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Week of Sept 22, 2023 Weekly Recap & The Week Ahead

Tuesday, September 26th, 2023

“If you can keep your head when all about you are losing theirs …
If you can wait and not be tired by waiting …
If you can think – and not make thoughts your aim …
If you can trust yourself when all men doubt you …
Yours is the Earth and everything that’s in it.”
— Warren Buffett

1. Kevin McCarthy Hits New Hurdles With Holdout Republicans — House Republican leaders worked to salvage a short-term spending bill that sparked angry disagreements among the party’s rank-and-file, but they remained short of the support needed to pass the measure and show the party could unite to avert a government shutdown. The short-term proposal outlined Sunday by leaders of the hard-right Freedom Caucus and more-centrist Main Street Caucus would fund the government past Sept. 30 and contains an 8% cut in discretionary nonmilitary spending and a border-security provision. But about a dozen lawmakers, some from the Freedom Caucus itself, immediately called the deal a nonstarter, raising questions of whether the proposal would move ahead.
2. Fed Leaves Rates Unchanged, Signals Another Hike This Year — With economic activity stronger than anticipated, most officials also expected they would need to keep interest rates near their current level through next year, according to projections released Wednesday at the conclusion of their two-day policy meeting. Fed officials raised their benchmark federal-funds rate at their previous meeting in July to a range between 5.25% and 5.5%. They began lifting rates from near zero in March 2022.
3. House recesses after Defense bill, government funding plan implode — the House failed to pass a measure that would have set the rules for debate on a Pentagon funding bill, which had been expected to come to the House floor for a final vote later Thursday. During that meeting, Republicans had largely agreed on the rough outlines of a CR that would slash topline government funding well below the levels McCarthy and President Joe Biden agreed to last summer during high-stakes debt ceiling talks.
4. US Existing-Home Sales Fall to Seven-Month Low on Rates, Supply — Sales of previously owned US homes declined in August to the lowest since the start of the year, restrained by limited inventory and historically high mortgage rates.
Contract closings decreased 0.7% from a month earlier to a 4.04 million annualized pace, National Association of Realtors data reported. The median estimate in a Bloomberg survey of economists called for a pace of 4.1 million. Borrowing costs are now hovering around the highest levels in decades, discouraging existing homeowners — many who previously locked in lower mortgage rates — from moving. The combination of high financing costs, diminished inventory and elevated prices has created one of the least affordable housing markets on record.

The week ahead — Economic data from Econoday.com:

Week of May 21, 2021 Weekly Recap & The Week Ahead

Monday, May 24th, 2021

“There are three ingredients for success—aggressiveness, timing and skill—and if you have enough aggressiveness at the right time, you don’t need that much skill.”
― Howard Marks

1. WarnerMedia’s Combination with Discovery Is the Latest Salvo in the Streaming Wars — WarnerMedia’s combination with Discovery creates the second-largest U.S. media company behind Walt Disney. Viacom and Comcast, the parent of NBCUniversal, will find themselves on the smaller end after the deal closes in terms of streaming scale, competing against their rivals’ bigger subscriber bases with their Paramount+ and Peacock offerings.
2. New York Drops Masks and Capacity Limits, a Potential Boon to Tourism — New York officially drops mask mandates for the vaccinated and capacity limits for everything from restaurants to museums and theaters on Wednesday, a potential boon to New York City’s economy as workers return to Midtown offices and tourists repopulate Times Square. More than 42% of all New Yorkers have been fully vaccinated as of Tuesday, and 12- to 15-year-olds became eligible for the Pfizer shots last week. Nearly 53% of the state’s adults are fully vaccinated. Tourists can get vaccinated in the city.
3. Fed Officials Discussed Tapering Bond Buying in the Latest Fed Minutes — The minutes related to the Federal Open Market Committee meeting at the end of April, before a weak report on the number of jobs added that month and before the April consumer-price index reported the fastest yearly increase since 2008. In the minutes, Fed officials noted elevated risk appetite in capital markets. “Should investor risk appetite fall, an associated drop in asset prices coupled with high business and financial leverage could have adverse implications for the real economy,” the minutes said. Supply chain bottlenecks and input shortages may not be resolved quickly, the minutes said, and could put upward pressure on prices.
4. Treasury Calls for Crypto Transfers Over $10,000 to Be Reported to IRS — The U.S. Treasury said the Biden administration’s proposal to strengthen tax compliance includes a requirement for transfers of at least $10,000 of cryptocurrency to be reported to the Internal Revenue Service. Cash transactions in excess of $10,000 are already subject to IRS reporting requirements.
The IRS in 2020 added a line about cryptocurrency on the Form 1040, the individual tax return, in an effort to gain more visibility into virtual currency transactions.

The week ahead — Economic data from Econoday.com:

Week of Dec 26, 2020 Weekly Recap & The Week Ahead

Monday, December 28th, 2020

“Be Patient – There’s the Rarest Thing On Wall Street” – Jeff Saut

1. Congress Passes $900 Billion Aid Package That Includes Stimulus Checks — Congress approved $900 billion in economic relief for Americans and businesses hit hard by the coronavirus pandemic. The relief package, attached to the $1.4 trillion spending bill that will fund the federal government through September, includes stimulus payments for Americans, federal unemployment benefits, relief for small businesses, among other things. Americans who earned $75,000 or less in 2019 will receive $600 checks. Starting Dec. 27, those receiving unemployment benefits will receive an additional $300 a week in federal benefits through March. An eviction moratorium is also extended through January 2021.
Additional relief includes about $325 billion for small businesses, $55 billion into funding for vaccines, testing and tracing, $82 billion for schools, and $45 billion for transportation. The bill also extends a tax credit for businesses that retain employees.
2. Walmart Accused in Lawsuit of Fueling Opioid Crisis — The U.S. Justice Department is suing Walmart, alleging the company helped fuel the opioid crisis.
The civil complaint claims Walmart violated rules for dispensing opioids and its duty to detect and report suspicious orders. Walmart was “woefully understaffed” to review such orders, and managers put “enormous pressure on pharmacists to fill prescriptions,” according to the suit.
Walmart’s violations of the Controlled Substances Act as both a pharmacy and a distributor “had disastrous results, harming individuals who filled prescriptions at Walmart and then abused the drugs,” the lawsuit claims. “Given the nationwide scale of those violations, Walmart’s failures to follow basic legal rules helped fuel a national crisis.”
3. More Than 1 Million People in the U.S. Have Gotten Covid Vaccine Doses — three states have now vaccinated more than 1% of their populations: North Dakota, West Virginia, and Alaska. California leads in total vaccinations at 128,000 shots. The numbers fall short of a U.S. goal to administer 20 million shots in 2020. Shots are rolling out from Pfizer Inc. and Moderna Inc., focused at first on hundreds of thousands of health-care workers around the country who have been battling the virus on the front lines in hospitals. The vaccines require two shots weeks apart to deliver the highest level of protection. Urgency is rising as a wave of winter infections washes over the northern hemisphere. New variants of the disease have been detected in the U.K. and South Africa. The mutations appear to make the virus more contagious and may be increasing infections among healthy young people. In the U.S., more than 2,500 people are dying every day.
4. Trump Signs Relief Package, Calls on Congress to Increase Stimulus Checks to $2,000 Per Person — Sunday night, President Donald Trump signed a relief package that he previously objected to that includes $900 billion in pandemic relief and $1.4 trillion to fund the government through September. The legislation passed in Congress last week with bipartisan support. Trump rejected the package, saying the proposed $600 direct payments to Americans should be increased to $2,000 per person.

Week of May 29, 2020 Weekly Recap & The Week Ahead

Tuesday, June 2nd, 2020

“The process of intelligently building a portfolio consists of buying the best investments, making room for them by selling lesser ones, and staying clear of the worst.” – Howard Marks

1. U.S. economy shrank at 5% annual rate in the first quarter — The Commerce Department reported Thursday that the gross domestic product, the broadest measure of economic health, fell at an annual rate of 5% in the first quarter, a bigger decline than the 4.8% drop first estimated a month ago. Economists believe the lockdowns that shut wide swaths of the economy and triggered the layoffs of millions of workers will send the GDP sinking at an annual rate of 40% in the current quarter. That would be the biggest quarterly decline on records that go back to 1947. It would be four times the size of the previous decline set back in 1958.
2. U.S. Announced Hong Kong’s No Longer Autonomous — the Trump administration said it could no longer certify Hong Kong’s political autonomy from China, a move that could trigger sanctions and have far-reaching consequences on the former British colony’s special trading status with the U.S. The move comes as tensions between the world’s two largest economies continue to escalate, fueled by accusations from President Donald Trump that China was slow to disclose the peril of coronavirus.
3. Americans on Jobless Benefits Post First Drop of Pandemic — Labor Department figures reported continuing claims, which tally Americans’ ongoing benefit claims in state programs, fell to 21.1 million for the week ended May 16. Initial jobless claims for regular state programs totaled 2.12 million in the week ended May 23, to bring the 2 1/2-month total above 40 million.
4. Protests Hammer U.S. Cities Still Recovering From Lockdown — Violence erupted in dozens of places following the death of George Floyd, a black Minneapolis man who died after a white police officer pressed a knee into his neck for more than eight minutes. Demonstrators rampaged through shopping districts including Rodeo Drive in Beverly Hills, California, and Chicago’s Michigan Avenue, and set fire to police cars and municipal buildings. Meanwhile, Donald Trump demanded governors crack down, saying “most of you are weak” and urging them to “dominate” rioters. “You have to put them in jail for 10 years and you’ll never see this stuff again,” the president said during a conference call with governors and law enforcement.

The week ahead — Economic data from Econoday.com:

Week of Feb 3 2018 Weekly Recap & The Week Ahead

Monday, February 5th, 2018

“My attitude is that I always want to be better prepared than someone I’m competing against. The way I prepare myself is by doing my work each night.” — Marty Schwartz

1. President Trump team Considers Nationalizing 5G Network — national security officials in the Trump administration are looking at options where the U.S. government could take over part of the country’s mobile network as a way of guarding against “dominant malicious actor” China. The report from Axios describes two options: The U.S. government pays for and builds the single network – an unprecedented nationalization of private infrastructure – or an alternative where U.S. wireless providers build their own 5G networks, which would be less commercially disruptive to the industry.
2. Amazon, Berkshire, JPMorgan Link Up to Form New Health-Care Company — Amazon (AMZN) rocked the healthcare sector after announcing that it has partnered with Warren Buffett’s Berkshire Hathaway (NYSE: BRK-A) and Jamie Dimon’s JPMorgan Chase & Co. (NYSE: JPM) to start a new company to address rising healthcare costs for their U.S. employees, that may potentially be rolled out to all Americans. The new entity will be an independent company that will be “free from profit-making incentives and constraints”. Its initial focus will be on technology solutions that will provide U.S. employees and their families with simplified, high-quality and transparent healthcare at a reasonable cost.
3. Boeing Buys Stake in Battery Technology Start-up — Boeing HorizonX Ventures (NYSE:BA) has taken a minority stake in startup Cuberg, which is seeking to develop next-generation battery technology for potential aerospace and industrial applications. “Battery technology is still heavy,” so you can’t make it for a plane of current commercial aircraft size, Cuberg CEO Richard Wang addressed in a recent interview on CNBC.
4. FOMC Stays On Hold, Expects Further Gradual Hikes — the Federal Reserve held its Fed Funds target range at 1.25-1.5% in its recent meeting as Janet Yellen gets ready to depart the central bank. The economy continues to strengthen, and inflation is expected to move up, according to the policy statement, while the FOMC continues to anticipate further gradual increases in short-term rates. Rate markets have about fully priced in March as the next move.
5. Treasury Yields Spike – 10-year yield surpassing 2.8 percent and the 30-year bond yield rising above 3 percent for the first time in eight months — The S&P 500 Index’s slumped nearly 5% last week after the 10-year Treasury yield popped above 2.85 percent for the first time since January 2014.

