Source:
http://creditbubblebulletin.blogspot.com/2020/12/weekly-commentary-unnecessary-head.html
"If Tesla can trade with a market capitalization approaching $600 billion (more than double Toyota!), what’s keeping Airbnb from sporting a snazzy $100 billion valuation?"
"once a quarter we have the opportunity to examine the Fed’s Z.1 “flow of funds” report ... the U.S. system is in the throes of runaway central bank “money” creation"
At 249%, Q3 Total Debt Securities-to-GDP compares to 213% at the end 2008; 158% to end the nineties; 126% to close out the eighties; and 74% to conclude the seventies.
At 153%, Q3 Total Equities holdings-to-GDP compares to a cycle low 53% during Q1 2009 - and previous cycle peaks 104% during Q2 2007 and 117% for Q1 2000.
Federal Reserve Assets inflated $3.393 TN, or 85%, over five quarters. Federal Reserve Assets have inflated 678% in just over 12 years.
Nothing short of an incredible three quarters of U.S. “money” and credit growth (in 2020)."
For the Week:
GLOBAL STOCKS:
S&P500
declined 1.0%
(up 13.4% y-t-d)
Dow Industrials
slipped 0.6%
(up 5.3%)
Utilities
dipped 0.3%
(down 2.3%)
Transports
slipped 0.5%
(up 16.2%)
S&P 400 Midcaps
declined 0.2%
(up 8.6%)
Russell 2000
rose 1.0%
(up 14.6%)
Nasdaq100
fell 1.2%
(up 41.7%)
Biotechs
dropped 1.4%
(up 9.4%).
With bullion little changed,
the HUI gold stock index
declined 0.3%
(up 20.6%)
U.K.'s FTSE
was little changed
(down 13.2%).
Japan's Nikkei
declined 0.4%
(up 12.7% y-t-d).
France's CAC40
dropped 1.8%
(down 7.9%)
German DAX
fell 1.4%
(down 1.0%).
Spain's IBEX 35
sank 3.1%
(down 15.6%).
Italy's FTSE MIB
lost 2.1%
(down 7.7%).
Brazil's Bovespa
gained 1.2%
(down 0.4%),
Mexico's Bolsa
little changed
(up 0.1%).
South Korea's Kospi
rose 1.4%
(up 26.0%).
India's Sensex
jumped 2.3%
(up 11.7%).
China's Shanghai
dropped 2.8%
(up 9.7%).
Turkey's Istanbul National 100
rose 3.0%
(up 19.8%).
Russia's MICEX
jumped 2.9%
(up 7.6%).
U.S. BONDS & MORTGAGES
Ten-year US Treasury bond yields
dropped seven bps to 0.90%
(down 102bps year over year).
Thirty-year US Treasury bond yields
sank 11 bps to 1.63%
(down 76bps y-o-y)
Freddie Mac 30-year
fixed mortgage rates
were unchanged
at a record low 2.71%
(down 102bps y-o-y).
Fifteen-year rates
were unchanged
at an all-time low 2.26%
(down 93bps).
Five-year hybrid ARM rates
dropped seven bps to 2.79%
(down 57bps).
Jumbo mortgage
30-year fixed rates
down three bps to 2.91%
(down 107bps).
Federal Reserve Credit
Over the past year
expanded 77.7%.
M2 money supply
surged 23.6%,
over the past year.
COMMODITIES:
December 9
– Bloomberg
(Jeffrey Bair):
“(gasoline) Stockpiles in the week ending December 4 grew about 4 million barrels from the previous week to about 238 million barrels… That’s the highest seasonally since at least the mid-1990s when data on gasoline started being kept and the biggest single-week build since April, when driving had slowed to a halt.”
The Bloomberg
Commodities Index
gained 0.8%
(down 7.4% y-t-d).
Spot Gold
was little changed at $1,840
(up 21.2%).
Silver
declined 0.9% to $24.092
(up 34.4%).
WTI crude oil
increased 48 cents to $46.57
(down 24%).
Gasoline
rallied 3.6%
(down 23%),
Natural Gas
rose 1.5%
(up 18%).
Copper
was unchanged
(up 26%).
Wheat
surged 6.5%
(up 10%).
Corn
increased 0.8%
(up 9%).
COVID-19 NEWS:
(A)
December 10
– Bloomberg
(Sarah McGregor):
“The latest Los Angeles lockdown is another hammer blow for businesses still struggling through the pandemic -– and it could be a taste of what lies ahead all over the country. Residents of the second-biggest U.S. city have been under state orders to stay home since late Sunday… Officials elsewhere in the U.S. are in a similar spot, forced to consider tapping the brakes on local economies again just when they were coming back. Indoor dining in New York City may be forced to close Monday if hospitalization rates don’t stabilize."
(B)
December 9
– Associated Press
(Lauran Neergaard and
Hannah Fingerhut):
“As states frantically prepare to begin months of vaccinations that could end the pandemic, a new poll finds only about half of Americans are ready to roll up their sleeves when their turn comes. The survey from The Associated Press-NORC Center for Public Affairs Research shows about a quarter of U.S. adults aren’t sure if they want to get vaccinated against the coronavirus. Roughly another quarter say they won’t. Many on the fence have safety concerns and want to watch how the initial rollout fares…”
(C)
December 9
– USA Today
(Karen Weintraub):
“Two British people with severe allergies apparently had allergic reactions to Pfizer/BioNTech's COVID-19 vaccine, raising questions about whether it is safe for people with preexisting allergies. In response, British regulators advised those with severe allergies to avoid the vaccine. It was not immediately clear what triggered the allergic reactions. Unlike some vaccines, in the Pfizer/BioNTech vaccine there are no preservatives or egg products… Allergic reactions were not a significant problem in the U.S. trial in which more than 20,000 people have received both two doses of the vaccine… But a vaccine that triggers dangerous reactions in people with severe allergies poses a major challenge in the U.S., said Dr. Peter Hotez, a pediatrician and dean of the National School of Tropical Medicine at Baylor College of Medicine… Hotez was confused by the allergic reaction, which was not predicted by trials in tens of thousands of people. ‘It's very inconsistent,’ he said. ‘That's why it's really puzzling me.’”
(D)
December 7
– Washington Post
(Laurie McGinley,
Yasmeen Abutaleb and
Carolyn Y. Johnson):
“Pfizer has told the Trump administration it cannot provide additional doses of its coronavirus vaccine until late June or early July because other countries have rushed to buy up its supply… That means the U.S. government will have 100 million doses of the two-shot Pfizer vaccine purchased earlier this year — far fewer than it initially planned — raising questions about whether it can keep to its aggressive schedule to vaccinate most Americans by late spring or early summer. Trump administration officials denied there would be availability issues in the second quarter, citing other vaccines in the pipeline, but others said problems are possible.”
ALL OTHER NEWS:
(E)
December 10
– Bloomberg
(Gregory Calderone):
“While traditionally a tool that fund managers have used to hedge their portfolios, it now appears options are being used more for speculative bets on the price of the underlying shares by retail investors. A surge in trading of small lots of options this year has been linked to the growing number of individuals who got involved in the market amid the Covid-19 lockdowns.”
(F)
December 10
– Bloomberg
(Joanna Ossinger):
“Initial public offerings have been doing extremely well lately, bringing to mind the excesses of the tech bubble in the late 1990s. Shares in Chinese toymaker Pop Mart International Ltd. jumped as much as 112% in their debut Friday, after home-rental platform Airbnb Inc. closed 113% above its IPO price... JD Health International Inc. surged 56% in its debut Tuesday while DoorDash Inc. soared 86% in on Wednesday. The FTSE Renaissance Global IPO Index, which tracks the performance of offerings worldwide, is up 82% this year…”
(H)
December 11
– Bloomberg
(Cormac Mullen and
John Ainger):
“The world’s stockpile of negative-yielding debt has swelled to a fresh record in a sign that demand for havens is just as intense as that for riskier assets. The market value of the Bloomberg Barclays Global Negative Yielding Debt Index rose to $18.04 trillion on Thursday, the highest level ever recorded. Spanish 10-year bonds were the latest to join the club, with rates sliding below 0% for the first time Friday.”
(I)
December 10
– Financial Times
(Song Jung-a):
“South Korea plans to jail and levy hefty fines on traders that illegally bet against the country’s stocks as part of a broader campaign against short selling that has annoyed hedge funds. Investors who break rules that outlaw so-called naked short selling could be imprisoned for at least a year or have to cough up financial penalties of up to five times any profit they make on a trade…”
(J)
December 7
– Wall Street Journal
(Frances Yoon):
“Shares of some companies the U.S. government says support China’s military fell Monday, after index compiler FTSE Russell said it would drop the stocks from major indexes. Late Friday, FTSE Russell said it would remove securities of eight Chinese companies from the FTSE Global Equity Index Series, the FTSE China A Inclusion Indexes and other associated benchmarks on Dec. 21.”
(K)
December 10
– Bloomberg
(Jesse Hamilton and
Lisa Lee):
“For the better part of a decade, Janet Yellen has been issuing a warning: Wall Street is piling a dangerous amount of debt onto the balance sheets of risky U.S. businesses. Time and time again, she has hammered home the point, turning it into a staple of the speeches and interviews she’s given since leaving the top job at the Federal Reserve in 2018. ‘Regulators should sound the alarm,’ she said in one. But now, as Yellen prepares to take over as Treasury secretary, she may find it difficult to do anything quickly to rein in these markets, experts say.”
(L)
December 10
– Associated Press
(Martin Crutsinger):
“The U.S. government’s deficit in the first two months of the budget year ran 25.1% higher than the same period a year ago as spending to deal with the COVID pandemic soared while tax revenues fell. …With two months gone in the budget year, the deficit totaled $429.3 billion, up from $343.3 billion in last year’s October-November period. The deficit… reflected an 8.9% jump in outlays, to $886.6 billion, and a 2.9% decline in tax revenues, to $457.3 billion.”
(M)
December 10
– Bloomberg
(Kriston Capps):
“Between past due rent, late fees and unpaid utility bills, Americans may collectively owe $70 billion by January, when the current federal eviction moratorium is set to expire. Estimates for the nation’s total rent shortfall on Jan. 1 range in the tens of billions of dollars, potentially exceeding the amount of emergency rental assistance that Congress may or may not deliver over the next few weeks. If lawmakers fail to act, the New Year could trigger a long-feared disaster — an avalanche of evictions during the dead of winter, as the pandemic rages.”
(N)
December 7
– Bloomberg
(Carolina Gonzalez):
“More than 110,000 restaurants have closed permanently or long-term across the country as the industry grapples with the devastating impact of the Covid-19 pandemic. And more pain is ahead, with a potential shutdown of indoor dining in New York City just as the temperatures drop. The nationwide tally -- representing one in six U.S. eateries -- is among the findings of a survey… by the National Restaurant Association. The figure was up from about 100,000 shutdowns in a September survey.”
(O)
December 10
– Bloomberg
(Olivia Rockeman):
“Applications for U.S. unemployment benefits surged last week, topping estimates with the highest level since September, suggesting that widening business shutdowns to curb the pandemic are spurring fresh job losses. Initial jobless claims in regular state programs rose by 137,000 to 853,000… Continuing claims, which reflect Americans on ongoing unemployment benefits, jumped by 230,000 to 5.76 million in the week ended Nov. 28. It was the first increase since August.”
(P)
December 9
– CNBC
(Diana Olick):
“Mortgage rates fell again, falling to a record low for the 14th time this year… And that is sending ever more borrowers to their lenders looking to refinance their home loans. Mortgage applications to refinance rose 2% last week from the previous week, and an eye-popping 89% higher from a year ago… Mortgage applications to purchase a home fell 5% for the week but were a strong 22% higher annually.”
(Q)
December 9
– CNBC
(Lauren Feiner and
Salvador Rodriguez):
“The Federal Trade Commission and a coalition of attorneys general from 48 states and territories filed two separate antitrust lawsuits against Facebook.... The suits target two of Facebook’s major acquisitions: Instagram and WhatsApp. Both are seeking remedies for the alleged anti-competitive conduct that could result in requiring Facebook to divest the two apps.”
(R)
December 8
– Bloomberg
(Sophie Alexander):
“The resurgent coronavirus has thrust the tech hub back into lockdown. Offices sit empty as work-from-home policies stretch indefinitely… Nowhere are the effects more pronounced than in the real estate market, where apartment rents are plunging the most in the country. The median rent for a studio apartment dropped 35% last month from a year earlier, to $2,100, while costs for one-bedrooms were down 27% to $2,716…”
(S)
December 10
– Bloomberg
(Oshrat Carmiel):
“Apartments in Manhattan haven’t been this cheap to rent in 10 years. The median rental price plummeted 22% in November from a year earlier to $2,743 a month, according to… appraiser Miller Samuel Inc. and… Douglas Elliman Real Estate. That’s the lowest in data going back to October 2010.”
