Topley’s Top Ten – October 29, 2019

Author

Matt Topley
October 29, 2019

1. Federal Income Taxes and Federal Spending Both Set Records in FY19

FederalIncome Taxes and Federal Spending Both Set Records in FY19By Terence P.Jeffrey | October 28, 2019 | 3:36pm EDT

2.Market Following 3 Fed Rate Cuts.

Bill Stone-Avalon Advisors

Source: StrategasResearch Partners, Avalon Investment & Advisory as of October 28, 2019

Chartof the Week: The Federal Reserve (Fed) meets and is widely expected to deliverthe third cut of the cycle. Markets are pricing in almost a 90% chance of a0.25% cut and Fed officials would have pushed back against markets in recentweeks if they disagreed. Clues as to the future policy path will be the realfocus with attention on Chair Powell’s press conference followed by at leastfour other Fed speeches including Vice Chair Clarida on Friday. Interestingly,a study by Strategas Research Partners shows that stocks are higher by anaverage of 14% in the following six months if there are either zero or one morecut after the third versus close to flat when there are two or more additionalcuts. This is consistent with Avalon’s analysis that economic mid-cycleslowdowns are consistent with better future stock returns versus recessionaryconditions. Data recently has been better than feared, which lends credence toour notion that the worst might be behind the global economy. Avalon expects arate cut this week with a pause for at least the remainder of 2019 to follow.

3.Oil and Gas Production Stocks Trailing Oil Prices by 42% YTD….The Group Has 10 Year Negative Returns.

XOP has underperformed Crude Oil by 42% YTD as Investors are bracingfor weaker results from U.S. shale players in coming days as loweroil and natural gas prices and cost-cutting measures have weighed onthird-quarter operations.  Major shale producers COP and CXO this week kick off quarterly earnings reports for a groupwhipsawed this year by volatile pricing and investor demands for improvedreturns. Oil and gas producers have cut drilling and slashed jobs amid worriesover pricing outlooks

From Dave Lutz at Jones Trading.

  • 10 Years of Negative Returns From Oil and Gas Production Stocks

  • The SPDR® S&P® Oil & Gas Exploration & Production ETF seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the S&P® Oil & Gas Exploration & Production Select Industry® Index (the “Index”)

  • Seeks to provide exposure the oil and gas exploration and production segment of the S&P TMI, which comprises the following sub-industries: Integrated Oil & Gas, Oil & Gas Exploration & Production, and Oil & Gas Refining & Marketing

4.Marijuana Stocks -50% From Highs—Earnings Season for Big Canadian Names

Barrons EarningsReview

Marijuana Stocks Have Taken a Hit.There May Be Room for Growth Now.–Connor Smith

Photograph by Matthew Brodeur

Manymarijuana stocks have taken a serious hit since Canadian grower Hexo earlierthis month lowered its fourth-quarter revenue forecast and withdrew its fiscal2020 outlook.

Aphria (ticker: APHA:T)stock has mostly recovered following an upbeatearnings report on Oct. 15. Canopy Growth (CGC) was alsotrending higher last week.

But that doesn’t mean theindustry is out of the woods. In fact, most of the field of Canadian potgrowers are gearing up to report earnings the week of Nov. 11. Hexo (HEXO) pushed itsearnings release back to Oct. 28 from Oct. 24, but there’s already a decentidea of how that mightgo.

The upcoming earnings reportscould further torch these stocks, or help separate winnersfrom the pack.

Cowen analyst Vivien Azer wrote in a note to clients Friday thatas investors are resetting their expectations for Canadian pot stocks, she’slooking for any indication of incremental progress heading into third-quarterearnings.

“Whilesector growth has thus far come in below expectations, industry sales continueto gradually move higher,” she noted. Canadian retails sales in August wereabout C$127 million, or US$97.22 million, up about 19% from July.

FullRead

5.$25 Trillion In the Desert at Saudi Davos.

Largest Sovereign Wealth Funds 2019

In the Saudi Desert, World’s Business Leaders Follow the Money

Credit…The New York Times

RIYADH, Saudi Arabia — Private jets ferrying businesstitans from all over the globe began landing Monday in this sand-swept Saudicapital.

