investmentwatchblog--2020-08-04--FAMANG Controls The Market

FAMANG Controls The Market

In July , the consumer sentiment index fell from 78.1 to 72.5 as the chart below shows .
However , it didn ’ t fall much in the 2nd half of the month .
The preliminary reading was 73.2 which means it fell 0.7 in the final reading .
You might say this is rock bottom .
The spike in COVID-19 cases and the increase in restrictions occurred between the 2nd half of June and the first half of July which correlates with the drop in confidence .
In the 2nd half of July , it was status quo on @ @ @ @ @ @ @ .
The other aspect involved is the end of the $ 600 weekly unemployment benefits which occurred on the 25th .
It ’ s difficult to determine when people started getting more anxiety about this .
It ’ s always tough to be relying on the government .
It ’ s especially nerve-racking when you need Congress to agree to another stimulus package .
The savings rate was 19 % in June which indicates a lot of economic uncertainty .
Between February and June , wages and benefits pushed disposable income down 4.1 @ @ @ @ @ @ @ mostly because unemployment benefits as the chart below shows .
The current economic conditions index fell from 87.1 to 82.8 which was unlike the Conference Board confidence index which rose .
Both expectations indexes fell as the sentiment index was down from 72.3 to 65.9 .
When the bottom quintile of incomes was asked how much COVID-19 changed their lives , 40 % said a great deal and 26 % said little/none .
The top quintile said there was much more of a difference as 51 % said a great deal and only @ @ @ @ @ @ @ be why we ’ re seeing retail investors much more optimistic than wealthy veterans .
Also , the bottom 20 % was saved by unemployment benefits .
The top 20 % have stopped flying which is big part of most of their lives .
They can ’ t travel as much and didn ’ t get as much/any income support .
That ’ s excluding the PPP loans ( and the stock market ) .
The PCE report from June just came out .
That ’ s ancient news in this quick moving @ @ @ @ @ @ @ official data , so let ’ s give it a quick glance .
Income fell 1.1 % as there was an increase in compensation from jobs , but a decrease in pay from the government .
That ’ s a good sign .
Unfortunately , the labor market worsened in July .
Disposable income was down 1.4 % and real disposable income growth was -1.8 % .
Consumer spending was growth 5.6 % and real growth was 5.2 % .
The chart above reviews the changes from February .
Spending on goods was @ @ @ @ @ @ @ was down 12 % .
Only motor vehicles & parts and recreational goods & vehicles were up .
There was a massive increase in camping and boating as those are good social distancing endeavors .
Even though the stock market is supposed to be forward looking , it ’ s assuming all the changes to the economy will last for a while .
It acts as if working from , online shopping , electric vehicle buying , camping , and boating will all continue their recent trends indefinitely which is questionable with the @ @ @ @ @ @ @ declining .
PCE inflation rose from 0.5 % to 0.8 % and core PCE inflation was 0.9 % which fell a tick .
Remember , investors don ’ t think the Fed will hike rates until core PCE inflation rises to and stays at 2.1 % .
We are miles away from a rate hike .
That ’ s why Powell isn ’ t thinking about thinking about a rate hike .
The biggest stocks dominated the market on Friday as Apple rose over 10 % .
It gained $ 174 billion in @ @ @ @ @ @ @ worth $ 3.36 trillion which is $ 1.18 trillion more than all the stocks in Russell 2000 combined .
This decline in breadth usually symbolizes an end to a bull market .
Throw out the rules that a bull market usually doesn ’ t end a few months into a recovery with the Fed extremely dovish .
We already have extreme optimism in the large cap stocks as some are saying the market went from 1929 to 1999 in 4 months .
Stocks crashed as many feared a depression .
Now we have @ @ @ @ @ @ @ stocks like the late 1990s .
As you can see from the chart below , the 40 day put to call ratio in the S & P 500 is the lowest since after the market peaked in 2000 .
Let ’ s see if the S & P 500 powers to a new record high and takes out the early 2000 low in this ratio .
On Friday , Apple ’ s market cap gain was the size of Exxon Mobile .
Berkshire Hathaway ’ s stake in Apple is 22 % of @ @ @ @ @ @ @ ’ t value its other businesses highly ( Geico , BNSF Railway , etc. )
.
They are old line businesses in a new world controlled by tech .
The FAMANG stocks are up 33.4 % on average year to date as they added $ 1.7 trillion market cap .
They are worth $ 6.77 trillion combined .
This is like the nifty 50 stocks in the 1960s and 70s .
As the table below shows , their forward 2021 earnings estimates rose 1.1 % .
That ’ s usually not enough to @ @ @ @ @ @ @ .
They are being rewarded for their stability in the recession with giant multiple expansion .
The average expansion is 32 % .
The biggest spike was in Amazon which went from a 31 multiple to a 53.5 multiple .
The average went from 22 to 29.1 .
The big problem , as mentioned before , is that this unusual economy won ’ t stick .
The entire world is working on 100s of vaccines and treatments for COVID-19 and the 2nd wave of cases in America is already receding .
In the @ @ @ @ @ @ @ the future .
They bought stocks without earnings .
This time many tech firms have more mature businesses , but their earnings growth is unsustainable .
There might be a double negative if the economy goes back to normal and there is increased regulations against the mega cap tech companies in 2021 .
Consumer sentiment was weak in July , but at least it barely fell from the preliminary reading .
Spending only recovered in a couple areas in June as the savings rate was very elevated .
Inflation stayed low .
The @ @ @ @ @ @ @ look at the put to call ratio .
Investors around the world are piling into a few stocks which is a classic sign of a market top .

