Saudi Arabia has called off both the domestic and international stock listing of state oil giant Aramco, billed as the biggest such deal in history, four senior industry sources said on Wednesday.

The financial advisors working on the proposed listing have been disbanded, as Saudi Arabia shifts its attention to a proposed acquisition of a “strategic stake” in local petrochemicals maker Saudi Basic Industries Corp., two of the sources said.

“The decision to call off the IPO was taken some time ago, but no-one can disclose this, so statements are gradually going that way — first delay then calling off,” a Saudi source familiar with IPO plans.

Saudi Aramco did not immediately respond to an emailed request for comment. The Saudi Royal Court had no immediate comment.

The proposed listing of the national champion was a central part of Crown Prince Mohammed bin Salman’s reform drive aimed at restructuring the kingdom’s economy and reducing its dependence on oil revenue.

The prince announced the plan to sell about 5 percent of Aramco in 2016 via a local and an international listing, predicting the sale would value the whole company at $2 trillion or more. Several industry experts however questioned whether a valuation that high was realistic, which hindered the process of preparing the IPO for the advisors.

Stock exchanges in financial centers including London, New York and Hong Kong had been vying to host the international tranche of the share sale.

An army of bankers and lawyers started to fiercely compete to win advisory roles in the IPO, seen as a gateway to a host of other deals they expected to flow from the kingdom’s wide privatization program.

International banks JPMorgan, Morgan Stanley and HSBC, were working as global coordinators, boutique investment banks Moelis & Co and Evercore were chosen as independent advisors and law firm White & Case as legal adviser, sources had previously told Reuters.

More banks were expected to be named but no bookrunners were formally appointed despite banks pitching for the deal.

Lawyers, bankers and auditors are all essential in the drafting the prospectus, a formal document that provides essential details on the company.

“The message we have been given is that the IPO has been called off for the foreseeable future,” said one of the sources, a senior financial advisor.

“Even the local float on the Tadawul Stock Exchange has been shelved,” the source added.

Saudi energy minister and Aramco chairman Khalid al-Falih said in the company’s 2017 annual report, released in August, that Aramco “continued to prepare itself for the listing of its shares, a landmark event the company and its board anticipate with excitement.”

Aramco had a budget which it used to pay advisors until the end of June. This has not been renewed, one of sources said.

“The advisors have been put on standby,” a third source, a senior oil industry official said.

“The IPO has not been officially called off, but the likelihood of it not happening at all is greater than it being on.”

Sources have previously told Reuters that in addition to the valuations, disagreements among Saudi officials and their advisers over which international listing venue to be chosen had slowed down the IPO preparations.
…

Disney is offering to pay full tuition for hourly workers who want to earn a college degree or finish a high school diploma.

The Walt Disney Co. said Wednesday it will pay upfront tuition to workers who want to take classes starting in the fall.

Disney initially will invest $50 million into the “Disney Aspire” program and up to $25 million a year after that.

Other large corporations have begun paying tuition for workers in a job market with low unemployment.

In May, Walmart said it will offer workers the chance to get a college degree at three universities with online programs.

Disney is rolling out its program in phases, with the first limited to online classes. It is being administered by Guild Education, the same firm operating Walmart’s program.
…

The U.S. economy likely created 43,000 more jobs in the 12 months through March than previously estimated, the Labor Department said on Wednesday.

The marginal increase, which the Labor Department said represented less than a 0.05 percent gain versus current estimates, is a preliminary estimate of the government’s annual “benchmark” revision to nonfarm payrolls data.

Job growth in the U.S. economy remains relatively strong despite the labor market being near full employment.

Once a year, the government compares its nonfarm payrolls data, based on monthly surveys of a sample of employers, with a much more complete database of unemployment insurance tax records.

A final benchmark revision will be published in February along with the employment report for January. Government statisticians will use the final benchmark count to revise payrolls data for months both prior to and after March 2018.
…

When reforms began in Myanmar in 2011, its tourism sector was considered as one of those most likely to take advantage of the economic opportunities as the country looked to reconnect with the outside world. 

