AYA Analytica financial health memo June 2018
As of June 2018, this regular podcast is available on our Andy Yeh Alpha fintech network platform.
Amazon acquires an Internet pharmacy PillPack in order to better compete with Walgreens and many other drug distributors.
Amazon acquires an online pharmacy PillPack in order to better compete with Walgreens Boots Alliance, CVS Health, Rite Aid, and many other drug distributors.
CVS Health, Rite Aid, and Walgreens Boots Alliance shares plunge 6%-10% in response to Amazon's expansion into the online retail pharmacy business.
Through this strategic move, Amazon shakes up the online drugstore business with its ambitious $1 billion acquisition of online pharmacy PillPack.
This disruptive innovation changes the competitive landscape for traditional pharmacies.
PillPack organizes, packages, and delivers drugs online.
This online pharmacy sends consumers medical packages and prescription drugs with the specific number of medications that these consumers need to take at particular times.
Amazon CEO Jeff Bezos continues to focus on the long-term persistent trends that are less likely to change in the next few decades.
In one of his earlier letters to Amazon shareholders, Bezos emphasizes the fact that the vast majority of consumers want to enjoy cost-effective online retail solutions to their daily problems with both fast delivery and vast selection.
The recent acquisition of PillPack allows Amazon to tap into the uncharted territory of online pharmacy as the tech titan continues to uphold the Bezos tripartite principle (i.e. low cost, fast delivery, and vast selection).
Apple and Samsung are the archrivals for the title of the world's top smart phone maker.
Apple and Samsung are the archrivals for the title of the world's largest smartphone maker.
The recent patent lawsuit settlement between Apple and Samsung demonstrates that the dollar sums are unlikely to significantly shrink either's bottom line.
Nonetheless, the case has caused a major impact on U.S. patent law.
Both companies continue to impress smartphone consumers with AMOLED curvy touch screens, wireless charging capacities, facial recognition functions, and other high-tech features.
After a loss at trial, Samsung appealed to the U.S. Supreme Court.
In December 2016, the court sided unanimously with Samsung's argument that a patent violator should not have to hand over the entire profit made from stolen design features if these features covered only specific portions of a smart product but not the entire object.
When the case went back to the lower court for trial earlier in 2018, however, the jury sided with Apple's argument that Samsung's profits were wholly attributable to the design elements that directly violated Apple's prior patents.
Because of the recent verdict, the legal settlement called for Samsung to make an extra $140 million payment to Apple in addition to the prior $399 million payment that Samsung previously paid to Apple to compensate for iPhone-driven patent infringement.
The recent verdict marks the end of the 7-year-long patent dispute between Apple and Samsung.
Due to hefty legal fees, neither side turns out to be a clear victor throughout the arduous battle.
Harley Davidson plans to move its major production for European customers out of America due to European Union tariff retaliation.
Harley Davidson plans to move its major production for European customers out of America due to European Union tariff retaliation.
E.U. retaliatory and punitive taxes might cost Harley Davidson up to $100 million per year in total revenue.
White House senior economic advisor Peter Navarro pushes back on investor fears and sentiments that the Trump administration may introduce widespread trade restrictions on foreign companies.
Navarro interprets the recent sharp Dow decline by 500 points as a key market overreaction to the Trump trade reform that focuses on protecting U.S. interests, investments, and innovations.
The Trump administration's Trade Act Section 301 investigation suggests that U.S. intellectual property protection remains the top priority (especially for the information technology industry).
Meanwhile, several tech companies from Netflix, AMD, and Micron to Twitter and Square experience dramatic dips in share prices and bottomline forecasts in light of the recent Sino-American trade war.
When push comes to shove, smart stock market investors need to carefully gauge corporate valuation and profitability on the core basis of fundamental indicators such as E/P, Div/P, and B/P.
In fact, the Trump administration should focus less on curbing China's tech-savvy progress and more on encouraging scientific breakthroughs and innovations at home.
Capital market liberalization and globalization connect global financial markets to allow an ocean of money to flow through them.
Over the past decades, capital market liberalization and globalization have combined to connect global financial markets to allow an ocean of money to flow through them.
In emerging-economies, the gross foreign financial position can be as large as annual GDP.
In rich economies, the ratio can rise even more.
Given the sheer size of cross-border capital flows, these co-movements can have enormous effects on local economic conditions.
The capital flows across borders is good since financial openness often allows investors in rich countries to seek out large returns in capital-scarce emerging-economies.
Yet, capital flows may not always follow this peculiar pattern.
Money can indeed flow in the other direction.
Less mature emerging-economies often save to safeguard against fickle global financial markets and so amass large quantities of foreign-exchange reserves.
This global savings-glut suggests that a sea of money can swamp individual economies.
The U.S. Federal Reserve determines the turn of the tide.
American monetary policy shapes the global appetite for risk because of the dollar's exorbitant privilege in global finance.
When the Fed changes course, asset prices, returns, and market volatilities all move in its wake, with many sorts of inadvertent consequences for other countries.
Most economies face a fundamental dilemma: these economies can choose open capital markets to attract the foreign investment that emerging markets need to invigorate their economic climate, but only if these economies accept losing domestic control over the global business cycle.
For many economies, this inexorable trade-off seems to be a fair price to pay in global finance.
However, when the Fed eventually raises its interest rate, the trade-off will then tilt toward a major capital exodus from emerging economies back to America.
The law of inadvertent consequences counsels caution.
Federal Reserve's interest rate hike may lead to an economic recession as credit supply growth ebbs and flows through the business cycle.
The Federal Reserve's current interest rate hike may lead to the next economic recession as credit supply growth ebbs and flows through the business cycle.
All of the 35 U.S. large banks such as JPMorgan Chase, Bank of America, and Citigroup pass the annual stress test and so would be able to lend even under the grimmest economic conditions.
During the Trump administration, the U.S. Treasury and Federal Reserve may roll back at least some of the Dodd-Frank rules and regulations.
These extreme economic conditions include 10% unemployment, a sharp decline in general house prices, and a deep recession in Europe and elsewhere.
Even under these dire conditions, the banks hold sufficient capital buffers that would exceed the financial-sector equity claims back in the years just before the Global Financial Crisis.
The Federal Reserve retains the final veto power to limit any dividend hikes or share repurchases that the banks may pursue in order to return cash distributions to their shareholders.
It is important for financial intermediaries to substantially increase their core equity capital buffers in order to safeguard against extreme losses that might arise in rare times of financial stress such as the Global Financial Crisis from 2008 to 2009.
Facebook, Apple, Amazon, Netflix, and Google (FAANG) have been the motor of the S&P 500 stock market index.
Facebook, Apple, Amazon, Netflix, and Google (FAANG) have been the motor of the S&P 500 stock market index.
Several economic media commentators contend that most U.S. stock market returns arise from a small fraction of shares.
This concentration tilts toward platform orchestrators that specialize in mobile communication, ecommerce, music, video, online search, and advertisement etc.
In fact, these platform orchestrators attract many early technology adopters and venture capitalists.
The former pour money into the mass purchases of mobile devices and online software services, and the latter inject capital into these tech titans at an early stage.
Apple and Amazon are the first U.S. heavyweight tech giants that pass the landmark $1 trillion stock market valuation.
Sino-American trade war worries now constrain S&P 500 year-to-date gains to 3.5% as of June 2018.
In contrast, the FAANG group reaps hefty double-digits and thus demonstrate business immunization to the Trump tariffs.
These tech titans make productive uses of their intellectual properties such as patents, trademarks, and copyrights.
This moat protection secures competitive advantages for their platform infrastructure.
As a result, these tech firms can better extract bottom-line rewards from the latest technological advances in mobile communication, ecommerce, video, online search, and advertisement etc.
Apple enters a multi-year content partnership with Oprah Winfrey to provide new original online video and TV programs.
Apple enters a multi-year content partnership with Oprah Winfrey to provide new original online video and TV programs in direct competition with Netflix, Amazon, Comcast, and DirecTV etc.
This multi-year partnership represents long-term collaboration between Apple and Oprah Winfrey as a well-known TV producer, talk show host, actress, author, philanthropist, and CEO of Oprah Winfrey Network (OWN).
Together Apple and Winfrey plan to create original online video and TV programs that embrace her incomparable ability to connect with U.S. and international audiences worldwide.
Winfrey's video projects incrementally arise as part of a major lineup of original content from Apple.
In effect, this multi-year content partnership allows Apple to better compete with several other online content providers such as Netflix, Amazon, Comcast, and DirecTV etc.
Winfrey's recent deal with Apple arises amid an aggressive arms race for TV producers after Netflix poaches Ryan Murphy and Shonda Rhimes from their long-time broadcast homes such as ABC in an outright push to own more video content.
Also, Amazon inks Nicole Kidman to a first-look film and TV pact, whereas, Saturday Night Live television producer and mastermind Lorne Michaels moves his film deal to Universal Studios.
These recent landmark events ignite traditional film and television studios and tech rivals such as Apple and Amazon etc to step up their games to offer atypically lucrative TV programs with top talents and celebrities.
In addition to the multi-year content partnership with Winfrey, Apple CEO Tim Cook assures stock investors that Apple should be immune to the highly probable trade conflict between China and America.
Both iPhone and iPad global supply chains are free from Trump steel and aluminum tariffs on Chinese goods and services, and China's retaliatory tariffs would not affect the global demand for Apple tech products.
Whether the Trump administration escalates its tariff tactics with some imminent impact on Apple products remains an open and controversial mystery.
President Trump continues to urge Apple and its upstream suppliers such as Foxconn and Pegatron to move their liquid crystal display (LCD) production to U.S. states such as Wisconsin, Michigan, and Pennsylvania.
The Trump administration introduces new tariffs on $50 billion Chinese goods amid the persistent bilateral trade dispute.
The Trump administration introduces new tariffs on $50 billion Chinese goods amid the persistent bilateral trade dispute.
These tariffs will effectively raise prices for American consumers and enterprises.
Thus, the global delivery company FedEx views U.S. tariffs on Chinese goods as *counterproductive to U.S. economic interests*.
China counteracts these penalties by imposing 25% retaliatory tariffs on $50 billion U.S. farm imports such as beef, cotton, rice, soy, and wheat.
This recent Sino-U.S. trade conflict may herald a new era of much greater trade protectionism.
The U.S. major stock indices S&P 500, Dow, and NASDAQ experience discernible losses in response to the complex trifecta of Sino-U.S. trade tension, Federal Reserve second interest rate hike, and energy cost momentum.
In addition to this negative U.S. stock market return performance, the greenback exhibits much more volatile near-term gyrations in the foreign exchange market.
In a putative trade war, there are winners and losers; whereas, everyone suffers in a major trade conflict.
Full-scale and all-out tit-for-tat may become a suboptimal approach to resolving the current bilateral trade imbalance.
It is important for each side to refrain from undertaking any unilateral actions to complicate the status quo.
Both sides might need to consider a better balance between carrots and sticks in addressing the Sino-U.S. trade dilemma.
Federal Reserve delivers a second interest rate hike to 1.75%-2% and then expects more rate increases in late-2018.
The Federal Reserve delivers a second interest rate hike to 1.75%-2% and then expects subsequent rate increases later in September and December 2018 to dampen inflationary pressures.
This decision reflects robust economic revival in America.
With reasonable price stability, the U.S. economy now operates near full employment with 2.1% inflation and 3.8% unemployment (i.e. the lowest unemployment rate since 2000).
The current economic growth trajectory accords with the Federal Reserve's congressional dual mandate of maximum employment and price stability.
The Federal Reserve pencils in subsequent interest rate hikes later in 2018 (2%-2.25% in September 2018 and 2.25%-2.5% in December 2018).
This gradual acceleration of interest rate increases helps contain inflation with steady gains in the labor market.
The current interest rate hike may disappoint President Trump who would otherwise prefer dovish monetary policy accommodation (in contrast to hawkish inflation containment).
However, the Federal Reserve reiterates monetary policy independence and so continues the current interest rate hike as the U.S. economy moves along the long-run steady-state economic growth path of healthy fundamental recalibration.
On balance, it is now quite plausible for America to achieve 3%+ real GDP economic growth to better balance the fiscal budget that helps neutralize both trade and budget deficits in the medium term.
AT&T wins court approval to take over Time Warner with a trademark $85 billion bid despite the Trump prior dissent due to antitrust concerns.
AT&T wins court approval to take over Time Warner with a trademark $85 billion bid despite the Trump administration prior dissent due to antitrust concerns.
This court approval involves no additional conditions on the potential mega merger between AT&T and Time Warner.
As a result, Time Warner's share price has surged by more than 5% since this unconditional court approval, whereas, AT&T's share price shows less volatile gyrations.
Both companies hope to better compete with Netflix, Amazon, Comcast, DirecTV and other online content providers.
Prior antitrust critics suggest that the joint company might lead to anti-competitive issues with greater market concentration.
This mega merger might result in higher oligopolistic markups to the detriment of U.S. consumers, this probable merger remains open to controversy.
A powerful combination of Trump tax cuts, lower capital costs, robust corporate net gains, and balance sheet capital improvements drive the current appetite for new mergers and acquisitions.
In the first half of the current fiscal year, we witness $978 M&A mega deals at a pivotal point in real business cycles with both full employment and low inflation.
As many unicorns package themselves as potential M&A targets for tech titans, the current M&A wave boosts the aggregate demand for high-skill R&D patents and tech talents.
During the Trump economic boom, the current M&A wave seems to start with telecom-and-media mergers.
Comcast may next target acquiring Fox in America or Sky in Europe, and T-Mobile and Sprint may form a $150 billion company to better compete with the top wireless communication rivals Verizon and AT&T.
These mega M&A deals can spill over to several other industries such as big banks, technology titans, and pharmaceutical giants.
