by NDD
My Weekly Indicators post is up at XE.com. There has been a real move to positivity in recent weeks.
Saturday, July 16, 2016
John Hinderaker Goes Off the Rails Again
On Jule 28, 2005, John Hinderaker of Power posted the following paragraph:
It must be very strange to be President Bush. A man of extraordinary vision and brilliance approaching to genius, he can’t get anyone to notice. He is like a great painter or musician who is ahead of his time, and who unveils one masterpiece after another to a reception that, when not bored, is hostile.
After being mercilessly criticised -- and in an obvious attempt to walk back his public display of absolute fealty -- he posted an "update" where he claimed the statement was "tongue in cheek." The update isn't dated, but it did occur after his original post.
Let's be blunt: Bush was an abject failure. He turned a budget surplus into a massive deficit, started a war that largely created the current political quagmire in the Middle East and left the country with the worst economic contraction since the Great Recession. The only good thing he has done is to remain quiet during his retirement, possibly hoping that his silence will somehow improve his historical standing.
Now we have this absolute gem:
We simply cannot afford another four years of such mind-numbing stupidity in the White House. Donald Trump has many faults as a presidential candidate. You don’t need me to list them for you. But he is not Hillary Clinton, he is not committed to a view of the world’s dangers that is almost literally insane, and he will not give us a third Obama term in either domestic or foreign policy. He also won’t appoint people like Ruth Bader Ginsburg to the Supreme Court. Our next president will be either Donald Trump or Hillary Clinton; we desperately need for it to be Trump. He deserves, and badly needs, our financial support.
It must be very strange to be President Bush. A man of extraordinary vision and brilliance approaching to genius, he can’t get anyone to notice. He is like a great painter or musician who is ahead of his time, and who unveils one masterpiece after another to a reception that, when not bored, is hostile.
After being mercilessly criticised -- and in an obvious attempt to walk back his public display of absolute fealty -- he posted an "update" where he claimed the statement was "tongue in cheek." The update isn't dated, but it did occur after his original post.
Let's be blunt: Bush was an abject failure. He turned a budget surplus into a massive deficit, started a war that largely created the current political quagmire in the Middle East and left the country with the worst economic contraction since the Great Recession. The only good thing he has done is to remain quiet during his retirement, possibly hoping that his silence will somehow improve his historical standing.
Now we have this absolute gem:
We simply cannot afford another four years of such mind-numbing stupidity in the White House. Donald Trump has many faults as a presidential candidate. You don’t need me to list them for you. But he is not Hillary Clinton, he is not committed to a view of the world’s dangers that is almost literally insane, and he will not give us a third Obama term in either domestic or foreign policy. He also won’t appoint people like Ruth Bader Ginsburg to the Supreme Court. Our next president will be either Donald Trump or Hillary Clinton; we desperately need for it to be Trump. He deserves, and badly needs, our financial support.
Donald Trump is a racist; his public statements encourage violence and stoke the fires of xenophobia.
He has publicly proposed defaulting on U.S. debt obligations, demonstrating a remarkable lack of ignorance on the basic underpinnings of international finance.
His primary method of communication is Twitter, which limits the writer to 140 characters or less.
And at least half of his content is comprised of simple adjectives (great, crooked) and exclamation points.
Perhaps the most damning indictment of Trump is the following video.
I loved the WWE -- when I was 8 years old. But, call me crazy, I just don't think Jimmy "Superfly" Snooka or the "Iron Shiek" are qualified for higher office.
The above clip, Mr. Hinderaker, is your preferred candidate for President of the United States. If you honestly believe that this individual is qualified to lead this country, then you're insane. Pediod.
Weekly Indicators for July 11 - 15 at XE.com
- by New Deal democrat
My Weekly Indicators post is up at XE.com. There has been a real move to positivity in recent weeks.
Weekly Indicators for July 11 - 15 at XE.com
- by New Deal democrat
My Weekly Indicators post is up at XE.com. There has been a real move to positivity in recent weeks.
Friday, July 15, 2016
Weekend Pitbull
When I first started this blog, I had two Weimaraners named Kate and Sarge. At some point, I started a weekly series called "Weekend Weimar." Every Friday I would put up pictures of Kate and Sarge as a way to signal that the week was over.
Since the start of this blog, I got married, making "Weekend Weimar" "Weekend Weimar and Beagle." Then about 4 years ago, a pit bull adopted us, so it became "Weekend Weimar, Beagle and Pit Bull."
The last time I did this was about 3 years ago. Since then we've lost Sarge, our oldest Weimar, and Cassie, out oldest Beagle. Both died of old age. That left us with 1 dog, which is a few too few for us. So we adopted another Pit Bull a few months ago named Mumphrey. So, here is a new edition of Weekend Pit Bull with Mumph and Lite.