Authorities and businesspeople were confident that foreign tourists would be drawn to Myanmar, eager to see such sites as the ancient temples of Bagan, the unique culture of Inle Lake, or the picturesque beaches overlooking the Bay of Bengal. 

For a while it worked, as Myanmar’s international reputation improved in-line with the reforms happening at the time, the country was at the top of many visitors’ wish lists. Official figures showed that more than 4.68 million tourists visited the country in 2015, up from 816,000 in 2011. In 2017, 3.4 million tourists visited. 

But the situation has changed again. The tourism sector has been heavily impacted by the crisis in Rakhine State, which has seen 700,000 Rohingya cross into Bangladesh to flee a brutal army crackdown. Myanmar’s military has been accused of ethnic cleansing the Rohingya, leading many tourists to stay away because of ethical concerns. 

Myanmar’s government recognizes the need to take action, and in early August held a meeting for stakeholders to discuss what measures can be taken to improve the situation. 

At that event, de facto leader Aung San Suu Kyi said the country should focus on measures such as improving rail and water transport, providing clean accommodation and developing more community-based tourism projects.

“Tourists can get many opportunities such as viewing the beautiful scenery and enjoying new experiences,” Aung San Suu Kyi said. “That is why roads, water ways and railways should be considered aside from air travel.” 

Tourist operators in the country welcomed the remarks, but said that there are more short-term measures that can be made, and have also called for a nationwide strategic plan to tackle the malaise the industry is currently undergoing. 

“What is needed is a comprehensive integrated approach from [the government] and the private sector to improve the tourism sector,” said Aung Kyaw Swar, former principal of the Inle Heritage Foundation. “This should include infrastructure, products, channels of communication, public relations, marketing and sales.” 

He said he welcomed Aung San Suu Kyi’s speech, particularly the calls to improve infrastructure, but said a cohesive plan should be formed, including one that ensures that the respective ministries work closely together. 

He also said that the government should invest in research teams, in order to effectively research potential clients’ expectations when they visit the country.

Foreign visitors to Myanmar have traditionally been drawn towards the major cities of Yangon and Mandalay, as well as Bagan and Inle Lake, but new destinations are emerging, and tourist development in lesser known areas could bring economic benefits. 

U Bawla, a hotelier in Kale, the gateway to Chin State, one of Myanmar’s most scenic but underdeveloped regions, said that government support for tourism development would bring huge improvements for the lives of Chin people. 

“When people come to Chin State, [they say] it is an amazing, and beautiful place,” he said, adding that only a handful of tourists visit each month. “I think that if the government concentrates on [developing tourism] in Chin State, that will bring many improvements for the Chin people, including improvements in roads and transportation.” 

Bertie Lawson, managing director of Yangon-based Sampan Travel, said that Aung San Suu Kyi’s recommendations were “a good start”, but that much more needed to be done. 

As examples, he highlighted the practice by domestic airlines of charging foreigners double the price of Myanmar citizens, and the fact that buses to tourist destinations are often scheduled to arrive in the middle of the night, rather than at times more convenient for visitors. 

“This might seem small and petty, but they add up and make people wonder if Myanmar is really worth it, when they could go elsewhere and not have to deal with this,” he told VOA. 

“People aren’t complaining about the lack of CBT projects, or waterways. They’re complaining about the price, or about the issues they have traveling around the county. Those things can be changed, and should be looked at first,” he said. 

Lawson said he believed the impact of the Rakhine crisis on tourism would likely be long-term, but said there was still reason to be optimistic. 

“Repairing that reputation will take quite a long time,” he said. “I don’t think that means that tourism can’t do well, I just don’t think it will grow quite at the rate many were previously expecting.” 
…

Mexico risks losing long-term passenger growth and billions of dollars if it fails to go through with building a new hub in the capital to alleviate congestion, an executive with the International Air Transport Association (IATA) said on Tuesday.

Mexico’s incoming government last week postponed a decision on whether to complete a partially constructed new airport in Mexico City, saying the public should be consulted on the fate of the $13-billion hub, which the next president initially opposed.

President-elect Andres Manuel Lopez Obrador said the project was tainted by corruption prior to his July 1 landslide election victory, and had pressed for an existing military airport north of the capital to be expanded instead.

Without the new airport, around 20 million fewer passengers would fly to Mexico City starting in 2035, year over year, said Peter Cerda, regional vice president in the Americas for IATA.

It would also mean a long-term loss of $20 billion from Mexico’s GDP and cost the country 200,000 jobs, according to an airline-industry study on the financial impact of not building the new airport, Cerda said.

IATA, the Montreal-based trade association, has 290 member airlines which together transport about 82 percent of global air traffic.

Passenger traffic is expected to double by 2035 on a global basis, including Latin America, Cerda said in an interview.

“If you don’t build an airport that’s able to meet the needs of the next 50 years you just cannot continue to grow,” Cerda said on the sidelines of the International Aviation Forecast Summit in Denver. “And that has financial implications for the country.”

Work began on the new airport, which is a few miles northeast of the current one, in 2015. The present airport, located in the east of Mexico City, has become increasingly saturated by rising air traffic and has no room to expand.

“This is an airport that was built for 32 million passengers a year and currently we have 45 million passengers traveling through,” Cerda said.

Cerda urged Mexico to make any decision on “technical justifications” rather than “public outcry that may not fully understand the consequences.”
…

For Mazen Rahhal, a shop owner in a bustling district of Beirut, Lebanon’s economy has seldom felt more precarious. In one store, he sells clothes at a fraction of their previous price. Another, which he rented to a rival business, now lies empty.

Years of gradual stagnation have in 2018 merged with several newer trends: high interest rates, falling house prices and questions about the currency at a moment of profound uncertainty as politicians wrangle over forming a new government.

For Lebanese businesses and people, economic unease and the lack of a government to take firm control over policy — some three months after they voted in a general election — have become ceaseless sources of worry.

“We are struggling just to manage the costs we have to pay: from electricity, employee wages, everything,” said Rahhal. His family has owned shops on Hamra Street, the main business thoroughfare of west Beirut, since the 1970s.

As Lebanon rebuilt after its 15-year civil war ended in 1990, there was a period of economic growth, and as in its 1950s and 60s heyday, it drew Gulf Arab tourists ready to open their wallets as they escaped the stifling summer heat of home.

But problems were never far away.

In 2005 prime minister Rafik al-Hariri was assassinated, opening up wide divisions over the roles of the Iran-backed Hezbollah group, and of powerful neighbor Syria.

Syria’s own war since 2011 has aggravated those rifts, while cutting off much of Lebanon’s overland trade and scaring off the mostly Sunni Muslim Gulf tourists, who feared the growing power of the heavily armed Shi’ite Hezbollah movement.

Sclerosis ensued. After Hariri’s death, the government did not pass another state budget until last year. Parliamentary elections in 2009 were not held again until this May.

Economic growth, which averaged 8-10 percent before the Syria war, has averaged 1-2 percent since it began, and a purchasing managers’ index for Blom Bank has shown business activity in decline every month since 2013.

The state owes about 150 percent of the gross domestic product, much of it to local banks, whose own business is partly based on remittances paid into them by Lebanese working abroad, in turn partly drawn by attractive interest rates.

Difficulties 

Khoury Home is a major business in Lebanon. Its shops, a familiar sight across the country, sell home appliances. 

Romen Mathieu said he had told his staff every year since becoming the company’s chairman in 2013 that the coming year would be more difficult than the last.

“Now we reached 2018, and this year is disastrous, and I think we still didn’t see the tough part of this year,” he said. “If I have to say it in 2019, there won’t be anyone listening to me any more.”

Compounding Mathieu’s difficulties, the government last year scaled back a series of incentives to banks for home loans, which contributed to a dip in the housing market. As fewer people bought houses, fewer wanted new fridges or televisions.

“Let’s not make fools of each other. There is no money in the market and we need to adapt to this situation and get used to it,” said Mathieu.

Not all businesses are suffering. Supermarket chain Spinneys has increased sales volumes because many of its goods are imported from Europe, and currency fluctuation has brought prices down, said chief executive Michael Wright.

“We are selling more, our volumes are going up. But that’s balanced by a price drop,” he said.Since May’s election the rival political parties have squabbled over forming a new national unity government — one that contains enough of the major parties to ensure political backing across the country.

Without a new government, Lebanon cannot institute the fiscal reforms needed to get its debt under control or unlock billions of dollars in pledged foreign investment in infrastructure to get the economy moving.

Everybody Reuters interviewed said it was critical for Lebanon to form a government soon.

Meanwhile, interest rates have risen as the authorities increasingly try to attract higher levels of the bank deposits on which government debt relies.

Those high rates are hurting too.

Jessy Kojababian has been engaged for two years. Her wedding was fixed for September. But as interest rates rose, and the government incentives for banks to offer housing loans were scaled back, she and her fiance could no longer afford to buy a house.

They have now cancelled the wedding.

“We were already booking everything for the wedding. The roses, the restaurant, the church. Everything. We paid a deposit of $6,000, so how can we get it back?” she said.
…

U.S. and Mexican trade ministers were set to resume talks over the North American Free Trade Agreement in Washington on Tuesday in a final push for a deal on autos that would open the door for Canada to return to negotiations this week.

If Mexican Economy Minister Ildefonso Guajardo and U.S. Trade Representative Robert Lighthizer can resolve remaining bilateral issues, “the plan is to try to incorporate Canada into the discussions,” possibly as early as Thursday, said a Mexican source close to the talks.

Though NAFTA is a trilateral trade deal, “there are issues that are really bilateral issues between Mexico and the United States,” said the source. In rules of origin for autos “Mexico clearly had to look for flexibilities because Canada was relatively comfortable with the original [U.S.] proposal.”

In the meantime, Canada has remained sidelined from the talks.

“We are making progress in the chapters that will modernize our agreement, and Mexico will continue working constructively on all fronts,” Mexico’s chief NAFTA negotiator Kenneth Smith said Tuesday on Twitter.

The United States and Mexico are close to a deal to increase North American automotive content thresholds, with substantial requirements for content produced in high-wage areas, namely the United States and Canada, said the source.

The deal is expected to lift the requirement for North American content in regionally made vehicles to at least 70 percent from the current 62.5 percent. It will also likely require that some 40 percent of the value come from high-wage locations paying at least $16 an hour, meaning the United States and Canada.

Mexican and U.S. negotiators were also close to agreeing on a 5-year phase-in period for implementing the changes in the auto industry, the source said.

Opposition

Still, foreign-brand automakers with U.S. plants oppose the move to raise the amount of local content in North American-made vehicles and could throw a monkey wrench in negotiators’ plans to secure a bilateral deal this week.

The carmakers, including Toyota, Volkswagen AG and Hyundai, sent a letter to top trade-focused members of U.S. Congress expressing their concern.

The letter could spark resistance to a revamped NAFTA from lawmakers in southern states, where foreign manufacturers have built auto plants.

U.S. President Donald Trump, who launched the renegotiation of the 1994 pact a year ago, has said he wants the reworked deal to bring manufacturing jobs back to the United States, particularly in autos and auto parts.

Other key unresolved issues include the dispute settlement mechanism and a U.S. demand for a “sunset” clause that forces a renegotiation every five years, which critics argue would make long-term investment decisions more difficult.

Guajardo last month expressed hope that there could be a preliminary NAFTA deal by the end of August, but he has since appeared to pull back from that position.
…

Large real-estate developments in India should be subject to the same scrutiny as industrial projects given their environmental impact, according to city planners and campaigners.

A proposal to redevelop parts of New Delhi that required the felling of thousands of trees recently provoked fierce protests, court petitions and night patrols to guard the trees.

While projects measuring more than 20,000 square meters require impact assessments, exemptions are often made and public hearings are never held, analysts said.

“Large construction projects have a huge environmental and social footprint, and deserve scrutiny for their impact on energy and water use, and urban infrastructure,” said Kanchi Kohli at New Delhi think tank Centre for Policy Research.

“Cities are already dealing with severe air pollution, water shortages and traffic congestion. Residents deserve a say in these projects,” she told Reuters.

Worldwide, cities occupy 2 percent of the land mass, but account for more than 70 percent of carbon dioxide emissions.

India is forecast to overtake China by 2024 as the world’s most populous country, with tens of millions of citizens cramming into already crowded cities.

As developers rush to cash in, unplanned urban sprawl is leading to congestion, flooding and more slums, analysts say.

Authorities have introduced stricter environmental laws for businesses in recent years, but analysts say they are poorly implemented in a rush to lure investors.

But it is not all one way.

Chirayu Bhatt, an urban planner at CEPT University in Ahmedabad, said large developments — be they residential or commercial — can be good for future generations even if today’s city dwellers often pay the price.

“While the costs of a project are borne by current residents, the benefits accrue to future residents — migrants, our children and grandchildren. We must recognize that,” he said.

In New Delhi, the National Green Tribunal — which decides on environmental matters — last week ordered that no trees be felled while the redevelopment case is examined.

Developers say subjecting real estate projects to the same scrutiny as large industrial developments is “not justified.”

“There are already stringent environmental clearances that are required, and measures such as rain water harvesting and sewage treatment plants have been made mandatory,” said Anuj Puri, chairman of Anarock Property Consultants.

But excluding citizens is not right, Kohli said.

“Citizens must be a part of the review process; more so now, because the drawing of ground water, the discharge of effluents, the use of public spaces affects us all.”
…

Washington is prepared to impose more economic pain on Russia if it does not change its behavior, Trump administration officials said on Tuesday, as U.S. lawmakers pushed for stronger measures to counteract “malign” Russian activities.

“Though Russia’s malign activities continue, we believe its adventurism undoubtedly has been checked by the knowledge that we can bring much more economic pain to bear using our powerful range of authorities — and that we will not hesitate to do so if its conduct does not demonstrably and significantly change,” Acting Deputy Treasury Secretary Sigal Mandelker told the Senate Banking Committee.

U.S. President Donald Trump has repeatedly said he would like better ties with Moscow, but although he met Russian President Vladimir Putin last month, relations between the two countries have come under further strain.

Members of Congress, where both chambers are controlled by Trump’ fellow Republicans, have called for more action — including threatening sanctions “from hell” — to punish Russia for actions including its annexation of Crimea, involvement in Syria’s civil war and cyberattacks seeking to influence U.S. elections.

Two U.S. Senate committees held simultaneous hearings on Russia on Tuesday, where some lawmakers chastised administration officials for failing to sufficiently answer their questions, and for sending conflicting messages and doing too little to change Russian behavior.

Both Republicans and Democrats in Congress have criticized Trump, particularly after his summit with Putin in Helsinki last month, for failing to stand up to Moscow on issues including what they see as Trump’s failure to hold the Russian president accountable for Moscow’s meddling in the 2016 U.S. election.

Microsoft Corp said late Monday that hackers linked to the Kremlin sought to launch cyberattacks on the Senate and conservative American think tanks, warning of broader attacks ahead of congressional elections in November. 

The Kremlin rejected the Microsoft allegations and said there was no evidence to support them. Moscow has repeatedly denied attempting to influence U.S. elections, including the 2016 presidential vote that brought Trump into office. U.S. intelligence agencies have concluded that Russia interfered in the 2016 campaign, seeking to tilt the vote in Trump’s favor.

Cost to Russia

U.S. administration officials told the Senate hearings that existing sanctions were having an effect on Russia’s economy, despite continuing behavior that concerns Washington.

Separately, the Treasury Department imposed new sanctions on two Russians, one Russian company and one Slovakian firm over actions it said helped another Russian company avoid sanctions over cyber-related activities.

The United States also announced sanctions on Russian shipping over the transfer of refined petroleum products to North Korea in violation of U.N. restrictions.

Assistant Secretary of State Wess Mitchell told the Foreign Relations Committee that concern about sanctions has cost Russia $8 to $10 billion in arms deals. Without the American measures, Moscow’s behavior would be further “off the charts,” Mitchell said.

Mitchell also said foreign direct investment in Russia has fallen by 80 percent since 2013, “which is a pretty stunning number.”

“I think this administration has been clear that we are prepared to take additional steps,” Mitchell said. “There is an escalatory ladder to sanctions. We are aware of what additional steps would be needed to make an even bigger point.”

Marshall Billingslea, assistant Treasury secretary for terrorism financing, told the Foreign Relations panel it was important that European allies, particularly in eastern Europe, do more to combat money laundering.

“There is an enormous amount of money that is still being exfiltrated from Russia by both organized crime and cronies surrounding Putin,” Billingslea said.

In an interview with Reuters on Monday, Trump said he would only consider lifting sanctions against Russia if it were to do something positive for the United States, for instance in Syria or in Ukraine.
…

South Africa’s state-owned Land Bank said on Monday a plan to allow the state to seize land without compensation could trigger defaults that could cost the government 41 billion rand ($2.8 billion) if the bank’s rights as a creditor are not protected.

Land Bank is a specialist bank providing financial services to the commercial farming sector and other agricultural businesses.

President Cyril Ramaphosa announced on Aug. 1 that the ruling African National Congress (ANC) is forging ahead with plans to change the constitution to allow the expropriation of land without compensation, as whites still own most of South Africa’s land more than two decades after the end of apartheid.

Land Bank Chairman Arthur Moloto said in the company’s 2018 annual report that the bank has approximately 9 billion rand of debt, which includes a standard market clause on “expropriation” as an event of default.

Moloto said if expropriation without compensation were to materialize without protection of the bank’s rights as a creditor, it would be required to repay 9 billion rand immediately.

“A cross default clause would be triggered should we fail to pay when these debts fall due because of inadequate liquidity or lack of alternative sources of funding,” Moloto said.

“This would make our entire 41 billion rand funding portfolio due and payable immediately, which we would not be able to settle. Consequently, government intervention would be required to settle our lenders.”

Moloto said the bank was generally funded by the local debt and capital markets, and more recently international multilateral institutions such as the African Development Bank and World Bank.

“A poorly executed expropriation without compensation could result in the main sources of funding drying up as investors might not be willing to continue funding Land Bank in particular, or agriculture in general,” he said.

Some investors are concerned that the ANC’s reforms will result in white farmers being stripped of land to the detriment of the economy, as happened in Zimbabwe, although Ramaphosa has repeatedly said any changes will not compromise food security or economic growth.

Since the end of apartheid in 1994, the ANC has followed a “willing-seller, willing-buyer” model under which the government buys white-owned farms for redistribution to blacks. Progress has been slow.

($1 = 14.6363 rand)
…

The bull market in U.S. stocks is about to become the longest in history.

 

If stocks don’t drop significantly by the close of trading Wednesday, the bull market that began in March 2009 will have lasted nine years, five months and 13 days, a record that few would have predicted when the market struggled to find its footing after a 50 percent plunge during the financial crisis.

 

The long rally has added trillions of dollars to household wealth, helping the economy, and stands as a testament to the ability of large U.S. companies to squeeze out profits in tough times and confidence among investors as they shrugged off repeated crises and kept buying.

 

“There was no manic trading, there was no panic buying or selling,” said Jack Ablin, chief investment officer of Cresset Wealth Advisors. “It’s been pretty steady.”

 

The question now is when the rally will end. The Federal Reserve is undoing many of the stimulative measures that supported the market, including keeping interest rates near zero. There are also mounting threats to global trade that have unsettled investors.

 

For such an enduring bull market, it shares little of the hallmarks of prior rallies.

 

Unlike earlier rallies, individual investors have largely sat out after getting burned by two crashes in less than a decade. Trading has been lackluster, with few shares exchanging hands each day. Private companies have shown little enthusiasm, too, with fewer selling stock in initial public offerings than in previous bull runs.

 

Yet this bull market has been remarkably resilient. After several blows that might have killed off a less robust rally — fears of a eurozone collapse, plunging oil prices, a U.S. credit downgrade, President Donald Trump’s trade fights — investors soon returned to buying, avoiding a 20 percent drop in stocks that by common definition marks the end of bull markets.

 

“I don’t think anyone could have predicted the length and strength of this bull market,” said David Lebovitz, a global market strategist at JPMorgan Asset Management.

One of the market’s biggest winners in recent years, Facebook, wasn’t even publicly traded when the bull market began. Facebook’s huge run-up of more than 350 percent since going public in 2012, Apple’s steady march to $1 trillion in value, and huge gains by other tech companies like Netflix have helped push the broader market higher.

 

Since the rally officially began on March 9, 2009, the Standard and Poor’s 500 has risen 321 percent. In the 1990s bull market, the current record holder for the longest, stocks rose 417 percent.

 

From the start, the Federal Reserve was a big force pushing markets higher. It slashed short-term borrowing rates to zero, then began buying trillions of dollars of bonds to push longer-term rates down, too. Investors frustrated with tiny interest payments on bonds felt they had no alternative but to pile into stocks.

 

Companies moved fast to adapt to the post-financial-crisis world of sluggish U.S. growth.

 

They slashed costs and kept wage growth low, squeezing profits out of barely growing sales. They bought back huge amounts of their own stock and expanded their sales overseas, particularly to China’s booming economy. Profit margins reached record levels, as wages sunk to record lows as measured against the size of economy.

 

“What people missed was how quickly U.S. corporations were restructuring and right-sizing themselves to regain profitability,” said money manager James Abate, who publicly urged investors to start buying stocks in early 2009 when most were dumping them. “It was really a catalyst for turning things around.”

 

China’s surging growth helped the market, too. Its boom drove up the price of oil and other commodities, helping to lift stocks of U.S. natural resource companies — for a while at least.

 

Then came a downgrade of the U.S. credit rating in August 2011, which caused stocks to swoon, and 2013 brought another fall as Fed Chairman Ben Bernanke talked of easing off stimulus policies. In the second half 2014, oil plunged 50 percent, which rattled investors again.

 

Profits started falling the next year, but investors kept their nerve and didn’t sell and waited for profits to rise again. In 2016, stocks gained 10 percent then jumped 19 percent the next year. Since the start of 2018, they have risen 6.6 percent, boosted by surging profits following the massive cut in corporate tax rates earlier this year.

 

Several dangers threaten the rally.

 

The Fed has hiked its benchmark lending rate twice since January, and is expected raise it twice more by the end of the year.

 

Stocks could suffer as higher interest on bonds convinces investors to start shifting money into this safer alternative. Higher rates also increase costs for business and make expanding operations more difficult.

More worrisome, rising rates can trigger recessions, which often kill bull markets. Three of the past five recessions were preceded by rate hikes by the Federal Reserve.

 

With stocks richly priced, there isn’t much room for things to go wrong.

 

The prices investors are paying per share for companies are 2.2 times revenue per share, near historic peaks. And prices compared to long-term earnings are much higher than in 2007 before the market crashed.

 

For all its longevity and gains, the final verdict on the bull market won’t be known until it ends.

 

The financial crisis of 2008 that ended the last bull market laid bare just how much debt and risk-taking had fueled gains in the previous seven years. The dot-com bust that ended the 90s rally showed how reckless investors had been.

 

This time, many of the unanswered questions concern the Fed’s monetary stimulus.

 

How much did it help boost stocks, and thus the broader economy? Will the gains it helped manufacture prove ephemeral? What are the long-term costs of its unprecedented economic rescue effort as it faces the tricky task of unwinding its stimulus program?

 

Another question is the wisdom of so many buybacks. Companies have spent trillions in recent years repurchasing their own stock, which has helped lift prices in the short term but does nothing to expand operations, train workers and generally improve their business. Many of the purchases were made with borrowed money, adding to already sizable debts.

 

Abate, the money manager who urged people to buy early in 2009, says stock prices are too high given the threat to profits from higher borrowing costs as rates climb, higher input costs from Trump’s tariffs and, possibly, bigger raises for workers in the future.

 

“Profits are peaking and valuations are extreme,” said Abate, chief investment officer of Centre Asset Management.

 

His prediction is that stocks will plunge by the end of the year and a bear market will begin.

 

Others are more optimistic.

 

JPMorgan’s Lebovitz takes comfort in the fact investors have been skeptical of the rally all along, which he says has allowed none of the excesses of prior bull markets to build up.

 

“This is a bull market that people love to hate,” he said. “Blind exuberance hasn’t been a characteristic.”

 

Asked how much longer the rally will last, he said: “At least another year, but two might be a bit of stretch.”
…

The space company of billionaire Microsoft co-founder Paul Allen on Monday unveiled details of medium-lift rockets and a reusable space cargo plane it is developing, injecting more competition into the lucrative launch services market.

With its rockets, Allen’s Stratolaunch Systems is trying to cash in on higher demand in the coming years for vessels that can put satellites into orbit. But his vehicles will have to compete domestically with other space entrepreneurs and industry stalwarts such as Elon Musk’s SpaceX and United Launch Alliance — a partnership between Boeing and Lockheed Martin.

Seattle-based Stratolaunch, founded by Allen in 2011, said in a news release its launch vehicles will make satellite deployment “as easy as booking an airline flight,” though the first rocket launch is not slated until 2020 at the earliest and the massive airplane it is building to deploy the rockets is  still in pre-flight testing.

Rather than blasting off from a launch pad, Stratolaunch’s rockets will drop at high altitude from underneath the company’s six-engine, twin-fuselage airplane — the largest ever built by wingspan.

That launch method is similar to the one being developed by billionaire Richard Branson’s Virgin Galactic.

Stratolaunch’s plane is designed to carry a rocket and payload with a combined weight of up to 550,000 pounds (250,000 kg), on par with what a SpaceX Falcon 9 rocket can launch from the ground.

Timing is everything

Around 800 small satellites are expected to launch annually beginning around 2020, more than double the annual average over the past decade, according to Teal Group space analyst Marco Caceres.

Stratolaunch announced plans for the plane years ago with the goal of flying Northrop Grumman Corp’s small-payload Pegasus rocket in 2020, and some in the aerospace industry expected Stratolaunch to eventually make its own rockets after partnerships with other manufacturers fell through.

Stratolaunch said its new medium-lift rocket with a capacity of about 3,400 kg (7,500 pounds) would fly as early as 2022. It said it was in the early stages of developing a variant with a payload capacity of 6,000 kg. It made no mention of launch customers and declined to say how much it would cost to develop its space vehicles.

Stratolaunch acknowledged it was designing a reusable space plane to carry cargo to and from Earth and a follow-on variant could carry people.
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