The number of coffee establishments in the U.S. has increased by 16% over the last year to almost 33,000. The increased supply has started to take a toll on the coffee business. With everyone from Cumberland Farms to McDonald's making an aggressive push into the coffee business, profitability has suffered. Dunkin Donuts recently scaled back its new store plans and Starbucks has reduced is long-term profit goals. The share prices of Dunkin and Starbucks have held up relatively well in the face of increased competition, but then again neither have had to face the rumors that Amazon is entering … [Read more...]
Murky ETF Approval System Could Get an Upgrade
The new head of the SEC, Jay Clayton, is working to push forward new rules governing the creation of ETFs. Currently, the system is based on ad hoc reviews with little guidance given to fund companies about how they should prepare. Benjamin Bain and Robert Schmidt report at Bloomberg: U.S. Securities and Exchange Commission Chairman Jay Clayton is working to streamline the agency’s ad hoc approach to approving new exchange-traded funds, putting a spotlight on an issue that has vexed the regulator for a decade. Clayton, who joined the SEC in May, has asked staff to build upon a proposal … [Read more...]
Is the GOP About to Secretly Raise Taxes?
Yesterday the Republican leadership unveiled their much anticipated tax cut plan to the world. It is very much still a work in progress. The plan has potential, but also contains flaws that could lead to it actually harming America's potential for greater economic activity. The GOP used to recognize that lowering the top marginal rate would result in a bigger economic-pie for all Americans to share. Now it seems the Republicans have been cowed into a fear of reducing taxes for "the rich" by the Elizabeth-Warrens of the world. Politico reports that the Republicans writing the bill (aided … [Read more...]
Meet your New Fed Chairman
President Trump is expected to nominate Jerome Powell to replace Janet Yellen as Chairman of the Federal Reserve today. Powell is a current member of the Federal Reserve Board of Governors. He was appointed by Obama in 2012 and has kept a low profile. His speeches on monetary policy have hued closely to the company line. All indications are that Powell is a go-along to get-along member of the board. The Street views Powell as a continuity pick who is lighter on regulation than Yellen. Powell is not an academic nor does he have a PhD in economics. A welcome change after suffering through the … [Read more...]
Is Oil Finally Turning the Corner?
After extensive efforts by OPEC to rein in world oil production, it appears the plan may finally be working to raise estimates of future oil prices. Georgi Kantchev reports that analysts are raising their estimates of the future price of oil. He writes: A poll of 14 investment banks surveyed by The Wall Street Journal at the end of October predicted that Brent crude, the international benchmark, will average $54 a barrel next year, up $1 from the September survey. The banks expect West Texas Intermediate, the U.S. oil gauge, to average $51 a barrel in 2018, also up a dollar from the previous … [Read more...]
The Electrification of the Auto Fleet is Bullish for this Metal
The shift toward electric vehicles (EVs) promises to have a profound impact on the commodities landscape. Here the FT reports that nickel is likely to be one of the winners from the move to EVs. Nickel is likely to take centre stage at LME Week, analysts say. The metal is already emerging as one of the favoured ways to play the EV supply chain, as some of the largest battery makers shift towards models that use more nickel to increase the amount of power they can store, thereby boosting a vehicle’s range. Analysts at consultancy Wood Mackenzie estimate that nickel demand in EV batteries … [Read more...]
Would you invest 30% of your assets in Bitcoin?
Famed Value Investor Bill Miller is making news again by putting up to 30% of his fund’s assets in Bitcoin. Value Investor seems like the wrong label for a manager holding 30% of his fund’s asset in a speculative “currency.” Jason Zweig reports: In the letter [to shareholders], Mr. Miller pointed out that a “Murderers’ Row” of revered investors have been declaring that bitcoin is overpriced or a “bubble,” including Berkshire Hathaway Inc.’s Warren Buffett, James Dimon of J.P. Morgan Chase & Co. and Laurence Fink of BlackRock Inc., Bridgewater Associates’ Ray Dalio and Howard Marks of … [Read more...]
Is Donald Trump Really Paul Krugman’s Confidence Fairy?
In the dark days of 2010, Paul Krugman was coining the phrase “confidence fairy,” to explain his doubt that promising Americans better fiscal policy would encourage them to increase their economic activity. He wrote snarkily about people encouraging spending cuts: But don’t worry: spending cuts may hurt, but the confidence fairy will take away the pain. “The idea that austerity measures could trigger stagnation is incorrect,” declared Jean-Claude Trichet, the president of the European Central Bank, in a recent interview. Why? Because “confidence-inspiring policies will foster and not hamper … [Read more...]
Pfizer Prepares Sale of Consumer Health Business
In November, Pfizer will begin an auction process for its consumer health business, which could sell for $15 billion. The business owns great brands like Chapstick, Centrum and Advil. A number of companies have already expressed interest. Reuters reporters Pamela Barbaglia, Martinne Geller, and Ben Hirschler write: Several global companies, including GlaxoSmithKline and Reckitt Benckiser, have expressed interest in bidding for the unit, which had sales of about $3.4 billion in 2016. The prospective sale, which is being led by Centerview Partners, Guggenheim Securities and Morgan Stanley, … [Read more...]
Where to Find Opportunity in a Follow the Leader Market
At Young’s World Money Forecast a few weeks back Dick wrote, “What we are looking at in 2017 is a “follow the leader” momentum based market move completely untethered from the long term anchor of dependable cash flow for shareholders.” That was no joke. The chart below shows the difference in the annual return of the MSCI Momentum Index (follow the leader index) and the Russell 1000 Value Index (2017 return is YTD). This is only the third time in almost four decades that momentum has performed this much better than value. The only other occasions when a “follow the leader” strategy worked … [Read more...]
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