“The essence of portfolio management is the management of risks, not the management of returns. All good portfolio management begins and ends with this premise.” — Benjamin Graham

1. Singapore Confirms Locally Transmitted Zika Cases — Singapore authorities have identified 41 Zika cases that were transmitted locally, and cautioned that they expect to find more. The cases appear to be the largest single beachhead the virus has made in Asia in the current epidemic, which has also been detected in countries like Bangladesh, Malaysia and the Philippines. Also, China added the U.S. to a list of Zika-infected countries, worrying U.S. exporters, who fear they will be required to fumigate containers destined for Chinese ports. Furthermore, the FDA has issued an Emergency Use Authorization for Roche’s (OTCQX:RHHBY) “Lightmix Zika” test, a quick diagnostic check that allows healthcare professionals to quickly detect the virus.
2. Apple Received $14.5B In Illegal Irish Tax Benefits — EU antitrust regulators have ordered Apple (NASDAQ:AAPL) to pay up to €13B ($14.5B) in taxes to the Irish government after ruling that a special scheme to route profits through the country was illegal state aid. Apple and Ireland said they would appeal the decision.
3. U.S. Banks Log the Most Profitable Quarter Ever — according to figures from SNL Financial and S&P Global Market Intelligence, U.S. banking industry just logged its most profitable quarter ever Despite an increasing regulatory burden and lackluster share performance. Earnings for the three-month period totaled $43.6B, compared to the $43.01B in Q2 of 2015, a 1.4% beat. On a sequential basis, the April-to-June period topped the previous quarter by $4.56B, an 11.7% rise.
4. Job Report – US created 151,000 jobs in August vs. 180,000 jobs expected — Nonfarm payrolls increased just 151,000 for the month as Wall Street economists were expecting the nonfarm payrolls report to show a gain of 180,000 in August, with the unemployment rate ticking down one-tenth to 4.8 percent. Wage growth slowed and the probability of a September hike drops from 27 percent to 12 percent.
5. World Leaders Prepare for G20 Summit — World leaders descended upon Hangzhou for the G20 summit to reaffirm their dedication to global growth. Developing an open financial system, promoting an economic recovery and coordinating monetary policies are among the main topics to be discussed under this year’s theme of “building an innovative, invigorated, interconnected and inclusive world economy.”

The week ahead — Economic data from Econoday.com:

“The key to investing success is emotional discipline. If intelligent were the key, there would be a lot more people making money in trading” — Victor Sperandeo

1. G20 Meeting Conference in Shanghai Concluded — leaders from the world’s top economies declared “Monetary policies will continue to support economic activity and ensure price stability…but monetary policy alone cannot lead to balanced growth,”. Participants also repeated previous pledges not to engage in competitive currency devaluations and promised to “consult closely” on exchange markets.
2. China Eases Bank Lending — China’s central bank cut its reserve-requirement ration by another 0.5% point — its 5th cut in the past 12 months. The move shows further weakening of the yuan, which hit its weakest level vs. the US dollar in 3 weeks.
3. Moody’s Cuts China Outlook to Negative — Moody’s Investors Service has lowered the outlook on China’s credit rating from stable to negative, citing a weakening of fiscal metrics and a continuing fall in foreign exchange reserves. Moody’s current Aa3 rating on China is still seven notches above junk, so even if the agency were to follow up on its warning, investors wouldn’t have to suddenly start selling the country’s bonds.
4. Eurozone Recovery Loses Momentum – more deflationary pressures in the euro-zone are surfacing, raising the chances ECB President Mario Draghi will increase stimulus at a central bank meeting next week. Markit’s composite Purchasing Managers Index fell to 53 from 53.6 in January – its lowest level in 13 months – while the firm’s measure of output prices across manufacturing and services fell further below the key 50 level.
5. Auto Loans ‘s Size Hits Record — the avg amount financed for a new car or truck in Q4 rose 4.1% from last year to a record $29,551 per Experian Automotive. The avg monthly payment rose 2.3% TO $493, also a record, even as as loan terms got longer. New car loans for subprime lenders rose as well.
6. Low Priced Stocks Surge — courtesy of BIG, since 2/11, the average stock in the S&P 1500 is up an impressive 16.3%, but the performance of low priced stocks has trounced that. For example, on 2/11, there were 52 stocks in the S&P 1500 trading for less than $5 per share. Since then, the average return of those stocks is a gain of 58.9% with a median gain of 45%!

The week ahead — Economic data from Econoday.com: