Tuesday, October 17, 2017

Tuesday, October 17, Night Wall Street Roundup: Dow Pierces 23,000 But Finishes Below Milestone

By Caroline Valetkevitch
October 17, 2017

The Dow Jones Industrial Average briefly broke above the 23,000-point mark for the first time on Tuesday, driven by strong earnings from UnitedHealth and Johnson & Johnson, but finished the session just below that milestone.

The blue-chip index, which surpassed similar 1,000-point marks three times previously this year, has been steadily inching higher and is up 2.6 percent so far this month, putting it on track for a seventh straight monthly advance.

Still, the Dow may in the near term have a difficult time sustaining a move above 23,000, said Robert Pavlik, chief market strategist at Boston Private Wealth in New York.

“My view is it may pull back before staying above” that level. “It may take several days or a couple of weeks,” he said.

“Right now, you’re contending with earnings season and the fact that the market has run up leading up into the earnings season,” Pavlik said.

Shares of the largest U.S. health insurer UnitedHealth (UNH.N) touched a life intraday high and closed up 5.5 percent after the company reported a stronger-than-expected profit and raised its full-year earnings forecast.

Johnson & Johnson (JNJ.N), up 3.4 percent, also posted better-than-expected results and raised its forecast, leading a 1.3 percent gain in the S&P healthcare sector .SPXHC.

The Dow Jones Industrial Average .DJI rose 40.48 points, or 0.18 percent, to end at 22,997.44 after rising as high as 23,002.20.

The S&P 500 .SPX gained 1.72 points, or 0.07 percent, to 2,559.36. and the Nasdaq Composite .IXIC dropped 0.35 point, or 0.01 percent, to 6,623.66.

Also boosting some health insurers and U.S. hospital operators was news of a bipartisan deal in the U.S. Senate to stabilize Obamacare. Shares of Anthem (ANTM.N) were up 1.9 percent, while shares of Tenet Healthcare (THC.N) were up 5.3 percent.

Financials were the biggest drag on the S&P 500, with shares of Goldman Sachs (GS.N) down 2.6 percent despite reporting a profit beat and smaller-than-expected trading revenue fall.

Netflix (NFLX.O) slipped 1.6 percent after touching a record high as more subscribers signed up for its original content in the latest quarter.

After the bell, shares of International Business Machines (IBM.N) were up 4.9 percent after the company reported revenue that beat analysts’ expectations. The stock ended the regular session down 0.2 percent at $146.54.

During the session, declining issues outnumbered advancing ones on the NYSE by a 1.37-to-1 ratio; on Nasdaq, a 1.72-to-1 ratio favored decliners.

About 5.5 billion shares changed hands on U.S. exchanges. That compares with the 5.9 billion daily average for the past 20 trading days, according to Thomson Reuters data.

Article Link To Reuters:

Instead Of U.S. Midterms, Sanders Focuses On Smaller Races

By Amanda Becker and Richard Cowan
October 17, 2017

U.S. Senator Bernie Sanders will focus on getting liberal candidates elected to state and local offices ahead of next year’s midterm elections rather than on higher-profile U.S. congressional races, to help build a national progressive movement from the ground up.

Sanders said he hoped his emphasis on school boards, city councils and statehouses will help support the next generation of activist progressive candidates and dovetail with the mission of Our Revolution, a nonprofit political group run by former staffers and volunteers for his 2016 presidential campaign.

“I look at politics a little bit differently than some of my colleagues in the sense that I believe that we need to build a national grassroots movement,” Sanders told Reuters in an interview on Tuesday.

“So I think my emphasis is going to be more on grassroots politics,” he added.

Sanders, an independent in the U.S. Senate, galvanized the Democratic Party’s progressive wing last year with his primary challenge against eventual nominee Hillary Clinton.

Sanders, 76, drew huge crowds and won 43 percent of Democratic primary voters with his calls to end the influence of big money in politics, create Medicare-for all healthcare and establish free tuition at public universities.

Democrats are arguing over the best way out of a deep electoral rut capped by Clinton’s presidential election defeat by Republican Donald Trump. The party lost nearly 1,000 state legislative seats nationally during former President Barack Obama’s two terms in the White House, and hold the fewest governor’s offices in nearly a century.

New Generation

“There is an absolute need for the development of a new generation of leadership,” said Democratic strategist Erik Smith, adding that current Republican victories are the result of grassroots investment in the 1980s.

Sanders said the type of progressive policies he espoused during his campaign are winning support around the country.

He traveled to Georgia last month to campaign for Vincent Fort, a state senator running for Atlanta mayor. Sanders called Fort, who supports a $15 per hour minimum wage and the expansion of the Medicaid health insurance program for the poor and disabled, a “life-long progressive.”

Sanders also pointed to the success of local candidates backed by Our Revolution, including Randall Woodfin, a school board president who triumphed in a crowded field to oust the incumbent Democratic mayor of Birmingham, Alabama, and Chokwe Antar Lumumba, who defeated an incumbent and a state senator to become the Democratic nominee for mayor in Jackson, Mississippi.

“Democrats suffer from thin-bench syndrome in so many states,” said Matt Barron, a Massachusetts Democratic strategist focusing on rural issues.

Barron pointed out that in Mississippi, just one of eight statewide offices is held by a Democrat and both chambers of the legislature are controlled by Republicans. “There is almost nobody to run,” he said.

Sanders said he plans to travel to Somerville, Massachusetts, next week to support a half dozen candidates in city council races.

“If you look at cities and town and school boards, what you see all over the country is that we are in fact making progress,” Sanders said.

While Sanders frequently exasperated Clinton and her supporters, his policy prescriptions won support from many Democrats and the party has shifted to the left since Clinton’s defeat. Many potential 2020 Democratic presidential candidates back Sanders’ Medicare-for-all proposal.

Republicans hold 52 seats in the 100-member U.S. Senate, and Democrats and independents will be defending 25 of the 34 seats up for re-election in 2018. In the U.S. House of Representatives, Democrats hold 194 of 435 seats and all are up for re-election next year.

Article Link To Reuters:

(Fucking Moron) Faber: 'Thank God White People Populated America'

-- The market pessimist Marc "Dr. Doom" Faber claims that the U.S. is great primarily because it is ruled by white people.
-- "I am not a racist, but the reality — no matter how politically incorrect — needs to be spelled out," he says in his latest Gloom, Boom & Doom report.
-- Faber did not back away from the statements when asked for comment by CNBC, writing in an email, "If stating some historical facts makes me a racist, then I suppose that I am a racist."

By Jeff Cox
October 17, 2017

Market doomsayer Marc "Dr. Doom" Faber has launched a racially charged diatribe in his latest newsletter, alleging that the U.S. is great primarily because it is ruled by white people.

The eccentric Gloom, Boom & Doom report author, who often speaks on CNBC and other financial media, generally forecasting some type of market downturn, focused his latest comments on the racial conflicts happening around the country.

"And thank God white people populated America, and not the blacks. Otherwise, the US would look like Zimbabwe, which it might look like one day anyway, but at least America enjoyed 200 years in the economic and political sun under a white majority," he wrote.

"I am not a racist, but the reality — no matter how politically incorrect — needs to be spelled out."

Reached for comment via email, Faber did not back away from his statements to CNBC.

"If stating some historical facts makes me a racist, then I suppose that I am a racist. For years, Japanese were condemned because they denied the Nanking massacre," he told CNBC in an email.

In addition to the brief statement, he sent a link to a USA Today story titled, "Banned in Biloxi, 'To Kill a Mockingbird' raises old censorship debate," focusing on the Harper Lee classic.

In the newsletter, Faber's comments address the confrontation in Charlottesville, Virginia, directly. Protesters clashed in August over a white nationalist rally called Unite the Right in Charlottesville, where officials were debating the removal of a Robert E. Lee statue from the University of Virginia campus.

The violence sparked a national debate over race and monuments that honor prominent Confederate figures that Faber decided to weigh in on.

Faber called the monuments "statues of honourable people whose only crime was to defend what all societies had done for more than 5,000 years: keep a part of the population enslaved."

Article Link To CNBC:

Amazon Has A Chance To Redefine Corporate Responsibility

Its headquarters search should resist handouts and challenge cities to create better environments for all workers.

By Virginia Postrel
The Bloomberg View
October 17, 2017

Amazon’s search for a second headquarters presents the opportunity to take seriously the much-abused concept of corporate social responsibility.

The ideal asserts that a good company doesn’t just maximize profits. It acts as a good corporate citizen. But what does that mean?

In practice, “corporate social responsibility” is usually shorthand for embracing left-of-center causes. Companies pay obeisance, and sometimes money, to racial and gender diversity, recycling, women’s health, energy efficiency, gay pride, public schools, sometimes the arts. They use “social responsibility” to signal solidarity with current or potential employees, to draw attention to the brand, or to diffuse criticism for other actions. It serves as employee compensation, brand-building and protection money.

Amazon’s headquarters search offers the opportunity to make it something more.

The concept’s frequent misuse doesn’t make corporate social responsibility a meaningless phrase. A corporation does have ethical responsibilities that go beyond its employees’ individual moral duties, and those responsibilities may sometimes conflict with the short-term interests of shareholders.

To be a good corporate citizen requires acting to protect the efficiency and fairness of the system that allows the company to prosper in the first place. True corporate social responsibility prohibits using political influence to undermine competition and erode legal equality. It means not soliciting favors that hurt rivals or offer advantages unavailable to those without connections.

So Amazon has a choice. It can act as a responsible corporate citizen, viewing its headquarters search as a challenge to get cities thinking about how to create better environments for all sorts of enterprises. Or it can ignore ethics and go looking for handouts.

Local officials face the same decision. They can try to create the best possible environment for their citizens, including the potential Amazon headquarters. Or they can rob Peter to pay Jeff, siphoning money from taxpayers and throwing it at the retail giant.

Amazon’s request for proposals leaves room for either possibility. On the one hand, the company asks locales to spell out potential payoffs: “Outline the type of incentive (i.e. land, site preparation, tax credits/exemptions, relocation grants, workforce grants, utility incentives/grants, permitting, and fee reductions) and the amount. The initial cost and ongoing cost of doing business are critical decision drivers.”

No wonder critics are charging Amazon with looking for corporate welfare, practicing crony capitalism, or even demanding “blackmail.”

But a low cost of business need not entail special favors. And there’s another side to Amazon’s search criteria. The company says that “a stable and business-friendly environment and tax structure will be high-priority considerations” and later emphasizes the importance of a “stable and consistent business climate.” A place where businesses must solicit customized loopholes, rather depending on reasonable and equally applied tax and regulatory policies, is neither stable nor consistent.

Take New Jersey, where Gov. Chris Christie is rushing through special legislation permitting the state to give Amazon up to $5 billion in tax breaks. He wants to sign the bill before leaving office Jan. 16, so “this thing will all be adopted before any new governor comes in and once it’s on the statutes he can’t stop it from happening,” Christie told Observer NJ reporter Christian Hetrick. That doesn’t sound like a stable and consistent business climate. It sounds like crony capitalism of an especially unsavory sort.

Customers love Amazon, and it has earned its popularity by relentlessly focusing on serving them, even at the expense of near-term profits. The company clearly can take the long view.

As it searches for a new headquarters city, it should consider what its high-profile decision says about its values, priorities, and identity.

Does it want to define itself as a scrappy competitor devoted to its customers’ welfare? Or a lobbying shop looking for protection and subsidies? Does it want to sow further public cynicism, convincing the little guy that the game is rigged? Or to strengthen the rule of law? Even if all it cares about is the bottom line, the company might consider the dangerous resentment that taking the highest bid might generate from the dozens of losers.

Amazon’s primary criteria do in fact benefit the public at large: transportation links, short commutes, strong universities, “a community where our employees will enjoy living, recreational opportunities, educational opportunities, and an overall high quality of life.” It’s not just about the money. A good place to live and do business is a good place for everyone, not just those who can get the mayor on the phone.

Article Link To The Bloomberg View:

Saudi Oil Minister Downplays Prospect Of Aramco Abandoning IPO

‘No change’ in plans to publicly list company in 2018, he says.

By Benoit Faucon
The Wall Street Journal
October 17, 2017

Saudi Arabia still plans to publicly list a portion of its state oil company in 2018, the kingdom’s oil minister said Tuesday, after reports that the effort may be abandoned.

“We are on track,” Saudi oil minister Khalid al-Falih said on Tuesday outside the Oil and Money energy conference in London.

Doubts about the IPO of Saudi Arabian Oil Co., better known as Aramco, have grown in recent days as news organizations including The Wall Street Journal have reported that the kingdom may not go forward with the plan. The Journal reported last week that Aramco was interested in selling a stake to a private investor and that a Chinese company had made an offer.

Asked if Saudi Arabia still planned a local listing for Aramco in Riyadh and an international listing, Mr. Falih said, “No change.”

“You will know the venue and the exact date in due course,” said Mr. Falih, who also is Aramco’s chairman.

Prince Mohammad bin Salman, the kingdom’s heir apparent, announced the IPO of up to 5% of Aramco in January 2016 and estimated the company’s value at between $2 trillion and $3 trillion. If that valuation held true, the IPO could fetch over $100 billion—by far the largest ever.

The Journal has reported that the IPO has been delayed by questions over the valuation and difficulty untangling the vast state company from the government.

Article Link To The WSJ:

Kurds Now Face A Tricky Peace

By John Davison and Tom Perry
October 17, 2017

Kurdish groups who led the fight against Islamic State in its former capital Raqqa must navigate a complex peace to avoid ethnic tension with the city’s Arab majority and to secure critical U.S. aid.

The Kurdish-dominated Syrian Democratic Forces (SDF) which finally vanquished Islamic State in Raqqa on Tuesday face a big task rebuilding a city left in ruins by months of intense fighting and heavy air strikes by the U.S.-led coalition.

The political challenge is no less daunting in a city that falls outside the Kurdish-dominated regions of northern Syria.

The fall of Raqqa, where Islamic State staged euphoric parades after its string of lightning victories in 2014, is a potent symbol of the jihadist movement’s collapsing fortunes.

Its self-declared “caliphate” is also crumbling fast in eastern Syria, helping President Bashar al-Assad and his Iranian and Russian allies to recapture swathes of territory.

Keenly aware of Raqqa’s ethnic and tribal sensitivities, the SDF has been working hard to put Arabs at the heart of plans for local government and policing post-Islamic State, analysts say.

In the short term, the Raqqa Civil Council (RCC) set up under SDF auspices must urgently provide security, repair infrastructure and supply aid to win the backing of a population exhausted by conflict, and to allow the people of Raqqa to return home.

Longer term, Raqqa’s political destiny is tied to the wider fate of the war that has shattered Syria into a patchwork of areas over the last six years, including swathes of the north controlled by the Kurdish YPG militia that leads the SDF.

Ultimately, the Syrian state wants to recover control of this city on the Euphrates River, meaning it may eventually become the arena of a new conflict with Damascus, or a bargaining chip in eventual negotiations over possible Kurdish autonomy.

“Whoever leads us, Kurd or Arab, we want them to provide us with services,” said a man from Raqqa, speaking outside the RCC headquarters in Ain Issa, north of the city.

“Safety and security is the most important thing,” said the man, a government employee before the war who cited lingering fear of the Syrian state as his reason for staying anonymous.

“Federal” Future?

Raqqa was not a target for the YPG earlier in the war but gradually became one as the militia emerged as the main Syrian partner for the U.S.-led coalition.

The U.S.-led coalition says Arab fighters battling under the SDF banner made up the bulk of the force in the Raqqa campaign. But Kurdish commanders and fighters of the well-organized YPG appeared the leading force throughout the four-month campaign.

Syria’s main Kurdish party, the PYD, and its allies may hope Raqqa will eventually join a new “federal” system of autonomous regions they are establishing in the north.

But Kurdish leaders say it is too early to discuss that for now, underlining local and international sensitivities surrounding the political project opposed by their U.S. allies and neighboring Turkey.

While Syrian Kurds say they want to remain part of Syria, regional concern over Kurdish separatism has deepened since Iraqi Kurds voted for independence, triggering military action by Iraq and tough measures by Turkey and Iran.

Turkey, in particular, views rising Syrian Kurdish power at its border as a threat to its security, and unsuccessfully pressed Washington to abandon its alliance with the YPG in the run up to the Raqqa attack.

Turkey plays host to a rival Raqqa civil council which regards the YPG as a foreign occupation force. Kurdish politicians say Raqqa’s future is now entirely in the hands of its people.

“So far we have not seen any reactions to indicate there will not be acceptance of the SDF, or the RCC,” said Fawza Youssef, a senior Kurdish politician, in an interview.

“The ones who will remain in Raqqa will be the internal security forces and the RCC,” she said. “The security forces that are being prepared are all volunteers from Raqqa.”

Some YPG fighters quickly began pulling back from the city on Tuesday, handing their positions to non-Kurdish elements of the SDF, a witness and field commanders said.

Risk Of "Covert Interference"

The SDF applied a similar model in the northern Syrian city of Manbij last year after capturing it from Islamic State.

“The (RCC) is still closely linked with YPG/PYD power structures, but they have put more time and effort into emphasizing inclusivity than we have seen in some other areas,” senior International Crisis Group analyst Noah Bonsey said.

But the risk of unrest would rise if Kurdish groups were perceived to be micro-managing the city.

“There is also the risk of covert interference from the outside: IS sleeper cells, and the Syrian regime may see an interest in using loyalist networks to destabilize things. Either of those dynamics could heighten ethnic tension.”

Yasser al-Sayyed, a 43-year-old former car salesman from Raqqa, said people are “happy with the SDF now, of course, because they’re free from Daesh (Islamic State)”. “But this needs to be followed up” with aid, reconstruction and jobs.

The United States has deployed a team of diplomats to Syria to work on humanitarian and stabilization efforts.

“This is to make sure that after ISIS is cleared, we have conditions in place for people to return to their homes,” Brett McGurk, the U.S. envoy to the anti-IS coalition said last month.

But analysts question how long U.S. support will last.

A U.S. official involved in post-Raqqa planning said support could not be channeled to a “PYD political project of expansion into this part of the country”, and the United States would not support “the PYD project to make an autonomous administration”.

For example, the official said schools could only get aid if they were teaching a variant of the Syrian state curriculum, rather than an entirely new one. “We’re not going to support a separatist entity ... that’s cut and dry,” the official said.

Though McGurk said nobody living in SDF-held areas wanted a return of Syrian state control, Damascus may be planning to reassert its influence.

A Syrian government official forecast trouble ahead for the SDF in Raqqa and other Arab majority areas of Syria.

“There is a contradiction,” said one Syrian official, speaking on condition of anonymity. “The manpower is with the Arabs, but the military power is with the Kurds.”

Article Link To Reuters:

The Fall Of ISIS Tests U.S. Commitment To Syrian Kurds

By Louisa Loveluck and Liz Sly
The Washington Post
October 17, 2017

U.S.-backed forces in Syria claimed Tuesday that they had full control of the Islamic State’s onetime capital of Raqqa, heralding an end to the militants’ presence in their most symbolically important stronghold and raising new questions about the United States’ future role in Syria.

Mustafa Abdi, a spokesman for the Syrian Democratic Forces, or SDF, said that military operations had halted and that members of the joint Kurdish-Arab force were clearing the city of explosive devices and hunting for sleeper cells.

The U.S. military said a formal victory announcement will come after SDF forces are sure that no pockets of Islamic State resistance remain in the city, but the SDF portrayed the battle for Raqqa as over.

“There is an air of jubilation in the city,” Abdi said. “People are overjoyed that they are finally rid of this scourge.”

Kurdish and Arab fighters took to the streets to celebrate the end of the battle they have fought for four months, climbing onto vehicles and parading around the deserted, destroyed city, according to photographs posted on social media. One showed the offensive’s commander, Rojda Felat, waving a large yellow-and-red SDF flag in Naim Square, where the Islamic State carried out its beheadings.

By the time the battle was over, Raqqa had lost all strategic significance to the group that once had used the city to showcase its brutality and plot attacks against the West. The fall of the Iraqi city of Mosul in July and the loss of large areas of territory in eastern Syria to Syrian government forces leave the militants in control of only one sizable stretch of territory, spanning the Iraqi-Syrian border.

But the capture of Raqqa by the SDF, backed by U.S. airstrikes and American advisers on the ground, nonetheless marks a milestone in the U.S.-led war against the Islamic State. In a briefing to reporters in Washington, a U.S. military spokesman, Col. Ryan Dillon, called it “momentous.” He said that the Islamic State has now lost 87 percent of the territory it once controlled and that 6,500 fighters remain, out of tens of thousands at the peak of its prowess.

The victory also intensifies growing questions about what comes next. The remaining Islamic State strongholds in Syria lie to the south in the province of Deir al-Zour, where the Syrian government and its Iranian-backed and Russian allies are making fast progress. The U.S. military will leave it up to the SDF to decide whether it wants to continue to advance into the area, Dillon said.

Perhaps more importantly, the Trump administration has not yet indicated whether it is prepared to stay on in northeastern Syria to provide protection for the fledgling ministate being forged by Syria’s Kurds. The experience over the past two days of the Kurds in neighboring Iraq may embolden the Syrian government to challenge the Syrian Kurdish enclave once the Islamic State is vanquished, just as the Iraqi government has moved to dislodge Kurdish forces from the oil-rich city of Kirkuk and other areas they controlled.

Syrian government officials have spoken on several occasions about their determination to regain control over all of the territory they lost to the rebellion against President Bashar al-Assad, including the area controlled by the Kurds.

“What would be disastrous for Syrian Kurds is a rapid U.S. drawdown in Syria. It would take away their major foreign patron,” said Nicholas A. Heras of the Center for a New American Security.

A civilian council comprising Arabs and Kurds is waiting in the wings to take over governance of Raqqa, under the auspices of the Kurdish-led administration running northeastern Syria. But the international community has not committed funds for reconstruction of the devastated city, and the absence of a clear U.S. policy for northeastern Syria risks undermining the gains, cautioned Hassan Hassan of the Washington-based Tahrir Institute.

“No one trusts the Americans, not even the Kurds,” he said. “To defeat extremism after destroying areas through the necessity of war, you have to deal with the consequences, not just drop bombs and leave because you have an aversion to war.”

The offensive to capture the city began in June, with the SDF advancing on the ground as U.S.-led coalition airstrikes pummeled the militants. As was the case in Mosul, victory over the militants has come at a tremendous price. Much of the city now lies in ruins, its residents scattered in displacement camps across the country.

At least 1,000 civilians are said to have died, according to estimates by monitoring groups, most of them in the relentless airstrikes. More than 270,000 people fled their homes during the battle, according to the United Nations, and many will find they do not have homes to go back to.

Besieged and severely weakened, dozens of militants had launched a final stand from inside Raqqa’s main hospital and stadium. But the end of the battle was hastened by a controversial deal brokered by local officials under which local fighters were offered the chance to escape prosecution if they had not committed crimes, by surrendering to the SDF. Dillon said 350 fighters had surrendered in recent days, including some foreign fighters. They are being screened by the SDF to figure out whether they had participated in killings, he said.

Raqqa was the first provincial capital to fully fall from government control when it was captured in March 2013 by moderate and extremist groups including the al-Qaeda-linked Jabhat al-Nusra, then operating as the Syrian wing of the Iraqi-based Islamic State.

Article Link To The Washington:

ISIS Defeated In Its Syrian Capital Raqqa

By John Davison and Rodi Said
October 17, 2017

U.S.-backed militias in Syria declared victory over Islamic State in its capital Raqqa on Tuesday, raising flags over the last jihadist footholds after a four-month battle.

The fighting was over and the alliance of Kurdish and Arab militias was clearing the city’s stadium of mines and any remaining militants, said Rojda Felat, commander of the Raqqa campaign for the Syrian Democratic Forces (SDF).

A formal declaration of victory in Raqqa will soon be made, once the city has been cleared of mines and any possible Islamic State sleeper cells, said SDF spokesman Talal Selo.

In Washington, the U.S. military said that about 90 percent of Raqqa had been retaken from Islamic State but it expected the SDF to face pockets of resistance.

The fall of Raqqa, where Islamic State staged euphoric parades after its string of lightning victories in 2014, is a potent symbol of the jihadist movement’s collapsing fortunes.

Islamic State has lost much of its territory in Syria and Iraq this year, including its most prized possession, Mosul. In Syria, it has been forced back into a strip of the Euphrates valley and surrounding desert.

The SDF, backed by a U.S.-led international alliance, has been fighting since June to take the city which Islamic State used to plan attacks abroad.

A Reuters witness said militia fighters celebrated in the streets, chanting slogans from their vehicles.

The fighters and commanders clasped their arms round each other, smiling, in a battle-scarred landscape of rubble and ruined buildings around the main square.

The flags in the stadium and others waved in the city streets were of the SDF, its strongest militia the Kurdish YPG, and the YPG’s female counterpart, the YPJ.

Fighters hauled down the black flag of Islamic State, the last still flying over the city, from the National Hospital near the stadium.

“We do still know there are still IEDs (improvised explosive devices) and booby traps in and amongst the areas that ISIS once held, so the SDF will continue to clear deliberately through areas,” said Colonel Ryan Dillon, a spokesman for the coalition.

In a sign that the four-month battle for Raqqa had been in its last stages, Dillon said there were no coalition air strikes there on Monday.

Speaking with reporters in Washington later on Monday via video conference, Dillon said about 100 Islamic State fighters still remained in Raqqa.

“We expect our Syrian Democratic Force partners to hit pockets of resistance as the final parts of the city (are) cleared,” Dillon added.

Trapped By Fighting 

Fatima Hussein, a 58-year-old woman sitting on a pavement smoking a cigarette, said she had emerged from her house after being trapped for months by the fighting. Islamic State had killed her son for helping civilians leave the city, she said.

The fight for Raqqa has shattered much of the city. Houses, apartment blocks and public buildings were flattened by air strikes or holed by shellfire.

On Tuesday the international charity Save the Children said many of the 270,000 people who fled the fighting would likely be stuck in aid camps for months or years.

Children who fled were haunted by nightmares from the violence they witnessed, including Islamic State beheadings and coalition air strikes, it said.

The SDF has said that after the Raqqa battle ends, it would hand over control to a civil council set up by its political allies. It echoes the pattern in other territory the YPG and its allies have taken across northern Syria.

The State Department said the United States would help clear rubble and restore basic services in Raqqa.

“We will assist and take, essentially, the lead in bringing back the water, electricity and all of that,” State Department spokeswoman Heather Nauert told a briefing. “But eventually the governance of the country of Syria is something that I think all nations remain very interested in.”

Kurdish influence in the future of the mainly Arab city has been a sensitive issue for some activists from Raqqa and for Turkey. Ankara views the YPG militia as an extension of the PKK that has waged an insurgency on Turkish soil for three decades.

The SDF took the National Hospital after fierce fighting overnight and early on Tuesday, said spokesman Mostafa Bali.

“During these clashes, the National Hospital was liberated and cleared from the Daesh mercenaries, and 22 of these foreign mercenaries were killed there,” said Bali, using the Arabic acronym for Islamic State.

An SDF field commander who gave his name as Ager Ozalp said three militiamen had been killed on Monday by mines that have become an Islamic State trademark in its urban battles.

Another field commander, who gave his name as Abjal al-Syriani, said SDF fighters had found burned weapons and documents in the stadium.

The stadium and hospital became the last major positions held by Islamic State after some of its fighters quit, leaving only foreign jihadists to mount a last stand.

The SDF has been supported by a U.S.-led international coalition with air strikes and special forces on the ground since it started the battle for Raqqa city in early June.

The final SDF assault began on Sunday after a group of Syrian jihadists evacuated the city under a deal with tribal elders, leaving only a hard core of up to 300 fighters to defend the last positions.

Passports And Money

Raqqa was the first big city Islamic State captured in early 2014, before its series of rapid victories in Iraq and Syria brought millions of people under the rule of its self-declared caliphate, which passed laws and issued passports and money.

It used the city as a planning and operations center for its warfare in the Middle East and its string of attacks overseas, and for a time imprisoned Western hostages there before killing them in slickly produced films distributed online.

The SDF advance since Sunday also brought it control over the central city public square, where Islamic State once displayed the severed heads of its enemies, and which became one of its last lines of defense as the battle progressed.

The offensive has pushed Islamic State from most of northern Syria, while a rival offensive by the Syrian army, backed by Russia, Iran and Shi‘ite militias, has driven the jihadists from the central desert.

On Tuesday, a military media unit run by Lebanon’s Hezbollah said the Syrian army, which Hezbollah fights with, had pushed into the last Islamic State districts of Deir al-Zor city.

The only populated areas the jihadist group still controls in Syria are the towns and villages downstream of Deir al-Zor city along the Euphrates valley, areas that for the past three years Islamic State ran from Raqqa.

Article Link To Reuters:

Who Will Lead The Fed? A Look At Trump’s Five Finalists

The president is considering Janet Yellen, Gary Cohn, Jerome Powell, John Taylor and Kevin Warsh.

By WSJ Staff
The Wall Street Journal
October 17, 2017

President Donald Trump is considering five finalists to run the Federal Reserve and plans to announce his nominee before leaving for a trip to Asia on Nov. 3, a White House official said Tuesday. Mr. Trump is considering offering Fed Chairwoman Janet Yellen the chance to stay in the job after her current term as chief expires in February and is meeting with her Thursday. He also is considering nominating Gary Cohn, director of the National Economic Council; Fed governor and former Treasury Department official Jerome Powell ; Stanford University economist and former Treasury official John Taylor ; and former Fed governor Kevin Warsh.

Yellen, the Continuity Candidate

Picking Ms. Yellen would signal confidence in her handling of central-bank policy and the economy, including her slow and cautious unwinding of the Fed’s crisis-era stimulus policies. It also would follow the tradition in recent decades of a new president reappointing the incumbent Fed leader installed by a president of the other party.

Ms. Yellen, who became chairwoman in early 2014 when short-term interest rates were near zero, led the Fed to raise rates four times since late 2015 and to launch the process of shrinking the central bank’s $4.2 trillion in bondholdings acquired to lower long-term rates. The Fed signaled in September it expects to keep lifting borrowing costs gradually through 2020. Meantime, the U.S. economy is growing at a steady if moderate pace, the unemployment rate fell to 4.2% in September, the lowest level since 2001, and U.S. financial markets have taken the Fed’s policy moves in stride.

Gary Cohn, an Unknown on Monetary Policy

Mr. Cohn has been a central figure in the administration’s efforts to roll back regulations and cut taxes, but has provided few public clues of what he thinks about monetary policy or the big economic issues the Fed leader faces.

He has criticized forward guidance, or verbal efforts by central banks like the Fed to prepare markets for their envisioned policy path. Mr. Cohn said at an event in March 2016 that such measures have often confused markets.

Mr. Cohn joined Goldman Sachs as a metals trader in 1990 and became a partner in 1994. He served as Goldman’s operating chief from 2006 until he joined the Trump administration earlier this year.

Mr. Trump said in July that Mr. Cohn was a front-runner for the job, but Mr. Cohn fell out of favor with Mr. Trump for criticizing his response to violence at a white supremacist rally in Charlottesville, Va., in August. However, Mr. Cohn has remained in the running.

Powell, Continuity on Rates but More Open to Deregulation

A Powell-led Fed likely would continue Ms. Yellen’s slow approach to raising rates and reducing the bond portfolio very gradually, but have a lighter touch on financial regulation. During his five years at the Fed, Mr. Powell has been a reliable ally of Ms. Yellen. He has never dissented on a monetary policy vote and in speeches hasn’t deviated far from the board’s consensus.

But he has advocated loosening some of the banking rules included in the 2010 Dodd-Frank law, a position that meshes with Mr. Trump’s deregulatory agenda. Mr. Powell has suggested softening the Volcker rule barring banks from using their own money to make risky bets, and easing some bank stress tests. He also has endorsed reviewing some of the supervisory duties imposed on the boards of directors of banks to prevent them from being burdened with “an ever-increasing checklist.”

“More regulation is not the best answer to every problem,” Mr. Powell said in a speech in early October.

Taylor, a Vocal Fed Critic

Mr. Taylor, a longtime adviser to Republican presidents and presidential candidates, has been an outspoken opponent of the Fed’s easy-money policies adopted to stimulate the economy during and after the financial crisis. He is perhaps best known for his “Taylor Rule,” which was first spelled out in 1993 and provides a mathematical formula to set interest rates. Central bankers have used the rule as a benchmark against which to measure their own policy, but they have been hesitant to bind themselves to it. The rule would have called for considerably higher interest rates than the Fed put in place in the years since the crisis. Mr. Taylor has spent the past few years calling for higher interest rates.

He has criticized the Fed’s bond-buying programs, arguing that driving down longer-term bond yields would make lenders less likely to extend credit and hold down economic growth.

On fiscal policy, Mr. Taylor has advocated shrinking the federal deficit as a way to boost economic growth even in the aftermath of recessions. He has argued that reduced government spending would reduce the need for higher taxes in the future, prompting more private investment today.

