Credit Bubble Bulletin
by Doug Noland
Friday, April 16, 2021
For the Week ending April 16, 2021:
S&P500 gained 1.4%
(up 11.4% year-to-date)
Dow rose 1.2% (up 11.7%)
Utilities surged 3.7% (up 7.0%)
Transports unchanged (up 19.3%)
S&P 400 Midcaps jumped 1.9% (up 18.0%)
Small cap Russell 2000 up 0.9% (up 14.6%)
Nasdaq100 advanced 1.4% (up 9.0%)
Semiconductors declined 1.3% (up 16.4%)
Biotechs rallied 2.3% (down 3.3%).
With gold bullion surging $33,
the HUI gold stock index jumped 3.2%
(down 2.5%).
U.K.'s FTSE gained 1.5% (up 8.7% y-t-d).
Japan's Nikkei declined 0.3% (up 8.2% y-t-d).
German DAX gained 1.5% (up 12.7%).
Brazil's Bovespa jumped 2.7% (up 1.8%)
China's Shanghai declined 0.7% (down 1.3%).
Ten-year US Treasury bond yields
dropped eight bps to 1.58%
(up 67bps year over year).
Federal Reserve Credit last week
expanded $35.4bn to $7.692 TN.
Over the past 83 weeks,
Fed Credit expanded $3.930 TN, or 105%.
Freddie Mac 30-year fixed mortgage rates
dropped nine bps to 3.04%
(down 27bps year-over-year).
Five-year hybrid ARM rates
sank 12 bps to 2.80%
(down 54bps)
Jumbo mortgage 30-year fixed rates
down 12 bps to 3.06%
(down 63bps).
Commodities Watch:
Bloomberg Commodities Index
jumped 3.0% (up 10.9% y-t-d).
Spot Gold roses 1.9% to $1,777 (down 6.4%).
Silver jumped 2.8% to $25.97 (down 1.6%).
WTI crude rallied $3.81 to $63.13 (up 30%).
Gasoline surged 4.0% (up 45%)
Natural Gas jumped 6.1% (up 6%).
Copper advanced 3.2% (up 18%).
Wheat rose 2.5% (up 2%).
Corn slipped 0.6% (up 19%).
Bitcoin jumped $3,672, or 6.3%,
this week to $62,005 (up 113%).
NEWS FROM LAST WEEK
Coronavirus Watch:
April 13 – CNBC (Nate Rattner):
“As U.S. Covid cases rise, the country is also administering vaccine shots at the swiftest pace ever. Cases are on the rise in 27 states, with Michigan continuing to lead the nation in daily new infections per capita. Following more than 70,000 coronavirus cases reported on Monday, the seven-day average of daily new cases in the U.S. is 68,960, according to data from Johns Hopkins University. That figure is up 7% from one week ago.”
April 13 – CNBC (Berkeley Lovelace Jr.):
“Moderna’s Covid-19 vaccine was more than 90% effective at protecting against Covid and more than 95% effective against severe disease up to six months after the second dose, the company said…”
April 10 – Reuters (Maayan Lubell):
“The coronavirus variant discovered in South Africa may evade the protection provided by Pfizer/BioNTech’s COVID-19 vaccine to some extent, a real-world data study in Israel found, though its prevalence in the country is very low and the research has not been peer reviewed.”
Market Mania Watch:
April 15 – Financial Times (John Plender):
“There are no two ways about it, argues Jeremy Grantham: ‘The long, long bull market since 2009 has finally matured into a fully-fledged epic bubble’. The co-founder of Boston-based-based fund manager GMO says: ‘Featuring extreme overvaluation, explosive price increases, frenzied issuance and hysterically speculative investor behaviour, I believe this event will be recorded as one of the great bubbles of financial history, right along with the South Sea bubble, 1929, and 2000.’ Coming from a man who was famously prescient about the bursting of bubbles in 2000 and 2008, this red alert about investment risk, issued in January, merits attention.”
