“A 60:40 allocation to passive long-only equities and bonds has been a great proposition for the last 35 years,” …”We are profoundly worried that this could be a risky allocation over the next 10.” — Sanford C. Bernstein & Company Analysts on Diversification
1. China Forex Reserves Drop To The Lowest Level Since March 2011 — China’s foreign exchange reserves fell for the sixth the consecutive month in December, but held just above the critical $3T level, as authorities stepped in to support the weakening yuan. According to PBOC data, the world’s largest stockpile of foreign currency plunged by $41.08B to $3.01T, the lowest level since March 2011.
2. Self-Driving Cars Are a Focus for Major Auto Makers — self-driving cars are a big theme at the North American International Auto Show, which kicked off late last week in Detroit. Alphabet’s (GOOG, GOOGL) Waymo revealed that it has built all of its sensor hardware in-house and was ready to offer its autonomous-drive technology in “millions” of vehicles at a competitive price. A package of LIDAR sensors and radar, which used to run approximately $75,000 a few years ago, has fallen by more than 90%.
3. Oil Discoveries Seen Recovering After Crashing to 65-Year Low — oil companies found only 3.7 billion barrels of so-called conventional crude in 2016, 14 percent less than the previous year and the lowest amount since 1952, according to Bloomberg. Oil companies reduced spending on exploration to about $40 billion last year from $100 billion in 2014, and could invest as little as $35 billion this year. Lower budgets meant fewer wells drilled: 431 in 2016, or about a third of the activity two years earlier. Total expenditure on exploration could rise to $40 billion to $45 billion in 2018 and further in 2019 if the oil price recovery endures.
4. Apple Sets Its Sights on Hollywood With Plans for Original Content — WSJ reported that Apple is planning to build a significant new business in original television shows and movies, in a move that could make it a bigger player in Hollywood and offset slowing sales of iPhones and iPads. Programming would be available to subscribers of Apple Music (NASDAQ:AAPL), which already includes a limited number of documentary-style segments on musicians, but nothing like the premium programming the company is now seeking.
5. Trans Mountain Pipeline Expansion Gets Approval from British Columbia — British Columbia has given the green light to Kinder Morgan’s (NYSE:KMI) plan to nearly triple its Trans Mountain oil pipeline, which runs from Canada’s oil sands through the province to a marine terminal on the Pacific Coast. The federal government approved the $6.8B expansion in November after the National Energy Board recommended moving ahead with the project based on the fulfillment of 157 conditions.
6. Stocks Market May Weaken After Trump Swearing-in Ceremony — based on historical records, the market rally that has followed a new President election victory has already factored in potential upside, leaving the market ripe for at least a near-term downturn. In post-inauguration, stock-market performance since Dwight D. Eisenhower’s first oath of office in 1953 found that the S&P 500 (SPX) index, +0.17% or its predecessor, the index actually tended to strengthen in the two weeks after a new term had begun. However, the one-month return has tended to be negative for the last 11 Republican inaugurations (see charts below)
The week ahead — Economic data from Econoday.com: