Source:
Credit Bubble Bulletin
Weekly Commentary
by Doug Noland
My edited easy to read version follows
Ye Editor
For the Week Ending February 18, 2022:
GLOBAL STOCK INDEXES:
S&P500 fell 1.6% (down 8.8% y-t-d)
Dow Industrials dropped 1.9% (down 6.2%)
Utilities declined 1.3% (down 8.5%)
Banks sank 3.0% (up 3.8%)
Transports slipped 0.2% (down 9.1%)
S&P 400 Midcaps dipped 0.6% (down 7.4%)
Small cap Russell 2000 down 1.0% (down 10.5%)
Nasdaq100 dropped 1.7% (down 14.2%)
Semiconductors up 0.6% (down 14.2%)
Biotechs sank 3.4% (down 10.5%).
With gold bullion jumping $40,
the HUI gold stock index surged 6.5%
(up 9.2%).
U.K.'s FTSE fell 1.9% (up 1.7% y-t-d)
Japan's Nikkei down 2.1% (down 5.8% y-t-d).
France's CAC40 declined 1.2% (down 3.1%)
Japan's Nikkei down 2.1% (down 5.8% y-t-d).
France's CAC40 declined 1.2% (down 3.1%)
German DAX lost 2.5% (down 5.3%).
Spain's IBEX 35 down 2.4% (down 1.4%).
Italy's FTSE MIB index fell 1.7% (down 3.1%)
Brazil's Bovespa index slipped 0.6% (up 7.7%)
Mexico's Bolsa fell 1.8% (down 1.9%).
South Korea's Kospi little changed (down 7.8%).
India's Sensex equities index down 0.6% (down 0.7%)
China's Shanghai Exchange up 0.8% (down 4.1%).
Turkey's Istanbul National 100 fell 0.9% (up 9.4%). Russia's MICEX sank 4.3% (down 10.4%)
US BONDS:
Three-month Treasury bill rates
ended the week at 0.315%.
Two-year government yields
declined four bps to 1.47%
(up 74bps y-t-d).
Five-year T-note yields
fell four bps to 1.82%
(up 56bps).
Ten-year Treasury yields
slipped a basis point to 1.93%
(up 42bps).
Long bond yields
were unchanged at 2.24%
(up 34bps)
Fannie Mae MBS yields
gained three bps
to a 31-month high 2.89%
(up 82bps).
Federal Reserve Credit last week
jumped $20.8bn to a record $8.859 TN.
Over the past 127 weeks, Fed Credit
expanded $5.132 TN, or 138%.
US MORTGAGES:
Freddie Mac 30-year fixed mortgage rates
surged 23 bps to a 31-month high 3.92%
(up 111bps year-over-year).
Fifteen-year rates jumped 22 bps to 3.15%
(up 94bps).
Five-year hybrid ARM rates
rose 18 bps to 2.98%
(up 21bps)
Jumbo mortgage 30-year fixed rates
up 21 bps to 4.20%
(up 119bps).
COMMODITIES:
Bloomberg Commodities Index up 1.6%
(up 12.6% y-t-d).
Spot Gold rose 2.1% to $1,898 (up 3.8%).
Silver gained 1.4% to $23.92 (up 2.6%).
WTI crude declined $2.03 to $91.07 (up 21%).
Gasoline dropped 2.5% (up 20%)
Natural Gas surged 12.4% (up 19%).
Copper increased 0.4% (up 1.4%).
Wheat was little changed (up 4%)
Corn added 0.3% (up 10%).
Bitcoin sank $2,016, or 4.8%,
this week to $40.341 (down 13%)
DOUG NOLAND COMMENTARY:
Bubbles are sustained only
by ever increasing amounts of Credit.
Treasury debt has increased 300%
since 2007.
Federal Reserve Assets surged $5.14 TN
in 127 weeks to $8.911 TN, having now
inflated almost 10-fold since 2007.
by ever increasing amounts of Credit.
Treasury debt has increased 300%
since 2007.
Federal Reserve Assets surged $5.14 TN
in 127 weeks to $8.911 TN, having now
inflated almost 10-fold since 2007.
Since 2007, Chinese Bank Assets
expanded from $6.9 TN to $54.3 TN,
or 684%.
Led by the U.S. and China, the entire world
succumbed to reckless “money”
and Credit growth without precedent.
Powerful inflationary dynamics
escaped asset markets to jolt
consumer and producer prices.
Annual U.S. CPI has exceeded 7%
for the first time since 1982.
Short-term rates remain near zero,
and the Fed has yet to conclude
this round of QE (aka money printing)
.China is in the initial phase
of a historic real estate
(chiefly apartment) bust.
UKRAINE:
... Might the U.S. and its allies being
bogged down with a war in Europe
embolden Beijing’s Taiwan aspirations?
President Biden believes Putin has
“Made the Decision” to invade Ukraine.
The situation in eastern Ukraine
is rapidly deteriorating. A car explosion
at a government building. Gas pipelines
bombed. Satellite imagery showing
aggressive Russian military positioning
along the Ukraine border – in Russia,
Belarus and Crimea. Russian-supported
separatists announcing plans to evacuate
women and children to Russia.
Aggressive cyberattacks.
... the situation
appears increasingly dire.
U.S. intelligence believes Russia
is now executing its plan of “false flag”
attacks and provocations
(i.e. accusations of Ukrainian genocide)
that it will use as justification
for an invasion. “Nearly half of
Russian forces surrounding Ukraine
are in attack position.” Defense Secretary
Lloyd Austin: “I don’t believe it’s a bluff.”
Ukraine is not a current threat to Russia,
and there is little prospect for NATO
membership anytime soon.
If Russian forces cross the Pripyat River
in a move on Kyiv, I’ll see this aggression
as much an attack on the U.S. global order
as on Ukraine.
In the event of an invasion, the U.S.
will lead the global charge for imposing
the most onerous sanctions ever.
Can the Biden Administration keep
the Europeans on board with Putin
threatening to tighten shut the gas spigot?
How will the U.S. approach relations
after China repudiates American efforts
to punish Russia?
The Nasdaq100’s 1.7% decline
pushed y-t-d losses to 14.2%,
supporting the thesis of a deflating
U.S. “tech” Bubble.
Gold this week traded above $1,900.
NEWS FROM LAST WEEK:
Coronavirus Watch:
February 17
– Associated Press:
“The omicron wave ... there have been nearly 80 million US confirmed infections overall and many more infections have never been reported."
February 17
– Reuters:
“Hong Kong authorities reported new cases multiplied by 60 times so far this month, and the city's leader said city-wide testing was being considered in the global financial hub. Hospitals have been overwhelmed with some patients, including the elderly, left lying on beds outside in chilly, sometimes rainy weather, in shocking scenes that prompted an apology from authorities in the Chinese-controlled city.”
Market Mania Watch:
February 14
– Bloomberg:
“At least six mergers with special-purpose acquisition companies have been canceled this year, on pace for a record number of nixed deals in a single quarter. At least 22 have been spiked since the middle of 2021, according to… SPAC Research... That compares with 26 tie-ups that were called off in the more than five years prior...”
Market Instability Watch:
February 14
– Bloomberg:
“Credit investors are in a ‘sell what you can’ mood in an environment of rising rates and political tensions, a Bank of America Corp. survey showed, with Goldman Sachs Group Inc. strategists telling clients to switch to cash. The net overweight position in investment-grade credit has dropped to 16%, the lowest since February 2019, as investors slash bullish bets on bank bonds and boost cash levels, according to Bank of America’s latest European investor survey. That chimes with Goldman’s call… to move to underweight on corporate bonds.”
Inflation Watch:
February 15
– CNBC:
“The producer price index… increased 1% for the month of January, against the… estimate for 0.5%. Over the past 12 months the gauge rose an unadjusted 9.7%, close to a record in data going back to 2010… ‘PPI offers a window to the price pressures that businesses are facing, and which will likely be passed on to consumers in the way of consumer price inflation in the months to come" ...
February 13
– Bloomberg:
“Oil’s surge toward $100 a barrel for the first time since 2014 is threatening to deal a double-blow to the world economy by further denting growth prospects and driving up inflation. That’s a worrying combination for the U.S. Federal Reserve and fellow central banks as they seek to contain the strongest price pressures in decades without derailing recoveries"
February 15 – Bloomberg:
“A major supplier of an ingredient in glyphosate — an herbicide that’s widely used by corn, soy, cotton and other farmers around the world — shut down production due to mechanical failures, and repairs could take three months. Bayer AG, the maker of Roundup, whose active ingredient is glyphosate, declared a force majeure on Feb. 11, meaning it may not be able to meet its sales agreements.”
February 15
– Wall Street Journal:
“I just don’t see how I’m going to get paid this year,’ said Brooks Barnes, a… farmer in Wilson County, N.C… Mr. Barnes in the spring of 2021 said he paid $16 a gallon for Bayer AG’s Roundup, the world’s most commonly used weedkiller, for his crops. By September he bought it for about $40 a gallon and in February, his Nutrien Ltd. retailer told him it was $60 a gallon, he said. One of the fertilizers he buys, 24s, cost him $500 a ton, up from $175 last spring, he said.”
February 15
– Bloomberg:
“Fertilizer just got even more expensive. Canpotex has agreed to supply China with potash fertilizer shipments at $590 a metric ton through December, which is more than double the price from a year ago and the highest since at least 2013…”
February 12
– Wall Street Journal:
bogged down with a war in Europe
embolden Beijing’s Taiwan aspirations?
President Biden believes Putin has
“Made the Decision” to invade Ukraine.
The situation in eastern Ukraine
is rapidly deteriorating. A car explosion
at a government building. Gas pipelines
bombed. Satellite imagery showing
aggressive Russian military positioning
along the Ukraine border – in Russia,
Belarus and Crimea. Russian-supported
separatists announcing plans to evacuate
women and children to Russia.
Aggressive cyberattacks.
... the situation
appears increasingly dire.
U.S. intelligence believes Russia
is now executing its plan of “false flag”
attacks and provocations
(i.e. accusations of Ukrainian genocide)
that it will use as justification
for an invasion. “Nearly half of
Russian forces surrounding Ukraine
are in attack position.” Defense Secretary
Lloyd Austin: “I don’t believe it’s a bluff.”
Ukraine is not a current threat to Russia,
and there is little prospect for NATO
membership anytime soon.
If Russian forces cross the Pripyat River
in a move on Kyiv, I’ll see this aggression
as much an attack on the U.S. global order
as on Ukraine.
In the event of an invasion, the U.S.
will lead the global charge for imposing
the most onerous sanctions ever.
Can the Biden Administration keep
the Europeans on board with Putin
threatening to tighten shut the gas spigot?
How will the U.S. approach relations
after China repudiates American efforts
to punish Russia?
The Nasdaq100’s 1.7% decline
pushed y-t-d losses to 14.2%,
supporting the thesis of a deflating
U.S. “tech” Bubble.
Gold this week traded above $1,900.
NEWS FROM LAST WEEK:
Coronavirus Watch:
February 17
– Associated Press:
“The omicron wave ... there have been nearly 80 million US confirmed infections overall and many more infections have never been reported."
February 17
– Reuters:
“Hong Kong authorities reported new cases multiplied by 60 times so far this month, and the city's leader said city-wide testing was being considered in the global financial hub. Hospitals have been overwhelmed with some patients, including the elderly, left lying on beds outside in chilly, sometimes rainy weather, in shocking scenes that prompted an apology from authorities in the Chinese-controlled city.”
Market Mania Watch:
February 14
– Bloomberg:
“At least six mergers with special-purpose acquisition companies have been canceled this year, on pace for a record number of nixed deals in a single quarter. At least 22 have been spiked since the middle of 2021, according to… SPAC Research... That compares with 26 tie-ups that were called off in the more than five years prior...”
Market Instability Watch:
February 14
– Bloomberg:
“Credit investors are in a ‘sell what you can’ mood in an environment of rising rates and political tensions, a Bank of America Corp. survey showed, with Goldman Sachs Group Inc. strategists telling clients to switch to cash. The net overweight position in investment-grade credit has dropped to 16%, the lowest since February 2019, as investors slash bullish bets on bank bonds and boost cash levels, according to Bank of America’s latest European investor survey. That chimes with Goldman’s call… to move to underweight on corporate bonds.”
Inflation Watch:
February 15
– CNBC:
“The producer price index… increased 1% for the month of January, against the… estimate for 0.5%. Over the past 12 months the gauge rose an unadjusted 9.7%, close to a record in data going back to 2010… ‘PPI offers a window to the price pressures that businesses are facing, and which will likely be passed on to consumers in the way of consumer price inflation in the months to come" ...
February 13
– Bloomberg:
“Oil’s surge toward $100 a barrel for the first time since 2014 is threatening to deal a double-blow to the world economy by further denting growth prospects and driving up inflation. That’s a worrying combination for the U.S. Federal Reserve and fellow central banks as they seek to contain the strongest price pressures in decades without derailing recoveries"
February 15 – Bloomberg:
“A major supplier of an ingredient in glyphosate — an herbicide that’s widely used by corn, soy, cotton and other farmers around the world — shut down production due to mechanical failures, and repairs could take three months. Bayer AG, the maker of Roundup, whose active ingredient is glyphosate, declared a force majeure on Feb. 11, meaning it may not be able to meet its sales agreements.”
February 15
– Wall Street Journal:
“I just don’t see how I’m going to get paid this year,’ said Brooks Barnes, a… farmer in Wilson County, N.C… Mr. Barnes in the spring of 2021 said he paid $16 a gallon for Bayer AG’s Roundup, the world’s most commonly used weedkiller, for his crops. By September he bought it for about $40 a gallon and in February, his Nutrien Ltd. retailer told him it was $60 a gallon, he said. One of the fertilizers he buys, 24s, cost him $500 a ton, up from $175 last spring, he said.”
February 15
– Bloomberg:
“Fertilizer just got even more expensive. Canpotex has agreed to supply China with potash fertilizer shipments at $590 a metric ton through December, which is more than double the price from a year ago and the highest since at least 2013…”
February 12
– Wall Street Journal:
“Companies are finding all kinds of ways to make consumers pay for rising costs. Often that is not reflected in the posted price.Lettuce Entertain You Enterprises Inc., a… restaurant group, has added a 3% ‘processing fee’ to checks at many of its restaurants. Harley-Davidson Inc. added a charge last year to its motorcycles to cover rising material costs. Peloton… in January began charging $250 for delivery and setup of some of its indoor bikes, a service that was previously included free.”
February 15
– CNBC:
After falling back sharply from a record high in May of last year, lumber prices began climbing again in December. They are now about 22% lower than that peak, but still about three times their average pre-pandemic price, according to Random Lengths. That is adding to the cost of both building a new home and remodeling an older one. The National Association of Home Builders estimated the recent price jump added more than $18,600 to the price of a newly built home.”
February 12
– Wall Street Journal:
“Prices for soybeans—the base ingredient in many food products, poultry and livestock feed and renewable fuel, among other things—are edging back toward highs reached last year, which hadn’t previously been seen in a decade. Abnormally dry weather in South America that has spurred surges in coffee and sugar prices also has affected soybeans there… Soybean futures… are trading at their highest level since June... Soybeans have risen over 18% in the year to date…”
Biden Administration Watch:
February 18
– Bloomberg:
“The U.S. said Russia has massed as many as 190,000 personnel – including troops, National Guard units and Russian-backed separatists – in and around Ukraine in what it called the most significant military mobilization since World War II. Russia told the U.S. this week it has no plans to attack, and its officials have repeatedly dismissed U.S. warnings about a possible invasion as ‘hysteria’ and propaganda.”
U.S. Bubble Watch:
February 18 – CNBC;
“Sales of previously owned homes in January rose 6.7% from December to a seasonally adjusted annualized rate of 6.5 million units, according to the National Association of Realtors. That exceeded Wall Street expectations significantly. Sales were 2.3% lower compared with January 2021. The supply of homes for sale fell to a record low, down 16.5% from a year ago. There were just 860,000 homes for sale at the end of January. At the current sales pace it would take just 1.6 months to exhaust that inventory. A 4 to 6-month supply is considered a balanced market. That is also a record low… Homes priced between $100,000 and $250,000 were down 23% from a year ago, while sales of homes priced between $750,000 and $1 million rose 33%. Sales of homes priced above $1 million were up 39%.”
February 17
– Bloomberg:
“Mortgage rates in the U.S. are getting closer to 4%. The average for a 30-year loan was 3.92%, up from 3.69% last week and the highest since May 2019… ‘Psychologically, it’s clearly not great news, especially if you put in a bid three weeks ago and lost,’ said David Battany, executive vice president of capital markets for Guild Mortgage Co.”
February 15
– New York Times:
“A single house under construction in America today faces all kinds of problems, starting with a run on lumber, then bricklayers in demand, subcontractors with Covid, appliances on back order and plumbing fixtures out at sea. Get through all of that, and then comes one more hitch with what should be a straightforward finishing touch. ‘Garage doors are a nightmare,’ said Rick Palacios Jr., the director… at John Burns Real Estate Consulting. If you had to rank the headaches homebuilders face, he said, ‘garage doors are the worst right now.’ The home-building industry is having the most difficult time in decades meeting demand, the sum of many pandemic complications. But this moment reaches peak absurdity with garage doors.”
February 15
– Bloomberg:
“Costs for 30-year mortgage loans hit a more than two-year high of 3.69% last week… Further increases are expected as the Federal Reserve… hikes its benchmark rate. That’s a daunting prospect for entry-level buyers when affordability is already at its worst since 2018… Their modest incomes put them at a disadvantage when competing against downsizing seniors and single-family landlords for the same moderately priced houses… ‘Housing affordability is set to get crushed,’ said Mark Zandi, chief economist for Moody’s Analytics, who expects 30-year rates to climb above 4% this year.”
February 14
– Bloomberg:
“For Atlanta real estate agent Jamie Douglas, a dearth of inventory has made it almost impossible to take on new clients hunting for affordable rental homes. Now, she works with people who have at least $5,000 a month to spend on rent, double her usual base of around $2,500 because there’s just nothing available at lower price points. One house will get 15 to 20 applications and be rented within a day, she said. ‘I literally have people begging me to get them a rental,’ Douglas said... ‘It’s just so crazy down here.’”
China Watch:
February 15
– Bloomberg:
“China’s inflation eased in January as food and energy prices weakened, providing Beijing with more leeway to shore up a slowing economy ahead of a key political leadership meeting later this year. The producer price index rose 9.1% from a year earlier…, down from 10.3% in December, while consumer-price growth slowed to 0.9%.”
February 13
– Wall Street Journal:
“China’s property developers ... January contracted sales reports released in recent days by more than a dozen Chinese developers showed year-over-year declines ranging from about 10% to more than 80% for some companies. They also reflected price reductions by industry heavyweights such as Country Garden… and Sunac... In all, total contracted sales of the country’s 100 largest developers saw a year-over-year drop of nearly 40% in January…”
February 18
– Bloomberg:
“ Global agencies are pulling their ratings on property bonds, while a string of auditor resignations is adding to doubts over financial transparency... A sudden 81% plunge in the Hong Kong-listed shares of one real-estate firm is raising concern over the risk of margin calls… A Bloomberg index of Chinese junk dollar debt fell every day this week through Thursday, driving yields above 20%. A gauge of Chinese property shares is down 3.4% this week, taking its losses over the past 12 months to 28%...”
February 16 – Bloomberg:
“China’s defaulting property developers are making little headway on restructuring their offshore bonds, testing the patience of distressed-debt investors who stepped in to buy after an industrywide liquidity crunch. At least a dozen developers defaulted on their dollar bonds over the past year, with an estimated $48.9 billion outstanding pending debt resolution…”
February 14 – Dow Jones:
“China's car sales declined for the eighth straight month, as coronavirus outbreaks in some Chinese cities hit car production. Retail sales of passenger cars in January fell 4.4% from a year earlier to 2.09 million vehicles… Toyota Motor Corp. said its sales in China last month dropped 21.5% from a year earlier, while the sales of two China joint ventures of Volkswagen AG fell 19.9% and 17.9% in January…”
Global Bubble Watch:
February 16 – Reuters:
“British consumer prices rose at the fastest annual pace in nearly 30 years last month, intensifying the squeeze on households and reinforcing the chances that the Bank of England will raise interest rates for a third meeting in a row. The annual rate of consumer price inflation rose to 5.5% in January, the highest since March 1992, when Britain was emerging from a long period of inflation-feeding high wage deals.”
Turkey Watch:
February 17
– Bloomberg:
“Turkey’s central bank kept its benchmark interest rate unchanged for a second month…, as President Recep Tayyip Erdogan’s government struggles to contain price surges that could threaten his two-decade rule. The Monetary Policy Committee held its one-week repo rate at 14%... Turkish inflation climbed to 48.7% last month, pushing the nation’s yield when adjusted for inflation to almost -35%, the lowest by far among emerging market peers.”
February 12
– Financial Times:
“Fitch downgraded Turkey’s sovereign debt and issued a scathing verdict on president Recep Tayyip Erdogan’s plan to tackle soaring inflation. The international rating agency pushed the long-term debt rating deeper into junk territory, lowering it from BB- to B+ — putting G20 country on a par with Benin, Egypt, Turkmenistan, Rwanda and Kenya.”
Europe Watch:
February 14
– Bloomberg:
“Russia is showing no indication of increasing gas flows to Europe amid rising tension with the west over Ukraine. Top supplier Gazprom PJSC again opted not to book any pipeline space for March to send gas to Germany via the key Yamal-Europe link… Westbound supplies through that route have been halted since December. The company also didn’t buy extra transit capacity through Ukraine. Russia has been curbing flows for months.”
February 13
– Financial Times:
“Strikes by thousands of workers at mills owned by forestry group UPM-Kymmene in Finland have exacerbated paper shortages that started with an unexpectedly strong rebound in demand after lockdowns eased. ‘You’ve got paper prices spiking and everyone chasing too few tonnes,’ said Iwan Le Moine, director of EMGE, a consultancy. ‘It’s an absolute mess.’”
Social Watch:
February 16
February 15
– CNBC:
After falling back sharply from a record high in May of last year, lumber prices began climbing again in December. They are now about 22% lower than that peak, but still about three times their average pre-pandemic price, according to Random Lengths. That is adding to the cost of both building a new home and remodeling an older one. The National Association of Home Builders estimated the recent price jump added more than $18,600 to the price of a newly built home.”
February 12
– Wall Street Journal:
“Prices for soybeans—the base ingredient in many food products, poultry and livestock feed and renewable fuel, among other things—are edging back toward highs reached last year, which hadn’t previously been seen in a decade. Abnormally dry weather in South America that has spurred surges in coffee and sugar prices also has affected soybeans there… Soybean futures… are trading at their highest level since June... Soybeans have risen over 18% in the year to date…”
Biden Administration Watch:
February 18
– Bloomberg:
“The U.S. said Russia has massed as many as 190,000 personnel – including troops, National Guard units and Russian-backed separatists – in and around Ukraine in what it called the most significant military mobilization since World War II. Russia told the U.S. this week it has no plans to attack, and its officials have repeatedly dismissed U.S. warnings about a possible invasion as ‘hysteria’ and propaganda.”
U.S. Bubble Watch:
February 18 – CNBC;
“Sales of previously owned homes in January rose 6.7% from December to a seasonally adjusted annualized rate of 6.5 million units, according to the National Association of Realtors. That exceeded Wall Street expectations significantly. Sales were 2.3% lower compared with January 2021. The supply of homes for sale fell to a record low, down 16.5% from a year ago. There were just 860,000 homes for sale at the end of January. At the current sales pace it would take just 1.6 months to exhaust that inventory. A 4 to 6-month supply is considered a balanced market. That is also a record low… Homes priced between $100,000 and $250,000 were down 23% from a year ago, while sales of homes priced between $750,000 and $1 million rose 33%. Sales of homes priced above $1 million were up 39%.”
February 17
– Bloomberg:
“Mortgage rates in the U.S. are getting closer to 4%. The average for a 30-year loan was 3.92%, up from 3.69% last week and the highest since May 2019… ‘Psychologically, it’s clearly not great news, especially if you put in a bid three weeks ago and lost,’ said David Battany, executive vice president of capital markets for Guild Mortgage Co.”
February 15
– New York Times:
“A single house under construction in America today faces all kinds of problems, starting with a run on lumber, then bricklayers in demand, subcontractors with Covid, appliances on back order and plumbing fixtures out at sea. Get through all of that, and then comes one more hitch with what should be a straightforward finishing touch. ‘Garage doors are a nightmare,’ said Rick Palacios Jr., the director… at John Burns Real Estate Consulting. If you had to rank the headaches homebuilders face, he said, ‘garage doors are the worst right now.’ The home-building industry is having the most difficult time in decades meeting demand, the sum of many pandemic complications. But this moment reaches peak absurdity with garage doors.”
February 15
– Bloomberg:
“Costs for 30-year mortgage loans hit a more than two-year high of 3.69% last week… Further increases are expected as the Federal Reserve… hikes its benchmark rate. That’s a daunting prospect for entry-level buyers when affordability is already at its worst since 2018… Their modest incomes put them at a disadvantage when competing against downsizing seniors and single-family landlords for the same moderately priced houses… ‘Housing affordability is set to get crushed,’ said Mark Zandi, chief economist for Moody’s Analytics, who expects 30-year rates to climb above 4% this year.”
February 14
– Bloomberg:
“For Atlanta real estate agent Jamie Douglas, a dearth of inventory has made it almost impossible to take on new clients hunting for affordable rental homes. Now, she works with people who have at least $5,000 a month to spend on rent, double her usual base of around $2,500 because there’s just nothing available at lower price points. One house will get 15 to 20 applications and be rented within a day, she said. ‘I literally have people begging me to get them a rental,’ Douglas said... ‘It’s just so crazy down here.’”
China Watch:
February 15
– Bloomberg:
“China’s inflation eased in January as food and energy prices weakened, providing Beijing with more leeway to shore up a slowing economy ahead of a key political leadership meeting later this year. The producer price index rose 9.1% from a year earlier…, down from 10.3% in December, while consumer-price growth slowed to 0.9%.”
February 13
– Wall Street Journal:
“China’s property developers ... January contracted sales reports released in recent days by more than a dozen Chinese developers showed year-over-year declines ranging from about 10% to more than 80% for some companies. They also reflected price reductions by industry heavyweights such as Country Garden… and Sunac... In all, total contracted sales of the country’s 100 largest developers saw a year-over-year drop of nearly 40% in January…”
February 18
– Bloomberg:
“ Global agencies are pulling their ratings on property bonds, while a string of auditor resignations is adding to doubts over financial transparency... A sudden 81% plunge in the Hong Kong-listed shares of one real-estate firm is raising concern over the risk of margin calls… A Bloomberg index of Chinese junk dollar debt fell every day this week through Thursday, driving yields above 20%. A gauge of Chinese property shares is down 3.4% this week, taking its losses over the past 12 months to 28%...”
February 16 – Bloomberg:
“China’s defaulting property developers are making little headway on restructuring their offshore bonds, testing the patience of distressed-debt investors who stepped in to buy after an industrywide liquidity crunch. At least a dozen developers defaulted on their dollar bonds over the past year, with an estimated $48.9 billion outstanding pending debt resolution…”
February 14 – Dow Jones:
“China's car sales declined for the eighth straight month, as coronavirus outbreaks in some Chinese cities hit car production. Retail sales of passenger cars in January fell 4.4% from a year earlier to 2.09 million vehicles… Toyota Motor Corp. said its sales in China last month dropped 21.5% from a year earlier, while the sales of two China joint ventures of Volkswagen AG fell 19.9% and 17.9% in January…”
Global Bubble Watch:
February 16 – Reuters:
“British consumer prices rose at the fastest annual pace in nearly 30 years last month, intensifying the squeeze on households and reinforcing the chances that the Bank of England will raise interest rates for a third meeting in a row. The annual rate of consumer price inflation rose to 5.5% in January, the highest since March 1992, when Britain was emerging from a long period of inflation-feeding high wage deals.”
Turkey Watch:
February 17
– Bloomberg:
“Turkey’s central bank kept its benchmark interest rate unchanged for a second month…, as President Recep Tayyip Erdogan’s government struggles to contain price surges that could threaten his two-decade rule. The Monetary Policy Committee held its one-week repo rate at 14%... Turkish inflation climbed to 48.7% last month, pushing the nation’s yield when adjusted for inflation to almost -35%, the lowest by far among emerging market peers.”
February 12
– Financial Times:
“Fitch downgraded Turkey’s sovereign debt and issued a scathing verdict on president Recep Tayyip Erdogan’s plan to tackle soaring inflation. The international rating agency pushed the long-term debt rating deeper into junk territory, lowering it from BB- to B+ — putting G20 country on a par with Benin, Egypt, Turkmenistan, Rwanda and Kenya.”
Europe Watch:
February 14
– Bloomberg:
“Russia is showing no indication of increasing gas flows to Europe amid rising tension with the west over Ukraine. Top supplier Gazprom PJSC again opted not to book any pipeline space for March to send gas to Germany via the key Yamal-Europe link… Westbound supplies through that route have been halted since December. The company also didn’t buy extra transit capacity through Ukraine. Russia has been curbing flows for months.”
February 13
– Financial Times:
“Strikes by thousands of workers at mills owned by forestry group UPM-Kymmene in Finland have exacerbated paper shortages that started with an unexpectedly strong rebound in demand after lockdowns eased. ‘You’ve got paper prices spiking and everyone chasing too few tonnes,’ said Iwan Le Moine, director of EMGE, a consultancy. ‘It’s an absolute mess.’”
Social Watch:
February 16
– Bloomberg:
“The gender pay gap among top executives at S&P 500 companies in the first year of the pandemic grew to its widest since 2012, fueled in part by male executives’ disproportionate gains from stock-based compensation. In 2020, women in the c-suite earned 75% of what their male counterparts took home, a report… by Morningstar found. That’s the widest the gap has been in nine years, and down from 88% — a high point — in 2018. There were slightly more women in the highest paying jobs at public companies than years prior and their salaries were about on par with men in similar roles. Yet, the bulk of executive pay comes from stock-related awards, and there, men outperformed women by 30-percentage points.”
Geopolitical Watch:
February 15
“The gender pay gap among top executives at S&P 500 companies in the first year of the pandemic grew to its widest since 2012, fueled in part by male executives’ disproportionate gains from stock-based compensation. In 2020, women in the c-suite earned 75% of what their male counterparts took home, a report… by Morningstar found. That’s the widest the gap has been in nine years, and down from 88% — a high point — in 2018. There were slightly more women in the highest paying jobs at public companies than years prior and their salaries were about on par with men in similar roles. Yet, the bulk of executive pay comes from stock-related awards, and there, men outperformed women by 30-percentage points.”
Geopolitical Watch:
February 15
– New York Times:
“In the midst of his brinkmanship over neighboring Ukraine in recent weeks, President Vladimir V. Putin has also been busy trying to expand Russia’s influence thousands of miles away: in Latin America. He spoke to Daniel Ortega, Nicaragua’s strongman president, for the first time since 2014. He also called the leaders of Venezuela and Cuba. He hosted the president of Argentina, Alberto Fernández, who vowed during a Kremlin visit to reduce his country’s reliance on the United States. And on Wednesday… Mr. Putin is scheduled to meet with President Jair Bolsonaro of Brazil. Mr. Bolsonaro is flying to Moscow despite repeated entreaties from American officials in recent weeks that he postpone his trip as the West scrambles to pressure Mr. Putin over Ukraine.”
“In the midst of his brinkmanship over neighboring Ukraine in recent weeks, President Vladimir V. Putin has also been busy trying to expand Russia’s influence thousands of miles away: in Latin America. He spoke to Daniel Ortega, Nicaragua’s strongman president, for the first time since 2014. He also called the leaders of Venezuela and Cuba. He hosted the president of Argentina, Alberto Fernández, who vowed during a Kremlin visit to reduce his country’s reliance on the United States. And on Wednesday… Mr. Putin is scheduled to meet with President Jair Bolsonaro of Brazil. Mr. Bolsonaro is flying to Moscow despite repeated entreaties from American officials in recent weeks that he postpone his trip as the West scrambles to pressure Mr. Putin over Ukraine.”
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