Your Tuesday Market Blip 10/17/17

Your Tuesday Market Blip 10/17/17

The Dow broke above 23,000 for the first time ever before closing the day at 12,997 up 40. Trading volume was higher. Homebuilder confidence hit a sixth month high and earnings reports continue to come in with positive results.

Netflix posted another stellar earnings report as revenue grew 30% while bottom line profits were up 142%. The results surprised to the upside and smoked estimates like a hunk of meat at a Texas BBQ. Subscriber growth came in well above expectations for both domestic and international markets. Several investment firms raised target prices for Netflix.

Franklin Mutual Funds today hosted a conference call about the municipal bond market and the fallout from Puerto Rican bonds that are fast approaching toilet paper status. While Franklin has minimal exposure to PR bonds they had a discussion about the trend where local politicians, when faced with budget shortfalls, are moving Wall Street muni bond holders from a “first lien positon” to a “first haircut position” which, while it goes against state constitutions, is palatable with voters in helping solve the pension crisis faced by many cities and states. This new trend is turning the once crusty and safe muni bond space into a volatile market with risk levels on the rise. It is also causing some cities and states to pay more in interest as investors demand higher yields to compensate for higher risk. So far Washington State is immune from this trend but it “bears” watching.

Airbus announced it was investing in Bombardier’s C Series jet program with the idea of building the plane in the US (which is good for US jobs) to compete against Boeing. The hastily put together deal aims to get the gubment of Canada and Quebec out of the ownership picture while opening a 2nd manufacturing line in Alabama will address the issue of foreign dumping. Boeing called the deal an attempt to dodge import duties. This battle is an example of the highly competitive cat and mouse nature of the airplane business!