The Mission Report

The MissionIR Report - January 2017

In-depth analysis, timely updates, latest market news


Market News

Company Updates


Small Business Optimism Highest in Nearly 4 Decades, says NFIB

The 1980s did more than breed questionable fashion, great music and big hair; it was also an age of entrepreneurship as the nation saw 17 million small businesses open their doors with an air of unmatched optimism … until now.

Banking on expectations about where the economy is heading under the leadership of businessman and President-elect Donald Trump, America's small businesses are operating with revitalized confidence in the future of their brand.

In December, The National Federation of Independent Business' (NFIB) index jumped 7.4 points to 105.8, the highest mark since reaching 98.4 at the end of 2004. While seven of the 10 components increased in December, 73% of the monthly gains was fueled by optimistic outlooks for sales and the economy, the Nashville-based group reported.

Based on a survey of 619 small business owners, NFIB's data also shows that the number of business owners who say now is a good time to expand is triple the average of current expansion. Also, more companies said they plan to increase investment and keep hiring on anticipation that the Trump Administration will boost the economy through deregulation, tax reform and infrastructure spending.

"Rising confidence adds to the economy's upward momentum. At the same time, the NFIB membership appears to be disproportionately Republican, so it is possible that the data will start overstating strength, opposite the pattern during the Obama administration," Jim O'Sullivan, chief U.S. economist at High Frequency Economics in Valhalla, New York, said in a note.

Additionally, 50% of respondents said they expect better business conditions in the next six months, a position 38 percentage points higher than in November. Companies are also more optimistic about their financial performance, with the net share of firms projecting higher sales up 20 points to 31 percent.

"We haven't seen numbers like this in a long time," Juanita Duggan, president and chief executive of the NFIB, said in a statement. "Small business is ready for a breakout, and that can only mean very good things for the U.S. economy. Business owners are feeling better about taking risks and making investments."

Small companies – defined as an independent enterprise with fewer than 500 employees - currently represent more than 99% of all U.S employers, according to the U.S. Small Business Administration.

Richmond Fed President Announces Retirement, Effective in October

Jeffrey Lacker, president and chief executive officer of the Federal Reserve Bank of Richmond, announced his retirement on Tuesday, effective October 1, 2017. The decision marks the second announced departure from the Fed since September 2016, when Atlanta Fed President Dennis Lockhart announced that he will be stepping down on February 28.

Lacker has spent 28 years with the Richmond bank and currently serves as a nonvoting member of the Federal Open Market Committee. Notably, the Richmond district president will gain a voting position in 2018.

"It's been an honor to serve the Federal Reserve," Lacker told reporters following the announcement. "I feel fortunate to have spent time throughout the Fifth District learning first-hand about people's economic experiences, and to have participated in some of the most extraordinary policy deliberations in our nation's history. It's been my deepest privilege to lead the Richmond Fed and the dedicated people who work here."

Originally joining the Richmond Fed in 1989, Lacker served in a variety of leadership positions ahead of his appointment as president in August 2004. He was also an assistant professor of economics at Purdue University's Krannert School of Management, in addition to working at Wharton Econometrics in Philadelphia.

Looking toward the future, Lacker highlighted President-elect Donald Trump's fiscal stimulus plans as a key factor in near-term interest rate hikes. He indicated that the Federal Reserve may need to raise rates quicker than markets currently predict if these plans provide a significant boost.

"Monetary policy rates are likely to increase, and my view is that they may need to increase more briskly than markets appear to expect, depending on developments as the year unfolds," Lacker added.

Following Lacker's announcement, the Richmond Fed's board of directors outlined plans to form a search committee in order to find his successor.

Janus Capital's Bill Gross Warns of Implications if 10-Year Note Rises

While most of us with an interest in the financial markets were cheering the Dow's performance earlier this week, prominent bond investor Bill Gross had his eyes on the 10-year Treasury note. The present manager of Janus Capital's global unconstrained bond fund was quick to issue his warning of what will happen if the 10-year not climbs above its current level.

President-elect Donald Trump's win over Hillary Clinton in November triggered a bond sell-off that pushed the yield on the benchmark 10-year Treasury note to around 2.60% in December up from a low of 1.36% in July.

