Saturday, March 18, 2017
Bloomberg by Megan Durisin & Shruti SinghA second case of bird flu in Tennessee has been reported at a chicken farm, heightening the threat of the disease in the U.S. southeast, the country’s biggest poultry region.
Highly-pathogenic avian influenza -- which can be fatal to domesticated poultry -- was found at a commercial chicken-breeder farm in Lincoln County, Tennessee, the state’s agriculture department said Thursday in a statement. The case comes after a chicken farm that was less than 2 miles (3 kilometers) away had reported the deadly virus in early March, the first incident in the U.S. in more than a year. Both farms were contracted with Tyson Foods Inc., according to spokesman Worth Sparkman.
“Given the close proximity of the two premises, this is not unexpected,” Tennessee state veterinarian Charles Hatcher said in the statement. “We will continue to execute our plan, working quickly to prevent the virus from spreading further.”
Shares of Tyson, the largest U.S. chicken company, dropped 2.7 percent to $61.39 at 12:30 p.m. in New York. The stock earlier fell as much as 2.9 percent, the biggest intraday decline since March 6. Rival poultry producer Sanderson Farms Inc. declined 2.4 percent and Pilgrim’s Pride Corp. slid 1.5 percent.
While countries across Europe and Asia are also battling with bird flu outbreaks, Brazil, the world’s leading chicken exporter, has remained free of the disease. BRF SA, the country’s largest chicken exporting company, had the biggest intraday gain in eight days after the news of the second Tennessee case.
55,000 Chickens
The affected flock had 55,000 chickens, according to a U.S. Department of Agriculture statement. The farm has been quarantined, and the birds will be destroyed to prevent the disease’s spread. The virus reported at both farms was an H7N9 strain from North American wild-bird lineage.
Since the initial Tennessee report, South Korea banned imports of U.S. poultry and some other importing nations restricted product from the state or area affected.
The U.S. southeast was largely spared during the last major American outbreak, which affected turkey and egg farms in the Midwest and led to the death of more than 48 million birds through mid-2015, either from infection or culling.
Lincoln County is near Tennessee’s border with Alabama, one of the largest U.S. chicken-producing states. Earlier this week, Alabama said it was investigating bird flu cases at three premises in the northern part of the state. One was a commercial chicken-breeding facility, while the others were at a backyard poultry flock and flea market.
A case of low-pathogenic avian influenza, which typically causes only minor symptoms in poultry, was also found last week in a commercial chicken flock in Giles County, Tennessee.
Bloomberg by Julie VerhageThe Fed’s policy decision is sending shock waves through financial markets.
But it’s not the first rate hike of 2017 that’s got the dollar tumbling and Treasuries rallying with equities. Instead, markets are reacting to Federal Reserve officials’ forecast that rates will rise three times this year, which is in line with its outlook from December. Some investors had thought policy makers might change it to four increases.
“The markets are excited -- bonds, stocks, gold and everyone short the dollar -- because the Fed didn’t change their dot plot and thus remain on pace with 3 hikes this year in total,” said Peter Boockvar, chief market analyst at The Lindsey Group LLC. “The Fed reminded us all of the gradual nature of their expected behavior on this rate hike cycle.”
Investors anticipated the tightening. In fact, Treasury yields had climbed with the dollar on speculation the central bank might signal a faster pace. But those trades unwound quickly Wednesday afternoon.
Here’s a look at the markets seeing some of the biggest moves:
Stocks
The S&P 500 Index rallied to its highest level of the session on the back of the Fed’s announcement and is holding on to its gains.
Treasuries
The yield on 10-year Treasury notes fell 9 basis points to 2.51 percent, erasing gains made over the past week.
Dollar
The U.S. Dollar Index tumbled to the lowest level since Feb. 20 on the back of a dovish outlook from the Fed.
Gold
The weaker dollar is helping commodities like gold. The precious metal is up more than 1 percent following the announcement.
Weekly Market Commentary
March 13, 2017
The Markets
Rate hike ahead…maybe.
Last week’s U.S. employment report was better than expected. The United States added 235,000 jobs in February, which was a few more than economists had forecast.
