Onward and Upward?

There’s a good chance the dollar could continue heading higher, if at a slower pace. Bank of America Merrill Lynch strategist David Woo notes that in the past, the combination of higher interest rates and more fiscal stimulus, such as Trump has proposed, was a recipe for continued dollar strength. “The political configuration in Washington makes us upbeat about the outlook for the U.S. dollar,” Woo says.

(Barron’s)

Despite the sharp decline in correlation among S&P 500 stocks, mutual funds have continued to lag in 2016. Since Election Day, average 3-month S&P 500 stock correlation has declined to 0.17, the lowest level since early 2007. Mutual funds have benefited from the cyclical rebound with 50% of large-cap core fund managers outperforming S&P 500 in 2H. However, YTD returns remain weak: Just 26% of core funds has outperformed the S&P 500.

(Goldman Sachs)

Steven Eisman, the strategist portrayed by Steve Carell in “The Big Short,” told CNBC on Monday he believes President-elect Donald Trump’s administration will roll back financial regulations.

Eisman, senior portfolio manager at Neuberger Berman, said he would be as “long as I can be” on financial stocks.

Eisman, whose bet against the subprime housing market prior to the 2008 financial crisis was depicted in the 2015 movie, told CNBC’s “Squawk Box” he was “a little bit schizophrenic” on the markets.

He said the Dodd-Frank financial regulations, put in place after the financial crisis, is “good law” that should not be changed. However, he said he understands that under the Trump administration, change is likely to come.

Eisman said bought the financial sector the day after the election and has invested more since then.

“I’m very long” the stock market overall, he added.

(CNBC)

He has been an advocate for spending cuts, often taking on his own party to push for more aggressive curbs to government spending.

“We are going to do great things for the American people with Mick Mulvaney leading the Office of Management and Budget,” Trump said in a statement. “Right now we are nearly $20 trillion in debt, but Mick is a very high-energy leader with deep convictions for how to responsibly manage our nation’s finances and save our country from drowning in red ink.

“With Mick at the head of OMB, my administration is going to make smart choices about America’s budget, bring new accountability to our federal government, and renew the American taxpayer’s trust in how their money is spent,” he added.

(Washington Post)

Although list prices are continuing to rise sharply, pharmacy benefit managers have started to extract larger discounts and rebates, meaning the real price received by the manufacturer is lower.

In 2016, the list price of drugs rose by between 6 and 7 per cent, but net price inflation — after all the discounts were subtracted — was lower, at between 2 and 3 per cent, according to QuintilesIMS, the research group.

On the face of it, the market is functioning as it should. Pharmacy benefit managers amass big groups of patients — 85m in the case of Express Scripts — and use their clout to extract large savings from drug companies, which they pass on to their clients: employers and health insurers.

Theoretically, it should result in lower premiums for consumers.

But in fact it has resulted in much higher costs for patients because their “out-of-pocket” expense is still calculated using the list price, rather than the net price.

(Financial Times)

With 98 per cent of clothes sold in the US made overseas, the National Retail Federation said the import tax could inflate the tax bills of some fashion chains to three to five times their pre-tax profits, jeopardising their solvency.

(Financial Times)

High confidence in much above-normal temperatures across the East in early January

(NOAA)

Given the potential changes to income-tax rates, what should individuals be doing now?

We’re recommending the same things we recommended back in 1986 when the Tax Reform Act lowered individual rates. The smartest thing to do is accelerate deductions into the current year when they will be deductible at higher tax rates and defer income until future years when it will be taxed at lower rates. Specifically, you should think about accelerating charitable contributions and prepaying state and local taxes. Pay them in December rather than in January. If you have stock-market losses, you ought to take them in 2016. You want to accelerate those losses and you want to defer gains.

How would you approach long-term capital gains?

While long-term gains are preferentially taxed, you still want to defer them until next year because, under the House plan, they will be taxed at even lower rates.

(Barron’s)

OxyContin is a dying business in America.

This is the third part of a Los Angeles Times investigation exploring the role of OxyContin in the nation’s opioid epidemic.

With the nation in the grip of an opioid epidemic that has claimed more than 200,000 lives, the U.S. medical establishment is turning away from painkillers. Top health officials are discouraging primary care doctors from prescribing them for chronic pain, saying there is no proof they work long-term and substantial evidence they put patients at risk.

Prescriptions for OxyContin have fallen nearly 40% since 2010, meaning billions in lost revenue for its Connecticut manufacturer, Purdue Pharma.

So the company’s owners, the Sackler family, are pursuing a new strategy: Put the painkiller that set off the U.S. opioid crisis into medicine cabinets around the world.

(LA Times)

Using leaves, stems, banana peels and other fresh plant materials left behind after fruits and vegetables are picked or processed, Apeel has developed a method for creating imperceptible, edible barriers that the company says can extend the life of produce like green beans and berries by as much as five times. Apeel can even deliver a day-of-the-week bunch of bananas, each ripening on a different day.

An Apeel product already has been used to stretch the shelf life of cassava in Africa.

“It takes 30 days to get blueberries grown in Chile to market in the United States, which means they have to be picked before they’re ripe and shipped under heavy refrigeration,” said James Rogers, the founder and chief executive of Apeel. “We can change that.”

If the product performs as advertised, it could bring sweeping changes to the produce industry and grocery aisles. It could reduce food waste and the use of pesticides and increase the varieties of fruits and vegetables available.

(NY Times)

Four-year private, nonprofit schools, many of which rely heavily on tuition dollars for revenue, posted a 0.6% decline, with 3.79 million students. About half that decline came among the smallest schools—those with fewer than 3,000 students, and for which each student’s enrollment is critical.

“The trend of prices continuing to rise faster than inflation is beginning to have more and more of an impact on enrollments, especially among low-income and first-generation students,” says Jamie Merisotis, president and CEO of Lumina Foundation, a nonprofit aiming to increase college attainment. He says affordability concerns are outweighing projections about the economic benefits of a college education.

Adding to the pain at many colleges is a dearth of new students fresh from high school. Schools in mid-Atlantic and Midwestern states reported the sharpest declines this year, reflecting the shift in population centers away from traditional industrial centers and toward the south and southwest.

(WSJ)