All posts in "Politics"

Goldman: “Market expectations of quick fiscal expansion may be running ahead of political and legislative realities”


by PredragKezic from pixabay

Goldman: “Market expectations of quick fiscal expansion may be running ahead of political and legislative realities”

by Bill McBride on 11/17/2016 04:41:00 PM

 A few brief excerpts from analysis by Goldman Sachs economist Alec Phillips: A Fiscal Boost in 2017: How Much, How Fast?

Tax reform has political momentum, which is likely to increase the budget deficit... In light of the election result, we assume that the deficit will increase by more than previously expected. Specifically, we assume that fiscal policy choices under the next Congress will increase the budget deficit by around 0.75% of GDP, or around $150bn, in 2018, and similar amounts over the next few years.

but the market is more focused on fiscal “stimulus” than Congress is. There are risks in both directions to our fiscal assumptions, but we note that financial markets appear to be more focused on fiscal “stimulus” than lawmakers are. …

Both sides support some type of infrastructure program, but neither side seems enthusiastic. Although President-elect Trump has highlighted infrastructure among the priorities he hopes to address, the reaction from Congressional Republicans has been tepid. While some believe the inclusion of an infrastructure plan in the tax legislation that Congress is expected to consider in 2017 could increase Democratic support for the combined package, others are wary of proposals to use the proceeds from taxing the unrepatriated profits of US multinationals to pay for it. Instead, Republican lawmakers appear more inclined to use the bulk of the proceeds from taxing those overseas earnings to offset the budgetary effects of reducing statutory tax rates.

Obamacare “repeal” seems unlikely to change the fiscal picture for 2017 or even 2018. Congress will face a number of challenges in reforming the ACA in 2017, and we would expect that the process to devise a replacement plan will take until late 2017, if not 2018. We would also expect whatever replaces the current system to take effect after the midterm congressional elections, in 2019. This could lead to uncertainty regarding the changes that might be made, but we expect that whatever changes to the ACA might ultimately occur, they would probably not take effect until 2018 at the earliest and more likely 2019.

CR Note: The “infrastructure” proposal that many investors are focusing on is really a proposal for about $100+ billion in tax credits to spur private investment in infrastructure (I’ve seen some people talking about $1 trillion in infrastructure investment – but that is the projected size of the private investment, not the proposed government spending).  This proposal is actually very modest in terms of a fiscal boost.   More analysis to come when we see the actual proposals, but I think analysts might be overestimating the boost from government spending in 2017.


by Bill McBride on 11/17/2016 04:41:00 PM

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Published at Thu, 17 Nov 2016 21:41:00 +0000

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Trump victory pushing U.S. fund managers into small-cap shares


U.S. President-elect Donald Trump in Manchester, New Hampshire, U.S., October 28, 2016.REUTERS/Carlo Allegri/File Photo

Trump victory pushing U.S. fund managers into small-cap shares

By David Randall | NEW YORK

President-elect Donald Trump’s victory last week is pushing U.S. fund managers into the shares of small, domestic-oriented companies that they expect to benefit should Trump cut back on regulations and renegotiate free trade agreements as promised.

Already, the Russell 2000, the benchmark for small companies in the United States, is up nearly 12 percent over the past five trading days, a performance nearly triple the 4.4 percent gain of the large-cap S&P 500 over the same time. Fund managers say they expect the small-cap rally to continue into 2017 as the incoming Trump administration begins to put policies in place.

“Right now this is the hope rally, but it will be a while before you have any real changes out there that flow through to earnings,” said Barry James, president of Dayton, Ohio-based James Advantage Funds.

James is moving approximately 40 percent of his multi-cap fund into small-cap shares, up from 10 percent earlier this year, by buying companies such as Neenah Paper Inc, which manufacturers filtration and specialty paper in plants in Wisconsin and Ohio, and outsourcing company Convergys Corp, which has its primary call centers in Florida and Ohio.

The move into small-caps comes at a time when the category had underperformed larger-caps over the past one and three years, leaving valuations more attractive regardless of the outcome of the election, said Martin Jarzebowski, a portfolio manager at Federated Investors in New York.

Trump’s administration is expected to cut back on regulations across industries, leading to more mergers and acquisition activity, Jarzebowski said.

“We’re looking at adding acquisition targets” in sectors such as industrials and materials, Jarzebowski said.

Yet Trump’s administration will also likely bring higher market volatility, which would hurt small-caps, which often are thought of as riskier than larger companies, said Steven DeSanctis, an equity strategist at Jefferies in New York.

At the same time, small-cap exchange traded funds brought in $4.2 billion in the week since Trump’s victory, DeSanctis added, which was the biggest inflow since May 2008 and suggests that markets already have priced in any benefits to the category.

Tim Cunningham, a portfolio manager at Santa Fe, New Mexico-based Thornburg Investments, said he was moving away from dividend-stocks like Molson Coors Brewing Corp and adding to his positions in regional banks such as Silicon Valley Bank-parent SVB Financial Group that should benefit from higher interest rates.

“Even with a small increase in rates, it will immediately see a big increase in its earnings. That’s basically pure margin,” Cunningham said.

Cunningham has also been adding to his position in energy-drink company Monster Beverage Corp thanks to its international growth. The company’s shares are down 6.7 percent over the past five days after voters in Boulder, Colorado, Cook County, Illinois and the San Francisco Bay Area passed new taxes on sugar-sweetened beverages.

He is also looking to add to large-cap technology shares such as Inc, Facebook Inc and Google-parent Alphabet Inc that have been hurt by concerns that the incoming Trump administration could dampen their foreign sales and make it harder to recruit and retain talented engineers.

“These are dominant businesses with huge barriers to entry, and we could be getting an opportunity if they continue to pull back,” Cunningham said.

(Reporting by David Randall; Editing by Will Dunham)

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Published at Wed, 16 Nov 2016 21:47:14 +0000

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A post-Trump SEC could shake up current policy


A general exterior view of the U.S. Securities and Exchange Commission (SEC) headquarters in Washington, June 24, 2011.REUTERS/Jonathan Ernst

A post-Trump SEC could shake up current policy

By Sarah N. Lynch | WASHINGTON

It will be a new day at the U.S. Securities and Exchange Commission after President-elect Donald Trump installs his choice to run the agency.

With Trump’s transition team already in regulatory-relief mode and promising to revamp the Dodd-Frank financial reform legislation, some rules already are marked for death or dialback.

Expected on the chopping block soon after Trump takes the oath of office is a proposal that would require companies to disclose pay ratios between their CEOs and employees. Another would require companies to disclose whether their products contain conflict minerals — minerals that were mined in a war-torn region of Africa.

Dead for now is any prospect of the SEC approving a tough fiduciary rule for financial advisers, say policy experts.

Trump’s decision to tap former Republican SEC Commissioner Paul Atkins to help manage the Trump team’s transition efforts at the SEC and other financial agencies offers a window into some other changes that could be in store. Atkins, the founder of the regulatory consulting firm Patomak Global Partners, is viewed by some to be a top contender for the position of SEC chairman itself, though as the transition head he could also recommend someone else for that job.

Atkins’ well-known conservative views on everything from enforcement penalties to corporate governance are likely to be reflected in the SEC’s agenda.

Here are five policy areas likely to change.


Paul Atkins was a staunch critic of the Public Company Accounting Oversight Board (PCAOB), a body created after the Enron accounting scandal to police and write new rules for corporate auditors.

Atkins raised concerns about the board’s budget and high salaries, and advocated against prescriptive accounting rules that he felt constrained auditors from making professional judgments.

Recently, Republicans have criticized the PCAOB for taking on more progressive causes, such as proposing companies rotate auditors to reduce conflicts or requiring accounting firms to disclose the name of individual partners working on company audits.

The PCAOB’s chairman Jim Doty, who advocated for the controversial reform measures, will almost certainly not be re-appointed by the incoming SEC chair.

“I expect that a new Chair will refocus the Board’s standard-setting agenda on the core audit function,” said Hunton & Williams Partner Scott Kimpel. “I would expect a return to the basics.”


The topic of whether to impose corporate penalties against a company would come under scrutiny.

During his time at the SEC, Atkins advocated for an enforcement approach that he said did not unduly punish corporate shareholders that had already suffered from the misconduct. He called for the SEC to carefully weigh who had profited from the bad behavior, and urged the SEC to hold individuals accountable for their actions.


Atkins has long opined that the SEC’s rules requiring “best price” execution of stock trades actually skews the market by causing fragmentation and harming price discovery by directing orders away from traditional stock exchanges into “dark pool” trading platforms.

As a commissioner, Paul Atkins was critical of the rule called Regulation National Market System (NMS), saying it could impede true price discovery and encourage gaming of the system.

In January 2016 he wrote an opinion piece in the Wall Street Journal calling for the SEC to do major surgery on the rule, allowing considerations beyond ‘best price’ and speed to determine order flow.


The Dodd-Frank law gave the SEC newfound powers to reward whistleblowers who come forward with tips of corporate malfeasance.

From August 2011 through fiscal year 2015, the SEC has received more than 14,000 tips, and by August of 2016, the program had given out more than $100 million in rewards.

But corporate America has long disliked the part of the rule that protects whistleblowers from having to report wrongdoing to their own companies before they tip off the government.

In 2011, Atkins urged the SEC to require whistleblowers to report internally first, saying a failure to do so could undermine compliance programs.