It may seem counter-intuitive, but the positive economic data helped push U.S. stock markets lower. The jobs report was a sign the American economy continues to be strong and indicates a rate hike may be on the horizon. Barron’s reported:
“If anything, the data just confirms what we’ve known for a while now: The economy is growing, and one rate hike is unlikely to do much damage…There’s still a strong likelihood of some sort of economic stimulus plan from the Trump administration sometime this year…But the fact that tax cuts and infrastructure projects are even being considered at a time when the U.S. economy is adding 200,000-plus jobs a month is ‘unprecedented’…”
Federal Reserve (Fed) interest rate hikes affect stock markets because they make borrowing more expensive. Higher borrowing costs may reduce the amounts people and companies spend and affect companies’ profitability and share values.
At the end of last week, CME’s FedWatch Tool, which gauges the likelihood of changes in U.S. monetary policy, indicated there was better than an 88 percent chance of a rate hike when the Fed meets on March 15.
It’s interesting to note investor sentiment has become less optimistic. Last week, the AAII Investor Sentiment Survey showed investor pessimism had reached its highest level since February 2016. Bearish sentiment increased by almost 11 points, finishing at 46.5 percent. That’s significantly higher than the historic average of 30.5 percent. Bullish sentiment fell by almost eight points to 30 percent. That’s below the historic average of 38.5 percent. The AAII survey is often used as a contrarian indicator.
Data as of 3/10/17 | 1-Week | Y-T-D | 1-Year | 3-Year | 5-Year | 10-Year |
Standard & Poor's 500 (Domestic Stocks) | -0.4% | 6.0% | 19.3% | 8.1% | 11.6% | 5.4% |
Dow Jones Global ex-U.S. | 0.1 | 5.2 | 11.7 | -1.7 | 1.9 | -0.9 |
10-year Treasury Note (Yield Only) | 2.6 | NA | 1.9 | 2.8 | 2.0 | 4.6 |
Gold (per ounce) | -1.9 | 3.8 | -5.0 | -3.6 | -6.7 | 6.4 |
Bloomberg Commodity Index | -3.4 | -3.7 | 6.2 | -14.6 | -10.3 | -6.6 |
DJ Equity All REIT Total Return Index | -4.2 | -1.1 | 8.3 | 9.8 | 10.3 | 4.4 |
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
They’re all on the pro rodeo circuit.They all grow corn and soybeans. They all have renowned universities. In addition, according to The Economist, Texas, Iowa, Nebraska, Mississippi, Alabama, and Michigan are likely to experience the biggest increase in tariffs – as a percent of state gross domestic product (GDP) – if and when the North American Free-Trade Agreement (NAFTA) is revised.
Under NAFTA, goods are imported from and exported to Mexico and Canada without tariffs, which are essentially taxes on imported goods. Tariffs typically increase the cost of imports, making them less attractive to consumers. This can help support the market for domestically produced goods and help protect domestic jobs and industries. Currently, the United States sends about $240 billion worth of goods to Mexico, each year, and Mexico sends even more to the United States.
The Economist’s analysis measured potential increases in tariffs, in tandem with the volume of state exports to Mexico, to determine the possible impact on a state’s economy. (The analysis did not include Canadian exports, even though Canada is also a NAFTA participant.) While the effect on the majority of states’ economies would be relatively small, the impact on others could be more significant:
“In 2015, Iowa’s farmers shipped $132M of high-fructose corn syrup to Mexico. Without NAFTA, Mexico would slap a tooth-aching 100 percent tariff on the stuff…Among this group, Texas stands out. It faces an average tariff of only 3 percent, but its exports to Mexico are worth nearly 6 percent of its GDP (compared with 1.3 percent nationally)…Michigan also fits this category. Its exports of cars and parts – many of which end up back in America – would attract tariffs averaging only about 5 percent. But, with such shipments totaling $4.1B, the bill would be painfully large.”
No one yet knows how renegotiating NAFTA may affect any of the countries involved because talks are not expected to begin for several months.
Weekly Focus – Think About It
“Making good decisions involves hard work. Important decisions are made in the face of great uncertainty, and often under time pressure. The world is a complex place: People and organizations respond to any decision, working together or against one another, in ways that defy comprehension. There are too many factors to consider. There is rarely an abundance of relevant, trusted data that bears directly on the matter at hand. Quite the contrary – there are plenty of partially relevant facts from disparate sources – some of which can be trusted, some not – pointing in different directions. With this backdrop, it is easy to see how one can fall into the trap of making the decision first and then finding the data to back it up later. It is so much faster. But faster is not the same as well-thought-out.”
--Thomas C. Redman, “the Data Doc”
Best regards,
Womack Investment Advisers, Inc.
