-opportunities-in-retail.html

Lyft competing for 1/3 of rideshare market

Millennials love ridesharing companies. It is a great way to go out on the weekend or a great replacement to public transportation if you don't have a car. However, between the two major companies of Uber and Lyft, Uber has always been the "king of the hill," in a sense. However, in the last year Uber has hit roadblock after roadblock which might give Lyft an advantage.

What exactly did Uber do wrong? To start, consumers began a boycott of Uber because there was a belief that Uber was undermining a protest involving President Trump's initial travel ban. Shortly after, Uber began having problems with sexual harassment, executive departures and they were even sued by Waymo on grounds that Uber's self-driving car was based on stolen technology. All of this led to CEO Travis Kalanick stepping down.

As a result, Uber has not had the 2017 it was looking to have and Lyft is ready to capitalize on the poor performance especially since rideshare users are only an app away from switching. In order to get consumers to make the switch, Lyft has focused on public perception. It is clear that there is no major differences between the apps so focusing on perception may be enough to begin the switch. In addition, Lyft has also been attracting large new investments that are looking to propel it to Uber's level of success. However, it looks like it is going to take time to fully catch up to Uber's market size, but it is a great start. 

http://fortune.com/2017/11/12/lyft-us-rideshare-market-report/

Disney shares jump as Wall Street getting optimistic media giant can compete with Netflix

Disney shares rose by 3% on Friday due to analysts bullish stance on the prospects of Disney's internet video streaming services. Disney reported weaker than expected 4th quarter earnings and generated $1.07 earnings per share instead of the expected $1.12. Normally when company's release earnings that are less than expected their stocks slightly drop because investors see the loss in value and aren't as incentivized to invest. The increase in their stock price means that investors are super optimistic about the prospects of this new streaming service. Netflix pretty much has a monopoly on the streaming industry so it will be interesting to see how a big name like Disney will compete with them. The industry is still very young and over the next 10 years more and more companies will venture into this industry because there is so much potential.

Disney announced plans in August to launch a direct to consumer streaming service in 2019 and an ESPN streaming service in 2018. They have recently made progress on how to price their product and how to convert their gigantic customer base into subs. Analysts are very optimistic about Disney and foresee a big bump in stock prices. It will be interesting to see if Disney will succeed in this endeavor because the potential is massive. ESPN has also been losing money for Disney over the last few years so maybe this new streaming service will revitalize ESPN and get it back on track.

The Economics of Traffic

Traffic is not only is a large burden to commuters, it also has negative effects on the economy and worldwide pollution. A recent study from Texas A&M has tagged a price on traffic in the United States, and the results are stunning. Traffic leads to environmental costs, mental/social costs and economic costs. Starting with the environmental costs, vehicles that are stuck in traffic will emit more carbon monoxide than the exact same vehicle traveling the exact same distance but in a shorter time. The researchers at Texas A&M found that drivers in Los Angeles spent an average 104 hours stuck in traffic. To put this in perspective, their cars were idling over 4 days on top of their current necessary usage solely due to traffic. This highway congestion also causes mental and social costs from being late or the stress that arises due to traffic. A large social cost of traffic that is often overlooked is the addition to air pollution that we discussed in the environmental costs. This extra output of carbon monoxide speeds up the process of global warming and can be especially hard on citizens that live in the large cities of the United States that have high levels of pollution, some due to traffic. The economical effects of traffic are also negative. Inrix, a company that monitors traffic information, estimated that traffic in the United States has led to a usage of over 3 billion gallons of fuel each year. This is an estimated cost of $300 billion dollars wasted on fuel from cars idling an unnecessary period of time due to traffic which divides up to about $1,400 per driver. If US drivers had an extra $1,400 of disposable income each year if they did not have to waste it on gas consumption due to traffic, there could potentially be more saving which will grow the economy in the long run or an increase in spending.

What can be done about this? The US Department of Transportation has recommended "zipper-merging" in order to cut down on traffic. Another possible solution could be subsidizing or offering tax rebates for hybrids that do not use fuel while idling which would eliminate the majority of the negative effects of traffic, but not all. Lastly, increased government spending on roadways would decrease traffic, but would most likely be difficult to get voters to justify the raise in tax to do so.

https://www.wsj.com/articles/traffic-is-piling-upand-so-are-its-costs-1510322400

Are interest rates going to surprise us all by spiking up soon?

A new study by a scholar from Harvard University visiting the Bank of England provides data from the 1300s up to the present on interest rate trends, showing that the world’s rates are in a downturn but could spike up quickly and suddenly. People often talk about rates being low in the US the past twenty years. But Schmelzing, the scholar, showed using data going back 700 years that the current low rate trend is actually 200 years long. 

Schmelzing calculated the average real interest rate over the last 700 year period as nearly 5% for real interest rates—that subtract inflation rates. He showed that we are currently in a low period with rates averaging only 2.6% over the last 200 years. The current period of low rates starting in the 1980s is the period having the second lowest rates over the 700 years he tracked. So while it’s true that interest rates are currently at record lows, the low trend has actually been lasting longer than most of us realize.

