“Only when the tide goes out do you discover who’s been swimming naked.” — Warren Buffett
Merry Christmas and Happy New Year — from the staffs of EGS

1. Chile’s Corfo, SQM Seek Settlement of Lithium Mining Claims — Corfo and Pampa Calichera, a Chilean development agency that controls Sociedad Quimica y Minera de Chile (NYSE:SQM) stated that it had agreed to suspend its arbitration battle with SQM for 30 days as they try to solve a dispute over lithium mining claims. Chile will be able to expand its lithium production “significantly” if the negotiations are successful.
2. China Looks to Curb Greenhouse Emissions — China is planning to start a giant market to trade credits for the right to emit greenhouse gases. The program would initially cover the nation’s state-dominated power generation sector, which produced almost half of the country’s emissions from burning fossil fuels last year.
3. AAII Weekly Sentiment Survey — the weekly sentiment survey from the American Association of Individual Investors (AAII) showed that bullish sentiment increased from 45.0 up to 50.5%. That’s the first 50%+ reading since the first week of 2015! That streak of 154 weeks without a 50%+ reading was the longest in the history of the survey!

4. The Tax Cuts and Jobs Act Passed by Congress and Signed into Law by President Donald Trump — the new tax law will be a mixed bag of give-and-take for individual taxpayers, with benefits sharply skewed to the wealthy. The main component, the top corporate tax rate will drop from 35%—one of the highest top rates levied by developed nations—to 21% in 2018. Most taxpayers will see their tax burdens decline and their after-tax income rise in 2019, after the new law is fully in effect.
5. Congress Passes Stopgap Spending Bill — Congress has passed a stopgap spending bill that keeps the government funded through mid-January, punting thorny policy debates into next year. The most contentious part of the bill is what’s called a “pay-go” waiver. The provision suspends rules that bar the government from enacting expensive new programs, like the GOP tax cuts, unless there is enough money in the current year’s budget to pay for them.
6. Wall Street Strategists’ Forecast Year-End Price Targets — according to Bloomberg, the consensus S&P 500 price target for the end of 2018 stands at 2,854. That would represent a 2018 gain of roughly 6%.
Below is a chart showing consensus year-end price targets for the S&P 500 for every year going back to 2000. For each year, we show where Wall Street strategists saw the S&P 500 trading at the end of the year, the estimated annual percentage change based on the price target, and the actual percentage change that the S&P 500 experienced that year.

The week ahead — Economic data from Econoday.com:

“Bull markets are born on pessimism, grown on skepticism, mature on optimism, and die on euphoria.” — John Templeton

1. Bitcoin Debut on CBOE Futures Exchange — futures on the world’s most popular crypto-currency – trading under symbol(“XBT) – surged as much as 25% to $18,850 during their debut session on the CBOE Futures Exchange, triggering two temporary trading halts meant to cool volatility earlier this week. About 2,700 contracts for January changed hands. Also, the SEC has issued a warning to investors on the dangers of putting their money into cryptocurrencies. “There are tales of fortunes made and dreamed to be made,” said Chairman Jay Clayton. “We are hearing the familiar refrain, ‘this time is different.'”
2. WTO’s Ministerial Ramping Up Trade Pressure on China — the WTO’s ministerials, the EU, Japan and U.S. will announce a new alliance to take on China. The three economies will target “severe excess capacity” in important sectors like steel and commodities, the role of illegal subsidies and abusing intellectual property rules to acquire strategic technologies.
3. GOP Raising Corporate Rate to 21% — GOP negotiators have reached a tentative agreement to raise the corporate rate in their joint House-Senate tax bill from 20% to 21%, according to The Hill. The higher rate could pay for a reduction in the top individual rate, which Republicans are talking about lowering from 39.6% to 37%. It could also pay for keeping more deductions for taxpayers, particularly in high-tax states.
4. FOMC Raised Interest Rates but Sticks to Go-Slow Approach — the central bank raised its benchmark federal funds rate by a quarter percentage point to between 1.25% and 1.5% — the fourth increase in a year. In addition, the central bank made no change to its forecast for inflation and struck a wait-and-see stance in light of persistently low inflation and a pending change in leadership.
5. AAII Weekly Sentiment — courtesy of BIG, according to this week’s sentiment poll from the American Association of Individual Investors (AAII), bullish sentiment increased from 36.9% up to 45%. That’s the greatest weekly increase in three months and the fourth straight week of increased optimism. The last time bullish sentiment increased for four straight weeks was back in early 2016, and we haven’t seen five straight weeks of increased bullish sentiment since 2012. It has now been a record 154 straight weeks since bullish sentiment last eclipsed 50%.