Warsh, a Fed Critic With Crisis-Fighting Experience.

Mr. Warsh, a former Morgan Stanley executive who served on the Fed board during the financial crisis, has positioned himself as a conservative proponent of tighter monetary policy. He has expressed skepticism of central-bank rate policy and communications, criticized its asset-purchase programs, and accused officials of “trying to fine-tune the economy.”

In a December 2016 speech, Mr. Warsh criticized the Fed for straying from its mission of maintaining stable and low inflation. He chided the Fed for relying too heavily on short-term economic data when making policy decisions. “The Fed needs to stay out of politics, stick to its mission and reform its strategy, operation, communications and governance, and in so doing the weight and responsibility for the economy will have to be picked up by someone else,” he said.

Mr. Warsh served as an economic adviser to President George W. Bush before joining the Fed in 2006. After the crisis began, Mr. Warsh was part of then-Fed Chairman Ben Bernanke’s war room of officials who would brainstorm over ideas before Mr. Bernanke floated them with all Fed policy makers.

Article Link To The WSJ:

Key Takeaways From Wall Street's Third-Quarter Earnings

Fixed-income trading proved largest problem for U.S. banks; Record-high stock market boosted investment banking gains.

By Hannah Levitt
October 17, 2017

As earnings season for the biggest banks drew to a close, Morgan Stanley and Goldman Sachs Group Inc. joined other major U.S. lenders in showing the advantages and drawbacks of calm markets.

Like JPMorgan Chase & Co. and Citigroup Inc., the firms that reported Tuesday showed a decline in fixed-income trading revenue. Low volatility has been problematic for Wall Street, especially compared with what was an active trading environment in the third quarter of 2016 on the heels of Brexit and in anticipation of the U.S. presidential election.

And along with Bank of America Corp. and Wells Fargo & Co., the two investment banks said that their money management units and corporate investments rode the wave of record-high stock markets this quarter.

Here are Tuesday’s takeaways for investors.

Debt Trading

Goldman’s fixed-income trading revenue dropped 26 percent from a year ago, while Morgan Stanley posted a 21 percent decline. Still, both banks’ debt trading units slightly beat analyst expectations for the quarter.

These results are in line with the rest of the biggest U.S. banks this quarter. JPMorgan, Citigroup and Bank of America all posted double-digit declines in their fixed income trading units.

Rising Tide

Morgan Stanley, Wells Fargo and JPMorgan all posted record revenue from their wealth- and asset-management units as stock markets hit records and after the Federal Reserve hiked interest rates three times in the past year. Goldman Sachs also gained from rising markets, as its revenue from equity investments climbed to the highest in almost four years.

Investor Premium

Morgan Stanley’s wealth-management performance is helping it overtake Goldman Sachs in terms of the valuation investors put on its business, after years of a significant gap between the two companies’ price-to-book ratios. On Tuesday, Morgan Stanley’s stock climbed on its results, while Goldman’s shares fell more than 2 percent.

Investment Banking

Goldman Sachs and Morgan Stanley made it a clean sweep as all five of the major U.S. capital markets firms posted investment-banking revenue that surpassed expectations. Goldman Sachs posted the highest fees for advising on deals in more than two years, while Morgan Stanley Chief Financial Officer Jonathan Pruzan said receptive bond markets have helped activity. Bankers said clients aren’t waiting around on Washington to enact policy changes and are moving forward with their deals.


JPMorgan, Citigroup, Bank of America and Wells Fargo boosted provisions for consumer loan losses from the previous quarter, which could be a leading indicator of a turn in the credit cycle. That’s not scaring off Goldman Sachs, which has recently made building out online consumer-lending arm Marcus a key piece of its growth strategy. CFO Marty Chavez addressed those concerns head-on Tuesday, saying the firm is “well aware” of the state of the credit cycle and is pursuing prime borrowers.

Article Link To Bloomberg:

NAFTA Deadlock Forces Ministers To Extend Talks Into 2018

Contentious American proposals address cars and dairy products; Talks will continue with Mexico hosting next round Nov. 17-21.

By Josh Wingrove, Andrew Mayeda, and Eric Martin
October 17, 2017

Negotiations over the future of Nafta were extended into the first quarter of 2018 in a bid to resolve differences after Canada and Mexico rejected what they see as hardline U.S. proposals.

U.S. Trade Representative Robert Lighthizer, Mexican Economy Minister Ildefonso Guajardo and Canadian Foreign Minister Chrystia Freeland spoke in Washington Tuesday as battle lines form around contentious proposals to revamp the North American Free Trade Agreement.

“New proposals have created challenges and ministers discussed the significant conceptual gaps among the parties,” Lighthizer said, reading a joint statement at the close of the fourth round of talks Tuesday. “Ministers have called upon all negotiators to explore creative ways to bridge these gaps.”

During their joint remarks to the press, Lighthizer said he’s “surprised and disappointed” by the outcome so far, Guajardo said Mexico has limits to what it can accept in any deal, and Freeland said some of the proposals run counter to World Trade Organization rules.

In the joint statement, ministers reaffirmed their mandate to reach a deal in a reasonable period of time. Mexico will host the the fifth round of talks on Nov. 17-21, which is later than originally anticipated as ministers give themselves more time between rounds to assess proposals.

The Mexican peso jumped more than 1 percent on news of the 2018 timeframe for talks, as investors bet it decreased the odds that the deal would fall apart any time soon. The Trump administration had previously set a goal of finishing negotiations as soon as this year.

But Mexico and Canada have repeatedly and publicly rejected the U.S. demands on dairy, autos, dispute panels, government procurement and a sunset clause.

President Donald Trump has called Nafta a disaster and repeatedly threatened to withdraw the U.S. from the agreement, a step the White House can set into motion by giving six-months’ notice to its trading partners. At stake is the $1.2 trillion in annual trade between the three countries, as well as the business models of companies such as Ford Motor Co. and General Motors Co. that have adapted their supply chains to take advantage of the trade zone.

Trump again decried “massive trade deficits” with trading partners, speaking at the White House on Tuesday.

“Companies are leaving and they’re firing the people and the product is made elsewhere and then it’s sold back into the United States,” he said. “I’m not going to be allowing that, so I can understand how certain countries and the leaders of certain countries may feel. But we’re just not going to allow the United States to be taken advantage of by other countries anymore.”

Article Link To Bloomberg:

George Soros Transfers $18 Billion To His Foundation, Creating An Instant Giant

The pioneer of hedge-fund investing has transferred the bulk of his wealth to Open Society Foundations

By Juliet Chung and Anupreeta Das
The Wall Street Journal
October 17, 2017

George Soros, who built one of the world’s largest fortunes through a famous series of trades, has turned over nearly $18 billion to Open Society Foundations, according to foundation officials, a move that transforms both the philanthropy he founded and the investment firm supplying its wealth.

Now holding the bulk of Mr. Soros’s fortune, Open Society has vaulted to the top ranks of philanthropic organizations, appearing to become the second largest in the U.S. by assets after the Bill and Melinda Gates Foundation, based on 2014 figures from the National Philanthropic Trust.

Soros Fund Management LLC’s 87-year-old founder now shares influence over the firm’s strategy with an investment committee of Open Society. Mr. Soros set up the committee and is its chairman, but it is meant to survive him, people familiar with it said.

A new chief investment officer at the Soros firm is less a trader than an allocator of capital to various internal and external asset managers. Unlike past investment chiefs, the official, Dawn Fitzpatrick, doesn’t report to Mr. Soros or others at his firm but to the philanthropy’s investment committee.

Mr. Soros doesn’t plan to trade the billions that now belong to Open Society, according to the people familiar with the situation. Mr. Soros was trading his own money, held separately within the Soros firm, as recently as last year, when he bet—wrongly, it turned out—that stocks would slump after Donald Trump was elected president.

“It’s an ongoing process of migration from a hedge fund toward a pool of capital deployed to support a foundation over the long term,” said Bill Ford, a committee member and the chief executive of General Atlantic LLC, a firm that invests in growth-stage companies.

Though the $26 billion Soros Fund Management was a pioneering hedge fund, it returned outside investors’ money several years ago and became a family office—a type of structure, largely free of regulation, that is increasingly popular with wealthy clans.

Mr. Soros began his giving in 1979 and stepped it up to fight communism across Eastern Europe. In 1984, he set up a foundation in Hungary, the country of his birth, that distributed photocopiers to universities and libraries to break the government’s hold on information.

Having lived under both communism and a Nazi occupation in Hungary, Mr. Soros hoped to foster “open societies” in places where authoritarian governments held power. He named his foundation after a book by the philosopher Karl Popper, one of his teachers, that defended liberal democracies.

Open Society today has a broad mandate driven largely by its founder’s values. It operates through a network of more than 40 foundations and offices in countries from Afghanistan to South Africa. It has funded refugee relief, public-health efforts and programs including a mobile court for gender crimes in the Democratic Republic of the Congo. The philanthropy also advocates for rights of the Roma, one of Europe’s largest ethnic minorities.

Open Society’s activism has sometimes angered nationalist governments, such as the current one in Hungary, which targeted a university Mr. Soros founded and which has run poster campaigns singling him out for his support of refugees. Mr. Soros has urged developed countries in Europe and elsewhere to share the burden of increased migration from conflict-ridden countries. Anti-Soros politicians in Macedonia, Poland and some other European countries have attacked foreign-funded groups, including Open Society, for what they see as outside interference in their affairs.

In the U.S., where Mr. Soros is a major contributor to liberal and Democratic causes, he is a lightning rod for conservatives. Open Society has supported efforts to overhaul immigration policies and the criminal-justice system, including prisons, and funded mentoring programs for black and Latino young men. It has supported activists working on issues raised by the Black Lives Matter movement.

Mr. Soros funded Latino get-out-the-vote efforts last year and donated to largely Democratic district-attorney candidates around the country. A Hillary Clinton supporter, he was an outspoken critic of Mr. Trump, whose campaign cited Mr. Soros in a closing ad as part of a “global power structure” the ad said disadvantaged the working class. After the election, Open Society said it would spend $10 million to fight hate crimes, a problem Mr. Soros said had been inflamed by the Trump campaign.

In all, Mr. Soros and Open Society have given $14 billion so far, said a foundation spokeswoman.

When it comes to investments, philanthropic foundations typically focus more on preserving capital than maximizing returns, unwilling to tolerate the losses that can accompany high-risk, potentially high-reward trading. Now that Soros Fund Management’s main client is a philanthropy, several people close to the firm say they expect it to curtail its tradition of large “macro” trades—wagers on the direction of currencies, stocks, commodities or interest rates.

Mr. Soros declined to be interviewed. Ms. Fitzpatrick, the new investment chief, said the firm isn’t backing away from macro investing but expects future opportunities to be more fleeting and smaller. “There are fewer currencies, [and] central banks are savvier and more coordinated now,” she said.

Mr. Soros immigrated to Britain as a youth, studied philosophy and then became a stock trader, before moving to the U.S. and setting up what became Soros Fund Management in 1969.

In a trade that brought him wide attention, he made a giant “short” wager against the British pound in the early 1990s, which paid off when Britain devalued its currency and withdrew from that era’s European Exchange Rate Mechanism. Mr. Soros’s firm earned roughly $1 billion and he was dubbed the man who broke the Bank of England.

A run of rich annual returns hit a pothole in 2000, when the firm’s flagship Quantum fund lost heavily on cratering technology and biotech stocks. Discord with Mr. Soros over the soured tech bets factored in the departure of his investment chief of 11 years, Stanley Druckenmiller, to whom Mr. Soros credited the idea for the pound trade.

That marked the start of continued change atop the firm as chief investment officers cycled through. Some operations also were rejiggered, which ex-employees said was partly to make way for Mr. Soros’s eldest sons. At one point in 2003 Mr. Soros hired Steven Mnuchin, now U.S. treasury secretary, to run a credit business.

Despite regularly telling others he was retired, Mr. Soros occasionally stepped back into active trading, such as during the financial crisis, when he helped guide his firm to big gains. Former employees say some past investment chiefs bristled at how Mr. Soros inserted himself in operations, judging them critically on what they felt was short-term performance.

The longest-serving investment chief of recent years, Scott Bessent, stopped by Mr. Soros’s estate in Southampton, N.Y., one July weekend in 2015 and said he was thinking of leaving to start a hedge fund of his own, adding he would want more authority were he to stay. He didn’t get it. Mr. Bessent soon left, ending a strong run of 4 1/2 years with a $2 billion investment in his new fund from Mr. Soros.

The departure, the fifth by a Soros investment chief in 15 years, coincided with a stepped-up pace of change at the firm. Mr. Soros decided that year to form the Open Society investment committee that now wields power, and his wealth transfers to the philanthropy accelerated around the same time.

That most of his fortune would eventually go to Open Society has long been known, but Mr. Soros previously funded it with annual donations. He plans to give it most of the rest of his wealth in his lifetime or upon his death, said people familiar with the matter, pushing its assets above $20 billion.

Soros Fund Management’s annual returns have averaged around 11% in the past 10 years, according to a person familiar with the figures, well below the 30% of its early decades.

Ms. Fitzpatrick, who began as investment chief in April, is an options trader by background who arrived from UBS Asset Management, where she oversaw teams managing more than $500 billion in client money across a wide range of strategies.

Her priority isn’t making her own trades but moving money as opportunities shift, said people familiar with the Soros firm. They added she is whittling the number of managers given money to invest and is seeking to build a more collaborative approach, such as by linking employee pay more closely to returns of the firm as a whole.

The firm has about $6 billion in private-equity and related investing, from African cellphone towers to a stake in a restaurant chain called Dinosaur Bar-B-Que. The overseers of this chunk of money report to Open Society’s investment committee.

Ms. Fitzpatrick, 47 years old, recalled how one Sunday morning shortly before she started, an unfamiliar number lit up her phone as she was walking out of church with her young daughter. It was Mr. Soros, wanting to share an observation on the markets. “I recognize his number now and pick up on the first ring,” she said.

The two speak regularly, with Mr. Soros sharing his view of the markets but so far refraining from interfering in her decisions.

Mr. Soros now spends about half the year on the road in connection with Open Society’s work and rarely visits his office at his firm’s Manhattan headquarters. He still gets a daily copy of its profit-and-loss statement.

Article Link To The WSJ:

Wall Street Believes GE, Nike And Disney Will Carry The Dow To 24,000

-- The Dow Jones industrial average broke above 23,000 for the first time ever on Tuesday, nearly 76 days since the index first closed above 22,000.
-- CNBC looked at which Dow members are expected to rise the most in coming months based on their average forecast by Wall Street analysts.

October 17, 2017

The Dow Jones industrial average broke above 23,000 for the first time ever on Tuesday, nearly 53 trading days since the index first closed above 22,000. As investors celebrate the latest in a string of new records, many are wondering which stocks will lead the Dow to 24,000.

CNBC compiled data on the companies in the index to see which stocks Wall Street analysts are currently betting on to drive the market's next leg higher. The table below shows the stock's average 12-month price target from Wall Street analysts, its latest stock price and the difference between the two.

Strong performance in both large-cap tech and health care this year helps explain why both Apple and UnitedHealth make the cut. Analysts have been bullish on Apple's latest iPhone generation and corresponding price increases.

UnitedHealth, the largest U.S. health insurer, remains insulated from the political firestorm surrounding health care since it has largely pulled back from offering plans in the individual insurance exchanges.

General Electric presents a tricky bet for investors: The company's stock has steadily fallen throughout the year and may now present a value trade. Goldman Sachs told clients to expect both an EPS reset and a dividend cut soon on Tuesday.

But the dramatic 27 percent decline in the company's stock price has spurred the curiosity of some value investors, drawn to the historically-low price. Market-beating investor Bill Nygren told CNBC's "Halftime Report" explained why he's bullish on GE shares even at a seemingly high price-to-earnings multiple on Tuesday.

"We aren't owning this because they pay a high dividend, we're owning this because we think they can improve earnings," said Nygren. "This company is going to show much better than average growth, that they have higher-than-average quality businesses ... We think this is a business that deserves to get back to a market multiple if not a premium."

But analysts are not bullish on all of the Dow components.

American Express beat EPS estimates in their latest earnings report in July, but analysts remain uncertain on the credit card company's long-term plan. The company's revenues trend downward while some researchers believe there may not be much more fat to trim in operating costs.

Goldman Sachs's stock has been disappointing this year, down 1.33 percent year to date against the S&P 500 return of more than 14 percent and a rise of 2.4 percent for the SPDR S&P Bank ETF.

The stock fell more than 2.5 percent Tuesday after Goldman Sachs reported a 26 percent drop on bond trading in its earnings. Chief financial officer Marty Chavez said commodities were on their way to the worst full-year performance since Goldman went public in 1999.

