Weak U.S. Dollar Boosts Profits

Weak U.S. Dollar Boosts Multinational Stock Profits

by Louis Navellier

July 25, 2017

*All content in this Introduction to Marketmail represents the opinion of Louis Navellier of Navellier & Associates, Inc.*

Our friends at Bespoke prepared a great report last week (“Internationals Still Trouncing Domestics,” July 19, 2017) that illustrated how the “international” stocks within the S&P 500 – defined as those with more than 50% of their revenue outside the U.S. – are soundly beating the “domestic” stocks, defined as companies that earn over 90% of their revenue within the U.S. Specifically, this report showed that since the 2016 Presidential election international stocks have risen 28.4% while domestic stocks were up only 12.8%.

Communist/Capitalist Flag Image

Clearly, international stocks are hot, including Chinese American Depositary Receipts (ADRs). One of the reasons that many Chinese ADRs were running higher last week was that China’s National Bureau of Statistics announced that its GDP expanded at a 6.9% annual pace in the second quarter. Second-quarter GDP growth expanded by 1.7% (a 6.8% annual rate) vs. the first quarter. This acceleration in GDP growth is being boosted by a surge in both exports and imports, so China has resumed its leadership role as one of the strongest economies in the world and investors are aggressively buying Chinese ADRs.

In This Issue

In Income Mail, Bryan Perry takes a skeptical look at oil prices in light of the recent surge in rig counts. In Growth Mail, Gary Alexander covers the startling development of the bulls dominating the bears in a conference that was previously bearish on U.S. stocks. In Global Mail, Ivan Martchev explains the all-important difference between China’s large- and small-cap stocks and the ADRs vs. domestic exchanges.  In Sector Spotlight, Jason Bodner talks about what he looks for in choosing potentially rapid short-term pops in stocks.  In the end, I close with a look at the ECB and the Fed, plus lumber tariffs vs. housing trends.

Income Mail:
Don’t Be Tempted by the Bounce in Oil Prices
by Bryan Perry
America’s New Battle Cry: “Drill, Baby, Drill”

Growth Mail:
Surprisingly, the Bulls dominated the “Freedom Fest” Debates
by Gary Alexander
The Skeptics Have a Lot of Explaining to Do

Global Mail:
Extreme Divergence Between Chinese Small and Large Caps
by Ivan Martchev
Is the North Korea Travel Ban the First Step Towards Invasion?

Sector Spotlight:
Short-Term Stock Gratification is Rare, But Possible
by Jason Bodner
Utilities Lead the Parade in Mid-July

A Look Ahead:
No Rate Increases Likely Soon in the U.S. or Europe
by Louis Navellier
The Lumber Tariff meets the Housing Shortage

Income Mail:

*All content of "Income Mail" represents the opinion of Bryan Perry*

Don’t Be Tempted by the Bounce in Oil Prices

by Bryan Perry

Oh, how the market pundits love to circle the wagons around any vestiges of a fresh rally in the oil patch. There is constant chatter about the eventual rebalancing of oversupply and rising demand that will find equilibrium in the not-too-distant future, leading crude oil prices back up towards $60 per barrel.

For instance, the latest OPEC Monthly Oil Report (for June 2017) says this:

“The decline seen in the overhang in OECD commercial oil inventories in the first four months of the year is expected to continue in the second half, supported by production adjustments by OPEC and participating non-OPEC producers. These trends, along with the steady decline in oil in floating storage, indicate that the rebalancing of the market is underway, but at a slower pace, given the changes in fundamentals since December, especially the shift in US supply from an expected contraction to positive growth. In light of these developments, OPEC and the participating non-OPEC countries decided to extend production adjustments for a further period of nine months in recognition of the need for continuing cooperation among oil exporting countries.”

OPEC members were over 90% compliant with their late-2016 announced production limits at first (source: “Oil Markets on a Knife Edge Despite 91 Percent OPEC Compliance,” February 7, 2017), but there were already fears that the possibility of production rapidly coming back online in two states that were granted exemptions from the agreement, namely Libya and Nigeria, might sabotage the accord.

