## Economics

### Stocks to Watch:

$FB Facebook$MCD McDonalds
$BRKB Berkshire Hathaway, B$LNVGY Lenovo
$SNY Sanofi$MCK McKesson Corporation
$HGEN Humanigen$AXIO Axiom Oil & Gas
$LMT Lockheed Martin$CPSH CPS Technologies Inc, Class A
$MAT Mattel Inc$PFE Pfizer Inc.
$MS Morgan Stanley$JPM JPMorgan Chase & Co.
$GS The Goldman Sachs Group, Inc.$CI Cigna Corp.
$GE General Electric Company$X United States Steel Corporation
$TGT Target Corp$MYL Mylan NV
$RACE Ferrari$NVS Novartis AG
$TSLA Tesla$VRX Valeant
$CMGO CMG Holdings Group$NKE Nike Inc
$HAS Hasbro Inc$WYNN Wynn Resorts

$DWDP, DowDuPont Short Interest$MU, Micron Short Interest
$CAT, Caterpillar Company is Accused of Tax Fraud - NY Times - 2017$EBAY Ebay Short Interest

### News:

Russia to slam retaliatory tariffs on US imports
11:12 AM ET, 06/19/2018 - Associated Press
MOSCOW (AP) — Russia on Tuesday announced retaliatory measures in response to the U.S. move to impose tariffs on foreign steel and aluminum.

Economic Development Minister Maxim Oreshkin said a statement that Moscow has decided to apply retaliatory measures in line with the World Trade Organization's rules to compensate for damage incurred by the U.S. tariffs.

Oreshkin said that additional tariffs will be applied to a range of U.S. imports, but he declined to immediately name them, saying his ministry will release the list in the coming days. He added that the tariffs will be applied to the U.S. goods that have domestic equivalents to avoid hurting the national economy.

Oreshkin later told reporters that tariffs may apply to road construction equipment and some other items, but will not target medicines, according to Russian news agencies.

The European Union, India, China and Russia all have applied to the WTO to challenge the tariffs that took effect March 23. Washington argued they were for national security reasons.

#### Notable earnings out next week

Briefing.com - 3:38 PM ET - 20, April 2018
Next week marks the first of three very heavy weeks of earnings reports -- roughly 1/3 of the S&P 500 will report quarterly results.
Monday (April 23) Pre-Market: HAL KMB PHG FE AGR HAS LII ALK
After-Hours: GOOG AMTD AMP CSGP WHR CDNS ZION ELS SUI BRO HXL CR

Tuesday (April 24) Pre-Market: VZ KO MMM SAP LMT UTX CAT LLY NEE BIIB SHW TRV FCX PCAR GLW FITB CNC TECK WAT HBAN EDU QSR MAS
After-Hours: AMGN TXN CB COF ILMN EW EQR WYNN BXP TSS PKG WRB TER RHI

Wednesday (April 25) Pre-Market: BA UMC CMCSA TMO GD NOC ANTM BSX NSC TEL SRE SIRI TROW APH TWTR ROK DPS IR DTE HES LH CHKP CVE STM ETR NDAQ VIAB
After-Hours: FB V T PYPL QCOM LVS F EBAY AFL PSA NOW AVB ALGN ORLY XLNX BMRN EFX CTXS

Thursday (April 26) Pre-Market: RDS.A SPIL PEP ABBV AUO MO UNP UPS BMY COP TWX RTN CME ITW GM SPGI VLO PX MMC APD BAX SHPG AEP LUV FCAU RCL ALXN HLT PH XEL ZBH NEM IP AAL MGM
After-Hours: AMZN MSFT INTC SBUX SYK VRTX FTV WDC DFS DLR HIG TS MHK PFG EXPE KLAC MXIM EMN NOV RMD SIVB VRSN AEM RGA TRMB FLEX LUK FBHS FSLR SGEN MSCC NATI X PFPT LOGM CY

Friday (April 27)Pre-Market: SNE HMC XOM CVX SNY CHTR CL PSX CLS SPG D LYB MCO VFC WY COL

United States Steel Exports Report 2017, In light of Trump's policies this is relevant to understanding U.S. involvement in the steel market.

OECD Long-Term Interest Rates by Country

Buffett Partnership Letters

JPMorgan Chase Commercial Mortgage Securities SEC Filings

JPMorgan Chase SEC Filings

The IRS on IRAs

Wikipedia: Mortgage-Backed Securities

Financial Derivatives, Risk Management in Finance

Wikipedia: Credit Spread (options)

Chet Wang, Economics Blog

Approved Credit Line Providers, New York State: From Department of Financial Services

### Crypto Currency:

Binance

Ethereum
Bitcoin
Ripple

Slate on Blockchain

### Definitions:

Personal Consumption Expenditures PCE: Measures price changes of consumer goods and services.

Consumer Price Index CPI: Examination of the wighted average price of a basket of consumer goods and services. Used to assess price changes to the price of living, and used in statistics to identify periods of inflation or deflation.

### Formulae:

Final Return = [(Final Price - Initial Price/ Initial Price)]

Expenditure Approach to Measuring GDP:
GDP = C + I  + G + Xn

Income Approach to Measuring  GDP:
GDP = W + I + R + P

GDP Deflator: A price used to adjust nominal GDP to real GDP:
• Real GDP: (Nominal GDP/GDP Deflator)(100)
• GDP Growth Rate: [(Current Year's GDP - Last Year's GDP)/Last Year's GDP)(100)]

Inflation Rate Via Consumer Price Index (CPI): [This Year's CPI - Last Year's CPI)/Last Year's CPI)(100)]

Real Interest Rate = Nominal Interest Rate - Inflation Rate

Unemployment Rate = [(Number of Unemployed/Number in the Labor Force)(100)]

Money Multiplier = (1/RRR)

Quantity Theory of Money: MV = PY, Explains how changes to money supply impact price level assuming fixed levels of output and fixed velocity of money.

Spending Multiplier = (1/1-MPC) OR (1/MPS)

Tax Multiplier = MPCMPS, Tells you how much spending will result from an initial change in the level of taxation. When taxes decrease, spending increases and vis versa.

Velocity of Money: VT = (PT/M)
Where:
V T is the velocity of money for all transactions in a given time frame
P is the price level
T is the aggregate real value of transactions in a given time frame
M is the total nominal amount of money in circulation on average in the economy

Thus PT is the total nominal amount of transactions per period

Alternate Calculation: V = (PQ/M)
Where:
V is the velocity for transactions counting towards national or domestic product
PQ is nominal national or domestic product

## Simple Interest Formula

I = Prt
Where:
• P = Principal Amount
• I = Interest Amount
• r = Rate of Interest per year in decimal; r = R/100
• R = Rate of Interest per year as a percent; R = r * 100
• t = Time Periods involved

### Credo: Always be willing to question your beliefs.

· Scan your "Mental Arsenal" and make Corrections to your heuristic where necessary.

### The Crisis: A Classical Financial Panic

· A financial panic occurs when providers of short-term credit (think depositors in a bank) suddenly lose confidence in the ability to repay; providers of short-term credit then quickly withdraw their funds.

### What Goes Around Comes Around: Sectoral Trends

Cyclical Industries: Profits are dependent upon economic strength of the overall market
Utilities
Household Non-Durables
Tobacco
Food Distribution & Convenience Stores
Personal Products
Beverages - Brewer
Beverages - Non-Alcoholic
Retail - Drugs
Food Processing
Household Products
Personal Services

Non-Cyclical Industries: Also called defensive stock experience profit regardless of the economic shifts of the overall market
Durable Goods
Service
Non-durable/soft goods

IS-LM Hicks-Hansen Model: Shows the relationship between interest rates (ordinate)
and assets market (also known as real output in goods and services market plus money market, as abscissa). The intersection of the "investment--saving" (IS) and "liquidity preference-money supply" (LM) curves models "general equilibrium" where supposed simultaneous equilibrium occurs in both interest and assets markets.

Ben Bernanke:
The Role of Monetary Policy
· Most evidence suggests otherwise:
-International comparisons: For example, the United Kingdom had a house price boom during the 2000s despite tighter monetary policy than the United States.
-Size of the bubble: Changes in mortgage rates during the boom years seemed too small to account for the magnitude of house price increases.

Berkeley: How to Build Economic Models

Microeconomic Equations:

Elasticity of Demand Coefficient:
= (% change in quantity) / (% change in price)

Income-Elasticity of Demand: Shows sensitivity of product to changes in income:
= (% change in quantity) / (% change in income)

Relativity Inelastic:
Price increase causes Total Revenue (TR) increase, Price decrease causes Total Revenue (TR) decrease.

