Sunday, December 25, 2016

TLH Market Review 12/24/16

Well this is the last review of the year.  I'll have a somewhat uneven posting schedule the next few weeks also. 

It's been a quiet week.  Besides the Dow flirting with 20,000 part of the week there really wasn't much going on.  Most of the Western world took unused vacation days to finish up last minute shopping, travel, relax, and prepare for Christmas weekend.  The big money's pretty much finished up their books in the weeks following Thanksgiving, so as expected volume tails off significantly this week and next. 

We did get some economic data.  Q3 GDP was revised up to 3.5% from 3.2%. This isn't a big deal though.  Q3 ended in September and it's already the end of December.  The markets already figured out what happened between June-September. 

More importantly we received Personal Spending, Income, and Core PCE Index.  I didn't like the soft numbers for income which came in flat at 0% when the market expected 0.3%.  Incomes need to grow for the economy to expand.  Either way it's not as if zero's have been a trend so it's not much to worry about yet.  Spending was weaker and that's fine if Savings were increasing. But we got a 0.2% bump in spending after expectations were coming in at 0.3-0.4%. On top of that the savings rate has dipped down to 5.5% from a previous 5.7%.  So the money must be going somewhere. Taxes maybe??? 

Core PCE also had a zero reading.  This is one of the indicators the Fed keeps an eye on and the index has had trouble gaining steam all year.  Inflation continues to be tame and I think that's just the new reality we are in. 

Portfolio News

Once again the portfolio was quiet overall.  Fine with me!  We did get news the Linde AG and Praxair(PX) finally agreed on merger details.  The new company will be worth approximately $65 billion with revenues of approximately $30 billion.  There's talk divestitures will be necessary so maybe we can expect revenues to be 3-5 billion less. Linde AG shareholders will receive 1.54 shares of new company stock for each share owned, and Praxair shareholders will be given 1 share in the new entity for each share already owned. The company's new ownership structure will be split 50/50 between each company. 

I think the deal makes sense for the most part.  The industry is consolidating, and this should give the company better negotiating power at the table with customers.  I'm not extremely excited about the increased currency exposure, but over time this should all even out.  This is long haul investing don't forget.

Have a great weekend and a Merry Christmas, Happy Hanukkah, and Happy Kwanzaa.


The Long Haul Investor.

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