by UPFINA
In July, the consumer sentiment index fell from 78.1 to 72.5 as the chart below shows. However, it didn’t fall much in the 2nd half of the month. The preliminary reading was 73.2 which means it fell 0.7 in the final reading. You might say this is rock bottom. The spike in COVID-19 cases and the increase in restrictions occurred between the 2nd half of June and the first half of July which correlates with the drop in confidence. In the 2nd half of July, it was status quo on restrictions with a modest decline in cases.
Final July UM Sentiment weaker at 72.5 vs. initial reading of 73.2; expectations fell to 65.9 vs. 66.2 prior & current conditions fell to 82.8 vs. 84.2; lapse of special jobless benefits will directly hurt most vulnerable & further affect missed rent/mortgage/debt payments pic.twitter.com/VdR5cH78aT — Liz Ann Sonders (@LizAnnSonders) July 31, 2020
The other aspect involved is the end of the $600 weekly unemployment benefits which occurred on the 25th. It’s difficult to determine when people started getting more anxiety about this. It’s always tough to be relying on the government. It’s especially nerve-racking when you need Congress to agree to another stimulus package. The savings rate was 19% in June which indicates a lot of economic uncertainty. Between February and June, wages and benefits pushed disposable income down 4.1%, but income rose 5.4% mostly because unemployment benefits as the chart below shows.
Unemployment insurance did its job. Between February and June, wages and benefits accounted for a -4.1% fall in disposable personal income, but income still rose +5.4%. pic.twitter.com/7uiKTYPAj1 — Ernie Tedeschi (@ernietedeschi) July 31, 2020
The current economic conditions index fell from 87.1 to 82.8 which was unlike the Conference Board confidence index which rose. Both expectations indexes fell as the sentiment index was down from 72.3 to 65.9. When the bottom quintile of incomes was asked how much COVID-19 changed their lives, 40% said a great deal and 26% said little/none. The top quintile said there was much more of a difference as 51% said a great deal and only 11% said none. This might be why we’re seeing retail investors much more optimistic than wealthy veterans. Also, the bottom 20% was saved by unemployment benefits. The top 20% have stopped flying which is big part of most of their lives. They can’t travel as much and didn’t get as much/any income support. That’s excluding the PPP loans (and the stock market).
Quick PCE Review
The PCE report from June just came out. That’s ancient news in this quick moving economy, but it’s the official data, so let’s give it a quick glance. Income fell 1.1% as there was an increase in compensation from jobs, but a decrease in pay from the government. That’s a good sign. Unfortunately, the labor market worsened in July. Disposable income was down 1.4% and real disposable income growth was -1.8%. Consumer spending was growth 5.6% and real growth was 5.2%.
Still a steep road ahead for US consumers. Spending on durables & non-durables has been supported by stimulus checks & UI benefits & can easily be done w/ limited face-to-face interactions. Not so much for services. Summer will be tough w/ less fiscal aid & + #COVID19 infection pic.twitter.com/nQknYL4ILi — Gregory Daco (@GregDaco) July 31, 2020
The chart above reviews the changes from February. Spending on goods was up 5% and spending on services was down 12%. Only motor vehicles & parts and recreational goods & vehicles were up. There was a massive increase in camping and boating as those are good social distancing endeavors. Even though the stock market is supposed to be forward looking, it’s assuming all the changes to the economy will last for a while. It acts as if working from, online shopping, electric vehicle buying, camping, and boating will all continue their recent trends indefinitely which is questionable with the 7 day average in COVID-19 cases steadily declining.
PCE inflation rose from 0.5% to 0.8% and core PCE inflation was 0.9% which fell a tick. Remember, investors don’t think the Fed will hike rates until core PCE inflation rises to and stays at 2.1%. We are miles away from a rate hike. That’s why Powell isn’t thinking about thinking about a rate hike.
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Overbought?
The biggest stocks dominated the market on Friday as Apple rose over 10%. It gained $174 billion in market share. It and Amazon are worth $3.36 trillion which is $1.18 trillion more than all the stocks in Russell 2000 combined. This decline in breadth usually symbolizes an end to a bull market. Throw out the rules that a bull market usually doesn’t end a few months into a recovery with the Fed extremely dovish.
We already have extreme optimism in the large cap stocks as some are saying the market went from 1929 to 1999 in 4 months. Stocks crashed as many feared a depression. Now we have extreme optimism in a few big tech stocks like the late 1990s. As you can see from the chart below, the 40 day put to call ratio in the S&P 500 is the lowest since after the market peaked in 2000. Let’s see if the S&P 500 powers to a new record high and takes out the early 2000 low in this ratio.
6 Stocks Rule Them All
On Friday, Apple’s market cap gain was the size of Exxon Mobile. Berkshire Hathaway’s stake in Apple is 22% of its market cap as the market doesn’t value its other businesses highly (Geico, BNSF Railway, etc.). They are old line businesses in a new world controlled by tech. The FAMANG stocks are up 33.4% on average year to date as they added $1.7 trillion market cap. They are worth $6.77 trillion combined. This is like the nifty 50 stocks in the 1960s and 70s.
As the table below shows, their forward 2021 earnings estimates rose 1.1%. That’s usually not enough to drive a big gain in stock prices. They are being rewarded for their stability in the recession with giant multiple expansion. The average expansion is 32%. The biggest spike was in Amazon which went from a 31 multiple to a 53.5 multiple. The average went from 22 to 29.1.
So, it isn't fundamentals for the FAMANG's trouncing expectations (which are essentially flat), as it is people wanting to pay a lot, lot more for them than they did at the beginning of the year. Multiple expansion has been 32/33rds of the FAMANG share price moves this year. pic.twitter.com/Fe6hxHaNqH — Drew Dickson (@AlbertBridgeCap) July 31, 2020
The big problem, as mentioned before, is that this unusual economy won’t stick. The entire world is working on 100s of vaccines and treatments for COVID-19 and the 2nd wave of cases in America is already receding. In the late 1990s, investors were hopeful for the future. They bought stocks without earnings. This time many tech firms have more mature businesses, but their earnings growth is unsustainable. There might be a double negative if the economy goes back to normal and there is increased regulations against the mega cap tech companies in 2021.
Conclusion
Consumer sentiment was weak in July, but at least it barely fell from the preliminary reading. Spending only recovered in a couple areas in June as the savings rate was very elevated. Inflation stayed low. The stock market is very overbought if you look at the put to call ratio. Investors around the world are piling into a few stocks which is a classic sign of a market top.


investmentwatchblog--2020-08-04--Unusual Variable For Labor Market Recovery

Unless you have children and are dealing with the economic ramifications of COVID-19 , you might not realize its importance .
As you can see from the chart on the left , caring for children not in school or at daycare was the 3rd most common reason people weren ’ t at work from May to July .
It ’ s no surprise , given the uniqueness of this situation , that the share of people not working due to child care more than tripled ( to almost 2 % ) from where it was before this pandemic .
Children @ @ @ @ @ @ @ , but they can spread it .
NYC plans to reopen schools if its positive rate stays below 3 % ( NY is currently near 1 % ) .
It ’ s extremely difficult to have a child and work from home .
The ones who have it the toughest are single parents and parents of young children .
It ’ s also impossible to work from home if you don ’ t have a job that ’ s capable of that .
It ’ s estimated that 15 % of the labor @ @ @ @ @ @ @ , are in 2 of the 3 situations that prevent them from working from home .
As we described in articles in 2019 and early 2020 , the labor market was fantastic for low income low education workers .
They are hurt the hardest by recessions , but see great gains when the labor market is full .
It ’ s back to square one for these workers as it will take at least a few quarters , if not years , to get back to how it was in 2019 .
In @ @ @ @ @ @ @ unemployment .
The consensus estimate is for 1.75 million jobs created in July ( down from 4.8 million in June ) which would bring the unemployment rate down 0.6 % to 10.5 % .
We know the labor market weakened in July ( rate of improvement fell ) and that there were fewer people who could get back to work ( easy fruit already picked ) .
Plus , there were additional economic restrictions in the COVID-19 hotspots in the south and west .
The highly educated were the least impacted by this @ @ @ @ @ @ @ 600 per week from unemployment benefits was so critical .
Congress is trying to pass another stimulus by August 7th which is when it ’ s scheduled to go on recess .
If there ’ s something close to being done , they will push back the recess .
The stock market is completely ignoring this .
The logic is that the economy is so bad , Congress has no choice but to act .
Secondly , the big tech stocks that are carrying the market will be insulated from any potential slowdown @ @ @ @ @ @ @ those with an advanced college degree , 63.3 % worked from home .
48 % of people with a Bachelor ’ s degree worked from home .
People who have a college degree or more are likely to work with computers at their job anyway , so working remotely isn ’ t an issue .
On the other hand , 12.6 % of those with a high school degree and 4.8 % those who didn ’ t finish high school worked from home .
Retail jobs for example can ’ t be done @ @ @ @ @ @ @ recession , where certain aspects of the economy were hurt more than normally and others were spared .
On the negative side , the number of active small businesses fell 2.2 million from February to May .
If these small firms don ’ t come back , either a new business will be created or the mega corps of the 2020s will eat up the new demand .
The latter would only accelerate the recent trend towards monopolies .
83 % of NYC restaurants and bars can ’ t pay their full rent @ @ @ @ @ @ @ regulations on indoor dining even though the COVID-19 positive rate in NY has been near 1 % for the past couple weeks .
To make matters worse , 71 % of landlords wouldn ’ t waive part of the rent , 61 % wouldn ’ t defer payments , and 90 % didn ’ t renegotiate leases .
The rule for taking PPP loans that become grants is that at least 60 % of the money needs to go to paying employees .
That doesn ’ t mean some of these firms receiving @ @ @ @ @ @ @ off workers anyway .
Between $ 291.6 million and $ 647.5 million in loans were given out to the over 150 companies that plan to layoff workers .
From May 1st to July 17th , they had plans to cut 15,814 jobs .
The chart above shows the type of layoffs .
44 % were permanent or the business closed .
In total , 4.9 million PPP loans were given out .
That ’ s $ 521.1 billion .
Congress might add more money to the program which could help a lot as @ @ @ @ @ @ @ .
The best catalyst would be for the restrictions to be lowered and COVID-19 cases to fall .
We ’ ve seen cases fall recently as it appears the worst of the 2nd wave is over .
That ’ s critical to getting children back to school .
Remember , the back to school shopping season is the 2nd most important shopping holiday season of the year .
Even with all these negatives , more people are buying cars , RVs , and boats as social distancing vacations have become common .
In @ @ @ @ @ @ @ from June to 14.52 million .
There is literally a shortage of used cars because demand is so high .
As you can see from the chart below , this was a rare recession in which credit card delinquencies fell as credit card debt itself also fell .
Consumers are also investing more which could be a problem for the stock market like the late 1990s .
Interactive Brokers had 913,000 new accounts created this year as of the end of July which was a 40 % increase from last year .
Robinhood @ @ @ @ @ @ @ on June 8th which was an intermediate term peak in the market .
It ’ s currently the 89th most downloaded app .
Whether or not kids can go back to school will be huge in determining where the labor market is headed .
If they go back to school , the unemployment rate might drop quickly .
The higher the education someone has , the more likely they can work from home .
Millions of small businesses have closed and NYC restaurants are struggling .
Congress is expected to pass a stimulus @ @ @ @ @ @ @ no doubt about one passing .
Credit card debt is falling and people are spending more on social distancing activities .
They are also investing more which could create a boom & bust in the stock market .

by UPFINA
Unless you have children and are dealing with the economic ramifications of COVID-19, you might not realize its importance. As you can see from the chart on the left, caring for children not in school or at daycare was the 3rd most common reason people weren’t at work from May to July. It’s no surprise, given the uniqueness of this situation, that the share of people not working due to child care more than tripled (to almost 2%) from where it was before this pandemic.
Children are the least impacted by this virus, but they can spread it. NYC plans to reopen schools if its positive rate stays below 3% (NY is currently near 1%). It’s extremely difficult to have a child and work from home. The ones who have it the toughest are single parents and parents of young children. It’s also impossible to work from home if you don’t have a job that’s capable of that. It’s estimated that 15% of the labor force, which is 24 million people, are in 2 of the 3 situations that prevent them from working from home.
Low Educated Hurt The Most
As we described in articles in 2019 and early 2020, the labor market was fantastic for low income low education workers. They are hurt the hardest by recessions, but see great gains when the labor market is full. It’s back to square one for these workers as it will take at least a few quarters, if not years, to get back to how it was in 2019. In the meantime, there will be high unemployment. The consensus estimate is for 1.75 million jobs created in July (down from 4.8 million in June) which would bring the unemployment rate down 0.6% to 10.5%. We know the labor market weakened in July (rate of improvement fell) and that there were fewer people who could get back to work (easy fruit already picked). Plus, there were additional economic restrictions in the COVID-19 hotspots in the south and west.
The highly educated were the least impacted by this virus which is why the extra $600 per week from unemployment benefits was so critical. Congress is trying to pass another stimulus by August 7th which is when it’s scheduled to go on recess. If there’s something close to being done, they will push back the recess. The stock market is completely ignoring this. The logic is that the economy is so bad, Congress has no choice but to act. Secondly, the big tech stocks that are carrying the market will be insulated from any potential slowdown.
Specifically, in June, of those with an advanced college degree, 63.3% worked from home. 48% of people with a Bachelor’s degree worked from home. People who have a college degree or more are likely to work with computers at their job anyway, so working remotely isn’t an issue. On the other hand, 12.6% of those with a high school degree and 4.8% those who didn’t finish high school worked from home. Retail jobs for example can’t be done from home.
We are primarily funded by readers. Please subscribe and donate to support us!
Weird Recession: The Negatives
This is a unique recession, where certain aspects of the economy were hurt more than normally and others were spared. On the negative side, the number of active small businesses fell 2.2 million from February to May. If these small firms don’t come back, either a new business will be created or the mega corps of the 2020s will eat up the new demand. The latter would only accelerate the recent trend towards monopolies. 83% of NYC restaurants and bars can’t pay their full rent. That’s because of the regulations on indoor dining even though the COVID-19 positive rate in NY has been near 1% for the past couple weeks. To make matters worse, 71% of landlords wouldn’t waive part of the rent, 61% wouldn’t defer payments, and 90% didn’t renegotiate leases.
Over 150 Firms That Got U.S. Relief Aid Plan Layoffs, S&P Sayst.co/db8xLF4JEi pic.twitter.com/ts6clUkTIN — Alessio Urban (@AlessioUrban) August 3, 2020
The rule for taking PPP loans that become grants is that at least 60% of the money needs to go to paying employees. That doesn’t mean some of these firms receiving money don’t plan on laying off workers anyway. Between $291.6 million and $647.5 million in loans were given out to the over 150 companies that plan to layoff workers. From May 1st to July 17th, they had plans to cut 15,814 jobs. The chart above shows the type of layoffs. 44% were permanent or the business closed.
In total, 4.9 million PPP loans were given out. That’s $521.1 billion. Congress might add more money to the program which could help a lot as many firms have already spent the money. The best catalyst would be for the restrictions to be lowered and COVID-19 cases to fall. We’ve seen cases fall recently as it appears the worst of the 2nd wave is over. That’s critical to getting children back to school. Remember, the back to school shopping season is the 2nd most important shopping holiday season of the year.
Consumers Saving & Investing
Even with all these negatives, more people are buying cars, RVs, and boats as social distancing vacations have become common. In July, auto sales increased 11.1% from June to 14.52 million. There is literally a shortage of used cars because demand is so high. As you can see from the chart below, this was a rare recession in which credit card delinquencies fell as credit card debt itself also fell. Consumers are also investing more which could be a problem for the stock market like the late 1990s. Interactive Brokers had 913,000 new accounts created this year as of the end of July which was a 40% increase from last year. Robinhood peaked at 16th in the App Store on June 8th which was an intermediate term peak in the market. It’s currently the 89th most downloaded app.
Conclusion
Whether or not kids can go back to school will be huge in determining where the labor market is headed. If they go back to school, the unemployment rate might drop quickly. The higher the education someone has, the more likely they can work from home. Millions of small businesses have closed and NYC restaurants are struggling. Congress is expected to pass a stimulus this week. The market has literally no doubt about one passing. Credit card debt is falling and people are spending more on social distancing activities. They are also investing more which could create a boom & bust in the stock market.


investmentwatchblog--2020-08-04--Reversion to the mean, anyone? Growth-to-Value rotation, ever?

$ AAPL trades 45 % above its 200D , has risen from 9 to 32 PE in one year giving @ @ @ @ @ premium to 495 other SPY cos – the largest premium in 20 yrs – despite @ @ @ @ @ .
Reversion to the mean , anyone ?
Growth-to-Value rotation , ever ?
# BondProxy

$AAPL trades 45% above its 200D, has risen from 9 to 32 PE in one year giving it a 70% PE premium to 495 other SPY cos – the largest premium in 20 yrs – despite slowing buybacks considerably since Q219.
Reversion to the mean, anyone?
Growth-to-Value rotation, ever?#BondProxy
— Samantha LaDuc (@SamanthaLaDuc) August 4, 2020


investmentwatchblog--2020-08-04--Bankruptcies Almost Up To 09 Levels. Bank Credit Availability Continues To Dry Up. The Fed Is Increa

Bankruptcies Almost Up To 09 Levels. Bank Credit Availability Continues To Dry Up. The Fed Is Increasingly The Only Game In Town.

BANKRUPTCIES ALMOST UP TO 09 LEVELS pic.twitter.com/yW1n27mzgR Bottom line – bank credit availability continues to dry up .
The Fed is increasingly the only game in town .
# Recessionary pic.twitter.com/inCuIlfdRp Fed Senior Loan Officer Survey – C & I underwriting standards .
Net % tightening standards : +70 % this Q ( 6/22-7/3 ) , up from +40 % Q/Q ( 3/23-4/3 ) US satisfaction at a nine-year low .
To be fair , 2020 is a remarkably unsatisfactory year .
pic.twitter.com/ce48khHbCM DEUTSCHE : “ The C & I Loan Standards reading within the Fed Senior Loan Officers Survey @ @ @ @ @ @ @ defaults one year in advance .
It suggests a 12 month trailing US HY default rate that edges into double digits by mid 2021.
” pic.twitter.com/DSyYAJkqqO ISM data improving in RoC terms but still weak and not a convincing upturn .
Employment still in the toilet .
pic.twitter.com/1sc87rShtQ '' The U.S. economy needs more support than originally thought , '' says @ marydalyecon The structural problems could be seen long before Covid-19 happened .
Did the Fed highlight or impel Congress to seriously address it ?
NO .
@ EricRosengren @ neelkashkari @ @ @ @ @

BANKRUPTCIES ALMOST UP TO 09 LEVELS pic.twitter.com/yW1n27mzgR
Bottom line – bank credit availability continues to dry up. The Fed is increasingly the only game in town. #Recessionary pic.twitter.com/inCuIlfdRp
Fed Senior Loan Officer Survey – C&I underwriting standards. Net % tightening standards: +70% this Q (6/22-7/3), up from +40% Q/Q (3/23-4/3)
US satisfaction at a nine-year low. To be fair, 2020 is a remarkably unsatisfactory year. pic.twitter.com/ce48khHbCM
DEUTSCHE: “The C&I Loan Standards reading within the Fed Senior Loan Officers Survey is a good predictor of high yield defaults one year in advance. It suggests a 12 month trailing US HY default rate that edges into double digits by mid 2021.” pic.twitter.com/DSyYAJkqqO
ISM data improving in RoC terms but still weak and not a convincing upturn. Employment still in the toilet. pic.twitter.com/1sc87rShtQ
"The U.S. economy needs more support than originally thought," says @marydalyecon
The structural problems could be seen long before Covid-19 happened. Did the Fed highlight or impel Congress to seriously address it? NO.@EricRosengren @neelkashkari @RobSKaplan @RaphaelBostic pic.twitter.com/gx0gD2mwKG
— M/I_Investments (@MI_Investments) August 4, 2020


investmentwatchblog--2020-08-04--Global debt rose to $258 trillion in Q1, or a record 331% of the world’s GDP. Gold ends above $2,000

Global debt rose to $258 trillion in Q1, or a record 331% of the world’s GDP. Gold ends above $2,000 an ounce for the first time in history. Analyst: Dollar could be a ‘crash risk’ if U.S. Loses ‘credibility,’

Dollar Could Be a ‘ Crash Risk ’ if U.S. Loses ‘ Credibility , ’ Analyst Warns Rising economic and @ @ @ @ @ dollar may be a “ crash risk ” — a danger more often associated with @ @ @ @ @ The Fragile Recovery May Already Be Heading Into Reverse : Barron ’ s Household spending @ @ @ @ @ with income growth .
But that ’ s set to reverse as the job market @ @ @ @ @ , and the government prematurely removes needed support .

Global debt rose to $258 trillion in Q1, or a record 331% of the world’s GDP. While rates are low for established economies, there's concern about the fate of developed markets, which have about $3.7 trillion of debt coming due through yearend. t.co/zXiqHaYzIW — Lisa Abramowicz (@lisaabramowicz1) August 4, 2020
GLOBAL NEGATIVE YIELDING DEBT pic.twitter.com/OHhM93q8hv — Win Smart, CFA (@WinfieldSmart) July 29, 2020
When you’re looking at what [DXY, 10 year real yields] levels we would need to see gold at $2500 per ounce, it is combinations like DXY at 90 and real rates at minus 2,” said Michael Widmer, metals strategist in comments included in an Aug. 3 research note, citing July 30 call — Win Smart, CFA (@WinfieldSmart) August 4, 2020
Gold ends above $2,000 an ounce for the first time in history t.co/IB0NVPyTgD — Win Smart, CFA (@WinfieldSmart) August 4, 2020
Rising economic and political uncertainty means the U.S. dollar may be a “crash risk” — a danger more often associated with emerging market currencies,…
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Household spending had been rising in line with income growth. But that’s set to reverse as the job market stalls, the virus spreads, and the government prematurely removes needed support.


investmentwatchblog--2020-08-04--SEC Launches Investigation Of Trading In Kodak Shares Before And After $765 Million Loan Disclosure

The SEC ’ s investigation is at an early stage and might not produce allegations of wrongdoing by the company @ @ @ @ @ people said .
Among the areas being probed by regulators : how Kodak controlled disclosure @ @ @ @ @ began to emerge on July 27 , one day before the official announcement , causing @ @ @ @ @ to rise 25 % that day .

www.wsj.com/articles/kodak-loan-disclosure-and-stock-surge-under-sec-investigation-11596559126
The SEC’s investigation is at an early stage and might not produce allegations of wrongdoing by the company or any individuals, the people said. Among the areas being probed by regulators: how Kodak controlled disclosure of the loan, which began to emerge on July 27, one day before the official announcement, causing Kodak’s stock price to rise 25% that day.


investmentwatchblog--2020-08-04--Government DEBT PROBLEM will get much WORSE!

Government DEBT PROBLEM will get much WORSE !
😳

Government DEBT PROBLEM will get much WORSE! 😳
I explain in 1, simple, fast step!! 😎👍👇 pic.twitter.com/4VOhYyLqoF
— George Gammon (@GeorgeGammon) August 4, 2020


investmentwatchblog--2020-08-04--Nasdaq Only Put/Call is even more extreme… Who’s right: Bankers or Investors?

$ AMZN and $ TSLA both reversed into red.. $ MSFT , $ GOOG and $ FB are red as @ @ @ @ @ be the titan holding things up for now.. on not stock you need to watch @ @ @

$AMZN and $TSLA both reversed into red.. $MSFT, $GOOG and $FB are red as well.. $AAPL continues to be the titan holding things up for now.. on not stock you need to watch for market temperature
— Igor Schatz (@Copernicus2013) August 4, 2020


investmentwatchblog--2020-08-04--PELOSI SAYS SHE DOESN’T THINK THERE WILL BE A DEAL THIS WEEK – FOX NEWS

PELOSI SAYS SHE DOES N'T THINK THERE WILL BE A DEAL THIS WEEK – FOX NEWS Government officials making $ @ @ @ @ @ benefits and healthcare just can ’ t get their shit together for the average American @ @ @ @ @ Remember this in Nov

PELOSI SAYS SHE DOESN'T THINK THERE WILL BE A DEAL THIS WEEK – FOX NEWS
Government officials making $200,000 a year with unlimited benefits and healthcare just can’t get their shit together for the average American during a global pandemic. Remember this in Nov
— Quoth the Raven (@QTRResearch) August 4, 2020


investmentwatchblog--2020-08-04--Another day, another record low for the real U.S. 10-year yield, now below negative 1%.

Another day , another record low for the real U.S. 10-year yield , now below negative 1 % .
via @ @ @ @ @ the world be like if the US defaulted on its debt rather than leaving the @ @ @

Another day, another record low for the real U.S. 10-year yield, now below negative 1%. via @tomkeene pic.twitter.com/fDqbCowFGm
What would the world be like if the US defaulted on its debt rather than leaving the gold standard?
— Silver Watchdog (@Silver_Watchdog) August 4, 2020


investmentwatchblog--2020-08-04--Economist on the need for stimulus: No jobs… people can’t pay the rent… can’t buy food for kids… Ret

Economist on the need for stimulus: No jobs… people can’t pay the rent… can’t buy food for kids… Retail bankruptcies rage on in 2020

Joseph Minarik , Conference Board Chief Public Policy Economist Fmr .
OMB Chief Economist & Chief Economist to Pres .
@ @ @ @ @ more stimulus amid the challenges many Americans are facing as the economy struggles because of @ @ @ @ @ at a ‘ major tipping point ’ as 30 million people are cut off from @ @ @ @ @ Australia “ An eviction crisis will make every crisis the country ’ s already facing @ @ @ @ @ Prof. Matthew Desmond .
“ It ’ s not only gon na deepen the poverty @ @ @ @ @ it ’ s gon na expose them to the virus.
” t.co/1a8Xr8b2kC

Joseph Minarik, Conference Board Chief Public Policy Economist Fmr. OMB Chief Economist & Chief Economist to Pres. Clinton discusses the need for more stimulus amid the challenges many Americans are facing as the economy struggles because of the coronavirus pandemic.
US at a ‘major tipping point’ as 30 million people are cut off from COVID-19 payments | Sky News Australia
“An eviction crisis will make every crisis the country’s already facing much worse,” says Prof. Matthew Desmond.
“It’s not only gonna deepen the poverty of families getting evicted … it’s gonna expose them to the virus.” t.co/1a8Xr8b2kC
— MSNBC (@MSNBC) August 3, 2020


investmentwatchblog--2020-08-04--Massachusetts Department of Corrections Makes Prisoners Create Blue Lives Matter Flags

Ever wonder where all those Blue Lives Matter Flags are coming from ?
A recent Tweet by Newton City Councilor Bill Humphrey , revealed that our “ depraved state prison labor system ” is producing and selling Thin Blue Line flags at a profit .
Mass Cor Industries from Milford , Massachusetts uses prison labor to manufacture and sell Thin Blue Line flags .
Their slogan proudly proclaims , “ everything MassCor makes is hand crafted and hand assembled right here in Massachusetts !
” Makes you feel proud to be an American , knowing Thin Blue Line flags are @ @ @ @ @ @ @ t it ?
Mass Cor Industries is just another word for the Massachusetts Department of Correction , as their history page explains .
The Department of Corrections claims that forcing 500 prisoners to make Blue Lives Matter flags provides prisoners with “ a job related skill set.
” Who here believes ex-con ’ s will be able to make a living , producing Blue Lives Matter flags once they are released from prison ?
This story takes a truly bizarre twist when The Patriot Ledger revealed that Hingham , MA.
, firefighters refused @ @ @ @ @ @ @ flags from their fire trucks last week .
“ Fire Chief Steve Murphy and Police Chief Glenn Olsson explained in a letter to personnel that the blue and black flags , which are black-and-white versions of the American flag with a single blue line in the center , will have to be removed from where they ’ ve flown atop Hingham fire trucks after a citizen complaint .
Murphy and Olsson say the flags are now in violation of a long-standing town policy that forbids displaying any political messaging on town property.
” @ @ @ @ @ @ @ sacrifice their moral fortitude to remove Thin Blue Line flags “ At this time , the Hingham Firefighters of Local 2398 respectfully request the town reconsider their decision to deem these flags as political statements .
Otherwise , we regret to inform you that over the past four days no member of Local 2398 was able to sacrifice his or her moral fortitude in order to remove the flags from the apparatus , ” Melanson said .
“ As we said before , our support for our brothers and sisters in blue is @ @ @ @ @ @ @ fly with honor every day .
They will have to be removed by someone other than a member of this union , the president of Hingham ’ s fire union , Lt. Chris Melanson , said ” It takes a certain type of moral fortitude to even display a Thin Blue Line flag in America during Black Lives Matter protests .
Today , the Massachusetts Firefighters Union announced that they would take Hingham ’ s Thin Blue Line flag and display it across the state .
The wife of fallen Weymouth police officer @ @ @ @ @ @ @ reform bills and removing Thin Blue Line flags is “ showing the utmost disrespect.
” Earlier this year , the Boston Herald revealed that Massachusetts police officers showed up for a Trump Rally wearing “ Cops For Trump 2020 ” T shirts .
It ’ s time to demand an end to manufacturing Thin Blue Lives and Blue Lives Matter flags , especially in light of the demonstrations against police racism and abuse going on across the country .
Doing so would show the utmost respect for people of color everywhere Why not @ @ @ @ @ @ @ ’ s desire for national police reform in words and deeds instead of claiming that removing Blue Lives Matter flags from taxpayer paid vehicles is a sacrifice to their member ’ s moral fortitude or that police reform is the utmost disrespect ?

by mapi
Ever wonder where all those Blue Lives Matter Flags are coming from?
A recent Tweet by Newton City Councilor Bill Humphrey, revealed that our “depraved state prison labor system” is producing and selling Thin Blue Line flags at a profit.
Mass Cor Industries from Milford, Massachusetts uses prison labor to manufacture and sell Thin Blue Line flags.
Their slogan proudly proclaims, “everything MassCor makes is hand crafted and hand assembled right here in Massachusetts!” Makes you feel proud to be an American, knowing Thin Blue Line flags are hand crafted by prisoners, doesn’t it?
Mass Cor Industries is just another word for the Massachusetts Department of Correction, as their history page explains.
“The Department of Correction made a commitment to reconstitute the correctional industries program, which was rebranded as MassCor, shorthand for Massachusetts Correction Industries. MassCor teaches the importance of work ethics and vocational skills to approximately 500 offenders. MassCor operates 17 manufacturing operations within seven institutions.”
The Department of Corrections claims that forcing 500 prisoners to make Blue Lives Matter flags provides prisoners with “a job related skill set.”
Who here believes ex-con’s will be able to make a living, producing Blue Lives Matter flags once they are released from prison?
We are primarily funded by readers. Please subscribe and donate to support us!
This story takes a truly bizarre twist when The Patriot Ledger revealed that Hingham, MA., firefighters refused an order to remove Thin Blue Line flags from their fire trucks last week.
“Fire Chief Steve Murphy and Police Chief Glenn Olsson explained in a letter to personnel that the blue and black flags, which are black-and-white versions of the American flag with a single blue line in the center, will have to be removed from where they’ve flown atop Hingham fire trucks after a citizen complaint. Murphy and Olsson say the flags are now in violation of a long-standing town policy that forbids displaying any political messaging on town property.”
Union won’t ask firefighters to sacrifice their moral fortitude to remove Thin Blue Line flags
“At this time, the Hingham Firefighters of Local 2398 respectfully request the town reconsider their decision to deem these flags as political statements. Otherwise, we regret to inform you that over the past four days no member of Local 2398 was able to sacrifice his or her moral fortitude in order to remove the flags from the apparatus,” Melanson said. “As we said before, our support for our brothers and sisters in blue is unwavering. The flags have continued to fly with honor every day. They will have to be removed by someone other than a member of this union, the president of Hingham’s fire union, Lt. Chris Melanson, said”
It takes a certain type of moral fortitude to even display a Thin Blue Line flag in America during Black Lives Matter protests.
Today, the Massachusetts Firefighters Union announced that they would take Hingham’s Thin Blue Line flag and display it across the state.
“The Professional Fire Fighters Association of Massachusetts will now send one of the flags to unions around the state to be hung in a show of solidarity with police officers. The flag will be presented to Sergeant Chesna’s family after the tour.”
The wife of fallen Weymouth police officer Sgt. Michael Chesna, claims police reform bills and removing Thin Blue Line flags is “showing the utmost disrespect.”
“Now, those same politicians are showing the utmost disrespect to our officers with this reform bill and even a certain town (with the agreement of both the fire chief and police chief) are disrespecting our officers by demanding that the Thin Blue Line flag be removed from their fire trucks, Cindy Chesna said.”
Earlier this year, the Boston Herald revealed that Massachusetts police officers showed up for a Trump Rally wearing “Cops For Trump 2020” T shirts.
“He stands up for law enforcement. It’s really, really great to get that type of support from a president,” said Chuck Vella, who said he works for the Plymouth County Sheriff’s Department.
Sgt. Todd Testa of the Milford Police Department said, he likes “to have someone who really supports law enforcement” in the White House. “It makes me feel good.”
It’s time to demand an end to manufacturing Thin Blue Lives and Blue Lives Matter flags, especially in light of the demonstrations against police racism and abuse going on across the country. Doing so would show the utmost respect for people of color everywhere
Why not do some soul-searching and embrace the public’s desire for national police reform in words and deeds instead of claiming that removing Blue Lives Matter flags from taxpayer paid vehicles is a sacrifice to their member’s moral fortitude or that police reform is the utmost disrespect?


investmentwatchblog--2020-08-04--DRAIN THE SWAMP: Ex-FBI Agent Indicted for Felony Perjury in Soros-funded Case against GOP Gov. Eric

DRAIN THE SWAMP: Ex-FBI Agent Indicted for Felony Perjury in Soros-funded Case against GOP Gov. Eric Greitens

Ex-FBI Agent William Don Tisaby was indicted by a St. Louis grand jury on 7 felony counts of perjury & @ @ @ @ @ case against Missouri Republican Navy SEAL Governor Eric Greitens .
Tisaby was hired by St. @ @ @ @ @ , who was elected with over 70 % campaign funding from PACs with direct ties @ @ @ @ @ .
All charges against Greitens were dropped as St. Louis police opened a criminal investigation @ @ @ @ @ her private investigator , William Tisaby .
As of June 2020 , Gardner remains under @ @ @ @ @ February 2020 , the Missouri Ethics Commission exonerated Greitens after an exhaustive 20-month investigation .
@ @ @ @ @ evidence of any wrongdoing by Greitens .
”

Ex-FBI Agent William Don Tisaby was indicted by a St. Louis grand jury on 7 felony counts of perjury & evidence tampering in the unsuccessful case against Missouri Republican Navy SEAL Governor Eric Greitens. Tisaby was hired by St. Louis Circuit Attorney Kim Gardner, who was elected with over 70% campaign funding from PACs with direct ties to liberal mega-donor George Soros.
All charges against Greitens were dropped as St. Louis police opened a criminal investigation into DA Kim Gardner & her private investigator, William Tisaby.
We are primarily funded by readers. Please subscribe and donate to support us!
As of June 2020, Gardner remains under active criminal investigation.
In February 2020, the Missouri Ethics Commission exonerated Greitens after an exhaustive 20-month investigation. The MEC found “no evidence of any wrongdoing by Greitens.”


investmentwatchblog--2020-08-04--Four men admit to paying homeless people in LA’s Skid Row cash and cigarettes in exchange for forged

Four men admit to paying homeless people in LA’s Skid Row cash and cigarettes in exchange for forged signatures on ballots and voter registration forms

• Richard Howard , Louis Thomas Wise , Christopher Joseph Williams and Nickey Demelvin were arrested for the voter fraud scheme in November 2018 • The men were accused of soliciting hundreds of false and forged signatures in the impoverished Skid Row neighborhood of Los Angeles • They allegedly paid homeless people $ 1 and cigarettes to sign the documents • Howard , 64 , and Wise , 37 , pleaded no contest to two felony charges last week • Williams , 41 , and Huntley , 45 , also pleaded no contest to one felony charge each Four men @ @ @ @ @ @ @ and cigarettes in exchange for forged signatures on ballot petitions and voter registration forms in Los Angeles ’ Skid Row neighborhood .
Richard Howard , Louis Thomas Wise , Christopher Joseph Williams and Nickey Demelvin were arrested in November 2018 for their participation in the voter fraud scheme during the election that year and in 2016 .
The LA County District Attorney ’ s Office on Wednesday announced that Howard , 64 , and Wise , 37 , pleaded no contest to one felony count each of registration of a fictitious person and @ @ @ @ @ @ @ of another to an initiative petition .
Williams , 41 , and Huntley , 45 , likewise pleaded no contest to one felony count of circulating an initiative or petition containing false , forged or fictitious names .
Radical Democrat Governor Sisolak and Nevada Democrats called a special session this past weekend with no public present and inside of 24 hours they rammed through mail-in voting and ballot harvesting .
Democrats did this during the special leglislative session .
The Democrats are going to cheat at all costs to keep the state from @ @ @ @ @ @ @ Democrat law allows people not related to or friends with elderly voters to fill out their ballots and turn them in to be counted !

Richard Howard, Louis Thomas Wise, Christopher Joseph Williams and Nickey Demelvin were arrested for the voter fraud scheme in November 2018
The men were accused of soliciting hundreds of false and forged signatures in the impoverished Skid Row neighborhood of Los Angeles
They allegedly paid homeless people $1 and cigarettes to sign the documents
Howard, 64, and Wise, 37, pleaded no contest to two felony charges last week
Williams, 41, and Huntley, 45, also pleaded no contest to one felony charge each
Four men have admitted to paying homeless people cash and cigarettes in exchange for forged signatures on ballot petitions and voter registration forms in Los Angeles’ Skid Row neighborhood.
Richard Howard, Louis Thomas Wise, Christopher Joseph Williams and Nickey Demelvin were arrested in November 2018 for their participation in the voter fraud scheme during the election that year and in 2016.
The LA County District Attorney’s Office on Wednesday announced that Howard, 64, and Wise, 37, pleaded no contest to one felony count each of registration of a fictitious person and subscribing a fictitious name or the name of another to an initiative petition.
Williams, 41, and Huntley, 45, likewise pleaded no contest to one felony count of circulating an initiative or petition containing false, forged or fictitious names.
www.dailymail.co.uk/news/article-8578247/Four-men-admit-paying-homeless-people-LAs-Skid-Row-join-voter-fraud-scheme.html
Radical Democrat Governor Sisolak and Nevada Democrats called a special session this past weekend with no public present and inside of 24 hours they rammed through mail-in voting and ballot harvesting.
We are primarily funded by readers. Please subscribe and donate to support us!
Democrats did this during the special leglislative session.
The Democrats are going to cheat at all costs to keep the state from going to Donald Trump!
The new Democrat law allows people not related to or friends with elderly voters to fill out their ballots and turn them in to be counted!
www.thegatewaypundit.com/2020/08/new-nv-law-allows-democrats-enter-nursing-homes-vote-dementia-patients-without-signature-video/?utm_source=Twitter&utm_campaign=websitesharingbuttons
Democrats can't tell you who won their Iowa caucus–but "trust them" on ballot harvesting. — thebradfordfile™ (@thebradfordfile) August 4, 2020
AC


investmentwatchblog--2020-08-04--Stop hospitals from keeping their prices secret. “I received an EKG, chest X-ray, flu test, urine-pr

Stop hospitals from keeping their prices secret. “I received an EKG, chest X-ray, flu test, urine-pregnancy test and IV fluids. My diagnosis: potential COVID.”

Health costs are one of America ’ s biggest problems .
They decimate family incomes , drive Americans into bankruptcy @ @ @ @ @ have come to expect hefty bills for the simplest of hospital visits .
But there @ @ @ @ @ transparency — and it isn ’ t too late to enact it as part of @ @ @ @ @ Patients don ’ t know what they are paying in advance , because hospitals and @ @ @ @ @ information .
In June , nine US senators introduced the Health Care PRICE Transparency Act @ @ @ @ @ and insurers to provide discounted cash prices and negotiated rates , and to publicly reveal @ @ @ @ @ .
By doing so , it would offer our people a decent measure of certainty @ @ @ @

Stop hospitals from keeping their prices secret
Health costs are one of America’s biggest problems. They decimate family incomes, drive Americans into bankruptcy and demoralize citizens. Americans have come to expect hefty bills for the simplest of hospital visits. But there is a solution — price transparency — and it isn’t too late to enact it as part of the next coronavirus-relief package.
Patients don’t know what they are paying in advance, because hospitals and insurers work to hide this information. In June, nine US senators introduced the Health Care PRICE Transparency Act. The bill compels hospitals and insurers to provide discounted cash prices and negotiated rates, and to publicly reveal how they calculate those rates. By doing so, it would offer our people a decent measure of certainty in turbulent times.


investmentwatchblog--2020-08-04--Netherlands and Swedan say NO to mandatory masking