Whether this will change remains to be seen, especially in the wake of the Wells Fargo & Co scandal, where employees who reported internally about the opening of unauthorized accounts were fired.

Atkins “cares deeply about the commission and its enforcement program,” said Jordan Thomas, a whistleblower attorney at Labaton Sucharow who previously worked in the SEC’s enforcement division during Atkins’ tenure.

“I find it very hard to believe that he would support undermining such a successful program.”


Atkins was a strong proponent of the 2012 Jump Start Our Business Startups Act, which scaled back some SEC rules to help smaller companies raise capital.

In testimony on Capitol Hill, Atkins advocated for additional steps to be taken to help smaller companies, including rules to help create venture exchanges for mid-cap stocks and broadening efforts to exempt private capital-raising rules from regulation by states.

(Reporting by Sarah N. Lynch; editing by Linda Stern and Diane Craft)

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Published at Wed, 16 Nov 2016 09:35:06 +0000

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TEXT-Britain’s leaked Brexit memo


By MIH83 from Pixabay

TEXT-Britain’s leaked Brexit memo

Nov 15 The following is a copy of a
leaked memo on Brexit prepared for the Cabinet Office. It was
printed by The Times newspaper.

May’s office said it did not recognise the claims made in
the memo.

“This is not a government report and we don’t recognise the
claims made in it,” a spokesman for May’s office said. “We are
focused on getting on with the job of delivering Brexit and
making a success of it.”

The following is the memo as published by The Times:


Brexit update as of 7th November 2016

This note summarises the current state of play on Brexit
issues in Whitehall in the critical inter-related domains of
politics, government and industry.


The Prime Minister’s over-riding objective has been to keep
her party from repeating its history of splitting 4 times in the
past 200 years over global trade – each time being out of power
for 15-30 years. The public stance of Government is orientated
primarily to its own supporters, with industry in particular
barely being on the radarscreen – yet.

The Government’s appeal to the Supreme Court has to be seen
in this light – it is about avoiding any more public debate than
necessary because it will expose splits within the predominantly
“remain” Conservative MPs and intensify the pressure from
predominantly “leave” constituency parties. A General Election
is only a last resort for 3 reasons – boundary changes (that
favour the Conservatives) will not be effective until 2019; the
Fixed Term Parliaments Act obstructs Prime Ministerial freedom
to call an election at will; and it may suit major decision
makers to slowly shift away from more difficult aspects of
Brexit on the grounds that Parliament has forced them to do so.

The divisions within the Cabinet are between the 3
Brexiteers on one side and Philip Hammond/Greg Clark on the
other side. The Prime Minister is rapidly acquiring the
reputation of drawing in decisions and details to settle matters
herself – which is unlikely to be sustainable. Overall, it
appears best to judge who is winning the debate by assuming that
the noisiest individuals have lost the intra-Government debate
and are stirring up external supporters.

The Supreme Court appears likely to delay its ruling until
early January and, assuming it sustains the High Court, a short
enabling bill will then be submitted to Parliament, permitting
the Government to invoke Article 50 in March as planned. The
Government will probably be able to face down wrecking
amendments, but the debate in Parliament will certainly shift
expectations of what will be achieved/sellable in Brexit
negotiations. Remain supporters can be expected to reserve their
fire until winners and losers emerge from negotiation and the
political atmosphere allows more sophisticated assessment of



Individual Departments have been busily developing their
projects to implement Brexit, resulting in well over 500
projects, which are beyond the capacity and capability of
Government to execute quickly. One Department estimates that it
needs a 40% increase in staff to cope with its Brexit projects.
In other words, every Department has developed a “bottom up”
plan of what the impact of Brexit could be – and its plan to
cope with the “worst case”. Although necessary, this falls
considerably short of having a “Government plan for Brexit”
because it has no prioritisation and no link to the overall
negotiation strategy.

However, it may be 6 months before there is a view on
priorities/negotiation strategy as the political situation in
the UK and the EU evolves. Despite extended debate among
Permanent Secretaries, no common strategy has emerged, in part
because the potential scope and negotiating positions have to be
curtailed before realistic planning can happen, in part because
of the divisions within the Cabinet. It is likely that the
senior ranks in the Civil Service will feel compelled to present
potential high level plan(s) to avoid further drift.

Departments are struggling to come up to speed on the
potential Brexit effects on industry. This is due to starting
from a relatively low base of insight and also due to
fragmentation – Treasury “owning” financial services, DH-BEIS
both covering life sciences, DCMS for telecoms, BEIS most other
industries, DIT building parallel capability focussed on trade

Capability-building is making slow progress, partly through
deliberate control by the Cabinet Office and partly from
Treasury’s opening negotiating position that Departments will
meet Brexit costs from existing settlements – although no one is
treating that position as sustainable. Expectations of increased
headcount are in the 10-30,000 range. Initiatives to build
capability are getting off the ground – the Diplomatic Academy
is providing trade training programmes, Cabinet Office is
discussing system-wide capability programmes.

The Autumn Statement on 23rd November is expected to provide
some headlines in terms of infrastructure investment, making the
UK fit for growth and the inclusive economy. It will not provide
resources for the Civil Service to grow its Brexit capacity and
capability. In fact, we are more likely to see a further squeeze
on Departmental operating costs to compensate for new spending.



Government expects lobbying on 3 levels to continue:

1. Company-specific decisions – the Nissan investment
decision is a prime example. These are viewed as major
opportunities/threats for Government. Other major players can be
expected to, similar to Nissan, point a gun at the Government’s

2. Industry insights – the major challenge for industry and
Government are “the unknown unknowns” where industry has to
educate Government fast on the most important negotiating issues
– e.g., they think they know about talent, but know they know
little about data.

3. Overall business concerns – the province of CBI and
largely dealt with as a PR issue.

Industry has 2 unpleasant realisations – first, that the
Government’s priority remains its political survival, not the
economy – second, that there will be no clear economic-Brexit
strategy any time soon because it is being developed on a
case-by-case basis as specific decisions are forced on

(Reporting by Guy Faulconbridge; editing by John Stonestreet)

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Published at Tue, 15 Nov 2016 08:56:30 +0000

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Trump University asks for trial delay until after inauguration


Republican presidential nominee Donald Trump arrives for his election night rally at the New York Hilton Midtown in Manhattan, New York, U.S., November 9, 2016.REUTERS/Andrew Kelly/File Photo

Trump University asks for trial delay until after inauguration

By Tracy Rucinski | CHICAGO

U.S. President-elect Donald Trump has requested that a trial over a lawsuit by former students of his now-defunct Trump University be put on hold until after the presidential inauguration, according to a motion filed by his lawyer late Saturday.

A trial in federal court in San Diego over former Trump University students’ claims that they were defrauded by a series of real-estate seminars is scheduled to begin on Nov. 28, but Trump lawyer Daniel Petrocelli said the president-elect needs to “devote all of his time and attention to the transition process.”

Trump is due to assume office on Jan. 20, 2017.

“The 69 days until inauguration are critical and all-consuming,” Petrocelli said in the filing, arguing that the president-elect should not be required to stand trial during that time.

Petrocelli had said at a hearing in San Diego on Thursday that he would request the delay, though U.S. District Judge Gonzalo Curiel, who is overseeing the lawsuit, told lawyers he was not inclined to put off the six-year-old case further and encouraged the parties to settle.

The lawsuit involves students who claim they were lured by false promises to pay up to $35,000 to learn Trump’s real estate investing “secrets” from his “hand-picked” instructors.

Trump owned 92 percent of Trump University and had control over all major decisions, the students’ court papers say. The president-elect denies the allegations and has argued that he relied on others to manage the business.

Curiel also tentatively rejected last week a bid by the president-elect to keep a wide range of statements from the presidential campaign, which included attacks against Curiel himself, out of the fraud trial.

Trump attacked the judge as biased against him. He claimed Curiel, who was born in Indiana but is of Mexican descent, could not be impartial because of Trump’s election campaign pledge to build a wall between the United States and Mexico.

Trump’s lawyers have argued that Curiel should bar from the trial accusations about Trump’s personal conduct including alleged sexual misconduct, his taxes and corporate bankruptcies, along with speeches and tweets.

Curiel is presiding over two cases against Trump and the university. A separate lawsuit by New York’s attorney general is pending.

While presidents enjoy immunity from lawsuits arising from their official duties, the U.S. Supreme Court has held that this shield does not extend to acts alleged to have taken place prior to taking office.

(Reporting by Tracy Rucinski; Editing by Alan Crosby

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Published at Sun, 13 Nov 2016 19:12:39 +0000

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Zuckerberg again rejects claims of Facebook impact on U.S. election


Facebook CEO Mark Zuckerberg is seen on stage during a town hall at Facebook's headquarters in Menlo Park, California September 27, 2015. REUTERS/Stephen Lam/File Photo

Facebook CEO Mark Zuckerberg is seen on stage during a town hall at Facebook’s headquarters in Menlo Park, California September 27, 2015.REUTERS/Stephen Lam/File Photo

Zuckerberg again rejects claims of Facebook impact on U.S. election

By Chris Prentice | NEW YORK

Facebook Inc chief executive Mark Zuckerberg again rejected the idea that the social network affected the U.S. presidential election, saying late Saturday it is “extremely unlikely” news hoaxes changed the outcome.

Ensnared in a string of content controversies in recent months, Facebook has insisted that it is a technology company, not a media firm. But scrutiny of the site has heightened since the surprise election of Republican Donald Trump on Tuesday, with critics alleging the site helped spread lies via fake news stories and hoaxes.

Zuckerberg has vehemently defended the network against such criticism, calling the idea that Facebook affected the election “crazy” at a conference on Thursday. He echoed that stance in his late Saturday post, though he said the company would do more to prevent fake news.

Such hoaxes represent a sliver of content shared on Facebook and because they are not limited to partisan views or politics, it is unlikely they could have changed the election’s outcome, Zuckerberg said.

“Of all the content on Facebook, more than 99 percent of what people see is authentic,” he said, noting the network’s goal is to “give every person a voice.”

Still, Facebook has launched work to enable people to flag hoaxes and fake news, the statement said.

Facebook has faced a number of content controversies this year, including international outcry after it removed an iconic Vietnam War photo due to nudity, a decision that was later reversed. The thorniest content issues are decided by a group of top executives at Facebook.

Questions over content policing have returned to the fore in the tense days since the election, which has led to protests against Trump and his proposed policies in major U.S. cities.

Ahead of the Nov. 8 election, Facebook users saw fake news reports erroneously alleging that Pope Francis endorsed Donald Trump and that a federal agent who had been investigating Democratic candidate Hillary Clinton was found dead.

Senior management have launched a conversation to examine Facebook’s involvement in affecting opinions and votes, The New York Times reported on Saturday, saying a group of vice presidents and executives began discussing late Tuesday the company’s role in the election’s outcome.

Facebook’s policy team was called together and the firm plans to address staff concerns at a broader meeting, the paper reported, citing anonymous sources.

Facebook representatives were not immediately available to comment on the report.

“After the election, many people are asking whether fake news contributed to the result, and what our responsibility is to prevent fake news from spreading,” Zuckerberg said on Saturday.

“These are very important questions and I care deeply about getting them right.”

(Reporting by Chris Prentice; Editing by Mary Milliken)

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Published at Sun, 13 Nov 2016 20:40:47 +0000

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After U.S. election, retirement security heads for a crash

By tpsdave from Pixabay

After U.S. election, retirement security heads for a crash

By Mark Miller

Retirement security already looked like a looming train wreck for most U.S. households before Election Day. Now, the consolidation of Republican control of government threatens to accelerate the crash.

It is too early to predict the agenda Donald Trump will bring to the White House on retirement policy, or where it might fit on his priority list. We live in a rapidly aging nation, but retirement policy never received a serious airing during the hot mess of a campaign that just ended.

It is also impossible to predict how Trump’s priorities will match up with those of Republican leaders in Congress, considering their deep divides on many issues during the campaign.

But previous Republican proposals and Trump’s campaign pledges point toward a range of possible GOP retirement initiatives between now and the 2018 midterm elections.

The economic frustrations of older, middle-class voters played an important role in Trump’s upset win over Hillary Clinton. Exit polling reveals that voters above age 45 favored him, especially among middle-class households.

These are households bearing the brunt of job loss, income inequality, the decline of traditional defined benefit pensions, rising healthcare costs and shrinking Social Security benefits. And they have managed to save precious little for retirement: 62 percent of working households headed by people aged 55-64 have less than one year of annual income, according to the National Institute on Retirement Security (NIRS) – far less than they will need to maintain their standard of living in retirement.

But here is the irony: Republican control of the White House and Congress over the next two years could leave these struggling near-retirement households even worse off. Below is just a partial rundown of the retirement-related issues that will bear careful watching.


This might not seem like a retirement issue at first glance. But if Trump and Republican lawmakers make good on their promises to repeal the Affordable Care Act, millions of older Americans who fall short of Medicare’s eligibility age (65) likely will lose their health insurance.

Hate Obamacare if you like, but it has hugely benefited millions of older low- and middle-income households. The Commonwealth Fund estimates that the percentage of uninsured Americans aged 50-64 fell to 9.1 percent this year, compared with 14 percent in 2013. That translates to 3.1 million previously uninsured people who now have health insurance.


Republicans will likely try to repeal the law, or at minimum gut many of its most important provisions, such as Medicaid coverage for low-income people, and premium subsidies for middle-income households.

The uninsured-and-over-fifty group will be more likely to forego healthcare, and they will arrive at Medicare’s doorstep with more untreated illnesses.

“If they repeal it and don’t replace it with something meaningful, it’s going to really hurt this older population,” said Christian Weller, professor of public policy at the University of Massachusetts Boston.


The U.S. Department of Labor finalized rules this year requiring all financial advisers working with retirement accounts to avoid conflicts and act in the best interest of clients in the products they recommend. This is a huge, positive step in reforming the way retirement savings are managed.

Trump took no position on the so-called fiduciary rule, but he has pledged to cut government regulation aggressively. And one of his advisers promised during the campaign to repeal the rule, even likening it to slavery.

Financial-services lobbyists have been trying to spike the Labor Department rule in the courts and through legislation; President Barack Obama vetoed Republican-sponsored legislation aimed at blocking it in June.

“There is potential for a partial or full pullback,” said Rick Jones, senior partner and national retirement practice leader at Aon Hewitt.


Trump said during the campaign he does not favor cutting Social Security or Medicare benefits. But Republican congressional leadership has long favored raising the Social Security retirement age, reducing cost-of-living adjustments and at least partial privatization of the program by allowing workers to divert part of their payroll tax contribution to a personal savings account.

This year’s Republican convention platform stated that Social Security’s solvency problems should be addressed without tax increases. That is a de facto call for benefit cuts, because there are only two ways to solve Social Security’s financial problems: cut benefits or increase revenue. The platform also contained a vague call for privatization.

On Medicare, House Speaker Paul Ryan has advanced plans repeatedly to shift Medicare toward so-called premium support. Seniors could choose between private insurance plans and traditional Medicare, and receive a voucher from the federal government to purchase coverage. Studies have shown this approach would shift costs to seniors.


Among the other questions to ponder: How will we reform our retirement saving system to increase coverage and low-cost saving? How will we fix our broken approach to financing long-term care?

All told, the inequalities in our retirement security system could grow worse over the next four years – much worse. That would be not just an ironic outcome of this election – it would be tragic.

(The opinions expressed here are those of the author, a columnist for Reuters)

(Editing by Matthew Lewis)

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Published at Fri, 11 Nov 2016 12:09:06 +0000

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Trump may already have a plan ready to revamp Dodd-Frank

PhotoU.S. President-elect Donald Trump (2ndR) answers questions as his wife Melania Trump and Senate Majority Leader Mitch McConnell (R-KY) watch on Capitol Hill in Washington, U.S., November 10, 2016. REUTERS/Joshua Roberts

U.S. President-elect Donald Trump (2ndR) answers questions as his wife Melania Trump and Senate Majority Leader Mitch McConnell (R-KY) watch on Capitol Hill in Washington, U.S., November 10, 2016.REUTERS/Joshua Roberts

Trump may already have a plan ready to revamp Dodd-Frank

By Lisa Lambert and Sarah N. Lynch | WASHINGTON

When Jeb Hensarling, the Republican chair of the U.S. House Financial Services Committee, released legislation this summer to weaken the major financial law known as Dodd-Frank, many said it was a prêt-a-porter plan that his party’s nominee, Donald Trump, could easily adopt.

Now that Trump is president-elect, he appears to be doing just that.

Language about financial services posted on the Trump transition website,, echoes the tone of Hensarling’s bill, known as the CHOICE Act.

It calls Dodd-Frank, passed in the wake of the 2007-09 financial crisis and recession, as “a sprawling and complex piece of legislation that has unleashed hundreds of new rules and several new bureaucratic agencies” and promises to dismantle and replace it with “new policies to encourage economic growth and job creation.”

Hensarling’s legislation, which his committee approved in September, also takes a replacement approach.

The Texas Republican had unveiled his proposal in Trump’s hometown of New York in June, and then met with the businessman later in the day. At the same time, Hensarling was mentioned as a possible Treasury secretary by Trump’s team. He has said he is not pursuing a Cabinet position.

“The CHOICE Act accurately reflects the priorities that President Trump has placed on the Dodd-Frank problem,” said J.W. Verret, an associate professor at the George Mason University Antonin Scalia Law School and financial regulation expert. Verret regularly meets with and briefs members of Congress and the Securities and Exchange Commission on financial regulation.

I think it is a great blueprint for everything that he has promised,” said Verret, a former Republican congressional staffer.

The Hensarling blueprint would primarily allow banks to choose between complying with Dodd-Frank or meeting tougher capital requirements – primarily to maintain a ratio of tangible equity to leverage exposure of 10 percent.

It would also reorganize the Consumer Financial Protection Bureau, throw out the Volcker Rule restricting banks from making speculative investments and eliminate the authority of the Financial Stability Oversight Council to designate non-banks as “systemically important.”

It also differs from the Dodd-Frank legislation in the way it treats insolvent banks. Hensarling says his approach will prevent taxpayer dollars from being used to bail out failed institutions.

Alongside Obamacare, Dodd-Frank is considered one of Democratic President Barack Obama’s signature domestic policies.

The most senior Democrat on the Senate Banking Committee, Sherrod Brown, has been a vocal defender of it, as has liberal firebrand Senator Elizabeth Warren. That means a Dodd-Frank revamp could stall in one chamber of Congress. Senate rules allow a single member to block a bill from proceeding to a vote.

Trump said last May that he would dismantle Dodd-Frank, primarily because the law makes it hard for banks to loan money.

But few have called for total demolition of it, with bank industry sources privately saying they would like to see an easing of Dodd-Frank rules.

Trump campaign adviser Anthony Scaramucci, a Wall Street financier, said this week that the administration will review the law and “the worst anti-business parts of it will be gutted.”

Verret said he believes some components of the CHOICE Act will appeal to the populist anger felt by Tea Party members and Trump supporters toward big banks.

One such provision, he said, would place limits on how central banks can lend to financial institutions in times of crisis, an in effort to prevent future bailouts.

This kind of reform, he added, appeals “to both populists and free market thinkers at the same time.”

(Reporting by Lisa Lambert and Sarah N. Lynch; editing by Linda Stern and Jonathan Oatis)

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Published at Fri, 11 Nov 2016 21:19:27 +0000

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WRAPUP 3-Trump packs transition team with loyalists and family

Byquinntheislander from Pixabay

WRAPUP 3-Trump packs transition team with loyalists and family

By Steve Holland and Luciana Lopez

President-elect Donald Trump began laying the groundwork on Friday to take office on Jan. 20, 2017, gathering the most loyal advisers from his insurgent campaign and three of his children to plot his transition strategy.

Trump put Vice President-elect Mike Pence in charge of his White House transition team, while demoting his former transition chief, tarnished New Jersey Governor Chris Christie, to one of the six vice-chair posts.

Daughter Ivanka and sons Eric and Donald Jr. and son-in-law Jared Kushner accounted for a fourth of the 16-member executive committee, which was filled with politicians and advisers who stuck with Trump during his rollercoaster first run for public office.

Aides huddled in the real-estate mogul’s Trump Tower in New York City to begin prioritizing policy changes and considering Cabinet picks and other candidates for the 4,000 positions he will need to fill shortly after he takes the reins of the White House.

A member of the Trump transition team told Reuters there were more than 100 people now involved in developing “white papers” on what regulations to roll back after Jan. 20. Some environmental measures and a rule requiring retirement advisers to act in their clients’ interests could be among the first on the chopping block, an industry lobbying source said.

Trump promised during his campaign to cut taxes, clamp down on immigration and repeal President Barack Obama’s signature Affordable Care Act, popularly known as Obamacare.

But in interviews with the Wall Street Journal and CBS “60 Minutes” on Friday, he said he was open to keeping some provisions of Obamacare.

James Woolsey, a former CIA director who has advised Trump on foreign policy, said several of Trump’s campaign promises were “advocacy of a general direction” that may require compromise – including his signature pledge to build a wall on the border with Mexico.

Woolsey told CNN that border security could be achieved with a combination of fence and wall. “I don’t think we ought to fall on our sword about the difference between a wall and fence. Maybe this will be cheaper because it’s mainly fence, but it’s a good fence. I wouldn’t have any problem with that myself,” he said.

Trump, a billionaire real estate magnate, also moved on Friday to extricate himself from his sprawling business empire, which will be overseen by his three grown children on the transition team.

His company said it was vetting new business structures for the transfer of control to the three and the arrangement would not violate conflict-of-interest laws. But government ethics experts said the move would fall short of blind trust standards and was unlikely to prevent potential conflicts of interest.

Trump said that Pence – who has strong ties to Republican leaders in Congress – will build on work done by Christie and has the mission of assembling “the most highly qualified group of successful leaders who will be able to implement our change agenda in Washington.”

Christie, once viewed as a top candidate for attorney general, is dealing with political fallout from the ‘Bridgegate’ lane closure scandal. Former New York mayor Rudy Giuliani is now the leading contender for the top law enforcement job, according to two sources familiar with the discussions.


Trump’s campaign spent relatively little time on transition planning during the campaign, and even his Republican supporters had been bracing for a loss to Democratic rival Hillary Clinton in Tuesday’s election.

“I was on Romney’s transition team, and it was a well-oiled machine months before the election. Now there’s a scramble,” said one Republican source, referring to the party’s 2012 presidential nominee, Mitt Romney.

Since Tuesday, dozens of possible cabinet appointees have been floated, from grassroots conservative heroes like Sarah Palin to seasoned Washington hands like David Malpass.

During his campaign, many establishment Republicans condemned Trump’s racially inflammatory rhetoric as well as his attacks on trade deals and the NATO alliance, which could take many traditional names out of the running.

But outgoing Republican Senator Kelly Ayotte – who had distanced herself from Trump at points in her unsuccessful reelection campaign in New Hampshire – was being floated as a potential defense secretary on Friday, the Washington Post reported.

Trump’s relatively small cadre of steadfast supporters is expected to play a prominent role in his administration. Campaign sources say Alabama Senator Jeff Sessions could serve as Defense Secretary, former House Speaker Newt Gingrich might be named as Secretary of State and retired General Michael Flynn could serve as national security adviser.

Those three, along with Giuliani and retired neurosurgeon Ben Carson, were named as vice chairs of the transition team.

Republican National Committee chairman Reince Priebus is a strong candidate for White House chief of staff, according to sources close to the campaign. Trump campaign CEO Steve Bannon, a conservative provocateur, is also being considered for the job.

As Trump mulled his team, demonstrators hit the streets in major cities for the third straight night to denounce his election and the inflammatory campaign rhetoric on immigrants, Muslims and women. Thousands marched through Miami, Atlanta, Philadelphia, New York and San Francisco as night fell.


Trump appears to be leaning toward seasoned Republicans for many economic positions. David Malpass, a former Treasury and State Department official, and Paul Atkins, a former Securities and Exchange Commission official, are guiding the transition team on economic issues.

“This is one area where the most Republican orthodoxy will come out,” said Brandon Barford, a former Republican congressional staffer.

The Trump transition website,, picked up on the tone of legislation aimed at weakening Dodd-Frank financial regulations that was released this summer by Republican chair of the House Financial Services Committee, Jeb Hensarling.

Trump’s victory is forcing President Barack Obama to scale back his ambitions for his final months in office. Obama, who is set to meet with key allies from Europe and Asia next week during his final foreign trip, is giving up on a last-ditch attempt to seek congressional approval for the Trans-Pacific Partnership trade deal before leaving office.

Japanese Prime Minister Shinzo Abe, a TPP partner, is slated to meet with Trump next week in New York, and the president-elect also fielded calls from German Chancellor Angela Merkel and French President Francois Hollande on Friday.

But EU Commission President Jean-Claude Juncker had a blunter reaction to the Trump transition. “I think we will waste two years before Mr. Trump tours the world he does not know,” Juncker said on Friday.

(Additional reporting by David Shepardson, Emily Stephenson, Ginger Gibson, Eric Beech, Diane Bartz, Jason Lange, David Brunnstrom, David Lawder, Julia Harte and Julia Edwards Ainsley in Washington, Dan Whitcomb in Los Angeles; Writing by Roberta Rampton and Andy Sullivan; Editing by Bill Rigby and Mary Milliken)


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Trump bets blast Dow to new high, bank sector hits 2008 levels




 by publicdomainpictures at pixabay

graph-163509_1280Trump bets blast Dow to new high, bank sector hits 2008 levels

By Noel Randewich

U.S. banking sector shares on Thursday surged to levels not seen since the midst of the 2008 financial crisis, pushing the Dow to an all-time high, while technology shares sank as Wall Street rearranged its bets to benefit from Donald Trump’s presidency.

The S&P 500 financial sector .SPSY surged 3.70 percent to its highest since the 2008 financial crisis, bringing its gain since Trump’s surprise victory in Tuesday’s election to 7.9 percent, its biggest two-day gain since 2011.

Shares of Wells Fargo & Co (WFC.N) jumped 7.58 percent to their highest since January, and have now erased all of the losses incurred in the wake of a scandal over fake accounts opened by its employees. Bank of America (BAC.N) surged 4.40 percent and JPMorgan Chase (JPM.N) rallied 4.64 percent to a record high.

Trump has sided with leading conservatives in calling for the repeal of the 2010 Dodd-Frank Financial Reform Act largely opposed by banks.

“The Trump campaign did say it would repeal Dodd-Frank. Rates are higher and the yield curve is steeper. Those are all good things for the banks,” said Warren West, principal at Greentree Brokerage Services in Philadelphia.

Apple (AAPL.O) dropped 2.79 percent while (AMZN.O) fell 3.82 percent and the S&P 500 technology index .SPLRCT fell 1.59 percent.

The Dow Jones industrial average .DJI jumped 1.17 percent to end at 18,807.88, smashing through its previous record high set in August by almost 1 percent.

The S&P 500 .SPX rose 0.2 percent to 2,167.48 while the Nasdaq Composite .IXIC dropped 0.81 percent to 5,208.80, hurt by losses in tech shares.

With Thursday’s gain, the Dow is up 8 percent in 2016 and the S&P 500 is up 6 percent.

High-dividend sectors utilities .SPLRCU, telecom services .SPLRCL and consumer staples .SPLRCS sold off by more than 2 percent as bond yields rose due to expectations of higher interest rates.

The market got a lift after St. Louis Federal Reserve President James Bullard said the Republican sweep of the White House and Congress could break the current gridlock over national policy in a potential boon to the U.S. economy.