The week ahead — Economic data from Econoday.com:

Week of May 24 2013 – Weekly Recap & The Week Ahead

Thursday, June 6th, 2013

There will not be any re-cap for the week of May 24 2013. We are away for some needed R&R.

Have a good week.

The staffs at EGS.

DJIA Hits New Highs Since 2007

Wednesday, March 6th, 2013

DJIA Set New Record Highs Since 2007 — the Dow Jones closed +0.83% at a record high of 14246 and surpassed 2007. Below are the charts of the DJIA (past 25 years) and the S&P500 (last 20 years).

The Healthcare Act & Its Investment Implications

Saturday, July 7th, 2012

June 28th, 2012 the Supreme Court decided to uphold the Affordable Care Act that was approved by Congress March 2010.

This is a multi part series. Part 1 (this article) summarizes the Affordable Care Act and its wide ranging effects on the healthcare industry. Hospitals, health insurers, drug-makers, physicians and technology companies will be affected. Subsequent articles will examine in detail each affected industry and individual related companies.

One of the Affordable Care Act‘s most sweeping changes is to require most individuals to obtain health insurance or pay a tax penalty if they do not obtain coverage for themselves and dependents starting in 2014. Coverage can be obtained through their employer, the Insurance Exchange, or private insurance market outside of the Exchange or government programs such as Medicare, Medicaid. The Affordable Care Act also provides subsidies to low-income individuals and their families in the form of tax credits and reduced costs for coverage purchased through the Exchange.

Here are the key points of the Affordable Care Act (click here for additional details from the Government Healthcare site):

1. Up to 33 million additional Americans are projected to secure insurance coverage by 2021 (assuming all states participate in the Medicaid expansion).
2. Penalties will be assessed for not buying insurance by 2014; Starting at $95 or 1% of annual income and rising to $695 and 2.5% by 2016.
3. Insurance companies, those that focused on the wholesale market of employer-sponsored coverage, will have to devote a considerable amount of resources to individual policies sold on the exchanges.
4. Government through the Department of Health and Human Services (HHS) dictates premium increases by the insurance companies via the Medical Loss Ratio (MLR).
5. Physician services are already constrained. Increased demand for physician services may come from physician extenders, tele-health, retail clinics, and Federally Qualified health Centers.
a. Some primary-care physician may benefit from a temporary increase in the Medicaid rate.
b. First dollar coverage will be provided for preventive services. This will shift healthcare dollars to areas previously not well funded.
c. Large physician groups are better equipped to participate in the new reimbursement model.
6. Long-term care, skilled-nursing facilities, home healthcare and rehab centers may experience a negative effect from the Medicare rate cut.
7. Focus on EMR (Electronic Medical Record) implementation for reimbursement as dictated by Medicaid. This will shift dollars to technology but also result in a significant new cost to care providers.
8. Pharmaceutical and Life Sciences industry will experience the least operation disruption from the law.
9. Branded pharmaceuticals stand to lose over the next decade as a result of discounts in the Medicare Part D, the effect of the doughnut hole, increased Medicaid rebates and industry fees. This will be partially offset by a modest increase in sales from expanded insurance coverage.
10. Large generic manufacturers stand to gain in sales because of new discounts and rebate provisions.
11. The 2.3% Medical Device excise tax will mean that smaller medical device firms will be affected most.

The Affordable Care Act requires all employers with more than 50 employees to offer health benefits to every full-time employee or pay a penalty of $2,000 per worker (less the first 30). It also dictates the employers will have to provide insurance benefits to all employees as well as bear the cost of insuring the children of employees to a later age. The benefits must provide a reasonable level of health coverage. Except for grandfathered plans, employers will no longer be able to offer better benefits to their highly compensated executives than to their hourly employees. Employees can shop around for group health plans on new insurance exchanges as opposed to individual plans.

