Saturday, November 30, 2019
Weekly Commentary:
Just the Facts
by Doug Noland
full column here:
Portions that
interested me
are below:
Ye Editor
For the week ending
November 29, 2019:
S&P500 gained 1.0% (up 25.3% y-t-d)
Dow Industrials added 0.6% (up 20.3%)
Dow Utilities were unchanged (up 19.0%)
Dow Transports increased 0.7% (up 18.4%)
S&P 400 Midcaps rose 1.2% (up 20.9%)
Small cap Russell 2000 jumped 2.2% (up 20.5%).
Nasdaq100 advanced 1.6% (up 32.8%)
Nasdaq100 advanced 1.6% (up 32.8%)
Biotechs surged 3.5% (up 18.5%).
Though gold bullion fell $18,
the HUI gold stock index
gained 1.9% (up 33.8%).
U.K.'s FTSE added 0.3% (up 9.2% y-t-d).
Japan's Nikkei gained 0.8% (up 16.4% y-t-d).
France's CAC40 tbd
German DAX increased 0.6% (up 25.4%).
Spain's IBEX 35 rose 1.1% (up 9.5%).
Italy's FTSE MIB unchanged (up 26.9%).
Brazil's Bovespa declined 0.4% (up 18.9%)
Mexico's Bolsa fell 0.4% (up 2.8%).
South Korea's Kospi declined 0.7% (up 2.3%).
India's Sensex advanced 1.1% (up 13.1%).
China's Shanghai dipped 0.5% (up 15.2%).
Turkey's Istanbul National 100 added 0.3% (up 17.1%).
Russia's MICEX declined 0.4% (up 23.9%).
US Ten-year Treasury yields
added one basis point to 1.78% (down 91bps).
US Thirty-year Treasury yields
declined two bps to 2.21% (down 81bps).
US Freddie Mac 30-year fixed mortgage rates
gained two bps to 3.68% (down 113bps y-o-y).
Fifteen-year rates
were unchanged at 3.15% (down 110bps).
Five-year hybrid ARM rates
rose four bps to 3.43% (down 69bps).
Jumbo mortgage 30-year fixed rates
up a basis point to 4.02% (down 64bps).
Federal Reserve Credit
last week increased $14.5bn
to $4.002 TN, with an
11-week gain of $275 billion.
Over the past year,
Fed Credit contracted 1.5%.
M2 money supply
gained $30.1 billion
last week to a record $15.326,
up 7.5%, over the past year.
Commodities Watch:
Bloomberg Commodities Index
dropped 2.1% this week (up 0.2% y-t-d).
Spot Gold declined 1.2% to $1,444 (up 12.6%).
Silver slipped 0.2% to $17.106 (up 10.1%).
WTI crude sank $2.60 to $55.17 (up 22%).
Gasoline dropped 5.0% (up 20%)
Natural Gas sank 15.8% (down 22%).
Copper was little changed (up 1%).
Wheat rallied 4.4% (up 8%).
Corn increased 0.7% (up 2%).
November 29 – Wall Street Journal (Akane Otani):
“The CBOE Volatility Index, or VIX, finished Wednesday at 11.75. That was just a hair above where it ended Tuesday, which was its lowest closing level since Aug. 9, 2018…”
November 27 – CNS (Terence P. Jeffrey):
“The federal debt has increased by $1,303,466.578.471.45 since last Thanksgiving,.. That is the largest Thanksgiving-to-Thanksgiving increase in the debt in nine years. The last time the debt increased more from Thanksgiving to Thanksgiving was in 2010, when it increased by $1,785,995,360,978.10. It also equals approximately $10,137.48 per household in the United States.”
“The federal debt has increased by $1,303,466.578.471.45 since last Thanksgiving,.. That is the largest Thanksgiving-to-Thanksgiving increase in the debt in nine years. The last time the debt increased more from Thanksgiving to Thanksgiving was in 2010, when it increased by $1,785,995,360,978.10. It also equals approximately $10,137.48 per household in the United States.”
November 25 – CNBC (Jeff Cox):
“Federal Reserve economists warn that printing money to pay for deficit spending has been a disaster for other nations that have tried it. In a paper that discusses the burgeoning U.S. fiscal debt, Fed experts note that high levels are not necessarily unsustainable so long as income is rising at a faster pace. They note that countries that have gotten into trouble and looked to central banks to bail them out haven’t fared well. ‘A solution some countries with high levels of unsustainable debt have tried is printing money. In this scenario, the government borrows money by issuing bonds and then orders the central bank to buy those bonds by creating (printing) money,’ wrote Scott A. Wolla and Kaitlyn Frerking. ‘History has taught us, however, that this type of policy leads to extremely high rates of inflation (hyperinflation) and often ends in economic ruin.’”
“Federal Reserve economists warn that printing money to pay for deficit spending has been a disaster for other nations that have tried it. In a paper that discusses the burgeoning U.S. fiscal debt, Fed experts note that high levels are not necessarily unsustainable so long as income is rising at a faster pace. They note that countries that have gotten into trouble and looked to central banks to bail them out haven’t fared well. ‘A solution some countries with high levels of unsustainable debt have tried is printing money. In this scenario, the government borrows money by issuing bonds and then orders the central bank to buy those bonds by creating (printing) money,’ wrote Scott A. Wolla and Kaitlyn Frerking. ‘History has taught us, however, that this type of policy leads to extremely high rates of inflation (hyperinflation) and often ends in economic ruin.’”
November 26 – Bloomberg (Reade Pickert):
“Buyers snapped up new U.S. homes over the past two months at the fastest pace in more than 12 years, adding to signs of sturdy housing demand amid lower prices and borrowing costs. Single-family house sales ran at a 733,000 annualized pace in October, topping all estimates in a Bloomberg survey, following an upwardly revised 738,000 in September… Those were the two strongest readings since July 2007. The median sales price decreased 3.5% from a year earlier to $316,700.”
“Buyers snapped up new U.S. homes over the past two months at the fastest pace in more than 12 years, adding to signs of sturdy housing demand amid lower prices and borrowing costs. Single-family house sales ran at a 733,000 annualized pace in October, topping all estimates in a Bloomberg survey, following an upwardly revised 738,000 in September… Those were the two strongest readings since July 2007. The median sales price decreased 3.5% from a year earlier to $316,700.”
November 24 – Bloomberg:
“China said it will raise penalties on violations of intellectual property rights in an attempt to address one of the sticking points in trade talks with the U.S.
The country will also look into lowering the thresholds for criminal punishments for those who steal IP, according to guidelines issued by the government…. It didn’t elaborate on what such moves might entail. The U.S. wants China to commit to cracking down on IP theft and stop forcing U.S. companies to hand over their commercial secrets as a condition of doing business there.”
“China said it will raise penalties on violations of intellectual property rights in an attempt to address one of the sticking points in trade talks with the U.S.
The country will also look into lowering the thresholds for criminal punishments for those who steal IP, according to guidelines issued by the government…. It didn’t elaborate on what such moves might entail. The U.S. wants China to commit to cracking down on IP theft and stop forcing U.S. companies to hand over their commercial secrets as a condition of doing business there.”
November 26 – Reuters (Stella Qiu and Se Young Lee):
“Profits at China’s industrial firms shrank at their fastest pace in eight months in October,
tracking sustained drops in producer prices and exports and underscoring slowing momentum in the world’s second-largest economy. Industrial profits fell 9.9% in October year-on-year to 427.56 billion yuan ($60.74bn)…, marking the biggest drop since January-February period and compared with a 5.3% decline in September.”
“Profits at China’s industrial firms shrank at their fastest pace in eight months in October,
tracking sustained drops in producer prices and exports and underscoring slowing momentum in the world’s second-largest economy. Industrial profits fell 9.9% in October year-on-year to 427.56 billion yuan ($60.74bn)…, marking the biggest drop since January-February period and compared with a 5.3% decline in September.”
November 28 – Bloomberg (Gregor Stuart Hunter):
“The number of Chinese companies failing to make payments will continue to rise in the year ahead as economic growth sputters and the government attempts to rein in support to indebted companies, according to Moody’s… The credit ratings company expects 40-50 new defaults in 2020, up from 35 this year, according to Ivan Chung, head of greater China credit research and analysis at Moody’s. He expects the total value of defaults would be below 200 billion yuan ($28bn), representing less than 1% of the size of China’s bond market.”
“The number of Chinese companies failing to make payments will continue to rise in the year ahead as economic growth sputters and the government attempts to rein in support to indebted companies, according to Moody’s… The credit ratings company expects 40-50 new defaults in 2020, up from 35 this year, according to Ivan Chung, head of greater China credit research and analysis at Moody’s. He expects the total value of defaults would be below 200 billion yuan ($28bn), representing less than 1% of the size of China’s bond market.”
November 29 – Bloomberg (Vrishti Beniwal):
“India’s economy grew at its weakest pace in more than six years last quarter, a blow to Prime Minister Narendra Modi as he steps up action to stem the fallout.
Gross domestic product rose 4.5% in the September quarter from a year ago, down from 5% in the previous quarter… Core infrastructure industries’ output declined 5.8% in October, the biggest contraction since at least 2005…”
“India’s economy grew at its weakest pace in more than six years last quarter, a blow to Prime Minister Narendra Modi as he steps up action to stem the fallout.
Gross domestic product rose 4.5% in the September quarter from a year ago, down from 5% in the previous quarter… Core infrastructure industries’ output declined 5.8% in October, the biggest contraction since at least 2005…”
November 25 – Reuters (Emma Farge):
“Greenhouse gases in the atmosphere hit a new record in 2018, exceeding the average yearly increase of the last decade and reinforcing increasingly damaging weather patterns, the World Meteorological Organization (WMO) said… ‘There is no sign of a slowdown, let alone a decline, in greenhouse gases’ concentration in the atmosphere - despite all the commitments under the Paris Agreement on Climate Change,’ said WMO Secretary-General Petteri Taalas.”
“Greenhouse gases in the atmosphere hit a new record in 2018, exceeding the average yearly increase of the last decade and reinforcing increasingly damaging weather patterns, the World Meteorological Organization (WMO) said… ‘There is no sign of a slowdown, let alone a decline, in greenhouse gases’ concentration in the atmosphere - despite all the commitments under the Paris Agreement on Climate Change,’ said WMO Secretary-General Petteri Taalas.”
November 25 – Financial Times (Galia Velimukhametova):
“Zombies continue to stalk the corporate landscape, and the horde is growing. The number of businesses in industrialised countries whose interest costs are in excess of their annual earnings — ‘zombie companies’, as they are sometimes known — has reached a level not seen since the global financial crisis.
Bank of America Merrill Lynch estimates that there are 548 of these zombies in the OECD club of mostly rich nations, against a peak of 626 during the crash. These zombies have been kept alive by years of cheap borrowing costs, created by investors chasing whatever yield they can find in a long bull market for government bonds. This helps to explain why there are five times more zombies today than during the late 1990s, when interest rates were significantly higher worldwide.”
“Zombies continue to stalk the corporate landscape, and the horde is growing. The number of businesses in industrialised countries whose interest costs are in excess of their annual earnings — ‘zombie companies’, as they are sometimes known — has reached a level not seen since the global financial crisis.
Bank of America Merrill Lynch estimates that there are 548 of these zombies in the OECD club of mostly rich nations, against a peak of 626 during the crash. These zombies have been kept alive by years of cheap borrowing costs, created by investors chasing whatever yield they can find in a long bull market for government bonds. This helps to explain why there are five times more zombies today than during the late 1990s, when interest rates were significantly higher worldwide.”
November 25 – CNBC (Yun Li):
“What a tough month it has been for bitcoin. The world’s most popular cryptocurrency sank to $6,558.14 on Monday, its lowest level since May… It lost $3,000 in value in just a month as China accelerated a crackdown on businesses involved in cryptocurrency operations, a reversal from President Xi Jinping’s previous signal to be more open to the blockchain technology. The coin last traded at $7,150.79.”
“What a tough month it has been for bitcoin. The world’s most popular cryptocurrency sank to $6,558.14 on Monday, its lowest level since May… It lost $3,000 in value in just a month as China accelerated a crackdown on businesses involved in cryptocurrency operations, a reversal from President Xi Jinping’s previous signal to be more open to the blockchain technology. The coin last traded at $7,150.79.”
November 28 – Reuters (Daniel Leussink):
“Japan’s industrial output slipped at the fastest pace since early last year in October, exposing widening cracks in the economy which faces a decline in domestic and foreign demand. Factory output fell 4.2% in October from the previous month…, below the median market forecast for a 2.1% fall and swinging from a 1.7% rise the previous month.”
“Japan’s industrial output slipped at the fastest pace since early last year in October, exposing widening cracks in the economy which faces a decline in domestic and foreign demand. Factory output fell 4.2% in October from the previous month…, below the median market forecast for a 2.1% fall and swinging from a 1.7% rise the previous month.”
November 25 – Financial Times (Robert Armstrong):
“The market for securities backed by the riskiest US car loans is booming, as yield-crazed investors shrug off nagging concerns over the health of the American consumer. Deals have been ‘going gangbusters’ in subprime auto asset-backed securities (ABS), said Jennifer Thomas, an analyst at Loomis Sayles… At $29bn so far this year, issuance of subprime auto ABS is on track to surpass 2018’s record haul of $32bn, according to data from Finsight… The lower-rated slices of recent deals are ‘five or six times oversubscribed’, said Ms Thomas. ‘The market is trading very well.’”
“The market for securities backed by the riskiest US car loans is booming, as yield-crazed investors shrug off nagging concerns over the health of the American consumer. Deals have been ‘going gangbusters’ in subprime auto asset-backed securities (ABS), said Jennifer Thomas, an analyst at Loomis Sayles… At $29bn so far this year, issuance of subprime auto ABS is on track to surpass 2018’s record haul of $32bn, according to data from Finsight… The lower-rated slices of recent deals are ‘five or six times oversubscribed’, said Ms Thomas. ‘The market is trading very well.’”
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