Industrials .SPLRCI trailed the financials with a 2.05 percent advance.

Macy’s (M.N) rose 5.6 percent after the department store operator raised its full-year sales forecast and announced a partnership to monetize some of its real-estate assets.

After the bell, Nordstrom (JWN.N) reported quarterly results that sent its shares 5 percent higher while Walt Disney’s (DIS.N) quarterly report pushed its stock down 2.6 percent.

Declining issues outnumbered advancing ones on the NYSE by a 1.15-to-1 ratio; on Nasdaq, a 1.58-to-1 ratio favored advancers.

The S&P 500 posted 84 new 52-week highs and seven new lows; the Nasdaq Composite recorded 336 new highs and 48 new lows.

About 12.3 billion shares changed hands on U.S. exchanges, far above the 7.3 billion daily average over the last 20 sessions.

(Additional reporting by Yashaswini Swamynathan in Bengaluru; Editing by James Dalgleish)

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Published at Thu, 10 Nov 2016 21:46:06 +0000

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The Future is still Bright!


by Geralt at pixabay

The Future is still Bright!

by Bill McBride on 11/09/2016 02:53:00 PM

 In January 2013 I wrote The Future’s so Bright …. In that post I outlined why I was becoming more optimistic. I updated that post earlier this year (with a discussion of demographics).

For new readers: I was very bearish on the economy when I started this blog in 2005 – back then I wrote mostly about housing (see: LA Times article and more here for comments about the blog). I predicted a recession in 2007, and then I started looking for the sun in early 2009, and I’ve been fairly positive since then (although I expected a sluggish recovery).

I’ve also been optimistic about next year (2017), with most economic indicators improving – more jobs, lower unemployment rate, rising wages and much more – and with more room to run for the current expansion.   Also the demographics in the U.S. are becoming more favorable (see here for more on improving demographics).

Now Mr. Trump has been elected President.  How does that change the outlook?

In the long term, there is little or no change to the outlook.  The future is still bright!  Although I’m concerned about the impact of global warming.

In the short term, there is also no change (Mr Obama will be President until January, and it takes time for new policies to be implemented).

The intermediate term might be impacted. The general rule is don’t invest based on your political views, however it is also important to look at the impact of specific policies.

I will probably disagree with most of Mr. Trump’s proposals for both normative reasons (different values), and for positive reasons (because Mr. Trump rejects data that doesn’t fit his view – and that is not good).

With Mr. Trump, no one knows what he will actually do.  He has said he’d “build a wall” along the border with Mexico, renegotiate all trade deals, cut taxes on high income earners, repeal Obamacare and more.   As an example, repealing the ACA – without a replacement – would lead to many millions of Americans without health insurance.  And those with preexisting conditions would be uninsurable.   This seems politically unlikely (without a replacement policy), but it is possible.

Since Trump is at war with the data (he rejects data that doesn’t fit his views), I don’t expect evidence based policy proposals – and that almost always means bad results.   However bad results might mean higher deficits with little return – not an economic downturn.  Until we see the actual policy proposals, it is hard to predict the impact.  I will not predict a recession just because Trump is elected.  In fact, additional infrastructure spending might give the economy a little boost over the next year or two.   On the other hand, deporting 10+ million people would probably lead to a recession.  We just have to wait and see what is enacted.

In conclusion: The future is still bright,  but there might be a storm passing through.



by Bill McBride on 11/09/2016 02:53:00 PM

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Wall Street jumps after Trump wins White House


U.S. President elect Donald Trump arrives to address supporters with his son Barron and wife Melania at election night rally in Manhattan, New York, U.S., November 9, 2016.REUTERS/Brendan McDermid

U.S. stocks rose sharply on Wednesday in a dramatic turnaround from deep overnight losses as Wall Street digested the upset presidential election victory of Republican Donald Trump.

The Dow Jones industrial average .DJI rose 255.27 points, or 1.39 percent, to 18,588.01, the S&P 500 .SPX gained 23.52 points, or 1.1 percent, to 2,163.08 and the Nasdaq Composite .IXIC added 57.58 points, or 1.11 percent, to 5,251.07.

(Reporting by Noel Randewich; Editing by James Dalgleish)

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Published at Wed, 09 Nov 2016 09:42:31 +0000

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U.S. mutual fund managers brace for closer presidential election


People sit outside the New York Stock Exchange (NYSE) during the morning commute in New York City, U.S., September 15, 2016.REUTERS/Brendan McDermid
By David Randall | NEW YORK

The U.S. presidential election is looking like less of a certainty for Democratic nominee Hillary Clinton than it did a month ago, prompting mutual fund managers to brace for more volatility by raising cash and getting their buying lists ready for opportunities.

“The market has been pricing in a Hillary victory, and now with the introduction of the Comey letter, there’s a stronger possibility that the base case doesn’t happen,” said Phil Orlando, portfolio manager of the New York-based Federated Global Allocation (FSTBX.O) fund.

FBI Director James Comey wrote Congress last Friday that more of Clinton’s emails would be scrutinized as part of an investigation into Clinton’s use of a private email system while she was secretary of state.

The benchmark S&P 500 stock index has shed nearly 2 percent since Comey’s letter was made public, and notched its longest losing streak in nearly five years.

Orlando said his fund has been raising cash out of the possibility that the market could fall as much as 10 percent from the all-time high of 2,193.81 it notched Aug. 15.

And Orlando is not the only one. Lipper data released on Thursday showed investors fled U.S. based stock and bond funds in the latest week. Nearly $7.7 billion left taxable bond funds in the seven days through Nov. 2, the largest weekly withdrawals this year by a wide margin, while U.S. equity funds showed $3.4 billion in outflows.

His fund is now neutral to the market, he said, in order to guard against the possibility that either Republican nominee Donald J. Trump wins the election, or that Democrats win both the Senate and the House in addition to the presidency, both of which outcomes would push the market down at least another 5 percent, he said.

The market volatility has also caused anxiety for retail investors, according to Phil Blancato, chief executive of Ladenberg Thalmann Asset Management in New York, who has cautioned against overreacting to the market movements caused by the election.

“I’ve had multiple people call us up to say ‘let’s raise cash in my account’ because of the election,” said Blancato.

“Having to talk them off a cliff is becoming almost comical at this point because of the idea that suddenly the world is going to fall into the ocean because Trump wins the election.”

Terri Spath, chief investment officer at Sierra Investment Management in Santa Monica, California, has been selling as the market’s volatility picks up, shifting more assets into emerging market debt and floating rate loans that should be more “insulated” from the results of the U.S. election, she said.

“We think it’s going to be a tight race and we’re willing to step out of the way if volatility picks up,” she said.

One area in which she has been buying, however, is infrastructure and transportation related stocks that have dropped more than the broad market, she said.

Both candidates have pledged to spend more on rebuilding bridges, tunnels and other links, while the iShares Global Infrastructure ETF IGF.O, one of the best proxies for global infrastructure stocks, is down 4.3 percent over the last month.

Eric Marshall, a fund manager at Dallas-based Hodges Capital, said he welcomed the sell-off because the U.S. market had been steadily rising since February except for a short fall after the so-called Brexit vote.

He is drawing down his approximately 8 percent stake in cash to buy more healthcare and consumer companies that have fallen over the last week, he said, and is preparing to buy more should either Trump wins or the Democratic party sweeps the election.

“The Brexit blip was the last time when you could have made some money, and we’re ready to be opportunistic again,” he said.

(Additional reporting by Chuck Mikolajczak; Editing by Bernadette Baum)

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Published at Sat, 05 Nov 2016 01:28:33 +0000

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Public and Private Sector Payroll Jobs: Carter, Reagan, Bush, Clinton, Bush, Obama

By 777546 from PixabayPublic and Private Sector Payroll Jobs: Carter, Reagan, Bush, Clinton, Bush, Obama

Public and Private Sector Payroll Jobs: Carter, Reagan, Bush, Clinton, Bush, Obama

by Bill McBride on 11/04/2016 03:31:00 PM

 By request, here is another update of an earlier post through the October 2016 employment report including all revisions.

NOTE: Several readers have asked if I could add a lag to these graphs (obviously a new President has zero impact on employment for the month they are elected). But that would open a debate on the proper length of the lag, so I’ll just stick to the beginning of each term.

Note: We frequently use Presidential terms as time markers – we could use Speaker of the House, or any other marker.

Important: There are many differences between these periods. Overall employment was smaller in the ’80s, however the participation rate was increasing in the ’80s (younger population and women joining the labor force), and the participation rate is generally declining now.  But these graphs give an overview of employment changes.

First, here is a table for private sector jobs. The top two private sector terms were both under President Clinton.  Reagan’s 2nd term saw about the same job growth as during Carter’s term.  Note: There was a severe recession at the beginning of Reagan’s first term (when Volcker raised rates to slow inflation) and a recession near the end of Carter’s term (gas prices increased sharply and there was an oil embargo).

Term Private Sector
Jobs Added (000s)
Carter 9,041
Reagan 1 5,360
Reagan 2 9,357
GHW Bush 1,510
Clinton 1 10,884
Clinton 2 10,082
GW Bush 1 -811
GW Bush 2 415
Obama 1 1,921
Obama 2 9,3221
145 months into 2nd term: 9,943 pace.

