Credit Bubble Bulletin
- Chronicling History's
Greatest Financial Bubble
Friday, December 3, 2021
by Doug Noland
My edited easy to read version follows:
Ye Editor
For the Week Ending December 2, 2021:
S&P500 fell 1.2% (up 20.8% y-t-d)
The Dow declined 0.9% (up 13.0%)
Utilities gained 1.0% (up 7.6%)
Banks dropped 3.2% (up 33.2%)
Transports declined 1.5% (up 27.7%)
S&P 400 Midcaps dropped 2.8% (up 17.1%)
Small cap Russell 2000 sank 3.9% (up 9.3%)
Nasdaq100 dropped 2.0% (up 21.9%)
Semiconductors rose 1.3% (up 36.1%)
Biotechs fell 3.2% (down 9.0%).
U.K.'s FTSE rallied 1.1% (up 10.2% y-t-d).
Japan's Nikkei dropped 2.5% (up 2.1% y-t-d).
France's CAC40 increased 0.4% (up 21.9%)
German DAX declined 0.6% (up 10.6%).
Spain's IBEX 35 fell 1.9% (up 2.1%).
Italy's FTSE MIB added 0.3% (up 16.7%)
Brazil's Bovespa jumped 2.8% (down 11.7%)
Mexico's Bolsa recovered 2.2% (up 14.8%).
South Korea's Kospi gained 1.1% (up 3.3%).
India's Sensex rallied 1.0% (up 20.8%).
China's Shanghai rose 1.2% (up 3.9%).
Russia's MICEX recovered 2.7% (up 19.0%).
BONDS:
Three-month Treasury bill rates ended the week at 0.0425%.
Two-year government yields jumped nine bps to 0.59% (up 47bps y-t-d).
Five-year T-note yields declined three bps to 1.13% (up 77bps).
Ten-year Treasury yields dropped 13 bps to 1.35% (up 43bps).
Long bond yields sank 15 bps to 1.68% (up 3bps).
Benchmark Fannie Mae MBS yields declined one basis point to 1.99% (up 65bps).
Federal Reserve Credit last week dropped $41.0bn to $8.610 TN. Over the past 116 weeks, Fed Credit expanded $4.884 TN, or 131%
MORTGAGES:
Freddie Mac 30-year fixed mortgage rates added one basis point to 3.11% (up 40bps y-o-y).
Fifteen-year rates declined three bps to 2.39% (up 13bps).
Five-year hybrid ARM rates increased two bps to 2.49% (down 37bps).
Jumbo mortgage 30-year fixed rates up five bps to 3.22% (up 28bps).
COMMODITIES:
Bloomberg Commodities Index sank 4.3% (up 22.7% y-t-d).
Spot Gold fell $19 to $1,783 (down 6.1%).
Silver dropped 2.7% to $22.52 (down 14.7%).
WTI crude dropped $1.89 to $66.26 (up 37%).
Gasoline dropped 3.8% (up 39%)
Natural Gas sank 24.1% (up 63%).
Copper dipped 0.6% (up 21%).
Wheat dropped 4.3% (up 36%)
Corn declined 1.3% (up 21%).
Bitcoin lost $1,313 or 2.4%, this week
to $52,405 (up 80%).
NEWS FROM LAST WEEK:
Coronavirus News:
https://electioncircus.blogspot.com/2021/12/coronavirus-news-summsry-from-last-week.html
Global Crisis Watch:
December 1 – Bloomberg:
“Global junk bonds suffered their worst November in 10 years after the omicron variant supercharged concerns over economic growth, inflation and tightening monetary policy. The yield on non-investment grade bonds worldwide, excluding emerging markets, climbed 50 bps in November to 4.89%... It’s the biggest monthly jump in yields since the pandemic first roiled markets in March 2020. The Bloomberg U.S. Corporate High Yield Bond Index suffered its biggest monthly loss since September 2020.”
Biden Administration Watch:
December 2 – CNBC:
“The Biden administration is tightening travel rules to and within the U.S., requiring all in-bound international passengers to test for Covid within 24 hours of departure starting on Monday and extending its mask requirement on planes and public transportation through March 18. The changes were announced Thursday as part of a broader plan to bolster the nation’s arsenal of tools in its fight against the virus as the world enters its third year of the pandemic.”
U.S. Bubble Watch:
December 3 – CNBC:
“The U.S. economy created far fewer jobs than expected in November, in a sign that hiring started to slow even ahead of the new Covid threat… Nonfarm payrolls increased by just 210,000 for the month, though the unemployment rate fell sharply to 4.2% from 4.6%, even though the labor force participation rate increased for the month to 61.8%, its highest level since March 2020… A more encompassing measure of unemployment that includes discouraged workers and those holding part-time jobs for economic reasons dropped even more, tumbling to 7.8% from 8.3%. The household survey painted a brighter picture, with an addition of 1.1 million jobs as the labor force increased by 594,000.”
December 2 – Reuters (Lucia Mutikani):
“The number of Americans filing new claims for unemployment benefits increased less than expected last week, pointing to tightening labor market conditions, while layoffs tumbled to the lowest level in 28-1/2 years in November. The weekly unemployment claims report… also showed jobless benefits rolls falling below 2 million for the first time since the COVID-19 pandemic started in the United States nearly two years ago.”
November 30 – Yahoo Finance:
“Home price growth in the U.S. is starting to decelerate. Standard & Poor’s said… its S&P CoreLogic Case-Shiller national home price index posted a 19.5% annual gain in September, down from 19.8% from August. The 20-City Composite posted a 19.1% annual gain, down from 19.6% a month earlier. The 20-City results came in lower than analysts’ expectations of a 19.3% annual gain… Phoenix continued to lead the 20-City Composite, posting a 33.1% annual gain followed by two cities in Florida — Tampa and Miami. Tampa posted a 27.7% year-over-year gain and Miami a 25.2% gain.”
November 30 – Bloomberg (Reade Pickert):
“U.S. consumer confidence decreased to a nine-month low in November as accelerating inflation and a pickup in Covid-19 cases weighed on Americans’ views on the economy. The Conference Board’s index declined to 109.5 from a downwardly revised 111.6 reading in October…”
November 29 – Dow Jones:
“The pandemic has unleashed a historic burst in entrepreneurship and self-employment. Hundreds of thousands of Americans are striking out on their own as consultants, retailers and small-business owners. The move helps explain the ongoing shake-up in the world of work, with more people looking for flexibility, anxious about covid exposure, upset about vaccine mandates or simply disenchanted with pre-pandemic office life. It is also aggravating labor shortages in some industries and adding pressure on companies to revamp their employment policies. The number of unincorporated self-employed workers has risen by 500,000 since the start of the pandemic…, to 9.44 million. That is the highest total since the financial-crisis year 2008, except for this summer.”
December 1 – CNBC:
“CEOs and corporate insiders have sold a record $69 billion in stock in 2021, as looming tax hikes and lofty share prices encourage many to take profits. From Satya Nadella at Microsoft to Jeff Bezos and Elon Musk, CEOs, founders and insiders have been cashing in their stock at the highest pace on record. As of Monday, sales by insiders are up 30% from 2020 to $69 billion, and up 79% versus a 10-year average, according to InsiderScore/Verity…”
November 30 – Bloomberg:
“A growing cohort of smaller companies that survived the cold depths of the pandemic say now they’re in danger because the economy is too hot. Mattress sellers, flooring manufacturers and makers of clean energy equipment are warning that stretched supply chains and runaway freight bills have pushed them to the brink of ruin. Unlike global giants, they don’t have the cash and scale to hire their own cargo ships or pass on the soaring expenses, forcing them to seek private bailouts.”
China Watch:
November 30 – Reuters:
“China's factory activity fell back into contraction in November as subdued demand, shrinking employment and elevated prices weighed on manufacturers, a business survey showed… The Caixin/Markit Manufacturing Purchasing Managers' Index (PMI) fell to 49.9 in November from 50.6 the month before, versus analyst expectations of 50.5 in a Reuters poll. The 50-mark separates growth from contraction on a monthly basis.”
December 3 – Bloomberg:
“Some Evergrande dollar notes are on pace for their biggest drops in months, ahead of the grace period on a unit’s bond interest payments ending on Monday. The declines also occurred as China’s high-yield dollar bond market weakened Friday, as two other builders warned of possible inability to meet upcoming debt payments…”
November 30 – Reuters:
“China's property market woes worsened in November, with prices for both new and resale homes falling amid weaker demand in bigger cities, a private-sector survey showed… The property sector, accounting for a quarter of the country's gross domestic product, has slowed sharply in recent months, with sentiment shaken by tight regulations and a growing liquidity crisis that has engulfed some of the country's most indebted developers. New home prices in 100 cities dipped 0.04% in November from a month earlier, compared with 0.09% growth in October, according to… [the] China Index Academy…”
Global Bubble Watch:
November 28 – Financial Times:
“Half of the companies that raised more than $1bn at initial public offerings this year are trading below their listing price, despite robust stock markets around the world. The busted IPOs include some of the best-known names to list, such as UK food delivery app Deliveroo, alternative food manufacturer Oatly and Indian payments giant Paytm. Their weak performance has raised questions about the valuations pinned to companies by large investors such as SoftBank* and leading underwriters including Goldman Sachs and Morgan Stanley.”
November 30 – Bloomberg:
“Canadians are flush with cash and ready to spend. Quarterly economic activity numbers released Tuesday showed consumers powering the nation’s economy back to growth over the summer as most Covid restrictions were lifted. A surge in household spending fueled a faster-than-expected 5.4% annualized expansion in the third quarter -- a sharp comeback from a disappointing first half of the year…”
Emerging Markets Watch:
December 2 – Bloomberg:
“Brazil’s economy fell into recession as extreme weather conditions, high interest rates and inflation cut short its recovery from the pandemic, dealing a blow to President Jair Bolsonaro just as he prepares for his re-election campaign. Gross domestic product fell 0.1% in the July-September period after posting a revised decline of 0.4% in the second quarter. From a year ago, the economy expanded 4%...”
Europe Watch:
November 29 – Financial Times:
“Inflation in Germany has surged to its highest level since 1992, increasing the pressure on the European Central Bank to explain why it thinks it would be premature to tighten its ultra-loose monetary policy. German inflation rose 6% in November from a year earlier… Inflation in the country was last this high shortly after its reunification three decades ago. Spiralling prices are a sensitive subject in a country where people’s approach to money is still haunted by the hyperinflation of the 1920s and 1940s that wiped out most people’s savings.”
November 30 – Financial Times:
“Inflation in the eurozone rose to 4.9% in November, a record high since the single currency was created more than two decades ago, prompting policymakers and economists to warn that price pressures are likely to persist for longer than expected. Driven by soaring energy prices, the increase in eurozone inflation… outstripped the 4.5% expected on average by economists...”
December 2 – Reuters:
“Euro zone producer prices jumped more than expected in October…, driven mainly by a surge in energy prices, while unemployment eased... The European Union's statistics office Eurostat said prices at factory gates in the 19 countries sharing the euro rose 5.4% month-on-month for a 21.9% year-on-year surge.”
Environmental and Crime Watch:
December 2 – Bloomberg:
“Drought has gripped every inch of California for 30 straight weeks, or more than half a year, according to the U.S. Drought Monitor. Abnormally dry conditions began to afflict parts of the Golden State as far back as February 2020 and by May of this year had enveloped every corner of California. That’s strained water resources and added to ongoing wildfire risks. So far this year, more than 8,000 fires have charred almost 3.1 million acres across California… Across 11 western states, nearly 94% of the land is in drought conditions…”
December 3 – Yahoo Finance:
“Retail theft is soaring across the U.S., with large chains like Best Buy (BBY) and Walgreens (WBA) beset by increasingly brazen and widespread instances of shoplifting… In recent weeks, reports of ‘smash and grab’ robberies in major cities — featuring crowds of thieves making it off with electronics, clothing and footwear, have flooded social media. Security experts cite a litany of reasons including fallout from the COVID-19 pandemic, overwhelmed law enforcement, and deteriorating public safety. In San Francisco in particular, certain types of theft have been all but decriminalized, with officials facing accusations of being too lax on crime.”
Geopolitical Watch:
December 3 – Reuters:
“Russia has massed more than 94,000 troops near Ukraine's borders and may be gearing up for a large-scale military offensive at the end of January, Ukraine's defence minister told parliament…, citing intelligence reports. Oleksii Reznikov said Ukraine would not do anything to provoke the situation but was ready to fight back if Russia launched an attack.”
November 30 – Reuters:
“Ukraine Prime Minister Denys Shmygal accused Russia… of being ‘absolutely’ behind what he called an attempt to organise a coup to overthrow the pro-Western government in Kyiv, citing intelligence. Last Friday, President Volodymyr Zelenskiy said Ukraine had uncovered a plot to topple his government this week, involving individuals from Russia, but he stopped short of saying whether he believed the Kremlin was behind the plot.”
November 28 – Reuters:
“Taiwan's air force scrambled again on Sunday to warn away 27 Chinese aircraft that entered its air defence zone, Taiwan's defence ministry said, the latest increase in tensions across the Taiwan Strait as China's president met his top generals. Chinese-claimed Taiwan has complained for a year or more of repeated missions by China's air force near the democratically governed island…”
November 30 – Reuters:
“Japan and the United States could not stand by if China attacked Taiwan, and Beijing needs to understand this, former Japanese Prime Minister Shinzo Abe said… Tensions over Chinese-claimed Taiwan have risen as President Xi Jinping seeks to assert his country's sovereignty claims against the democratically ruled island. Taiwan's government says it wants peace, but will defend itself if needed.”
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