April 12 – Bloomberg (Vildana Hajric and Lu Wang):
“It’s a bubble, according to a survey of retail stock investors. And they don’t want to miss it. An E*Trade Financial survey found that roughly three-quarters of retail investors believe the market is ‘fully or somewhat’ in a bubble, a 3 percentage-point increase from the previous quarterly poll. At the same time, bullish sentiment has increased, rising to pre-pandemic levels at 61%. ‘Optimism grew as the market hit new all-time highs, vaccines increased, stimulus measures continued, and earnings estimates are high,’ said Mike Loewengart, managing director of investment strategy…”
April 14 – Bloomberg (Crystal Tse and Katie Roof):
“Cryptocurrency exchange Coinbase Global Inc. reached a valuation of $105 billion in its trading debut Wednesday, as Bitcoin hit a record high and investors bet on digital currencies going mainstream. The company’s shares climbed as high as $405.05… to reach the $105 billion valuation…”
April 16 – Bloomberg (Joanna Ossinger and Vildana Hajric):
“While Coinbase Global Inc. captured the headlines with its market debut, the frenzy around digital tokens is taking its zaniest turn yet in the price of a token created as a joke. Dogecoin, boosted by the likes of Elon Musk and Mark Cuban, rallied roughly 180% Friday, according to CoinMarketCap.com, reaching a market value of more than $48 billion. It’s now up 18,000% from a year ago, when it traded for $0.002… Doge’s surge is part of a rise in altcoins, a term for all the digital tokens that have sprung up in imitation of Bitcoin. Like most of them, its use case is limited, making it a tool for speculators and raising concern that a bubble is inflating in a crypto world now worth more than $2.25 trillion.”
April 13 – Bloomberg (Ben Bain, Heather Perlberg, Gillian Tan and Crystal Tse):
“U.S. regulators are throwing another wrench into Wall Street’s SPAC machine by cracking down on how accounting rules apply to a key element of blank-check companies. The Securities and Exchange Commission is setting forth new guidance that warrants, which are issued to early investors in the deals, might not be considered equity instruments and may instead be liabilities for accounting purposes. The move… threatens to disrupt filings for new special purpose acquisition companies until the issue is resolved. The accounting considerations mark the latest effort by the SEC to clamp down on the white-hot SPAC market.”
Market Instability Watch:
April 13 – Bloomberg (Kyungji Cho and Ameya Karve):
“Credit markets in Asia have been shaken by a selloff in one of China’s largest bad-debt managers, raising concern that other heavily leveraged borrowers may also stumble. The Markit iTraxx Asia ex-Japan credit-default swap index of investment-grade bonds widened about 2 bps, after recent reports of a looming restructuring at bad-debt manager China Huarong Asset Management Co., traders said. The gauge is set for a seventh day of increases, the longest streak since December 2018, and is at its highest since October last year…”
April 13 – Bloomberg (Cathy Chan and Steven Arons):
“The collapse of Archegos…, an investment firm that few even on Wall Street had heard of until it imploded last month, is changing a lucrative, decades-old part of global banking. Nomura… and Credit Suisse… have started to curb financing in the business with hedge funds and family offices. European regulators are looking at risks banks are taking when lending to such clients, while in the U.S., authorities started a preliminary probe into the debacle. Together, steps taken from Washington to Zurich and Tokyo could portend some of the biggest changes since the financial crisis to a cornerstone of global banking known as prime brokerage.”
Inflation Watch:
April 13 – Reuters (Lucia Mutikani):
“U.S. consumer prices rose by the most in more than 8-1/2 years in March as increased vaccinations and massive fiscal stimulus unleashed pent-up demand, kicking off what most economists expect will be a brief period of higher inflation… The consumer price index jumped 0.6% last month, the largest gain since August 2012, after rising 0.4% in February. A 9.1% surge in gasoline prices accounted for nearly half of the increase in the CPI. Gasoline prices rose 6.4% in February.”