The first graph shows the change in private sector payroll jobs from when each president took office until the end of their term(s). Presidents Carter and George H.W. Bush only served one term, and President Obama is in the final months of his second term.

Mr. G.W. Bush (red) took office following the bursting of the stock market bubble, and left during the bursting of the housing bubble. Mr. Obama (blue) took office during the financial crisis and great recession. There was also a significant recession in the early ’80s right after Mr. Reagan (yellow) took office.

There was a recession towards the end of President G.H.W. Bush (purple) term, and Mr Clinton (light blue) served for eight years without a recession.
Private Sector PayrollsClick on graph for larger image.

The first graph is for private employment only.

The employment recovery during Mr. G.W. Bush’s (red) first term was sluggish, and private employment was down 811,000 jobs at the end of his first term.   At the end of Mr. Bush’s second term, private employment was collapsing, and there were net 396,000 private sector jobs lost during Mr. Bush’s two terms.

Private sector employment increased slightly under President G.H.W. Bush (purple), with 1,510,000 private sector jobs added.

Private sector employment increased by 20,966,000 under President Clinton (light blue), by 14,717,000 under President Reagan (yellow), and 9,041,000 under President Carter (dashed green).

There were only 1,921,000 more private sector jobs at the end of Mr. Obama’s first term.  Forty five months into Mr. Obama’s second term, there are now 11,243,000 more private sector jobs than when he initially took office.
Public Sector Payrolls A big difference between the presidencies has been public sector employment.  Note the bumps in public sector employment due to the decennial Census in 1980, 1990, 2000, and 2010.

The public sector grew during Mr. Carter’s term (up 1,304,000), during Mr. Reagan’s terms (up 1,414,000), during Mr. G.H.W. Bush’s term (up 1,127,000), during Mr. Clinton’s terms (up 1,934,000), and during Mr. G.W. Bush’s terms (up 1,744,000 jobs).

However the public sector has declined significantly since Mr. Obama took office (down 344,000 jobs). This has been a significant drag on overall employment.

And a table for public sector jobs. Public sector jobs declined the most during Obama’s first term, and increased the most during Reagan’s 2nd term.

Term Public Sector
Jobs Added (000s)
Carter 1,304
Reagan 1 -24
Reagan 2 1,438
GHW Bush 1,127
Clinton 1 692
Clinton 2 1,242
GW Bush 1 900
GW Bush 2 844
Obama 1 -708
Obama 2 3641
145 months into 2nd term, 388 pace

Looking forward, I expect the economy to continue to expand through the remainder of Mr. Obama’s presidency, so I don’t expect a sharp decline in private employment as happened at the end of Mr. Bush’s 2nd term (In 2005 and 2006 I was warning of a coming down turn due to the bursting of the housing bubble – and I predicted a recession in 2007).

For the public sector, the cutbacks are over.  Right now I’m expecting some further increase in public employment during the last few months of Obama’s 2nd term, but obviously nothing like what happened during Reagan’s second term.

Below is a table of the top four presidential terms for private job creation (they also happen to be the four best terms for total non-farm job creation).

Clinton’s two terms were the best for both private and total non-farm job creation, followed by Reagan’s 2nd term.

Currently Obama’s 2nd term is on pace to be the 3rd best ever for private job creation.  However, with very few public sector jobs added, Obama’s 2nd term is only on pace to be the fifth best for total job creation.

Note: Only 364 thousand public sector jobs have been added during the forty five months of Obama’s 2nd term (following a record loss of 708 thousand public sector jobs during Obama’s 1st term).  This is about 25% of the public sector jobs added during Reagan’s 2nd term!

Top Employment Gains per Presidential Terms (000s)
Rank Term Private Public Total Non-Farm
1 Clinton 1 10,884 692 11,576
2 Clinton 2 10,082 1,242 11,312
3 Reagan 2 9,357 1,438 10,795
4 Carter 9,041 1,304 10,345
5 Obama 21 9,322 364 9,686
Pace2 9,943 388 10,332
145 Months into 2nd Term
2Current Pace for Obama’s 2nd Term

The last table shows the jobs needed per month for Obama’s 2nd term to be in the top four presidential terms. Right now it looks like Obama’s 2nd term will be the 3rd best for private employment (behind Clinton’s two terms, and ahead of Reagan) and probably 4th or 5th for total employment.

Average Jobs needed per month (000s)
for remainder of Obama’s 2nd Term
to Rank Private Total
#1 521 630
#2 253 546
#3 12 370
#4 -94 220


by Bill McBride on 11/04/2016 03:31:00 PM

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Asia shares slip, dollar shaky as investors anxious before U.S. election


Pedestrians are reflected in an electronic board showing the graph of the recent fluctuations of the Tokyo Stock Exchange Stock Price Index (TOPIX) outside a brokerage in Tokyo, Japan, May 28, 2015.REUTERS/Yuya Shino

Asia shares slip, dollar shaky as investors anxious before U.S. election

Asian shares slipped on Friday and the dollar nursed losses in a week marked by growing uncertainty about the outcome of the U.S. presidential election.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS slipped 0.4 percent after brushing its lowest levels since early August. It looked set for a loss of 1.7 for the week.

Investors have been unnerved in recent days by signs that the presidential race between Democrat Hillary Clinton and Republican Donald Trump may be tightening just days before Tuesday’s vote.

That anxiety has rippled across global financial markets as investors ponder hedging the possible ramifications of a Trump presidency, overshadowing other events including Friday’s U.S. employment report for October.

“This negative sentiment is also spilling over into Europe’s markets as they also slip back as the weaker U.S. dollar pushes up the pound and the euro, as we look again at the potential for another negative open this morning,” wrote Michael Hewson, chief market analyst at CMC Markets in London.

CMC expects Britain’s FTSE 100 .FTSE, France’s CAC 40 .FCHI and Germany’s DAX <.GDAXI to all open down moderately lower.

According to the latest Reuters/Ipsos States of the Nation project, Clinton, who is seen as the status quo candidate by markets, maintained her narrow lead over Trump.

But several swing states that the Republican challenger must win shifted from favoring Clinton to toss-ups, offering Trump a possible route to victory.

“Even if opinion polls show that Clinton is maintaining a lead, anything can happen at the last minute, something the Brexit outcome taught us,” said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities, referring to Britain’s surprising vote in June to leave the European Union.

Trump, a political novice, has campaigned to clamp down on immigration, rethink trade relations and slap high tariffs on imported goods. Some fear his election would pose risks for global trade and growth.

On Wall Street on Thursday, U.S. stocks sagged, with the S&P 500’s .SPX eighth straight losing session marking its longest streak since the 2008 financial crisis. A slump in Facebook shares (FB.O) and the U.S. election jitters sapped investor confidence.

Japan’s Nikkei stock index .N225 slid 1.3 percent, reopening after a public holiday on Thursday and catching up to losses in the previous global session. It was down 3.1 percent for the week, the biggest weekly drop in four months, dragged down by the resurgence of the perennial safe-haven yen.

The dollar clawed back some lost ground against the yen, rising 0.2 percent to 103.19 JPY= and pushing away from the previous session’s one-month low of 102.54 yen, though still down 1.5 percent for the week. The euro EUR= edged down 0.1 percent to $1.1097 EUR=, up about 1 percent for the week.

The dollar index, which tracks the greenback against a basket of six rival currencies, inched up 0.1 percent to 97.244 .DXY, down 1.1 percent for the week and not far from a more than three-week low of 97.041 struck overnight.

The nonfarm payrolls report due later Friday is expected to show employers added 175,000 jobs in October, according to the median estimate of 106 economists polled by Reuters. [ECONUS]

U.S. data on Thursday showed that services industry activity cooled last month amid a slowdown in new orders and hiring, while planned job cuts by U.S.-based employers dropped 31 percent to a five-month low.

That underscored the labor market’s healthy fundamentals, though more Americans filed for unemployment benefits last week.

The pound was a stand-out performer overnight, rising to a nearly one-month high of $1.2494 GBP= on Thursday after a British court ruled that the government needs parliamentary approval to start the process of leaving the European Union. That could potentially delay Prime Minister Theresa May’s Brexit plans.

The pound also got a boost from the Bank of England, which scrapped its plan to cut interest rates and ramped up its forecasts for growth.

Sterling was last up slightly at $1.2465, poised to gain 2.3 percent for the week.

Oil prices took back some ground after settling down more than 1 percent on Thursday as investors reacted to a record weekly surge in U.S. crude inventories and remained skeptical that OPEC will actually implement its planned output curbs.

U.S. crude CLc1 added 0.3 percent to $44.79 per barrel. Brent crude LCOc1 also rose 0.3 percent to $46.47.

(Additional reporting by Ayai Tomisawa; Editing by Shri Navaratnam and Kim Coghill)

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Published at Fri, 04 Nov 2016 06:40:05 +0000

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“How do I protect myself if Trump is elected?”


“How do I protect myself if Trump is elected?”

by Bill McBride on 10/30/2016 12:01:00 PM

 Quite a few readers have asked me this question. My usual answer is that I expect Ms. Clinton to be elected President, and that the expansion will continue.

I’ve spoken to several key analysts and economists, and for their forecasts, all are assuming Ms. Clinton will be the next President (my forecasts also assume a Clinton presidency).  So if Trump is elected, expect some market volatility as forecasts are changed.  As Merrill Lynch recently noted:

“As our strategists have noted, the initial reaction to a potential Trump victory would likely be a risk-off event in the markets, which we think could end up delaying the Fed from hiking in December.”