NETHERLANDS REFUSES TO MANDATE FACE MASKS ; SWEDEN SAYS THEY ARE ‘ POINTLESS ’ Is universal masking to prevent/reduce the spread of covid-19 the correct approach ?
Netherlands and Sweden say no .
Their position appears to be backed by science .
In May , 2020 , the CDC published a meta-analysis of the evidence on the effectiveness of nonpharmaceutical personal protective measures and environmental hygiene measures in nonhealthcare settings and discuss their potential inclusion in pandemic plans .
With respect to facemasks , it concluded : In our systematic review , we identified 10 RCTs that reported estimates of @ @ @ @ @ @ @ laboratory-confirmed influenza virus infections in the community from literature published during 1946–July 27 , 2018 .
In pooled analysis , we found no significant reduction in influenza transmission with the use of face masks ( RR 0.78 , 95 % CI 0.51–1.20 ; I2 = 30 % , p = 0.25 ) .
Disposable medical masks ( also known as surgical masks ) are loose-fitting devices that were designed to be worn by medical personnel to protect accidental contamination of patient wounds , and to protect the wearer against splashes or sprays of @ @ @ @ @ @ @ for their effectiveness in preventing influenza virus transmission either when worn by the infected person for source control or when worn by uninfected persons to reduce exposure .
Our systematic review found no significant effect of face masks on transmission of laboratory-confirmed influenza .
Further , as reported by the New York Times : Even in its latest guidance , the W.H.O .
made its reluctance abundantly clear , saying the usefulness of face masks is “ not yet supported by high quality or direct scientific evidence , ” but that governments should @ @ @ @ @ @ @ growing compendium of observational evidence .

by ratioetlogicae
NETHERLANDS REFUSES TO MANDATE FACE MASKS; SWEDEN SAYS THEY ARE ‘POINTLESS’
“There is no proven effectiveness”
Is universal masking to prevent/reduce the spread of covid-19 the correct approach?Netherlands and Sweden say no.
We are primarily funded by readers. Please subscribe and donate to support us!
Their position appears to be backed by science.
In May, 2020, the CDC published a meta-analysis of the evidence on the effectiveness of nonpharmaceutical personal protective measures and environmental hygiene measures in nonhealthcare settings and discuss their potential inclusion in pandemic plans.
With respect to facemasks, it concluded:
In our systematic review, we identified 10 RCTs that reported estimates of the effectiveness of face masks in reducing laboratory-confirmed influenza virus infections in the community from literature published during 1946–July 27, 2018. In pooled analysis, we found no significant reduction in influenza transmission with the use of face masks (RR 0.78, 95% CI 0.51–1.20; I2 = 30%, p = 0.25). Disposable medical masks (also known as surgical masks) are loose-fitting devices that were designed to be worn by medical personnel to protect accidental contamination of patient wounds, and to protect the wearer against splashes or sprays of bodily fluids. There is limited evidence for their effectiveness in preventing influenza virus transmission either when worn by the infected person for source control or when worn by uninfected persons to reduce exposure. Our systematic review found no significant effect of face masks on transmission of laboratory-confirmed influenza.
Further, as reported by the New York Times:
Even in its latest guidance, the W.H.O. made its reluctance abundantly clear, saying the usefulness of face masks is “not yet supported by high quality or direct scientific evidence,” but that governments should encourage mask wearing because of “a growing compendium of observational evidence.


investmentwatchblog--2020-08-04--U.S. Shale Faces Another Round Of Bankruptcies

More than thirty billion dollars : this is the size of the collective debt of oil and gas companies that filed for bankruptcy protection in the first half of the year .
That is 23 companies , all but five of which filed during the second quarter when Covid-19 really took hold .
Now , with the resurgence of new cases and an equal resurgence in doubts about the outlook for oil demand , more filings are on the way .
“ It is reasonable to expect that a substantial number of producers will continue to seek protection from creditors @ @ @ @ @ @ @ over the next few months , ” Haynes and Boone said in its June report on oil and gas bankruptcies .
The reasons : lukewarm oil demand improvement and even more lukewarm economic improvement .
Until economies return to normal , the law firm noted , the situation for oil and gas is unlikely to book any marked improvement .
Yet within the industry , different segments have different degrees of vulnerability .
Oilfield services , for instance , is the most vulnerable , as Westwood Global Energy Group noted in a recent @ @ @ @ @ @ @ most vulnerable because of their almost complete dependence on the upstream segment .
When exploration and production slump , the companies actually providing these services suffer the most , as we saw during the last crisis .
While the upstream segment also took a hard hit from the 2014-2016 oil price collapse , it was not as painful as it was for their services providers .
The latter were forced to lower the prices of their services to survive , which in turn helped producers to limit their losses .
Yet the upstream @ @ @ @ @ @ @ as well , especially in U.S. shale , Westwood Global Energy Group ’ s Head of Consulting , Arindam Das , noted in comments to Oilprice.com .
According to Das , shale producers are the most vulnerable group within the oil and gas industry after oilfield service providers , along with smaller exploration and production companies in Western Canada .
Remember those 30 billion dollars in debt accumulated by the companies that went bankrupt during the first half of the year ?
The exact figure is $ 30.62 billion , and it compares @ @ @ @ @ @ @ for all the companies that went under throughout 2019 .
In the second quarter alone , the energy companies that filed for bankruptcy protection accumulated $ 29 billion in debt—again more than the figure for the entire last year .
And banks are increasingly reluctant to do business with such a troubled industry .
Lenders started tightening their requirements for borrowers from the shale patch before the crisis , as many of them kept failing to hit their production targets despite the overall production boom .
Now , with the outlook grimmer than @ @ @ @ @ @ @ , they are tightening their lending requirements further , although , as Westwood ’ s Das notes , banks remain open to businesses with long-standing good names .
Here again , oilfield services providers are in a weaker position than pretty much everyone else .
Banks have been reducing their exposure to this segment of the industry for a while before the crisis struck , according to Das , and it seems they will continue doing that while they tighten their lending criteria for the sector players that are still their clients .
@ @ @ @ @ @ @ oil and gas industry get back on its feet , but so far , the only major deal that made headlines was Chevron ’ s acquisition of Noble Energy .
Uncertainty is a big factor here .
The future of the industry , especially the shale patch , is highly uncertain , and this may be dampening the appetite of private equity-backed companies that would have otherwise swooped in to pick up the tastiest morsels .
This might change , according to Das .
Private equity-backed buyers could yet decide to take advantage @ @ @ @ @ @ @ is making a lot of assets cheap .
If that happens , they will go after cash generative assets , Das noted , rather than assets in the early stages of development that would require a hefty investment to exploit .
Indeed , this seems to be the prevailing sentiment in the industry .
“ We will be drilling wells again when oil is back in probably the $ 50 range , ” David Hayes , partner at Natural Gas Partners , told the Midland Reporter-Telegram earlier this year .
“ It will @ @ @ @ @ @ @ horizontal , but it will be much more development-focused .
Anything with even a whiff of exploration is not a near-term focus for capital , public or private.
” Nobody , it seems , wants to risk too much , and this is understandable : the situation is unprecedented .
“ Since humans started using oil , we have never seen anything like this , ” the chief economist of Trafigura , Saad Rahim , told the Wall Street Journal in April .
“ There is no guide we are following .
This @ @ @ @ @ @ @ , caution would be the name of the game for everyone—sellers and buyers , lenders , and shareholders .

