Week of March 30, 2015

The euphoria felt after last week’s Federal Reserve meeting was overwhelmed by nervousness this week as equities erased nearly all of the gains posted last week. The S&P 500 collapsed 2.2%, the Dow Jones Industrial Average fell 2.3% and the technology-heavy Nasdaq composite was cut by 2.7%. The negative momentum could continue. Equities face a couple of obstacles from deteriorating earnings momentum, historically high valuations, a slowing economy and a stronger dollar. This coupled with a lighter than normal period for economic news releases and fewer corporate share repurchases heading into earnings season could continue exerting downward pressure on markets.

Give me Your Tired, Your Poor, Your Huddled Masses Yearning For Yield

Last Wednesday, the U.S. government auctioned $13 billion of two-year, floating-rate Treasury notes and it drew the most interest from overseas investors since the securities began selling at the beginning of 2014. The appeal of floating rate debt has been growing lately in anticipation of the Federal Reserve raising rates. These instruments offer more protection than fixed rate securities in a rising rate environment. The allure is even greater for international investors where yields in their home countries are paltry or negative.

What’s in a Name?

Hedge funds have embarked on a public relations campaign to change their image, starting by calling themselves something else. Years of underperformance and public scrutiny for lavish pay have prompted several hedge funds to rebrand as alternative asset managers, investment holding companies or private partnerships. Regardless of what they are known as, their numbers have swollen over the last decade. According to HFR Inc, an industry research group, there are more than 8,000 hedge funds managing approximately $2.8 trillion as of the end of 2014.

There’s No Place Like Home

A recent report from Credit Suisse estimates that more than $300 billion of foreign profits were repatriated or earmarked to be brought back home by U.S. firms in 2014. This is the most since 2005 when more than $359 billion returned to U.S. shores. The catalyst back then was a “tax holiday” enacted by Congress. The reason for the latest surge is unclear. Domestic companies are sitting on more than $2 trillion of foreign earnings. A significant chunk of this is held in cash overseas to minimize taxes; bringing it back home would require paying the 35% corporate tax rate. Despite this, an increasing number of domestic companies brought back cash in 2014 to repurchase shares and pay down debt.

Fun Story of the Week

Have you ever wondered why electric eels don’t electrocute themselves? It sounds like the beginning of a Seinfeld stand-up comedy routine, but the truth is no one really knows for sure. The freshwater fish have specialized organs that create an electric charge up to 650 volts used to navigate, communicate, and even stun prey. But they never seem to shock themselves. The two keys may be body size and the conductivity of water. Eels can grow up to eight feet long and weigh nearly 50 pounds. This makes them much larger than most victims. Also, out of water the eels can spasm since the charge doesn’t dissipate in air like it does in water and concentrates on the fish’s wet skin. Genetic sequencing may be unlocking the mystery. A team of scientists at Vanderbilt found that several electric fish express the same genes that build specific proteins for insulation. Still, this silly question remains a mystery.

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_{Securities offered through Jacques Financial, LLC (JFLLC) a Broker-Dealer, Member FINRA and SIPC. Certain associates of Joseph W. Jacques, CPA, CFP^TM are registered representatives of JFLLC. Joseph W. Jacques, CPA, CFP^TM and JFLLC are affiliated. Investment advisory services are offered through Jacques Advisors, LLC an affiliate of JFLLC. Tax services are offered through Jacques & Associates Certified Public Accountants, LLC an affiliate of JFLLC.}