WOMACK INVESTMENT ADVISERS, INC.
Oklahoma / Main Office: 1366 E. 15th Street - Edmond, OK 73013
California Office: 4660 La Jolla Village Dr., Ste. 500 - San Diego, CA 92122
Phone (405) 340-1717 - Toll Free (877) 340-1717
P.S. Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this e-mail with their e-mail address and we will ask for their permission to be added.
* These views are those of Peak Advisor Alliance, and not the presenting Representative or the Representative’s Broker/Dealer, and should not be construed as investment advice.
* This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with the named broker/dealer.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indices referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* You cannot invest directly in an index.
* Consult your financial professional before making any investment decision.
* Stock investing involves risk including loss of principal.
* To unsubscribe from the Womack Weekly Commentary please reply to this e-mail with “Unsubscribe” in the subject line, or write us atmichelle@womackadvisers.com Sources:
Bloomberg by Alex Longley
Oil’s plunge through $50 a barrel set the options market on fire.
A record number of options contracts -- equivalent to more than 800 million barrels of crude oil -- changed hands on Thursday, according to exchange data compiled by Bloomberg. The tally includes trading for Brent and West Texas Intermediate crude in London and New York and shows a surge in bets that the former will reach $70 a barrel by September.
The trading, which allows investors to protect themselves or profit from price swings, takes place as the market emerges from its least volatile period in years. Since Nov. 30, when the Organization of Petroleum Exporting Countries agreed to curb output for the first six months of this year, prices have hovered above $50 a barrel. That period of calm ended as WTI fell to its lowest level since the OPEC deal, amid rising U.S. stockpiles that threaten to prolong the global glut.
“Everyone is a little afraid in the short run because who knows what the market beast might do,” Michael Poulsen, oil risk manager at A/S Global Risk Management Ltd., said by phone. “In the long run, either OPEC will cut or demand will pick up a bit of this extra supply. It’s a bit of a tango around the middle-term.”
Thursday’s activity marks the second time in a matter of months that options trading in the oil market has soared. In late November, investors rushed to make bets that prices would rise as OPEC hammered out its deal to cut production. After both Brent and WTI this week fell the most in more than a year, traders again sought to profit from market gyrations.
Record Volumes
Options trading reached its second-busiest day for both Brent crude on the ICE Futures Europe exchange in London and WTI on CME Group Inc.’s Nymex exchange in New York. The increase occurred as Brent volatility rebounded to a two-month high and the bearish bias, or skew, surged. Ten WTI options contracts saw more than 10,000 lots traded on Thursday, with five profiting from higher prices and five from lower prices.
For Brent, September contracts were among the most active, with record volumes on bets that prices would hit $60 and $70 a barrel. The move toward longer-dated contracts comes as investors seek cheap protection against price swings after the next OPEC meeting in Vienna on May 25, according to Nick Williams, a commodity futures broker at GF Financial Markets Ltd.
While the number of contracts betting on $70 a barrel Brent crude by September rose by about 10,000 lots Thursday, other bullish bets declined. Brent $60 calls for both June and July saw open interest slip in spite of bumper trading. Traders are likely adjusting their expectations about when a re-balancing will arrive, said Jesper Dannesboe, senior commodity strategist at Societe Generale SA in London.
“The bullish structures may have moved their maturities longer, that would mean they’re starting to feel less confident about a near-term bullish story,” he said. “If OPEC compliance stays high and global demand stays pretty strong, the re-balancing is going to happen. ”
Weekly Market Commentary
March 8, 2017
The Markets
It was a grand slam.
Major U.S. stock markets were positively euphoric following President Trump’s speech on February 28. Optimism about the new administration’s pro-growth policies propelled the four major U.S. stock indices to record highs, despite a dearth of policy details, reported Financial Times.
It’s hard to pinpoint exactly why stocks have moved so far, so quickly. However, it appears that mom-and-pop investors have become quite enthusiastic about the asset class according to data from JPMorgan Chase cited by Bloomberg. While institutional investors (pensions, insurance companies, etc.) have been reducing exposure to stocks, smaller investors have been loading up on shares.