Additionally, while U.S. oil output decreased following the collapse in prices in early 2016, the industry proved to be viable at a much lower oil price than previously thought via the technological advances made in horizontal drilling and fracking techniques. Some producers are generating a profit at $35/bbl.

Therefore, even if OPEC and non-OPEC producers manage to stick to their quotas and prices stay in a $40-$50 range, prices are at a level which is economical for many U.S. producers to come back online and begin grabbing market share, forcing prices to fall or at least stabilize – precisely the opposite of what OPEC intended in its November agreement. The U.S. rig count has nearly doubled from 488 last July 22 to 950 as of July 21, 2017, even though this is still down over 50% from the high of 1,920 rigs in 2014.

America’s New Battle Cry: “Drill, Baby, Drill”

Here are the facts from the latest Baker Hughes Rig Count, as of July 22, 2017:

United States Rotary Total Active Rigs Count  Table/Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

I would venture to say that, outside of a major geopolitical destabilizing event, it would be prudent to take $60 oil prices off of one’s “bucket list.” Within the past three weeks, WTI crude prices rallied 10%+ from the recent lows under $43. That’s all well and good, but the technicians and oil futures traders will point to the break of key support at $47 back in early June that changed the buy-the-dip mentality to one of a sell-the-rallies mindset. And that remains the current state of affairs, as far as I can determine.

West Texas Intermediate Crude Oil Price Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

I am in no hurry to go long energy stocks. For those that are over-weighted in energy holdings, any decent relief rally should be viewed as a prime opportunity to lighten up. Having traded the markets for over three decades, I can sense the rising angst in a sector where trust and confidence are waning. The great irony in all of this is that the biggest year-over-year earnings comparisons will be among the energy stocks, and that may provide some brief headline optimism, but it should not be confused with that “great sucking sound” of net capital outflows leaving the sector like the tide going out at Waimea Bay.

Yes, it’s easy to point to the three consecutive weeks of drawdowns in the weekly oil inventory data. But this is also the peak of the summer driving season. Weekly crude inventory showed a drawdown of -6.3 million barrels on July 6, a drawdown of -7.56 million barrels on July 12, and a draw of -4.73 million on July 19. By historical comparison, these are decent-sized drawdowns and fully justify the 10% pop in crude prices over the same period. But there is always the portent of oil demand declining in the fall.

Without going into the macro and micro data feed that supports both higher and lower prices, one need not look any further than the price action of the leading stocks in the energy sector to see that investors are not very impressed. The most widely-traded ETF representing the “who’s who” in the energy patch is the Energy Select Sector SPDR ETF (XLE), loaded with every blue-chip oil-related company in the sector. It is trading less than two points off its 52-week low. (I have no position in XLE or any of the XLE holdings.) Last Thursday (July 20), shares of the XLE traded above its 50-day moving average for the first time in months, only to be followed Friday by a failure to follow through.

From my vantage point the weak sector rally in oil stocks did not confirm the stronger rally from the underlying commodity. Something is very wrong with this layout. Typically, the oil stocks rally ahead of oil prices on perception of a turn higher and fall before prices decline for the same reason. There is no front running on the oil price rally. In fact, after a $5 rally in the price of WTI crude, shares of the two largest oil stocks (and XLE components) barely budged.

Energy Select Sector SPDR Fund Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

To summarize, the recent rally that has hoisted the hopes of oil bulls is, in my view, a temporary relief rally in an otherwise oversupplied market that will experience surges in levels of production every time WTI crude trades anywhere near $55 per barrel. It will be hard to make money in the exploration and production stocks, but some of the infrastructure MLPs that pay juicy yields offer some opportunities, just not to the same degree as when oil was trading above $70. For the energy market, there is a “new normal” of lower oil prices and investors simply have to understand that it’s here to stay.

Growth Mail:

*All content of "Growth Mail" represents the opinion of Gary Alexander*

Surprisingly, the Bulls dominated the “Freedom Fest” Debates

by Gary Alexander

I’ve attended nearly all of the “Freedom Fest” meetings in Las Vegas, since their inception in 2002.  I’ve moderated many of their bull vs. bear debates and have observed similar debates conducted by others.  Freedom Fest is a generally bearish conference, where gold is usually touted more than U.S. stocks.  For instance, Freedom Fest themes in recent years have been “Are We Going the Way of Rome?” (2013) and “Is Big Brother Here?” (2014).  This year’s theme was more positive: “Exploring New Frontiers.”

