CWS Market Review – December 31, 2016

CWS Market Review

December 31, 2016
 
“Don’t you see what’s happening? Potter isn’t selling;
Potter’s buying! And why? Because we’re panicking and he’s not.”

The 2016 trading year has come to a close. For the year, the S&P 500 gained 9.5%, but a lot of that came late in the year. As late as November 4th, the index was up a measly 2% on the year.

This was a very unusual year for Wall Street—and the world. I would guess that if I had told the average professional investor the outcomes of the Brexit vote and the U.S. election beforehand, having that info probably would have harmed his or her portfolio. Here’s an amazing stat: 295 stocks in the S&P 500 beat the index this year.

Not only did the unexpected happen, but those unexpected events drew unexpected responses. In this week’s CWS Market Review, I’ll go through all the numbers on our Buy List’s performance. I’ll also list the details on the 2017 Buy List.

The Final Numbers for 2016

Now let’s get to the numbers. For 2016, the S&P 500 gained 9.54%, while our Buy List gained 0.99%. Although we did make a profit, we trailed the broader market. This was only the second time in the last decade in which we lost to the market.

Including dividends, the S&P 500 gained 11.96% this year, while our Buy List gained 2.17%.

Over the long haul, we’re still doing quite well. Over the last 11 years, the total compounded gain for the Buy List is 169.39%, compared with 126.63% for the S&P 500.

With the Buy List, I always try to be as transparent as possible. The table below details the Buy List’s performance for 2016. I’ve listed each stock, along with the number of shares and the starting and ending prices. For tracking purposes, I assume the Buy List is a $1 million portfolio that starts out equally divided among the 20 stocks.

Stock Shares 12/31/15 Beginning 12/30/16 Ending Profit/Loss
ADS 180.7861 $276.57 $50,000.00 $228.50 $41,309.62 -17.38%
AFL 834.7245 $59.90 $50,000.00 $69.60 $58,096.83 16.19%
BBBY 1,036.2694 $48.25 $50,000.00 $40.64 $42,113.99 -15.77%
BCR 263.9358 $189.44 $50,000.00 $224.66 $59,295.82 18.59%
BIIB 163.2120 $306.35 $50,000.00 $283.58 $46,283.66 -7.43%
CERN 830.9789 $60.17 $50,000.00 $47.37 $39,363.47 -21.27%
CTSH 833.0556 $60.02 $50,000.00 $56.03 $46,676.11 -6.65%
ESRX 572.0169 $87.41 $50,000.00 $68.79 $39,349.04 -21.30%
F 3,548.6160 $14.09 $50,000.00 $12.13 $43,044.71 -13.91%
FISV 546.6871 $91.46 $50,000.00 $106.28 $58,101.90 16.20%
HEI 919.7940 $54.36 $50,000.00 $77.15 $70,962.11 41.92%
HRL 1,264.5422 $39.54 $50,000.00 $34.81 $44,018.71 -11.96%
MSFT 901.2257 $55.48 $50,000.00 $62.14 $56,002.16 12.00%
ROST 929.1953 $53.81 $50,000.00 $65.60 $60,955.21 21.91%
SBNY 326.0090 $153.37 $50,000.00 $150.20 $48,966.55 -2.07%
SNA 291.6642 $171.43 $50,000.00 $171.27 $49,953.33 -0.09%
SRCL 414.5937 $120.60 $50,000.00 $77.04 $31,940.30 -36.12%
SYK 537.9815 $92.94 $50,000.00 $119.81 $64,455.56 28.91%
WAB 703.0371 $71.12 $50,000.00 $83.02 $58,366.14 16.73%
WFC 919.7940 $54.36 $50,000.00 $55.11 $50,689.85 1.38%
Total     $1,000,000.00   $1,009,945.07 0.99%

Note that Hormel Foods (HRL) split 2-for-1 in February.

The 2017 Buy List

Now let’s turn our attention to the new Buy List. We’re expanding the Buy List to 25 names. Here again are the 25 stocks for 2017:

AFLAC (AFL)
Alliance Data Systems (ADS)
Axalta Coating Systems (AXTA)
Cerner (CERN)
Cinemark Holdings (CNK)
Continental Building Products (CBPX)
Cognizant Technology Solutions (CTSH)
CR Bard (BCR)
Danaher (DHR)
Express Scripts (ESRX)
Fiserv (FISV)
HEICO (HEI)
Hormel Foods (HRL)
Ingredion (INGR)
Intercontinental Exchange (ICE)
Microsoft (MSFT)
Moody’s (MCO)
Ross Stores (ROST)
RPM International (RPM)
Sherwin-Williams (SHW)
Signature Bank (SBNY)
JM Smucker (SJM)
Snap-on (SNA)
Stryker (SYK)
Wabtec (WAB)

Here’s the new $1 million portfolio, now divided equally among 25 stocks. Below are all 25 positions, with the number of shares for each and the closing price for 2016. Whenever I discuss how well the Buy List is doing, the list below is what I’m referring to. The Buy List is now locked and sealed, and I can’t make any changes for 12 months.

Company Ticker Price Shares Balance
AFLAC AFL $69.60 574.7126 $40,000
Alliance Data Systems ADS $228.50 175.0547 $40,000
Axalta Coating Systems AXTA $27.20 1,470.5882 $40,000
Cerner CERN $47.37 844.4163 $40,000
Cinemark CNK $38.36 1,042.7529 $40,000
Continental Building Products CBPX $23.10 1,731.6017 $40,000
Cognizant Technology Solutions CTSH $56.03 713.9033 $40,000
CR Bard BCR $224.66 178.0468 $40,000
Danaher DHR $77.84 513.8746 $40,000
Express Scripts ESRX $68.79 581.4799 $40,000
Fiserv FISV $106.28 376.3643 $40,000
HEICO Corporation HEI $77.15 518.4705 $40,000
Hormel Foods HRL $34.81 1,149.0951 $40,000
Ingredion INGR $124.96 320.1024 $40,000
Intercontinental Exchange ICE $56.42 708.9685 $40,000
Microsoft MSFT $62.14 643.7078 $40,000
Moody’s MCO $94.27 424.3131 $40,000
Ross Stores ROST $65.60 609.7561 $40,000
RPM International RPM $53.83 743.0801 $40,000
Sherwin-Williams SHW $268.74 148.8427 $40,000
Signature Bank SBNY $150.20 266.3116 $40,000
JM Smucker SJM $128.06 312.3536 $40,000
Snap-on SNA $171.27 233.5494 $40,000
Stryker SYK $119.81 333.8619 $40,000
Wabtec WAB $83.02 481.8116 $40,000
Total       $1,000,000

The 25 stocks range from a market cap of $483 billion for Microsoft to $924 million for Continental Building Products. The average market cap is $38 billion, but that’s heavily distorted by Microsoft. Take out MSFT, and the average market cap is just under $20 billion. Fourteen of the 25 stocks fall between $4 billion and $20 billion in market value.

Eighteen of the 25 stocks pay dividends. Currently, the Buy List has a yield of 1.48%.

Only AFLAC and Fiserv have been on the Buy List all 12 years. This is Stryker’s 10th year. Danaher is returning to the Buy List after a seven-year absence.

Our Ten New Members

Here’s a brief look at our ten new stocks, plus their starting Buy Below prices. I’ll have more to say on each stock in upcoming issues.

Axalta Coating Systems (AXTA) is a Philadelphia-based coatings company. The stock had its IPO two years ago. It was previously owned by The Carlyle Group. Buy Below $30 per share.

Cinemark Holdings (CNK) runs a chain of movie theaters in the United States, Taiwan and South America. Buy Below $42 per share.

Continental Building Products (CBPX) is a “leading manufacturer of gypsum wallboard, joint compound and complementary finishing products.” Buy below $26.

Danaher (DHR) is a diversified manufacturer. The stock has been an amazing long-term winner. Buy below $83 per share.

Ingredion (INGR) calls itself “a global ingredient-solutions company.” They turn plants into ingredients for food. Buy below $134.

Intercontinental Exchange (ICE) runs several exchanges, including the New York Stock Exchange. Buy below $61.

Moody’s (MCO) is a credit-rating agency. They also own Moody’s Analytics. Buy below $103.

RPM International (RPM) makes building materials and adhesives. The company has increased its dividend for 43 consecutive years. Buy below $58.

Sherwin-Williams (SHW) is mostly known for its line of paint. The company recently bought Valspar for $9 billion. Buy below $289.

JM Smucker (SJM) makes a lot more than jelly. The company makes a broad line of food products. Of course, with a name like Smucker’s, it has to be good. Buy below $136.

I’m also lifting the Buy Below on CR Bard (BCR) as $230 per share.

That’s all for now. The new trading year begins bright and early on Monday morning. We’ll get some of the key turn-of-the-month econ reports. ISM comes out on Monday. The ADP payroll report is on Wednesday. Then the big jobs report comes out next Friday. Be sure to keep checking the blog for daily updates. I want to wish everyone a happy, healthy and profitable New Year. I’ll have more market analysis for you in the next issue of CWS Market Review!

– Eddy

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Named by CNN/Money as the best buy-and-hold blogger, Eddy Elfenbein is the editor of Crossing Wall Street. His free Buy List has beaten the S&P 500 eight times in the last ten years. This email was sent by Eddy Elfenbein through Crossing Wall Street.
2223 Ontario Road NW, Washington, DC 20009, USA
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New Year’s edition—Good riddance 2016, finding aliens, idiot savant economists

Good morning, Quartz readers!

2016? As the sign guy said, “Geez.”

Yes, there have been far worse years in history. Yes, it’s in our (and the media’s) nature to give too much weight to bad, short-term news. Sure, you can take solace in the vast longer-term strides humanity has made, or in devil-may-care existential nihilism, or in hopeful bromides—the arc of the moral universe, yadda yadda. Choose your flavor of forced optimism, and indulge in it all you want. By any objective measure, this has still been an awful year.

It’s not just because of Aleppo, Nice, Brussels, Orlando, and other milestones in carnage. Nor because of the rise of Trump, Farage, Le Pen, Fillon, Duterte, and other merchants of hatred. Nor because free trade and movement are on the retreat. Nor even because a newlyisolationist US, resurgent Russia, and aggressive China are about to take the world’s geopolitical balance and shake it like a snow-globe.

