Saturday, December 7, 2019
Weekly Commentary:
Crazy Extremis
by Doug Noland
full column here:
http://creditbubblebulletin.blogspot.com/2019/12/weekly-commentary-crazy-extremis.html
Portions that
interested me
are below
Ye Editor
Crazy Extremis
by Doug Noland
full column here:
http://creditbubblebulletin.blogspot.com/2019/12/weekly-commentary-crazy-extremis.html
Portions that
interested me
are below
Ye Editor
For the week ending
December 6, 2019:
December 6, 2019:
S&P500 added 0.2% (up 25.5% y-t-d)
Dow Industrials little changed (up 20.1%).
Dow Utilities increased 0.3% (up 19.4%)
Dow Transports fell 1.4% (up 16.8%)
S&P 400 Midcaps rose 0.6% (up 21.6%)
Small cap Russell 2000 gained 0.6% (up 21.2%).
Nasdaq100 was little changed (up 32.7%)
Biotechs rose 1.5% (up 20.3%).
With GOLD bullion rallying $16,
the HUI gold index gained 1.2%
(up 35.3%).
Dow Industrials little changed (up 20.1%).
Dow Utilities increased 0.3% (up 19.4%)
Dow Transports fell 1.4% (up 16.8%)
S&P 400 Midcaps rose 0.6% (up 21.6%)
Small cap Russell 2000 gained 0.6% (up 21.2%).
Nasdaq100 was little changed (up 32.7%)
Biotechs rose 1.5% (up 20.3%).
With GOLD bullion rallying $16,
the HUI gold index gained 1.2%
(up 35.3%).
U.K.'s FTSE dropped 1.5% (up 7.6% y-t-d).
Japan's Nikkei added 0.3% (up 16.7% y-t-d).
France's CAC40 dipped 0.6% (up 24.1%).
German DAX declined 0.5% (up 24.7%).
Spain's IBEX 35 added 0.3% (up 9.9%).
Italy's FTSE MIB lipped 0.3% (up 26.5%).
Brazil's Bovespa rallied 2.7% (up 22.1%)
Mexico's Bolsa dropped 2.1% (up 0.7%).
South Korea's Kospi index declined 0.3% (up 2.0%).
India's Sensex equities fell 0.9% (up 12.1%).
China's Shanghai rose 1.4% (up 16.8%).
Turkey's Istanbul National 100 gained 1.8% (up 19.3%).
Russia's MICEX slipped 0.2% (up 23.6%).
US Ten-year Treasury yields
rose six bps to 1.84% (down 85bps).
Long bond yields
jumped seven bps to 2.28% (down 74bps).
rose six bps to 1.84% (down 85bps).
Long bond yields
jumped seven bps to 2.28% (down 74bps).
Freddie Mac 30-year fixed mortgage
rates were unchanged at 3.68% (down 107bps y-o-y).
Fifteen-year rates
slipped a basis point to 3.14% (down 107bps).
Five-year hybrid ARM rate
fell four bps to 3.39% (down 68bps).
Jumbo mortgage 30-year fixed rates
down ten bps to 3.92% (down 79bps).
rates were unchanged at 3.68% (down 107bps y-o-y).
Fifteen-year rates
slipped a basis point to 3.14% (down 107bps).
Five-year hybrid ARM rate
fell four bps to 3.39% (down 68bps).
Jumbo mortgage 30-year fixed rates
down ten bps to 3.92% (down 79bps).
Over the past year,
Fed Credit contracted
$28.5bn, or 0.7%.
M2 money supply
'up 7.6%, over
the past year.
'up 7.6%, over
the past year.
Commodities Watch:
Bloomberg Commodities Index
rallied 1.5% this week (up 1.6% y-t-d).
Spot Gold recovered 1.1% to $1,460 (up 13.9%).
Silver dropped 3.0% to $16.596 (up 6.8%).
WTI crude surged $4.03 to $59.20 (up 30%).
Gasoline rallied 3.5% (up 25%)
Natural Gas gained 2.3% (down 21%)
Copper jumped 2.4% (up 4%).
Wheat sank 3.2% (up 4%). '
Corn fell 1.2% (up 1%).
rallied 1.5% this week (up 1.6% y-t-d).
Spot Gold recovered 1.1% to $1,460 (up 13.9%).
Silver dropped 3.0% to $16.596 (up 6.8%).
WTI crude surged $4.03 to $59.20 (up 30%).
Gasoline rallied 3.5% (up 25%)
Natural Gas gained 2.3% (down 21%)
Copper jumped 2.4% (up 4%).