The predominance of the bulls was evident early in this year’s conference, with the opening Global Economic Summit on Thursday, July 20.  Host and Freedom Fest founder Mark Skousen interviewed Joel Stern (former economics professor and current fund manager), Barbara Kolm (President of the Hayek Institute), Keith Fitz-Gerald (a consulting market analyst), Steve Forbes (editor-in-chief of Forbes), Robert Salinas-Leon (President of the Mexico Business Forum), and legendary investor Jimmy Rogers.

As these pundits debated, the S&P 500 had just set its 27th all-time record high for the calendar year 2017.  When it came time to predict where the S&P 500 would be a year from now, five of the six panelists said “up” with only Rogers repeating his famous advice to “be worried, be very worried” (more on him later).

What I concluded from this unusual unanimity in the bullish case was that the bears were tired of being wrong and had run out of excuses for why the market keeps going higher.  To me, this switch in tone is reason to become a little worried (but not “very worried”) about the market in the Dog Days of August.

There were two more panels to report on, first the traditional bull vs. bear debate on Friday morning.  Louis Navellier and Keith Fitz-Gerald were the declared bulls, while Peter Schiff (CEO of Euro Pacific Capital) and John Mauldin (financial writer and head of Mauldin Economics) were the bears.  Such was the phobia of being labelled a ‘bear’ that Mauldin called himself ‘neutral’ though he sounded like a bear.

For the bearish case, Mauldin said the world is awash in debt, with a simultaneous government debt bubble, China debt bubble, private debt (especially college loan) bubble, and a looming trade war.  He said, “We will be lucky to average 2% GDP growth over the next decade.”  Schiff agreed on the debt angle and that “this is the longest, weakest recovery on record.”  He added that international stocks have beaten U.S. stocks, and a weak dollar has meant that foreign investors have no net gains in U.S. stocks for 2017.

Louis Navellier responded by saying that the U.S. stock market is slowly disappearing, with thousands of fewer stock listings now than 20 years ago.  Buy-backs, mergers, and buyouts have reduced the number of shares available, raising the earnings-per-share.  Although the leadership is changing, as always, supply vs. demand point to higher share prices over time.  Keith Fitz-Gerald agreed, pointing to rising liquidity chasing fewer stocks.  He added that rising global wealth will likely see stocks as the best place to invest.

Surprisingly, the bulls won this debate too.  In past Freedom Fests, the audience poll usually showed the bears badly outnumbering the bulls, but in this case the bulls comprised a slight majority of the audience.

The Skeptics Have a Lot of Explaining to Do

Finally, I was able to moderate a closing (Saturday afternoon) debate on “Market History – and What I Would Do Differently.”  This panel featured two real estate experts, John T. Reed and Gena Lofton, along with two stock market gurus (who were also on the opening panel), Jim Rogers and Joel Stern.  After we covered the topics described in the panel title (history and regrets), I asked the panelists to comment on that morning’s Wall Street Journal “Business and Finance” section page 1 article (“Short Sellers Retreat Amid Rally,” WSJ, July 22-23, 2017).  It seemed to me like a “perfect storm” of over-confident quotes.

“Times are tough for skeptics of the bull market,” the Journal article began.  In the week ending July 14, short interest in the SPDR S&P 500 ETF reached the lowest level since May 2013.  The article quoted a hedge fund manager as saying, “There seems to be an overall view that things will always go up, that there are no risks and no matter what goes on, no matter what foolishness is in play, people don’t care.”

Joel Stern responded by offering to bet Jimmy Rogers dinner at one of New York’s finest restaurants that the market would be higher three years from now.  Picking up on that offer, I asked them to make history by demonstrating “20/20 foresight for the year 2020” – to make a public bet on the market levels of 2020. Rogers, who lives in Singapore, waved off dinner in New York but said, “I don’t know the timing. The Dow might reach 30,000 first, but it’s eventually headed for 10,000.”  Stern responded that “buy and hold” tends to beat market timing strategies over the long-term, so he is prepared to ride out any coming storm.

