Credit Bubble Bulletin
- Chronicling History's
Greatest Financial Bubble
December 16, 2020
by Doug Noland
M2 “money” supply (had)
Overheated markets
by this frightening
December 14
– Bloomberg
(Rich Miller):
“U.S. financial conditions are the easiest they’ve been in more than a quarter century as stock markets scale new heights on hopes of an end to the Covid-19 pandemic, according to an index compiled by Goldman Sachs… The index, which dates back to 1990 and also takes account of the value of the dollar and interest rates, reached its loosest level ever last week. That came as financial markets have boomed, thanks to unprecedented support for the economy from the Federal Reserve and Congress.”
S&P500 gained 1.3%
(up 14.8% y-t-d)
Dow Industrials up 0.4%
(up 5.7%).
Utilities increased 0.3%
(down 2.0%).
Transports fell 0.8%
(up 15.3%)
S&P 400 Midcaps up 2.1%
(up 10.9%)
Small cap Russell 2000
up 3.0% (up 18.1%)
Nasdaq100 rallied 2.9%
(up 45.9%)
Biotechs surged 6.8%
(up 16.8%).
With bullion jumping $42,
the HUI gold stock index
was up 4.0% (up 25.4%)
U.K. FTSE
slipped 0.3%
(down 13.4%).
Japan's Nikkei
added 0.4%
(up 13.1% y-t-d)
France's CAC40
increased 0.4%
(down 7.5%)
German DAX
surged 3.9%
(up 2.9%)
Spain's IBEX 35
slipped 0.3%
(down 15.8%)
Italy's FTSE MIB
rose 1.3%
(down 6.5%)
Brazil's Bovespa
jumped 2.5%
(up 2.1%)
Mexico's Bolsa
increased 0.6%
(up 0.7%)
South Korea's Kospi
was little changed
(up 26.1%)
Turkey's Istanbul National 100
jumped 2.7%
(up 23.1%)
Russia's MICEX
was little changed
(up 7.5%).
US BONDS & MORTGAGES
Ten-year Treasury bond yields
rose five bps to 0.95%
(down 97bps year-ver-year)
Freddie Mac 30-year
fixed mortgage rates
dropped four bps
to a record low 2.67%
(down 106bps y-o-y).
Fifteen-year rates
fell five bps
to an all-time low 2.21%
(down 98bps).
Five-year hybrid ARM rates
were unchanged at 2.79%
(down 58bps)
Jumbo mortgage
30-year fixed rates
down two bps to 2.89%
(down 104bps).
Federal Reserve Credit
over the past year,
expanded 77%
M2 money supply
surged 25.3%,
over the past year
COMMODITIES:
Bloomberg Commodities Index
jumped 3.3%
(down 17.4% y-t-d).
Spot Gold
rose 2.3% to $1,881
(up 23.9%).
Silver
surged 8.1% to $26.033
(up 45.3%).
WTI crude oil
was up 2.53 to $49.10
(down 20%).
Gasoline
spiked 6.7% higher
(down 17%)
Natural Gas
rose 4.2%
(up 23%)
Copper
jumped 3.0%
(up 30%)
Wheat
declined 1.0%
(up 9%)
Corn
gained 3.3%
(up 13%).
Coronavirus Watch:
December 16
– Reuters
(Chang-Ran Kim and
Kiyoshi Takenaka):
“The Japanese capital Tokyo, faced with acute strains on its medical system from the COVID-19 pandemic, raised its alert level to the highest of four stages on Thursday as the number of new cases spiked to a record daily high of 822.”
TOP 20
ALL OTHER NEWS:
(1)
December 12
– Bloomberg
(Sarah Ponczek and
Lu Wang):
“After its price was set with professional fund managers the night before, food-delivery service DoorDash Inc. surged 86% in its public debut Wednesday. Software firm C3.ai Inc. jumped 120%. Airbnb Inc. more than doubled a day later… The 2020 return in an index of IPO stocks? 111%. While initial offerings are often occasions for appreciation, this year has been different, with first-day rallies almost three times bigger than the average of the last 40 years.”
(2)
December 18
– Bloomberg:
“The U.S. Commerce Department announced it’s blacklisting Semiconductor Manufacturing International Corp. and more than 60 other Chinese companies ‘to protect U.S. national security.’ ‘This action stems from China’s military-civil fusion doctrine and evidence of activities between SMIC and entities of concern in the Chinese military industrial complex,’ the Commerce Department said…”
(3)
December 18
– Reuters
(Patricia Zengerle and
Eric Beech):
“President Donald Trump on Friday signed legislation that would kick Chinese companies off U.S. stock exchanges unless they adhere to American auditing standards, the White House said, giving the Republican one more tool to threaten Beijing with before leaving office next month.”
(4)
December 16
– Financial Times
(James Politi and
Colby Smith):
“The Federal Reserve has said it will keep buying at least $120bn of debt per month until ‘substantial further progress has been made’ in the recovery, strengthening its support for the US economy amid a surging coronavirus outbreak. ... The language on debt purchases mirrors the Fed’s pledge to keep interest rates close to zero until the economy reaches full employment and inflation is on track to exceed its 2% target for some time.”
(5)
December 18
– Reuters
(Lucia Mutikani):
“The U.S. current account deficit surged to its highest level in more than 12 years in the third quarter as a record rebound in consumer spending pulled in imports, outpacing a recovery in exports. The… current account deficit, which measures the flow of goods, services and investments into and out of the country, widened 10.6% to $178.5 billion last quarter. That was the highest since the second quarter of 2008.”
(6)
December 17
– Associated Press
(Paul Wiseman):
“The number of Americans applying for unemployment benefits rose again last week to 885,000, the highest weekly total since September, as a resurgence of coronavirus cases threatens the economy’s recovery from its springtime collapse… All told, 20.6 million people are now receiving some type of unemployment benefits.”
(7)
December 14
– New York Times
(Ana Swanson):
“American imports from China are surging as the year draws to a close, fueled by stay-at-home shoppers who are snapping up Chinese-made furniture and appliances, along with Barbie Dream Houses and bicycles for the holidays. ... In November, China reported a record trade surplus of $75.43 billion, propelled by an unexpected 21.1% surge in exports compared with the same month last year. Leading the jump were exports to the United States, which climbed 46.1% to $51.98 billion, also a record.”
(8)
December 17
– Bloomberg
(Olivia Rockeman):
“U.S. new home construction rose more than forecast to a nine-month high in November, highlighting the strength of a residential housing market that’s been supported by strong demand amid low interest rates. Residential starts rose 1.2% to a 1.547 million annualized rate from a downwardly revised 1.528 million a month earlier… Single-family starts rose for a seventh month to a 1.186 million annualized rate that was the highest since 2007…”
(9)
December 15
– Bloomberg
(Christopher Maloney):
“A growing percentage of U.S. homeowners are looking to delay making mortgage payments, the latest sign that the economic recovery is hitting a snag. In the first week of December, the proportion of mortgage borrowers that started seeking forbearance relief rose to its highest level since August, according to the Mortgage Bankers Association. And call volume at the companies that collect payments rose to the highest level since April, a sign of growing distress among homeowners…”
(10)
December 15
– Reuters
(David Lawder):
“Most small business owners in the United States believe the worst of the coronavirus pandemic is still ahead of them, with half saying their operations would permanently close within a year unless the business environment improves, the U.S. Chamber of Commerce said… A new U.S. Chamber-MetLife poll of small businesses taken from Oct. 30-Nov. 10 showed that 74% of the owners said they need further government assistance to weather the pandemic. That percentage rises to 81% for minority-owned businesses.”
(11)
December 16
– Bloomberg
(Lisa Lee and
Tom Contiliano):
“From Boeing Co., Carnival Corp. and Delta Air Lines Inc. to Exxon Mobil Corp. and Macy’s Inc., many of the nation’s most iconic companies aren’t earning enough to cover their interest expenses (a key criterion, as most market experts define it, for zombie status). More than 200 corporations have joined the ranks of so-called zombie firms since the onset of the pandemic… In fact, zombies now account for nearly a quarter of those firms. Even more stark, they’ve added almost $1 trillion of debt to their balance sheets in the span, bringing total obligations to $1.98 trillion. That’s more than the roughly $1.58 trillion zombie companies owed at the peak of the financial crisis.”
(12)
December 16
– New York Times
(David McCabe and
Daisuke Wakabayashi):
“Ten state attorneys general… accused Google of illegally abusing its monopoly over the technology that delivers ads online, adding to the company’s legal troubles with a case that strikes at the heart of its business.”
(13)
December 14
– Bloomberg
(John Gittelsohn):
“An estimated $126 billion in commercial real estate will be forced to sell at distressed prices through 2022, more than the first two years after the global financial crisis, according to CoStar Group Inc. Distressed hotel, retail, office and other properties will continue to flow to the market over the coming five years, potentially reaching $321 billion in sales by 2025, the real estate analytics company said. The total may swell to $659 billion in a worst-case scenario…”
(14)
December 14
– Reuters
(Kevin Yao,
Gabriel Crossley, and
Colin Qian):
“China’s factory output grew at the fastest pace in 20 months in November, as revived consumer spending and a gradual easing of COVID-19 restrictions in major trading partners lifted demand for the country’s manufactured goods.”
(16)
December 14
– Financial Times
(Martin Arnold and
Victor Mallet):
“Germany is heading for a double-dip recession this winter after Berlin imposed a hard lockdown, economists have predicted… Chancellor Angela Merkel’s government announced at the weekend that schools and most shops would be closed from Wednesday until January 10 in an effort to contain a surge in coronavirus infections. ‘Germany must brace itself for a second recession,’ said Jörg Krämer, chief economist at Commerzbank. ‘The additional closures affect, among other things, all stores except those for daily needs . . . hairdressers and largely schools and day care centres for children.’”
(17)
December 18
– Reuters
(Kaori Kaneko and
Leika Kihara):
"Japan’s core consumer prices dropped in November at their fastest pace in a decade as the coronavirus pandemic hit demand, stoking fears of a return to deflation and wiping out the benefits former premier Shinzo Abe’s stimulus policies.”
(18)
December 17
– Bloomberg
(William Turton,
Michael Riley and
Jennifer Jacobs):
“The U.S. nuclear weapons agency and at least three states were hacked as part of a suspected Russian cyber-attack that struck a number of federal government agencies…, indicating widening reach of one of the biggest cybersecurity breaches in recent memory. Microsoft Corp. said that its systems were also exposed as part of the attack.”
(19)
December 15
– Associated Press
(Ben Fox and Frank Bajak):
“U.S. government agencies and private companies rushed Monday to secure their computer networks following the disclosure of a sophisticated and long-running cyber-espionage intrusion suspected of being carried out by Russian hackers. The full extent of the damage is not yet clear. But the potential threat was significant enough that the Department of Homeland Security’s cybersecurity unit directed all federal agencies to remove compromised network management software and thousands of companies were expected to do the same.”'
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