AYA Analytica financial health memo August 2017

As of August 2017, this regular podcast is available on our Andy Yeh Alpha fintech network platform.

Bill Gates and Warren Buffett shared their best business decisions in a 1998 panel discussion.
Top 2 wealthiest men Bill Gates and Warren Buffett shared their best business decisions in a 1998 panel discussion with students at the University of Washing-ton Business School.
Buffett said his investment business Berkshire Hathaway was the best career because he enjoys what he does.
He said it is important to take a big swing when extraordinary investment opportunities emerge.
Alluding to his own experiences as a stock market investor, Buffett noted the need for a typical investor to act quickly when these great investment opportunities arise because "there is no time to be reading a book on the modern portfolio theory of diversification".
Buffett further explained that when one finds a company or a business idea within his or her own circle of competence, the price is right, the people are right, then the investor should barrel in.
For Gates, his best business decision was to go into partnership with Microsoft co-founder Paul Allen.
Gates explained the importance of working with a person who "shares our vision, earns our trust, and complements us with a different set of skills".
Buffett concurred and regarded his long-time reliable business partner Charlie Munger as his best friend with sound expert judgement.
For Gates and Buffett, friendship and clairvoyance are the backbone of their business success.

HPE CEO Meg Whitman decides to step down after her 6-year stint at the technology giant.
HPE CEO Meg Whitman has run both eBay and Hewlett Packard within Fortune 500 and now has decided to step down after her 6-year stint at the technology giant.
As one of the most prestigious women in Corporate America and a former candidate for California governor, Whitman split Hewlett Packard Corporation into HPE and PC-and-printer business HP Inc back in 2015 as part and parcel of an ambitious plan to turn around the large conglomerate.
She aggressively shed assets and cut tens of thousands of jobs as HPE sharpened its focus on cloud server and network businesses. HPE share prices have risen by a margin of 47% in stark contrast to a bullish 27% return on S&P 500 in the same period.
At HPE, Whitman's tenure set a healthy sequence of corporate reorganizations that she regarded as necessary to focus on the core businesses.
For instance, Whitman rubber-stamped several complex deals of spinning off HP's software business to British tech firm Micro Focus, as well as spinning off HP's IT service business to DXC Technology.
During Whitman's tenure, HPE further unloaded its Indian IT outsourcing unit Mphasis to the Blackstone Group.
Whitman's HPE adventures represent a classic business case study of valuable aggressive corporate reorganizations that reorient the essential core assets of a tech conglomerate.
This landmark case study sheds fresh light on successful corporate reorganizations for business executives and stock market investors to focus on more sustainable firm valuation and shareholder wealth creation.

President Trump criticizes the potential media merger between AT&T and Time Warner.
President Trump criticizes the potential media merger between AT&T and Time Warner, the latter of which owns the anti-Trump media network CNN.
President Trump thinks this deal is "not good for the country" because consumers would have to pay more with serious and rampant antitrust concerns.
In recent times, Justice Department has sued to block AT&T's $85.3 billion bid for Time Warner.
This lawsuit sets up a showdown over a blockbuster acquisition that the Trump administration deems to weaken competition in the capricious media landscape.
This legal battle differs starkly from the Obama administration's approval of a similar deal by Comcast to acquire NBC Universal Media in 2011.
If AT&T's bid for Time Warner were to proceed, the merger would create a media and tele-communication behemoth.
With its 2015 acquisition of the largest U.S. satellite company DirecTV, AT&T became the largest television distribution in America.
Should AT&T be able to acquire Time Warner, the joint company would possess a non-rivalrous capability to reach consumers through news and entertainment programs with Time Warner's unique content distribution of Games of Thrones, Wonder Woman, Harry Potter, CNN news, TNT sports, and so forth.
The law of inadvertent consequences counsels caution.

Broadcom announces its strategic plans to move its legal headquarters from Singapore to America.
Broadcom, a one-time division of Hewlett-Packard and now a semiconductor maker whose chips help power iPhone X, has announced its strategic plans to move its legal headquarters from Singapore to America.
This press conference takes place at the White House where President Trump heralds this move as an endorsement of his recent business-friendly tax overhaul reform and then names Broadcom one of the great companies worldwide.
In addition, Broadcom has announced its $100 billion offer to acquire Qualcomm, another major chip-maker and upstream supplier for Apple.
This strategic M&A deal would be the biggest takeover in the history of the technology industry.
In the broader context of consolidation within the semiconductor industry, the Broadcom-Qualcomm empire's services would reach almost every smartphone in the world.
Although Qualcomm intends to reject this takeover bid and portrays it as cheap and opportunistic, Broadcom's close connections to the Trump administration can be viewed as a new template for savvy deal makers and tech executives to politically maneuver mergers and acquisitions under the Trump administration.

Netflix stares at higher content costs as Disney and Fox hold merger talks.
Netflix is staring at higher content costs as Disney and Fox hold merger talks. Disney has held talks to acquire most of 21st Century Fox's business equity. These media titans are planning a merger in part to become more competitive against several digital video platforms such as Netflix, YouTube, and Amazon.
Fox senior executives believe that a tighter focus group of properties around news and sports may better compete with several other digital media giants.
In fact, Netflix's media content costs have increased quite a bit in recent times. Amazon and Google's YouTube face the gradual shrinkage of average revenue per user (ARPU). In recent times, Disney has announced its intention to pull back all of its movies from Netflix and other similar digital media platforms in order to establish at least 2 major direct-to-consumer media programs: one for sports and one for its key franchises such as Star Wars and Marvel Heroes.
For Disney, the golden opportunity to take control of another movie studio and significant TV production helps enhance its direct-to-consumer entertainment media assets with significant exposure to international markets such as Britain, Germany, Italy, and some parts of Asia. This market penetration sifts through the current Fox networks and 39% ownership of Sky TV networks.
In this context, it is quite reasonable to expect both Disney and Fox share prices to appreciate in the foreseeable future.

Leon Cooperman points out that the current Trump stock market rally now approaches normalization.
Leon Cooperman, Chairman and CEO of Omega Advisors, points out that the current Trump stock market rally now approaches normalization. The U.S. stock market is neither cheap nor expensive with a forward P/E ratio of 22x, which is a little higher than the long-run average P/E ratio of 16x to 18x. Most conditions for a bearish stock market correction are not present. For instance, bull markets typically end in overvaluation, whereas, Cooperman shares his wise and upbeat observation that the current stock market rally can continue north for another 15% margin. However, Cooperman suggests several reasons for bear markets:
First, inflation should accelerate for substantial interest rate liftoff;
Second, the relative likelihood of an NBER recession becomes real;
Third, the Federal Reserve becomes hawkish and aggressive; and
Fourth, some major geopolitical event reverberates across America.
Despite these reasons for bearish stock market normalization, we expect the Trump stock market rally to continue insofar as the Federal Reserve gradually implements the interest rate hike once in December 2017 and then 3 to 4 times in 2018 with target core inflation around 2% to 2.5%, especially in the absence of any clear and present dangers in the quasi-diplomatic relations between the U.S. and *nuclear nations* such as North Korea and Iran.

Ivanka Trump and Treasury Secretary Steven Mnuchin press the case for GOP tax legislation.
Ivanka Trump and Treasury Secretary Steven Mnuchin both press the case for GOP tax legislation as economic relief for the middle-class without substantial tax cuts to wealthy Americans.
In addition to this positive portrayal, Adam Looney, a senior fellow at Brookings Tax Policy Center, analyzes the pros and cons of the current tax overhaul plan.
First, this reform transitions to a territorial tax system that restricts the scope of legitimate tax avoidance by U.S. multinational corporations to defer taxes on artificial foreign income in offshore tax havens.
Second, this reform eliminates the current inequitably favorable treatment of foreign multinational corporations in America by constraining their ability to reduce their U.S. tax burden in the form of deductible interest payments or royalties.
Third, this reform can be made better if the GOP tax team proposes to boost the Earned Income Tax Credit (EITC), especially for single workers with a wider definition of age eligibility.
This tax credit boosts take-home pay and hence serves as an effective incentive for the marginal worker to participate in the labor force.

The current Trump stock market rally has been impressive from November 2016 to October 2017.
The current Trump stock market rally has been impressive over the past year. S&P 500 has risen by 21.1% since the 2016 presidential election, and the Dow has gained 28.5% in the same period.
In addition, NASDAQ is up 30.3%.
Since the surprise Trump election victory, banks and tech stocks have been the best performers.
The former include Citigroup, JPMorgan Chase, and Bank of America while the latter include FAMGA or Facebook, Apple, Microsoft, Google, and Amazon as well as Nvidia, Netflix, and Broadcom.
The Trump administration's pro-growth and business-friendly economic policy reforms such as fiscal stimulus, new infrastructure, and financial deregulation give investors good reasons to inject capital into stocks.
Insofar as the Federal Reserve keeps its gradual and dovish monetary policy contraction, the Trump stock market rally can continue over the medium term.

President Trump nominates Jerome Powell to be the new Federal Reserve chairman.
President Trump has nominated Jerome Powell to run the Federal Reserve once Fed Chair Janet Yellen's current term expires in February 2018.
Trump's strategic decision is unlikely to disturb the current roaring stock market.
Powell will probably maintain monetary policy continuity with a dovish stance of slow and gradual interest rate acceleration.
This dovish stance not only extends the gradual interest rate hike, but also accommodates sluggish manufacturing work recovery, low wage growth, and wider diffusion of digital technology usage in America.
The Trump administration targets 3% GDP growth and 2% inflation for household and corporate tax incentives to meet fiscal neutrality.
Powell has risen to the challenge of competing with several contenders for the top post of Federal Reserve: Janet Yellen (incumbent), John Taylor (Stanford professor), Gary Cohn (White House chief economist), and Kevin Warsh (former governor).
Powell's inclination toward more pervasive financial deregulation is a primary advantage for Trump's calculus.
Others warn that the likely imbalance between inflation containment and employment growth may cause distortions in the U.S. economy.
In essence, dovish monetary policy continuity trumps contractionary monetary policy normalization under the current Trump administration.

President Trump allows most JFK files to be released to the general public.
President Trump has allowed most JFK files to be released to the general public.
This batch of documents reveals many details of the assassination of President John F. Kennedy by Lee Harvey Oswald in Dallas, Texas, on November 22, 1963.
While some records remain secret, mysteries hover around this recent declassification of JFK documents in response to the rampant proliferation of conspiracy theories.
Most of the JFK assassination records remain in the National Archives.
Under the 1992 JFK Assassination Records Collection Act, congressional approval of declassification permits President Trump to authorize the legitimate release of additional JFK assassination records.
President Trump, somewhat of a conspiracy theorist himself, opts to maintain the top-secret classification of these JFK files under a pending review up to 180 days.
Intelligence agencies such as the FBI and CIA request that the records remain confidential.
In recent times the White House has confirmed this request, and President Trump's recent approval of declassifying JFK files helps assuage the primary concerns of some conspiracy theorists. Overall, this declassification has minimal impact on the current Trump stock market rally although one needs more substantive evidence to demystify the JFK assassination puzzle.

Facebook, Twitter, and Google executives explain the scope of Russian interference in the U.S. 2016 presidential election.
Facebook, Twitter, and Google executives head before the Senate Judiciary Committee to explain the scope of Russian interference in the U.S. presidential election in 2016.
Facebook admits that the Russian Internet Research Agency's prior abuse of their social network platforms affects 126 million users in America.
Google confirms that the Kremlin Internet Research Agency spreads more than 1,000 inflammatory videos on YouTube to sway the U.S. presidential election.
Twitter further flags more than 131,000 inflammatory messages on its platform.
Stock market observers marvel at the extent to which these high-tech platforms spread viral content via social media.
Both Democrats and some Republicans complain that these companies have waited nearly a year to publicly admit the scary scope of American exposure to the Russian effort to spread political propaganda during the 2016 presidential election campaign.
Senators push for harsh remedies such as new regulations on social media marketing practices in the form of rules for political advertisement on television.
This development suggests a near-term stock market pushback for Facebook, Google, and Twitter.

Andy Yeh Alpha (AYA) AYA Analytica financial health memo (FHM)
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We should not conform to this world, but we should allow the renewal of our minds to transform us, so that we can prove what is the good, acceptable, and perfect will of God.
Romans 12: 2

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