Credit Bubble Bulletin
by Doug Noland
Friday, April 9, 2021
This is my highly edited and
much easier to read version
of the original column.
Ye Editor
INFLATION
"U.S. Producer Prices
surged a full 1.0% in March,
double the estimate.
This pushed y-o-y
Producer Price Inflation
to 4.2%, the strongest
advance since 2011.
The ISM Non-Manufacturing
(services) Index surged
to a record high 63.7,
with all 18 industry groups
reporting they’re paying
higher prices (up from 67%
in December).
The Prices Index jumped to 74,
the high going back to July 2008."
For the week ending
April 9, 2021:
S&P500 jumped 2.7% (up 9.9% y-t-d)
The Dow rose 2.0% (up 10.4%)
Utilities gained 1.4% (up 3.1%)
Transports advanced 1.2% (up 19.3%)
S&P 400 Midcaps increased 0.9% (up 15.8%)
Nasdaq100 surged 3.9% (up 7.4%)
Semiconductors rose 1.7% (up 17.9%)
Biotechs fell 2.6% (down 5.4%).
With gold bullion rising $15,
the HUI gold stock index gained 2.4%
(down 5.5%).
U.K.'s FTSE jumped 2.6% (up 7.0% y-t-d).
Japan's Nikkei dipped 0.3% (up 8.5% y-t-d).
German DAX increased 0.8% (up 11.0%).
China's Shanghai fell 1.0% (down 0.6%).
Federal Reserve Credit last week
gained $14.9bn to $7.657 TN.
Over the past 82 weeks,
Fed Credit expanded 105%.
Freddie Mac
30-year fixed mortgage rates
fell five bps to 3.13%
(down 20bps y-o-y).
Fifteen-year rates
declined three bps to 2.42%
(down 35bps).
Five-year hybrid ARM rates
jumped eight bps to 2.92%
(down 48bps).
Jumbo mortgage 30-year fixed rates
down 11 bps to 3.18%
(down 68bps).
Commodities Watch:
Bloomberg Commodities Index
added 0.2% (up 7.7% y-t-d).
Spot Gold rallied 0.9% to $1,744
(down 8.2%).
Silver gained 1.0% to $25.266
(down 4.3%).
WTI crude fell $2.13 to $59.32
(up 22%).
Gasoline dropped 3.0%
(up 39%),
Natural Gas sank 4.3%
(down 1%).
Copper rallied 1.2%
(up 15%).
Wheat surged 4.5%
(unchanged).
Corn rose 3.1%
(up 19%).
Bitcoin declined $540, or 0.9%,
this week to $58,334
(up 101%).
Coronavirus Watch:
April 7 – CNBC (Berkeley Lovelace Jr.):
“The highly contagious variant first identified in the U.K. is now the most common Covid strain circulating in the U.S., the head of the Centers for Disease Control and Prevention said… ‘The variant, known as B.1.1.7, is ‘now the most common lineage circulating in the United States.’ CDC Director Dr. Rachelle Walensky said… ‘Testing remains an important strategy to rapidly identify and isolate infectious individuals, including those with variants of concern,’ Walensky said.”
April 7 – CNBC (Rich Mendez):
“Hospitals are seeing more and more younger adults in their 30s and 40s admitted with severe cases of Covid-19, Centers for Disease Control and Prevention Director Dr. Rochelle Walensky said… ‘Data suggests this is all happening as we are seeing increasing prevalence of variants, with 52 jurisdictions now reporting cases of variants of concern,’ Walensky said…”
April 6 – Reuters (Pedro Fonseca):
“Brazil’s brutal surge in COVID-19 deaths will soon surpass the worst of a record January wave in the United States, scientists forecast, with fatalities climbing for the first time above 4,000 in a day on Tuesday as the outbreak overwhelms hospitals. Brazil’s overall death toll trails only the U.S. outbreak, with nearly 337,000 killed… But with Brazil’s healthcare system at the breaking point, the country could exceed total U.S. deaths, despite having a population two-thirds that of the United States… ‘It’s a nuclear reactor that has set off a chain reaction and is out of control. It’s a biological Fukushima,’ said Miguel Nicolelis, a Brazilian doctor and professor at Duke University…”
April 4 – Bloomberg (Debjit Chakraborty and Dhwani Pandya):
“India added more than 100,000 coronavirus infections over the last 24-hours, a record increase that pushed its richest state to order offices to work from home and shut malls and restaurants through April.”
