- Chronicling History's Greatest Financial Bubble
U.S. BONDS & MORTGAGES:
2020 Year in Review
"Over
350,000 Americans dead, with the Covid death toll projected to rise
another 150,000 by the end of January. Confirmed Covid cases have
exceeded 20 million (84 million globally), ending 2020 with new U.S.
infections growing by a million every four to five days. The year ended
with more than 125,000 Covid patients in overburdened hospitals across
the U.S. The national lockdown was an enormous burden that, in the end, sure seems like a wasted effort.
The contrast between the depressing health crisis and booming financial markets could not be more stark. ...
Tesla’s
stock was up more than 740%, as the Nasdaq100 (NDX) returned (price and
dividends) almost 49% for the year. ... Things tend to turn crazy at
the end of cycles.
... Going back to the September 2019 restart
of QE, Federal Reserve Assets had surged ... 97%. We are now in the
throes of one of history’s greatest monetary inflations. M2 “money”
supply inflated ... 29% annualized, over 43 weeks ... .
...
After reversing ... deleveraging, the unprecedented tsunami of
central bank liquidity resuscitated the global leveraged speculating
community.
...
The U.S. employment rate spiked to 14.7% in April from February’s 3.5%
(dropping back to 6.7% by November), as U.S. Q2 GDP collapsed at a 31.4%
annualized rate.
NEWS FOR THE WEEK
December 30 – Bloomberg (Drew Armstrong, Gabrielle Coppola, and John Tozzi):
“The U.S. is vaccinating an average of only 200,000 people a day against Covid-19, and many states have used just a small percentage of the shipments sent to them this month. Data gathered from states and the U.S. Department of Health and Human Services show that while Operation Warp Speed has distributed millions of doses, some states have been slow to get them into people’s arms. The nation almost certainly won’t hit the Trump administration’s goal of 20 million vaccinations by year-end…”
December 31 – Reuters (Rebecca Spalding and Carl O’Donnell):
“Seattle public health officials have so little COVID-19 funding on hand they worry they will have to shut down some virus testing sites as they mount a campaign to dose their 2.3 million residents with Pfizer Inc’s and Moderna Inc’s vaccines… In counties across the United States, the funding crisis has limited the hiring of needed vaccine staff, delayed the creation of vaccination centers, and undermined efforts to raise public awareness, officials told Reuters.”
December 30 – Reuters (Steve Gorman):
“The leading U.S. infectious disease specialist, Dr. Anthony Fauci, said… he foresees America achieving enough collective COVID-19 immunity through vaccinations to regain ‘some semblance of normality’ by autumn 2021, despite early setbacks in the vaccine rollout.”
December 27 – The Hill (Zack Budryk):
“Anthony Fauci … who has discouraged outright barring flights from the United Kingdom, said… U.S. officials were right to require proof of negative coronavirus tests for anyone entering the country from Britain. Public health officials are examining the new strain ‘very intensively now,’ including questions such as, ‘Does it make someone more ill? Is it more serious virus in the sense of virulence? And the answer is, it doesn’t appear to be that way.’”
December 29 – CNBC (Noah Higgins-Dunn):
“California will extend its stay-at-home order for two regions of the state — Southern California and San Joaquin Valley — where intensive-care unit capacity is strained from an onslaught of Covid-19 patients, the state’s Health and Human Services Secretary Dr. Mark Ghaly said… The regional order, which Gov. Gavin Newsom first announced on Dec. 3 and was set to expire Monday, splits the state into five regions… If the remaining ICU capacity in a region falls below 15%, it will trigger a three-week stay-at-home order, Newsom said.”
December 29 – Reuters (Steve Gorman):
“Strict stay-at-home orders were renewed indefinitely on Tuesday for much of California, a leading U.S. hot spot of the COVID-19 pandemic, as the state’s top health official said that many hospitals were teetering on the brink of crisis… At least 90% of the county’s hospitals, he said, have been stretched so thin by the influx of COVID-19 patients that they were forced to divert incoming emergency patients to other facilities for much of the day over the past weekend.”
December 28 – Reuters (Irene Wang and Kiyoshi Takenaka):
“Japan… detected a coronavirus variant found in South Africa, the government said, the first such discovery in a nation that has already identified more than a dozen cases of another variant that is spreading rapidly in Britain.”
December 30 – CNBC (Will Feuer and Kevin Stankiewicz):
“ ... More than 11.4 million doses of Pfizer and Moderna’s two-dose vaccines have been distributed across the country as of Monday morning, but just about 2.1 million shots have been given to people… That’s a far cry from U.S. health officials’ original goal of injecting at least 20 million Americans with their first shots before the end of the year. ‘The Federal Government has distributed the vaccines to the states,’ the president said in a tweet. ‘Now it is up to the states to administer. Get moving!’”
All Other News:
December 29 – Bloomberg (Elizabeth Stanton):
“For the first time in two years, bond investors are betting that U.S. inflation will average close to 2% per year over the coming decade. The market’s key measure of price expectations reached 1.981% on Tuesday after touching 1.992% Monday, the highest since December 2018… The gauge, known as the breakeven rate, is gaining momentum as traders prepare for an economic recovery in 2021….”
December 31 – Bloomberg (Bailey Lipschultz):
“The S&P 500 Index went from peak to trough to peak again within 175 days as investors initially shunned most stocks in response to Covid-19 lockdowns and fears of prolonged recession, but later piled into stay-at-home beneficiaries. Since its pandemic-driven low, the benchmark has rallied 67%, smashing old records and adding $14 trillion in value.”
December 30 – Wall Street Journal (Maureen Farrell):
“Defying expectations, investors piled into initial public offerings at a record rate in 2020, and few expect the euphoria to wear off soon… Companies raised $167.2 billion through 454 offerings on U.S. exchanges this year through Dec. 24, compared with the previous full-year record of $107.9 billion at the height of the dot-com boom in 1999, according to Dealogic. The coronavirus pandemic turned the typical rhythm of the IPO market on its head, with $67.3 billion raised in the fourth quarter. That is roughly six times the total for the first three months of the year. As a result of the scramble, stalwarts of the 21st-century economy including Airbnb Inc., DoorDash Inc. and Palantir Technologies Inc. are now publicly traded…”
December 29 – NPR (Camila Domonoske):
“This year, the hottest trend on Wall Street could be summed up in one strange and unfamiliar word: SPAC. Shaquille O'Neal's got a SPAC. Former House Speaker Paul Ryan’s got a SPAC. Famed investor Bill Ackman launched a $4 billion SPAC. And a 25-year-old became the youngest self-made billionaire thanks to… a SPAC. So what is a SPAC? A ‘special purpose acquisition company’ is a way for a company to go public without all the paperwork of a traditional IPO, or initial public offering. In an IPO, a company announces it wants to go public, then discloses a lot of details about its business operations. After that, investors put money into the company in exchange for shares. A SPAC flips that process around. Investors pool their money together first, with no idea what company they're investing in. The SPAC goes public as a shell company.”
December 29 – Wall Street Journal (Mike Bird):
“The Federal Reserve, European Central Bank and Bank of Japan have collectively expanded their balance sheets by around $8 trillion in 2020. It took them almost eight years to achieve the same growth following the seizure of global financial markets in September 2008. ... ”
December 31 – Bloomberg (Devon Pendleton and Jack Witzig): “... While much of the world grappled with soaring unemployment and plunging growth, the 0.001% benefited from unprecedented wealth creation. The world’s 500 richest people added $1.8 trillion to their combined net worth this year and are now worth $7.6 trillion, according to the Bloomberg Billionaires Index. Equivalent to a 31% increase, it’s the biggest annual gain in the eight-year history of the index…”
December 28 – Financial Times (David Carnevali, Eric Platt, Camilla Hodgson and Hudson Lockett):
“Companies raised more money through stock market listings in 2020 than in any year besides 2007, as a rebound in equities valuations lured in businesses and blank-cheque acquisition vehicles rushed to list in the US. Businesses raised almost $300bn through flotations globally in 2020, including a record $159bn in the US… Stripping out the roughly $76bn raised through blank-cheque companies, deal activity in the US and Asia jumped more than 70% from the previous year. Listings in Europe, by contrast were lethargic. At $20.3bn, they were down by a tenth from 2019 to reach almost half of 2018 levels. Proceeds in Asia, at $73.4bn, would have been far higher if payment company Ant Group had not halted its blockbuster $37bn IPO after it ran afoul of Chinese regulators.”