This means it's Friday and it's time to stop working. Go home.
Since the start of this blog, I got married, making "Weekend Weimar" "Weekend Weimar and Beagle." Then about 4 years ago, a pit bull adopted us, so it became "Weekend Weimar, Beagle and Pit Bull."
The last time I did this was about 3 years ago. Since then we've lost Sarge, our oldest Weimar, and Cassie, out oldest Beagle. Both died of old age. That left us with 1 dog, which is a few too few for us. So we adopted another Pit Bull a few months ago named Mumphrey. So, here is a new edition of Weekend Pit Bull with Mumph and Lite.
This means it's Friday and it's time to stop working. Go home.
Bonddad's Friday Linkfest
Public Investment has also been weak
According to the preliminary estimation, the gross domestic product (GDP) of China was 34,063.7 billion yuan in the first half year of 2016, a year-on-year increase of 6.7 percent at comparable prices. Specifically, the year-on-year growth of the first quarter was 6.7 percent and 6.7 percent for the second quarter. The value added of the primary industry was 2,209.7 billion yuan, up by 3.1 percent; the secondary industry 13,425.0 billion yuan, up by 6.1 percent; and the tertiary industry 18,429.0 billion yuan, up by 7.5 percent. The GDP of the second quarter of 2016 went up by 1.8 percent on a quarter-on-quarter base.
Weekly Chart of the Chinese Market
Thursday, July 14, 2016
Bonddad's Thursday Linkfest
The Bank of England’s Monetary Policy Committee (MPC) sets monetary policy to meet the 2% inflation target and in a way that helps to sustain growth and employment. At its meeting ending on 13 July 2016, the MPC voted by a majority of 8-1 to maintain Bank Rate at 0.5%, with one member voting for a cut in Bank Rate to 0.25%. The Committee voted unanimously to maintain the stock of purchased assets financed by the issuance of central bank reserves at £375 billion. Committee members made initial assessments of the impact of the vote to leave the European Union on demand, supply and the exchange rate. In the absence of a further worsening in the trade-off between supporting growth and returning inflation to target on a sustainable basis, most members of the Committee expect monetary policy to be loosened in August. The precise size and nature of any stimulatory measures will be determined during the August forecast and Inflation Report round.
.....
Official data on economic activity covering the period since the referendum are not yet available. However, there are preliminary signs that the result has affected sentiment among households and companies, with sharp falls in some measures of business and consumer confidence. Early indications from surveys and from contacts of the Bank’s Agents suggest that some businesses are beginning to delay investment projects and postpone recruitment decisions. Regarding the housing market, survey data point to a significant weakening in expected activity. Taken together, these indicators suggest economic activity is likely to weaken in the near term.
6-Month Chart of the Pound Dollar
6-Month Chart of the Pound Euro
Weekly Chart of the UK ETF
Australia's trend estimate of employment increased by 8,300 persons in June 2016, with:
- the number of unemployed persons decreasing by 200;
- the unemployment rate steady at 5.7 per cent;
- the participation rate unchanged at 64.8 per cent; and
- the employment to population ratio steady at 61.1 per cent.
Over the past 12 months, trend employment increased by 212,000 (or 1.8%), which was in line with the average percentage year-on-year growth over the last 20 years. Over the past 12 months, the trend employment to population ratio, which is a measure of how employed the population is, increased from 60.9 to 61.1 per cent.
Weekly Chart of the Australian ETF
The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1/2 per cent. The Bank Rate is correspondingly 3/4 per cent and the deposit rate is 1/4 per cent.
Inflation in Canada is on track to return to 2 per cent in 2017 as the complex adjustment underway in Canada’s economy proceeds. The fundamentals remain in place for a pickup in growth over the projection horizon, albeit in a climate of heightened uncertainty.
.....
Now let me turn to the Canadian economy. Our discussions focused on how we should look through the choppiness in recent data to see the underlying trends, and what these trends mean for the inflation outlook. Among other factors, the fires in Northern Alberta, which have been costly for many, represent a sharp, but temporary, hit to the economy. We expect to see GDP fall by 1 per cent at annual rates in the second quarter, and then grow by 3.5 per cent in the third quarter as oil production resumes, rebuilding around Fort McMurray begins and the new Canada Child Benefit lifts consumption. In fact, fiscal measures, including infrastructure spending, provide an important support to growth over the forecast horizon.
.....
We have always said that the adjustment to the oil price shock would be a complex process. And we see evidence that these adjustments are happening, thanks to the resiliency and flexibility of the Canadian economy. On the energy side, firms have been quick to cut back investment plans and reduce costs. By the end of the year, we expect these reductions to be largely over.
On the non-commodity side of the economy, we have also seen evidence of adjustment, but it has been more uneven. Export data have been particularly volatile, and it is very important for us as policy makers to assess underlying trends. What we see is that non-commodity exports over the past couple of years have been responding largely as expected to growth in foreign activity and the Canadian dollar. Businesses are telling us that they are benefiting from stronger demand and a lower dollar. We have a great chart in the MPR that shows that non-commodity exports have recovered almost to their pre-recession peak, which puts the recent volatility into proper perspective. Exports are projected to grow in line with the US economy over the projection period. We are being conservative by assuming that exports only make up part of the ground lost over the past four months. The past depreciation of the exchange rate will continue to support the level of exports, but its effect on export growth is projected to taper off over the course of this year.
5-Year Chart of the Canadian Dollar/US Dollar
Weekly Chart of the Canadian ETF
Monday, July 11, 2016
Bonddad's Wednesday Linkfest
Are Emerging Markets Becoming the New Safe Markets? (FT)
EU IP Down 1.2% M/M (Eurostat)
Labor Market Conditions Index Rose But Still Negative (Doug Short)
This would be quite a turnaround from recent years, when a flight to safety has seen many investors sell out of emerging markets, deeming them too risky in the wake of China’s slowdown and the decline in commodity prices. But with uncertainty gripping the western world, market sentiment could shift once again; we are seeing a number of trends that point towards this potentially happening.
....
Protest movements of a different sort are also taking hold in many of the markets where we invest. It is strengthening the hand of leading politicians in places, including Nigeria and India, where an anti-corruption mandate is forcing genuine – and long awaited – change in regulation and the policing of theft from the public purse. Such improved governance is vital for western investors looking to invest.
More fundamentally, emerging markets are also likely to continue to offer significantly stronger growth than developed markets. The Brexit result is expected to tip the UK towards recession, while many European economies have been struggling to find ways to accelerate growth. In contrast, despite investors’ aversion to growth markets over the past couple of years, the fundamentals have not changed; namely, the rapidly expanding middle class and their desire to spend money on the things we in the west take for granted – meals out, designer clothes, consumer electronics.
1-Year Candleglance Charts of Emerging Market ETFs
EU IP Down 1.2% M/M (Eurostat)
1-Year Chart of the IEV ETF
Labor Market Conditions Index Rose But Still Negative (Doug Short)
Nearly half of small businesses that tried to fill jobs in the second quarter reported that they had few or zero qualified applicants for those positions, according to the June NFIB Small Business Optimism report.
As a result 29 percent of small businesses said they had job openings they were unable to fill, and 15 percent of owners surveyed said that finding quality labor was their single most-important business problem, which is almost the highest reading of this expansion
Bonddad Tuesday Linkfest
Fed President George Argues For Slowly Increasing Rates (Denver Post)
Why Are Global Rates So Low (Wonkblog)
Federal Reserve Bank of Kansas City president Esther George said Monday she wants the U.S. central bank to get back to raising short-term interest rates gradually to reflect progress on hiring and inflation.
George deemed the current level of short-term rates maintained by the Fed as “too low given the progress we’ve seen in the economy.” She also said keeping rates at super-low levels raises the risk financial markets will run into trouble as an additional factor arguing in favor of lifting the cost of borrowing.
“Gradual adjustments” in short-term interest rates mean the Fed is more likely to achieve its growth and inflation goals, George said. She added that the economy is near full employment levels, the housing sector is continuing its rebound and price pressures are moving back to the levels targeted by the central bank. All of this means short-term rates should move toward “more normal levels,” the Fed official said, while acknowledging a so-called normal rate is not a precise concept.
.....
George, as has long been the case, finds herself arguing for actions other central bankers don’t appear to be ready to take. That suggests she is very likely to be casting a dissenting vote at the FOMC meeting later this month.
Why Are Global Rates So Low (Wonkblog)
The following paragraph strongly implies that global negative/low rates are in the middle of an endless loop, which is a very scary proposition.
The rest of the world has only made this more true. That's because zero interest rates in one country exert a kind of gravitational pull on interest rates in another. They're "contagious," as economists Gauti Eggertsson, Neil Mehrotra, Sanjay Singh and Larry Summers put it. Here's why: if you have zero interest rates and are expected to for a while, then capital will flow into my economy every time I even consider raising my own. Money, after all, moves to where it thinks it can get the best return. But on a less happy note, this will push my currency up so much that my exports will start to lose competitiveness. And that, in turn, will slow my economy down enough that I won't actually have to raise rates. Instead, I'll keep them around zero — just like yours. The same kind of thing happens any time there's any financial turbulence in the world. Investors stampede into the safe haven that is U.S. government debt, pushing down yields and pushing out expectations of rate hikes.
What’s consistent with the data, instead, is the notion that investors are throwing in the towel and accepting secular stagnation as the new normal. Almost 8 years after Lehman, no sign of a really strong recovery in sight anywhere; perceived private-sector investment opportunities remain weak. Stock and land prices are pretty high, but probably because of low discounting rather than expected high returns.
The U.S. earnings recession waylaying the seven-year-old bull market has been a long one by any standard. Measured by depth, however, it isn’t registering -- either with history or investors.
Quarterly profits in the S&P 500 Index are about to fall again, extending a streak of declines poised to match the longest earnings retreat on record, data compiled by S&P Dow Jones Indices and Bloomberg show. At the same time, net income in the gauge is down 18 percent from its 2014 high -- a retreat that is less than half the size of the last three drops and pales next to the 28 percent average in recessions since 1936.
While the lack of profit growth explains why the S&P 500 struggled to advance for more than a year, the less-heralded shallowness of the decline is key to understanding the market’s resilience. The equity benchmark is heading for an all-time high after posting a second week of gains following the Brexit selloff and recovering from two separate 10 percent corrections in 10 months.
Y/Y Percentage Change in Corporate Profits from St. Louis Fred
5-Year Chart of Actual Level of Corporate Profits
Wall Street analysts have taken an axe to profit forecasts for the biggest US banks, fearing that the US Federal Reserve — spooked by sluggish job growth and the UK vote to leave the EU — will hold off on pushing up interest rates.
After the Fed’s first post-crisis bump in rates last December, many analysts had been counting on more increases to help boost bank earnings throughout this year and next.
But with JPMorgan Chase due to start the second-quarter reporting season this week, analysts now believe those assumptions look too bullish because of the market turmoil unleashed first by slumping oil prices and then the UK’s referendum on EU membership.
Analysts at Credit Suisse have stripped out any expectation of higher rates from its estimates for US banks’ profits in 2016 and 2017. Barclays and Morgan Stanley have also docked forecasts, noting that investors rate the chances of a rate rise from the Fed this year at about 20 per cent, down from about 75 per cent before the Brexit vote.
1-Year Chart of the KRE ETF
1-Year Chart of the XLF ETF
XLF/SPY
Bonddad Tuesday Linkfest
Fed President George Argues For Slowing Increasing Rates (Denver Post)
Why Are Global Rates So Low (Wonkblog)
Federal Reserve Bank of Kansas City president Esther George said Monday she wants the U.S. central bank to get back to raising short-term interest rates gradually to reflect progress on hiring and inflation.
George deemed the current level of short-term rates maintained by the Fed as “too low given the progress we’ve seen in the economy.” She also said keeping rates at super-low levels raises the risk financial markets will run into trouble as an additional factor arguing in favor of lifting the cost of borrowing.
“Gradual adjustments” in short-term interest rates mean the Fed is more likely to achieve its growth and inflation goals, George said. She added that the economy is near full employment levels, the housing sector is continuing its rebound and price pressures are moving back to the levels targeted by the central bank. All of this means short-term rates should move toward “more normal levels,” the Fed official said, while acknowledging a so-called normal rate is not a precise concept.
.....
George, as has long been the case, finds herself arguing for actions other central bankers don’t appear to be ready to take. That suggests she is very likely to be casting a dissenting vote at the FOMC meeting later this month.
Why Are Global Rates So Low (Wonkblog)
The following paragraph strongly implies that global negative/low rates are in the middle of an endless loop, which is a very scary proposition.
The rest of the world has only made this more true. That's because zero interest rates in one country exert a kind of gravitational pull on interest rates in another. They're "contagious," as economists Gauti Eggertsson, Neil Mehrotra, Sanjay Singh and Larry Summers put it. Here's why: if you have zero interest rates and are expected to for a while, then capital will flow into my economy every time I even consider raising my own. Money, after all, moves to where it thinks it can get the best return. But on a less happy note, this will push my currency up so much that my exports will start to lose competitiveness. And that, in turn, will slow my economy down enough that I won't actually have to raise rates. Instead, I'll keep them around zero — just like yours. The same kind of thing happens any time there's any financial turbulence in the world. Investors stampede into the safe haven that is U.S. government debt, pushing down yields and pushing out expectations of rate hikes.