Speaking of August hurricanes, during our regular Friday morning conference call about MarketMail strategies – Louis Navellier, Jason Bodner, and I agreed that we are growing somewhat concerned about the markets in August, especially late August, after earnings season expires and Wall Street traders go on vacation.  After all, that’s when the “flash crash” of August 24, 2015 happened – an event Louis described in detail during his Freedom Fest speech on the cause of the 2008 crash and the 2015 mini-crash.

In two of the recent odd-numbered Augusts, we’ve seen serious crashes, first in the debt-ceiling debate of August 2011, which witnessed record-high daily volatility in the first week of August.  Then came the flash crash of August 24, 2015, which was preceded by severe warning tremors.  According to the Wikipedia article on that event: “The Dow Jones fell 588 points during a two-day period, 1300 points from August 18–21. On Monday, August 24, world stock markets were down substantially, wiping out all gains made in 2015, with interlinked drops in commodities such as oil, which hit a six-year low…. With this plunge, an estimated ten trillion dollars had been wiped off the books on global markets since June 3.”

Stock Market Timing Charts

August is historically a terrible month.  According to the Stock Trader’s Almanac of 2016, August ranks 10th of 12 months (since 1950) in the DJIA and S&P 500 and in 11th place on NASDAQ.  All this leads me to suspect that the overwhelming bullishness of Freedom Fest panelists is right long-term, but maybe not short-term.  Either way, nobody knows the precise future, so I will remain fully invested in August.

Global Mail:

*All content of "Global Mail" represents the opinion of Ivan Martchev*

Extreme Divergence Between Chinese Small and Large Caps

by Ivan Martchev

It is no secret to readers of this column that I think China is in the beginning stages of a credit bubble unravelling, which is likely to have an outcome similar to the 1997-98 Asian Crisis. I am surprised that after the Chinese stock market crashed in 2015 we have not seen the hard landing that I am looking for. When Nasdaq first crashed in March 2000 the U.S. recession started exactly a year later, in March 2001.

China Shanghai Composite Stock Market Index Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

It is true that China still has much stronger government control over its economy and the Chinese authorities are fighting this hard landing with all they’ve got. Many investors are looking at the stabilization of the Shanghai Composite and mainland economic data and thinking that China is out of the woods. Will China succeed in ultimately preventing a hard landing from happening? I don’t think so.

First, the Shanghai Composite has not managed to recover what it lost in January 2016, which is what I have referred to as the Mother of All Dead Cat Bounces (MOADCB). This type of trading action has all the hallmarks of a bear market rally.

Commodities Research Bureau Commodity Index Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Second, commodity prices, particularly oil, are refusing to rally in the seasonally strong part of the year, the March-September period. China is the #1 consumer of most commodities. This type of price weakness across multiple commodities does not rhyme well with stronger-than-expected Chinese economic data. Could it be that the Chinese are cooking the books on some of their economic releases? Sure could.

Third, the action in the Chinese stock market shows a rather pronounced weakness under the surface. While the Shanghai Composite looks to be rebounding in MOADCB fashion, the mainland small-cap ChiNext Index (Shenzhen: 399006) is going in the opposite direction. If the Shanghai Composite is experiencing a dead cat bounce, the ChiNext Index is the ultimate roadkill as it has been flattened out after multiple trucks have run it over. ChiNext has long taken out that climactic January 2016 low when mainland Chinese stock exchanges re-crashed due to malfunctioning circuit breakers. It is now headed lower.

Chi Next Index Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Some of this extreme dichotomy between mainland large caps and small caps can probably be explained by the decision of MSCI next year to add shares of 222 Chinese companies to its emerging markets benchmark for the first time. This means that some tracker funds will begin to include Chinese stocks, with an initial flow of some $1.8 billion expected from passive funds. Ultimately that number is likely to be closer to $20 billion. The new weighting will include less than 1% of the MSCI indexes, which is not all that much in the grand scheme of things. This type of index decision is not large enough to explain a situation where the Shanghai Composite is going up and the ChiNext Index is going down.

