 The Market Sum | Insight after the bell
By Caleb Silver, Editor in Chief Monday's Headlines 1. Markets and G20 Expectations Markets Closed
 U.S. Markets Meander Ahead of G20
U.S. markets went a whole lot of nowhere today as investors brace themselves for the upcoming G20 meetings in Osaka, Japan this weekend. The S&P500 is right around its record levels, and has met some resistance since it crossed that threshold last Wednesday.
Meanwhile, yields on the U.S. 10-year treasury bond continue to fall. Uncertainty will do that, and we've had a whole bunch of that all year. Uncertainty about:
Here's the 10-year U.S. Treasury yield over the past month. Yields are at their lowest levels since September of last year.  And here's Gold futures, at their highest levels since June of 2013. Investors hide out in gold when treasury yields fall and stock prices look tenuous. You might say that both of those things are happening right now.   G20 Expectations
Japan plays host to the annual summit of the Group of 20 (G20) this weekend.
For historical reference, the G20 is essentially a club of the 20 major global economies that emerged out of the G7 meeting of global finance ministers in 1999 in the midst of the Asian financial crisis. It comprises 19 countries in addition to the European Union that represent around 85% of global economic output, two thirds of the world's population, and 75% of international trade. In 2008, U.S. President George W. Bush convened the G20 in an emergency summit to try to stem the financial crisis, but its mission has expanded to cover a wider gambit of global economic and policy issues.
This year's themes:
These are all worthy issues and many of them are connected. The U.S. China trade war is the current that runs through many of them this year, and that's what many investors will be focused on. Expectations are high that President Trump and President Xi will have 'productive meetings', to find common ground on trade issues, but there are many complicating factors.
The first of which is the increasing tariffs each country has placed upon the other's imports. It's been a tit for tat trade battle between the U.S. and China, but as the Peterson Inst. for International Economics notes, China has actually been lowering tariffs for every country except for the U.S. That might make it hard for the U.S. to find sympathetic listeners among the other G20 dignitaries.
chart courtesy piie.com  Don't Forget about 5G You can't talk about the global economy, trade, innovation and employment without talking about 5G, literally the woolly mammoth in the room.
Read more: 5 Things to Know about 5G
At the heart of the U.S. China trade war is the issue of Forced Technology Transfer (FTT) and 5G, the super-strong wireless signal that will enable the Internet of Things. We've covered FTT in recent newsletters, but here's a quick refresher:
There's more to it than that, but if you understand that, you'll understand why 5G is a critical part of that dispute. Since 5G will power the next generation of technological and communications devices, and that technology reaches even deeper into our personal lives and our government, the U.S. does not want devices that will be sold to U.S. consumers that use 5G to be made in China. The Wall Street Journal explains it clearly in this article, but that's the basic premise.
U.S. carriers like AT&T and Verizon have been working hard on how they will implement 5G across their services and platforms, but so have the global wireless device makers, especially Chinese firms like Huawei and ZTE.
After years of mergers and consolidation, there are only a few wireless device makers left, and two of them are Chinese.
This chart from the WSJ sums it up.  Now What? The U.S. China trade war is about many things:
Each one of these is highly complicated and would be challenging to solve unilaterally. When you add them all together, it becomes a near-impossible labyrinth for the two countries to solve on their own. Sitting among 18 other members of the G20 may help, but it's also likely to make matters even more complicated.  courtesy @Carl_C_Icahn
Caesars and Icahn Hit the Jackpot
This is a relatively small merger nowadays, but it provides an interesting lesson in corporate takeovers and activist investors, so I thought it worth our time.
Eldorado Resorts, a small (by global standards) resort and gaming company from Reno, Nevada, is acquiring Caesars Entertainment Corp., the legendary Las Vegas and Atlantic City resort and casino, for $8.58 billion. The move will make Eldorado the largest owner of casinos in the United States. That says a lot, given the legalization of gambling in most U.S. states, and the construction and acquisition of many casinos by Native American tribes across the country.
Caesars has had its problems over the years, and never fully recovered from a leveraged buyout in 2008 by the Apollo Group and TPG. It's subsidiary company, Caesars Entertainment Operating Company, filed for Chapter 11 in 2015.
In walks Carl Icahn, the legendary investor activist and corporate raider. He is famous for taking large equity positions in struggling companies, gaining a seat or seats on the board of directors, and forcing change or a sale of that company.
Read more: Carl Icahn's Investing Strategy
Icahn built an 18% equity stake in Caesars as of filings available in March, and obtained three board seats. He backed a new CEO, and pushed aggressively for a sale of the company. Many suitors came forward, according to reports, but no one was able to match Eldorado's price tag, which was a 24% premium to Caesars share price as of Friday, and a 50% increase from the day Icahn took an equity position in the company. Jackpot!
What's Next? Icahn's firm also owns a 5% equity position in Occidental Petroleum, which is trying to buy Anadarko Petroleum for $38 billion. Icahn calls the acquisition 'misguided', and has sued Occidental to block it
He took to his blog today to blast the deal and the board.
"... Too many boards like Occidental's believe they are unaccountable and cannot be removed, and therefore can do almost anything they please. This attitude is a major threat to the value of America's companies, the stockholders of which are many middle Americans who have more of their savings invested in stocks than ever before."
chart courtesy www.koyfin.com  Electronic Arts rose nearly 4% today, on analyst enthusiasm for new developments.  Bristol-Myers Squibb fell more than 7% and Celgene more than 5% today on news that Bristol-Myers' acquisition of Celgene will close later than previously anticipated, and will include a divestiture of Celgene's psoriasis drug, Otezla. The drug reportedly made Celgene near $1.6 billion last year.  Word of the Day President Trump announced on Monday that he is imposing new sanctions on Iran, stepping up a policy of pressuring the nation's leaders and the crippled Iranian economy in retaliation for what the United States says are recent aggressive acts by Tehran.
These sanctions are in addition to sanctions already imposed by the Trump administration aimed at cutting off all revenues from Iranian oil exports. New sanctions are aimed at barring Iranian officials from the international financial system.
Regardless, economic sanctions are an established practice, and the United States is waiting to see if sanctions imposed will have their desired effect in bringing Iran to the negotiating table to discuss, among other things, uranium enrichment and nuclear weapons.
"A sanction is a penalty levied on another country, or on individual citizens of another country. It is an instrument of foreign policy and economic pressure that can be described as a sort of carrot-and-stick approach to dealing with international trade and politics.  Today in History June 24th, 1971 - Entrepreneur Fred Smith founds a company to compete with the U.S. Postal Service. His idea? Deliver packages overnight…by routing everything, regardless of origination, through Memphis. The idea was out there - one of Smith's business school professor almost failed him for proposing it. Smith starts the business, naming it Federal Express. Soon enough a new verb (to Fedex) has entered the vernacular.
Chart of the Day: Student Loan Debt Around the World  In the U.S., we have a student debt problem. College graduates start out their careers with an average of $30,000 in debt, or more. It is becoming a big campaign issue for 2020 presidential hopefuls.
Bernie Sanders, who ran for President in 2016 and is trying again for 2020, issued a proposal today that would cancel $1.6 trillion of student loan undergraduate and graduate debt for approximately 45 million people. His plan would be centered on new taxes on securities trading - effectively taxing Wall Street. It would include a 0.5% tax on stock trades (or 50 cents for every $100 worth of stock), a 0.1% fee on bonds, and a 0.005% fee on derivatives. Sanders believes that could raise more than $2.4 trillion dollars over the next ten years. I expect he'll see a fair amount of resistance to that plan, but it's provocative.
It got me wondering how other countries are dealing with student debt, if at all. Today's chart, courtesy of SoFi. shows us that student debt is not just a U.S. centric problem. If you live in any of these other countries, drop us a line and tell us how student loans work where you live.
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Monday, June 24, 2019
Jackpot
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