Wheat sank 3.2% (up 4%). '
Corn fell 1.2% (up 1%).
December 4 – CNBC (Fred Imbert):
“Between mid-August and late November, the Dow Jones Industrial Average was up 10.5% in a 74-day sprint that seemed to be immune from negative headlines. According to Ned Davis Research, the Dow has posted a median gain of 13.4% during blow-off tops dating to 1901. The median rally length was 61 days. ‘Given the high valuations I see, plus these divergences between many different indices, I am aware that many bull markets have ended with a rally similar to what we have seen since August,’ firm founder Ned Davis said…”
“Between mid-August and late November, the Dow Jones Industrial Average was up 10.5% in a 74-day sprint that seemed to be immune from negative headlines. According to Ned Davis Research, the Dow has posted a median gain of 13.4% during blow-off tops dating to 1901. The median rally length was 61 days. ‘Given the high valuations I see, plus these divergences between many different indices, I am aware that many bull markets have ended with a rally similar to what we have seen since August,’ firm founder Ned Davis said…”
December 3 – Wall Street Journal (Bob Davis and Lingling Wei):
“President Trump said he was willing to wait until after next year’s presidential election to strike a limited trade deal with China, sending stock prices down and casting doubt on whether the two sides will find enough common ground to head off new tariffs. ‘In some ways, I think it’s better to wait until after the election, you want to know the truth,’ Mr. Trump said… Mr. Trump’s remarks probably indicated an effort to gain leverage during the last two weeks before a Dec. 15 deadline for new tariffs on consumer goods to take effect, rather than signaling a fundamental breakdown in talks, said U.S. officials and close allies of Mr. Trump.”
“President Trump said he was willing to wait until after next year’s presidential election to strike a limited trade deal with China, sending stock prices down and casting doubt on whether the two sides will find enough common ground to head off new tariffs. ‘In some ways, I think it’s better to wait until after the election, you want to know the truth,’ Mr. Trump said… Mr. Trump’s remarks probably indicated an effort to gain leverage during the last two weeks before a Dec. 15 deadline for new tariffs on consumer goods to take effect, rather than signaling a fundamental breakdown in talks, said U.S. officials and close allies of Mr. Trump.”
December 3 – Financial Times (Editorial Board):
“Donald Trump announced on Monday that Brazil and Argentina would lose exemptions from higher tariffs on steel and aluminum. Most worrying, however, is the disclosure that France could face 100% tariffs over its digital services tax, which aims to ensure tech companies — often American — pay their fair share of corporation tax.”
“Donald Trump announced on Monday that Brazil and Argentina would lose exemptions from higher tariffs on steel and aluminum. Most worrying, however, is the disclosure that France could face 100% tariffs over its digital services tax, which aims to ensure tech companies — often American — pay their fair share of corporation tax.”
December 4 – Wall Street Journal (Akane Otani):
“ Morgan Stanley’s wealth-management unit found in an analysis of earnings that more than a third of S&P 500 companies have posted a year-over-year decline in earnings in 2019. The last times the share of companies posting contracting earnings was that high: 2009, 2008 and 2002, all periods when the broader economy, plus the stock market, were in decline.”
“ Morgan Stanley’s wealth-management unit found in an analysis of earnings that more than a third of S&P 500 companies have posted a year-over-year decline in earnings in 2019. The last times the share of companies posting contracting earnings was that high: 2009, 2008 and 2002, all periods when the broader economy, plus the stock market, were in decline.”
December 2 – Bloomberg (Lu Wang):
“Wall Street analysts are slashing projections for fourth-quarter earnings at a furious pace, making it more likely that a profit recession will hit Corporate America for the first time in almost four years. Two months into the quarter, analysts have shaved 4% off their estimates to $41.12 a share, a drop of almost 1% compared with a year ago after a 1.3% decline last quarter. While they almost always lower expectations as a period progresses the current pace has been exceeded only twice since 2015.”
“Wall Street analysts are slashing projections for fourth-quarter earnings at a furious pace, making it more likely that a profit recession will hit Corporate America for the first time in almost four years. Two months into the quarter, analysts have shaved 4% off their estimates to $41.12 a share, a drop of almost 1% compared with a year ago after a 1.3% decline last quarter. While they almost always lower expectations as a period progresses the current pace has been exceeded only twice since 2015.”