To be sure, these Wall Street analyst forecasts are not perfect by any means. They tend to be too bullish, especially around times when a bull market is slowing down. Plus, sometimes the stocks with the biggest projected upside get that way because the shares keep dropping, yet the analysts are keeping their forecasts the same.

Still, the exercise does give you an idea about which stocks the Wall Street analyst crowd likes the most in the index, if it continues to go higher.

Article Link To CNBC:

The Moment Of Truth For U.S. Stocks Will Take Place In The Next Two Weeks

Third-quarter corporate earnings and the ECB’s all-important stimulus plans for 2018 will converge

By Thomas H. Kee Jr.
October 17, 2017

The next two weeks in the U.S. stock market are bound to be more interesting than usual as companies begin reporting third-quarter results and central banks around the world start talking in earnest of draining liquidity from the financial system.

The market could move quickly, so we need to be ready. I have a strategy designed for that, and so should you.

Demand for stocks, bonds and real estate are driven by liquidity. The more money that chases those asset classes, the higher those investments’ prices will rise. That is simple supply and demand, and it works on both sides.

There are two scenarios:

• Assume that supply is constant and demand increases. In an environment like that, we would expect prices to increase. That would happen regardless of news, earnings or any other corporate event.

• The same is true on the other side of the equation. If there’s less money chasing the same supply, prices are going to decline. But in this scenario, prices also can decrease regardless of news, earnings or any other corporate event.

Before we continue, let me say that changes in supply, most notably in the Treasury market, also have a material influence. But the focus of this article is on demand.

Demand for the asset classes listed above comes from two primary sources.

The first is natural flows of money from U.S. investors. This natural flow of money is defined by The Investment Rate, my longer-term macroeconomic model. It defines market cycles dating to 1900 and extending beyond 2060. Using a combination of societal norms and natural lifetime investment patterns, The Investment Rate tells us in advance where current natural demand levels are.

The second source of primary demand comes from stimulus (unnatural). Central bank stimulus has been targeting asset price appreciation since 2012, and since then, the stock market has surged and the price-to-earnings ratio of the S&P 500 Index SPX, +0.07% has increased to 24. That makes this the most expensive bull market in history.

ECB meeting

The relationship between those two primary sources of demand is important. Natural demand levels defined by the Investment Rate are declining, but the fabricated demand coming from stimulus efforts have been consistent.

The European Central Bank (ECB) is currently printing $60 billion a month, but that will soon change.

On Oct. 26, the ECB will meet to discuss changes to its stimulus program. There is a fluid debate on what exactly policy makers will do, and we have our opinions too, but the conclusion is the same no matter how we slice it. The ECB is winding down its stimulus program. Economists expect policy makers to outline its bond-buying program and give guidance for 2018.

The ECB’s meeting may be overshadowed on the same day by earnings from GoogleGOOG, +0.02% Microsoft MSFT, -0.04% and Intel INTC, +0.05%

It’s not unusual for the market to discount future events in favor of immediate events, and a decision by the ECB to end its stimulus program sometime next year, which seems to be the going consensus, will not change the stimulus monies that are flowing into those asset classes today. If the money is still flowing now, greed-driven investors are not likely to care. The media will be talking about earnings too, so it will be easy to lose focus on what may be the biggest financial news event since 2012.

The demand side of the equation is set to change dramatically, and when it does, the natural demand that is identified by The Investment Rate will again define the demand side of the equation on its own. Natural demographic demand is declining aggressively, and it will compound the adverse impact of the end of stimulus and the lower demand levels.

Protect yourself

The writing is on the wall: Fabricated demand is going away, and investors should protect their portfolios. I have designed a strategy specifically for this called our CORE portfolio strategy, and it is designed to neutralize portfolios against market declines when adverse conditions present themselves.

Everyone should have something like this available to them, given the changes that are coming. Preparing for this in advance is important because, again, the market will seem to forget about what the ECB says next week. But don’t get caught off guard. Smart money knows that demand matters.

Article Link To MarketWatch:

The Moment Of Truth For U.S. Stocks Will Take Place In The Next Two Weeks

Tuesday, October 17, Morning Global Market Roundup: Global Stocks Stay Buoyant As Dollar, Bond Yields Rise

By Marc Jones
October 17, 2017

World equity markets held close to all-time highs on Tuesday, as investors latched on to rising bets on higher borrowing costs in the U.S. and Britain.

Reports that U.S. President Trump might pick Stanford University economist John Taylor to lead the Fed after Janet Yellen’s term ends next year sent two-year Treasury yields to their highest since 2008 and pushed up the dollar.

That meant European bonds started in the red too [GVD/EUR] while the euro EUR=EBS was down for a fourth straight day for the first time since May.

Taylor is an advocate of a rules-based approach to interest rate policy that would likely see official Fed rates much higher than at present - at least 3.5 percent according to some economists.

The pop in short-yields was not matched at the long end and the 2-to-10 year U.S. yield curve hit its shallowest in more than a year.

“Fed chairs have often influenced U.S. monetary policy quite considerably in the past. And I would certainly see Taylor as a candidate who would fit in this pattern,” Commerzbank analyst Thu Lan Nguyen said.

“That makes one thing clear: should Trump nominate Taylor as Yellen’s successor the U.S. dollar would initially appreciate notably.”

Despite’s the dollar’s gains, Wall Street stocks set new records again on Monday [.N] along with all-time highs on the MSCI’s 47-country ‘All-World’ index .MIWD00000PUS.

The MSCI index held close to those levels on Tuesday, shedding around 0.1 percent.

European shares were close to flat too, underpinned by solid earnings from food group Danone (DANO.PA) and education specialist Pearson (PSON.L) and talk of a break-up of investment bank Credit Suisse (CSGN.S). [.EU]

The ViX volatility gauge .VIX, which measures market nervousness, stayed near its recent record lows below 10 percent and while Asia stocks had been more mixed, Japan’s Nikkei .N225 eked out its 11th straight daily gain as eyes there turned to the weekend’s Japanese elections. [.T]

One of Monday’s big movers, oil, consolidated a near month-high having spiked after Iraqi forces seized the oil-rich city of Kirkuk from fighters loyal to the country’s semi-autonomous Kurdish Regional Government.

After months of rangebound trading during which OPEC-led supply cuts supported crude values but rising U.S. output capped markets, prices have moved up significantly this month.

Brent crude oil LCOc1 was 5 cents higher at $57.87 a barrel by 0800 GMT, up almost a third from its mid-year levels. U.S. West Texas Intermediate (WTI) crude CLc1 was nudging up again too at $51.99.

There were unconfirmed reports that Kurdish forces had shut around 350,000 barrels per day (bpd) of oil production from major fields.

“The 500,000 bpd Kirkuk oilfield cluster is at risk,” Goldman Sachs said in a note to clients.

Tension between the United States and Iran is also rising, after U.S. President Donald Trump on Friday refused to certify Iran’s compliance over a nuclear deal which removed long-running sanctions.

“If there (were new sanctions), we expect that several hundred thousand barrels of Iranian exports would be immediately at risk,” Goldman said. During the previous round of sanctions around 1 million bpd of oil was cut from global markets.

Bellwether industrial metal copper CMCU3 hit a three-year high as it soared to $7,134.5 a tonne after its biggest gain in about 10 months.

Swirling Sterling 

Britain’s pound drifted higher against the dollar and the euro as UK inflation data bolstered the chances of the Bank of England’s first interest rate hike in over a decade next month.

The figures showed year-on-year price growth hit 3.0 percent in September, up from 2.9 in August which was already a more than five-year high.

It left sterling at $1.3275 GBP= and at 88.6 pence per euro EURGBP=. BoE Governor Mark Carney may offer further clues about a possible rate rise later too when he appears before a parliamentary committee.

Brexit-related rumblings weren’t far below the surface either.

British Prime Minister Theresa May and European Commission chief Jean-Claude Juncker agreed over dinner in Brussels on Monday that the pace of negotiations over Britain’s departure from the European Union should be stepped up.

Some market watchers such as JP Morgan are sceptical on sterling’s outlook, recommending investors to buy euros against the British pound as “the overhang of the Brexit issue itself would constrain how much accommodation the BoE would be able to remove.”

Mexico's peso MXN=D2 flirted with a five-month low on concerns over the future of the North American Free Trade Agreement (NAFTA) after Washington presented a number of hard-line proposals in re-negotiation talks.

