Source:
http://creditbubblebulletin.blogspot.com/2020/11/weekly-commentary-pondering-new.html
Friday, November 27, 2020
More than three Trillion worth of Fed liquidity injections coupled with more than a Three Trillion fiscal deficit ... Money supply has skyrocketed, and stocks have gone on a wild speculative moonshot. Corporate bond issues surged to new records ... and booming imports pushed the Goods Trade Deficit to an all-time high. Home sales have boomed, with the strongest house price inflation in years.
For the week ending
November 27, 2020:
GLOBAL STOCKS
S&P500
up 2.3%
(up 12.6% year-to-date)
Dow Industrials
up 2.2%
(up 4.8%)
Dow Utilities
little changed
(up 0.4%)
Dow Transports
up 2.7%
(up 15.2%)
S&P 400 Midcaps
up j2.7%
(up 6.9%)
Small cap Russell 2000
up 3.9% (up 11.2%)
Nasdaq100 up 3.0%
(up 40.4%)
Semiconductors
up 3.0%
(up 42.3%)
Biotechs
up 2.1%
(up 8.8%)
With gold down $83,
the HUI gold index
was down 5.4%
(up 16.2%)
U.K.'s FTSE up 0.3%
(down 15.6%)
Japan's Nikkei up 4.4%
(up 12.6% y-t-d)
France's CAC40 up 1.9%
(down 6.4%)
German DAX up 1.5%
(up 0.7%)
Spain's IBEX 35 up 2.7%
(down 14.2%)
Italy's FTSE MIB up 3.0%
(down 4.9%)
Brazil's Bovespa up 4.3%
(down 4.4%)
Mexico's Bolsa down 0.7%
(down 4.5%)
South Korea's Kospi up 3.1%
(up 19.8%)
India's Sensex up 0.6%
(up 7.0%)
China's Shanghai up 0.9%
(up 11.7%).
Turkey's Istanbul National 100
up 0.4%
(up 16.1%)
Russia's MICEX
up 3.0%
(up 3.2%)
COMMODITIES:
Bloomberg Commodities Index
up 0.9%
(down 7.5% y-t-d)
Spot Gold down 4.4% to $1,788
(up 17.8%)
Spot Silver down 7.0% to $22.775
(up 27.1%)
WTI crude oil up $3.10 to $45.52
(down 26%)
Gasoline up 8.9%
(down 24%)
Natural Gas up 7.6%
(up 30%)
Copper up 3.4%
(up 22%)
Wheat gained 1.3%
(up 9%)
Corn rose 1.6%
(up 12%).
US BONDS
Ten-year US Treasury bond yields
added a basis point to 0.84%
(down 108bps year-over-year).
Thirty-year US Treasury bond yields
added five bps to 1.57% (down 82bps).
US MORTGAGES
Freddie Mac 30-year
fixed mortgage rates
were unchanged
at a record low 2.72%
(down 96bps y-o-y)
Fifteen-year rates
were unchanged at 2.28%
(down 87bps)
Five-year hybrid ARM rates
jumped 31 bps to 3.16%
(down 27bps)
Jumbo mortgage
30-year fixed rates
up three bps to 2.97%
(down 105bps).
Federal Reserve Credit
over the past year,
expanded 80.3%.
M2 money supply
over the past year
expanded 24.7%
NEWS FROM LAST WEEK:
(1)
November 24
– Bloomberg
(Saleha Mohsin):
“Treasury Secretary Steven Mnuchin will put $455 billion in unspent Cares Act funding into an account that his presumed successor, former Federal Reserve Chair Janet Yellen, will soon need authorization from Congress to use. The money will be placed in the agency’s General Fund… Most of it had gone to support Federal Reserve emergency-lending facilities, and Mnuchin’s clawback would make it impossible for Yellen as Treasury secretary to restore for that purpose without lawmakers’ blessing.”
(2)
November 25
– NPR
(Will Stone and
Sean McMinn):
“Far more people in the U.S. are hospitalized for COVID-19 now than at any other moment of the coronavirus pandemic — more than twice as many as just a month ago. Hospitals in some of the hardest-hit states are exhausting every health care worker, hospital room and piece of equipment to evade the worst-case scenario, when crisis plans have to be set in motion and care may have to be rationed. Many states are warning they’re on the brink. On the ground, equipment and staff shortages are already straining the system and changing how hospitals provide care.”
(3)
November 24
– The Hill
(John Bowden):
“Americans are lining up in historic numbers at food banks across the country this week as the COVID-19 pandemic exacerbates levels of food insecurity for millions of people. As the Thanksgiving holiday draws closer, news reports from states around the U.S. indicate that more Americans face food insecurity now than at any time in recent decades. Video obtained by CNN on Tuesday from the Meadowlands entertainment complex in New Jersey showed residents waiting for several hours to obtain prepackaged boxes of meals for the Thanksgiving holiday.”
(4)
November 23
– CNBC
(Emily DeCiccio):
“The Cleveland Clinic’s Chief Caregiver Officer Kelly Hancock urged her community to follow social distancing and mask guidelines as Covid-19 grips hundreds of those working inside of one of America’s best hospitals. ‘We had a record today, we saw nearly 12,000 new cases in the state of Ohio of Covid-positive patients, and so when you think about the increase and the hospitalizations that results in, it’s incredible,’ Hancock said… ‘We’re experiencing close to 1,000 of our caregivers who’ve been affected by Covid-19, and unable to come in and care for those patients.’ The Cleveland Clinic reported that 970 caregivers are out due to the virus, triple the number from two weeks ago.”
(5)
November 26
– Bloomberg
(Eric Lam and
Todd White):
“Bitcoin plunged on Thursday in a sell-off that saw other digital assets fall as much as 27%, a slide likely to stoke speculation about the durability of the latest boom in cryptocurrencies. The largest token fell more than 8% in Thursday trading after slumping as much as 13%, heading for one of its worst days since the pandemic-spurred liquidation in March. The rout began just hours after Bitcoin rose to within $7 of its record high of $19,511, the culmination of a more than 250% surge in past nine months.”
(6)
November 24
– Reuters
(Chuck Mikolajczak):
“U.S. stocks rallied on Tuesday and the Dow breached the 30,000 level for the first time, as investors anticipated a 2021 economic recovery on coronavirus vaccine progress and the formal clearance for President-elect Joe Biden’s transition to the White House.”
(7)
November 27
– Wall Street Journal
(Mike Bird):
“This October, U.S. housing sales hit their highest level since 2006. China’s residential real-estate investment was up 14% relative to the same month last year. Around the world, many housing markets have shrugged off a colossal economic slump, helped by low interest rates. In the short term, such investment is a boost to economic activity in a year where headline figures have collapsed. But there are significant downsides. The fact that housing booms can be a longer-term risk to financial stability is well known, but a growing body of research suggests that even where there is no market blowup, surges in prices and investment can have a deleterious impact on productivity.”
(8)
November 20
– Reuters
(David Lawder and
Andrea Shalal):
“U.S. Treasury Secretary Steven Mnuchin’s decision to de-fund several Federal Reserve coronavirus lending programs on Dec. 31 is ‘deeply irresponsible,’ President-elect Joe Biden’s transition team said…, and threatens to undermine the country’s fragile economic state. Ending support for Fed programs that ‘could be used for small businesses across the country when they are facing the prospect of new shutdowns is deeply irresponsible,’ Biden’s camp said…”
(9)
November 25
– Associated Press
(Martin Crutsinger and
Paul Wiseman):
“Gripped by the accelerating viral outbreak, the U.S. economy is under pressure from persistent layoffs, diminished income and nervous consumers, whose spending is needed to drive a recovery from the pandemic. A flurry of data released Wednesday suggested that the spread of the virus is intensifying the threats to an economy still struggling to recover from the deep recession that struck in early spring. The number of Americans seeking unemployment aid rose last week for a second straight week to 778,000, evidence that many employers are still slashing jobs more than eight months after the virus hit. Before the pandemic, weekly jobless claims typically amounted to only about 225,000.”
(10)
November 25
– Reuters
(Jonnelle Marte):
“The number of Americans receiving unemployment benefits under pandemic programs set to expire the day after Christmas continued to rise in early November… As of Nov. 7… a total of 13.7 million people were receiving unemployment benefits through emergency CARES Act-related programs expiring Dec. 26. That is up from 13.1 million for the week ending Oct. 31… Some 4.5 million people collect pandemic emergency unemployment compensation (PEUC), which provides 13 extra weeks of benefits for people who have exhausted state benefits. Enrollment is growing steadily as more people use up their regular benefits, which last for up to 26 weeks in most states.”
(11)
November 23
– Bloomberg
(Alex Tanzi):
“Millions of Americans expect to face eviction by the end of this year, adding to the suffering inflicted by the coronavirus pandemic raging across the U.S. About 5.8 million adults say they are somewhat to very likely to face eviction or foreclosure in the next two months, according to a survey completed Nov. 9 by the U.S. Census Bureau. That accounts for a third of the 17.8 million adults in households that are behind on rent or mortgage payments. The CARES Act… allows homeowners to pause mortgage payments for up to a year if they experience hardship as a result of the pandemic. Borrowers who signed up at the start of the program could face foreclosure by March.”
(13)
November 24
– CNBC
(Diana Olick):
“Covid-induced demand from homebuyers over the summer caused an exceptionally strong spike in home prices. Values jumped 7% annually in September, up from a 5.8% annual gain in August, according to the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index. That is the largest annual gain since September 2014. Prices are now nearly 23% higher than their last peak in 2006. The 10-City Composite was up 6.2% year over year, up from 4.9% in the previous month. The 20-City Composite posted a 6.6% gain, up from 5.3% in the previous month.”
(14)
November 22
– CNBC
(Nassa Anwar):
“The past year saw a record number of listings by special purpose acquisition companies — better known as SPACs, but these ‘shell companies’ are hardly a modern phenomenon. From January to October 2020, some 165 SPACs were listed, according to… Refinitiv. That’s nearly double the number of global SPAC IPOs issued in the whole of 2019 and five times that of 2015. Entrepreneurs, hedge fund managers and sports executives are among those who have established SPACs, an increasingly popular method of taking companies public.”
(15)
November 21
– Wall Street Journal
(Josh Mitchell):
“The U.S. government stands to lose more than $400 billion from the federal student loan program, an internal analysis shows, approaching the size of losses incurred by banks during the subprime-mortgage crisis. The Education Department, with the help of two private consultants, looked at $1.37 trillion in student loans held by the government at the start of the year. Their conclusion: Borrowers will pay back $935 billion in principal and interest. That would leave taxpayers on the hook for $435 billion… The analysis was based on government accounting standards and didn’t include roughly $150 billion in loans originated by private lenders and backed by the government.”
(16)
November 25
– Reuters
(Radhika Anilkumar):
“Walt Disney Co said… it would lay off about 32,000 workers, primarily at its theme parks, an increase from the 28,000 it announced in September, as the company struggles with limited customers due to the coronavirus pandemic.”
(17)
November 23
– Financial Times
(Sun Yu):
“Beijing has warned it will show ‘zero tolerance’ for financial misconduct after several high-profile bond defaults by state-owned companies roiled the Chinese debt market. Speaking at a meeting for the committee that oversees China’s financial sector over the weekend, vice premier Liu He said authorities would ‘severely’ crack down on illegal behaviour on bond financing, ranging from ‘malicious’ transfer of assets to misuse of funds. The comments come as one of China’s largest coal companies Yongcheng Coal and Electricity Holding Group this week faces potential defaults on Rmb26.5bn ($4bn) worth of bonds after it missed a Rmb1bn debt payment earlier this month.”
(18)
November 24
– Bloomberg:
“A string of defaults by Chinese state-owned companies has sent shockwaves across the world’s second-largest credit market. But some bonds have fared much worse than others as investors clamber to avoid the next potential blowup. Among the most notable losers: notes issued by Pingdingshan Tianan Coal Mining Co., Jizhong Energy Group Co., Tianjin TEDA Investment Holding Co. and Yunnan Health & Culture Tourism Holding Group. While none of the companies have missed debt payments, and all four are rated AAA by Chinese domestic ratings firms, their bonds have tumbled by at least 14% since Nov. 10. That’s when a surprise default by a state-owned Chinese coal producer cast fresh doubt on the implicit guarantees that have long underpinned government-backed borrowers.”
(19)
November 27
– Reuters
(Jamie McGeever):
“Brazil’s unemployment rate rose to a record high 14.6% in the three months to September, official figures showed on Friday, as the easing of COVID-19 social distancing and lockdown measures encouraged people to look for work again.”
(20)
November 27
– Bloomberg
(Vrishti Beniwal and
Karthikeyan Sundaram):
“India entered an unprecedented recession with the economy contracting in the three months through September due to the lingering effects of lockdowns to contain the Covid-19 outbreak. Gross domestic product declined 7.5% last quarter from a year ago… That was milder than an 8.2% drop forecast…, and a marked improvement from a record 24% contraction the previous quarter.”
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