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December 2016

6 January 2017 - By Wim Bernards

Happy New Year!

So that was 2016. Last month, a large number of famous people passed away: pop stars George Michael (53) and Status Quo's Rick Parfitt (68), actresses Carrie Fisher (60) (Star Wars), her mother Debbie Reynolds (84) and Zsa Zsa Gabor (99), actor William Christopher (chaplain in M*A*S*H*) (84), Tyrus Wong (106) (lead artist on Disney's 1942 film Bambi), Watership Down author Richard Adams (96), astronomer Vera Rubin (88), doctor Henry Heimlich (96), astronaut John Glenn (95) and more than sixty members of the Russian Red Army Choir, who died in a plane crash. In December, Time magazine made Donald Trump 'person of the year', French solo sailor Thomas Coville sailed around the world in 49 days, setting a new record, and there was a terrorist attack in Berlin. Last month, it was 75 years ago that Japanese forces attacked Pearl Harbor, 25 years ago that the USSR ceased to exist, and 100 years ago that Rasputin was murdered. 2016 was the year in which the 500 richest people in the world added 237 billion US dollars to their wealth.

2016 according to Wall Street Breakfast:
Politics, economics and markets were all turned on their head in 2016, and investors are looking ahead to 2017 following a turbulent year. Highlights: The Panama Papers, Dieselgate settlement, Greek debt relief, Megabrew, the EU's tax crackdown, sale of Yahoo, nuclear test and impeachment in Korea, Pokemon Go, Twitter takeover rumors, Brexit and sterling's plunge, the Italian referendum, panic at Deutsche Bank and Monte dei Paschi, OPEC's output deal, and following Donald Trump's election ­– a Fed rate hike, the dollar's surge and soaring treasury yields. The Dow, S&P and Nasdaq also partied like it was 1999 – the three markets all closed at historic highs for the first time in 17 years.

The Dow Jones ended at 19,762 (up 15%)
The S&P ended at 2,238 (up 11%)
The Nasdaq ended at 5,383 (up 8 %)
The All Ordinaries ended at 5,719 (up 7%)
The Hang Seng Index ended at 22,000 (flat)
The DAX ended at 11,481 (up 9%)


From Bespoke:
Just before Christmas, the stock markets were in overbought territory. The 20,000 mark came closer and the
major averages struggled to advance amid extended overbought conditions.  As shown in the trading range charts below, both the DJIA and S&P 500 were trading in overbought (more than one standard deviation above 50-DMA) territory. This situation changed at the end of the month. The streak of overbought conditions of 31 days, which had been in place since the election, was broken.

USA DJIA Tradign Range 2016

In the post-election rally, it took a little longer for the S&P 500 to hit overbought levels, so the latest streak of overbought closed at just 27 days.  While this streak was shorter, it still went down as the longest streak of overbought closes for the S&P 500 since July 2014.  

USA SP 500 Trading Range


Santa Rally? Well, it didn't really work out in 2016.

USA Santa Ralley

We are in the low volatility season...

US Low vol season

Share buybacks are declining. Something to do with the expected rate increases in 2017?

USA Buybacks 

Fear Greed index

Fear and greed

Source: CNN Money

As a result of the FED rate increase (with more increases expected in 2017), investors are taking their money out of bonds and moving it to stocks.

USA bond to stock markets


New home sales hit the highest level since the recession. Some of these purchases may have been pushed forward because of higher rate expectations. Below are the Existing Home Sales.

USA New Home Sales 


From Wall Street Breakfast:
More Brexit uncertainty? Lloyds is planning to establish a subsidiary in Germany or the Netherlands if the U.K. leaves the European Union without retaining access to its single market, FT reports. A number of Japanese banks also said this month they would begin shifting parts of their business by June unless they had clarity on Britain's relationship with the EU.


Despite its current problems, Italy's retail sales grew by the largest percentage in years.

Eurzone Italian Retail sales 


From Wall Street Breakfast:
Italy's government approved a state bailout for Monte dei Paschi di Siena, after the world's oldest bank failed to secure backing from private investors. (CNBC).
Monte dei Paschi plans to issue €15B of debt next year to restore liquidity and boost investor confidence, according to several reports. BMPS's debt sales would be supported by government guarantees. They form part of a liquidity scheme for "banks in need," which the European Commission has agreed to extend for six months.

Eurozone MDP 

2008 crisis

Wall Street Breakfast:
Deutsche Bank agreed to a $7.2 billion settlement with the U.S. Justice Department over its financial crisis-era sale of mortgage-backed securities. That's about half of the DOJ's originally request. (CNBC) 
Credit Suisse (CS) agreed in principle to a $5.3 billion settlement with the DOJ, over charges related to mortgage-backed securities. That's about in-line with what U.S. regulators had sought. (CNBC) 


As Trump's transition team discusses a possible 10% tariff on imports, Chinese firms look poised to suffer the most.

China shares

Recent history of the renminbi

China yuan 


Bitcoins did very well last month. The price is increasing again. This may have something to do with the outflow of funds from China.



In December, oil prices went up after the OPEC (and non-OPEC) deal to cut their outputs.


US gasoline inventory in terms of days of supply

Crude inventory 

US dollar index

December 2016:

US dollar index 


US dollar index 2016



From The Wall Street Journal:
TOKYO— Toshiba Corp. seemed poised to profit from a global nuclear power revival when it paid $5.4 billion to win a bidding war for Westinghouse Electric Co. in 2006. However, that bet threatens to sink the venerable Japanese conglomerate, as cost overruns and missed deadlines on nuclear reactor projects around the world have forced it to warn investors that it may soon have to report billions of dollars in losses.
Toshiba lost a fifth of its market value ib 28 December and its stock fell an additional 17% the day after in Tokyo as panicked investors rushed to sell shares. The news of the nuclear write-downs came just as Toshiba was beginning to emerge from an earlier accounting scandal.

shares toshiba 


US spending patterns have changed hugely

misc USA spending

US shoe imports

The US imports most of its shoes, even though high tariffs are levied.

Misc Shoe inports 

Use of device/internet by age

misc use of internet

This was our December 2016 monthly overview. Our goal is not to cover all market developments, but just the subjects that appeared important to us. We hope you found it interesting and useful. All feedback is welcome. Just send an email to



Wim Bernards

Wim Bernards peruses the media on financial and world affairs. Every month, he describes the things he finds interesting from an investor's point of view. This can range from macro-economics to micro-economics and everything in between. Sometimes, he may sidestep to behavioral finance, politics and other areas the reader may find interesting. However, he doesn't aim to be all inclusive; he just aims for an interesting monthly read.