Source:
http://creditbubblebulletin.blogspot.com/2021/02/weekly-commentary-short-but-momentous.html
Credit Bubble Bulletin
Friday, February 12, 2021
"The Short but Momentous History of Fed QE"
by Doug Noland
Following is my highly edited
easy to read version of the
column at the link above
Ye Editor
For the week ending
February 12, 2021:
GLOBAL STOCKS:
S&P500 gained 1.2%
(up 4.8% y-t-d)
Dow Industrials increased 1.0%
(up 2.8%)
Utilities fell 2.0%
(down 0.3%)
Transports advanced 3.0%
(up 5.3%)
S&P 400 Midcaps jumped 2.7%
(up 10.3%)
Small cap Russell 2000 rose 2.5%
(up 15.9%)
Nasdaq100 gained 1.5%
(up 7.1%)
Semiconductors surged 7.9%
(up 15.2%)
Biotechs were little changed
(up 8.6%).
Though gold bullion gained $10,
the HUI gold stock index
declined 0.8%
(down 5.1%).
U.K.'s FTSE rose 1.5% (up 2.0% y-t-d)
Japan's Nikkei up 2.6% (up 7.6% y-t-d)
France's CAC40 up 0.8% (up 2.7%)
German DAX unchanged (up 2.4%)
Spain's IBEX 35 fell 1.9% (down 0.2%).
Italy's FTSE MIB gained 1.4% (up 5.3%)
Brazil's Bovespa down 0.7% (up 0.3%)
Mexico's Bolsa little changed (up 0.3%).
South Korea's Kospi down 0.6% (up 7.9%)
India's Sensex up 1.6% (up 7.9%)
China's Shanghai up 4.5% (up 5.2%)
Russia's MICEX rose 1.0% (up 4.2%)
US BONDS & MORTGAGES:
Federal Reserve Credit
expanded 79% in the past year
M2 money supply
surged 25.5% over the past year.
Ten-year US Treasury bond yields
rose five bps to 1.21% (up 30bps).
Freddie Mac 30-year fixed
mortgage rates were unchanged at 2.73%
(down 77bps year-over-year).
Fifteen-year rates slipped two bps to 2.19%
(down 78bps).
Five-year hybrid ARM rates
added a basis point to 2.79%
(down 49bps).
Jumbo mortgage 30-year fixed rates
were down three bps to 2.84%
(down 77bps).
COMMODITIES:
Bloomberg Commodities Index gained 1.9%
(up 7.7% y-t-d).
Bitcoin jumped $10,088, or 26.6%,
this week to $47,947
(up 65%).
Spot Gold rallied 0.6% to $1,824
(down 3.9%).
Silver jumped 1.6% $27.36
(up 3.6%).
WTI crude surged $2.65 to $59.47
(up 23%).
Gasoline jumped 2.6%
(up 20%)
Natural Gas gained 1.7%
(up 15%).
Copper surged 4.5%
(up 8%).
Wheat slipped 0.7%
(unchanged).
Corn fell 2.2%
(up 11%).
"Central banking traditionally operated as a judicious and conservative institution, with an overarching mandate of promoting monetary and financial stability. "
... The current QE (credit expansion) ... is unprecedented.
The Fed is creating $120 billion of additional market liquidity on a monthly basis in the face of extreme market developments: unprecedented debt and “money” supply expansion;
record stock prices and valuations;
the most speculative equities market in generations;
booming leveraged speculation;
record equities and corporate bond inflows;
record corporate debt issuance;
unprecedented public market participation;
booming equities and options trading volumes;
record low junk bond yields; along with
overheated markets for IPOs and SPACs.
with a two-year federal deficit
poised to exceed $6.0 TN
– or approaching 30% of GDP.
... while M2 “money supply” inflated
an incredible $3.7 trillion, or 24%.
... The policy focus at this point
is little more than a desperate
monetary inflation to incite
higher markets and more
borrowing and spending.
There is no long-term strategy ...
COVID NEWS:
February 7 – Reuters (Mike Stone):
“President Joe Biden said that it will be difficult for the United States to reach herd immunity, at least 75% of the population inoculated against the coronavirus, by the end of this summer. ‘The idea that this can be done and we can get to herd immunity much before the end of next -- this summer, is -- is very difficult,’ Biden told CBS…”
February 9 – Financial Times (Donato Paolo Mancini):
“One of the UK government’s top scientific advisers has warned that early signs the Oxford/AstraZeneca vaccine is less effective at stopping mild and moderate cases of the South African coronavirus variant are a ‘worrying harbinger’ for 2021. Sir Jeremy Farrar… told the Financial Times that this year was ‘very unpredictable’ as new viral variants less susceptible to current control methods were likely to undermine efforts to contain the virus. Signs of the reduced efficacy of the Oxford/AstraZeneca vaccine against the 501. V2 variant in a limited South Africa study have already caused the country to suspend rollout of the jab, pending more data.”
February 9 – CNBC (Lora Kolodny):
“About 10 to 30% of all Covid patients will suffer from long-haul symptoms, according to the latest research from Mt. Sinai’s Center for Post-Covid Care. Those numbers should be a ‘wake-up call’ for young people and motivate them to avoid infection, Dr. Peter Hotez of Texas Children’s Hospital said… Patients with post acute Covid syndrome typically experience serious fatigue, shortness of breath, digestive issues, ‘brain fog’ and a racing heart. Some can even develop type 1 diabetes after a Covid infection, Dr. Hotez said. Endocrinologists are still trying to understand exactly why this occurs.”
ALL OTHER NEWS:
February 11 – Bloomberg (Amanda Albright):
“U.S. home prices, fueled by the lowest mortgage rates in history, rose at the fastest pace on record, surpassing the peak from the last property boom in 2005. The median price of a single-family home climbed 14.9% to $315,000 in the fourth quarter. That was the biggest surge in data going back to 1990…”
February 11 – Wall Street Journal (Nicole Friedman):
“ ... the strongest housing boom in more than a decade is boosting home values from major metro areas to small cities and vacation spots. The median sales price for existing homes in each of more than 180 metro areas tracked by the National Association of Realtors rose in the fourth quarter from a year earlier …The biggest home-price gainers in the fourth quarter were in the Northeast, led by the area around the seaport city of Bridgeport, Conn., where prices shot up 39.2% from a year earlier. In Pittsfield, Mass., they rose 32.2%, while in the coastal resort town of Atlantic City, N.J., home prices gained 30%. Other top performers included popular vacation spots like Naples, Fla., and towns within driving distance of urban centers such as Kingston, in New York’s Hudson Valley.”
February 8 – Bloomberg (Elizabeth Stanton, Stephen Spratt and John Ainger):
“ ... The market-implied pace of U.S. consumer-price increases briefly accelerated to the fastest since 2014, and 30-year Treasury yields temporarily topped 2% for the first time in a year as rising expectations for an economic recovery fueled an oil rally. ... ”
February 9 – Bloomberg (Davide Scigliuzzo):
“... The tidal wave of demand has slashed borrowing costs and opened up financing avenues for even the least credit-worthy firms, handing them an unprecedented opportunity to raise cash. Some $855 billion of junk-rated corporate debt, or around 58% of the entire market, is now trading at a yield of under 4%...”
February 8 – Bloomberg (Carolina Gonzalez):
“The average yield on U.S. junk bonds dropped below 4% for the first time ever as investors seeking a haven from ultra-low interest rates keep piling into an asset class historically known for its high yields. The measure for the Bloomberg Barclays U.S. Corporate High-Yield index dipped to 3.96% on Monday evening ... ”
February 8 – Financial Times (Adam Samson and Colby Smith):
“ ... The 30-year Treasury yield briefly traded above 2% for the first time since last February on Monday, extending a rise that has seen it climb around 0.36 percentage points since the end of last year.”
February 10 – Reuters (David Lawder):
“The U.S. government posted a budget deficit of $163 billion in January, a record high for the month ... Both receipts and outlays were record highs for January. For the first four months of the 2021 fiscal year, the deficit rose 89% to $736 billion, with receipts rising 1% to $1.19 trillion and outlays increasing 23% to $1.92 trillion.”
February 9 – Bloomberg (Prashant Gopal and Alex Wittenberg):
“ ... Home prices in urban U.S. markets rose 15% in the three months through late January, slightly ahead of the annual pace in suburbia, according to… Redfin…”
February 10 – Reuters (Lucia Mutikani):
“U.S. consumer prices ... increased 0.3% last month after climbing a revised 0.2% in December. In the 12 months through January the CPI rose 1.4% after gaining a revised 1.3% December.”
February 9 – Wall Street Journal (Orla McCaffrey):
“ Mortgage forbearance has been a financial lifeline for many Americans navigating the pandemic-ravaged economy… But the relief programs, largely designed to last a maximum of 12 months, are set to expire in the coming months, a serious challenge for borrowers who are still out of work or are earning less than they did pre-pandemic. More than half of 2.7 million active forbearance plans are set to end for good in March, April, May or June…”
February 11 – Bloomberg (Kim Chipman):
“ ... Agriculture land values rose 6% last year, the biggest gain since 2012, across the Seventh Federal Reserve District, a five-state region including all of Iowa and most of Illinois, Indiana, Michigan and Wisconsin.”
February 11 – Bloomberg (Devon Pendleton and Ben Stupples):
“A company catering to women and led by women has made its 31-year-old female founder a billionaire. Shares of Bumble Inc., the owner of the dating app where women make the first move, soared 67% in its trading debut to $72…, valuing Chief Executive Officer Whitney Wolfe Herd’s stake at $1.5 billion.”
February 11 – Bloomberg (Amanda Albright):
“American municipal bonds are yielding less than they have in generations and a key measure shows that valuations are at an all-time high, which would seem to give investors little room to keep piling in. But they are. Every week since early November, investors have added an average of $2.3 billion to mutual funds focused on state and local government bonds, more than four times the typical amount over the past decade… They’ve also plowed into exchange-traded funds, which in January raked in the most on record.”
February 6 – New York Times (Alexandra Stevenson):
“Its lenders are pushing for bankruptcy. Its chairman and co-founder has been quietly stripped of power. Nearly $10 billion of its money has been embezzled. HNA Group, the vast Chinese conglomerate that threw tens of billions of dollars at trophy businesses around the world, is nearing the biggest corporate collapse in recent Chinese history. ... At its height, HNA employed 400,000 people around the world. For China’s leadership, HNA is now a cautionary tale. Its story offers a glimpse of how Beijing treats its most powerful entrepreneurs.”
February 10 – Reuters (Francois Murphy):
“Iran has carried out its plan to produce uranium metal, the U.N. atomic watchdog confirmed…, despite Western powers having warned Iran that would breach their 2015 nuclear deal as uranium metal can be used to make the core of an atom bomb.”
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