No: It’s also because this has been the year of post-truth, when the combined effects of polarizing social media, weakening traditional media, shameless politicians, and economic and political tribalism reached their logical destination. In countries whose systems of governance were premised on at least a veneer of reasoned debate about mutually agreed-on facts, the scope for such debate is shrinking fast. This is fundamental. Don’t like the way the world is going? Want to change it? How do you convince people if they won’t even hear you?

So yes; things are bad, and it’s foolish to pretend otherwise. But it’s equally foolish to wallow in despair. Whether history records 2016 as the start of a new age of darkness, or just the darkness before a new dawn, is still up to us—each one of us. Don’t like the way the world is going? Want to change it? There’s no shortage of ideas.—Gideon Lichfield

SOME THINGS ON QUARTZ WE ESPECIALLY LIKED

We’re closer to finding alien life than ever before. Akshat Rathi explains why 2016 saw so many reputable scientists suddenly—and seriously—ascribe new phenomena to aliens.

Adobe Flash is worth saving. Its video, interactivity, and animation capabilities enabled “the web’s adolescence—its weird, rioting teenage years,” writes Keith Collins, who analyzes the rise and fall of Flash, and why it should be preserved.

Nestlé wants to change your diet—for the better. Outgoing chairman Peter Brabeck-Letmathe talks to Chase Purdy about why he’s steered the world’s largest food company into the realm of healthy nutrition.

South Africans love reading about their own dysfunction. How Long Will South Africa Survive? and We Have Now Begun Our Descent are just some of the apocalyptic titles flying off the shelves of Africa’s biggest economy, writes Lynsey Chutel.

This was the year solar panels became cheaper than fossils fuels. Michael J. Coren recounts the incredible gains made in renewable energy—and the many obstacles that still remain.

Has bitcoin’s time finally come? Joon Ian Wong on why the cryptocurrency is reaching a new all-time high, and why it might be for real this time.

Donald Trump doesn’t need to build a Muslim registry. There already is one, explains Michael Coren: It’s called Facebook.

Farewell, trading floors. As New York shutters its last commodity trading pits, Leslie Josephs and Siyi Chen take a nostalgic look back, with a video guide to the lost language of trading gestures.

QUARTZ ANNOUNCEMENT

Sign up for our pop-up newsletter, the Davos Daily Brief. Each day from January 16 to 20, we’ll deliver the most interesting news from the World Economic Forum conference directly to your inbox. Our team of veteran journalists in Davos will tell you what to watch for each day, report back on the news and discussions that matter, and identify the most intense debates and any surprises on the ground.

FIVE THINGS ELSEWHERE THAT MADE US SMARTER

Meet the reporter Trump calls a “nasty guy.” In a year that saw journalists do their best to expose Trump’s many flaws, Washington Post reporter David Fahrenthold took the prize for most hard-hitting stories. In a personal essay, he reveals how he broke those stories through the use of both digital tools and simple shoe-leather reporting.

The 2016 movies that resonated with behavioral economists.The Becons, or “Behavioral Economics Oscars,” go to movies and movie-makers who embody concepts explored in that field of study. With nods to everything from cognitive operation to norm theory, Bloomberg’s Cass R. Sunstein doles out awards for best director, best documentary, best actor, best actress, and best picture.

America can learn something from Singapore. The city-state is often portrayed as a democratic success story, but Singapore suffers from an authoritarian streak that will sound familiar to Americans fearful of a United States under president Trump. “Authoritarianism isn’t just about show trials or disappearing dissidents,” Kirsten Han writes in The Establishment. “It’s about the gradual consolidation of power through the erosion of democratic institutions and processes.”

Economists don’t understand the world. The great economists of yore were polymaths. Mill was also a philosopher; Hayek, a political scientist. These days, economists treat the world as a set of abstract equations, argues Robert Skidelsky, economic historian, in a Project Syndicate column. The result is that the profession can only tell us what is true in its models, not the real world. “The economists,” writes Skidelsky, “are the idiots savants of our time.”

The key to Apple’s China operation is perks—lots of them. The world’s biggest iPhone factory—capable of producing 500,000 phones a day—is a Foxconn outfit in Zhengzhou, China, dubbed “iPhone City” by locals. In a detailed glimpse (paywall) at China’s efforts to lure overseas companies, New York Times reporter David Barboza documents the string of incentives that make iPhone City possible—everything from construction subsidies to recruiting help to bonuses for high production.

Our best wishes for a relaxing but thought-filled weekend and New Year’s Eve. Please send any news, comments, alien phenomena, and Becon nominations to hi@qz.com. You can follow us on Twitter here for updates throughout the day.

#Obama takes on #Russia, a ceasefire in #Syria, #Netflix tricks kids

Good morning, Quartz readers!

WHAT TO WATCH FOR TODAY

Syria tries another ceasefire. The Syrian government and rebel groups agreed on a yet another nationwide ceasefire to begin at midnight local time. Under the terms of the deal, peace talks will be held in Kazakhstan next month, though a date hasn’t been announced. Monitors have already reported violations in some areas—and if the truce breaks like the previous ones, plans for peace talks will falter.

India’s first transgender school opens. The Sahaj International School in Kochi, Kerala, will initially serve 10 transgender students, and be run by six transgender teachers and administrators, working with the TransIndia Foundation. After nearly 50 building owners refused to house the institute, it finally secured a lease from a Christian organization.

World leaders bid 2016 adieu. French president Francois Hollande and German chancellor Angela Merkel will make televised speechesto close out the year; the latter is expected to discuss her policy agenda for 2017. On New Year’s Eve, Indian prime minister Narendra Modi will address the nation, in part about the impact of his controversial 50-day demonetization scheme. While US president Barack Obama has no plans for an end-of-year speech, he is expected to make an end-of-presidency speech on Jan. 10, 2017.

WHILE YOU WERE SLEEPING

The US fired back at Russia over election hacking. The Obama administration ejected 35 Russian intelligence operatives from US soil, expanded sanctions, and published declassified information on Russia’s cyber-meddling in the US presidential election. A Russian presidential spokesperson vowed retaliation, saying that there would be “no alternative here to the principle of reciprocity.” The move will force president-elect Donald Trump to either accept the sanctions when he takes office, or lift them against the will of US intelligence agencies—and members of his own party.

Theresa May criticized John Kerry for his comments on Israel.“We do not believe that it is appropriate to attack the composition of the democratically elected government of an ally,” said a spokesperson for the UK prime minister. Other European politicians have shown support for Kerry, while opinion is more divided in the US.

Australian anti-terror police made another arrest. Authorities detained 40-year-old Damien James O’Neil at Sydney Airport, after receiving tips that he made threats regarding a terror attack on New Year’s Eve. Police said that the incident was isolated, which suggests there was no connection to a plot in Melbourne foiled last week.

Police might have found Greece’s missing ambassador.Brazilian authorities say they found a body inside a charred vehicle believed to be Kyriakos Amiridis, Greece’s ambassador to Brazil. Amiridis was last seen on Monday leaving the home of family friends in Rio De Janeiro. Neither the Greek Embassy in Brazil nor Brazil’s foreign ministry have released statements on Amiridis’ disappearance.

Milo Yiannopoulos scored a book deal. The right-wing provocateur received a $250,000 advance to write for Threshold Editions, an imprint of Simon & Schuster. The imprint has published titles from other conservative pundits like Glenn Beck and Rush Limbaugh—as well as Donald Trump.

QUARTZ OBSESSION INTERLUDE

Neha Thirani Bagri on the scary, unimpeachable evidence that climate change is already here. “According to Pew Research, less than half of all American adults believe that the Earth is warming mostly due to human activity. They are wrong, though, and 2016 was the year that news from around the world made climate change undeniable to anyone paying attention.” Read more here.

MATTERS OF DEBATE

The UN called Netanyahu’s bluff. Israel’s prime minister has long assumed that the international community would overlook the plight of Palestinians.

High CEO pay doesn’t help companies’ bottom line. There’s a “material disconnect” between what bosses are paid and a company’s financial performance.

Mobile-app games teach bad economics. In-app purchasesmanipulate children into buying things they don’t need.

SURPRISING DISCOVERIES

Nine species have been named after Barack Obama. That’smore than any other president—though Teddy Roosevelt comes close with seven.

Half the planet will have to endure 2016 for an extra moment.On Dec. 31, the world will experience its 28th “leap second.”

Netflix is helping parents get kids to bed early on New Year’s Eve. The streaming service offers 10 different countdown videos to be played, well, whenever you want.

Helsinki’s anti-drug police chief ran a drug ring. He will serve 10 years in prison for helping import 800kg of hashish into Finland.

The CIA refuses to sell a calendar of its official paintings.Produced by the nephew of a CIA contractor, the Secret Ops of the CIA calendar is available for purchase at the International Spy Museum.

Our best wishes for a productive day. Please send any news, comments, CIA paintings, and countdown videos for kids tohi@qz.com. You can follow us on Twitter for updates throughout the day or download our apps for iPhone and Android.

#Japan’s #Abe at Pearl Harbor, George Michael’s last ballad, Korean Santa protests

Good morning, Quartz readers!

WHAT TO WATCH FOR TODAY

Officials from China, Pakistan, and Russia assess the threat posed by Islamic State extremists in Afghanistan. The gathering in Moscow will take place without a representative from Afghan president Ashraf Ghani’s national unity government.

A conference of Chinese Catholics meets after a six-year-long hiatus. The ninth Chinese-Catholic representative conference will begin Tuesday and run through Thursday in Beijing, which is a step toward mending relations with the Vatican. The country’s 12 million Catholics are divided between the official government-run association and “underground” Catholics whose allegiance is to the Vatican.

Japanese prime minister Shinzo Abe visits Pearl Harbor with president Barack Obama. Abe is not expected to apologize for the attack on a US military base there in 1941, which brought the US into World War II. “This will be a visit to console the souls of the victims,” Abe told reporters in Tokyo. “I would like to show to the world the resolve that horrors of war should never be repeated.”

OVER THE WEEKEND

British pop star George Michael died in his home. The 53-year-old singer was widely mourned for his genius at creating catchy, ubiquitous music and for inspiring many as an openly gay celebrity. In 1985, his band Wham! also became the first Western pop act to perform in communist China.

Israeli prime minister Benjamin Netanyahu chided Barack Obama. He was upset about a Dec. 23 vote by the United Nations Security Council seeking the end of Israeli settlements in Palestinian territories. The resolution passed 14 to 1, with the US abstaining. “Friends don’t take friends to the Security Council,” Netanyahu retorted.

Iran says it got a sweet deal on 80 new Boeing airliners. The order for Iran Air had previously valued the planes at $16.6 billion, but Tehran said on Dec. 25 that it had negotiated to pay about half that price, closer to $8 billion.

Donald Trump had a baffling, chaotic Christmas Eve. With reporters on vacation, the president-elect said he would close his controversial foundation, but law enforcement officials said it cannot be shuttered until they complete investigations into possible illegal activities there. Meanwhile, days after being tapped as the next White House communications director, Jason Miller announced his resignation following allegations of an extra-marital affair with a Trump campaign surrogate.

A Russian military plane crashed in the Black Sea. Vladimir Putin’s erratic efforts to project Russian power abroad saw another setback when a military jet headed for Syria crashed in the Black Sea. The crash was likely due to mechanical or pilot error, and all 92 passengers aboard have been reported dead. The plane was carrying a Russian military choir planning to perform for Russian soldiers fighting in Syria’s bloody civil war.

QUARTZ OBSESSION INTERLUDE

Michael J. Coren on a tipping point for renewable energy.“Solar and wind is now the same price or cheaper than fossil fuels in more than 30 countries, the WEF reported in December (pdf). As prices for solar and wind power continue their precipitous fall, two-thirds of all nations will reach the point known as ‘grid parity’ within a few years, even without subsidies.” Read more here.

MATTERS OF DEBATE

German chancellor Angela Merkel is destroying Europe. Heropen-door policy toward immigration is not only damaging her party’s reputation, but the European Union’s security as a whole.

Many young Russians see Putin as a hero. His steadfast stoicism and promise of stability are exactly what millennials who don’t remember decades of totalitarian USSR rule are looking for.

Bigotry did not help elect Trump. Voters in this year’s presidential election simply supported the candidate perceived as the lesser of two evils.

MESSAGE FROM OUR PARTNER

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SURPRISING DISCOVERIES

An ostrich-like dinosaur might explain how birds became toothless. The two-legged Limusaurus inextricabilis lost its teeth and became vegetarian in adulthood, scientists have determined.

A trial vaccine for ebola has shown a 100% protection rate.Thousands of people tested in Guinea were all confirmed as virus-free within 10 days. It could be available for mass use by 2018.

Scientists have created the world’s thinnest wires yet—and they’re made of atoms coated in diamonds. These nanometer-scale wires could help cram more computing power into even-smaller devices.

South Koreans staged a “Santa protest” against president Park Geun-hye. In the ninth-consecutive weekend rally against the embattled leader, demonstrators rang in the holidays by dressing up in Santa suits and mocking Park to the tunes of famous carols.

George Michael was the original Carpool Karaoke invitee. Back when James Corden was still starring in the British sitcom Gavin & Stacey, he took a musical spin with Michael crooning in the passenger seat.

Our best wishes for a productive day. Please send any news, comments, cheap Boeing airplanes, and George Michael carpool singalongs to hi@qz.com. You can follow us on Twitter for updates throughout the day or download our apps for iPhone and Android.

Weekend edition—Nuclear poker, Chinese memes, lab mouse genes

Good morning, Quartz readers!

The nuclear threat is now greater than at any time since the 1980s.

While the number of nuclear warheads in the world is continuing its slow decline, both Russia and America have been investing heavily in modernizing their weapons and delivery systems. In the White House will soon be a famously irascible man who is also famously ignorantabout nukes. In the Kremlin is the first Russian leader since Nikita Khrushchev to put the use of nuclear weapons on the table (paywall), and who has reveled in provoking Europe, sowing carnage in the Middle East, and destabilizing the US political process.

What’s scary is that of the two men, Vladimir Putin is the rational one.

It’s surely no accident that Putin spoke publicly about upgrading Russia’s nuclear arsenal the day before his annual marathon press conference: Clearly, he wanted to be asked about it with the whole world watching. What was unexpected was that Donald Trump reacted by tweeting that the US “must greatly strengthen and expand its nuclear capability.” Puzzling over what exactly he might have meant, the New York Times noted that where the Obama administration took a year of thought and 64 pages to express its nuclear policy, Trump had done it in a few moments and 140 characters.

Putin may have meant to manoeuvre the American political neophyte into a deal that leaves Russia unthreatened by US warheads. But if so he didn’t reckon with Trump’s tweet-from-the-hip approach. As chess champion Garry Kasparov has observed, Putin likes playing “geopolitical poker” with a strong enough nerve to out-bluff his Western opponents. This works when your opponents are rational and predictable. Trump, though, has said he believes the key to a nuclear deterrent is unpredictability.

Putin said he hopes for “businesslike and constructive” relations with Trump. If so, he should put aside the mind games and work on striking one of Trump’s beloved “deals.” Because we just don’t know when the billionaire might get bored of playing geopolitical poker and pull out a geopolitical gun.—Max de Haldevang

FIVE THINGS ON QUARTZ WE ESPECIALLY LIKED

China’s most popular—and revealing—memes of 2016. Mystic energy, “giant small goals,” watermelon-eating spectators: these were some of the memes that dominated China’s internet. Zheping Huang and Echo Huang dissect how these viral hits illustrated China’s assertiveness, but also its frailties and vulnerabilities.

How to keep tabs on Donald Trump. Christopher Groskopf and Jasan Karaian lay out the 10 key indicators to track in order to hold him accountable for his promise to revitalize the economy. Meanwhile, John West explores the dangers of online surveillance under a Trump presidency, and offers a philosophical strategy for protecting your privacy—and saving your soul in the process.

Why doesn’t Venezuela just default? It’s too poor to import food and medicine, yet it’s still paying off its debt to wealthy foreign creditors. Eshe Nelson explains the terrible double bind that forces the country to keep paying and traps it in a spiral of economic despair.

The controversial experiment to educate Africa’s children. A school chain backed by Bill Gates and Mark Zuckerberg that made radical promises to fix some of the world’s worst education systems is now under fire for its methods. Nimi Hoffman on the questionable ethics of using schookids as guinea pigs.

The Ultimate Authoritative Unimpeachable Top 20 Books of 2016. You could easily read so many best-books-of-the-year rankings that you’ll never get around to reading the actual books. Kira Bindrim has saved you the bother by aggregating dozens of rankingsto create a master list.

Plus, some inspiration for the holidays …

Meet the world’s most extreme cold-water swimmer. Lewis Pugh, the UN’s “Patron of the Oceans,” swims Arctic and Antarctic seas in just a bathing suit to draw attention to the environment. Cassie Werber talks to him about what it takes and why, despite the grim prognoses, he’s an optimist about stopping climate change. And if that inspires you, read Cassie’s ultimate guide to exercising in winter. (Arctic swimming not included.)

QUARTZ ANNOUNCEMENT

Sign up for our pop-up newsletter, the Davos Daily Brief. Each day from January 16 to 20, we’ll deliver the most interesting news from the World Economic Forum conference directly to your inbox. Our team of veteran journalists in Davos will tell you what to watch for each day, report back on the news and discussions that matter, and identify the most intense debates and any surprises on the ground.

 

FIVE THINGS ELSEWHERE THAT MADE US SMARTER

The profiteers of the refugee crisis. Maria Politzer and Emily Kassie have a multimedia series at Huffington Post Highline on the Nigerian people-smugglers, Italian mafiosi, Syrian exile sweatshop owners, and German corporations that have turned human desperation into a nice little earner.

The Oskar Schindler of the refugee crisis. If the foregoing destroyed your faith in humanity, this will restore it. Mark Mann in Toronto Life tells the story of Jim Estill, a Canadian businessman who has brought hundreds of Syrian families to safety by helping them get government support and find work.

The inside story of Apple’s $14 billion tax bill. Prohibition-era Chicago had The Untouchables. Today’s EU has the Maxforce—a small gang of bureaucrats led by, yes, a guy called Max. Bloomberg’s Gaspard Sebag, Sara Doyle, and Alex Webb tell how the Maxforce discovered that a decades-old agreement was letting Apple avoid almost all taxes in Europe, and came down on it like a ton of iPhones.

How the lab mouse got its genes. The Jackson Laboratory in Maine, a.k.a. JAX, breeds mice for medical experiments, taking painstaking efforts to churn out a consistent product—think mouse McDonald’s. Yet minor variations in feeding, care, or experimental protocols can make a hash of results. The Economist’s Jason Palmer looks at how JAX is tackling the problem by taking mouse breeding to the next level.

Rejoice, for the end of the world is not at hand. Max Roser at Our World in Data offers an antidote to end-of-2016 gloom in the form of some historical perspective. Education, literacy, child mortality, vaccination, poverty, and democracy have all made immeasurable—no, actually, highly measurable and huge advances in the past couple of centuries. Only by knowing how far we have come, Roser argues, can we see how to keep on moving forward.

Our best wishes for a relaxing but thought-filled weekend and Christmas holiday. Please send any news, comments, lab mice, and heart-warming charts to hi@qz.com. You can follow us on Twitter here for updates throughout the day.

CWS Market Review – December 23, 2016

CWS Market Review

December 23, 2016
Ladies and gentlemen, here are the 25 stocks for the 2017 Crossing Wall Street Buy List:

AFLAC (AFL)

Alliance Data Systems (ADS)

Axalta Coating Systems (AXTA)

Cerner (CERN)

Cinemark Holdings (CNK)

Continental Building Products (CBPX)

Cognizant Technology Solutions (CTSH)

CR Bard (BCR)

Danaher (DHR)

Express Scripts (ESRX)

Fiserv (FISV)

HEICO (HEI)

Hormel Foods (HRL)

Ingredion (INGR)

Intercontinental Exchange (ICE)

Microsoft (MSFT)

Moody’s (MCO)

Ross Stores (ROST)

RPM International (RPM)

Sherwin-Williams (SHW)

Signature Bank (SBNY)

JM Smucker (SJM)

Snap-on (SNA)

Stryker (SYK)

Wabtec (WAB)

The ten new stocks are Axalta Coating Systems (AXTA), Cinemark Holdings (CNK), Continental Building Products (CBPX), Danaher (DHR), Ingredion (INGR), Intercontinental Exchange (ICE), Moody’s (MCO), RPM International (RPM), Sherwin-Williams (SHW) and JM Smucker (SJM).

I’ll have more details on the new buys in next week’s issue.

The five sells are Bed Bath & Beyond, Biogen, Ford, Stericycle and Wells Fargo.

To recap, I assume the Buy List is equally weighted among the 25 stocks. The buy price for each stock will be the closing price as of Friday, December 30, 2016. The new Buy List goes into effect on Monday, January 2, 2017, the first day of trading of the new year.

The Buy List is now locked and sealed, and I won’t be able to make any changes for the entire year. I’ll have a complete recap of 2016 at the end of the year. I’ll also have more to say about our new buys, and I’ll give you new Buy Below prices.

With a week to go, this looks to be one of our rare years where we trailed the market. Through Thursday, our Buy List is up 1.93% for the year, compared with 10.62% for the S&P 500. That doesn’t include dividends, but I’ll have the final calculations in next week’s issue.

I should add two points in my defense. The first is that most of our underperformance came during a difficult spring and summer. We turned the corner recently and have beaten the market over the last two months. Let’s hope that trend continues into next year.

Also, our 11-year track record against the market is still quite good. Again, I’ll have complete details in next week’s issue.

Our Five Sells

Let me add a few words on the sells. My belief is that each new buy should last a few years. I only turn against a stock when it turns out to be something quite different from what I originally believed.

Bed Bath & Beyond was one of the most frustrating stocks to own. They had a long-time reputation for being a well-run outfit. Unfortunately, they fell behind the times. I simply stayed in this one for too long. I waited for a turnaround that never came. This week, the company released yet another poor earnings report. It’s time to let it go.

There’s a lot I like about Ford. Overall, I think the company did a good job managing its way through the recession. Ford was never bailed out. They also made an impressive change to aluminum-body trucks. I also liked Ford’s generous dividend, plus their special dividend payment. Unfortunately, the outlook for Ford isn’t as rosy as I had assumed.

I’m sad to part with Biogen. There’s a lot to like about this biotech, but I think they need to make some big changes first. Sales of Tecfidera have slowed down dramatically, and their broader pipeline is weak. Next year’s spinoff of Bioverativ is a good start. Despite its terrible name, Bioverativ could turn into a winner. I need to see results first, however.

Stericycle was a mistake from the beginning. I simply missed how poorly organic sales had been performing. Management tried to mask these issues with a series of unwise rollups. This was a massive loser for us this year.

There’s not much else to be said about Wells Fargo that hasn’t been said before. Fundamentally, WFC is a sound bank, but it’s been tainted by its indefensible behavior. At least, the stock has been a terrible performer this year.

Dow Flirts with 20,000, Gets Number, Never Calls

There wasn’t much news this week. The Dow has made a few runs at 20,000 but has so far failed to break through. On Wednesday, the index got as high as 19,986.56. On Tuesday, Wednesday and Thursday, most stock market volatility slowed to a crawl. The Dow is apparently doing its own version of the mannequin challenge. On Wednesday, the VIX briefly dropped below 11. That hasn’t happened in more than a year.

On Thursday, the government revised its report on Q3 GDP growth from 3.2% to 3.5%. Last quarter was the best for economic growth in two years. The first quarter is about to start.

Over the last ten years, there’s been a very noticeable trend of Q1 being quite poor for economic growth. I don’t know if that’s due to weather or other factors. Still, for the first time in a long time, I’m optimistic about the economy. I think there’s a good chance GDP growth for Q4 will top 2.5%. This week, we learned that consumer spending rose by 0.2% last month, while the number for October was revised up to a healthy 0.4%.

I also wanted to pass along this excerpt by Gary Alexander in Louis Navellier’s most recent Market Mail. Keep this in mind when you hear the latest forecasts from experts.

Last August, shortly after the political nominating conventions ratified Clinton and Trump as the two major party candidates, William Buiter, Chief Economist at Citigroup, and his team warned of a global recession if Trump won. His team said that a Trump win would cut world growth by 0.7-0.8 percentage points and could “easily” push growth below 2%, the threshold that indicates a looming recession. But last week, Buiter and his team reversed course and raised their 2017 forecast for global growth to 2.7%. (Source: Business Insider, December 12, 2016, “RPT-Investment Focus: Among the shocks, steady global growth is the biggest surprise.”)

(…)

On October 31st, Andrew Ross Sorkin wrote a New York Times analysis of what would happen after a surprise Trump victory. First, he quoted MIT economist Simon Johnson, who said a Trump presidency would “likely cause the stock market to crash and plunge the world into recession.” Sorkin added that Johnson’s “pessimism is shared by many economists across Wall Street, from Citigroup to Goldman Sachs. Each cites a different set of reasons the markets will fall if Trump wins.”

Remember: Prices drive narratives.

Before I go, I want to adjust two of our Buy Below prices. I’m lifting our Buy Below on Fiserv (FISV) to $111 per share. I’m also raising Stryker (SYK) to $128 per share.

That’s all for now. The stock market will be closed on Monday, December 26 for Christmas. Trading resumes on Tuesday, and the final day of trading for 2016 will be on Friday, December 30. The next issue if CWS Market Review will be on Saturday, December 31. I’ll have a complete summary of how we did in 2016, plus I’ll list the starting prices for 2017. Be sure to keep checking the blog for daily updates. I’ll have more market analysis for you in the next issue of CWS Market Review!

– Eddy

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Named by CNN/Money as the best buy-and-hold blogger, Eddy Elfenbein is the editor of Crossing Wall Street. His free Buy List has beaten the S&P 500 eight times in the last nine years. This email was sent by Eddy Elfenbein through Crossing Wall Street.
2223 Ontario Road NW, Washington, DC 20009, USA

#Putin answers questions, two thwarted terror attacks, murderous cowbirds

Good morning, Quartz readers!

WHAT TO WATCH FOR TODAY

Vladimir Putin holds his annual press conference. The event had been pushed back so that Putin could attend the funeral of Andrei Karlov, the Russian ambassador to Turkey who was assassinated on Dec. 19 in Ankara. More than 14,000 journalists are accredited to cover the much-anticipated Q&A, which lasted three hours in 2015, touching on everything from the Russian economy to Putin’s private life.

India’s longest expressway opens to commuters. The new roadcuts Agra-to-Lucknow travel time from eight hours to five.Inaugurated on Nov. 21, the six-lane highway spans 10 districts.

The United Kingdom gets a report card. The Office for National Statistics releases the UK’s third-quarter GDP numbers, andconfirms whether the economy grew at a healthy 0.5% as expected. The ONS will also disclose how the UK’s services sector, which accounts for a large share of the economy, fared in October.

WHILE YOU WERE SLEEPING

The Syrian military took control of Aleppo. Syria’s government said that the last of the civilians and rebel fighters were evacuatedfollowing a deal brokered by Russia and Turkey. The recapture of Aleppo, which ends four years of fighting there, marks president Bashar al-Assad’s most significant victory in the Syrian conflict so far.

Israel revealed it worked with Trump to delay the UN’s settlements vote. Expecting the US to abstain and let the resolution pass, officials close to the matter say Israel prompted Donald Trump(paywall) to tweet his opposition to the proposal, and phone Egyptian president Abel Fattah al-Sisi to ask for a postponement. No date has been set for the vote’s revival.

Australia foiled a terror attack planned for Christmas Day…Police arrested five Australian nationals suspected of plotting a scheme involving explosives and other weapons across multiple locations in Melbourne. Authorities say the men were “self-radicalized” but inspired by ISIL propaganda.

…and so did Germany. Officials detained two Serbian mensuspected of preparing an attack on a mall in the western city of Oberhausen. It’s not clear if the plans were connected to the recent attack in Berlin.

China slammed Trump’s trade pick. After the president-elect tapped vocal China critic Peter Navarro to head a new trade office, state-backed tabloid the Global Times published an editorial fiercely condemning the choice. China “must discard any illusions and make full preparations for any offensive move by the Trump government,” the piece reads.

QUARTZ OBSESSION INTERLUDE

Leslie Josephs with a guide to premium-economy upgrades. “Leave it to the crafty airlines to invent a new product—called premium economy—to capitalize on passengers’ trauma of cramped cabins past. Taiwan’s EVA Air and the UK’s Virgin Atlantic were the ones who pioneered the in-between service class in the early 1990s, but the concept really took off this year as fares tumbled and airlines grappled with ways to drum up revenue.” Read more here.

MATTERS OF DEBATE

A two-state solution for Israel and Palestine is impossible. The only hope for sustained peace is a “binational” state.

Empathy in medicine is overrated. Doctors should alleviate patients’ pain, not mirror their distress.

Believing in Santa Claus is rational. Given all the “evidence,” children’s faith in St. Nick is actually scientific thinking.

SURPRISING DISCOVERIES

A university in Thailand is accepting rice as tuition. The school will put an above-market value on rice to counter the lowest grain prices in a decade.

Teaching African girls about puberty keeps them in school.One study found a 17% drop in absenteeism when girls were given sanitary napkins, puberty education, or both.

Cowbirds are devious criminals. The shiny cowbird drops its egg in other birds’ nests, then punctures all the other eggs.

The hottest borehole ever made is almost complete. Iceland’s Deep Drilling Project could reach depths where the temperature is as high as 500°C (932°F).

Wrapping paper is only 99 years old. It all started when two brothers in Kansas ran out of red, white, and green tissue paper.

Our best wishes for a productive day. Please send any news, comments, cowbird eggs, and century-old wrapping paper tohi@qz.com. You can follow us on Twitter for updates throughout the day or download our apps for iPhone and Android.