Globis maritime soared, and global has climbed 450 . And this performance is even more peculiar, because the sector has been facing a nun of challenges as it deals with global overcapacity and sluggish trade. You may recall, the bankruptcy filing earlier this year of south koreas han engine shipping. So whats going on . Dominic chu takes a look at some theories and why investors need to proceed with caution. Reporter the stock market has been riding high since the election, and there have been a lot of bets placed on companies in industries that might benefit or be hurt by a trump administration. But the recent surge in small and microcaps shipping stocks have defied a lot of market logic. The question is, what is fueling this parabolic move and traders are offering a multitude of theories on why bulk cargo shippers could be seeing brighter days ahead. Could a Trump Presidency lead to a surge on spending on things like roads, bridges and other Infrastructure Projects if that were to happen, there could be a lot of demand for things like gravel, concrete, steel, et cetera, which could lead to more activity and more revenue for cargo shipping companies. Others believe the move in some of these smaller market caps shipping stocks has to do with technical market factors, like traders rushing in to buy stock in order to close out possible bets on stock market declines. But buyers should proceed with extreme caution, even if you believe that the story is bullish for chipping stocks. Not much can justify a rise in some cases by 1,000 in a little over a week. The mindboggling move isnt just catching the eye of traders. The Nasdaq Stock Market halted the trading of dry ships early wednesday morning, because it was requesting more information from the company about whats happening with its stock. Nasdaq said it would keep the trading halt in place until its request for information was fully satisfied. Dry ship stock traded below 5 per share just before the election and rose to over 100 a share earlier this week. It and many other bum being shipping companies have seen stocks fall dramatically, and many are still down a lot since their highs in that span, even with this big rally. Regardless of the possible reasons behind the big move, any time you see trading action like this in small and microcap stocks, many experts quote that latin phrase, caveat emptor, buyer beware. For nightly Business Report, im dominic chu. Michael weber joins us now to talk more about what you need to know before investing in microcap stocks. He is managing director of research and Senior Analyst at wells fargo securities. Welcome. Nice to have you here. Thank you for having me. Before we get to the potential pitfalls, what do you think is going on in this particular sector . You know, the degree of volatility we have seen in the past week has been its been pretty extreme, even for a sector like shipping. You know, i think that what were looking at here is its almost a bit of a perfect storm. Were first really three things happening. First, you get a trump rotation tried. A lot of money put into riskier assets and a bit of a retail bid into those stocks. A lot of retail money that drives some short squeezes. So the outperformance of seller rates is a little more more. And most recently, we think we have seen basically the machines take over. We have seen we think we have seen a significant amount of volume driven by trading which is how youre getting these parabolic stock rises we have seen in the past three or four days. And to be clear for those who dont understand what that is, thats a program that is put into a computer by a trading desk or by a money manager, and its triggered when a stock hits a certain point in the program. Thats right. So youll get a bit of a short squeeze and then all of a sudden once that performance hits a certain level, the program will take over, and it will just ride from there. So i think thats what we have seen. I dont necessarily think the last two or three days have been indicative of fundamentals, but even buyers or sellers. But in a market that has had a little less volatility than some traders or investors would like, making it harder to make money, a lot of times when you see these stocks, the individual investor wants to get in. So what do they need to know before they even venture anywhere near a microcap, whether its in shipping or some other sector . Yeah. The message here is to be very careful. Especially for names like were talking about that have these parabolic pricing moves. As little as a month ago, we were talking about these Companies Still be in business. Now theyre up 1,000 , 2,000 . So if you are going to look at those sectors, there are companies usually within the sectors that have solid Balance Sheets. Thats a bit like buying a Lottery Ticket and actually buying a company and youre actually investing. So from our end, we look at the Balance Sheets. Want to minimize our down side risk. If we are going to take a risky bet like dry bulk, easily the most beaten up and most down trodden of the sectors we cover, we want to make sure the Balance Sheet is in really good condition. Most of the stocks youre seeing that are really off to the races here, and have these big moves are really the bottom of the barrel. So good old stockpicking due diligence. Absolutely. Michael, thank you very much. Thank you very much. Michael weber with wells fargo securities. On wall street today, the dow snapped its sevenday win streak as financials weighed on the broader market, and a rebound in oil prices stalled a bit. The blue chip dow index fell to 18,868. The nasdaq added 18, and the s p 500 was off 3. But the small cap russell index saw nine Straight Days of gains, its longest win streak ins early 2013. To the economy now. Where inflation pressures remain mild, according to the latest government report. The produce irprice index, which measures the prices Companies Receive for their goods and services was unchanged in october. The reading was below the slight gain many economists had been looking for. And manufacturing output rose for a second straight month. Production at factories, which makes up 75 of all output, increased. 2 . Factories are starting benefit from steady Household Spending growth, and gains in the production of Motor Vehicles following a prolonged slump. But that prolonged slump is still being felt at the nations coal mines. Where production has dropped sharply, and where jobs have disappeared. President elect donald trump promised to bring the coal industry back to its former glory. And as Contessa Brewer reports, that resonated with voters. In tiny pal hatten point ohio, hour after hour. This whole section right here, used to be a coal mining section. Reporter inside a rural store outfitting energy workers, the silence is deafening. We try to ride it out. Like i said, in the past six months, six items in the whole section were purchased and we had to close it out. Reporter coal has been on a steady decline nationwide. In the last five years, 30,000 coal jobs, gone. The percentage of electricity generated by coal, down to 31 . A 14 drop. It definitely has affected our business. Reporter gina runs her hair salon out of the same house where she grew up, as coal jobs disappeared, so did the extras customers were willing to pay for. Wives and of husbands that worked in the mines, they maybe have to cut the budget a little bit here or there. They might instead of getting color, they might color it at home. Reporter like many of her customers, she is looking for a change. Donald trump campaigned hard here and coal country in pennsylvania, west virginia, ohio, voted overwhelmingly for him. But independent experts say president elect trump may not have the power to keep his promise. In recent years, we have seen a perfect storm of three factors that have come together that put tremendous downward pressure on coal demand. Reporter first, International Demand weakened for american coal. Though china has Just Announced a massive 20 rise in power, produced from coal. Secondly, natural gas has gotten cheaper as production has climbed. Whilit grown by 15 in the last five years Coal Production has dropped by 18 . I can handle that. Im an american first. I can compete with natural gas, and will. As long as we have a level playing field. Reporter coal leaders accuse president obama of stacking the deck against them with environmental regulation. They want donald trump immediately to kill the paris climate agreement, and to appoint a Supreme Court justice who will abolish obamas clean energy plan. Mr. Trump has a mandate to carry out what he said. Its going to be difficult. To do it all. But hes got to do it. Hes not even officially in office yet. So, yes, i hope they give him patience. Reporter but patience, like gear for the coal miners, may be in short supply. For nightly Business Report, Contessa Brewer, ohio. The decline in coal volumes has also hurt the railroads, which moved the commodity from place to place. But there is renewed hope that the rail sector will get a lift from the possibility of increased Infrastructure Spending under the new president. Morgan brennan has our story. Reporter rail yard 22 trains loaded with 1,300 containers moved daily on the 26 miles of track. It is a huge facility and privately funded by csx. It highlights the fact that the freight railroads already maintain their own networks. On track to spend 26 billion this year alone. But if president elect donald trump comes through on plans to drum up Infrastructure Spending, rails will still likely benefit as connecting highways and Passenger Rail tracks and courts get an update. But the biggest boon would actually be moving the building splice themselves. Increasing volumes at a time when rails have struggled amid a weak freight environment. We served industrial economy, to large degree. And when they win, we win. And theres opportunities here, based on what ultimately the policies are going to be for potentially more spending and obviously be helpful for us, as well. Reporter there are many questions that are far from being answered. Particularly around trade. If the Incoming Trump Administration Takes a more protectionist approach to trade, up ending nafta and taking a tougher stance against china, that could have big ripple effects in the north american supply chain. For the u. S. Railroads, about onethird of total traffic is traderelated to the according to association of railroads with grain and autos among the biggest groups. Analysts say some railroads would be more affected, particularly those that benefited with mexico. A growth story in an otherwise tough freight environment. Were going to see a shiflting trade pattern and that could impact some of the railroading that go across border. And continue on trade. And does that investment go back into that rust belt states where you could see more and more traffic originate from those areas. Reporter and more traffic could come. The president elect has vowed to reinvigorate coal which for the rails has plunged by half from a peak of 140,000 weekly car loads in 2008. But while coal deregulations could boost revenues and certainly the stocks, not even the railroads themselves expect to return to the commodities glory days. For nightly Business Report, im Morgan Brennan in bedford park, illinois. While out on the campaign trail, president elect donald trump vowed to lower taxes. He promised to streamline the tax brackets and to cut taxes for the wealthy and the middle class. If all of this were to happen, how might his proposed tax changes impact you . Financial planner at highland financial advisers. Good to see you, welcome back. Good to see you. Thank you for having me back. You were looking back at history to tell us exactly what you think the president elect will be able to achieve. Yeah, its an interesting statistic dating back to Woodrow Wilson to the present. Every president makes promises during that i campaign. Statistically, about 70, 75 of the promises actually get fulfilled during their tenure as president. So looking at that, even barack obama has completed about 73 of what he promised. So the trend follows. So a good probability that a lot of these tax proposals are going to remain intact, at least three quarters. So lets tlun r run through some of the things you think will happen based on what the president elect has said on the campaign trail. Its time for individuals who have control over their income to defer some of that into next year. Right. So if you look at those tax brackets, these basically have taken seven brackets and boiled it down to three brackets. Some simplification. Its a good possibility you may be in a better tax position next year. So for those people who have control over their income, its not everyone, but sole proprietors, people who have a small business, Corporate Executives who can control deferred comp. Things like that, most ponying until next year, youre better off postponing any income until next year. You may be better off. What if you file single . What do you think will happen, especially since mr. Trump may have a friendly congress. So he may be able to get through some of his initiatives. Its interesting on the single tax bracket. For single taxpayers, theres three brackets now. 12 tax bracket is for taxpayers who have going to be up to 37,500. The next bracket, 25 is for taxpayers who are up to 112,500 and above that, 33 . So for single taxpayers, what we find is for both married and single, the people who are probably at that upper end of each of those brackets. As you get close to the 30 to 37,000, as you get close to the 90 to 112,000, you may be actually end up being worse off than today. But the people most people, it looks like theyre going to be probably better off. And what about if you file married . Or if youre married and filed jointly . What kind of a break might you get . Obviously, depending on your income . Yeah, so for those, theres a couple things going on, especially in the higher income brackets. The highest income bracket now is at 225,000, 33 . Thats quite a bit of a reduction from that top bracket it used to be. Theyre also proposing to eliminate the alternative any more tax. So theres a lot of moving parts to this. For most people. In that area, if you are married and you have income above 225,000, youre most certainly going to pay less taxes. We also see the people in the very low bracket, whether youre married or single, youre probably going to pay less tax. Those are the two benefits. We will see what happens. Reid, thank you very much. With highland financial advisers. Still ahead, the big bet two Real Estate Developers are making on a risky market. The securities and Exchange Commission approved a new system to detect market manipulation. The agency okayed the creation of a digital warehouse designed to track and leave an audit trail of every trade made in the u. S. Market. Officials say the system should be mostly operational by the year 2018. Facebook says it found more problems with the data it provides to advertisers and publishers that use its sites. The social network miscalculated four metrics, including undercounting the number of people who watch an entire video, and overcounting how much time is spent reading certain articles. Facebook and google account for the majority of digital ad dollars spent in the u. S. Cisco said profit for the Current Quarter will be weaker than expected. This as the dow components switcher and router business struggles with slowing demand and increased competition. In the most recent quarter, cisco earned 61 cents a share, 2 cents better than estimates. Revenue fell about 2. 5 to more than 12 billion. But it was the profit outlook that moved the stock in initial after hours trading. The back to School Shopping season helps target get an a with investors and thats where we begin tonights market focus. The retailer said an uptick in Digital Sales helped beat profit and revenue estimates. The company also raised samestore Sales Guidance for the quarter, as well as its earnings forecast for the year. Shares rose 6 to 76. 03. A slow down in customer traffic caused lowes to post a disappointing quarter. The Home Improvement retailer missed profit and revenue estimates as well as samestore sales expectations. Lowes also cut its earnings outlook for the year. Shares fell nearly 3 to 6. 02. Microsoft has reportedly made undisclosed commitments to european antitrust officials regarding the companys takeover of professional net working site linkedin. Reuters says the e. U. Expressed concern last week over the 26 billion deal. The commission is expected to give its approval decision december 6th. Microsoft shares were up 78 cents to 59. 65 while linkedin shares rose 1 to 193. 47. El brands which owns Victoria Secret and bath and body works posted better than expected earnings. But the company gave a weak outlook for the upcoming holiday quarter. Shares fell in after hours and ended the regular session down just a fraction to 67. 