That is just a guess at the short term reaction.  The general rule is don’t invest based on your political views. 

However policy does matter for investing and the economy.  As an example, it was obvious to invest in oil when George W. Bush became President.  And insurance companies like United Healthcare and Aetna seemed like good bets with a President Obama.

Another example of policy is the deregulation of banks (and the anti-regulation attitude of the Bush administration) as part of the housing bubble story.

But what about with Mr. Trump?  He has said he’d “build a wall” along the border with Mexico, renegotiate all trade deals, cut taxes on high income earners, repeal Obamacare and more.   But it is unclear what he’d actually do as President.   As an example, no one really thinks a wall will be built along the entire border (maybe sections of a wall – and Mexico wouldn’t pay for it).

Repealing the ACA – without a replacement – would lead to many millions of Americans without health insurance.  And those with preexisting conditions would be uninsurable.   This seems politically unlikely (without a replacement policy), but if it happens, sell those health insurance companies.

Right now it is hard to guess what policy would look like with Mr. Trump (Trump doesn’t seem to understand policy issues – like his ignorant comments on the VAT while talking about trade with Mexico).  One key concern with Trump is the potential for a trade war – and that could happen almost without warning.

Long time readers remember when I used to write about the impact of policy (both good and bad), but there hasn’t been much policy to discuss for the last few years.  If Trump is elected, I’d expect a GOP sweep, and then I’ll be writing frequently about policy again.  Since Trump is at war with the data (he rejects data that doesn’t fit his views), I don’t expect evidence based policy proposals – and that almost always means bad results.

Until we see the actual policy proposals, it is hard to predict the impact.  I will not predict a recession just because Trump is elected, but I do think the economy would perform better under Clinton than Trump.

Also, the words of a President matter.  Mr Trump has been reckless and irresponsible with his comments, and that would probably continue. One absurd comment could send the markets into a tailspin (and that could happen at any time).   That should make investors more cautious (as an example, I’m recommending that my home builder friends ease back on their spec building if Trump is elected).

In conclusion: I expect Ms. Clinton to be elected and I’m currently taking no action to protect myself against the risks of a Trump presidency.    The risks are real, but I think the odds of Trump winning are very low.  If the unimaginable happens, I’ll be writing about when to head to the bunker.


by Bill McBride on 10/30/2016 11:42:00 AM

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Published at Sun, 30 Oct 2016 15:42:00 +0000

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The Rape of America — The Core Federal Election Issue


The Rape of America — The Core Federal Election Issue

The 2016 US presidential election between leading candidates Republican Donald Trump and Democrat Hillary Clinton has been unusual in that allegations of rape have cropped up during the campaign with Bill Clinton accused of rape, Hillary Clinton accused as an accessory, and Donald Trump accused of groping women without their consent. However, the core issue of the campaign — indeed the reason the Trump campaign exists — is citizen anger at a growing sense that their country itself has been abused at the hands of a financial elite.  And this core campaign issue is lost as the back and forth sexual recriminations between the campaigns deflects attention from a critical issue.1

Something’s Wrong — And It’s Big

But citizens increasingly know something is wrong – and that realization is despite soaring stock markets and bond markets since the Great Financial Crisis of 2008.

The current US administration promotes an unemployment rate of 5% (down from 10% in 2009) as a sign that the economy has recovered from the Great Financial Crisis.

Flying in the face of this promotion is the fact that the number of adults not in the US labor force is 94 million people in September 2016 up from 80 million not in the labor force in October 2008. Excluding 14 million people from the US labor force so that they are not counted as unemployed helps to statistically reduce the unemployment rate.

And 41 million Americans now remain on food stamps up from 28 million in October 2008.

These statistics, and there are many more, show us that despite soaring financial markets fuelled by the Fed’s 0% interest rates, there is no real recovery underway.  Soaring financial markets with moribund labor markets and rising prices for essential goods do not signal a healthy economy. Donald Trump knows it as do US voters.

On September 5, 2016 Trump warned that the Federal Reserve had kept rates artificially low and “It’s an artificial market. It’s a bubble.” warning that the bubble economy that the Federal Reserve has created had resulted in “very scary scenarios”. On September 6 Clinton immediately responded to Trump by saying that “presidents and candidates should not comment on Fed actions”.  It was also revealed on September 6 that Goldman Sachs was banning partners from contributing to Trump’s campaign from September 1 forward.

The Rape of America (and Europe and Canada)

By (correctly) identifying the Fed as the source of economic distortions and the coming crash and impoverishment of the American people, Trump was alarming many in the financial industry by lighting fires of inquiry that cannot be put out. And the trail of evidence leads back not only to the Fed but to Goldman Sachs as well.

The rape of America has been a relatively simple process and involves a few key elements:

1) A debt-based currency system run by the central bank.

With a debt-based currency system and the ability of banks to instantly credit money into creation, the age-old formula of blowing bubbles can be effected by continually lowering interest rates and increasing the amount of currency in circulation thus driving speculation continually higher. This creates Trump’s “artificial markets”.

2) Recognize the inverse relationship between real interest rates and gold prices

Gold has historically limited the ability of central banks to blow bubbles by soaring in price. Former Clinton administration Treasury Secretary Larry Summers in his seminal 1985 paper with Barsky identified that the primary factor driving real gold prices was real interest rates (i.e. nominal interest rates minus the inflation rate). As inflation rises from loose central bank monetary policy, the real price of gold measured in constant dollars also rises and is the principal “tell” of those loose monetary policies. The principal driver of consumer goods inflation is monetary policy — as more money is created, goods prices also become more expensive. Indeed, the US dollar now buys 1% of what it could buy in 1913 when the Fed was created. But as was seen in the late 1970s, when inflation rages gold rages more. Central bankers are then forced to choose between abandonment of their paper money and bonds for real assets or to stop their money printing.

Now, Summers and Barsky were so certain of their observation that they wrote “(t)he negative correlation between real interest rates and the real price of gold that forms the basis for our theory is a dominant feature of actual gold price fluctuations.” [“Gibson’s Paradox and the Gold Standard“, Summers and Barsky, 1985 NBER working paper 1680].  The principal driver of the gold price was real interest rates — as they collapse due to inflation, the price of gold soars. The implication is that if you would like to sustain loose monetary policy for a protracted period, it is necessary to be able to control the price of gold.

And as we will see, the ability to control the bond market was almost lost in the late 1970s as both inflation and the price of gold soared forcing nominal interest rates up to the high teens before gold’s rise was arrested.

3) Convert the world’s principal gold markets from trading gold to trading paper gold thereby short-circuiting price discovery in the global gold and bond markets

The central characteristics of gold are that it is rare and of universally of value — gold has a 4,000 year history as a monetary asset as it cannot be debased or created without limit as fiat paper money can. With the 1987 creation of the London Bullion Market Association (LBMA) by the Bank of England (, gold trading was progressively thereafter converted to paper contract trading through the creation of “unallocated gold contracts” without gold backing and price discovery was thereby thwarted as these contract claims on gold can themselves be created and traded without limit (  By deflecting claims for gold into paper gold contracts, today there are an estimated 400 million to 600 million oz of claims for gold at the LBMA without gold backing and daily gold trading has reached 200+ million oz of gold per day (vs global annual gold mine production of ~ 100 million oz).

Price discovery of gold, and the ability of the price of gold to respond to real interest rates, has thus been greatly arrested — the knock-on and targeted effect was that the bond market was also short-circuited allowing the secular reduction of interest rates (and creation of mountains of debt in our debt-based economies). Central bankers could now defy gravity — for a while.

The following graph using the Bureau of Labor Statistic’s consumer price index (CPI) method of calculating inflation from 1980 held constant shows the 1987 decoupling of the price of gold’s historic inverse relationship with real interest rates with the creation of the LBMA — gold no longer responded by rising in price as real interest rates became negative and central banks were free to blow bubbles. Note also in the graph (where the inverse price of gold is plotted on the right) that in late 1982 the price of gold started to surge driving real interest rates to almost 9% higher than the rate of inflation before money started to return to bonds from gold.

Source: Reginald Howe, 1980 CPI computations by John Williams at

Another issue given Goldman Sachs response of banning Goldman partners from donationing to the Trump campaign is the key role of Goldman Sachs’ subsidiary J. Aron and Co. gold traders in advising central banks to sell and lease gold in the 1990s. Former gold banker and author Ferdinand Lips wrote at pages 123 to 124 in his book Gold Wars — The Battle Against Sound Money From a Swiss Perspective that he came to recognize in 1996 that Goldman’s J.Aron and Co. were the central advisors to central banks behind their gold policy to agressively sell and lease gold into the market — thereby further depressing the price of gold ( Mr. Trump’s reference to a bubble economy driven by central banks and artificially low interest rates leads inexorably back to Goldman Sachs and the LBMA.

4. Now, continually lower interest rates over the next 30 years creating a succession of financial bubbles — when the bubbles pop, bail-out the banks and not borrowers

With gold no longer properly signalling artificially low interest rates by central banks this enabled the creation of a of a fake bubble economy as identified by Trump. When you rig the global price of gold, you rig the global bond market.   Global credit market borrowing now totals $230 billion or 340% of global GDP more than double the historically sustainable level of 150% of GDP.