For the next several days, the world’spower center will shift from places like New York and London to this desertcity for an event that many invitees are privately calling “Davos in theDesert.” Saudi Arabia’s 32-year-old crown prince, Mohammed bin Salman, hassummoned a Who’s Who from industry and politics to take part in a series ofmeetings, conversations and panels.

Among those making the pilgrimage areStephen A. Schwarzman, co-founder of the private equity giant Blackstone Group;Masayoshi Son, founder of Japan’s SoftBank; the United States Treasurysecretary, Steven Mnuchin; the venture capitalist Peter Thiel; Laurence D.Fink, founder of BlackRock; Leon Black of Apollo Group; Thomas J. Barrack Jr.,the head of Colony NorthStar; and the entrepreneur Richard Branson. And that’san abbreviated list. All told, the group of 3,500 invitees is estimated tocontrol $22 trillion in assets.

A red carpet and dozens of emissaries forthe royal family waited as guests began streaming into the Ritz-Carlton here, apalatial hotel originally planned as a palace for guests of the royal familyand state dignitaries.

The gathering is an illustration of the newpower and influence that Saudi Arabia wields in the business world. The goal isto demonstrate the kingdom’s transformation as it embarks on a massiveexperiment: to open up its economy and move away from being a nation that isalmost entirely dependent on oil.

“Saudi Arabia is moving aggressively todiversify its economy and implement important reforms,” Mr. Schwarzman told me,explaining why so much of the world’s business community has become intriguedby the kingdom as an economic and business partner.

6.China’s moves to boost foreign business also help Chinese companies

PUBLISHED MON, OCT 28 201910:08 PM EDTUPDATED 3 HOURS AGO

KEY POINTS

  • China is making historic strides to increase foreign access toits local markets, moves which some analysts say are changes Chinese companiesneed in their own development to becoming global players.

  • “To me what is key about the opening is where it comes from:China is looking to globalize its market, not necessarily liberalize it,‘’ saidChantal Grinderslev, partner at Shanghai-based investment management consultingfirm Z-Ben.

  • Lester Ross, chair of the policy committee of the AmericanChamber of Commerce in China, said he expects foreign companies could likelygain 10% to 20% of the Chinese market, but it’s a question whether thebusinesses could capture much more than that.

BEIJING —The Chinese government’s latest efforts to make it easier for foreignbusinesses to operate locally come as China’s own companies seek to be globalplayers.

Chinapushed ahead this month with long-awaited announcements for removing foreign ownership limits inmajor parts of the financial industry. Some foreign business organizations alsosaid this month that they are encouraged by the draft rules forimplementing China’s new foreign investment law, which takes effectJan. 1.

While themoves come amid pressure from the U.S. on trade, some analysts point out howsuch changes help China achieve its own development goals, which may not jibewith the vision many foreign organizations have for a more market-orientedsystem.

“To me whatis key about the opening is where it comes from: China is looking to globalizeits market, not necessarily liberalize it,‘’ said Chantal Grinderslev, partnerat Shanghai-based investment management consulting firm Z-Ben. She added thatdifference will affect how companies — in her case, financial firms — choose toexpand into China.

There arealso limits to how much of the Chinese market foreign businesses can tap, nowthat the Asian country has grown into the world’s second largest economy. Interms of trade, technology and capital, the world has increased its exposure toChina between 2000 and 2017, while the Asian giant has reduced its exposure tothe rest of the world since 2007, McKinsey Global Institute said in a report this summer.

LesterRoss, chair of the policy committee of the American Chamber of Commerce inChina, said he expects foreign companies could likely gain 10% to 20% of theChinese market, but it’s a question whether the businesses could capture muchmore than that.

Foreignbanks still have less than 2% of the market, despite having been able tooperate in China for more than a decade, analysts pointed out.

In themeantime, the entrance of foreign financial institutions could help Chineseindividuals and companies get better access to global markets, said Ross, whois also partner at law firm WilmerHale. For example, he noted, “There areweaknesses in the Chinese regulatory system that hurt the ambitions of theChinese financial institutions in the U.S.”

7.$2.5 Trillion Cost to Opioid Crisis.

Caitlin Owens54 mins ago

We’re all paying for the opioid epidemic

The ongoing opioid crisiscost $696 billion in 2018 and more than $2.5 trillion between 2015 and 2018,according to a new estimate by the White House Council ofEconomic Advisers.

Why itmatters: Much of this cost is attributable to lives lost to opioids, buta good amount of it is borne by state and federal governments — and thustaxpayers. Meanwhile, opioid litigation settlement talks are homing in on payoutsnowhere near this amount.

Forcontext: $696 billion was 3.4% of GDP last year — an astronomicalamount.

  • The estimate is much higher than a recent report by the Society of Actuaries because of the way CEA calculated the value of a life.

  • It also includes health care and substance abuse treatment costs, criminal justice costs and reduced productivity costs.

  • “Under CEA’s calculation, the majority of the costs are ‘paid’ by those who lost their lives,” special advisor Jared Meyer said.

The bigpicture: The drug manufacturers and distributors being sued by thousandsof communities struck a deal last week with the plaintiffs that kept the firstfederal opioids trial from beginning as scheduled. But a larger deal to settleall of the pending lawsuits has yet to be reached.

  • Some state attorneys general have announced a settlement framework worth $48 billion, but nothing is final.

  • Congress gave $6 billion in new opioid funding in 2018 and 2019, per CEA.

What they’resaying: Andrew Kolodny of Brandeis University said that at least some ofthe plaintiffs have the resources to pay much more to help addressing theepidemic they’ve been accused of creating.

  • “The distributors and Johnson & Johnson have extremely deep pockets,” he added. “Considering the cost of the mess they created and the estimate that comes from the White House Counsel of Economic Advisors, $48 billion is way too little.”

The bottom line: “We’reall paying for this,” Kolodny said. “We’re paying an enormous price,both in terms of economic and human costs.”

8.5 Early-Morning Rituals to Power Up Your Practice

Your yoga practice begins as soon as you wakeup in the morning, from the first thoughts that enter your mind to what youhave for breakfast. Use these tips, techniques, and practices to clear yourhead and energize your practice before you even get on your mat.

1. Meditate first thing in the morning.

Manyyogis swear by morning meditation, claiming that doing it first thing helpsclear mental clutter and set an intention for their practice (and their day).Setting your alarm and waking up before dawn for quiet “you” time also makes iteasier to get out of bed and fills you with energy for the rest of theday, according to Ayurveda.

Needa little inspiration to wake up early? Try this morning meditation with Deepak Chopra, whichhelps you focus inward and establish four intentions for your day, orthis good morning meditation, which usesvisualization to help start your day on a positive note. Or, stay in bed andbegin your day with five minutes of silence, perhaps focusingon your breath.

2. Say a mantra/set an intention for your day.

Choosinga mantra for your a.m. meditation session could help you set your intention forthe entire day. Here are 13 classic ones to choose from, from ShantiMantra, a chant for peace, to the Gayatri Mantra, which invokes the light ofthe sun and helps you transcend suffering. Or, you could choose something morepersonal. Here, top yoga teachers recommend their go-to favorites,from Lauren Taus’ “I Am Love,” to Kathryn Budig’s, “Be Dangerous. But Be Kind.”

3. Eat a healthy, energizing breakfast.

Ifyou’re going to get the most out of your yoga practice, you need to eat anutritious breakfast. Healthy choices include a Greek yogurtparfait with fresh fruit and granola, a green smoothie, or a chia seed breakfast bowl. Power up yourmorning meal even more by adding a scoop of Solgar Spoonfuls Vanilla Chai veganprotein powder. This delicious, plant-based protein contains thevital nutrients, fiber, and energy-supporting B-vitamins you need to get themost out of your practice, along with Ayurvedic botanicals andgood-for-your-gut probiotics. You could even put a scoop in your morning teaor warm lemon water to kick off yourdigestion for the day, or add it to your water bottle to take it on the go.Bonus: It’s dairy- and gluten-free!

4. Get outside.

Takinga mindful nature walk can put you in apeaceful state of mind before you begin your practice, while boosting awarenessand concentration. Plus, research shows that spending timeoutdoors can increase vitality, release endorphins (feel-good chemicals), andreduce stress. If the weather is inclement, try another calming, reflectivepractice, such as gratitude journaling.

5. Finally, practice!

Nowthat you’ve cleared your head and given your body the nourishment it needs,it’s time to hit the mat and salute the sun. Try this good-morning yoga sequence thatlinks breath to movement, Jason Crandell’s energy-boosting sequence to wake up your body and yourmind, or these 5 poses that you can do right in your bed!

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From JOE DURAN