Financial data and economic news for the week ending January 22, 2021

Source:
http://creditbubblebulletin.blogspot.com/2021/01/weekly-commentary-short-term.html

 
Friday, January 22, 2021
Short-Term Unsustainable
by Doug Noland

My edited easy to read version follows:

 
For the week ending
January 22, 2021:

 
GLOBAL  STOCK  MARKETS:
S&P500 rallied 1.9% (up 2.3% y-t-d) 

Dow Industrials added 0.6% (up 1.3%). 

Utilities little changed (up 0.8%). 

Transports declined 0.7% (up 2.8%). 

S&P 400 Midcaps rose 1.6% (up 6.8%) 

Small cap Russell 2000 jumped 2.1% (up 9.8%). 

Nasdaq100 surged 4.4% (up 3.7%). 

Biotechs rose 2.3% (up 7.4%). 

 

With gold bullion rallying $27,

the HUI gold stock index 

recovered 1.5% 

(down 3.6%).

 

 U.K.'s FTSE declined 0.6% (up 3.6% y-t-d). 

Japan's Nikkei added 0.4% (up 4.3% y-t-d). 

 France's CAC40 declined 0.9% (up 0.1%)

German DAX increased 0.6% (up 1.1%). 

Spain's IBEX dropped 2.6% (down 0.5%).

 Italy's FTSE MIB fell 1.3% (down 0.7%).

Brazil's Bovespa dropped 2.5% (down 1.4%), 

Mexico's Bolsa sank 2.6% (up 1.4%). 

South Korea's Kospi gained 1.8% (up 9.3%). 

India's Sensex slipped 0.3% (up 2.4%). 

China's Shanghai rose 1.1% (up 3.8%). 

Turkey's Istanbul National 100 index added 1.2% (up 4.5%). 

Russia's MICEX fell 2.0% (up 2.9%).

US  BONDS  &  MORTGAGES

Ten-year US Treasury 

bond yields 

were unchanged at 1.09% 

   (up 17bps).

Federal Reserve Credit
over the past year
expanded 79%.

M2 money supply   

surged 27.1% 

over the past year.

Freddie Mac 30-year
fixed mortgage rates
declined two bps to 2.77%
   (down 83bps y-o-y).

Fifteen-year rates
slipped two bps to 2.21%
   (down 83bps).

Five-year hybrid ARM rates
fell back 32 bps to 2.80%
   (down 48bps).

Jumbo mortgage
30-year fixed rates
down four bps to 2.91%
  (down 104bps).

COMMODITIES:

Bloomberg Commodities Index fell 1.7% 

    (up 1.4% y-t-d). 

Spot Gold gained 1.5% to $1,856
   (down 2.3%). 

Silver jumped 2.8% to $25.556
   (down 3.2%). 

WTI crude slipped nine cents to $52.27 

(up 8%). 

Gasoline gained 1.3%
(up 10%)

Natural Gas sank 10.6%
   (down 4%)

Copper added 0.7%
   (up 3.0%). 

Wheat dropped 6.1%
   (down 1%). 

Corn sank 5.8%
   (up 3%). 

Bitcoin sank $2,939, or 8.1%
to $33,322
    (up 14.6%).

"For years now, I’ve listened as Washington politicians and central bankers admit to the obvious – that the trajectory of our federal debt is unsustainable – while invariably arguing it was not the time to be concerned or address it. 

... So, although the debt to GDP ratio has increased, it’s important to note that the interest burden of the debt - interest as a share of GDP - is no higher now than it was before the financial crisis in 2008 in spite of the fact that our debt has escalated.  ... of course, interest rates can increase. 

... We’re in the throes of the greatest monetary inflation in U.S. history. 

...  The stock market mania is raging out of control. Debt growth is spiraling out of control. 

The Fed and global central banks are trapped in desperate inflationism."

... A day trader's mentality has taken over our nation.

... M2 “money” supply has inflated a shocking $4.0 TN in 46 weeks – or 32% annualized. 

We’re witnessing the greatest monetary inflation the country has ever suffered – with nary a protest. 

Arguably, stock market speculation is the most precarious since 1929. 

We’re witnessing the greatest redistribution of wealth in our nation’s history."

 ... Market backlash is inevitable and overdue."

COVID-19  NEWS:

January 19 – Wall Street Journal (Margherita Stancati and Bojan Pancevski): 

 “Covid-19 infections and deaths remain stubbornly high across much of Europe while vaccination efforts are moving so slowly that widespread immunity is unlikely in the region before the fall... With between 3,000 and 4,000 people dying from the disease every day across the European Union in recent weeks.., governments are prolonging and tightening antivirus measures such as curfews, remote learning and restaurant closures. Fears are growing, too, of more contagious variants of the virus taking hold before governments can scale up their vaccination programs.”January 18 – New York Post (Yaron Steinbuch): “Almost a third of recovered COVID-19 patients in a UK study ended up back in the hospital within five months — and up to one in eight died of complications from the illness… Researchers at the UK’s Leicester University and the Office for National Statistics found that out of 47,780 people discharged from the hospital, 29.4% were readmitted within 140 days… Of the total, 12.3% ended up dying, it added… Many people who suffer long-lasting effects of the coronavirus develop heart problems, diabetes and chronic liver and kidney conditions, according to the report.”

January 20 – New York Times (Apoorva Mandavilli):  

“The steady drumbeat of reports about new variants of the coronavirus — first in Britain, then in South Africa, Brazil and the United States — have brought a new worry: Will vaccines protect against these altered versions of the virus? The answer so far is yes, several experts said... But two small new studies… suggest that some variants may pose unexpected challenges to the immune system, even in those who have been vaccinated — a development that most scientists had not anticipated seeing for months, even years… But experts who reviewed the papers agreed that the findings raised two disturbing possibilities. People who had survived mild infections with the coronavirus may still be vulnerable to infection with a new variant; and more worryingly, the vaccines may be less effective against the variants.”

ALL  OTHER  NEWS:

January 22 – CNBC (Bob Pisani):  

“Stock trading volumes are through the roof. It’s not just equity prices that are hitting new highs in 2021. Trading volumes for stocks and options are at records as well. ‘For trading volumes, the new year starts at a consistent, unprecedented strong & record pace,’ according to Rich Repetto, who tracks trading volumes at Piper Sandler. Much of it is being driven by retail investors, who are continuing the high level of engagement that began in 2020… Year over year, January volumes are up 92%, and from December, they are up 33%.”

January 22 – Wall Street Journal (Karen Langley): 

“Public companies have been taking advantage of a hot stock market by issuing shares at record pace in January. U.S.-listed companies have conducted 57 follow-on stock offerings this year through Wednesday, raising $12.35 billion. Both numbers are records for this point in the year, according to Dealogic… Many of the offerings have been from small pharmaceutical and other health-care firms.”

January 19 – Bloomberg (Catherine Traywick, Josh Saul, Mark Chediak and David R. Baker): “Fuelcell Energy Inc., a clean-energy developer that hasn’t reported an annual profit in 20 years ... market value has soared 800% in recent months to reach $5.6 billion. It’s not alone. Since November, a wave of once-obscure clean-energy companies have seen their valuations skyrocket into the billions -- despite generating little or no net income. Some of them are riding Tesla Inc.’s coattails after the industry giant’s own market capitalization reached a record $834 billion this month…”

 

January 20 – Reuters (Thyagaraju Adinarayan and Saikat Chatterjee): “A 1000% jump in the penny stock of a company with no staff and a high school investing club that doubled its money are just two examples of the big gains to be made from a retail share trading boom that shows no sign of flagging in 2021. Three weeks into the year, as world markets hit new record highs, retail investors, often trading from home on mobile phones, are credited with boosting the fortunes of the small-cap Russell 3,000 share index, where 10 of the top 20 best performers have surged by around 75% since the start of 2021. There is little or no research coverage on some of these companies… Shares in an over-the-counter traded U.S. healthcare company Signal Advance soared to $70 from 70 cents in under a week after Signal was mistaken for an unlisted texting app also called Signal that Tesla founder Elon Musk had tweeted about… ‘These are not normal markets!!’ -- Deutsche Bank strategist Jim Reid said.”

January 20 – Bloomberg (Lu Wang):

 “In the first two weeks of the new year, a total of 1,000 insiders sold their own stock and 128 bought shares, leaving the sell-to-buy ratio poised for the highest monthly reading in data going back to 1988… Meanwhile, corporations announced $29 billion of buybacks over the stretch, up 46% from a year earlier, data compiled by Birinyi Associates show.”

January 18 – Bloomberg (Mark Chediak and Brian K. Sullivan): 

“California utilities started cutting power to residents to prevent wildfires in an unprecedented move for this time of year. The measure is designed to prevent live wires from sparking blazes as high winds are set to sweep through the drought-weary state amid summer-like temperatures. More than 290,000 homes and business are at risk of losing electricity…

January 22 – Financial Times (Aime Williams and Justin Jacobs): 

“China has purchased less than three-fifths of the US goods projected under the ‘phase one’ trade deal that paused a tariff dispute between the two countries a year ago, posing another challenge for the administration of Joe Biden… Under the terms of the deal, China agreed to buy $200bn more of US goods and services than it did in 2017, before the start of the trade dispute, over a two-year period to the end of 2021. Trade analysts have been measuring Beijing’s progress towards that goal, and the latest Chinese import data suggest the country is falling far behind.”

January 22 – Bloomberg (Shahien Nasiripour): “Department of Education’s massive portfolio ... For years, bean counters at the department have been writing down the value of its $1.4 trillion portfolio of student debt as they adopted ever-more-pessimistic views of how much borrowers will repay. In September, the analysts made their biggest adjustment yet, valuing student loans at just 82 cents on every dollar owed, down from 104 cents in 2015… The student loan debt is now worth $258 billion less than the amount outstanding.”

January 21 – CNBC (Jeff Cox): 

“Jobless claims totaled 900,000 for the week ended Jan. 16… That was slightly less than the Dow Jones estimate of 925,000 and below the previous week’s downwardly revised total of 926,000.”

January 21 – Bloomberg (Reade Pickert):

“U.S. home construction starts rose in December to the best pace since late 2006 as builders responded to the robust demand for single-family housing. Residential starts climbed by 5.8% to a 1.67 million annualized rate… That topped all estimates in a Bloomberg survey… that had a median forecast of 1.56 million and compared with an upwardly revised 1.58 million rate in November… The Federal Reserve’s ultra-easy monetary policy has helped push mortgage rates to record lows that are attracting more potential home buyers and underpinning historically strong demand.”

January 20 – Bloomberg (Patrick Clark): 

 “U.S. hotels recorded the lowest occupancy rates on record in 2020, as the Covid-19 pandemic kept travelers at home and ate up lodging industry profits. Hotel occupancy was just 44% for the year, down from 66% in 2019 and the lowest number on record, according to… STR.”

January 18 – Financial Times (Thomas Hale and Sun Yu): “China's year-on-year GDP growth for the final quarter beat expectations…, with the Chinese economy expanding 2.3% over the course of the full year as industrial production continued to drive the country’s recovery.”

January 21 – Bloomberg (Livia Yap):  

“The MSCI Emerging Markets Index has now gained more than 9% this year, extending a rebound from its low during the coronavirus sell-off in March to a heady 88%... Exchange-traded funds covering developing-nation assets drew the highest inflows in more than a year last week, with traders increasing their holdings by a combined $3.56 billion… In total, that was an 11th straight week of inflows, increasing total assets to $332.1 billion…”

January 16 – Reuters (Giuseppe Fonte): 

 “Italy forecasts its debt to soar to a new post-war record level of 158.5% of gross domestic output (GDP) this year, surpassing the 155.6% goal it set in September… The new estimate reflects the impact of a stimulus package worth 32 billion euros ($39bn) announced this week, which will drive the 2021 budget deficit to 8.8% of national output, up from 7% previously targeted.”

January 20 – Reuters (Ben Blanchard): 

“Taiwan’s de facto ambassador in Washington attended the inauguration of U.S. President Joe Biden, hearting the Chinese-claimed island which has been nervous it would not win the same level of support from the new government as the previous one… ‘The first-ever invitation to Taiwan’s representative to the U.S. to attend the Inaugural Ceremonies, the most significant event celebrating U.S. democracy, highlights the close and cordial ties between Taiwan and the United States based on shared values,’ it said.”