Central bankers have responded to the succession of bubbles and financial crises of their own creation by bailing-out the banks (lending up to $16 trillion to banks during the Great Financial Crisis) and prescribing lower interest rates and more debt compared to the needed monetary system reform and debt write-down to stabilize our economy. And Alan Greenspan who was appointed to the Fed in 1987 has retired and has been knighted as Sir Alan Greenspan by the UK establishment. A job well done.

The Bubbles are Popping but the Debt Remains

With the creation of the debt bubble and the consequent sequence of financial and economic bubbles, the US economy is now so distorted by Fed policy that even with the zero interest rates the economic output is growing at 1% and is declining. We are at the terminus point of exceptionally loose money started in 1987 by the Bank of England and the Federal Reserve.

With assets stripped from their hands and large numbers of Americans out of work and on food stamps, Mr. Trump’s words have not elicited reasoned discussion.   Not only has Trump been told not to talk like that but the recriminations back and forth of sexual impropriety have stopped discussion of this core campaign issue reflecting American voter concern. And the hackneyed accusation of anti-semitism against Trump further muddies the waters  ( and with hedge fund donations to Trump totalling $19,000 vs 48.5 million for Clinton, we get some sense of the Candidate reflecting the interests of Wall Street. And this mirrors the Obama administration which executive structure was determined by Citibank (

The question now remains whether there will be any further discussion of this key issue broached by Trump and reform forced by the electorate or whether America will proceed with its politicians bickering about sex as the financial, economic and monetary system proceeds over the waterfall.


1. The well documented alleged rape of nursing administrator Juanita Broaddrick in 1978 by former President Bill Clinton and Broaddrick’s subsequent intimidation into silence by Democratic candidate Hillary Clinton has revolted many long-time Democratic supporters (for a catalogue of some of Bill Clinton’s alleged crimes against women see:  And Hillary Clinton’s successful 1975 legal defence leading to the release of a rapist who raped 12 year old Kathy Shelton and audio tapes of Clinton laughing at the process as well as her using a defence that the child had a “tendency to seek out older men and engage in fantasizing.” leaves observers disgusted.   The tape recording of Republican candidate Trump bragging about what women let a star like him do to them as well as the fusillade of accusations by women of unwanted groping and kissing by the Republican further leaves voters shocked — and not thinking. And more allegations are sure to follow in this political season.

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David B. Jensen, P.Eng., LL.B., MBA
Vancouver, BC

David Jensen

David Jensen, P.Eng., LL.B., MBA, is a Professional Engineer with a degree in Engineering from the University of Waterloo in Canada (1987). He worked through 1993 on the F-5 Fighter Overhaul program and the Bombardier Regional Jet programs. Mr. Jensen then graduated with a LL.B. degree in corporate and commercial law from the University of Calgary (1997) and an MBA from Univ. of B.C., majoring in Logistics and Supply Chain Management (1999). Returning first to aviation then, after reading Austrian School Economics, Mr. Jensen transitioned to the mining industry from the aerospace industry in 2004 first through his mining industry consultancy, then as Vice President of Corporate Development for Western Copper Corp., and most recently as President and COO of Skyline Gold. Mr. Jensen currently serves as President and COO of a private mining company and provides strategic, operational, risk assessment, and precious metals consulting services through his consultancy, Jensen Strategic.

Copyright © 2005-2016 David Jensen. All rights reserved.

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Published at Mon, 17 Oct 2016 09:34:59 +0000

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Transcripts of Clinton’s Wall Street talks released in new Wikileaks dump

Transcripts of Clinton’s Wall Street talks released in new Wikileaks dump

U.S. Democratic presidential nominee Hillary Clinton greets people at a campaign office in Seattle, Washington, U.S. October 14, 2016.REUTERS/Lucy Nicholson
By Emily Stephenson and Luciana Lopez

U.S. Democratic presidential candidate Hillary Clinton’s full remarks to several Wall Street audiences appeared to become public on Saturday when the controversial transparency group Wikileaks dumped its latest batch of hacked emails.

The documents showed comments by Clinton during question-and-answer sessions with Goldman Sachs Chief Executive Lloyd Blankfein and Tim O’Neill, the bank’s head of investment management, at three separate events in 2013 in Arizona, New York and South Carolina.

Some excerpts of Clinton’s speeches had already been released. For more than a week, Wikileaks has published in stages what it says are hacked emails from the account of John Podesta, Clinton’s campaign chairman.

Clinton’s campaign has declined to verify the emails. Goldman Sachs did not immediately provide any comment on Saturday.

Clinton came under fire for months for not releasing full details of her paid speeches to big business audiences, as opponents accused her of a cozy relationship with bankers and other members of the U.S. financial system.

The excerpts that have surfaced so far angered voters who backed Clinton’s former Democratic opponent, U.S. Senator Bernie Sanders, who endorsed her after losing the party’s primary.

Few of these voters are expected to vote for Republican nominee Donald Trump, who is dealing with his own larger scandal after the release last week of a 2005 video in which he bragged about making unwanted sexual advances toward women.

But Democratic strategists worry that disappointment with Clinton could hurt turnout in the Nov. 8 election among liberals and younger voters, posing a potential problem for the former secretary of state.

In the email released on Saturday containing the transcripts, Clinton campaign staff highlighted sections that could pose problems, including saying “political reasons” factored into passing the 2010 Dodd-Frank law on Wall Street reforms and, while talking about regulation, saying the people who work in the industry know it best.

(Reporting by Emily Stephenson and Luciana Lopez; Editing by Leslie Adler)

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Published at Sat, 15 Oct 2016 22:04:42 +0000

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A Parable for November

A Parable for November

You have a cross-country trip to take, and it’s a must-do trip.  You have to leave immediately and all that are available is a charter plane and your choice of two available pilots.  The first pilot has flown this plane before but has a longstanding negative reputation as being someone who will overcharge you and most likely take you to unannounced stops before (possibly) arriving at your destination.  The second pilot loudly announces how great the ride will be and how dishonest the other pilot is, but has never flown a plane before.

Must-do trip.

Two pilots.

Your choice.

Further Reading:  Why Character Matters

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Published at Mon, 10 Oct 2016 11:53:00 +0000

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Wall Street rises as Clinton seen winner of second debate

Wall Street rises as Clinton seen winner of second debate



Traders work on the floor of the New York Stock Exchange (NYSE) as the market closes in New York, U.S., October 3, 2016. REUTERS/Lucas Jackson
By Caroline Valetkevitch

Wall Street rose on Monday morning amid gains across most sectors, driven by oil prices, and as Democrat Hillary Clinton was widely seen as the winner of the second presidential debate.

A Clinton presidency would be more positive for the markets because her positions are more well known than those of her Republican rival Donald Trump, according to a Reuters poll.

A CNN/ORC snap poll of debate watchers found that 57 percent thought Clinton won the encounter, versus 34 percent for Trump.

Oil prices rose 2.8 percent and touched their one-year high as speculators raised bets that prices would gain on the back of an agreement among OPEC producers to rein in record output levels. [O/R]

“Investors will ponder the presidential debate and follow the events in the commodity markets, especially oil,” said Peter Cardillo, chief market economist at First Standard Financial in New York.


Investors are also bracing for the third-quarter earnings season, which unofficially kicks off on Tuesday when aluminum producer Alcoa (AA.N) reports.

“The markets seem to be looking for a repeat of last quarter, with most companies exceeding Street consensus but obviously on a scaled back earnings growth,” Cardillo said.

Earnings of S&P 500 companies are expected to drop 0.7 percent, according to Thomson Reuters data.

The dollar .DXY, which has been swinging between gains and losses for the past five trading days, was up 0.2 percent against a basket of major currencies. The pound GBP=fell again on Monday.

The U.S. bond market was closed for the Columbus Day holiday.

At 9:39 a.m. ET (1339 GMT), the Dow Jones Industrial Average .DJI was up 127.61 points, or 0.7 percent, at 18,368.1.

The S&P 500 .SPX was up 12.42 points, or 0.58 percent, at 2,166.16 and the Nasdaq Composite .IXIC was up 34.29 points, or 0.65 percent, at 5,326.70.

Ten of the 11 major S&P 500 indexes were higher, led by a 1.36 percent rise in the energy sector .SPNY. Telecom service providers .SPLRL were the lone losers.

Exxon (XOM.N) and Chevron (CVX.N) were among the top influences on the S&P and the Dow

Twitter (TWTR.N) dropped 12.3 percent after Bloomberg reported on Saturday that “top potential bidders” had lost interest in the company.

Mylan (MYL.O) was the top gainer on the S&P, rising 11.4 percent. The drugmaker on Friday said it would pay $465 million to settle questions over whether it underpaid U.S. government healthcare programs by misclassifying its EpiPen emergency allergy treatment.

Merck (MRK.N) rose 2.1 percent after clinical data showed its Keytruda immunotherapy offered big benefits in previously untreated lung cancer patients, either when given on its own or with chemotherapy.

Advancing issues outnumbered decliners on the NYSE by 2,314 to 369. On the Nasdaq, 1,795 issues rose and 426 fell.

The S&P 500 index showed 15 new 52-week highs and one new lows, while the Nasdaq recorded 56 new highs and seven new lows.


(Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Anil D’Silva)


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Published at Mon, 10 Oct 2016 20:56:36 +0000

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