Gross warns that while falling bond prices have somewhat abated, the 10-year yield remains a key factor in the financial markets. An even higher 10-year note, for example, would usher in the end of the bull market in bonds, unleashing huge implications for broader markets.

On one hand, increasing yields (which equates to falling bond prices) would negatively affect stocks that in recent month have made gains on optimism that Trump will hold to his campaign promises, such as increased fiscal spending and tax cuts. High yields would make the security of bonds more attractive to buyers of comparatively risky stocks. Additionally, these proposals lend weight to inflation, which erodes the value of fixed-interest payments. In the housing industry, higher rates mean more expensive mortgages and higher corporate borrowing costs.

"And this is my only forecast for the 10-year in 2017. If 2.60% is broken on the upside – if yields move higher than 2.60% – a secular bear bond market has begun. Watch the 2.6% level. Much more important than Dow 20,000. Much more important than $60-a-barrel oil. Much more important that the Dollar/Euro parity at 1.00. It is the key to interest rate levels and perhaps stock price levels in 2017," said Gross, according to a recent article on MarketWatch.

eXp World Holdings, Inc. (EXPI)

EXPI continues to grow eXp Realty LLC, and kicked-off the New Year naming business veteran Laurie Hawkes as an independent director of The Agent-Owned Cloud Brokerage®. Hawkes has more than 35 years of business experience, formerly working as an investment banker, private real estate equity investor, and successful entrepreneur. Her experience includes raising capital for public and private ventures, real estate acquisition, developing strategic business plans, and other achievements critical to the growth of any real estate company.

"Laurie brings almost 40 years of leadership experience in realty and finance to eXp," EXPI founder, chairman and CEO Glenn Sanford stated in the news release dated January 5. "We look forward to leveraging her unique skill set and acumen as we further scale our innovative, cloud-focused real estate brokerage. Her decision to join eXp's board comes at an opportune time, as we work to build a profitable company that directly contributes to increased shareholder value. We are confident that the combined expertise and experience of our management and board positions us to realize those goals."

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Monaker Group, Inc. (MKGI)

MKGI is heading into 2017 with steady footing, anticipating the January launch of its alternative lodging rental (ALR) business, for which the company already has over 1 million "real-time" bookable properties integrated and more than 2 million ALR properties under contract in the U.S., Europe, Asia, South America and Caribbean. As such, the company forecasts "significant" booking revenue in 2017, most of which will stem from MBE (Monaker Booking Engine) and travel wholesale partners.

"In arriving at this exciting position, Monaker has this year achieved several key milestones. These include the buildout of our MBE and our "plug and play" application program Interface (API), making it possible for wholesale travel service providers to easily access our ALR inventory in the instantaneous booking format they require. We have also been working to integrate our ALR inventory into multiple travel platforms, distribution groups, and travel websites. Financially speaking, during the past year we also simplified our capital structure and strengthened our balance sheet by eliminating over $10 million of debt and three classes of Monaker's Preferred shares … Our revenue outlook is further buoyed by data from independent experts, which report that the ALR industry is one of the fastest growing segments in the travel sector and is projected to total $169 billion by 2019," MKGI CEO Bill Kerby said in a recent letter to shareholders.

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National Waste Management Holdings, Inc. (NWMH)

Rightly so, NWMH is quick to boast its aggressive acquisition-based growth strategy, which calls for at least one acquisition per quarter. In tune with this plan, the company wrapped up 2016 with its acquisition of Kingtson, New York-based Northeast Data Destruction and Recycling, LLC. The acquisition is a timely response to growing demand for cardboard recycling and document destruction, hard drive destruction, and other data destruction, and provides for NWMH an additional revenue stream while supporting its goal to become a vertically integrated player in the solid waste industry.

"Acquiring Northeast Data Destruction and Recycling extends our reach to Kingston, New York, allowing us to offer roll-off services as we plan future expansion of this location. We are currently searching for a good building - either to buy or move into - that will best suit our needs and the needs of our new client base in the area," NWMH CEO "Tiny" Paveglio stated in a news release. "The acquisition enables our sales team to offer the additional services in both locations, and at the same time enables us to trim overhead costs."

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