What’s consistent with the data, instead, is the notion that investors are throwing in the towel and accepting secular stagnation as the new normal. Almost 8 years after Lehman, no sign of a really strong recovery in sight anywhere; perceived private-sector investment opportunities remain weak. Stock and land prices are pretty high, but probably because of low discounting rather than expected high returns.
The U.S. earnings recession waylaying the seven-year-old bull market has been a long one by any standard. Measured by depth, however, it isn’t registering -- either with history or investors.
Quarterly profits in the S&P 500 Index are about to fall again, extending a streak of declines poised to match the longest earnings retreat on record, data compiled by S&P Dow Jones Indices and Bloomberg show. At the same time, net income in the gauge is down 18 percent from its 2014 high -- a retreat that is less than half the size of the last three drops and pales next to the 28 percent average in recessions since 1936.
While the lack of profit growth explains why the S&P 500 struggled to advance for more than a year, the less-heralded shallowness of the decline is key to understanding the market’s resilience. The equity benchmark is heading for an all-time high after posting a second week of gains following the Brexit selloff and recovering from two separate 10 percent corrections in 10 months.
Y/Y Percentage Change in Corporate Profits from St. Louis Fred
5-Year Chart of Actual Level of Corporate Profits
Wall Street analysts have taken an axe to profit forecasts for the biggest US banks, fearing that the US Federal Reserve — spooked by sluggish job growth and the UK vote to leave the EU — will hold off on pushing up interest rates.
After the Fed’s first post-crisis bump in rates last December, many analysts had been counting on more increases to help boost bank earnings throughout this year and next.
But with JPMorgan Chase due to start the second-quarter reporting season this week, analysts now believe those assumptions look too bullish because of the market turmoil unleashed first by slumping oil prices and then the UK’s referendum on EU membership.
Analysts at Credit Suisse have stripped out any expectation of higher rates from its estimates for US banks’ profits in 2016 and 2017. Barclays and Morgan Stanley have also docked forecasts, noting that investors rate the chances of a rate rise from the Fed this year at about 20 per cent, down from about 75 per cent before the Brexit vote.
1-Year Chart of the KRE ETF
1-Year Chart of the XLF ETF
XLF/SPY
Bonddad Monday Linkfest
Weekly Sector Performance (Stockcharts)
Other key employment data pointed to a still strong labor market.
After an abysmal headline Non-Farm Payrolls (NFP) report for May, June saw a complete 180-degree turn with this morning’s reported reading for total non-farm payrolls coming in at 287K compared to expectations for a gain of 180K. That beat of 107K qualifies as the best headline print relative to expectations since December 2009 (November 2009 report), and based on our Economic Indicator Database, the 10th best report relative to expectations since 1998.
The first half, by contrast, ended on a high note, based on today’s payrolls release. The 265,000 increase in private-sector jobs in June is the biggest monthly gain since last December. “If you take the last three months and smooth these numbers out — which is really what you should do — employment conditions are improving, but there’s no question there’s, to some extent, a slowdown in the improvement,” says Hugh Johnson, chairman at Hugh Johnson Advisors, via Bloomberg.
Let’s put Johnson’s advice to work in the chart below, which clearly shows that job growth in the private sector has decelerated steadily over the past year or so. The trend eased to just a hair below 2.0% for the year through June, based on three-month averaging–the lowest in three years. A 2% pace is still a respectable advance, but recent history suggests we’ll see even lower growth rates in the months ahead.
Every single month, the Bureau of Labor Statistics releases their update on the Employment Situation. It is based on a model that, as we have painstakingly explained many, many times, is a near-real time, very noisy, error-laden, data series with a huge margin of error, that is subject to repeated revision and further benchmarking.
.....
Let me remind readers (again) that the monthly employment situation report has a margin of error of 100,000 jobs. So last month could very likely have been as high as 173k (38 + 35 + 100) and this months could very likely be as low as 152k (287 – 35 – 100). If you understand this simple math, you should be able to understand why I insist on noting the actual BLS official monthly number ain’t all that.
Shinzo Abe has won a sweeping victory in elections to Japan’s upper house and there is now a parliamentary supermajority that supports revision of Japan’s pacifist constitution.
With all seats declared, Mr Abe’s ruling Liberal Democratic party and its allies won 77 out of the 78 seats they needed for a two-thirds majority, but there are also four independents who support a constitutional revision.
That leaves Mr Abe in undisputed control of Japanese politics and gives him a once-in-a-lifetime chance at putting constitutional change to a national referendum.
Given the bare majority, however, Mr Abe is likely to proceed slowly. His most likely goal is to create a precedent for future constitutional reform rather than to scrap the war-renouncing Article 9 immediately.