But the data show that there have been nine periods in total where rates followed a declining trend only to suddenly rise. What is worrying is that he shows that the history of the data reveals that within two years of hitting their lowest points, rates have gained rapidly and without much warning.  So with rates possibly set to rise very quickly and suddenly, people should be careful about getting into situations where they borrow money using flexible interest rate deals.

https://www.bloomberg.com/news/articles/2017-11-12/trump-showing-he-can-be-played-former-intelligence-chiefs-say

http://news.morningstar.com/all/market-watch/TDJNMW20171110488/update-7-centuries-of-interest-rates-theres-a-warning-for-investors-in-this-chart.aspx

http://www.zerohedge.com/news/2017-11-07/bank-england-700-years-data-suggests-reversal-rates-will-be-rapid

NFL Protests affect Papa John's Sales

The Papa John's CEO, John Schnatter, came out last week and commented on the NFL kneeling protest and talked about how he is blaming the NFL for mishandling the protests which has decreases the sales recently.  This in my opinion is a big problem with the NFL because Papa John's is the NFL's biggest pizza sponsor and if they this keeps up I feel like Papa John's will eventually try and move away from the NFL if these protests continue to occur.  Even the ratings of the NFL games has decreases by 5% during the first five weeks and down 18.7% from 2015.  NFL is going to need to figure out what to do with the protests because if companies keep feeling like the NFL is going to affect their business and sales numbers than many will try and stay as far from the NFL because they do not want their sales number to decrease.  Roger Goodell should begin handing out fines in my opinion to the players who kneel during the national anthem to try and finally put a halt to the protests.  The players need to see that them kneeling is doing more bad than good, it is causing problems with the number of viewers each week and the merchandise and ticket sales that have been decreasing from week to week.  John Schnatter made a good mood going public with his own opinion about how the protests is affecting his business in a bad way and needs to try and get the NFL to make some type of change.

https://www.usatoday.com/story/money/food/2017/11/01/papa-johns-ceo-blames-nfl-declining-sales-due-mishandling-anthem-protests/821368001/

October jobs report in U.S. reveals healthy economy, but wage growth disappoints

The creation of new jobs is always a big political battle of which party can do the best. So far during the month of October 261,000 jobs were created which is down from the predicted 310,000. This isn't a big deal to economists because of the hurricane damage through the month of September possibly holding up the creation of jobs in some parts of the country. Economists even say the country is doing better than industry expectations which is good news for now. One problem found during the month of October is the wage growth rate is down from 2.4% to 2.8%. Which is big news as the fed is reportedly planning an interest rate hike in December to combat inflation pressures. It will be interesting to see what the month of November brings as many changes are being put into place for the countries economy.


https://russellinvestments.com/us/insights/market-week-in-review?gclid=EAIaIQobChMIopy2oLO61wIV2IqzCh2wnQI8EAAYASAAEgIjLfD_BwE

Regulators begin to tackle the craze for initial coin offerings

After Floyd Mayweather made the first celebrity endorsement of cryptocurrency via Instagram in July, “stox.com” (an online prediction market) went on to raise $30 million, some of which went straight in to Floyds pocket. As of November 1^st, the SEC warned those affiliated of the unlawfulness of some of these promotions if the celebrities fail to report compensation numbers.

                  Over the past 12 months, $3.3 bn has been raised in more than 200 ICOs, which is the new rage compared to IPOs according the Coinschedule, a data provider in cryptocurrency. A former securities regulator stated, “Regulators have never seen a new financial product explode with the speed and velocity of ICOs.” Supervisors in China and South Korea have already outlawed ICOs due to a heavy tie to gambling cultures. Legally things are complicated surrounding these coins. A University of Pennsylvania Wharton School professor addresses that the SEC argues that the technology is irrelevant; when tokens are used to raise funds, they are securities. ICOs are initially used to raise funds but have been akin to produce raw finances for projects which bring to question the treatment of such money that can be used both ways.

                  The challenge here is to convince the SEC that these tokens are in fact “utility tokens” that initially raise funds but are now seen as investments, watching values skyrocket. A company, Tezos (coin logo above), had raised $232 million to finance another blockchain, but one with a sophisticated governance system that killed bitcoin. Ironically the company has become a token-financed system that ran into many governance issues. The company is currently in a public quarrel with the head of the foundation and how it should be run. The founders are facing suits from an ICO contributor who is accusing breaches of security law. Other block chains  have now taken action to prepare for such issues, Blockstack will not be like Tezos by launching without pre-sale and installing a discount. Only time will tell if Blockstack will solve the breach issues or join Tezos as suit-stricken block chain oriented firms.

https://www.economist.com/news/finance-and-economics/21731157-they-raise-difficult-legal-questions-regulators-begin-tackle-craze