Trump Uses ‘POTUS’ Account To Tweet FBI Director “Refuses To Deny” Briefing Obama On Flynn

In a very unusual move, President Trump took time away from his personal Twitter account to tell the free world – via @POTUS – that “FBI Director Comey refuses to deny he briefed President Obama on calls made by Michael Flynn to Russia.”

FBI Director Comey refuses to deny he briefed President Obama on calls made by Michael Flynn to Russia. pic.twitter.com/cUZ5KgBSYP

— President Trump (@POTUS) March 20, 2017

On the bright side, at least there were no typos.

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$5.6B Loan Approved For Glencore, Qatar Rosneft Stake Buy

Italy’s Financial Security Committee has approved a $5.6-billion (5.2-billion-euro) loan from Intesa SanPaolo to Glencore and the Qatar Investment Authority for the acquisition of a 19.5-percent stake in Rosneft. The deal, first announced in December and confirmed this January, was valued at $11.3 billion (10.5 billion euros), of which Glencore agreed to contribute some $324 million, and the rest was forked out by the Qatar partner, through loans. The Intesa loan was reviewed by the Financial Security Committee for possible violations…

Goldman Slashes Buyback Forecast By $100 Billion Due To Delay In Trump Tax Reform

Two months ago, in early January, when forecasting the source of funds for US stock purchases, Goldman calculated that of the $1 trillion in total demand for calendar 2017, the vast majority. or some $800 billion would come from corporate buybacks, with the balance, or $200 billion would be sourced from ETF demand. Fast forward to this weekend, when Goldman’s David Kostin has revised his buyback forecast, and now expects that corporation will repurchase $100 billion less of their own shares, reducing the total to $700 billion, because corporate tax reform is likely to be delayed. As we reported previously, Goldman had expected $150 billion of buybacks as a result of a one-time tax relief on foreign profit.

The reason for the forecast cut is that Goldman now expects that Trump’s tax reforms will be substantially delayed, and not take place until late 2017 or even early 2018, due to the delays facing Trump’s various other domestic agenda items, first and foremost the repeal of Obamacare.

Nonetheless, the new forecast still represents a 20% increase from 2016, when a total of $584 billion in corporate buybacks took place.

Here is the summary from Kostin:

In 2016, corporations and ETFs were the key drivers of positive US equity demand, purchasing almost $800 billion of equities. In contrast, mutual funds, pension funds, households, and foreign investors were net sellers. In 2017, we expect history will repeat itself. Although we lower our corporate demand forecast by $100 billion, to $700 billion, net buybacks will grow by 20% in 2017. ETF equity purchases will equal $200 billion this year while mutual funds, households, and pensions will remain net sellers…. We lower our 2017 forecast of corporate equity demand by $100 billion, to $700 billion, given our Washington, D.C. economist’s expectation for a delay in corporate tax reform. However, corporations will remain the primary source of US equity demand this year.

Finally, Kostin writes that since such pure yield strategies as buybacks are at risk during periods of rising interest rates, that Investors should favor dividend growth stocks.

Here are select excerpts from the Goldman note:

Corporations and ETFs were the key drivers of US equity demand last year. Net equity purchases by corporations and ETFs equaled $584 billion and $188 billion, respectively, which offset net selling by mutual funds, households, and pension funds. Foreign investors also fled US equities during 2016, including $60 billion of net selling post-election amidst concerns of potential protectionist policies proposed by the Trump Administration. 

 

 

In 2017, we expect history will repeat itself. Corporations and ETFs will continue to drive equity demand while mutual funds, households, and pension funds will remain net sellers of equities.

 

We lower our 2017 forecast of corporate equity demand by $100 billion, to $700 billion, given our Washington, D.C. economist’s expectation for a delay in corporate tax reform. However, corporations will remain the primary source of US equity demand this year. Our prior forecast assumed a one-time tax on untaxed foreign profits would occur in 2H 2017, resulting in an additional $150 billion of buybacks as firms repatriate overseas cash. However, we now expect corporate tax reform will not occur until in late 2017 or early 2018. Given this delay, we now estimate firms will only repatriate $60 to $70 billion of overseas cash this year and spend $50 billion (around 75%) on share buybacks.

 

ETF equity purchases will equal $200 billion given continued investor preference for passive vs. active management. Total inflows into equity ETFs equal $66 billion YTD vs. $23 billion of outflows from equity mutual funds. ETF ownership of the corporate equity market is at an all-time high (5%) while mutual fund ownership (24%) is at its lowest level since 1Q 2004.

 

We expect mutual funds will remain net sellers of equities ($50 billion) given investor outflows and low liquidity. Mutual fund liquid assets as share of total assets are near historical lows (3% as of Jan 2017). However, higher dispersion and improved fund returns YTD suggest that mutual fund demand in 2017 (-$50 billion) will be higher than in 2016 (-$117 billion). 

 

Pension funds will sell $175 billion of equities during 2017 alongside rising interest rates. We expect the 10-year US Treasury yield will equal 3% by year-end. Households will be net sellers of equities due to the surge in share repurchases. Given our forecast of $700 billion of net buybacks, we expect that Households will be the key sellers to companies ($300 billion).

Finally, going to the heart of the active vs passive investing debate, Goldman points out that in 2016, the ETF share of the equity market at an all-time high; meanwhile allocation to mutual funds continues to decline, and the end result may be tht mutual funds sell far more than the $50 billion that Goldman forecasts, mostly driven by the ongoing surge in redemptions.

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5-Year Treasury Yield Tumbles Below 2.00% As Short-Squeeze Picks Up

Five-year Treasury yields have tumbled back below 2.00% to the lowest levels in almost three-weeks, extending the drop amid the weakest economic growth period for a rate-hike since 1980.

 

The yield curve has flattened dramatically in the week since The Fed hiked…

 

With net positioning near record high shorts, and everyone and their pet rabbit sure that a breakout above 2.15% was ‘inevitable’…

 

And while some of the Treasury short has covered, the massive extension of Eurodollar shorts more than offset it – leaving ‘shorts’ across the entire curve at record highs…

 

We wonder what happens next.

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CEO Pay Soars In 2016 As Employee Wages Continue To Stagnate

CEO pay increases took a brief pause in 2015 dropping to a paltry median of just $10.8 million with most getting a pay cut or a raise of less than 1.5%.  But, as the Wall Street Journal points out this morning, the CEO’s of America can once again rest assured that their families will not starve to death as 2016 pay soared nearly 7% setting a post-recession record.

Median pay for the chief executives of 104 of the biggest American companies rose 6.8% for fiscal 2016 to $11.5 million, on track to set a postrecession record, according to a Wall Street Journal analysis.

 

Twice as many companies increased their chiefs’ pay as reduced it, though a few high-profile bosses took substantial pay cuts, including Apple Inc.’s Tim Cook and General Electric Co.’s Jeff Immelt.

 

The higher pay was doled out as the stock market notched strong gains and corporate profits rebounded over the course of 2016. “If ever there was going to be a good year for CEO pay, it was going to be 2016,” said David Yermack, a finance professor at New York University’s Stern School of Business who studies executive pay.

As usual, operating results had limited impact on CEO earnings potential and some of the largest payouts went to CEO’s who were fired in 2016.

Some of the biggest paydays went to companies in transition—or even turmoil. Philippe Dauman, who was forced out as chief of media giant Viacom Inc. in August, made $93 million during the year. The total includes $58 million of exit payments, promised under his 2015 employment agreement. A Viacom spokesman declined to comment.

 

At Johnson Controls International PLC, Alex Molinaroli made $46.4 million in the year ended Sept. 30, more than double the $21.7 million he made the prior year. Last fall, he split off an auto-parts business that accounted for a significant part of Johnson Controls’ revenue and closed a $14 billion merger with Tyco International PLC. A Johnson Controls spokesman declined to comment.

 

Meg Whitman made $35.6 million in the year ended Oct. 31 as chief executive of Hewlett Packard Enterprise Co., which was created when she split Hewlett-Packard Co. into two companies in late 2015. That is more than double the $17.1 million she made a year earlier at the combined company.

 

Her latest package included a special equity grant tied to the launch of HP Enterprise. Aside from such one-time items, “Meg’s target compensation has remained unchanged over the past three years,’’ an HP Enterprise spokeswoman said, referring to a portion of the CEO’s pay package.

 

Thomas Falk of Kimberly-Clark Corp. received a 29% raise, compared with a 21% pay cut in 2015 and bringing his total compensation to $15.7 million in 2016 from $15.4 million two years earlier.

 

Mr. Falk’s raise came even as the maker of Huggies diapers and Kleenex tissues posted a shareholder return of -7.7% last year compared with 14% a year earlier.

 

A Kimberly-Clark spokesman said the company considers its three-year shareholder return of 25% and five-year return of 90% better measures of Mr. Falk’s performance.

And here’s how the top 20 highest paid CEO’s in America made out in 2016:

CEO

 

Much of the higher pay was awarded in various forms of restricted stock or stock options. The compensation increases have come about because rising equity awards have more than made up for declines in cash incentive pay, according to a separate analysis by Institutional Shareholder Services, the large proxy advisory firm.

While cash bonuses have fallen about 1.4% among the companies that have filed pay disclosures, stock awards have risen 7.4% and option awards have risen 3%, noted John Roe, head of analytics at ISS.

Of course, that’s hardly any consolation for the average American worker who just saw his real earnings collapse over the past two years and actually turn negative in 2017.

Real Wages

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Al Katheeri named Mubadala Petroleum CEO

Bakheet Al Katheeri has been appointed chief executive officer of Mubadala Petroleum Co., Abu Dhabi, a wholly owned subsidiary of state-owned Mubadala Development Co. He previously was chief growth officer and chief operating officer.