December 27 – Reuters (Steve Holland and Susan Cornwell):
“U.S. President Donald Trump on Sunday signed into law a $2.3 trillion pandemic aid and spending package, restoring unemployment benefits to millions of Americans and averting a federal government shutdown in a crisis of his own making. Trump… backed down from his earlier threat to block the bill, which was approved by Congress last week, after he came under intense pressure from lawmakers on both sides.”
December 27 – Bloomberg (Billy House and Eric Martin)
: “The two Georgia runoffs that will decide control of the U.S. Senate begin their final stretch, with President Donald Trump again putting himself in the middle of the campaign. Trump ignited controversy last week by holding up pandemic relief and government funding. Although he signed the legislation…, a week after it cleared Congress, his late action will end up delaying the stimulus payments he criticized as too low and cutting a week’s worth of expanded benefits for the jobless. The outgoing president is also headed back to Georgia, where he has lashed out at the governor and other Republicans officials.”
December 30 – Bloomberg (Ana Monteiro):
“The U.S. merchandise-trade deficit widened to an all-time high in November as American companies imported a record value of consumer goods. The shortfall grew to $84.8 billion last month from $80.4 billion in October, according to Commerce Department data… The median estimate… was for a $81.5 billion deficit. Imports rose 2.6% to $212 billion, the highest since May 2019 and led by a jump in shipments of consumer goods. Exports increased 0.8% to $127.2 billion.”
December 29 – Associated Press:
“U.S. home prices jumped in October by the most in more than six years as a pandemic-fueled buying rush drives the number of available properties for sale to record lows. That combination of strong demand and limited supply pushed home prices up 7.9% in October compared with 12 months ago, according to Tuesday’s S&P CoreLogic Case-Shiller 20-city home price index. That’s the largest annual increase since June 2014. The coronavirus outbreak has forced millions of Americans to work from home and it’s curtailed other activities like eating out, going to movies or visiting gyms. That’s leading more people to seek out homes with more room for a home office, a bigger kitchen, or space to work out.”
December 30 – Reuters (Noel Randewich):
“Shares of companies that went public via IPOs or direct listings this year on average have surged 75%, with corporations that have yet to report a profit jumping more than twice as much as those with positive bottom lines... The analysis includes about 200 companies that held IPOs in the United States this year, and a handful of direct listings from companies such as Asana and Palantir Technologies. About 70% of the companies listing their shares this year are not run profitably…”
December 30 – Wall Street Journal (Xie Yu):
“China’s top credit-rating firm was banned from rating new bonds for three months, after an investigation found it ignored red flags at a state-owned coal miner whose default last month rattled the country’s bond market. China Chengxin International Credit Rating Co. had an AAA rating on the miner when it failed to repay the equivalent of $153 million in short-term debt on Nov. 10. The default occurred just weeks after the company, Yongcheng Coal & Electricity Holding Group Co., raised the same amount from a sale of three-year-debt.”
December 28 – Bloomberg (Joe Mayes, Siddharth Philip and Deirdre Hipwell):
“ ... More than four years in the making, the Brexit agreement avoids the worst-case scenario of new tariffs and quotas after Dec. 31… The divorce will still create significant disruption for a range of industries. Mutual recognition of standards, which would have allowed firms to make products in the U.K. and market them in the EU without any extra certification process, isn’t part of the deal. Likewise, workers in Britain’s services industry… face new costs and bureaucracy as their professional qualifications will no longer be automatically recognized in the EU.”
December 31 – Bloomberg (Dana Hull and Esha Dey): “
Tesla Inc. short sellers lost billions more on the electric-vehicle maker than any other company in 2020, as bears got severely burned by the stock’s surge to new highs. With shares up over 730%, Tesla bears have seen more than $38 billion in mark-to-market losses this year, according to… S3 Partners. By comparison, the next-biggest loss for short sellers was on Apple Inc., at just under $7 billion… This ‘is not only the largest mark-to-market loss for any stock this year, it is the largest yearly mark-to-market loss I have ever seen,’ said Ihor Dusaniwsky, a managing director at S3 Partners.”
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