Relativity Elastic:
Price increase causes Total Revenue (TR) decrease, Price decrease causes Total Revenue (TR) increase.

Utility Maximizing Rule:
[(MUx)/(Px)] = [(MUy)/(Py)]

Report on Predatory Lending Practices Directed at Members of the Armed Forces ans Their Dependents.

RankFund NameCityAUM ($millions)Strategy 1Kayne Anderson Capital AdvisorsLos Angeles19,357Private Equity 2Canyon PartnersLos Angeles19,148Multi Strategy 3ValueAct CapitalSan Francisco17,581Long/Short 4Beach Point Capital ManagementSanta Monica13,032Multi Strategy 5Nephila CapitalLarkspur11,575Insurance 6Horsley Bridge PartnersSan Francisco11,172Private Equity 7Pacific Alternative Asset ManagementIrvine10,053Fund of Funds 8Rimrock Capital ManagementIrvine8,359Commodities 9Parallax FundSan Francisco8,310Multi Strategy 10Alder CapitalDel Mar8,070Managed Futures 11Coast Asset ManagementSanta Monica6,930Fund of Funds 12Rockwood CapitalSan Francisco6,850Real Estate 13Tennenbaum Capital PartnersSanta Monica6,243Multi Strategy 14Partner Fund ManagementSan Francisco5,758 15Empyrean Capital PartnersLos Angeles5,054Fixed Income 16Sensato InvestorsSan Francisco4,985Long/Short 17Ivory Investment ManagementLos Angeles4,388Value 18Passport CapitalSan Francisco4,295Long/Short 19Ascend CapitalOrinda4,036Long/Short 20Criterion Capital ManagementSan Francisco3,374Long/Short Financial Armageddon is near. Commercial Mortgage Numbers Mortgage Default Rates XYL: Consumer Discretionary Sector Data Finance: Beta Equations Nominal Interest Rates: Either one of two distinct things, 1) the rate of interest before adjustment for inflation (in contrast with the real interest rate), or 2)for interest rates "as stated" without adjustment for the full effect of compounding (also referred to as the nominal annual rate). An interest rate is called nominal if the frequency of compounding (e.g. a month) is not identical to the basic time unit (normally a year). The relationship between the real interest value r, the nominal interest rate value R, and the inflation rate value i is given by: (1 + r) = (1 + R)/(1 + i), When the inflation rate i is low, the real interest rate is approximately given by the nominal interest rate minus the inflation rate, i.e., (r is approximately R - i). Forrex Currency Correlations: -GBP/USD (British Pound, sterling, etc...) has a negative correlation to the USD/CHF (Swiss Franc) and a positive correlation to the EURO/USD. -Base currency is the first currency listed in the pair, the second is the quote currency. The currency pair is an indicator of the amount of the quote currency one must have to purchase one unit of the base currency. -Purchase of pair on Forrex is simultaneously the purchase of one currency and the sale of another. You are buying the base currency with a sale of the quoted currency. -During a sale, you sell the base currency and receive the quote currency. The ask (sell price) is the amount made on dale of one unit of base. -Major currency pairs that involve the USD but where the USD is not the base currency include EUR/USD (Euro and U.S. dollar); GBP/USD (British pound and U.S. dollar); and AUD/USD (Australian dollar and U.S. dollar). ### Math for Economics: total cost formulas, average variable, marginal cost, and more, (work out your own algebra to find alternatives): Average Total Cost (ATC) = Total Cost / Q (Output is quantity produced or ‘Q’)Average Variable Cost (AVC) = Total Variable Cost / QAverage Fixed Cost (AFC) = ATC – AVC Total Cost (TC) = (AVC + AFC) X Output (Which is Q) Total Variable Cost (TVC) = AVC X Output Total Fixed Cost (TFC) = TC – TVC Marginal Cost (MC) = Change in Total Costs / Change in Output Marginal Product (MP) = Change in Total Product / Change in Variable Factor Marginal Revenue (MR) = Change in Total Revenue / Change in Q Average Product (AP) = TP / Variable Factor Total Revenue (TR) = Price X Quantity Average Revenue (AR) = TR / Output Total Product (TP) = AP X Variable Factor Economic Profit = TR – TC > 0 A Loss = TR – TC < 0 Break Even Point = AR = ATC Profit Maximizing Condition = MR = MC Explicit Costs = Payments to non-owners of the firm for the resources they supply. ### Discounted cash flows The discounted cash flow formula is derived from the future value formula for calculating the time value of money and compounding returns. ${\displaystyle DCF={\frac {CF_{1}}{(1+r)^{1}}}+{\frac {CF_{2}}{(1+r)^{2}}}+\dotsb +{\frac {CF_{n}}{(1+r)^{n}}}}$ ${\displaystyle FV=DCF\cdot (1+r)^{n}}$ Thus the discounted present value (for one cash flow in one future period) is expressed as: ${\displaystyle DPV={\frac {FV}{(1+r)^{n}}}}$ where • DPV is the discounted present value of the future cash flow (FV), or FV adjusted for the delay in receipt; • FV is the nominal value of a cash flow amount in a future period; • r is the interest rate or discount rate, which reflects the cost of tying up capital and may also allow for the risk that the payment may not be received in full;[5] • n is the time in years before the future cash flow occurs. Where multiple cash flows in multiple time periods are discounted, it is necessary to sum them as follows: ${\displaystyle DPV=\sum _{t=0}^{N}{\frac {FV_{t}}{(1+r)^{t}}}}$ for each future cash flow (FV) at any time period (t) in years from the present time, summed over all time periods. The sum can then be used as a net present value figure. If the amount to be paid at time 0 (now) for all the future cash flows is known, then that amount can be substituted for DPV and the equation can be solved for r, that is the internal rate of return. All the above assumes that the interest rate remains constant throughout the whole period. If the cash flow stream is assumed to continue indefinitely, the finite forecast is usually combined with the assumption of constant cash flow growth beyond the discrete projection period. The total value of such cash flow stream is the sum of the finite discounted cash flow forecast and the Terminal value (finance). ### Continuous cash flows For continuous cash flows, the summation in the above formula is replaced by an integration: ${\displaystyle DPV=\int _{0}^{T}FV(t)\,e^{-\lambda t}dt=\int _{0}^{T}{\frac {FV(t)}{(1+r)^{t}}}\,dt\,,}$ where ${\displaystyle FV(t)}$ is now the rate of cash flow, and ${\displaystyle \lambda =\log(1+r)}$. ### Financial Bloggers: Felix Salmon Joe Weisenthal ### Consumer Discretionary Numbers S&P 500 Market Cap:$2.6T