Donald Trump and Kim Jong Un meet, talk, and shake hands in the historic U.S.-North-Korean peace summit in Singapore.
Donald Trump and Kim Jong Un meet and shake hands in the historic peace summit between America and North Korea in Singapore.
At the start of the bilateral peace summit, Trump indicates a terrific bilateral relationship in the way forward and so expects the summit to be a tremendous success.
Kim admits numerous obstacles that both sides had to overcome in order to get to this historic moment.
U.S. Secretary of State Mike Pompeo, however, warns that American economic sanctions will remain in effect until North Korea completely denuclearizes its major arsenals.
In other words, senior U.S. foreign-policy technocrats emphasize that North Korea has yet to attain complete, verifiable, and irreversible denuclearization (CVID).
Former NBA star Dennis Rodman contributes to *basketball diplomacy*, bursts into tears in a CNN live interview about the summit, and wishes the best for the future peace and prosperity of both countries.
The world's major stock indices rise in response to the historic peace summit between Trump and Kim.
Due to a substantial reduction in geopolitical risk exposure, the recent tripartite peace talks among America, North Korea, and South Korea help alleviate investor concerns and sentiments about international economic policy uncertainty.
The Korean peninsula has been a major flashpoint in East Asia since the Korean War took place about 65 years ago.
During the peace summit, Trump and Kim have signed a comprehensive denuclearization agreement in order to free North Korea from draconian U.N. economic sanctions.
Both U.S. and most East Asian stock markets enjoy healthy gains due to sound and steady U.S.-Korean relations in recent times.
Just Capital issues a new report in support of the stakeholder value proposition in recent times.
Just Capital issues a new analytic report in support of the stakeholder value proposition in recent times.
U.S. corporations that perform best on key priorities such as worker treatment, fair pay, ethical leadership, and environmental protection both generate significantly higher investment returns and exhibit lower return volatility than the subpar performers.
Specifically, the top 20% U.S. corporations attract a higher 14% average annual stock return and 7% lower return volatility in comparison to the bottom 20% U.S. corporations.
Also, a composite stock investment portfolio strategy that involves both a long position in the former and a short position in the latter yields a hefty 10.6% annual Fama-French factor alpha on average.
Thus, the stock market rewards those companies that focus on achieving several key priorities in support of stakeholder value optimization (in addition to shareholder wealth maximization).
Overall, each wise stock market investor should look beyond both fundamental and technical indicators of corporate financial health in the hot pursuit of better employment treatment, equal pay, ethical leadership, and environmental sustainability.
These broader considerations help deepen each wide stock market investor's smart data analysis of both quantitative and qualitative insights and perspectives through the lens of long-term sustainable business enterprises.
Microsoft acquires GitHub, a software development platform that has been widely shared-and-used by 28 million programmers worldwide.
Microsoft seeks to acquire GitHub, a software development platform that has been widely shared-and-used by 28 million programmers worldwide.
GitHub's tools have become essential to many software developers, who use GitHub to store open-source codes and programs with version control on the online forum.
Microsoft CEO Satya Nadella says the $7.5 billion deal would accelerate a transition to greater cloud computing capacity to add artificial intelligence to its current applications such as Office 365 and other Windows apps.
Due to its prior open-source nature, the GitHub M&A deal might empower Microsoft to activate the next proliferation of Windows apps in direct competition with Android and iOS apps.
In this fashion, Microsoft can strategically position itself as one of the world's major platform orchestrators to better compete with U.S. tech titans such as Apple, Google, Amazon, and Facebook via its hardware-plus-software sales of Surface Pro tablets, Windows smart phones, Office software packages, and other Windows apps.
As platform proliferation expands the global user network, Microsoft can integrate both hardware and software products and services to ensure greater customer delight and satisfaction.
Exponential user growth can translate into the multinational corporation's global reach with better bandwidth for future platform-driven mergers and acquisitions.
A powerful combination of Trump tax cuts, lower capital costs, robust corporate net gains, and balance sheet capital improvements drive the current appetite for new mergers and acquisitions.
In the first half of the current fiscal year, we witness $978 M&A megadeals at a pivotal point in real business cycles with both full employment and low inflation.
As many unicorns package themselves as potential M&A targets for tech titans, the current M&A wave boosts the aggregate demand for high-skill R&D patents and tech talents.
Several recent events explain why Trump may undermine multilateral world order.
Several recent events help explain why Trump may undermine multilateral world order:
First, Trump withdraws America from the 12-country Trans-Pacific Partnership (TPP) trade agreement.
Second, Trump withdraws America from the multilateral Paris climate agreement and so disappoints the political leaders of most Western allies such as Britain, France, and Germany.
Third, Trump imposes heavy tariffs on aluminum and steel from Canada, Europe, and Mexico.
Fourth, Trump abandons the Iran nuclear deal and then imposes draconian economic sanctions on the nuclear nation.
Fifth, Trump begins bilateral peace talks with North Korea.
Sixth, Trump instigates a trade conflict toward China with at least $50 billion tariffs on Chinese imports and intellectual-property infringements.
Seventh, Trump is eager to re-admit Russia to the G8 bloc.
As China and Russia benefit much from their population dividends, these countries emerge as new superpowers to rival America.
In response to this inexorable international trend, the Trump administration gradually gravitates toward a new political paradigm where global cooperation may no longer be an option.
America is free to undertake unilateral actions to change the status quo and then pushes the boundaries for many Western allies and new democracies in Asia.
The finance ministers of Britain, Canada, France, Germany, Italy, and Japan team up against U.S. President Trump at the G7 forum.
The finance ministers of Britain, Canada, France, Germany, Italy, and Japan team up against U.S. President Donald Trump and Treasury Secretary Steven Mnuchin at a G7 forum.
These finance ministers suggest that the recent U.S. trade actions undermine economic confidence in the Western alliance.
The G6 delegation requests Mnuchin to communicate their unanimous concern and disappointment to President Trump.
Meanwhile, Commerce Secretary Wilbur Ross completes his recent trade talks in China with little sign of progress.
In China, the state-run news agency Xinhua states that all economic outcomes of these trade talks will not take effect if the U.S. imposes any tariffs or other trade sanctions.
These recent developments reflect the delicate balance that both Mnuchin and Ross need to maintain as President Trump moves forward with 25% tariffs on aluminum and 10% tariffs on steel from his close Western allies and another $50 billion tariffs on Chinese imports.
OECD figures suggest that the current global economic growth rate is 3.8% without any exogenous tariff shocks.
S&P chief economist Paul Gruenwald suggests that these tariffs can take a quarter off the world's economic growth rate in a Sino-U.S. trade war.
The European Central Bank's projections also warn of a 1% contraction in global economic growth in the first year of Trump tariffs.
The medium-term real effects of Trump tariffs may be detrimental to global economic growth and stock market resilience.
The U.S. federal government debt has risen from less than 40% of total GDP about a decade ago to 78% as of May 2018.
The U.S. federal government debt has risen from less than 40% of total GDP about a decade ago to 78% as of May 2018.
The Congressional Budget Office predicts that this ratio will surge to 96% in 2028.
Although many blame the Trump tax cuts as the primary root cause, the increases in health care and retirement benefits suggest a different real reason for U.S. deficit severity.
Harvard professor Martin Feldstein attributes the recent rise of U.S. budget deficit from 4% to 5.1% of total GDP to increases in Medicare and social security retirement benefits for middle-class older Americans.
These increases in health care and retirement benefits account for about 2.7% of total GDP.
The neoclassical Sargent-Wallace thesis suggests that the central bank cannot finance incessant increases in core deficits with government bond issuance regardless of money supply growth.
This money supply expansion would lead to inexorable inflationary pressures that defeat the dual mandate of both maximum employment and price stability in the suboptimal fiscal-monetary policy coordination.
Inflation serves as a seigniorage tax that would in turn dampen real macroeconomic variates such as household consumption, capital investment, labor supply, and total economic output.
In light of this ripple effect on sustainable financial market growth and prosperity, the law of inadvertent consequences counsels caution.
The modern world's most powerful nations, America and China, stumble into a Thucydides trap.
America and China, the modern world's most powerful nations may stumble into a Thucydides trap that Harvard professor and political scientist Graham Allison suggests in his recent book on Sino-U.S. relations.
Through the lens of an ancient Greek military chief and historian, the Thucydides trap refers to the notion that significant shifts in the relative strength of major powers can be a primary cause of bilateral conflict.
Financial market observers and economic media commentators may characterize superficial frictions and flashpoints as the root cause of both bilateral animosity and hostility.
However, the real cause of bilateral conflict, or an open Sino-American trade war, might reflect the fear and frustration of political leaders Trump and Xi on both sides.
Allison thus emphasizes that if a Sino-U.S. war is not inevitable, an open trade conflict is likely to emerge as a negative disequilibrium outcome in the medium run.
In recent times, the TIME magazine points out the 5 major myths that investors seem to misconstrue as new trends and inflection points in the U.S. stock market.
Investor worries and concerns arise from volatile asset price gyrations, pervasive tech stock slumps, inflationary price pressures, faster Fed interest rate hikes and their overall adverse impact on real GDP economic output and employment, and a pervasive regime switch of investor favor from stocks to bonds and other alternative investment vehicles such as credit default swaps (CDS) and other financial derivatives.
TIME demystifies these common myths and puzzles from a fundamental perspective.
The Federal Reserve accelerates the current interest rate hike at the neutral threshold that helps contain inflation when the U.S. economy operates near full employment.
Fiscal stimulus effectuates in the form of both Trump tax cuts and infrastructure expenditures.
It takes time for these fiscal measures to drive positive progress in real macro covariates such as real GDP economic output, capital investment, employment, and technological innovation.
These economic insights shine fresh light on the current Sino-U.S. bilateral trade relations and financial market conditions in the broader context of significant shifts in the relative strength of these major powers.
The Federal Reserve proposes softening the Volcker rule that prevents banks from placing risky bets on securities with deposit finance.
The Federal Reserve proposes softening the Volcker rule that prevents banks from placing risky bets on securities with deposit finance.
As part of the post-crisis Dodd-Frank regulation, the Volcker rule restricts banks from applying proprietary models to trade for their own profits or placing high equity stakes in hedge funds, mutual funds, and private equity funds.
Under the new proposal, banks with trading assets and liabilities of $1 billion to $10 billion would be subject to less stringent Volcker-rule compliance requirements with bespoke specifications.
Below the $1 billion asset threshold, financial institutions would not have to demonstrate compliance with the new Volcker rule.
In terms of public disclosure, trading desks would not have to report absolute daily net gains and losses below $25 million within a 90-day window.
This deregulatory rollback provides fresh momentum for most bank stocks.
As a result, most banks experience hefty stock price appreciation in recent times.
President Trump introduces $50 billion tariffs on Chinese products and new limits on Chinese high-tech investments in America.
President Trump introduces $50 billion tariffs on Chinese products and new limits on Chinese high-tech investments in America.
This new round of duties and tariffs arises as a major macro surprise less than a fortnight after Treasury Secretary Steve Mnuchin says the Sino-U.S. trade war is on hold.
China has already committed to significantly increasing its purchases of U.S. goods and services in order to reduce their trade imbalance.
Nevertheless, the Trump team aims to achieve a hefty $200 billion reduction in bilateral trade deficit.
In addition to the Sino-U.S. trade war, President Trump announces 25% steel tariffs and 10% aluminum tariffs on Canada, Europe, and Mexico.
The Trump administration seems to consider this deliberate trade tactic part of the political path toward the median voter with better midterm election results.
Many U.S. large public corporations spend their tax cuts on new dividend payout and share buyback.
Many U.S. large public corporations spend their hefty tax cuts on new dividend payout and share buyback but not on new job creation and R&D innovation.
These corporations channel $1 trillion onshore and offshore cash stockpiles into both dividend and share buyback programs.
For instance, Apple expects to spend $100 billion cash on share repurchases from mid-2018 to early-2020.
In the medium term, Cisco spends $25 billion on share buyback, and Wells Fargo plans another $22 billion share purchases.
Google also expects to spend about $9 billion on dividend payout and share buyback in order to boost its near-term stock price prospects.
Pepsi, AbbVie, and Amgen collectively spend about $35 billion on share repurchases for better shareholder value maximization.
Visa and eBay plan to initiate similar dividend and share buyback programs over the next couple of years.
Overall, these public corporations seem to view Trump tax cuts are temporary cash windfalls but not permanent cash gains.
These firms thus initiate medium-term cash dividends and share repurchases for immediate shareholder gratification.
In this light, it is less clear whether Trump tax cuts serve as permanent income boosts that can help revive real economic output, employment, capital investment, or R&D innovation etc.
Dodd-Frank rollback raises the asset threshold for systemic financial institutions from $50 billion to $250 billion.
Dodd-Frank rollback raises the asset threshold for systemically important financial institutions (SIFIs) from $50 billion to $250 billion.
This legislative change exempts several banks from annual stress tests and living wills that the Obama administration designed as a safety valve to prevent another major financial calamity.
As a result, this structural regime switch will provide smaller financial institutions with primary relief from the strict rules and regulations that apply to most Wall Street banks.
President Trump affirms his clear intention to sign this bill into law.
As a result, the Dodd-Frank rollback is likely to benefit non-systemic financial institutions, community banks, and other small lenders.
However, Congress expresses the consensus view that most banks should be subject to substantially higher equity capital requirements to safeguard against extreme losses in rare times of financial stress.
As financial intermediary capital covaries with both aggregate credit supply and household debt fluctuations, these ebbs and flows cause real business cycles and financial market gyrations.
Sticky prices and interest rates can persist over the interim period, and transitional dynamism manifests in real macro movements such as real GDP economic growth, employment, capital investment, industrial production, and bank balance sheet expansion.