April 8 – Reuters (Neha Arora and Francis Mascarenhas):
“India reported another record number of new COVID-19 infections on Friday and daily deaths hit their highest in more than five months, as it battles a second wave of infections and states complain of a persistent vaccine shortage. Evoking memories of the last national lockdown when tens of thousands of people walked on foot back to their homes, hundreds of migrants in badly affected Mumbai packed into trains as bars, malls and restaurants have again been forced to down shutters.”
Market Mania Watch:
April 7 – Bloomberg (Paula Seligson):
“Money managers are once again piling into U.S. junk bonds with abandon, pushing risk premiums so low that some fear any stumble in the economic recovery could lead to bruising losses. The extra yield investors demand to own speculative-grade bonds instead of Treasuries fell below 3 percentage points this week for the first time since 2007… Yields are close to all time lows as well, fueling a surge in borrowing as companies look to lock in historic rates. The first quarter was the busiest ever for high-yield debt sales, while volumes for bonds and loans backing leveraged buyouts are on the upswing.”
April 5 – Reuters (Gertrude Chavez-Dreyfuss):
“The cryptocurrency market capitalization hit an all-time peak of $2 trillion on Monday, according to… CoinGecko and Blockfolio, as gains over the last several months attracted demand from both institutional and retail investors.”
Inflation Watch:
April 6 – Bloomberg (Michael Sasso and Leslie Patton):
“ ... Restaurants and hotels are raising wages, offering bonuses for worker referrals or luring people from other states to cope with the shortage…. Nonfarm payrolls rose by 916,000 last month, blowing away economists’ median estimate of a 660,000-job gain. Meanwhile, a measure of service-industry activity released this week saw the fastest growth on record in March…”
April 7 – Bloomberg (Isis Almeida, Rachel Graham and Annie Lee):
“ ... Rising demand for everything from soybeans to steel has sent the cost of hauling dry goods soaring more than 50% this year. Manufacturing… is now accelerating elsewhere, and countries are stepping up commodity purchases to rebuild stockpiles after running them down during lockdowns that slowed port operations and hit economic activity globally. Analysts say the rally isn’t over, with rates to carry unpacked commodities like grains, iron ore and coal -- known as dry bulk -- expected to remain high this year and possibly into 2022.”
April 8 – Bloomberg (Agnieszka de Sousa and Megan Durisin):
“ ... a United Nations gauge of global food costs rose for a 10th month in March to the highest since 2014… Food prices are in the longest rally in more than a decade amid China’s crop-buying spree and tightening supplies of many staple products, threatening faster inflation.”
Biden Administration Watch:
April 5 – Financial Times (Aziza Kasumov):
“ ... Goldman Sachs calculated that Biden’s tax plan would knock 9% off earnings per share for companies in the S&P 500 next year. Under Biden’s plans… the US corporate tax rate would rise from 21% to 28%, a sharp reversal from the cuts rolled out during Donald Trump’s presidency. The proposal would also add a global minimum tax of 21%, determined on a country-by-country basis, to target tax havens.”
April 7 – Reuters (David Lawder):
“U.S. Treasury Secretary Janet Yellen… fleshed out the details of a corporate tax hike plan linked to President Joe Biden’s infrastructure investment proposal, aiming to raise $2.5 trillion in new revenues over 15 years by deterring tax avoidance. Yellen’s plan relies on negotiating a 21% global minimum corporate tax rate with major economies and a separate 15% minimum tax on ‘booked’ income aimed at the largest U.S. corporations. Dozens of big U.S. companies use complex tax strategies to reduce their federal tax liabilities to zero. Yellen said that promises of increased U.S. investment by corporations under the 2017 Republican tax cuts failed to materialize.”
U.S. Bubble Watch:
April 7 – Bloomberg (Olivia Rockeman):
“The U.S. trade deficit widened in February to a record high… The gap in trade of both goods and services increased to $71.1 billion in February from a revised $67.8 billion a month earlier… A decline in exports exceeded a drop in the value of imports during the month as severe winter weather disrupted two-way trade. The U.S. deficit has been widening fairly consistently on a monthly basis since reaching a more than three-year low in February 2020.”
April 6 – Reuters (Hilary Russ):
“Taco Bell wants to hire at least 5,000 employees in one day, it said…, and is adding benefits for some general managers to sweeten the pot as restaurants struggle to hire enough workers to keep up with a surge in sales amid a broader U.S. economic recovery… ‘It is no secret that the labor market is tight’ now, Kelly McCulloch, Taco Bell’s chief people officer, said… ‘Total nightmare’ is the way FAT Brands Inc CEO Andy Wiederhorn describes the staffing situation for franchisees of his company’s restaurants, which include Johnny Rockets and Fatburger.”
