Credit Bubble Bulletin
Friday, February 19, 2021
by Doug Noland
My highly edited and
easy to read version
follows. Ye Editor
For the week ending
February 19, 2021:
GLOBAL STOCKS:
S&P500 declined 0.7% (up 4.0% y-t-d)
Dow Industrials little changed (up 2.9%)
Utilities dropped 2.2% (down 2.5%)
Transports added 0.8% (up 6.1%)
S&P 400 Midcaps slipped 0.4% (up 9.9%)
Small cap Russell 2000 down 1.0% (up 14.8%)
Nasdaq100 dropped 1.6% (up 5.4%)
Semiconductors little changed (up 15.3%)
Biotechs fell 3.1% (up 5.3%)
With gold bullion dropping $40,
the HUI gold stock index sank 7.3%
(down 12.0%).
U.K.'s FTSE increased 0.5% (up 2.5% y-t-d).
Japan's Nikkei gained 1.7% (up 9.4% y-t-d).
France's CAC40 rose 1.2% (up 4.0%)
German DAX slipped 0.4% (up 2.0%).
Spain's IBEX 35 advanced 1.2% (up 1.0%).
Italy's FTSE MIB fell 1.2% (up 4.1%)
Brazil's Bovespa declined 0.8% (down 0.5%)
Mexico's Bolsa jumped 1.6% (up 1.9%).
South Korea's Kospi added 0.2% (up 8.1%).
India's Sensex declined 1.3% (up 6.6%).
China's Shanghai gained 1.1% (up 6.4%).
Turkey's Istanbul National 100 rose 1.4% (up 5.7%).
Russia's MICEX increased 0.9% (up 5.1%).
US BONDS & MORTGAGES:
Thirty year US Treasury bond yields
Federal Reserve Credit last week surged $124bn to a record $7.512 TN. Over the past year, Fed Credit expanded $3.368 TN, or 81.2%.
I've monitored the Fed's weekly "H.6 - Money Stock Measures" data on Thursday afternoons for more than 30 years. This exercise ended this week, as the Fed dropped its weekly data in favor of a monthly report.
COMMODITIES:
Spot Gold fell 2.2% to $1,784 (down 6.0%).
Silver slipped 0.3% to $27.2899 (up 3.4%).
WTI crude dipped 23 cents to $59.24 (up 22%).
Gasoline surged 6.8% (up 28%)
Natural Gas jumped 5.4% (up 21%).
Copper surged 7.6% (up 16%).
Wheat rose 2.2% (2%).
Corn gained 1.0% (up 12%).
Former Texas governor and U.S. Energy Secretary Rick Perry:
“Texans would be without electricity for longer than three days to keep the federal government out of their business. Try not to let whatever the crisis of the day is take your eye off of having a resilient grid that keeps America safe personally, economically, and strategically.”
... Texas experienced serious cold weather infrastructure issues in 1989 and again in 2011 – and yet the risk of grid failure under extreme cold was largely disregarded.
... Ten-year Treasury yields rose another 14 bps this week to a one-year high 1.35%.
... for some time to come, historic monetary and fiscal stimulus will support mounting inflationary pressures.
I do not recall a period when the domestic environment was as ripe for inflationary pressures to gather momentum.
... U.S. equities and crypto-currencies are in a historic mania.
ALL THE NEWS:
February 17 – Reuters (Marc Jones):
“The COVID pandemic has added $24 trillion to the global debt mountain over the last year a new study has shown, leaving it at a record $281 trillion and the worldwide debt-to-GDP ratio at over 355%. ”
February 15 – Associated Press (Sudhin Thanawala and Kate Brumback): “Average daily new coronavirus cases in the United States dipped below 100,000 in recent days for the first time in months, but experts cautioned… infections remain high and precautions to slow the pandemic must remain in place. The seven-day rolling average of new infections was well above 200,000 for much of December and went to roughly 250,000 in January…”
February 17 – Bloomberg (Lucia Mutikani):
“U.S. producer prices increased by the most since 2009 in January as the cost of goods and services surged, suggesting inflation at the factory gate was starting to creep up. The producer price index for final demand jumped 1.3% last month, the biggest gain since December 2009 when the government revamped the series, the Labor Department said on Wednesday. That followed a 0.3% rise in December. In the 12 months through January, the PPI accelerated 1.7% after rising 0.8% in December. A 1.3% rise in the prices of services accounted for two-thirds of the increase in the PPI. That was the biggest gain since December 2009…”
February 18 – Wall Street Journal (Joe Wallace):
“Ocean freight rates began to soar last summer, and haven’t let up. That is partly because consumers, unable to spend money in restaurants, have splashed out on goods that move by sea. Retailers and manufacturers, meanwhile, have rushed to rebuild inventories. The shortage of 40-foot steel shipping containers has snarled global supply chains for commodities, hiking prices for some raw materials… At $4,709 per container, rates from Asia to the U.S. West Coast are almost four times higher than they were in March 2020. For taking goods to the East Coast, rates have more than doubled to $5,658 per container.”
February 16 – Wall Street Journal (Ryan Dezember):
“Lumber prices have shot to fresh records, defying the normal winter slowdown in wood-product sales in a sign that the pandemic building boom is bowling into 2021. Records have been set across species, products and grades, according to pricing service Random Lengths. It has never cost more to buy oriented strand board, known as OSB and used for walls, Southern yellow pine, which is favored for fences and decks, or ponderosa pine, which is popular in cabinetry and interior trim.”
February 17 – Reuters (Lucia Mutikani):
“U.S. retail sales rebounded sharply in January after households received additional pandemic relief money from the government, suggesting a pick-up in economic activity after being restrained by a fresh wave of COVID-19 infections late last year… Retail sales surged by a seasonally adjusted 5.3% last month after decreasing 1.0% in December. Economists polled by Reuters had forecast sales increasing 1.1% in January. Retail sales increased 7.4% from a year ago.”
February 19 – CNBC (Diana Olick):
“There were 1.04 million homes for sale at the end of January, a 26% drop from a year ago. At the current sales pace, there is now a 1.9-month supply, the lowest since the Realtors began tracking this metric in 1982… The lack of supply in the face of strong demand continues to push prices higher and higher. The median price of an existing home sold in January was $303,900, a 14.1% increase from January 2020. That is the highest January price that the Realtors have ever recorded.”
February 18 – Bloomberg (Reade Pickert):
“Applications for U.S. state unemployment insurance jumped to a four-week high, indicating the labor market is suffering fresh setbacks even as the coronavirus pandemic shows signs of ebbing. Initial jobless claims in regular state programs totaled 861,000 in the week ended Feb. 13, up 13,000 from the prior week… Last week’s report had originally shown a decrease but was revised up to show a 36,000 increase.”
February 18 – Bloomberg (Olivia Rockeman):
“U.S. home-construction starts fell in January for the first time in five months, signaling that rising residential real estate prices may be constraining buyer demand. Residential starts dropped by 6% from the prior month to a 1.58 million annualized rate… The median in a Bloomberg survey… had called for a decline to a 1.66 million annualized rate… Single-family housing starts, which were at the highest since 2006 by the end of last year, decreased by 12.2% to a 1.16 million pace. Multifamily starts, which tend to be volatile, surged 17.1% to a 418,000 pace, the fastest since July.”
February 16 – CNBC (Silvia Amaro):
“China dethroned the U.S. last year to become Europe’s top trading partner for the first time… European Union exports to China grew by 2.2% last year and imports rose by 5.6%. In comparison, exports to the U.S. dropped by 8.2% and imports fell by 13.2%. The latest figures… showed that China now has an even bigger role in how European economies perform.”
February 18 – Reuters (Stella Qiu, Sophie Yu, Brenda Goh):
“China’s air passenger traffic fell 45.16% year-on-year over Lunar New Year, the aviation regulator said…, though signs of a quick recovery are emerging due to the country’s success in curbing domestic transmission of the COVID-19 virus.”
February 17 – Bloomberg (Sydney Maki):
“Governments, companies and households raised $24 trillion last year to offset the pandemic’s economic toll, bringing the global debt total to an all-time high of $281 trillion by the end of 2020, or more than 355% of global GDP, according to the Institute of International Finance. They may have little choice but to keep borrowing in 2021, said… director of sustainability research Emre Tiftik and economist Khadija Mahmood.”
February 17 – Bloomberg (Ari Natter and Jennifer A. Dlouhy):
“Federal regulators warned Texas that its power plants couldn’t be counted on to reliably churn out electricity in bitterly cold conditions a decade ago, when the last deep freeze plunged 4 million people into the dark. They recommended that utilities use more insulation, heat pipes and take other steps to winterize plants -- strategies commonly observed in cooler climates but not in normally balmy Texas. ‘Where did those recommendations go, and how were they implemented?’ said Jeff Dennis, managing director of Advanced Energy Economy… ‘Those are going to be some pretty key questions.’”
February 14 – Bloomberg (Yuko Takeo and Toru Fujioka):
“Japan’s economy clocked another quarter of double-digit growth and finished the pandemic year in better shape than initially expected, signaling potential for a more sure-footed recovery once a damaging state of emergency ends. Gross domestic product grew an annualized 12.7% from the prior quarter in the three months through December…”
February 16 – Reuters (Jeff Mason):
“China will pay a price for its human rights abuses, U.S. President Joe Biden warned…, responding to queries… on the Asian nation’s handling of Muslim minorities in its far western region of Xinjiang. Chinese President Xi Jinping has drawn global criticism for holding the minority Uighurs in internment camps and other human rights abuses. ‘Well, there will be repercussions for China and he knows that,’ Biden said of Xi…”
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