93. Well, today the trump name was removed from three large apartment complexes in manhattan. Workers took down the gold letters that spell trump place on the buildings facade. But the buildings landlord, equity residential, said it was a business decision, not a political one. We have been in the process of dealing with this for over a year. Our goal was, we have no interest in having any political position on anything. Once mr. Trump made the decision that he was going to enter the political scene, we looked at it and said, you know, we just want to be neutral. We dont want to have an opinion. And this was part of an agreement we had with him. The agreement is expired, and were basically renaming the buildings according to the street. He said the removal had nothing to do with resident protests, as well, to drop that trump name. Two billionaire Real Estate Developers, one from cuba and the other from iran, are teaming up for the efficient. Opening a luxury condo and hotel tower in the heart of miami. Dia diana olick talked to both men, and also about fellow developer president elect donald trump. Luxury, style and more luxury are the buzz words at miamis brandnew 450 condos, two James Beard Award restaurants and a hotel, all in one colorful tower. It is the first collaboration for miamis socalled condo king, george perez of related group and california based sam that zarn. He moves the centers of gravities of different cities and projects all over. So as it pertains to us, one of our biggest i think one of the biggest milestones of our company and me personally to have him ask us to work with him. Reporter project sold out in 90 days prediscussion. That was back in 2013 when sales were booming. The miami market is now slowing down. Condo sales are off 25 compared to a year ago, and prices are falling for the First Time Since the recession. Theyre very safe investments. And nobody speculating. Theres none of our buyers that were buying, saying, im going to flip this apartment before. They were buying saying, im either going to use it as a second home, or im going to rent it. And by the way, our rental demand is huge. Reporter the project also sold out before president elect donald trump was even on the political radar. At least half of miami condos sell to international buyers, and the immigrant population here fuels not only real estate, but the workers who build it. George perez is a cub cubanamerican and iranian american. The more we can be consistent and in a welcoming path. This country is a welcoming country. I think from that perspective, i feel hes also has been up to now in the hospitality business. I think he well understands the importance of investment in cities like miami. And cities like new york. Thats what has helped them become what hes become. And hes marketed his name internationally very well. Reporter but they believe in the market and keep putting the towers up. For nightly Business Report, im diana olick in miami. Coming up, the road ahead. How business may change for the Auto Industry during a trump administration. Airfares may actually fall next year. According to a report by american express, overcapacity and increased Competition Among carriers could put downward pressure on prices. Short haul economy flights could see 3 drops. Long haul Business Class fares may decline by about 1. 5 . But the airlines may charge higher fees to offset those lower fares. It is auto show season, and this year, near record sales. A Strong Economy and a slew of new models are helping generate some buzz. Phil lebeau is at the first big show in los angeles where executives are talking about the president elect and the new cars and trucks that are turning heads. Reporter in a city of stars, no expense is spared, rolling out dream cars. Take the 323,000 mercedes cabriolet. Mercedes expects strong sales of a rich vehicle only the very rich can afford. We are only building 300 worldwide, and were only bringing 75 to the u. S. We will have a situation that we already see where we have more demand than we actually have cars available. But i think thats the right strategy. Reporter l. A. Remains the center of americas luxury vehicle market. But its also become the largest market in the country for pickup trucks. Which is why gm chose l. A. To roll out its new chevy colorado zr2. What we know here is that theres a lot of people who want to go offroad. They really want a capable vehicle. I can tell you, this is seriously capable. Reporter but amidst the new models, automakers are facing questions about doing business during the trump administration. Fuel economy standards drop, and will cars built in mexico, but sold in the u. S. , face a 35 tax . Its a move that could cripple auto sales. What the automotive business is, its an International Business of parts and manufacturing and logistics and trade. An ecosystem that works well in america. We make a lot of cars here and across the globe. And i think the ecosystem works. The consumer really isnt looking at uncertainty when it comes to the automakers. They are looking theyre focused on what is being offered today. What is out there on their showroom floors. Reporter one thing is certain. Demand for luxury vehicles is not slowing down. Especially highend suvs. In fact, when you walk the floor and talk with Auto Executives here at this show, one thing is clear. They plan to feed americas appetite for bigger vehicles, which is why we should see more suvs debut at upcoming auto shows. Phil lebeau, nightly Business Report, los angeles. And that is nightly Business Report for tonight. Im sue herera. Thanks for joining us. Have a great evening, everybody. Well see you here tomorrow. Narrator today, americans are spending hundreds of millions of dollars on wearable devices and smartphone apps to track their fitness and health. Smarr this amazing explosion of Wireless Health devices is giving us the kind of feedback weve never had until now. Narrator this isnt just the latest health fad. From the number of steps walked to the genes in our bodies, we can now generate our own health data. But who has access to this information, and can regulation keep up with innovation . Coming up, how new technologies are helping drive a Digital Health revolution to hack, track, and quantify our lives. [ heart beating ]
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