Saturday, September 8, 2018
Weekly Commentary:
Approaching the
10-year Anniversary
by Doug Noland
full column here:
"We're rapidly Approaching
the 10-year Anniversary
of the 2008 financial crisis.
Exactly one decade ago
to the day
(September 7, 2008),
Fannie Mae and Freddie Mac
were placed into
government receivership.
And for at least a decade,
there has been
nothing more than talk
of reforming the
government-sponsored-enterprises.
The government agencies
were integral to
the mortgage finance Bubble
were integral to
the mortgage finance Bubble
- fundamental to liquidity excess,
pricing distortions (finance and housing),
general financial market misperceptions
and the misallocation of resources.
Scores of lessons from the crisis
went unheeded." ...
Doug Noland
My summary of the rest
of Noland's column, follows:
For the week
ending September 7:
STOCKS:
S&P500 declined 1.0% (up 7.4% y-t-d)
Dow Industrials slipped 0.2% (up 4.8%)
Dow Utilities gained 1.1% (up 1.5%)
Dow Transports added 0.4% (up 6.9%)
S&P 400 Midcaps declined 0.9% (up 6.7%)
Small cap Russell 2000 fell 1.6% (up 11.6%)
Nasdaq100 dropped 2.9% (up 16.2%)
Biotechs fell 3.7% (up 21.7%).
With bullion down $5,
the HUI gold stock index sank 4.9%
(down 29.2%).
U.K.'s FTSE fell 2.1% (down 5.3% y-t-d).
Japan's Nikkei 225 declined 2.4% (down 2.0%).
France's CAC40 dropped 2.9% (down 1.1%)
German DAX sank 3.3% (down 7.4%).
Spain's IBEX 35 fell 2.4% (down 8.7%).
Italy's FTSE MIB rallied 0.9% (down 6.4%)
Brazil's Bovespa slipped 0.3% (unchanged)
Mexico's Bolsa declined 1.2% (down 0.8%)
South Korea's Kospi fell 1.8% (down 7.5%)
India’s Sensex declined 0.7% (up 12.7%)
China’s Shanghai dipped 0.8% (down 18.3%)
Turkey's Istanbul National 100 increased 0.6% (down 19.1%).
Russia's MICEX equities index fell 1.0% (up 10.1%).
US BONDS
& MORTGAGES:
Ten-year Treasury yields
gained eight bps to 2.94% (up 53bps).
Long bond yields
rose eight bps to 3.10% (up 36bps).
Benchmark Fannie Mae MBS yields
jumped nine bps to 3.71% (up 71bps).
Freddie Mac 30-year fixed mortgage rates
added two bps to 4.54% (up 76bps y-o-y).
Fifteen-year rates
increased two bps to 3.99% (up 91bps).
Five-year hybrid ARM rates
jumped eight bps to 3.93% (up 78bps).
Jumbo mortgage 30-yr fixed rates
unchanged at 4.59% (up 58bps).
Federal Reserve Credit
Over the past year, contracted 5.2%.
M2 (narrow) "money" supply
gained 4.1%, over the past year.
Currency Watch:
The U.S. dollar index added 0.3% to 95.365
(up 3.5% y-t-d).
Commodities Watch:
Goldman Sachs Commodities Index dropped 1.8% (up 4.2% y-t-d).
Spot Gold slipped 0.4% to $1,196 (down 8.2%).
Silver sank 2.7% to $14.17 (down 17%).
Crude fell $2.05 to $67.75 (up 12%).
Gasoline lost 1.4% (up 10%)
Natural Gas sank 4.8% (down 6%).
Copper dropped 1.8% (down 21%).
Wheat sank 6.3% (up 20%).
Corn added 0.5% (up 5%).
Trump Administration Watch:
September 7 - Wall Street Journal (Vivian Salama):
"President Trump said Friday
that tariffs on another $267 billion
in Chinese goods are ready to go
and could be rolled out on short notice,
reinforcing earlier threats and signaling no end in sight for the growing trade dispute. Speaking aboard Air Force One en route to Fargo, N.D., Mr. Trump said the tariffs would be in addition to the $200 billion in tariffs on Chinese goods the administration has been preparing, which he said will "take place very soon, depending on what happens." 'I hate to say this, but behind that there is another $267 billion ready to go on short notice if I want,' he added. 'That changes the equation.'"
reinforcing earlier threats and signaling no end in sight for the growing trade dispute. Speaking aboard Air Force One en route to Fargo, N.D., Mr. Trump said the tariffs would be in addition to the $200 billion in tariffs on Chinese goods the administration has been preparing, which he said will "take place very soon, depending on what happens." 'I hate to say this, but behind that there is another $267 billion ready to go on short notice if I want,' he added. 'That changes the equation.'"
September 2 - Bloomberg (John Micklethwait):
"The president of the United States
awards himself an A-plus.
He is presiding over an economic boom.
The Robert Mueller investigation is 'illegal,'
and impeachment isn't possible because
they can't "impeach somebody
that's doing a great job," he said…
'The level of love' at his rallies
'is just a beautiful thing to watch.'"
September 5 - CNBC (Sara Salinas):
"U.S. Attorney General Jeff Sessions
will meet with state attorneys general
later this month to discuss concerns that
tech companies 'may be hurting competition
and intentionally stifling the free exchange
of ideas on their platforms,'
the Department of Justice said… The proposed meeting between the country's top prosecutor and state officials is the first major signal of potential antitrust action against Silicon Valley and follows recent claims by President Donald Trump of political bias and censorship by major social media firms. Last month, Trump said Facebook, Twitter and Google were 'treading on very, very troubled territory and they have to be careful.' He's also said the companies could be engaging in antitrust behaviors…"
the Department of Justice said… The proposed meeting between the country's top prosecutor and state officials is the first major signal of potential antitrust action against Silicon Valley and follows recent claims by President Donald Trump of political bias and censorship by major social media firms. Last month, Trump said Facebook, Twitter and Google were 'treading on very, very troubled territory and they have to be careful.' He's also said the companies could be engaging in antitrust behaviors…"
September 1 - Reuters (Lesley Wroughton):
"U.S. President Donald Trump
said on Saturday there was
no need to keep Canada in
the North American
Free Trade Agreement
and warned Congress
not to meddle
with the trade negotiations
or he would terminate the trilateral trade pact altogether. 'There is no political necessity to keep Canada in the new NAFTA deal. If we don't make a fair deal for the U.S. after decades of abuse, Canada will be out,' Trump said on Twitter."
September 6 - Bloomberg (Shawn Donnan and Jeff Kearns):
"New data… showed
the U.S. trade deficit in July
widening at its fastest rate
since 2015
as monthly deficits with China
and the European Union
both hit new records.
In the year so far, the U.S.'s overall goods and services deficit is up by $22 billion, or 7%, versus the same period last year."
U.S. Bubble Watch:
September 6 - Reuters (Lucia Mutikani):
"The number of Americans
filing new claims
for unemployment aid
fell to near a 49-year low
last week
and private payrolls rose steadily in August, pointing to sustained labor market strength that should continue to underpin economic growth… This likely keeps the Federal Reserve on track to raise interest rates this month for the third time this year. 'The economy is in overdrive with jobless claims at lows not seen since the 1960s, and this gives the Fed the green light to raise interest rates later this month and take away some of the economy's punch,' said Chris Rupkey, chief economist at MUFG…"
September 6 - Reuters (Laila Kearney):
"Some of the largest U.S. cities
spent more on pension payments
and other fixed costs in fiscal 2017
than the year before,
and those expenses
are likely to continue
to weigh on budgets,
according to an annual report released by S&P Global Ratings… On average, for the largest 15 cities in the country, public employee pensions, debt and other retirement benefits made up 26% of expenditures compared with 25% in fiscal 2016, S&P said…"
China Watch:
September 2 - CNBC (Huileng Tan):
"A private manufacturing survey
hit a 14-month low in August
as the Caixin/Markit
Purchasing Manager's Index (PMI)
came in at 50.6
- the weakest since June 2017.
Although output continued to expand, new orders rose at their slowest pace since May 2017… In particular, export sales fell for the fifth straight month. Overall confidence was low in August, 'with a number of panelists citing concerns over the impact of the ongoing China-U.S. trade war and relatively subdued market conditions,' added the release."
September 3 - Financial Times (Ben Bland):
"Steve Madden is shifting
handbag production to Cambodia,
Vietnam is sucking up
some production for
Hoover-maker Techtronic Industries
and Google's hardware maker Flex
is seeking new production centres
from Mexico to Malaysia.
The escalating US-China trade war is pushing China-based manufacturers and their US clients to rethink the complex and extensive supply chains that bind the world's two biggest economies together. 'While China will remain an important part of our global manufacturing platform for the next decade, we have accelerated the ramp-up in other low-cost countries and the US,' said Joseph Galli, chief executive of Techtronic… 'The focus on Vietnam in the short term is offsetting the future tariff impact we might see in the US.'"
Emerging Markets Watch:
September 4 - Reuters (Daina Beth Solomon and Hugh Bronstein):
"Argentina's government
said on Tuesday it hoped
the International Monetary Fund
would agree in the
second half of September
to a deal giving the country
more financial support
as it seeks to escape
a deepening economic crisis.
Economy Minister Nicolas Dujovne met IMF chief Christine Lagarde in Washington and both said they were working together to improve a $50 billion standby finance deal agreed with the IMF's executive board in June."
September 5 - Reuters (Mfuneko Toyana):
"A surprise economic recession
has brought a sharp focus
on South Africa's shrinking revenue
and mounting debt pile
and could intensify a bond sell-off
at a time the assets are reeling
from nervousness over
Turkey's economic woes.
Investors have dumped South African bonds since August as an emerging markets sell-off picked up pace driven by concerns over the Turkish central bank's ability to rein in double-digit inflation, which has surged to nearly 18%."
September 5 - Reuters (Ricardo Brito and Lisandra Paraguassu):
"Brazil's federal police
have recommended to prosecutors
that President Michel Temer
be charged with taking bribes
and money laundering,
according to a police document
reviewed… by Reuters.
The investigation involves 10 million reais ($2.41 million) in illicit funds Temer's Brazilian Democratic Party allegedly received from construction firm Odebrecht in 2014…"
September 1 - BBC:
"Brazil's top electoral court
has ruled that
jailed former President
Luiz Inácio Lula da Silva
cannot run as a candidate
in the presidential election
because of his corruption conviction...
Lula, 72, was leading in polls ahead of the vote despite serving a 12-year jail term for accepting a bribe. His legal team has said they will appeal against the court's decision."
Global Bubble Watch:
September 6 - Bloomberg (Alfred Liu):
"New York has lost its crown
as home to the most ultra-rich people,
beaten out by the rising tide
of extreme wealth in Asia.
Hong Kong surpassed the Big Apple
as the city with the highest population
of people worth at least $30 million…
The former British colony saw its number of ultra-wealthy increase 31% last year, to about 10,000, research firm Wealth-X found, higher than the nearly 9,000-strong population of the U.S.'s largest city. Tokyo came third, while Paris beat out London to take the European crown as Brexit weighed down the U.K. capital. The number of ultra-rich worldwide rose 13% last year, according to Wealth-X, totaling about 256,000 people with combined assets of $31.5 trillion. Asia saw the fastest growth, driven by mainland China and Hong Kong…"
September 5 - Financial Times (Jamie Smyth):
"Maggie Lu is one of thousands of borrowers hit by a credit squeeze, which has abruptly ended Australia's housing boom and poses a risk to one of the world's most successful economies. 'I got pre-approval for a mortgage last year but couldn't find a house we could afford before it lapsed,' said the mother of two… 'Prices are falling but now my bank will only agree a mortgage worth A$170,000 [US$120,000] less than the level agreed last year. So we are stuck.'
Economists cite tighter credit
and unaffordable prices
as the reason for
the biggest fall in Sydney
property prices for nine years.
New figures this week
show Sydney prices
have fallen 5.6% over the past year,
while the national market fell 2%."
Europe Watch:
September 2 - Financial Times (Kate Allen):
"Italy has less than three months
to raise the bulk of its
remaining annual financing needs
- amounting to about €63bn in fresh debt
- as its bond sales programme
lags behind those
of other big eurozone sovereigns.
The nation, which has been hit by a series of sharp bond market sell-offs since late May, has secured less than three-quarters of its total planned 2018 debt sales to meet bond redemptions and its net increase in borrowing…"
Geopolitical Watch:
September 6 - Bloomberg (Selcan Hacaoglu):
"Syrian troops are preparing
an offensive against the
last remaining rebel bastion,
an assault that could
draw in the U.S.,
displace hundreds of thousands
of civilians and cement
President Bashar al-Assad's
hold over the country
after seven years of war.
The attack on the northwest province of Idlib is expected soon. It comes after Assad's forces, backed by Russian and Iranian allies, retook the southern provinces of Suwaida and Daraa, the cradle of the 2011 revolt to topple him. With an estimated half a million people killed in the conflict, the president is now on the cusp of completing a remarkable rebound, after his fate seemed so uncertain just three years ago."
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