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Amazon acquires an Internet pharmacy PillPack in order to better compete with Walgreens and many other drug distributors.
Amazon acquires an online pharmacy PillPack in order to better compete with Walgreens Boots Alliance, CVS Health, Rite Aid, and many other drug distributors.
CVS Health, Rite Aid, and Walgreens Boots Alliance shares plunge 6%-10% in response to Amazon's expansion into the online retail pharmacy business.
Through this strategic move, Amazon shakes up the online drugstore business with its ambitious $1 billion acquisition of online pharmacy PillPack.
This disruptive innovation changes the competitive landscape for traditional pharmacies.
PillPack organizes, packages, and delivers drugs online.
This online pharmacy sends consumers medical packages and prescription drugs with the specific number of medications that these consumers need to take at particular times.
Amazon CEO Jeff Bezos continues to focus on the long-term persistent trends that are less likely to change in the next few decades.
In one of his earlier letters to Amazon shareholders, Bezos emphasizes the fact that the vast majority of consumers want to enjoy cost-effective online retail solutions to their daily problems with both fast delivery and vast selection.
The recent acquisition of PillPack allows Amazon to tap into the uncharted territory of online pharmacy as the tech titan continues to uphold the Bezos tripartite principle (i.e. low cost, fast delivery, and vast selection).
Apple and Samsung are the archrivals for the title of the world's top smart phone maker.
Apple and Samsung are the archrivals for the title of the world's largest smartphone maker.
The recent patent lawsuit settlement between Apple and Samsung demonstrates that the dollar sums are unlikely to significantly shrink either's bottom line.
Nonetheless, the case has caused a major impact on U.S. patent law.
Both companies continue to impress smartphone consumers with AMOLED curvy touch screens, wireless charging capacities, facial recognition functions, and other high-tech features.
After a loss at trial, Samsung appealed to the U.S. Supreme Court.
In December 2016, the court sided unanimously with Samsung's argument that a patent violator should not have to hand over the entire profit made from stolen design features if these features covered only specific portions of a smart product but not the entire object.
When the case went back to the lower court for trial earlier in 2018, however, the jury sided with Apple's argument that Samsung's profits were wholly attributable to the design elements that directly violated Apple's prior patents.
Because of the recent verdict, the legal settlement called for Samsung to make an extra $140 million payment to Apple in addition to the prior $399 million payment that Samsung previously paid to Apple to compensate for iPhone-driven patent infringement.
The recent verdict marks the end of the 7-year-long patent dispute between Apple and Samsung.
Due to hefty legal fees, neither side turns out to be a clear victor throughout the arduous battle.
Harley Davidson plans to move its major production for European customers out of America due to European Union tariff retaliation.
Harley Davidson plans to move its major production for European customers out of America due to European Union tariff retaliation.
E.U. retaliatory and punitive taxes might cost Harley Davidson up to $100 million per year in total revenue.
White House senior economic advisor Peter Navarro pushes back on investor fears and sentiments that the Trump administration may introduce widespread trade restrictions on foreign companies.
Navarro interprets the recent sharp Dow decline by 500 points as a key market overreaction to the Trump trade reform that focuses on protecting U.S. interests, investments, and innovations.
The Trump administration's Trade Act Section 301 investigation suggests that U.S. intellectual property protection remains the top priority (especially for the information technology industry).
Meanwhile, several tech companies from Netflix, AMD, and Micron to Twitter and Square experience dramatic dips in share prices and bottomline forecasts in light of the recent Sino-American trade war.
When push comes to shove, smart stock market investors need to carefully gauge corporate valuation and profitability on the core basis of fundamental indicators such as E/P, Div/P, and B/P.
In fact, the Trump administration should focus less on curbing China's tech-savvy progress and more on encouraging scientific breakthroughs and innovations at home.
Capital market liberalization and globalization connect global financial markets to allow an ocean of money to flow through them.
Over the past decades, capital market liberalization and globalization have combined to connect global financial markets to allow an ocean of money to flow through them.
In emerging-economies, the gross foreign financial position can be as large as annual GDP.
In rich economies, the ratio can rise even more.
Given the sheer size of cross-border capital flows, these co-movements can have enormous effects on local economic conditions.
The capital flows across borders is good since financial openness often allows investors in rich countries to seek out large returns in capital-scarce emerging-economies.
Yet, capital flows may not always follow this peculiar pattern.
Money can indeed flow in the other direction.
Less mature emerging-economies often save to safeguard against fickle global financial markets and so amass large quantities of foreign-exchange reserves.
This global savings-glut suggests that a sea of money can swamp individual economies.
The U.S. Federal Reserve determines the turn of the tide.
American monetary policy shapes the global appetite for risk because of the dollar's exorbitant privilege in global finance.
When the Fed changes course, asset prices, returns, and market volatilities all move in its wake, with many sorts of inadvertent consequences for other countries.
Most economies face a fundamental dilemma: these economies can choose open capital markets to attract the foreign investment that emerging markets need to invigorate their economic climate, but only if these economies accept losing domestic control over the global business cycle.
For many economies, this inexorable trade-off seems to be a fair price to pay in global finance.
However, when the Fed eventually raises its interest rate, the trade-off will then tilt toward a major capital exodus from emerging economies back to America.
The law of inadvertent consequences counsels caution.
Federal Reserve's interest rate hike may lead to an economic recession as credit supply growth ebbs and flows through the business cycle.
The Federal Reserve's current interest rate hike may lead to the next economic recession as credit supply growth ebbs and flows through the business cycle.
All of the 35 U.S. large banks such as JPMorgan Chase, Bank of America, and Citigroup pass the annual stress test and so would be able to lend even under the grimmest economic conditions.
During the Trump administration, the U.S. Treasury and Federal Reserve may roll back at least some of the Dodd-Frank rules and regulations.
These extreme economic conditions include 10% unemployment, a sharp decline in general house prices, and a deep recession in Europe and elsewhere.
Even under these dire conditions, the banks hold sufficient capital buffers that would exceed the financial-sector equity claims back in the years just before the Global Financial Crisis.
The Federal Reserve retains the final veto power to limit any dividend hikes or share repurchases that the banks may pursue in order to return cash distributions to their shareholders.
It is important for financial intermediaries to substantially increase their core equity capital buffers in order to safeguard against extreme losses that might arise in rare times of financial stress such as the Global Financial Crisis from 2008 to 2009.
Facebook, Apple, Amazon, Netflix, and Google (FAANG) have been the motor of the S&P 500 stock market index.
Facebook, Apple, Amazon, Netflix, and Google (FAANG) have been the motor of the S&P 500 stock market index.
Several economic media commentators contend that most U.S. stock market returns arise from a small fraction of shares.
This concentration tilts toward platform orchestrators that specialize in mobile communication, ecommerce, music, video, online search, and advertisement etc.
In fact, these platform orchestrators attract many early technology adopters and venture capitalists.