April 13 – Bloomberg (Marcy Nicholson):
“The frenzy sweeping the lumber market will likely keep going through the summer peak of U.S. home building as labor shortages and depleted inventories mean that supplies can’t keep up with skyrocketing demand. Tightness is acute across the entire timber supply chain. Sawmills have had trouble ramping up fast enough to meet the surge in demand. Meanwhile, trucking delays and worker shortages at lumber yards have added to costs, which are now getting passed on to consumers. Lumber futures have surged more than 60% to record highs this year… Soaring wood costs have already added more than $24,000 to the price of the average new U.S. house, according to National Association of Home Builders.”
April 11 – Bloomberg (Henry Ren):
“Stubbornly high shipping expenses for businesses are getting sealed into contracts for the next 12 months, forcing companies to pass the extra costs on to consumers… Along the bellwether trade lane linking Asia with North America, contract rates in recent weeks are coming in around $2,500 to $3,000 for a 40-foot container -- 25% to 50% higher than a year ago, according to George Griffiths, an editor on the global container freight-pricing team at S&P Global Platts.”
Biden Administration Watch:
April 15 – Bloomberg (Alberto Nardelli, Nick Wadhams and Jennifer Jacobs):
“The Biden administration imposed a raft of new sanctions on Russia, including long-feared restrictions on buying new sovereign debt, in retaliation for alleged misconduct related to the SolarWinds Corp. hack and efforts to disrupt the U.S. election. The new measures sanction 32 entities and individuals, including government and intelligence officials, and six Russian companies... The U.S. is also expelling 10 Russian diplomats working in Washington… The Biden administration is barring U.S. financial institutions from participating in the primary market for new debt issued by the Russian central bank, Finance Ministry and sovereign wealth fund.”
U.S. Bubble Watch:
April 12 – Reuters (David Lawder):
“The U.S. government posted a March budget deficit of $660 billion, a record high for the month, as direct payments to Americans under President Joe Biden’s stimulus package were distributed… The deficit for the first six months of the 2021 fiscal year ballooned to a record $1.706 trillion, compared to a $743 billion deficit for the comparable year-earlier period… The March 2021 deficit was the third highest U.S. monthly deficit on record, surpassed by gaps of $864 billion in June 2020 and $738 billion in April 2020.”
April 15 – CNBC (Jeff Cox):
“A fresh batch of stimulus checks sent consumer purchases surging in March as the U.S. economy continued to get juice from aggressive congressional spending. Advance retail sales rose 9.8% for the month... That compared to the Dow Jones estimate of a 6.1% gain and a decline of 2.7% in February.”
April 15 – Associated Press (Christopher Rugaber):
“The number of Americans applying for unemployment benefits tumbled last week to 576,000, a post-COVID low… Applications plummeted by 193,000 from a revised 769,000 a week earlier. Jobless claims are now down sharply from a peak of 900,000 in early January…”
April 11 – Wall Street Journal (Theo Francis and Kristin Broughton):
“ ... Median pay for the chief executives of more than 300 of the biggest U.S. public companies reached $13.7 million last year, up from $12.8 million for the same companies a year earlier and on track for a record… Pay kept climbing in 2020 as some companies moved performance targets or modified pay structures in response to the Covid-19 pandemic and accompanying economic pain.”
China Watch:
April 16 – Bloomberg:
“China’s economy strengthened in the first quarter of the year as consumer spending rose more than expected, putting it on course to join the U.S. as twin engines for a global recovery in 2021. Gross domestic product climbed 18.3% in the first quarter from a year earlier, largely in line with the 18.5% predicted… Retail sales beat expectations while industrial output growth moderated. The latest data puts China on course to grow well above its annual target of more than 6%...”
April 12 – Reuters (Gabriel Crossley and Stella Qiu):
“China’s exports rose sharply in March while imports growth surged to the highest in four years in yet another boost to the nation’s economic recovery, signalling improving global demand amid progress in worldwide COVID-19 vaccination… Total Chinese imports jumped 38.1% year-on-year last month, the fastest pace since February 2017 on high commodity prices, beating a 23.3% forecast and compared with 17.3% growth in February.”
Global Bubble Watch:
April 12 – Bloomberg (Yoojung Lee):
“The rally in tech shares has taken the number of people with fortunes of more than $100 billion to eight. Google co-founders Larry Page and Sergey Brin joined the exclusive club last week, entering a group dominated by U.S. tech entrepreneurs, according to the Bloomberg Billionaires Index. The world’s eight richest people together hold fortunes of more than $1 trillion and have added $110 billion combined this year.”
April 14 – Bloomberg (Alfred Cang, David Ramli and Chanyaporn Chanjaroen):
“At 33, Ng Yu Zhi had all the trappings of a wildly successful trader: a Rolodex full of rich clients, a three-story villa in a posh Singapore neighborhood and a Pagani Huayra supercar reportedly worth more than $5 million. Local prosecutors allege Ng also had a dark secret: His lavish lifestyle, they say, was built on lies. In a case that has riveted Singapore’s moneyed-classes, Ng was charged last month with four counts of fraud for allegedly raising at least S$1 billion ($740 million) from investors for commodity trades that didn’t exist. The police have called it one of the city-state’s largest-ever suspected investment fraud schemes.”
Brazil Watch:
April 11 – Financial Times (Bryan Harris, Michael Pooler and Carolina Pulice):
“After seven months in lockdown, Michele Marques received some unwelcome news when she returned to work: while she was away the prices of almost all the products she uses as a hairdresser had soared. ‘A box of gloves rose 200%. Colouring products increased at least 100%,’ said the 37-year-old from São Paulo… ‘I had to raise the price of my services, too.’ It is a dynamic that is playing out across Brazil, adding an extra layer of complexity to the country’s coronavirus crisis, which has already claimed the lives of almost 350,000 individuals and pushed hospital services to the brink.”
Geopolitical Watch:
April 13 – Reuters:
“China described its military exercises near Taiwan as ‘combat drills’…, upping the ante as senior former U.S. officials arrived in Taipei on a trip to signal President Joe Biden’s commitment to Taiwan and its democracy. Taiwan has complained over the proximity of repeated Chinese military activity, including fighter jets and bombers entering its air defence zone and a Chinese aircraft carrier exercising off the island…”
April 9 – Wall Street Journal (Ann M. Simmons):
“The recent deployment of Russian troops along Ukraine’s border and Moscow’s indication that it could intervene in the event of a full-scale war in eastern Ukraine are dimming hopes for a peaceful resolution of the conflict that has festered for seven years and cost thousands of lives. Kremlin spokesman Dmitry Peskov told reporters… Russia had the right to move its forces across its territory at its discretion and was simply taking precautions given the ‘dangerous, explosive region at its borders’ with eastern Ukraine. Mr. Peskov warned that the situation on the contact line was extremely unstable and said ‘the dynamics…create the danger of a resumption of full-scale hostilities.’”
April 13 – Associated Press (John Gambrell):
“Iran will begin enriching uranium up to 60% purity after an attack on its Natanz nuclear facility, a negotiator said…, pushing its program to higher levels than ever before though still remaining short of weapons-grade. The announcement marks a significant escalation after the sabotage that damaged centrifuges, suspected of having been carried out by Israel — and could inspire a further response from Israel amid a long-running shadow war between the nations.”
April 14 – Financial Times (Michael Hasenstab):
“Markets have been gripped by cryptocurrency fever. The price of bitcoin has attained new highs while debate has raged over the emergence of cryptocurrency technology. But these may be a sideshow for a big developing trend — the rapid digitalisation of the renminbi. This shift, combined with other macroeconomic and political factors, could be the key that accelerates the decline of the dollar’s dominance as the world’s leading reserve currency.
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.