(T)
December 10
– Bloomberg
(Shen Hong and
Rebecca Choong Wilkins):
“China will almost certainly let a high-flying chipmaker default on $2.5 billion worth of dollar debt, the strongest signal yet that foreign investors shouldn’t count on Beijing to bail them out. Tsinghua Unigroup Co. said it won’t be able to repay the principal on a $450 million dollar bond due Thursday, which would trigger cross defaults on a further $2 billion of debt. This would be the company’s first dollar bond repayment failure and came after it defaulted on a 1.3 billion yuan ($199 million) local bond last month. While investors weren’t exactly taken by surprise… the default will force them to reassess the creditworthiness of weaker state-linked companies.”
(U)
December 8
– Financial Times
(Jonathan Wheatley and
James Kynge):
“China has drastically curtailed the overseas lending programme of its two largest policy banks, after nearly a decade of ambitious growth which at its peak rivalled that of the World Bank… Lending by the China Development Bank and the Export-Import Bank of China collapsed from a peak of $75bn in 2016 to just $4bn last year… The sharp retrenchment comes as Beijing rethinks its Belt and Road Initiative, the signature scheme of China’s leader Xi Jinping that finances and builds roads, railways, ports and other infrastructure in mostly developing countries.”
(V)
December 6
– Reuters
(Gabriel Crossley and
Lusha Zhang):
“China’s exports rose at the fastest pace in almost three years in November, as strong global demand for goods needed to ride out the pandemic landed the world’s second-largest economy a record trade surplus… Exports in November rose 21.1% from a year earlier…, the fastest growth since February 2018. It also soundly beat analysts’ expectations for a 12.0% increase and quickened from an 11.4% increase in October… Imports rose 4.5% year-on-year in November, slower than October’s 4.7% growth, and underperforming expectations…”
(W)
December 11
– Reuters
(Guy Faulconbridge and
Gabriela Baczynska):
“Britain is likely to complete its journey out of the European Union in three weeks without a trade deal, British Prime Minister Boris Johnson and European Commission chief Ursula von der Leyen said on Friday… ‘It’s looking very, very likely we’ll have to go for a solution that I think will be wonderful for the UK, we’ll be able to do exactly what we want from January 1, it will obviously be different from what we set out to achieve,’ Johnson told reporters.”
(X)
December 8
– Financial Times
(Martin Arnold):
“Eurozone governments’ borrowing has rocketed to fund their response to the coronavirus pandemic ... Governments’ responses to the pandemic will rack up €1.5tn of extra debt, pushing the eurozone’s sovereign debt above the size of the bloc’s economy this year for the first time. Many countries are running budget deficits above 10% of gross domestic product, including Italy, France and Spain. Italy’s government debt is expected to rise from 135% of GDP last year to almost 160% in 2021.”
(Y)
December 6
– Bloomberg
(Min Jeong Lee and
Toshiro Hasegawa):
“The Bank of Japan has taken over as the biggest owner of the nation’s stocks, with the total value of its holdings climbing well above $400 billion. Massive exchange-traded fund purchases by the BOJ to support the market amid the pandemic this year combined with subsequent valuation gains pushed its Japanese equity portfolio to 45.1 trillion yen ($434bn) in November… That marks the first time that the central bank’s holdings have eclipsed those of the Government Pension Investment Fund, which Ide estimates stood at 44.8 trillion yen last month…”
(Z)
December 8
– Bloomberg
(Chris Bryant):
“Free lunches don’t last long in finance but hedge funds have identified a temporary exception to that rule: the special purpose acquisition company, or SPAC. North American SPACs have raised almost $70 billion this year in initial public offerings…, and a big chunk of that money comes from the hedge fund industry ... hedge funds are providing bridge loans that have enabled a host of famous names from the world of business, finance and politics to launch their own SPACs this year.”
December 10
– Bloomberg
(Lisa Pham):
“Short sellers won some high-profile victories this year with the collapse of payments firm Wirecard AG and hospital operator NMC Health Plc. Otherwise, 2020 is shaping up to be the worst year on record for some investors seeking to profit from share price declines. A monthly index of short-selling hedge funds is down 32% this year through October, according to… Hedge Fund Research. The performance is unlikely to have improved in November…”
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