CNBCreported some industry professionals, including Goldman’s chief U.S. equity strategist David Kostin, believe stocks have become too highly valued.ZeroHedge.comquoted Kostin, who said:
“Cognitive dissonance exists in the U.S. stock market. S&P 500 is up 10 percent since the election despite negative EPS [earnings per share] revisions from sell-side analysts…Investors, S&P 500 management teams, and sell-side analysts do not agree on the most likely path forward. On the one hand, investors, corporate managers, and macroeconomic survey data suggest an increase in optimism about future economic growth. In contrast, sell-side analysts have cut consensus 2017E [estimated] adjusted EPS forecasts by 1 percent since the election and ‘hard’ macroeconomic data show only modest improvement.”
Financial Timesreported pessimism prevails in the bond market. One bond market professional said, “The bond market is taking a totally different view from the equity market. Blowing raspberries is a good way to put it…There’s no belief that the growth agenda will be dramatic.”
So, is strong economic growth ahead? Do bond investors or stocks investors have it right? Are institutional investors or mom-and-pop investors positioning themselves correctly? Only time will tell.
Data as of 3/3/17 | 1-Week | Y-T-D | 1-Year | 3-Year | 5-Year | 10-Year |
Standard & Poor's 500 (Domestic Stocks) | 0.7% | 6.4% | 19.6% | 8.9% | 11.8% | 5.7% |
Dow Jones Global ex-U.S. | -0.2 | 5.2 | 12.2 | -1.4 | 1.7 | -0.5 |
10-year Treasury Note (Yield Only) | 2.5 | NA | 1.8 | 2.6 | 2.0 | 4.5 |
Gold (per ounce) | -2.2 | 5.8 | -1.9 | -3.1 | -6.4 | 6.8 |
Bloomberg Commodity Index | -0.3 | -0.4 | 13.4 | -13.6 | -9.8 | -6.2 |
DJ Equity All REIT Total Return Index | -1.0 | 3.2 | 12.4 | 11.0 | 11.2 | 5.5 |
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
don’t think so!Tax season is upon us. That means we can all use some entertainment. While many folks dread the process of completing and filing taxes, some see it as an opportunity to test the boundaries of the system. Here are a few deductions Americans have taken that have failed to pass muster in tax court, courtesy of Kiplinger.com:
· You cannot deduct the cost of a good night’s sleep.A tax preparer who worked from home escaped to a hotel because her clients were calling in the wee hours of the night and causing her to lose sleep. When she attempted to take a business deduction for the hotel expense, the tax court ruled a good night’s sleep is a non-deductible personal expense.
· You cannot take a theft loss deduction for poor construction.A couple moved into their newly built dream home only to realize the builder had cut some corners. The house had some serious issues, including its foundation. The couple claimed the builder had defrauded them and took a large theft loss deduction. While taxpayers can deduct losses from a home-related theft, shoddy construction doesn’t qualify.
· You cannot take a depletion deduction for bodily fluids.A woman earned $7,000 a year donating blood plasma because of her rare blood type. She took a depletion deduction, claiming “the loss of both her blood’s mineral content and her blood’s ability to regenerate,” wrote Kiplinger. While companies that take coal, iron, and other minerals from the ground can take a depletion deduction, the tax court ruled that individuals cannot claim depletion on their bodies.
· You cannot deduct a business trip if there are no formal business meetings involved.A repo firm sponsored a trip to Las Vegas for its bank customers. The firm’s employees chatted with clients about business on the way to Vegas, but no formal meetings were held. The tax court denied the deduction.
Before you get creative with your taxes, consult with a tax professional.
Weekly Focus – Think About It
“Because of your smile, you make life more beautiful.”
--Thich Nhat Hanh, Vietnamese Buddhist monk and peace activist
Best regards,
Womack Investment Advisers, Inc.
WOMACK INVESTMENT ADVISERS, INC.
Oklahoma / Main Office: 1366 E. 15th Street - Edmond, OK 73013
California Office: 4660 La Jolla Village Dr., Ste. 500 - San Diego, CA 92122
Phone (405) 340-1717 - Toll Free (877) 340-1717
P.S. Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this e-mail with their e-mail address and we will ask for their permission to be added.
* These views are those of Peak Advisor Alliance, and not the presenting Representative or the Representative’s Broker/Dealer, and should not be construed as investment advice.
* This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with the named broker/dealer.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indices referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* You cannot invest directly in an index.
* Consult your financial professional before making any investment decision.
* Stock investing involves risk including loss of principal.
* To unsubscribe from the Womack Weekly Commentary please reply to this e-mail with “Unsubscribe” in the subject line, or write us atmichelle@womackadvisers.com
Sources: