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August 2018

July is behind us and what a month it was!! The US economy grew at an annualized rate of 4.1% for the second quarter. This is the first of three readings of the Gross Domestic Product.

Personal Consumption grew at a 4% rate while the final reading of the University of Michigan Consumer Sentiment Index for July was adjusted higher to 97.9% from the preliminary reading of 97.1%. Strong consumer sentiment is key since consumer spending accounts for over 67% of the US Gross Domestic Product.

The Nasdaq Index reached an all time high of 7,933.31 on July 25, only to tumble after a few of its stalwarts posted disappointing quarterly results. Amazon shares reached an all time high of $1,880.05 on July 27 after reporting stellar quarterly results. Upon a closer reading of Amazon’s quarterly results, we learned that Amazon’s revenues grew 39.3% over 2017’s second quarter.

Meanwhile, Amazon shares are trading at a lofty multiple of 220x earnings.

Intel, Twitter and Facebook all reported disappointing quarterly earnings and the shares were punished by investors. Facebook’s drop was particularly alarming since its shares reached an all time high of $218.62 on July 25. The very next day, the shares plunged plunged over 20% after the release of its quarterly earnings. Its market capitalization fell overnight by about $150 billion, the largest drop in stock market history. Class action lawsuits are now being filed against Facebook as investors claim false and misleading statements were made by its executives regarding its outlook along with its subscriber and revenue growth.

Particularly disturbing about the plunge in Facebook’s shares was the disclosure that several executives sold over $4 billion worth of stock since the Cambridge Analytica news hit the wires on March 17. Bloomberg.com cited a report by InsiderInsights.com which showed that Mark Zuckerberg, Facebook’s Founder and CEO, accounted for about 85% of these insider sales. The report noted that these massive insider sales from March 17 through July were nearly equal in dollar amount to the total insider sales for all of 2017!!

In M&A news, we learned on July 12 that the Department of Justice will appeal the AT&T court victory allowing it to complete its acquisition of Time Warner. The deal closed on June 14 after US District Court Judge Richard Leon, on June 12, issued a decision that completely rejected the Justice Department’s case. A decision on the appeal is expected in early 2019 according to a report by Dow Jones. AT&T was disappointed by news of the appeal and found it ironic that the Justice Department did approve the sale of media properties by Fox to Disney on June 27.

My weekly radio show airs each Friday at 12.30PM EST on WWPR 1490 AM. The show can also be heard live on the station’s website (www.1490wwpr.com). My prior radio shows and newspaper columns are available here.

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