Article Link To Reuters:

Monday, October 16, 2017

Monday, October 16, Night Wall Street Roundup: Wall St. Inches Up With Financials; Earnings In Focus

By Caroline Valetkevitch
October 16, 2017

All three major U.S. stock index rose to record closing highs on Monday, with the Dow Jones Industrial Average less than 50 points below 23,000, ahead of a long list of earnings this week and as financial shares recovered from last week’s losses.

JPMorgan Chase (JPM.N) and Bank of America (BAC.N) led gains in bank stocks, tracking a climb in U.S. Treasury yields, which benefits banks. JPMorgan was up 2.1 percent, while Bank of America was up 1.6 percent.

The S&P 500 financial index .SPSY rose 0.6 percent after three days of losses. Shares of banks mostly slipped last week after they reported results.

Netflix (NFLX.O) gained 1.6 percent during the session and rose another 2 percent after the bell following the release of its results. Apple (AAPL.O) shares gained 1.8 percent following a bullish brokerage call on the iPhone maker.

The reporting period heats up this week, and with the S&P 500 already up 14 percent so far this year, investors are hoping results and guidance will justify the relatively high valuation of stocks.

“Big companies are going to start reporting earnings, and I think that’s going to drive the direction of the market for the next two or three weeks. There’s a lot of optimism built in, and hopefully it will be reflected in the earnings,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.

“You saw decent numbers from the banks but quirks here and there. But for the bigger tech companies, people have high hopes.”

The Dow Jones Industrial Average .DJI rose 85.24 points, or 0.37 percent, to close at 22,956.96, the S&P 500 .SPX gained 4.47 points, or 0.18 percent, to 2,557.64 and the Nasdaq Composite .IXIC added 18.20 points, or 0.28 percent, to 6,624.01.

All three hit record closing highs, adding to recent records.

Investors will keep a close eye on the Senate, which is trying this week to pass a partisan budget blueprint that would help guide federal spending.

The Republicans want to use the “budget resolution” to pave the way for the party later this year or next year to pass a major tax-cut bill without any Democratic support.

U.S. President Donald Trump said Republicans and Democrats in Congress are working on a short-term fix for healthcare insurance markets after he last week scrapped subsidies to insurers.

S&P healthcare stocks .SPXHC were among the biggest laggards, with the index falling 0.4 percent.

Declining issues outnumbered advancing ones on the NYSE by a 1.02-to-1 ratio; on Nasdaq, a 1.10-to-1 ratio favored decliners.

About 5.5 billion shares changed hands on U.S. exchanges. That compares with the 5.9 billion daily average for the past 20 trading days, according to Thomson Reuters data.

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Next Fed Chair Will Need Unusually Thick Skin

By Rob Cox
October 16, 2017

There are two things the next leader of the Federal Reserve must prepare for: a recession and a public beating. The first is a statistical likelihood. The second, however, is a bankable certainty. If there is anything predictable about President Donald Trump, it is his willingness to bully institutions with authority separate from his own. And the U.S. central bank’s effectiveness relies on its independence.

The challenge for whoever leads the Fed after Janet Yellen’s term expires early next year, however, won’t be confined to withstanding intemperate early-morning tweets from a White House boudoir. Since the financial crisis the Fed, like its cousins in Japan, the European Union and elsewhere, has stepped in when fiscal policymakers have not. The next chairperson may also have to push the burden of taking action back to Congress.

Yellen could yet be Trump’s safe fallback choice, but he’s also considering current Fed Governor Jay Powell, former Governor Kevin Warsh and former Treasury official John Taylor. Much of the debate about the candidates, at least up to now, has focused narrowly on their hawkishness or dovishness – Fedspeak for a preference for raising the cost of money on the one hand or for keeping it cheap and plentiful on the other. Yellen’s Fed leans towards the doves, as did the institution under her predecessor Ben Bernanke.

Monetary policy matters. Raising rates too abruptly can stifle economic expansion. Pumping too much money into the financial system risks widespread capital misallocation. The potential for a Fed chair to either crush growth or inflate bubbles is what makes the job best suited for highly intelligent, risk-averse people of considered judgment. All the candidates, being Ivy League-educated students of economics with a preponderance of degrees from Princeton and Stanford, fit this bill.

To investors who obsess over such matters, small differences in their views on the trajectory of interest rates or the pace at which the Fed’s $4 trillion balance sheet should shrink are a big deal. To ordinary citizens, though, these are technical quibbles. What the electorate may care about more is keeping the Fed cushioned from day-to-day politics. Fed independence, both perceived and perhaps to a slightly lesser extent real, has proven crucial to the role of the bureaucrats in the Marriner S. Eccles Building in Washington.

Paul Volcker, who literally towered over both the Fed and politicians from 1979 to 1987, once argued it this way. “The credibility of the Federal Reserve, its commitment to maintaining price stability, and its ability to stand up against partisan political pressures are critical. Independence can’t just be a slogan.” The central banker who raised interest rates – in defiance of the wishes of politicians – so as to crush inflation, continued that the Fed “should not be asked to do too much, to undertake responsibilities that it cannot reasonably meet with the appropriately limited powers provided.”

That’s a nod to the Fed’s finite set of tools and the need for lawmakers to wield their powers to change taxation and spending, not just rely on monetary policy. Despite Bernanke’s urging years ago, Congress has yet to do much on this front since the crisis.

Steady economic and employment growth has obscured this inaction. But things may soon change. Since the Great Depression, the average length from the end of a recession to the beginning of a new one was just under five years. It has been more than eight years since the last downturn ended in June 2009. When the economy turns negative, Trump and legislators will no doubt target the Fed, both as the scapegoat and as a potential rescuer. The new chair will need a thick skin as well as an ability to play both defense and offense.

Set Yellen aside as a known quantity. As for Powell, he has not dramatically distanced himself from the chair he has served since 2012. In a June speech, however, he argued that an attempt by the House of Representatives to audit the Fed “risks inserting the Congress directly into monetary policy decision-making, reversing decades of deliberate effort by the Congress to insulate the Fed from political pressure.”

Taylor seems to agree, insisting in a 2016 speech that “de jure central bank independence is insufficient for generating good monetary policy.” His philosophical bent has been to push for a rules-based system for determining interest rates. The benefit, Taylor has argued, would be to limit the Fed's hand, thus making it even less susceptible to political influence or criticism.

Warsh, a colleague of Taylor’s at Stanford’s Hoover Institution, takes it a step further. “When the recession hits, we will have brought it upon ourselves. And the credibility that central banks and fiscal policymakers need to respond to recessions will also be hit during that same episode,” he told me during a Reuters Newsmaker panel last year.

Though it was before last November’s election, it sure sounds like appropriate scenario planning for the barrage of Trump tweets he can expect at the Fed.

Article Link To Reuters:

Trump To Meet Yellen Thursday In Search For New Fed Chair

October 16, 2017

U.S. President Donald Trump will meet with Federal Reserve Chair Janet Yellen on Thursday as part of his search for a new candidate for her position, a source familiar with the planned meeting said.

On Thursday, a White House official said Trump had met with Stanford University economist John Taylor to discuss the job.

Trump is working from a short list that also includes Jerome Powell, a Fed governor; Kevin Warsh, a former Fed governor; Trump’s top economic adviser Gary Cohn; and Yellen, whose term expires in February, sources have said.

White House chief of staff John Kelly said on Thursday Trump is “some time away” from a decision on who should chair the Federal Reserve.

“There’s still ongoing ... interviews,” Kelly told reporters. “All of the people that have been in to interview have been really first round draft choices, and we have more to come,” he said.

Trump told reporters late last month he had met with four candidates to lead the U.S. central bank and would make a decision “over the next two or three weeks.” Kelly’s remarks suggest a somewhat longer time frame.

A White House official said Trump met with Taylor on Wednesday to discuss the job, accompanied by Vice President Mike Pence, Treasury Secretary Steve Mnuchin and other members of the team helping in the search. Last month, Trump met with former Fed Governor Kevin Warsh.

A new Fed chair would take the helm as the central bank eases well away from crisis-era policies in response to a strengthening economy and falling unemployment, though inflation still lingers below the Fed’s 2 percent goal.

Under Yellen, the Fed has raised interest rates and launched a plan to shrink its $4.5 trillion balance sheet, much of which was accumulated through a bond-buying program that Yellen said helped the economy avert an even deeper downturn.

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