Alchanati Campbell & Associates
Time Warner & T, sad day for the EDM world, risk, the rich, veggies, denuclearization, weed, and market strategy.
The Market. As the markets closed, it ended on a negative trend. Equities were dragged down on Friday by tech and concerns over the 10 year yield. Despite the consecutive days in the red, the Dow, S&P, and Nasdaq were all able to squeeze out weekly gains of 40, 50, and 60 basis points, respectively.
Apple and Chips. Apple fell another 4.1% today, marking the third straight day in the red. This is the result of recent news that iPhone sales are below expectations. This week, Taiwan Semiconductor ($TSM) lowered its revenue guidance for the year to roughly $7.8 billion, which was far less than the Wall Street estimate of $8.8 billion. Shares of TSM slid, and along with it went shares of APPL. Taiwan Semiconductor is the largest chip supplier for Apple, so the lower guidance has consumers and, more notably, Morgan Stanley, concerned about demand for iPhones, particularly the iPhone X, which is notoriously expensive. Once this Morgan Stanley concern was made public on Thursday, Apple stock took a dive. Along with it went tech, finishing -1.5%.
Justice? You may or may not be familiar with the current situation regarding Time Warner and AT&T. Allow us to give you bedrock of the situation. Time Warner is attempting to merge AT&T. They agreed on a deal way back in 2016 for approximately $85 billion. The issue is that the Department of Justice is not about to let this unfold and the parties involved have been locked in judicial combat this week. Jeff Bewkes, Chief Executive at Time Warner, played the necessity card, saying that this deal was needed in order for the companies to compete against the behemoths of Silicon Valley who are rich in data and technology. Randall Stephenson of AT&T generally got the same point across as Bewkes, with both officials stating that the DOJ concerns were ludicrous. The officials said that there is no way collusion will take place, as the refusal to offer Time Warner content to AT&T's rival providers will only lead to a loss in revenue for the companies, which would make no sense for them. Should the deal go through? Will the deal go through? Find out next time on Data: The Ongoing Suspicion of Corruption! (You know because Time Warner is a cable company..)
DJ Avicii. Swedish DJ, Time Bergling, passed away this morning. He is a Grammy nominee and an EDM rockstar who changed the world of music. Dead at age 28.
Biggest risk to global growth is the US. The International Monetary Fund projects global growth of 4% this year, and US growth of 2.9%. These are strong growth percentages that beat most estimates, but they do not factor in the risks. The first risk is hiking interest rates which will put stress on economies grown accustomed to cheap money. The second risk is the new enacted Tax-Reform Law and budget which adds to the debt that is 110% of GDP. The third risk is the tension over trade. With President Trump going against America’s longstanding commitment to open markets and liberal trade, he has initiated a trade war that he “expects to win” which would cause stormy weather for world markets.
The rich live longer. If anyone ever tells you, “money isn’t everything”, tell them this: The richest 1% of American women by income live more than 10 years longer than the poorest 1% of women, and for men, the gap between the richest and poorest is 15 years. It costs money to live with expenses like health care that are expected to grow which would cause it to be more expensive to live longer.
[Don’t] eat your vegetables. The US Centers for Disease Control and Prevention has released a warning about an E. Coli outbreak connected to romaine lettuce grown in Yuma, Arizona. 53 people in 16 states have been affected and 31 of those have been hospitalized.
The path of denuclearization. North Korean leader, Kim Jong Un, has announced the closure of their missile testing program and nuclear test sites. North Korea decided to open up a new chapter for their nation that included economic growth.
Just blaze. Today, Chuck Schumer, D-N.Y., announced that he would be introducing a bill to decriminalize marijuana federally. Since the The Controlled Substances Act of 1970, marijuana has been listed as a schedule-I controlled substance alongside heroin and cocaine. Schumer’s proposed legislation would remove marijuana from the list of controlled substances, provide funding for more research on the drug’s public health impact, and maintain federal authority to regulate commercial advertising of the drug. "It's time we allow states, once and for all, to have the power to decide what works best for them," the senator said in a tweet. With 29 states having legalized medical and 9 states legalizing recreational marijuana, a posture of deregulation is becoming more popular, and for good reasons. In a study released this year, the legalization of marijuana was found to have added $58 million to Colorado’s local economy. Wall Street is also rewarding the marijuana business, with cannabinoid drug maker W Pharmaceuticals PL-ADR (GWPH) gaining 1,110 percent since its inception. With decriminalization being introduced federally and legalization passing state by state, a deregulated marijuana market could mean big gains for investors.
Market Strategy. Increased volatility, high valuations, rising interest rates, and a long bull market can cause investors to fear. But this fear should not cause you to not put your money to work in the market. There are three market strategies for deploying large cash allocations into this market:
1) Invest a limp sum and ride the market
2) Wait for the market to fall and invest at a better entry point
3) Dollar cost average into the market and spread your risks
Research has shown that investors would do best by investing a lump sum and that lump sum investing beat dollar cost averaging about 2/3 of the time. But now with this market valuation, the smarter market strategy is dollar cost averaging which will help decrease current market risk.
The Alchanati Campbell and Associates Team
WHAT'S UP FRIDAY? is a weekly newsletter that will give you a summary of "What's up?" on Wall Street, in the US and around the World written by The Alchanati Campbell and Associates Team. What makes us unique is we focus on long-term knowledge; knowledge that will still be useful to you 10 years from now.