April 5 – Wall Street Journal (AnnaMaria Andriotis and Ben Eisen):
“A greater share of people with low credit scores has been falling behind on their car payments in recent months… Some 10.9% of subprime borrowers with outstanding auto loans or leases were more than 60 days past due in February, up from 10.7% in January and 8.7% a year prior, according to… TransUnion. It marked the sixth consecutive month-over-month increase and the highest level in monthly data going back to January 2019. More than 9% of subprime auto borrowers were more than 60 days past due in the fourth quarter, the highest quarterly figure in data going back to 2005.”
Fixed Income Watch:
April 5 – Bloomberg (Lisa Lee):
“Wall Street buyout barons are rushing to the leveraged loan market to finance takeovers and dividends as they dial up risk-taking amid a brightening economic outlook. Loan launches that back mergers and leveraged buyouts spiked to $70 billion in the first quarter of 2021, the most since 2018 and a 60% jump from a year ago. Those that have a dividend component surged to $13.4 billion, the most since 2014…”
April 9 – Wall Street Journal (Matt Wirz):
“No earnings? No problem. Investors are funneling money to unprofitable software companies through a new type of debt deal. Nonbank lenders like Golub Capital, AllianceBernstein Holdings LP and Owl Rock Capital Partners LP have issued asset-backed bonds to help finance about $2 billion of loans to such companies since November… Many of the loans are to fast-growing, but still unprofitable, software enterprises. The rash of recent deals is the latest indicator that large investors have resumed their hunt for high-yielding debt to offset low interest rates in safer government and corporate bonds. It also highlights the growing reach of private debt funds, which have replaced banks in many deals and weathered Covid-19 despite fears that they would suffer from a spike in loan defaults.”
China Watch:
Global Bubble Watch:
April 7 – Bloomberg (Alessandra Migliaccio, Yoshiaki Nohara and William Horobin):
“The drive to overhaul global taxes for companies gathered more steam… after Group of 20 finance chiefs, encouraged by new U.S. proposals, pledged to reach a consensus on new rules by mid-year. The finance ministers and central bank governors said they’re committed to ‘reaching a global and consensus-based solution’ on a minimum global corporate rates and how to levy the profits of multinational technology giants. An agreement could have significant ramifications for the world, bolstering incomes for many governments as they try to rebuild their economies after the pandemic. Others may balk though, as Ireland signaled.”
April 6 – Bloomberg (Ari Altstedter):
“Toronto home values continued to swell in March, bringing annual average price gains to more than 20% and adding fuel to a raging debate about whether policy makers should try to cool the market. New listings were up 57% from March 2020, when the onset of the pandemic temporarily caused a freeze in… activity. But the new supply was not able to keep up with demand spurred by low borrowing costs and demand for bigger homes, especially in the suburbs…”
Social, Political, Watch:
Geopolitical Watch:
April 7 – Associated Press (Robert Burns):
“The American military is warning that China is probably accelerating its timetable for capturing control of Taiwan, the island democracy that has been the chief source of tension between Washington and Beijing for decades and is widely seen as the most likely trigger for a potentially catastrophic U.S.-China war. The worry about Taiwan comes as China wields new strength from years of military buildup. It has become more aggressive with Taiwan and more assertive in sovereignty disputes in the South China Sea. Beijing also has become more confrontational with Washington; senior Chinese officials traded sharp and unusually public barbs with Secretary of State Antony Blinken in talks in Alaska last month.”
April 6 – Bloomberg (Henry Meyer, Daryna Krasnolutska and Kateryna Choursina):
“Russia announced the start of mass military drills, ratcheting up tensions with neighboring Ukraine amid Western concerns about the risk of renewed fighting. More than 4,000 training exercises will be held in military districts across Russia in April, Defense Minister Sergei Shoigu said…”
April 6 – Reuters (Gertrude Chavez-Dreyfuss):
“President Volodymyr Zelenskiy called on NATO… to lay out a path for Ukraine to join the Western military alliance, after days in which Russia has massed troops near the conflict-hit Donbass region. Zelenskiy’s comments drew an immediate rebuke from Moscow, which said Kyiv’s approach to NATO could further inflame the situation in Donbass, where violence has increased in recent days.”
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.