12 17-2016 -- market thoughts of week ending: USA Interest rate up. The Implication?

1. USA Interest Rate Up. The Implication?
Published on December 17, 2016
Market Thoughts of the Week Ending 12-17-2016
Yes, FOMC raised its target range from 0.25% to 0.5% to 0.5% to 0.75%, and plans two or three
more in 2017. Increased interest rates will have varying degree of impact on your
finances: credit cards, auto loans, mortgage rates, and savings. But it may have much greater
impact on China due to its heavy debt and as bond market about to crumble… Also many see
China’s economic condition is out of control, and increased US interest rate will further
exasperate it. Furthermore, looming trade war from incoming US administration and regional
political developments are not helping.
Living hell on earth is inhumanely real for the children, women, and aged as the Aleppo cease
fire is once again "on" and "off" to the devastation of the living and struggling in Aleppo. God
help their soul. So who is responsible for this meltdown of humanity? Syrians? Americans or
Russians? But now how do we stop this human suffering? Meanwhile South China Sea trouble
seems to be heading to a certain disaster as Chinese Navy seizes American sea drone performing
peaceful and scientific mission, and Philippines’ Duterte is boasting that his country does not
need American support anymore. These unprecedented geo-political and economic changes may
lead to trigger-happy incident that can devastate much more than we can imagine. We need a
Miracle for peace now. God help us.
In USA, infrastructure building, as promised by Donald Trump, will take off soon, and there may
be a reasonably good investment opportunity in the base metals. The three most-traded metals
are: aluminum, copper and zinc. If you agree, then you may want to take a closer look at the
base metal fund ETF (DBB). You decide.
Holiday travels will bring out 103 million Americans to the roads and to the airports. Plan ahead
so you will have high spirit and good time to enjoy the holidays. As you enjoy the holidays
please do think of, and pray for the poor people who often go without food. There are 42 million
people in America go hungry each day. And, there are millions more hungry people around the

2. world. Pray for them. Give if you can, so hungry children, women and men can eat during the
holidays.
Market closed Friday week at: DOW--19,843.41; S&P--2,258.07; NASDAQ--5,437.16; Gold--
$1,136.80; Oil--$52.03; and 10-Year Bond--2.599%...
Here are the highlights of the week:
1. How Fed rate hike affects you. The Federal Open Market
Committee raised its target range from a range of 0.25% to 0.5% to 0.5% to 0.75%. The
overnight funds rate currently sits at 0.41%. The committee now expects three rate hikes in 2017,
two or three in 2018 and three in 2019. So what is it mean to you? The rate hike likely will
change some of the terms by which you borrow money or access credit. Mortgages. Adjustable
rate mortgages will certainly be higher too and those with an ARM but Auto loans, for few
months, will not have any material effect on what rate you get. The average 5-year new car loan
rate is 4.27%t and the average 4-year used car loan rate is 4.89%. Credit cards, most have a
variable rate, has a direct connection to the Fed's benchmark rate. The quarter-percentage-point
rate hike means you'll pay an extra $25 a year for every $1,000 of debt. Savings, the average
interest rate on a savings account is about 0.11% right now, according to Bankrate, and even
with the Fed rate hike, banks may not pass on any of that increase to their customers. Student
loans, are fixed mostly, so most borrowers won't be impacted immediately by a rate hike. But a
private loan, those loans may be fixed or have a variable rate tied to the Libor, prime or T-bill
rates which means that as the Fed raises rates, borrowers will likely pay more in interest,
although how much more will vary by the benchmark. So plan your cost of using money
accordingly.
2. Higher US Interest Rates, Big Problems for China. Higher US
interest rates could make it harder for China to manage its exploding debt, as the Asian giant
increasingly depends on borrowing in order to keep growing while simultaneously trying to
block capital from fleeing for more fruitful shores in America. Today in China, it's taking $4 in
debt to create a dollar of GDP growth. Rising U.S. rates typically mean better yields for U.S.
Treasurys and a stronger U.S. dollar. And more trouble for Beijing, which is already working
hard to block capital from fleeing China as its currency, the yuan, and declines in value against
the dollar. More appealing investment options in the United States are a powerful lure drawing
money out of China. China also is using its foreign currency reserves to buy up yuan in a
desperate attempt to keep its currency from plunging. On Wednesday, the Chinese government
said it issued 794.6 billion yuan ($115.1 billion) in new loans last month, well above October's
651 billion yuan ($94.28 billion). Meanwhile, total social financing in China, a broad measure
of credit in the country, rose to1.74 trillion Yuan ($250 billion) in November, from 896.3 billion

3. ($129.8 billion) in October. This appears as out of control, as this is happening at the same time
their growth rate is in secular decline… China's GDP growth rate has steadily dropped since
2010, when China's economy grew nearly 10%, according to data from the International
Monetary Fund.
3. Aleppo, Meltdown of Humanity... The evacuation of the last
opposition-held areas of the Syrian city of Aleppo was suspended on Friday after pro-
government militias demanded that wounded people should also be brought out of two Shi'ite
villages being besieged by rebel fighters. The second day of the operation to take fighters and
civilians out of Aleppo's rebel enclave ground to a halt amid recriminations from all sides after a
morning that had seen the pace of the operation pick up. "Aleppo is now a synonym for hell,"
U.N. Secretary-General Ban Ki-moon told reporters. According to report pro-government forces
had reportedly entered homes and killed those they found inside, including women and
children. They also shot and killed civilians on Monday in al-Ahrar Square in al-Kallaseh, and
in the Bustan al-Qasr neighborhood. Any civilians remained in areas previously held by rebel
groups, including opposition activists and civil defense members may now risked detention,
torture and death. Pray for the children, women and all. Let there be peace. Please.
4. Philippines president to US: 'We don't need you... Philippine
President Rodrigo Duterte told the United States on Saturday to prepare for the eventual repeal
of a military deal that allows Washington to deploy troops and equipment for exercises in the
country. Duterte also said the Philippines can survive "without American money" after a U.S.
aid agency put on hold a decision to fund anti-poverty programs in the country. "We do not need
you," Duterte said in a news conference after arriving from visits to Cambodia and
Singapore. "Prepare to leave the Philippines. Prepare for the eventual repeal or abrogation of
the VFA." Philippines is leaning toward China and Russia… Ominous development.
5. China's Navy seizes American underwater drone. Chinese
warship has seized an underwater drone deployed by a U.S. oceanographic vessel in the South
China Sea, triggering a formal diplomatic protest and a demand for its return, U.S. officials told
Reuters on Friday. The incident, the first of its kind in recent memory, took place on Dec. 15
about 50 nautical miles northwest of Subic Bay off the Philippines just as the USNS Bowditch,
an oceanographic survey ship, was about to retrieve the unmanned, underwater vehicle (UUV),
officials said. "It's a sovereign immune vessel, clearly marked in English not to be removed
from the water, that it was U.S. property." The Pentagon later confirmed the incident at a news
briefing. It said the drone used commercially available technology and sold for about
$150,000. Still, the Pentagon viewed China's seizure seriously since it had effectively taken U.S.

4. military property. Taiwan sovereignty, Philippines political realignment, South China Seas,
possible Trade War… Not good news.
6. Base Metals Trade Bets. There is one big ETF with assets of nearly
$300 million, the PowerShares DB Base Metals Fund (DBB). It focuses on the three most-traded
metals: aluminum, copper and zinc. DBB has logged a hefty 32% return so far this year. Usually,
investors interested in metals usually stick to the precious ones, gold and, if dabbling beyond that,
maybe silver. But President-elect Trump's plans to shore up infrastructure and bring back
manufacturing means those good times are rolling for industrial metals. Trump's ambitious plans
could give industrial metals additional momentum as base metals including copper, aluminum
and lead are essential ingredients in construction and manufacturing. The PowerShares DB Base
Metals Fund (DBB) focuses on the three most-traded metals: aluminum, copper and
zinc. Infrastructural building resources make sense with new Presidential Elect. What do you
think?
7. Christmas travel smart. Holiday travel this year is expected to reach
"the highest level on record," with 103 million Americans on the move for year-end holidays,
according to AAA. Most will drive, but air travel is expected to increase 2.5%, with more than 6
million Americans flying. Don't let holiday crowds at the airport bring out your inner
Grinch. "As much as you can, start thinking about Plan B," SmarterTravel.com. Some of the
best travel tactics require planning: picking a nonstop flight, applying for trusted traveler status
to gain access to priority security lines and avoiding airports prone to bad winter weather and
other delays. Consider: 1) Download the airline app, 2) Invest in a priority pass, 3) Assess bag-
check options, 4) Compare security lines, 5) Compartmentalize carry-on bags, and 6) Come up
with a plan B. These may let you decide quickly if whatever alternative the airline is offering
will work, or if you need to ask for a refund and make other holiday plans. Be happy. Travel
safe.
8. Prayer for the Hungry. 42 million Americans suffering
from hunger. While families across the country gather around the dinner table during the holiday,
but more than 42 million people now suffer from hunger, according to Feeding America. In the
midst of a recovering economy, low unemployment and nearly nonexistent inflation, the fact
remains that nearly 1 in 7 Americans still goes to bed hungry each night. According to recent
statistics released by the U.S. Department of Agriculture, 15.8 million U.S. households, that's

5. 12.7% of the total didn't have enough food to eat at some point last year. Americans are
struggling financially as the result of the crash, and many remain unemployed. A whopping 95
million Americans are now not in the workforce, according to the November jobs report. Perhaps
more disturbing: An increasing number of working-poor families and the elderly are using these
emergency services. Pray for the hungry. Share if you can during these holidays.
Next Week: Christmas shopping and travel ensue… Monday-Janet Yellen speaks; Thursday-
Jobless Claims report; Friday-Consumer Sentiment report.
Again, these are my thoughts on the highlights of the week. Perhaps you should take a closer
look at them, do additional research and analysis, if these are interest to you. Always, you decide
with your own final analysis and position.
As always, I welcome your comments.
~ S. Vincent Shin
www.linkedin.com/in/vshin
Image credits to: vShin, Getty image, AP Photo, Reuters, CNBC...