Blaine Rollins: Good old days…

Markets Sanguine Amid Prospects of Tax Reform and Monetary Policy Normalization US stocks finished the week at fresh all-time highs, though volumes remained uninspiring and volatility stayed at historically low levels. Breadth expanded with the Transports, Russell 2000 and the NASDAQ joining the S&P at new highs. The Dow held back some, which may have been partially due to quarter-end profit taking and rotation out of large caps. Small caps and banks, in particular, benefited by an aggressive push by President Trump and congressional republicans to get a tax reform package approved by the end of this year. The growing hopes for fiscal stimulus reignited support for the reflation trade resulting in a move higher in rates and notable bounce in the Greenback. Treasury yields backed up and curves steepened. Central bank speak was pervasive with officials on both sides of the Atlantic indicating a continued willingness to push ahead with the admittedly gradual pace of normalization.

(Trade The News)

Economic modeling by Gillespie’s group suggests that a confluence of dynamics, from agriculture to energy, drove down the U.S. inflation rate in the middle of this year. That’s poised to change in coming months, sending six-month annualized gains in the consumer price index excluding food and energy to 3 percent, he said.

Investors may at first dismiss bigger CPI gains as being temporary, related to passing shortages caused by recent hurricanes, said Gillespie, who got his start in trading at Bankers Trust back in the early 1990s. But by the December CPI report, which comes hours before the Federal Reserve’s policy announcement on Dec. 13, it will be clear that inflation is trending higher, he says.

(Bloomberg)

Cycles usually do not last this long. We all know it can’t go on forever, but I believe we could continue on a positive course for both the economy and the market for several more years.

The principal reason for this conclusion is that the usual factors that warn of a bear market or recession are not evident. I think we will have a favorable environment for equities at least until 2019. What would really worry me would be an inverted yield curve, but there is now almost an eighty basis point spread between the two-year Treasury and the ten-year. I would also be concerned if retail investors were euphoric about equites as they were in 1999 or 2007. They are generally optimistic, but not excessively so, although earlier this year sentiment did rise to a worrisome level. Investors large and small are also leaning toward the defensive.

Hedge fund net exposure clearly shows a mood of caution: it is just under 50% now; it was mostly 55%–60% in the 2000–2008 period. Individuals are still buying bond funds even at these low yields because of their lack of confidence in the stock market. Institutions, in their desperate search for yield, have bid up the price of lower-quality bonds to the point where their spread with Treasuries is historically low. Warnings of trouble ahead, however, would usually be associated with high spreads. Maybe investors are too complacent, but not this may not be the case if the economy continues to grow.

(Barron’s)

Hedge fund manager Whitney Tilson announced on Thursday that he is shuttering Kase Capital Management and returning capital to investors, saying that “reporting sustained under-performance to you was making me miserable”. Mr Tilson said that while he had endured periods of under-performance before, he had been certain that those losses were temporary since the cheap stocks in their portfolio would rebound. “Alas, I don’t have that feeling today,” he said, adding: Historically, I have invested in high-quality, safe stocks at good prices as well as lower-quality ones at distressed prices. Given the high prices and complacency that currently prevail in the market, however, my favorite safe stocks (like Berkshire Hathaway and Mondelez) don’t feel cheap, and my favorite cheap stocks (like Hertz and Spirit Airlines) don’t feel safe. Hence, my decision to shut down.

(Financial Times)

Retiring Sen. Bob Corker said Republicans’ battle on tax reform will make health care look like a “piece of cake,” and he won’t vote for legislation that adds to the deficit — something the Trump administration’s plan very well might.

The Tennessee Republican, speaking to reporters on Capitol Hill, said there’s a big difference from tax reform — actually overhauling the system — and tax cuts. Tax reform takes intestinal fortitude, and staring people down for the good of the country, he said. Tax cuts are simple, he said.

(CBS News)

Amazon.com Inc. is searching for office space in Dublin that could hold as many as 800 employees, according to two people with knowledge of the matter.

The e-commerce giant is looking for as much as 7,432 square meters (80,000 square feet) of office space in the Irish capital, said the people, who asked not to be named because the information is private. Amazon declined to comment.

Last year, Amazon said it would bring another 500 jobs to Ireland, adding to more than 1,400 people in Dublin. Amazon’s search may add to a squeeze in the Irish capital’s office market as companies from JPMorgan Chase & Co. to Barclays Plc expand in the city following the U.K.’s decision to depart the European Union.

While the office vacancy rate in Dublin stands at about 9 percent, the figure falls to less than 1 percent for top-quality buildings in prime areas of the city, Savills Plc said last week.

(Bloomberg)

In addition to building electric cars, Tesla also sells an at-home battery pack, the Powerwall, that can capture energy generated by solar panels. Tesla is now shipping hundreds of Powerwalls to Puerto Rico as the island continues to suffer from power outages, Bloomberg first reported.

Puerto Rico was already grappling with power outages after Hurricane Irma, a cateogry 5 storm, hit the island. At least 60,000 people were already without power when Hurricane Maria, a category 4 storm, knocked out power for the entire island’s 3.5 million residents.

Generators are currently helping power high-priority buildings like hospitals, but power likely won’t return to the entire island for another six months. Tesla’s Powerwall could help bridge the gap in some areas as Puerto Rico works to repairs its electrical grid.

Tesla employees are on the ground in Puerto Rico to help install battery packs and repair solar panels, a Tesla spokesperson confirmed to Business Insider.

(Business Insider)