Chinese Total Social Spending versus Gross Domestic Product Annual Growth Rate Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Ultimately, the clock is running out on the Chinese economy, which is in the first stages of an unravelling credit bubble. As the Chinese economy has slowed dramatically, borrowing has picked up dramatically. This is similar to living on credit cards to maintain a lifestyle beyond one's means – only in this case the picture is incomplete as it does not include shadow banking lending activities, which are just as large as China’s GDP by some estimates. Including shadow banking, this is similar to living large on credit cards, and when no credit lines are available, visiting the local loan shark and getting another high-rate loan.

Is the North Korea Travel Ban the First Step Towards Invasion?

Last week the State Department banned all travel to North Korea and called on all U.S. nationals to depart immediately. It sure sounds like preparations for some action against Kim Jong Un, whose authoritarian government has stepped up its missile development to an unprecedented scale.

Kim Jong Un Image

Kim Jong Un, who has the looks of quite an accomplished bulgogi and soondubu connoisseur, became a major point of discussion between President Trump and Chinese President Xi Jinping in April. While President Trump originally expressed hope that the Chinese will cooperate in pressuring North Korea on giving up their nuclear program, he has since realized that China is unlikely to be of much help.

Chinese trade with North Korea is exploding. Furthermore, China takes in about 75.7% of North Korean exports and delivers 76.4% of North Korean imports. It would not be an overstatement to say that without China North Korea cannot function as a country. That exports and imports are so evenly balanced is due to the fact that this is the closest thing there is to a barter economy, where goods and services are paid for with coal and other natural resources. Still, the Chinese seem to be unwilling to use their massive leverage as they don't have too many allies throughout Asia. (Having a renegade ally is better than having none.)

United States Dollar Index Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

If the travel ban is indeed the first step toward an attempt to depose Kim Jong Un, the U.S. Dollar Index is in a prime position to experience a significant rebound as it is right at the bottom of a two-year trading range. Also, my theory that the Chinese may want to use the noise around the escalation of hostilities to devalue the yuan to the tune of 20%-40% may get tested as they have used yuan devaluations in the past to bypass an improperly functioning mainland financial system.

I think it is a high probability that they devalue the yuan again.

Sector Spotlight:

*All content of "Sector Spotlight" represents the opinion of Jason Bodner*

Short-Term Stock Gratification is Rare, But Possible

by Jason Bodner

Aside from “No!” or "Stop,” the advice to “Wait” or “Be patient” may be the thing parents say the most to their toddlers. But human instinct is geared towards immediate gratification. Just look at our society with instant media, news, communication, food, banking – and the list grows longer every day. People hardly have to wait for anything anymore, which is both good and bad. The good is obvious in that quality of life improves and things that were once time-sucking endeavors are now common conveniences. Just think about all the talk of self-driving cars; soon everyone will have so much more time to text and Facebook!

The bad side is that the reward for many of our actions is not immediate. Progress and infrastructure take time; so does child growth and development. Parents will still be saying "Be patient" to their kids far into the future, unless they have a robot do it for them. Yet the tools kids need for growth actually peak at age two. The average two-year-old has about 100 million synapses in their brain. This will be the most they have in their lifetime. If we think about that, at two, the child has all the fuel (synapse-wise) for future growth for life! If only the terrible twos weren’t so, well – terrible… (P.S. Don’t try this at home!)

Severe Timeout Method Image

So, as parents try to teach their toddlers patience – while texting away on their phones – it stands to reason that there is much impatience in the markets, too. Everyone wants massive gains by tomorrow! It’s natural to want massive gains within days. The reality, of course, is rare and odds are against it.

I continue to harp on the fact that a minute number of stocks account for all net long-term gains. In addition to the studies I have quoted before, I recently came across one done by Eric Crittenden of Longboard Capital, who analyzed 14,455 active stocks between 1989 and 2015, identifying the best performing stocks on an annualized return and total return basis. He found during that time, 20% of the stocks accounted for all of the net gains. These odds are very much better than the prior quoted similar study done from the 1920s which implies a much smaller percent of stocks account for all gains. But in any case, your best odds for random stock picking over a recent 26-year span is about at 1 in 5.

Attribution of Collective Return Chart

So, if it's so hard to make money long term, why are so many trapped into believing explosive short-term profits are attainable? As a matter of fact, such profits are attainable, though rare. There are methods one can employ to find the next potential major gainer of next week and perhaps more importantly the next five years. The key analogy is that some growth stocks are like two-year-olds: They are incredibly impatient but they can achieve remarkable progress in short bursts. These are the ones to watch for.

One short-term method I focus on is trafficking where the big boys go. Big, highly-educated, well informed fund managers and institutions don't take a massive stake in a company in hopes of losing money. Identifying what they are getting in and out of is a great indicator of where the next winners might be. Waiting for them to tell you through filings may be too late; so, studying price, volume, and volatility metrics can assist you. There are people out there who do this. Why this relates to sectors is that they tend to show up as breakouts in their sector when they get accumulated and the stock starts to perk up.

Utilities Lead the Parade in Mid-July

Looking at the sectors this last week, we find the winning sector is, drumroll please…. Utilities?

Yes, that’s right, Utilities staged a +2.59% surge last week, a performance that beat every other sector by a mile. Utilities is not the typical pool from which we would look to identify the growth stars of tomorrow. Viewed as a defensive sector, sought for yield, however, Utilities also benefit in the mid-summer heat, as they make more money when people choose to cool their homes more aggressively.

Standard and Poor's 500 Daily, Weekly, Monthly, and Quarterly Sector Indices Changes Tables

#1 for the July-to-date (and #2 last week) is Information Technology. Building on its stellar rally from the late June sell-off, Infotech popped +1.11%. That was closely followed by Health Care. These two sectors are where we have great hopes of finding the growth stories of tomorrow. It is important to pay attention to leaders within these sectors as unusual volume accumulation takes place. Again, Tech saw profit taking in late June which had everyone nail-biting for a fleeting moment. Now we see capital being once again deployed in the sector as earnings are underway and we see some nice beats. I would expect the Tech sector to take a breather after such an exhausting run up. Consumer Discretionary also posted a nice performance, but retail’s murky future is still on the minds of many investors.

Standard and Poor's 500 Information Technology Sector Index Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Energy continues to be my unloved sector. We have seen the recent perking up of Energy, but as I highlighted in recent weeks, we are now at the top end of the range of a clear downtrend. I suspect we will see resumed pressure, especially since we saw some selling in Oil & Gas stocks later last week, as well as a small retreat in the price of crude oil. The six-month performance of Energy is down nearly -13%.

Standard and Poor's 500 Energy Sector Index Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

The trick with growth stocks is – even if they exhibit the right qualities (growing sales, earnings, and market share) – they are still like potentially unruly two-year-olds. The key is identifying them early, and looking to hold onto the game changers for a longer spell. Jesse Livermore knew this when he said, “It was never my thinking that made the big money for me, it always was sitting.”

Jesse Livermore Quote Image

A Look Ahead:

*All content in this "A Look Ahead" section of Market Mail represents the opinion of Louis Navellier of Navellier & Associates, Inc.*

No Rate Increases Likely Soon in the U.S. or Europe

by Louis Navellier

The failure of the Republican-led Senate to pass healthcare reform last week caused the U.S. dollar to hit a 13-month low.  A weaker U.S. dollar is good for multinational companies and exporters.  The Trump Administration is not encouraging a strong U.S. dollar, since a weak dollar boosts exports.  In addition, the Fed’s recent admission that inflation is cooling off and that it will not raise key interest rates soon has also contributed to a weaker U.S. dollar.  A weak dollar tends to narrow the trade deficit, which has been a persistent drag on U.S. GDP.  One key to getting GDP growth back to 3% is to narrow the trade deficit.

As the Federal Open Market Committee (FOMC) meets today and tomorrow, they have sent out signals that they will NOT be raising key interest rates tomorrow or anytime soon.  Meanwhile, across the pond, last Thursday, the European Central Bank (ECB) left key interest rates unchanged and painted a picture that inflation has been “subdued” due to low energy prices.  The big surprise was that ECB President Mario Draghi said that a “substantial degree” of monetary accommodation is still needed despite improving economic growth in the European Union.  Furthermore, Draghi said that the ECB had not discussed the future of its bond buying program (e.g., quantitative easing), but would do so in the fall.

This essentially squelched any speculation that the ECB might wind down its quantitative easing sooner than later.  When Draghi speaks at the Kansas City Fed’s conference in Jackson Hole, Wyoming in mid-August, it looks like he may not make any significant announcement that would impact financial markets.

The Lumber Tariff meets the Housing Shortage

In general, commodity prices were down in the first half of 2017 but are now rising, since commodities are universally priced in U.S. dollars.  A weak dollar tends to lift commodity prices higher.

Log Truck Image

Back in April, Commerce Secretary Wilbur Ross announced a 20% tariff on Canadian softwood lumber imports due to the Trump Administration’s determination that Canada improperly subsidizes its lumber exports.  Lumber prices are now on the rise, which apparently caused the National Association of Home Builders’ sentiment index (released Tuesday) to decline to 64 in July, down from 67 in June.

Interestingly, homebuilder sentiment is now lower than it was prior to the Presidential election.  The reason that homebuilder sentiment is important is that there is a shortage of housing, so builders still have tremendous power to raise home prices.  Their sentiment shift is an interesting development to watch.

On Wednesday, the Commerce Department announced that housing starts in June rose to an annual pace of 1.22 million, significantly above economists’ consensus 1.16 million estimate.  June’s housing starts were 8.3% higher than May and 2.1% higher than a year ago.  Building permits also rose 7.4% in June compared to May and are now up 5.1% vs. a year ago.  Single family home starts rose 6.3% in June compared to May, so builders are still favoring multi-family homes.  The acute shortage of new homes for sale may have to be addressed politically.  Median home prices should continue to rise due to the lack of inventory of new homes for sale, so hopefully building activity will improve in the upcoming months.


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Past performance is no indication of future results.

FEDERAL TAX ADVICE DISCLAIMER: As required by U.S. Treasury Regulations, you are informed that, to the extent this presentation includes any federal tax advice, the presentation is not intended or written by Navellier to be used, and cannot be used, for the purpose of avoiding federal tax penalties. Navellier does not advise on any income tax requirements or issues. Use of any information presented by Navellier is for general information only and does not represent tax advice either express or implied. You are encouraged to seek professional tax advice for income tax questions and assistance.

IMPORTANT NEWSLETTER DISCLOSURE: The performance results for investment newsletters that are authored or edited by Louis Navellier, including Louis Navellier's Growth Investor, Louis Navellier's Breakthrough Stocks, Louis Navellier's Accelerated Profits, and Louis Navellier's Platinum Club, are not based on any actual securities trading, portfolio, or accounts, and the newsletters' reported performances should be considered mere "paper" or proforma performance results. Navellier & Associates, Inc. does not have any relation to or affiliation with the owner of these newsletters. There are material differences between Navellier & Associates' Investment Products and the InvestorPlace Media, LLC newsletter portfolios authored by Louis Navellier. The InvestorPlace Media, LLC newsletters and advertising materials authored by Louis Navellier typically contain performance claims that do not include transaction costs, advisory fees, or other fees a client may incur. As a result, newsletter performance should not be used to evaluate Navellier Investment Products. The owner of the newsletters is InvestorPlace Media, LLC and any questions concerning the newsletters, including any newsletter advertising or performance claims, should be referred to InvestorPlace Media, LLC at (800) 718-8289.

Please note that Navellier & Associates and the Navellier Private Client Group are managed completely independent of the newsletters owned and published by InvestorPlace Media, LLC and written and edited by Louis Navellier, and investment performance of the newsletters should in no way be considered indicative of potential future investment performance for any Navellier & Associates separately managed account portfolio. Potential investors should consult with their financial advisor before investing in any Navellier Investment Product.

Navellier claims compliance with Global Investment Performance Standards (GIPS). To receive a complete list and descriptions of Navellier's composites and/or a presentation that adheres to the GIPS standards, please contact Navellier or click here. It should not be assumed that any securities recommendations made by Navellier & Associates, Inc. in the future will be profitable or equal the performance of securities made in this report. Request here a list of recommendations made by Navellier & Associates, Inc. for the preceding twelve months, please contact Tim Hope at (775) 785-9416.

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It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities in this list. Click here to see the preceding 12 month trade report.

Although information in these reports has been obtained from and is based upon sources that Navellier believes to be reliable, Navellier does not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute Navellier's judgment as of the date the report was created and are subject to change without notice. These reports are for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of a security. Any decision to purchase securities mentioned in these reports must take into account existing public information on such securities or any registered prospectus.

Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. It should not be assumed that any securities recommendations made by Navellier. in the future will be profitable or equal the performance of securities made in this report.

Dividend payments are not guaranteed. The amount of a dividend payment, if any, can vary over time and issuers may reduce dividends paid on securities in the event of a recession or adverse event affecting a specific industry or issuer.

None of the stock information, data, and company information presented herein constitutes a recommendation by Navellier or a solicitation of any offer to buy or sell any securities. Any specific securities identified and described do not represent all of the securities purchased, sold, or recommended for advisory clients. The reader should not assume that investments in the securities identified and discussed were or will be profitable.

Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalized recommendation to you. Individual stocks presented may not be suitable for you. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. Investment in fixed income securities has the potential for the investment return and principal value of an investment to fluctuate so that an investor's holdings, when redeemed, may be worth less than their original cost.

One cannot invest directly in an index. Results presented include the reinvestment of all dividends and other earnings.

Past performance is no indication of future results.

FEDERAL TAX ADVICE DISCLAIMER: As required by U.S. Treasury Regulations, you are informed that, to the extent this presentation includes any federal tax advice, the presentation is not intended or written by Navellier to be used, and cannot be used, for the purpose of avoiding federal tax penalties. Navellier does not advise on any income tax requirements or issues. Use of any information presented by Navellier is for general information only and does not represent tax advice either express or implied. You are encouraged to seek professional tax advice for income tax questions and assistance.

IMPORTANT NEWSLETTER DISCLOSURE: The performance results for investment newsletters that are authored or edited by Louis Navellier, including Louis Navellier's Growth Investor, Louis Navellier's Breakthrough Stocks, Louis Navellier's Accelerated Profits, and Louis Navellier's Platinum Club, are not based on any actual securities trading, portfolio, or accounts, and the newsletters' reported performances should be considered mere "paper" or proforma performance results. Navellier & Associates, Inc. does not have any relation to or affiliation with the owner of these newsletters. There are material differences between Navellier & Associates' Investment Products and the InvestorPlace Media, LLC newsletter portfolios authored by Louis Navellier. The InvestorPlace Media, LLC newsletters and advertising materials authored by Louis Navellier typically contain performance claims that do not include transaction costs, advisory fees, or other fees a client may incur. As a result, newsletter performance should not be used to evaluate Navellier Investment Products. The owner of the newsletters is InvestorPlace Media, LLC and any questions concerning the newsletters, including any newsletter advertising or performance claims, should be referred to InvestorPlace Media, LLC at (800) 718-8289.

Please note that Navellier & Associates and the Navellier Private Client Group are managed completely independent of the newsletters owned and published by InvestorPlace Media, LLC and written and edited by Louis Navellier, and investment performance of the newsletters should in no way be considered indicative of potential future investment performance for any Navellier & Associates separately managed account portfolio. Potential investors should consult with their financial advisor before investing in any Navellier Investment Product.

Navellier claims compliance with Global Investment Performance Standards (GIPS). To receive a complete list and descriptions of Navellier's composites and/or a presentation that adheres to the GIPS standards, please contact Navellier or click here. It should not be assumed that any securities recommendations made by Navellier & Associates, Inc. in the future will be profitable or equal the performance of securities made in this report. Request here a list of recommendations made by Navellier & Associates, Inc. for the preceding twelve months, please contact Tim Hope at (775) 785-9416.

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