Week In Brief: April 3

April 3, 2015

Last week, a neighbor was explaining that he may have to forgo the family Spring Break in Florida. Allegiant's pilots were set to strike. So jeopardizing their Monday flight. The courts eventually stepped in. Determined that too many would be harmed. Forced the pilots to abort their plans.
The point? On Easter, the family flocked to our place. Enjoyed a lovely day, during which I had a conversation with a relative who works a blue collar job and happens to be union. We were discussing the Allegiant situation. As well as his employer. And his union. Though he belongs to one, he remains staunchly anti-union. When I asked him why, he made an interesting quip. Said that unions effectively make the "weak of mind strong and the strong of mind weak." An interesting play on a long-standing labor maxim.
April tends to be a solid month for stocks, with the S&P 500 rising an average of 1.36 percent the last 65 years. Recently, April has seen stocks do even better. With the ten year monthly average a gain of 2.78 percent.
Stocks recently rebounded off their 125-day moving averages. Again. They now appear to be headed into the higher end of the range in which they've traded since July. Which portends a possible April rally. Though we won't be shocked by a break lower. It's been a while since we had a real sell off.
TIS Group analysts point out that since 1980, the second quarter of every third year in each presidential cycle has been positive. Every one. The average return being seven percent. Accordingly, the S&P 500 could lift from current levels of 2066 to 2210. The Nasdaq would rise from 4886 to 5228.
Thus far, the best performing market caps have been mid caps and small caps. Both have yielded upwards of five percent or better. While earnings growth has dropped, and expectations stewarded lower, Dealogic reports a 108 percent year-over-year increase in mergers and acquisitions in Q1. Up to $126B. The second-highest period on record. Even if EPS growth diminishes a bit, M&A growth and share buybacks will continue to make shares more attractive.
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The Middle East descends into disarray. So much so that the chaos is unusual. Even for this most chaotic of regions. Events imperil President Obama's foreign policy hopes. Not to mention any chance at bringing the region's ethnic and religious strife under any semblance of control.
Saudi Arabia, terrified at the prospects of an Iranian-led takeover of Yemen, have assembled a coterie of Sunni nations in an effort to dislodge the Iranian-backed rebels from Yemen. The U.S. administration has pledged intelligence and hardware support. So placing the U.S. in a difficult position. As it will be working against Iranian-led efforts in Yemen while simultaneously negotiating a nuclear pact with Iran.
One might believe that someone's being played. If Iran was serious about reaching a nuclear accord, would it be simultaneously sowing the seeds of discontent with U.S. allies elsewhere? Conversely, if the U.S. was so insistent on a deal, why concomitantly act on behalf of Iran's enemies?

Still, we play this game. Perhaps there will yet be revealed a grand strategic design. Much remains to be seen. Deal frameworks have been announced, but true progress has been sparse. While the violence and contentiousness appears to be cascading.

World powers and Iran agreed on a deal framework intended to constrain Iran's nuclear program while easing sanctions. Of course, a variety of critical details remain unclear. What's the process for sanctions reinstatement if Iran doesn't deliver? How quickly can Iran return to exporting oil? How much nuclear infrastructure will Iran deconstruct? That was, in fact, the original premise of the talks. Though they appear long forgotten.
A realignment of U.S. interests away from Israel and towards Iran would mark a sea change in 65 years of U.S. foreign policy. Could burgeoning U.S. shale and solar capabilities be steering the nation away from the historically volatile Middle East? Where does this leave Israel? Our one democratic ally in the region. Keep an eye on the Navy's Sixth Fleet. Based in Italy, it is there to protect U.S. interests in the Persian Gulf. Any mention of the fleet's fluid future would signal our intentions. Gone are the days of our politicians simply stating their intentions.

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