In addition, bearish sentiment saw a 6.1 percentage point decline this week, falling from 34.2% down to 28.1%. That’s the lowest weekly print for bearish sentiment in just over a month, but nowhere near the lowest levels of the year.

6. Final Version of the Republican Tax Bill Head to Congress This Week — If the tax bill is passed this week, the sectors that should benefit the most are: Financials, Retailers, Telecom, Transports, and smalll–cap stocks. Indeed, the small–cap Russell 2000 saw a big lift on Friday as it bounced off of its 50-day moving average. Copper’s recent rally is also suggestive of world–wide economic strength.
The chart below shows the three secular Bull Market since 1949.

The week ahead — Economic data from Econoday.com:

“I’m always thinking about losing money as opposed to making money. Don’t focus on making money, focus on protecting what you have” – Paul Tudor Jones

1. Walgreens Rebranding Effort in Pharmacy Wars — Walgreens is taking a different approach to grow in the wake of CVS Health (NYSE:CVS) announcing plans to acquire Aetna (NYSE:AET). The company is re-positioning to reach two demographics of female shoppers – millennials and Gen X – with a big emphasis on beauty and food products.
2. Japan Wants Missiles that Could Strike N.Korea — Reuters reported Japan is preparing to acquire precision air-launched missiles that for the first time would give it the capability to strike North Korea. The country is exploring Lockheed Martin’s (NYSE:LMT) JASSM-ER, as well as missiles from Norway’s Kongsberg Defence & Aerospace. The report comes as UN chief diplomat Jeffrey Feltman travels to Pyongyang for rare, high-level, political talks to diffuse tension.
3. The Senate and House Passed the “Tax Cuts and Jobs Act Bill ” — the Senate and House lawmakers passed the “Tax Bill” and are now working to come up with a final version of the tax bill, and they still have some differences to resolve. Below is the summary of the Senate and House versions.

4. House Approves Two-Week Funding Extension, Avoiding Government Shutdown — the Senate has passed a stop-gap spending measure to continue funding the federal government for two weeks. President Trump would sign a stop-gap spending measure funding the government through Dec. 22, according to a statement from the White House. In addition, the White House said it will move forward with a massive infrastructure program in 2018.

The week ahead — Economic data from Econoday.com:

“Bulls make money, bears make money, pigs get slaughtered.” — unknown

1. Strong Start to Holiday Sales Season — Cyber Monday hit record revenues of $6.59B, making it the largest U.S. online sales day ever, in the latest report released. In comparison, Black Friday and Thanksgiving Day brought in $5.03B and $2.87B respectively. The internet holiday shopping season has so far (Nov. 1-27) driven a total of $50B in revenue, a 16.8% increase.
2. Bitcoin Shoots for $11,000 — a day after breaking above the $9,000 level, bitcoin has cracked $11,700, boosted by growing signs of mainstream adoption. About 100,000 Coin-base accounts were added over the Thanksgiving holiday, while CME will list bitcoin futures in the second week of December.
3. Samsung Develops Graphene-Based Battery, Quicker Charge than Lithium — Samsung Electronics has successfully developed a graphene-based battery that would take just 12 minutes to be fully charged, compared to current lithium-ion batteries, which take about an hour. Graphene has been dubbed a “miracle material” in the global electronics industry given its strength, electrical conductivity and elasticity.
4. OPEC/Russia Agree on Oil-Cuts Extension to End of 2018 — OPEC agreed to extend its oil-production cuts to the end of 2018. OPEC and other oil exporters led by Russia have kept 1.8 million barrels a day off the market since January, helping to boost crude prices about 40 percent from the lows of the year. Saudi Energy Minister Khalid Al-Falih told reporters “My preference is to go for nine months, we will meet again in June and we look at not only how we have done in first half of the year, but also our outlook for third and fourth quarters of 2018 and act accordingly.”
5. Amazon is in Exploratory Talks with Generic-Drug Makers — Amazon has held preliminary talks with makers of generic drugs about its potential entry into the pharmacy space, according to CNBC. The conversations, including with generics giants Mylan and Sandoz, a unit of Novartis. Stocks of drug distributors and others in the pharmaceutical supply chain, such as pharmacies and pharmacy benefits managers, have been pressured by the specter of Amazon entering the space.

The week ahead — Economic data from Econoday.com: