U.S. shares heading for best performance in 18 years. Fueled by the Fed's easy money policies and an improving economy, U.S. stocks are poised to close their best year since 1995. Prior to the final day of trading for 2013, the Dow was up 29% when dividends are included and the S&P 500 32%. "If you could've just invested in one of the major indexes, and worked on your golf game the rest of the year, you would've hit a home run," says David Rolfe, a chief investment officer. Not to mention a hole in one.
Latvia set to join euro. Latvia is poised to become the 18th member of the eurozone at midnight tonight, following the path of other former Soviet satellite states, Estonia and Slovakia. Given Latvia's recovery from a major debt crisis a few years back, and the terrible state of the economies of Greece, Portugal, Spain, Portugal and Cyprus, one might be tempted to ask, what on earth are they thinking?
Berkshire Hathaway to buy Phillips 66 unit for around $1.4B. Berkshire Hathaway (BRK.A, BRK.B) has agreed to acquire the flow improver business of Phillips 66 (NYSE:PSX) in exchange for the latter's stock that Berkshire owns. The unit, Phillips Specialty Products, makes polymers designed to reduce drag and increase the flow potential in pipelines. Berkshire owns a 27.2M-share stake in Phillips 66, with Reuters reporting that Warren Buffett's company will use around 19M of those shares, or approximately $1.4B, to pay for the deal.
Top Stock News
P-E sector enjoys another record year. Private-equity firms are set to return over $120B to their investors for this year, surpassing the 2012 record of $115B, Cambridge Associates estimates. The sector has been assisted by low interest rates, which have helped P-E backed companies sell $66.2B worth of debt in 2013 to fund dividends to their owners, up from $64.2B a year earlier. Meanwhile, a record 94 companies with P-E investors brought in $33.3B in IPOs. Those enjoying the boom include Blackstone (NYSE:BX) and KKR (NYSE:KKR).
China ends freeze on IPOs. China's government has given its approval to five companies to list on mainland stock exchanges, thereby ending an IPO freeze of more than a year. Over 760 firms are waiting to offer stocks to the public, a backlog that could drag down shares of listed companies as funds flow to the new entrants. Authorities suspended IPOs in October last year as part of a plan to crack down on fraud, reform the system and restore confidence.
FDA drug approvals fall sharply. The number of drugs the FDA has authorized this year has dropped to 27 from 39 in 2012, due to companies filing fewer applications. Still, the 2013 figure is close to the five-year average of 28, while the agency has also given several treatments the breakthrough designation. Earlier this month, a report showed that the average internal rate of return from pharmaceutical R&D has slipped to around 4.8% in 2013 from 7.2% in 2012 and 10.5% in 2010.
Top Economic & Other News
Small companies feeling bullish. With the economy appearing to hum along nicely, small-business owners are an optimistic bunch heading into 2014, with many even feeling that next year could be a breakout one. In a survey, three-quarters of owners said they expect sales to improve in 2014, while the small-business "confidence index" has hit an 18-month high of 108.4 in December. Still, the horizon isn't devoid of clouds, including the roll out of Obamacare to small companies.
Masses of healthcare enrollments incomplete. As of yesterday, only around half of those who had signed up for healthcare coverage offered by over 100 insurers in 17 states under Obamacare had paid for their plans. As a result, confusion is set to reign when the coverage takes effect tomorrow and until insurers can process those payments and issue membership cards. Around 2M people in total have signed up for coverage.
U.S. population growth remains muted. Population growth slowed to the weakest rate since the Great Depression between July 2012 and July 2013 with an increase of just 0.72% to 316.13M people. Demographer William Frey of the Brookings Institution attributes the low growth, which has been muted for a number of years, to the recession and its aftermath. The situation has led to "diminished immigration, low fertility and below-normal movement across state lines to prosperous areas," Frey says.
Oil industry hit by yet another train accident. A train carrying crude oil collided with one transporting grain in North Dakota yesterday, causing a series of explosions and fires, and prompting evacuation warnings. The accident is the latest to hit a crude-oil train amid increasing concerns about the safety of transporting the fuel by rail.
Top Ideas: Movers and Great Calls
1) On Friday, Bishop Research & Analytics detailed the bull case for Mason Graphite (OTCQX:MGPHF), arguing that secular growth in the graphene market could lead to 5x upside. The stock is +59.4% since his call. Read article »
2) Paul Nouri wrote on June 26 that Trinity Biotech (NASDAQ:TRIB) was one of the most undervalued names in med-tech, with new diagnostic tests serving as a catalyst to its earnings and its stock price. Shares are +47.1% to date. Read article »
Top Ideas To Watch
1) Positive developments at all three of its mines suggest significant potential upside for Sierra Metals (DBEXF), whose shares are poised to double next year, according to Itinerant. Read article »
2) Confusion over its dividend leaves Gladstone Land (NASDAQ:LAND) vulnerable to a downturn; a dividend cut should lead to 30% downside, says REIT expert Dane Bowler. Read article »
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In Asia, Japan closed. Hong Kong +0.3% to 23306. China +0.9% to 2116. India +0.1% to 21171.
In Europe, at midday, London +0.3%. Paris +0.3%. Frankfurt closed.
Futures at 6:20: Dow flat. S&P +0.5%. Nasdaq flat. Crude -0.3% to $98.98. Gold -0.2% to $1201.60.
Ten-year Treasury Yield +2 bps to 3%.
Today's economic calendar:
7:45 ICSC Retail Store Sales
8:55 Redbook Chain Store Sales
9:00 S&P Case-Shiller Home Price Index
9:45 Chicago PMI
10:00 Consumer Confidence
10:00 State Street Investor Confidence Index
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