Congress created a $19 billion subsidy program in March 2009 (American Recovery and Reinvestment Act) to help physicians and hospitals purchase electronic-health record (EHR) systems. At this juncture, we are only at an initial funding stage of providing EHR.
a. EHR systems program is overseen by Centers Medicare and Medicaid Services (CMS) and Office of the National Coordinator for Health Information Technology (ONC) under the U.S. Department of Health and Human Services (HHS) umbrella.
b. Recipients of the subsidy must meet the criteria of “meaningful users” by purchasing a “certified” EHR and facilitate adoption of Health Information Technology.

Affordable Care Act‘s effects on the healthcare industries:

1. Benefit Hospitals 16 to 20 million patients gain insurance coverage for payment. Fewer losses from treating the uninsured since the legislation mandates that everyone buy healthcare insurance or pay a penalty.

Below are list of Hospitals
Hospital Name Symbol
Tenet Healthcare THC
HCA Holdings HCA
Health Management Associates HMA
Community Health Systems CYH
Vanguard Health Systems VHS
Lifepoint Hospital Inc. LPNT

2. Temporary Staffing Companies may also benefit as companies hire temporary employees to reduce expenses

Staffing Company Symbol
Manpower MAN
Kelly Services KELYA
Korn/Ferry Intl. KFY
Robert Half Intl. RHI

3. Individual insurance plans will be hurt by burdensome rules placed on these companies. (Companies will have to accept all patients and spend at least 80% of their collected premiums on patient care)

Insurance Company Symbol
Aetna AET
Cigna CI
Coventry Healthcare CVH
Wealthpoint WLP
UnitedHealth Group, Inc UNH
Humana Inc. HUM
Healthnet Inc. HNT
Wellcare Healthcare WCG

4. Medical Device Manufacturers may see a decrease in profits, the law affirms the imposition of a 2.3% excise tax on all medical devices and expanded reporting of payments to physicians and institutional providers as mandated by the Sunshine Act

Staffing Company Symbol
Boston Scientific BSX
Medtronic MDT
Hologic Inc HOLX
St. Jude Medical STJ
Stryker Corp. SYK
Zimmer Holdings Inc ZMH

5. Pharmaceutical Manufacturers and biologics companies will need to address sweeping changes to Average Manufacturer Price (AMP) and Best Price (BP); i.e. (gov’t dictates prices?)

Company Symbol
Merck & Co. Inc MRK
Pfizer Inc PFE
Bristol-Myers Squibb Co. BMY
Eli Lilly & Co. LLY
Sanofi SNY
GlaxoSmithKline Plc GSK
Novatis NVS

6. Long-term care, skilled-nursing facility, home healthcare, rehab centers may experience negative effects from Medicare rate cuts.

Company Symbol
Brookdale Senior Living Inc BKD
Sunrise Senior Living Inc SRZ
Kindred Healthcare Inc KND
Sun Healthcare Group, Inc SUNH

7. Information Technology companies — selected EHR companies will benefit from the implementation and adoption of digital patient records.

Company Symbol
Cerner Inc CERN
Qualily Systems Inc QSII
Allscript Healthcare Solutions Inc MDRX
Computer Programs and Systems Inc CPSI

We provide more in-depth research for each company listed above. For each company, we examine in detail of each company’s fundamentals and provide technical analysis to determine the appropriate buy/sell point.

Week Jan 20 2012 – Weekly Recap & The Week Ahead

Monday, January 23rd, 2012

“It’s allright to have butterflies in your stomach, just set them to fly in formation”Colin Powell

1. IMF Seeks $500B Boost to Lending Resources — The International Monetary Fund is proposing to raise its lending capacity by as much as $500 billion to insulate the global economy against any worsening of Europe’s debt crisis. The IMF is pushing China, Brazil, Russia, India, Japan and oil-exporting nations to be the top contributors, according to a G-20 official, who spoke on condition of anonymity because the talks are private. The fund wants a deal struck at the Feb. 25- 26 meeting of G-20 finance ministers and central bankers in Mexico City, the official said.
2. China’s economy slows — China’s GDP growth slowed to an annualized 8.9%, the lowest expansion since mid-2009, but ahead of expectations of +8.7%.
3. Feds step up S&P mortgage ratings probe — Federal prosecutors are pushing forward with their probe of S&P’s (MHP) ratings of troubled mortgage securities, sources say, after a delay that led many to believe the investigation had been all but abandoned.
4. France, Spain hold strong bond auctions— France has passed its first test following S&P’s downgrade last week, attracting strong demand and obtaining lower yields in an auction of €7.965B ($10.28B) of medium-term bonds. Meanwhile, Spain sold over €6.6B ($8.46B) of bonds with maturities of up to 10 years, with demand beating forecast and yields roughly in line with expectations.
5. Greek Debt-Swap Talks Set for Second Day in Push for Accord Greece’s government heads into a second day of talks with private creditors in a push to reach an accord that would slash the nation’s debt and avert a collapse of the economy. Greece needs to seal the agreement in time to meet a debt repayment of €14.5B ($18.5B) in March.

The week ahead — Economic data from Econoday.com:

Week Jan 13 2012 – Weekly Recap & The Week Ahead

Tuesday, January 17th, 2012

“I made my money by selling too soon.” – Bernard Baruch

1. German economy shrank in Q4 as crisis weighs — according to Reuter, Germany showed first signs of feeling the pain from the euro zone’s debt crisis as the economy shrank in the last three month of 2011, despite outperforming its peers for main part of the year thanks to strong domestic demand and exports.
2. Saudis may not be able to counter effect of Iran sanctions — Saudi Arabia is reportedly nearing its oil output capacity limit and may have little room to respond to potential shortages caused by sanctions on Iran. Currently pumping just under a record 10M bpd, the country has an on-paper capacity of up to 12.5M bpd.
3. Romney gains momentum with New Hampshire win — Mitt Romney has taken another important step in gaining the GOP nomination for the presidency, comfortably winning the New Hampshire primary ahead of a crucial test in South Carolina next week.
4. S&P500 Approaching Technical Resistance — view the chart listed below

5. Sears loses source of ready cash flow — Sears (SHLD) has taken another hit after CIT Group said it will stop factoring accounts payable for it – cutting off a source of ready cash flow for the embattled retailer.
6. Yields fall sharply at Spanish, Italian debt sales — according to Reuter, The Spanish Treasury raised 10 billion euros ($12.7 billion) from the auction of three bonds, doubling its target of up to five billion, and yields dropped by about 1 percentage point. Italy also fared well, paying less than half what it did a month ago to sell one-year bills at its first auction of the year. A major reason for the success was that local banks used the ECB’s ultra-cheap lending to support the sale.
7. European Central Bank holds rates steady — The ECB Governing Council left its key lending rate at 1%, matching its historic low. The central bank also left the interest rate on its marginal lending facility unchanged at 1.75% and maintained the interest rate on its overnight deposit facility at 0.25%.
8. Hedge funds hunker down for Greek debt — according to Reuter, The deal asks creditors to voluntarily write down 50 percent of the notional value of their bond holdings. Hedge funds may opt out. The stakes for Greece are high. Without the deal, the international lenders will not bail Athens out a second time, which means it will likely default around March 20, when a 14.5 billion euro (12.1 billion pounds) bond falls due.
9. S&P hits euro zone with downgrades — late Friday (1/13/2012), Ratings agency Standard & Poor’s (S&P) cut France, Austria, Malta, Slovakia and Slovenia by one notch, stripping France and Austria of rare triple-A ratings that were key to their ability to support efforts to rescue struggling euro zone members. The ratings agency also downgraded by two notches Italy, Spain, Portugal and Cyprus. Portugal and Cyprus were cut to junk status.

The week ahead — Economic data from Econoday.com:

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