December 4 – Reuters (Karen Pierog):
“Illinois’ growing unfunded pension liability, which increased by $3.8 billion to $137.3 billion at the end of fiscal 2019, underscores the need for state action to boost funding or cut costs, analysts said… The increase was fueled by actuarially insufficient state contributions and lower-than-expected investment returns… Illinois has the lowest credit ratings among U.S. states at a notch or two above the junk level due to its huge unfunded pension liability and chronic structural budget deficit.”
“Illinois’ growing unfunded pension liability, which increased by $3.8 billion to $137.3 billion at the end of fiscal 2019, underscores the need for state action to boost funding or cut costs, analysts said… The increase was fueled by actuarially insufficient state contributions and lower-than-expected investment returns… Illinois has the lowest credit ratings among U.S. states at a notch or two above the junk level due to its huge unfunded pension liability and chronic structural budget deficit.”
December 3 – Wall Street Journal (Konrad Putzier):
“Prices of office buildings, apartment properties, retail centers and industrial real estate in Chicago fell by 4.1% over the past year, according to… Real Capital Analytics. That was the worst performance among major metropolitan areas analyzed by the company, behind even crisis-stricken Hong Kong, where prices fell 2.6%.”
“Prices of office buildings, apartment properties, retail centers and industrial real estate in Chicago fell by 4.1% over the past year, according to… Real Capital Analytics. That was the worst performance among major metropolitan areas analyzed by the company, behind even crisis-stricken Hong Kong, where prices fell 2.6%.”
December 4 – Reuters (Gabriel Crossley and Yawen Chen):
“Tariffs must be cut if China and the United States are to reach an interim agreement on trade, the Chinese commerce ministry said…, sticking to its stance that some U.S. tariffs must be rolled back for a phase one deal. ‘The Chinese side believes that if the two sides reach a phase one deal, tariffs should be lowered accordingly,’ ministry spokesman Gao Feng told reporters, adding that both sides were maintaining close communication.”
“Tariffs must be cut if China and the United States are to reach an interim agreement on trade, the Chinese commerce ministry said…, sticking to its stance that some U.S. tariffs must be rolled back for a phase one deal. ‘The Chinese side believes that if the two sides reach a phase one deal, tariffs should be lowered accordingly,’ ministry spokesman Gao Feng told reporters, adding that both sides were maintaining close communication.”
December 3 – Bloomberg (Hong Shen and Molly Dai):
“China is hurtling toward another record year of onshore bond defaults, testing the government’s ability to keep financial markets stable as the economy slows and companies struggle to cope with unprecedented levels of debt. At least 15 defaults since the start of November have pushed this year’s total to 120.4 billion yuan ($17.1bn), within a hair’s breadth of the 121.9 billion yuan annual record in 2018…”
“China is hurtling toward another record year of onshore bond defaults, testing the government’s ability to keep financial markets stable as the economy slows and companies struggle to cope with unprecedented levels of debt. At least 15 defaults since the start of November have pushed this year’s total to 120.4 billion yuan ($17.1bn), within a hair’s breadth of the 121.9 billion yuan annual record in 2018…”
December 3 – Reuters (Gaurav Dogra and Brenda Goh):
“Capital investment by Chinese firms has ground to its slowest pace in three years, as a weakening economy, tight credit and prolonged trade war with the United States dent sales growth and cash reserves, a Reuters analysis showed. Companies are also spending more days to turn inventory into sales and eking out smaller profit gains…, with many analysts expecting the slowdown to intensify… Chinese firms raised capital spending by 1.6% in the three months through September versus the same period a year prior…”
“Capital investment by Chinese firms has ground to its slowest pace in three years, as a weakening economy, tight credit and prolonged trade war with the United States dent sales growth and cash reserves, a Reuters analysis showed. Companies are also spending more days to turn inventory into sales and eking out smaller profit gains…, with many analysts expecting the slowdown to intensify… Chinese firms raised capital spending by 1.6% in the three months through September versus the same period a year prior…”
December 1 – Reuters (Yawen Chen and Kevin Yao):
“China’s factory activity showed surprising signs of improvement in November, with growth picking up to a near three-year high, a private sector survey showed on Monday, reinforcing upbeat government data released over the weekend.”
“China’s factory activity showed surprising signs of improvement in November, with growth picking up to a near three-year high, a private sector survey showed on Monday, reinforcing upbeat government data released over the weekend.”
December 3 – Reuters (Gabriel Crossley):
“Activity in China’s services sector accelerated to a seven-month high in November, as new business, especially new export business, picked up, a private survey showed… Beijing has been counting on the services sector, which accounts for more than half of China’s economy, to partly offset sluggish domestic and global demand for manufactured products as a prolonged trade war with the United States drags on. The Caixin/Markit services purchasing managers’ index (PMI) rose to 53.5 last month, the quickest pace since April, from 51.1 in October.”