YTD: + 5.3%
1 Mo: - 4.7%
3 Mo: - 6.6%
6 Mo: + 0.3%
12 Mo: + 11.8%

Consumer Discretionary reversal is an indicator for directionality of the market. This reversal may indicate a reversal in the overall market.

Overall S&P 500 Summary:

# Fed Rate Hike: What Does It Mean for Your Portfolio?

Here we go again: The Federal Reserve just raised the federal funds rate target for the second time so far this year. The move was widely expected—the economy has been gaining traction, unemployment is at historical lows and Fed policymakers had suggested a hike was coming. Now that it has happened, how might it affect your investments? Here are five things to keep in mind.
1.Short-term fixed income investments are strongly influenced by the federal funds rate. The federal funds rate is an overnight bank-to-bank lending rate that the Fed can use to implement monetary policy. Put simply, when the Fed wants to tap the brakes on economic growth, it can raise the fed funds rate, making it more expensive for banks to borrow money from each other. Banks tend to scale back lending in turn, slowing the economy. (Conversely, the Fed can lower the rate when it wants to boost growth, allowing more money to circulate in the economy).
Because it’s a short-term rate, any changes tend to have the strongest impact on short-term instruments, such as deposit accounts, money market funds, Treasury bills, short-term bonds and short-term bond funds. When the federal funds rate is rising, it generally means that bank savings accounts and money market funds will pay a higher yield over time. As new Treasury bills and short-term bonds are issued, they should pay higher yields, too.
2.Intermediate- and long-term bonds may be less affected. That’s not to say intermediate-term bonds (generally, those maturing in five to seven years) or long-term bonds (maturing in 15 years or more) won’t feel it. But rates typically don’t rise in lockstep all along the yield curve.
“One thing to keep in mind that when the Fed raises short-term interest rates, it doesn’t mean all interest rates go up,” says Kathy Jones, senior vice president and chief fixed income strategist at the Schwab Center for Financial Research. “Long-term rates tend to be affected by other factors, as well—like the prospects for growth, inflation expectations and generally the supply and demand for bonds that have attractive yields on a global basis. Not all rates are going to respond to a fed funds hike in the same way.”
3. The effect on savings accounts, CDs, mortgages, floating-rate notes and other products will vary. For example, rates on short-term certificates of deposit (CDs) probably will rise along with the federal funds rate, but not all CD rates will rise by the same amount. Longer-maturity CD rates may behave like intermediate- or long-term bond yields.
Adjustable-rate mortgages are usually tied to short-term rates, and if so they can be expected to rise. However, fixed-rate mortgages generally track 10-year Treasury bond yields, and won’t necessarily move higher just because short-term rates do­.
Meanwhile, although income from floating-rate notes should rise over time, it doesn’t always happen right away. Additionally, many floating-rate investments, like bank loans, have “caps” or “floors” that limit how much their coupon payments can change.
4. Stock markets typically rise during the earlier stages of rate-tightening cycles. But the Fed’s moves on short-term rates aren’t the only factor driving stocks. How longer-term interest rates move also affects stock market performance—as does the shape of the yield curve.
As things stand now, the yield curve is flattening as short-term interest rates rise in the face of a strong economy, while longer-term rates lag slightly due to the moderate pace of inflation. Stocks have historically performed well in such conditions—and in some cases have continued to do so even after the yield curve has inverted (i.e., when short-term rates have surpassed longer-term ones). Inversion is generally seen as a warning sign for the economy.
It’s typically only when monetary policy becomes overly restrictive that a recession grows more likely and stocks suffer. In any case, recessions have historically come after the Fed has finished hiking rates, not during a rate-hiking cycle. The period immediately before the recession showed up—starting up to six months prior—has tended to be the worst for the U.S. stock market in terms of returns. But we aren’t there yet.
“The conditions for a more rapid pace of rate hikes—inflation trending higher and job growth still robust—are favorable for stocks for now,” says Liz Ann Sonders, senior vice president and chief investment strategist at Charles Schwab & Co. “Although inflation is often seen as a bogeyman for stocks, it’s not typically until inflation overheats that trouble ensues.”
However, we are arguably late in the economic cycle, and are seeing tighter financial conditions overall for the first time in this rate-tightening cycle. So even if the economy and/or inflation are not yet overheating, it does suggest an era of heightened volatility.
5. Rising rates underscore the importance of diversification and rebalancing. Rising rates can be a market game-changer, or at least a signal that economic and market conditions are changing. A well-diversified portfolio can help keep you from being overexposed to areas of the market that may not perform as well in the future as they have in the past and also help ensure that you’re appropriately weighted to investments that may now outperform.
Periodic rebalancing can help, too, and here’s why: Over time, “winning” investments will gain in value and take up a larger portion of your portfolio, while other investments will shrink in comparison. That can leave your portfolio unbalanced—and potentially increase your risk when market conditions change. Rebalancing involves periodically buying and selling assets to bring your portfolio back to your current desired asset allocation.
“Investors can’t control interest rates, credit spreads, currency values or Fed policy,” Kathy says. “But they can control what they own and how they position their portfolios for a range of potential outcomes.”

Important Disclosures
Please note that this content was created as of the specific date indicated and reflects the authors’ views as of that date. It will be kept solely for historical purposes, and the authors’ opinions may change, without notice, in reaction to shifting economic, business, and other conditions. The information presented does not consider your particular investment objectives or financial situation (including taxes), and does not make personalized recommendations. Supporting documentation for any claims or statistical information is available upon request.
Investing involves risk including loss of principal. Fixed income securities are subject to increased loss of principal during periods of rising interest rates. Fixed-income investments are subject to various other risks including changes in credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications and other factors.
Past performance is no guarantee of future results and the opinions presented cannot be viewed as an indicator of future performance.
Diversification and rebalancing strategies do not ensure a profit and do not protect against losses in declining markets.
While the market value of a floating rate note is relatively insensitive to changes in interest rates, the income received is highly dependent upon the level of the reference rate over the life of the investment. Total return may be less than anticipated if future interest rate expectations are not met.
The S&P 500 index is a market-capitalization-weighted index that consists of 500 widely traded stocks chosen for market size, liquidity and industry group representation.
Schwab Center for Financial Research (“SCFR”) is a division of Charles Schwab & Co., Inc.