The former pour money into the mass purchases of mobile devices and online software services, and the latter inject capital into these tech titans at an early stage.
Apple and Amazon are the first U.S. heavyweight tech giants that pass the landmark $1 trillion stock market valuation.
Sino-American trade war worries now constrain S&P 500 year-to-date gains to 3.5% as of June 2018.
In contrast, the FAANG group reaps hefty double-digits and thus demonstrate business immunization to the Trump tariffs.
These tech titans make productive uses of their intellectual properties such as patents, trademarks, and copyrights.
This moat protection secures competitive advantages for their platform infrastructure.
As a result, these tech firms can better extract bottom-line rewards from the latest technological advances in mobile communication, ecommerce, video, online search, and advertisement etc.
Apple enters a multi-year content partnership with Oprah Winfrey to provide new original online video and TV programs.
Apple enters a multi-year content partnership with Oprah Winfrey to provide new original online video and TV programs in direct competition with Netflix, Amazon, Comcast, and DirecTV etc.
This multi-year partnership represents long-term collaboration between Apple and Oprah Winfrey as a well-known TV producer, talk show host, actress, author, philanthropist, and CEO of Oprah Winfrey Network (OWN).
Together Apple and Winfrey plan to create original online video and TV programs that embrace her incomparable ability to connect with U.S. and international audiences worldwide.
Winfrey's video projects incrementally arise as part of a major lineup of original content from Apple.
In effect, this multi-year content partnership allows Apple to better compete with several other online content providers such as Netflix, Amazon, Comcast, and DirecTV etc.
Winfrey's recent deal with Apple arises amid an aggressive arms race for TV producers after Netflix poaches Ryan Murphy and Shonda Rhimes from their long-time broadcast homes such as ABC in an outright push to own more video content.
Also, Amazon inks Nicole Kidman to a first-look film and TV pact, whereas, Saturday Night Live television producer and mastermind Lorne Michaels moves his film deal to Universal Studios.
These recent landmark events ignite traditional film and television studios and tech rivals such as Apple and Amazon etc to step up their games to offer atypically lucrative TV programs with top talents and celebrities.
In addition to the multi-year content partnership with Winfrey, Apple CEO Tim Cook assures stock investors that Apple should be immune to the highly probable trade conflict between China and America.
Both iPhone and iPad global supply chains are free from Trump steel and aluminum tariffs on Chinese goods and services, and China's retaliatory tariffs would not affect the global demand for Apple tech products.
Whether the Trump administration escalates its tariff tactics with some imminent impact on Apple products remains an open and controversial mystery.
President Trump continues to urge Apple and its upstream suppliers such as Foxconn and Pegatron to move their liquid crystal display (LCD) production to U.S. states such as Wisconsin, Michigan, and Pennsylvania.
The Trump administration introduces new tariffs on $50 billion Chinese goods amid the persistent bilateral trade dispute.
The Trump administration introduces new tariffs on $50 billion Chinese goods amid the persistent bilateral trade dispute.
These tariffs will effectively raise prices for American consumers and enterprises.
Thus, the global delivery company FedEx views U.S. tariffs on Chinese goods as *counterproductive to U.S. economic interests*.
China counteracts these penalties by imposing 25% retaliatory tariffs on $50 billion U.S. farm imports such as beef, cotton, rice, soy, and wheat.
This recent Sino-U.S. trade conflict may herald a new era of much greater trade protectionism.
The U.S. major stock indices S&P 500, Dow, and NASDAQ experience discernible losses in response to the complex trifecta of Sino-U.S. trade tension, Federal Reserve second interest rate hike, and energy cost momentum.
In addition to this negative U.S. stock market return performance, the greenback exhibits much more volatile near-term gyrations in the foreign exchange market.
In a putative trade war, there are winners and losers; whereas, everyone suffers in a major trade conflict.
Full-scale and all-out tit-for-tat may become a suboptimal approach to resolving the current bilateral trade imbalance.
It is important for each side to refrain from undertaking any unilateral actions to complicate the status quo.
Both sides might need to consider a better balance between carrots and sticks in addressing the Sino-U.S. trade dilemma.
Federal Reserve delivers a second interest rate hike to 1.75%-2% and then expects more rate increases in late-2018.
The Federal Reserve delivers a second interest rate hike to 1.75%-2% and then expects subsequent rate increases later in September and December 2018 to dampen inflationary pressures.
This decision reflects robust economic revival in America.
With reasonable price stability, the U.S. economy now operates near full employment with 2.1% inflation and 3.8% unemployment (i.e. the lowest unemployment rate since 2000).
The current economic growth trajectory accords with the Federal Reserve's congressional dual mandate of maximum employment and price stability.
The Federal Reserve pencils in subsequent interest rate hikes later in 2018 (2%-2.25% in September 2018 and 2.25%-2.5% in December 2018).
This gradual acceleration of interest rate increases helps contain inflation with steady gains in the labor market.
The current interest rate hike may disappoint President Trump who would otherwise prefer dovish monetary policy accommodation (in contrast to hawkish inflation containment).
However, the Federal Reserve reiterates monetary policy independence and so continues the current interest rate hike as the U.S. economy moves along the long-run steady-state economic growth path of healthy fundamental recalibration.
On balance, it is now quite plausible for America to achieve 3%+ real GDP economic growth to better balance the fiscal budget that helps neutralize both trade and budget deficits in the medium term.
AT&T wins court approval to take over Time Warner with a trademark $85 billion bid despite the Trump prior dissent due to antitrust concerns.
AT&T wins court approval to take over Time Warner with a trademark $85 billion bid despite the Trump administration prior dissent due to antitrust concerns.
This court approval involves no additional conditions on the potential mega merger between AT&T and Time Warner.
As a result, Time Warner's share price has surged by more than 5% since this unconditional court approval, whereas, AT&T's share price shows less volatile gyrations.
Both companies hope to better compete with Netflix, Amazon, Comcast, DirecTV and other online content providers.
Prior antitrust critics suggest that the joint company might lead to anti-competitive issues with greater market concentration.
This mega merger might result in higher oligopolistic markups to the detriment of U.S. consumers, this probable merger remains open to controversy.
A powerful combination of Trump tax cuts, lower capital costs, robust corporate net gains, and balance sheet capital improvements drive the current appetite for new mergers and acquisitions.
In the first half of the current fiscal year, we witness $978 M&A mega deals at a pivotal point in real business cycles with both full employment and low inflation.
As many unicorns package themselves as potential M&A targets for tech titans, the current M&A wave boosts the aggregate demand for high-skill R&D patents and tech talents.
During the Trump economic boom, the current M&A wave seems to start with telecom-and-media mergers.
Comcast may next target acquiring Fox in America or Sky in Europe, and T-Mobile and Sprint may form a $150 billion company to better compete with the top wireless communication rivals Verizon and AT&T.
These mega M&A deals can spill over to several other industries such as big banks, technology titans, and pharmaceutical giants.
Donald Trump and Kim Jong Un meet, talk, and shake hands in the historic U.S.-North-Korean peace summit in Singapore.
Donald Trump and Kim Jong Un meet and shake hands in the historic peace summit between America and North Korea in Singapore.
At the start of the bilateral peace summit, Trump indicates a terrific bilateral relationship in the way forward and so expects the summit to be a tremendous success.
Kim admits numerous obstacles that both sides had to overcome in order to get to this historic moment.
U.S. Secretary of State Mike Pompeo, however, warns that American economic sanctions will remain in effect until North Korea completely denuclearizes its major arsenals.
In other words, senior U.S. foreign-policy technocrats emphasize that North Korea has yet to attain complete, verifiable, and irreversible denuclearization (CVID).
Former NBA star Dennis Rodman contributes to *basketball diplomacy*, bursts into tears in a CNN live interview about the summit, and wishes the best for the future peace and prosperity of both countries.
The world's major stock indices rise in response to the historic peace summit between Trump and Kim.
Due to a substantial reduction in geopolitical risk exposure, the recent tripartite peace talks among America, North Korea, and South Korea help alleviate investor concerns and sentiments about international economic policy uncertainty.
The Korean peninsula has been a major flashpoint in East Asia since the Korean War took place about 65 years ago.
During the peace summit, Trump and Kim have signed a comprehensive denuclearization agreement in order to free North Korea from draconian U.N. economic sanctions.
Both U.S. and most East Asian stock markets enjoy healthy gains due to sound and steady U.S.-Korean relations in recent times.
Just Capital issues a new report in support of the stakeholder value proposition in recent times.
Just Capital issues a new analytic report in support of the stakeholder value proposition in recent times.
U.S. corporations that perform best on key priorities such as worker treatment, fair pay, ethical leadership, and environmental protection both generate significantly higher investment returns and exhibit lower return volatility than the subpar performers.
Specifically, the top 20% U.S. corporations attract a higher 14% average annual stock return and 7% lower return volatility in comparison to the bottom 20% U.S. corporations.
Also, a composite stock investment portfolio strategy that involves both a long position in the former and a short position in the latter yields a hefty 10.6% annual Fama-French factor alpha on average.
Thus, the stock market rewards those companies that focus on achieving several key priorities in support of stakeholder value optimization (in addition to shareholder wealth maximization).
Overall, each wise stock market investor should look beyond both fundamental and technical indicators of corporate financial health in the hot pursuit of better employment treatment, equal pay, ethical leadership, and environmental sustainability.
These broader considerations help deepen each wide stock market investor's smart data analysis of both quantitative and qualitative insights and perspectives through the lens of long-term sustainable business enterprises.
Microsoft acquires GitHub, a software development platform that has been widely shared-and-used by 28 million programmers worldwide.
Microsoft seeks to acquire GitHub, a software development platform that has been widely shared-and-used by 28 million programmers worldwide.
GitHub's tools have become essential to many software developers, who use GitHub to store open-source codes and programs with version control on the online forum.
Microsoft CEO Satya Nadella says the $7.5 billion deal would accelerate a transition to greater cloud computing capacity to add artificial intelligence to its current applications such as Office 365 and other Windows apps.
Due to its prior open-source nature, the GitHub M&A deal might empower Microsoft to activate the next proliferation of Windows apps in direct competition with Android and iOS apps.
In this fashion, Microsoft can strategically position itself as one of the world's major platform orchestrators to better compete with U.S. tech titans such as Apple, Google, Amazon, and Facebook via its hardware-plus-software sales of Surface Pro tablets, Windows smart phones, Office software packages, and other Windows apps.
As platform proliferation expands the global user network, Microsoft can integrate both hardware and software products and services to ensure greater customer delight and satisfaction.
Exponential user growth can translate into the multinational corporation's global reach with better bandwidth for future platform-driven mergers and acquisitions.
A powerful combination of Trump tax cuts, lower capital costs, robust corporate net gains, and balance sheet capital improvements drive the current appetite for new mergers and acquisitions.
In the first half of the current fiscal year, we witness $978 M&A megadeals at a pivotal point in real business cycles with both full employment and low inflation.
As many unicorns package themselves as potential M&A targets for tech titans, the current M&A wave boosts the aggregate demand for high-skill R&D patents and tech talents.
Several recent events explain why Trump may undermine multilateral world order.
Several recent events help explain why Trump may undermine multilateral world order:
First, Trump withdraws America from the 12-country Trans-Pacific Partnership (TPP) trade agreement.
Second, Trump withdraws America from the multilateral Paris climate agreement and so disappoints the political leaders of most Western allies such as Britain, France, and Germany.
Third, Trump imposes heavy tariffs on aluminum and steel from Canada, Europe, and Mexico.
Fourth, Trump abandons the Iran nuclear deal and then imposes draconian economic sanctions on the nuclear nation.
Fifth, Trump begins bilateral peace talks with North Korea.
Sixth, Trump instigates a trade conflict toward China with at least $50 billion tariffs on Chinese imports and intellectual-property infringements.
Seventh, Trump is eager to re-admit Russia to the G8 bloc.
As China and Russia benefit much from their population dividends, these countries emerge as new superpowers to rival America.
In response to this inexorable international trend, the Trump administration gradually gravitates toward a new political paradigm where global cooperation may no longer be an option.
America is free to undertake unilateral actions to change the status quo and then pushes the boundaries for many Western allies and new democracies in Asia.
The finance ministers of Britain, Canada, France, Germany, Italy, and Japan team up against U.S. President Trump at the G7 forum.
The finance ministers of Britain, Canada, France, Germany, Italy, and Japan team up against U.S. President Donald Trump and Treasury Secretary Steven Mnuchin at a G7 forum.
These finance ministers suggest that the recent U.S. trade actions undermine economic confidence in the Western alliance.
The G6 delegation requests Mnuchin to communicate their unanimous concern and disappointment to President Trump.
Meanwhile, Commerce Secretary Wilbur Ross completes his recent trade talks in China with little sign of progress.
In China, the state-run news agency Xinhua states that all economic outcomes of these trade talks will not take effect if the U.S. imposes any tariffs or other trade sanctions.
These recent developments reflect the delicate balance that both Mnuchin and Ross need to maintain as President Trump moves forward with 25% tariffs on aluminum and 10% tariffs on steel from his close Western allies and another $50 billion tariffs on Chinese imports.
OECD figures suggest that the current global economic growth rate is 3.8% without any exogenous tariff shocks.
S&P chief economist Paul Gruenwald suggests that these tariffs can take a quarter off the world's economic growth rate in a Sino-U.S. trade war.
The European Central Bank's projections also warn of a 1% contraction in global economic growth in the first year of Trump tariffs.
The medium-term real effects of Trump tariffs may be detrimental to global economic growth and stock market resilience.
The U.S. federal government debt has risen from less than 40% of total GDP about a decade ago to 78% as of May 2018.
The U.S. federal government debt has risen from less than 40% of total GDP about a decade ago to 78% as of May 2018.
The Congressional Budget Office predicts that this ratio will surge to 96% in 2028.
Although many blame the Trump tax cuts as the primary root cause, the increases in health care and retirement benefits suggest a different real reason for U.S. deficit severity.
Harvard professor Martin Feldstein attributes the recent rise of U.S. budget deficit from 4% to 5.1% of total GDP to increases in Medicare and social security retirement benefits for middle-class older Americans.
These increases in health care and retirement benefits account for about 2.7% of total GDP.
The neoclassical Sargent-Wallace thesis suggests that the central bank cannot finance incessant increases in core deficits with government bond issuance regardless of money supply growth.
This money supply expansion would lead to inexorable inflationary pressures that defeat the dual mandate of both maximum employment and price stability in the suboptimal fiscal-monetary policy coordination.
Inflation serves as a seigniorage tax that would in turn dampen real macroeconomic variates such as household consumption, capital investment, labor supply, and total economic output.
In light of this ripple effect on sustainable financial market growth and prosperity, the law of inadvertent consequences counsels caution.
The modern world's most powerful nations, America and China, stumble into a Thucydides trap.
America and China, the modern world's most powerful nations may stumble into a Thucydides trap that Harvard professor and political scientist Graham Allison suggests in his recent book on Sino-U.S. relations.
Through the lens of an ancient Greek military chief and historian, the Thucydides trap refers to the notion that significant shifts in the relative strength of major powers can be a primary cause of bilateral conflict.
Financial market observers and economic media commentators may characterize superficial frictions and flashpoints as the root cause of both bilateral animosity and hostility.
However, the real cause of bilateral conflict, or an open Sino-American trade war, might reflect the fear and frustration of political leaders Trump and Xi on both sides.
Allison thus emphasizes that if a Sino-U.S. war is not inevitable, an open trade conflict is likely to emerge as a negative disequilibrium outcome in the medium run.
In recent times, the TIME magazine points out the 5 major myths that investors seem to misconstrue as new trends and inflection points in the U.S. stock market.
Investor worries and concerns arise from volatile asset price gyrations, pervasive tech stock slumps, inflationary price pressures, faster Fed interest rate hikes and their overall adverse impact on real GDP economic output and employment, and a pervasive regime switch of investor favor from stocks to bonds and other alternative investment vehicles such as credit default swaps (CDS) and other financial derivatives.
TIME demystifies these common myths and puzzles from a fundamental perspective.
The Federal Reserve accelerates the current interest rate hike at the neutral threshold that helps contain inflation when the U.S. economy operates near full employment.
Fiscal stimulus effectuates in the form of both Trump tax cuts and infrastructure expenditures.
It takes time for these fiscal measures to drive positive progress in real macro covariates such as real GDP economic output, capital investment, employment, and technological innovation.
These economic insights shine fresh light on the current Sino-U.S. bilateral trade relations and financial market conditions in the broader context of significant shifts in the relative strength of these major powers.
The Federal Reserve proposes softening the Volcker rule that prevents banks from placing risky bets on securities with deposit finance.
The Federal Reserve proposes softening the Volcker rule that prevents banks from placing risky bets on securities with deposit finance.
As part of the post-crisis Dodd-Frank regulation, the Volcker rule restricts banks from applying proprietary models to trade for their own profits or placing high equity stakes in hedge funds, mutual funds, and private equity funds.
Under the new proposal, banks with trading assets and liabilities of $1 billion to $10 billion would be subject to less stringent Volcker-rule compliance requirements with bespoke specifications.
Below the $1 billion asset threshold, financial institutions would not have to demonstrate compliance with the new Volcker rule.
In terms of public disclosure, trading desks would not have to report absolute daily net gains and losses below $25 million within a 90-day window.
This deregulatory rollback provides fresh momentum for most bank stocks.
As a result, most banks experience hefty stock price appreciation in recent times.
President Trump introduces $50 billion tariffs on Chinese products and new limits on Chinese high-tech investments in America.
President Trump introduces $50 billion tariffs on Chinese products and new limits on Chinese high-tech investments in America.
This new round of duties and tariffs arises as a major macro surprise less than a fortnight after Treasury Secretary Steve Mnuchin says the Sino-U.S. trade war is on hold.
China has already committed to significantly increasing its purchases of U.S. goods and services in order to reduce their trade imbalance.
Nevertheless, the Trump team aims to achieve a hefty $200 billion reduction in bilateral trade deficit.
In addition to the Sino-U.S. trade war, President Trump announces 25% steel tariffs and 10% aluminum tariffs on Canada, Europe, and Mexico.
The Trump administration seems to consider this deliberate trade tactic part of the political path toward the median voter with better midterm election results.
Many U.S. large public corporations spend their tax cuts on new dividend payout and share buyback.
Many U.S. large public corporations spend their hefty tax cuts on new dividend payout and share buyback but not on new job creation and R&D innovation.
These corporations channel $1 trillion onshore and offshore cash stockpiles into both dividend and share buyback programs.
For instance, Apple expects to spend $100 billion cash on share repurchases from mid-2018 to early-2020.
In the medium term, Cisco spends $25 billion on share buyback, and Wells Fargo plans another $22 billion share purchases.
Google also expects to spend about $9 billion on dividend payout and share buyback in order to boost its near-term stock price prospects.
Pepsi, AbbVie, and Amgen collectively spend about $35 billion on share repurchases for better shareholder value maximization.
Visa and eBay plan to initiate similar dividend and share buyback programs over the next couple of years.
Overall, these public corporations seem to view Trump tax cuts are temporary cash windfalls but not permanent cash gains.
These firms thus initiate medium-term cash dividends and share repurchases for immediate shareholder gratification.
In this light, it is less clear whether Trump tax cuts serve as permanent income boosts that can help revive real economic output, employment, capital investment, or R&D innovation etc.
Dodd-Frank rollback raises the asset threshold for systemic financial institutions from $50 billion to $250 billion.
Dodd-Frank rollback raises the asset threshold for systemically important financial institutions (SIFIs) from $50 billion to $250 billion.
This legislative change exempts several banks from annual stress tests and living wills that the Obama administration designed as a safety valve to prevent another major financial calamity.
As a result, this structural regime switch will provide smaller financial institutions with primary relief from the strict rules and regulations that apply to most Wall Street banks.
President Trump affirms his clear intention to sign this bill into law.
As a result, the Dodd-Frank rollback is likely to benefit non-systemic financial institutions, community banks, and other small lenders.
However, Congress expresses the consensus view that most banks should be subject to substantially higher equity capital requirements to safeguard against extreme losses in rare times of financial stress.
As financial intermediary capital covaries with both aggregate credit supply and household debt fluctuations, these ebbs and flows cause real business cycles and financial market gyrations.
Sticky prices and interest rates can persist over the interim period, and transitional dynamism manifests in real macro movements such as real GDP economic growth, employment, capital investment, industrial production, and bank balance sheet expansion.
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