“Activity in China’s services sector accelerated to a seven-month high in November, as new business, especially new export business, picked up, a private survey showed… Beijing has been counting on the services sector, which accounts for more than half of China’s economy, to partly offset sluggish domestic and global demand for manufactured products as a prolonged trade war with the United States drags on. The Caixin/Markit services purchasing managers’ index (PMI) rose to 53.5 last month, the quickest pace since April, from 51.1 in October.”
December 4 – Bloomberg:
“A Chinese stock closed below its listing price on debut for the first time in seven years, showing how weak investor sentiment has become. Luoyang Jianlong Micro-Nano New Materials Co. fell 2.2% on Shanghai’s Star board Wednesday, the first mainland listing to flop on opening day since Haixin Foods Co. plunged 8% in October 2012…”
“A Chinese stock closed below its listing price on debut for the first time in seven years, showing how weak investor sentiment has become. Luoyang Jianlong Micro-Nano New Materials Co. fell 2.2% on Shanghai’s Star board Wednesday, the first mainland listing to flop on opening day since Haixin Foods Co. plunged 8% in October 2012…”
December 1 – Financial Times (Jennifer Thompson):
“More than a decade of ultra-loose monetary policy has damaged the prospects of a safe retirement for millions and is sowing the seeds of the next financial crisis, according to new research. Quantitative easing… has ‘inexorably inflated’ global debt, according to almost four in five pension funds surveyed by consultancy Create Research and Amundi Asset Management. More than half (55%) of the 153 European pension plans with €1.9tn in assets surveyed believe it will be a factor in the next financial crisis.”
“More than a decade of ultra-loose monetary policy has damaged the prospects of a safe retirement for millions and is sowing the seeds of the next financial crisis, according to new research. Quantitative easing… has ‘inexorably inflated’ global debt, according to almost four in five pension funds surveyed by consultancy Create Research and Amundi Asset Management. More than half (55%) of the 153 European pension plans with €1.9tn in assets surveyed believe it will be a factor in the next financial crisis.”
November 29 – Washington Post (David Lynch):
“ A decade of historically low interest rates has allowed companies to sell record amounts of bonds to investors, sending total U.S. corporate debt to nearly $10 trillion, or a record 47% of the overall economy. In recent weeks, the Federal Reserve, the International Monetary Fund and major institutional investors such as BlackRock and American Funds all have sounded the alarm about the mounting corporate obligations.”
“ A decade of historically low interest rates has allowed companies to sell record amounts of bonds to investors, sending total U.S. corporate debt to nearly $10 trillion, or a record 47% of the overall economy. In recent weeks, the Federal Reserve, the International Monetary Fund and major institutional investors such as BlackRock and American Funds all have sounded the alarm about the mounting corporate obligations.”
December 1 – Wall Street Journal (Georgi Kantchev):
“An 1,800-mile pipeline is set to begin delivering Russian natural gas to China on Monday. The $55 billion channel is a feat of energy infrastructure—and political engineering. Russia’s most significant energy project since the collapse of the Soviet Union, the Power of Siberia pipeline is a physical bond strengthening a new era of cooperation between two world powers that have separately challenged the U.S. Beijing and Moscow, after years of rivalry and mutual suspicion, are expanding an economic and strategic partnership influencing global politics, trade and energy markets. At the same time, Beijing is fighting a trade war with Washington, and Russia’s relations with the West grow colder. ‘China and Russia joining forces sends a message that there are alternatives to the U.S.-led global order,’ said Erica Downs, a Columbia University fellow and former CIA energy analyst.”
“An 1,800-mile pipeline is set to begin delivering Russian natural gas to China on Monday. The $55 billion channel is a feat of energy infrastructure—and political engineering. Russia’s most significant energy project since the collapse of the Soviet Union, the Power of Siberia pipeline is a physical bond strengthening a new era of cooperation between two world powers that have separately challenged the U.S. Beijing and Moscow, after years of rivalry and mutual suspicion, are expanding an economic and strategic partnership influencing global politics, trade and energy markets. At the same time, Beijing is fighting a trade war with Washington, and Russia’s relations with the West grow colder. ‘China and Russia joining forces sends a message that there are alternatives to the U.S.-led global order,’ said Erica Downs, a Columbia University fellow and former CIA energy analyst.”
ivisions and acrimony that were on full display heading into this week’s summit.”
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