Hi Again,

Over the past few months, some people thought that the stock market goes up without going down. Unrealistic expectations! Markets go up and markets go down. Every time the market goes down, all kinds of pundits come up with reasons or excuses. Many months ago I asked you if you are ready for the Trump crash; but Trump is not to blame for the crash that is coming and he cannot take credit for the current bull market. This bull market is very old. Markets are like dogs. This market is over 9 years old and that is very old for a market. This is the 2nd longest bull market since 1990; and this is the 4th longest bull market since 1960. All bull markets, like all humans got to die one day. In the 1980s Martin Zweig became famous on Wall Street for his theory that got his Ph. D-“Do not fight the Feds”. By Feds, he meant the Federal Reserve Bank (US Central Bank). They are watching what economists call the “Phillips Curve”-the relationship between inflation and the unemployment rate. After reaching a certain level of unemployment, in order to keep inflation at bay, the Feds increase interest rates to slow down the economy. They always try to have a ‘soft landing’ but most of the time, they miss their targets. In the 1970s, it was believed that full employment with no inflation was considered to be around 6%, now as the unemployment rate dips below 4%, we are seeing signs of inflation but the Feds cannot afford to wait to see significant rates of inflation as at that time, they have to raise interests in a big way causing a recession. Fiscal stimulus created by the Administration is only causing the Federal Reserve to increase rates faster than earlier projected.

On 3/22/18, Jim Cramer shouted, “This was nothing but a tsunami of selling stocks”. For months we have been told by pundits that we are experiencing synchronized global economic growth but latest reports show weak growth in Europe and in some other countries. European banks stocks got hit badly. The market is still waiting to see how China (PRC) will respond to Trump’s tariffs. Tech companies that get as much as 70% from overseas, are very nervous. Heavily subsidized agriculture sector in the US could become another target of China. When Trump talked about tariffs for US steel to protect it from China, I wondered why Trump does not take a different route to achieve the same goal. If we have tariffs on steel, all things made by steel would be more expensive than what other countries produce with Chinese steel so the US will become less competitive in many industries (i.e. cars). I was wondering why Trump did not want to do the same thing China was doing; in other words, we too could subsidize the US steel industry as Chinese do and make our steel even cheaper. Recently, a professor of economics at a prominent university in the US also proposed the same route for Trump. Trump can work with US companies to use a mixture of subsidies and technology to have our sell at a lower price point than the Chinese.

What we have been going through for the past 2 months (volatility and the correction) is good and it has contributed to the overall health of this bull market. Market going up in a straight line is never a good thing. The market could go even lower and that too is good.

EXXON-In an analyst meeting today, oil giant Exxon Mobil (XOM) laid out an aggressive earnings target and capital expenditure plan for the next five years. The company also said it would “broaden and deepen” its engagement with shareholders and stakeholders. Exxon Mobil Chairman and CEO Darren Woods said that 2018 capital expenditures for 2018 would be $24 billion, including chemical, upstream, and downstream businesses, a bit higher than 2017’s $23 billion. Next year it will jump to $28 billion and rise to about $30 billion in the 2020-25 period. Woods said that the company’s average return on capital employed would rise to double-digit percentage levels, or about 15%, by 2025, assuming a $60-per-barrel oil price, from the current 7% level. Much of the company’s guidance was predicated on $60 oil. f oil averages about $40 per barrel, Exxon sees a 35% potential increase in earnings by 2025, Woods said, compared to a gain of about 135% if oil remains around the current $60 price. With $60 oil, the upstream business would triple divisional profit by 2005, thanks to the discovery or addition in 2017 of resources with 10 billion barrels of oil equivalent (BOE) potential; a fivefold increase in tight oil production in the Permian basin of Texas; and the addition of 25 start-up projects adding a net 1 million BOE per-day production. The downstream part of the business, which includes refining and chemicals, should double earnings at $60 oil. That will derive from improved proprietary technology; a 20% margin improvement from a shift to higher-value products like jet fuel and away from fuel oil; and integrating Permian Basin production into downstream production. Like other oil companies, Exxon has sharply cuts costs since 2014, when oil prices were about twice where they are now. In the upstream business, there was a 22% reduction in operating cash costs through 2017, said upstream head Neil Chapman. He said that production would grow to around 5 million BOE per day by 2025 from last year’s 4 million, which was down 2% from 2016. When pressed for a dividend growth number, Woods declined to give one. He said that “we are confident we can reliably grow the dividend at $40-per-barrel oil.” Excess cash beyond dividend needs and company investment plans will go to shareholders in the form of buybacks, he said.( V Racanelli Real Time Analysis, 3/8/18)

 IBM-The Street today was digesting what it heard yesterday from International Business Machines’s (IBM) CFO James Kavanaugh and CEO Ginni Rometty in their analyst briefing. Today the stock closed up $3.10, almost 2%, at $159.31, after dipping slightly yesterday, suggesting investors are warming to what they heard. Kavanaugh, in a phone conversation, intimated that avoiding explicit targets was somewhat by design. The discussion, which was not in person but rather webcast — you can view a replay on IBM’s investor relations site — included a reiteration of long-term intentions by Kavanaugh, including “low single-digit revenue growth.” He also provided some new metrics, such as the company’s "as-a-service” business at some point achieving "an exit run rate of growth of 15-20% annually." The event is part a “wave” of events IBM will have, he said, as a new approach to talking with the Street. The next even is on March 20th, IBM’s annual “THINK” conference, in Las Vegas. There will be various “deep dives” on topics such as Watson A.I. and blockchain throughout the year, he said. Reaction has been mixed. Among the most bullish, Katy Huberty of Morgan Stanley this morning reiterated her Overweight rating, and $198 price target, writing that IBM is positioned to lead in a “new computing cycle” dominated by tIf things seem a bit vague, that is perhaps because, Kavanaugh tells me, he has learned the hard way that setting traditional financial targets can be a vexed matter.hings such as A.I. She believes that the bottom line is “IBM is returning to growth." “You’re talking to the guy who put in place the original long-term financial roadmap for this company years ago,” Kavanaugh reflected.(Tiernan Ray, Tech Trader Daily,3/9/18)

Disney- Investors were clearly excited by the Netflix’s potential venture with Barack Obama. Netflix is planning to spend nearly $8 billion on content in 2018, so it won’t have any trouble paying the former president. The skeptics who long questioned Netflix’s big-spending ways have been steamrolled by the impressive numbers. In the U.S., the company finished 2017 with 53 million paid streaming customers. Netflix has another 58 million customers abroad, a figure that has more than doubled in two years. Just 5% of the company’s publicly available stock is now held short -- the lowest level in at least 10 years. Netflix’s stock surge gives it a market value of $144 billion, not much below Walt Disney at $157 billion. That creates an interesting opportunity for investors. Disney shares have languished over the last year, but the company is about to take a major step into Netflix’s terrain. Later this year, the company will launch a direct-to-consumer ESPN streaming service, for $4.99. By 2019, the company plans an entertainment package, as well. That product gets all the more impressive once Disney closes its deal for 21st Century Fox . Imagine a platform with exclusive rights to Pixar movies, Disney princesses, and Marvel superheroes. It’s a compelling offer, if my young daughters are any guide. Having tired of Netflix’s choices, most mornings they now turn on our Apple TV and pull up the Disney app that comes with our cable subscription (Disney’s forthcoming streams won’t require cable authentication). In a note to clients today, BTIG analyst Rich Greenfield said that Disney could “win the streaming war” if it stopped trying to protect its legacy movie business. He points out that Black Panther should reach $1 billion in global box office revenue this weekend.(Alex Eulie, Review & Preview, 3/9/18)

Apple- While many investors are focused on device sales at Apple and other tech companies, services could be the way forward as the company tries to work its way toward a $1 trillion market cap. “Over the last five years, the vast majority (86%) of Apple’s 8% annual revenue growth was driven by iPhone sales,” Morgan Stanley analysts wrote in a Thursday note. “But as replacement cycles extend further and device installed base growth slows to single digits (from 14% over the last two years), it is through monetization of Apple’s (AAPL) Services business that we see the company still generating mid single digit revenue growth.” Morgan Stanley, which has a $203 price target—about 21% above current levels—on the Barron’s Next 50 stock’s shares, suggested several “levers” the company could use to accomplish this. (David Marino-Nachison,3/22/18)

Have a great month!

Fernando