Good Morning,

Stocks closed mostly higher on Friday, boosted by strong quarterly earnings from U.S. banks, while investors mulled over several pieces of economic data. Short-term momentum continues to weaken as the major indices move sideways.

JPMorgan Chase, Bank of America and PNC Financial all reported better-than-expected profits, but only JPMorgan exceeded revenue estimates. All in all these earnings were solid but nothing particularly notable.

In political news Donald Trump will enter the White House next week as one of the most unpopular presidents in recent American history. And he will be pushing an agenda that most Americans don't seem to support.

The latest numbers for Trump, beset this week by fresh reports of Russian efforts to boost his candidacy, are stark. A new poll from Gallup shows that just 44 percent of Americans approve of his presidential transition efforts while 51 percent disapprove. By contrast, 83 percent approved of President Barack Obama's transition in 2008. Even George W. Bush, who like Trump lost the popular vote, enjoyed a 61 percent approval rating of his transition as he prepared to enter the White House.

Trump himself has also seen his approval ratings slide again after a brief uptick following his surprise Electoral College win. A Quinnipiac poll out this week showed that just 37 percent of Americans approve of the way Trump is handling his job as president-elect to 51 percent who disapprove. The numbers are the reverse of Obama, who had a 55 percent approval rating in the poll.

But….polls also predicted that Trump would lose the election….(Great memo published this week by Howard Marks on expert opinion)

While on the topic of Trump, another fun fact: New York has currently spent $32 974 356 protecting Trump. Based on Bloomberg estimates the City spends about $450 000 per day on his security. Freedom isn’t free…

Our Take

Wednesday’s press conference featuring Trump was awful. In answering questions, he raised more than he answered. His plans to insulate the presidency from his business interests is a joke (handing power to his sons) and he again refused to release his tax returns.

He also mocked those worrying about his conflicts of interest, saying that under his read of U.S. law, a president cannot be accused of such a thing, no matter what he does.

He also claimed that he had both the ability and the legal right to simultaneously run the Trump Organization and the executive branch of the U.S. government, but was choosing to step away from the former as a sort of favour to American voters.

Yet if that wasn’t bad enough he refused to take a question from a CNN reporter because “your organization is terrible” and “you are fake news.” He also took time out of his busy “presidential” schedule to denigrate Meryl Streep and Hilary Clinton. Yes Meryl denigrated him and his voter base but a president should rise above such insults. He should attempt to set an example.

Our worry is that the market continues to price in the best version of Donald Trump. A version it may never see…

Our second worry is more for our home country Canada. If Trump does in fact make good on many of his promises we now risk falling even further behind America with its pro-business president and free enterprise Congress. Pierre Poilievre for the Financial Post takes an interesting look at how a potential Border Adjusted Tax (BAT) and other republican tax plans could wreak havoc on Canadian exports. Not pretty as higher mortgage rates are starting to squeeze Canadians…

Musings

I read a nice article this week by Ben Carlson which explained how certain “pundits” in the financial world are able to continuously sell books and newsletter subscriptions despite the fact that their predictions have continuously turned out to be dead wrong.

The article really hit home as I have a certain acquaintance that every year, sometimes as often as every quarter, informs me of a new impending stock market crash.

This has been going on for years now: currency crisis, debt crisis, trade crisis, war, famine, viral outbreak, collapse of the monetary system and variations of “the whole system is a sham”. I can’t keep track.

Yet even after a disastrous string of predictions the subscriptions keep increasing and the talking heads keep talking.

Why?

Because “There Is No Easy Way To Get Rich Overnight” simply doesn’t sell. It’s like playing the lottery: losing every year, every month or even every week doesn’t stop people from playing.

The rush you get when you play, when you get that chance to be right, to be the “outlier” is simply too sweet for most to pass up.

These “pundits” are aware of this fact and use it to their advantage in order to make money. Yet unfortunately, this is a terrible strategy for investors to use in order to generate returns. But, I suppose it remains a compelling strategy to generate entertainment…

Logos LP In The Media

One of our GP’s top picks for 2017: Syntel (NASDAQ: SYNT) was featured on the MoneyShow.

Thought of the Week

"Life is hard, and a lot of people come home tired from work. If they’re gonna spend half an hour reading, they want some entertainment and sense of achievement. So that’s what I give them. That’s all I’m trying to do. Is that really so wrong?” -James Patterson

Stories and Ideas of Interest

We are beginning to fight back against technology. French workers now have the “right to disconnect,” or more appropriately, a new law instructs companies to ask workers on how they can—if at all—be contacted outside of the office or during non-work hours. Would you want that right for yourself?
Silicon Valley needs startup Drano. An entire library could be filled with books about how the bright minds in Silicon Valley find and fund the next Google or Facebook.
But there are four basic steps to startup investing:

1)Persuade people to give you lots of money.
2) Use that money to buy shares in young companies.
3) Cash out those shares in an IPO or acquisition.
4) Return to the people from step one (if all goes as planned) a much larger pile of money than what they gave you. Keep some for yourself.

But the basic mechanics are sputtering. Steps 3 and 4 are broken as money and thus returns are not flowing out…

Instagram’s shameless Snapchat knockoff is doing marvellously well. On Jan 11 Instagram announced that Instagram Stories, a feature it launched in August 2016 that was a blatant copy of Snapchat, has accumulated 150 million daily active users. That’s exactly how many users Snapchat had as of June 2016. That in turn means it’s taken Instagram Stories about four months to get the same number of users it took Snapchat over four years to attract. This may put pressure on its proposed IPO as Snap has yet to make a profit. A problem Facebook certainly does not have…
Did the global elite’s devotion to borderless capitalism sow the seeds of a populist backlash? Kenneth Rogoff can pinpoint the moment he started to grow concerned Donald Trump would be the next U.S. president: It was when Rogoff’s fellow attendees at the World Economic Forum’s annual meeting last January said it could never happen. “A joke I’ve told 1,000 people in the months since leaving Davos is that the conventional wisdom of Davos is always wrong,” says the Harvard professor and former chief economist of the International Monetary Fund. “No matter how improbable, the event most likely to happen is the opposite of whatever the Davos consensus is.” Could this year’s Davosbe any different?

Feel your cost of living is getting to high? Feel like seeing your dollars go farther? It may boil down to where you choose to live. CNBC puts together an interesting list of American cities in which you can live really well on $60,000.

Could goal setting be holding you back? We are all told from a young age that setting goals is the way to achieve the things we want. Yet perhaps when it comes to actually getting things done and making progress, focusing on systems is more useful. What is a goal and what is a system? If you’re a coach, you’re goal is to win a championship. Your system is what your team does to practice every day. Interesting piece suggesting that committing to the process is what makes the difference.

All the best for a productive week,

Logos LP