By Irina Slav
More than thirty billion dollars: this is the size of the collective debt of oil and gas companies that filed for bankruptcy protection in the first half of the year. That is 23 companies, all but five of which filed during the second quarter when Covid-19 really took hold. Now, with the resurgence of new cases and an equal resurgence in doubts about the outlook for oil demand, more filings are on the way. “It is reasonable to expect that a substantial number of producers will continue to seek protection from creditors in bankruptcy even if oil prices recover over the next few months,” Haynes and Boone said in its June report on oil and gas bankruptcies. The reasons: lukewarm oil demand improvement and even more lukewarm economic improvement. Until economies return to normal, the law firm noted, the situation for oil and gas is unlikely to book any marked improvement.
Yet within the industry, different segments have different degrees of vulnerability. Oilfield services, for instance, is the most vulnerable, as Westwood Global Energy Group noted in a recent report. Oilfield services are traditionally the most vulnerable because of their almost complete dependence on the upstream segment. When exploration and production slump, the companies actually providing these services suffer the most, as we saw during the last crisis. While the upstream segment also took a hard hit from the 2014-2016 oil price collapse, it was not as painful as it was for their services providers. The latter were forced to lower the prices of their services to survive, which in turn helped producers to limit their losses.
Yet the upstream sector is in dire straits now, as well, especially in U.S. shale, Westwood Global Energy Group’s Head of Consulting, Arindam Das, noted in comments to Oilprice.com. According to Das, shale producers are the most vulnerable group within the oil and gas industry after oilfield service providers, along with smaller exploration and production companies in Western Canada.
Remember those 30 billion dollars in debt accumulated by the companies that went bankrupt during the first half of the year? The exact figure is $30.62 billion, and it compares with $25.77 billion in accumulated debt for all the companies that went under throughout 2019. In the second quarter alone, the energy companies that filed for bankruptcy protection accumulated $29 billion in debt—again more than the figure for the entire last year. And banks are increasingly reluctant to do business with such a troubled industry.
Lenders started tightening their requirements for borrowers from the shale patch before the crisis, as many of them kept failing to hit their production targets despite the overall production boom. Now, with the outlook grimmer than it has been for a long time, they are tightening their lending requirements further, although, as Westwood’s Das notes, banks remain open to businesses with long-standing good names.
Here again, oilfield services providers are in a weaker position than pretty much everyone else. Banks have been reducing their exposure to this segment of the industry for a while before the crisis struck, according to Das, and it seems they will continue doing that while they tighten their lending criteria for the sector players that are still their clients.
We are primarily funded by readers. Please subscribe and donate to support us!
Perhaps a consolidation could help the U.S. oil and gas industry get back on its feet, but so far, the only major deal that made headlines was Chevron’s acquisition of Noble Energy. Uncertainty is a big factor here. The future of the industry, especially the shale patch, is highly uncertain, and this may be dampening the appetite of private equity-backed companies that would have otherwise swooped in to pick up the tastiest morsels.
This might change, according to Das. Private equity-backed buyers could yet decide to take advantage of the low oil price environment that is making a lot of assets cheap. If that happens, they will go after cash generative assets, Das noted, rather than assets in the early stages of development that would require a hefty investment to exploit. Indeed, this seems to be the prevailing sentiment in the industry.
“We will be drilling wells again when oil is back in probably the $50 range,” David Hayes, partner at Natural Gas Partners, told the Midland Reporter-Telegram earlier this year. “It will be unconventional, and it will be horizontal, but it will be much more development-focused. Anything with even a whiff of exploration is not a near-term focus for capital, public or private.”
Nobody, it seems, wants to risk too much, and this is understandable: the situation is unprecedented.
“Since humans started using oil, we have never seen anything like this,” the chief economist of Trafigura, Saad Rahim, told the Wall Street Journal in April. “There is no guide we are following. This is uncharted.”
In such an environment, caution would be the name of the game for everyone—sellers and buyers, lenders, and shareholders.
By Irina Slav for Oilprice.com


investmentwatchblog--2020-08-04--Technically Speaking: COT Positioning – Back To Extremes: Q2-2020

As discussed in Is It Insanely Stupid To Chase Stocks , the market has gotten quite ahead of the fundamentals as money continues to chase performance .
In the Q2-2020 review of Commitment Of Traders report ( COT , ) we can see how positioning has moved back to extremes .
The market remains in a bullish trend from the market lows but is very overbought short-term .
Despite valuations reaching more extreme levels , economic growth very weak , and a risk of a reduction in stimulus ; investors continue to chase markets .
While the S & P @ @ @ @ @ @ @ largest 5-market capitalization companies , it is the Nasdaq that has now reached a more extreme deviation from its longer-term moving average .
Moving averages , especially longer-term ones , are like gravity .
The further prices become deviated from long-term averages , the greater the “ gravitational pull ” becomes .
An “ average ” requires prices to trade above and below the “ average ” level .
The risk of a reversion grows with the size of the deviation .
The Nasdaq currently trades more than 23 % above its 200-dma @ @ @ @ @ @ @ existed was in February of this year .
The Nasdaq also trades 3-standard deviations above the 200-dma , which is another extreme indication .
Such does not mean the market is about to crash .
However , it does suggest the “ rubber band ” is stretched so tightly any minor disappointment could lead to a contraction in prices .
But it isn ’ t just the more extreme advance of the market over the past 8-weeks which has us a bit concerned in the short-term , but a series of other indications @ @ @ @ @ @ @ in the market .
Market sentiment is back to more “ extreme greed ” levels .
Unlike a pure “ sentiment ” based indicator , this gauge is a view of what investors are doing , versus what they are “ feeling.
” The rapid acceleration in price has sent our technical composite gauge back towards extreme overbought levels as well .
( Get this chart every week at RIAPRO.NET ) What we know is that markets move based on sentiment and positioning .
Such makes sense considering that prices are affected by @ @ @ @ @ @ @ given time .
Most importantly , when prices , or positioning , become too “ one-sided , ” a reversion always occurs .
As Bob Farrell ’ s Rule # 9 states : So , how are traders positioning themselves currently ?
The COT ( Commitment Of Traders ) data , which is exceptionally important , is the sole source of the actual holdings of the three key commodity-trading groups , namely : • Commercial Traders : this group consists of traders that use futures contracts for hedging purposes and whose positions exceed @ @ @ @ @ @ @ These traders are usually involved with the production and/or processing of the underlying commodity .
• Non-Commercial Traders : this group consists of traders that use futures contracts for hedging and whose positions exceed the CFTC reporting levels .
They are typically large traders such as clearinghouses , futures commission merchants , foreign brokers , etc .
• Small Traders : the positions of these traders do not exceed the CFTC reporting levels , and as the name implies , these are usually small traders .
The data we are interested in is @ @ @ @ @ @ @ This is the group that speculates on where they believe the market is headed .
While you would expect these individuals to be “ smarter ” than retail investors , we find they are just as subject to “ human fallacy ” and “ herd mentality ” as everyone else .
Therefore , as shown in the charts below , we can look at their current net positioning ( long contracts minus short contracts ) to gauge excessive bullishness or bearishness .
The extreme net-short positioning against the volatility index was an excellent @ @ @ @ @ @ @ sharp sell-off in March , not surprisingly , sharply reduced the short-positions outstanding .
With the markets continuing to rally from the March lows , investors are again becoming encouraged to take on risk .
Currently , net shorts on the VIX are rising sharply and are back to more extreme levels .
While not as severe as seen in 2017 or 2020 , the positioning is large enough to fuel a more significant correction .
The only question is the catalyst .
Investors have gotten used to extremely low levels of volatility @ @ @ @ @ @ @ cycle .
Due to low volatility , the complacency has encouraged investors to take on greater levels of risk than they currently realize .
When volatility eventually makes it return , as we saw in March , the consequences will not be kind .
The recent attempt by crude oil to get back above the 200-dma coincided with the Fed ’ s initiation of QE-4 .
Historically , these liquidity programs tend to benefit highly speculative positions like commodities , as liquidity seeks the highest rate of return .
While prices collapsed along @ @ @ @ @ @ @ has been a sharp reversion on expectations for a global economic recovery .
Interestingly , with the economic recovery showing signs of slowing , crude oil has stalled below its 200-dma .
As we discussed recently with our RIAPRO subscribers : • The rally in oil has stalled at the 200-dma and the 50 % Fibonacci retracement level .
• Importantly , the lower pane “ buy/sell ” signal is the most overbought in 25-years .
( We see the same in many other areas of the market as well like Technology , @ @ @ @ @ @ @ . )
A correction is coming , and it will likely be large .
• There is currently little support for oil and a break of $ 35 will lead to a retest in the $ 20 ’ s .
Despite the decline in oil prices earlier this year , it is worth noting crude oil positioning is still on the bullish side with 543,826 net long contracts .
While not the highest level on record , it is definitely on the “ extremely bullish ” side .
Importantly , there is a @ @ @ @ @ @ @ fall , of oil prices and the S & P 500 index .
If oil begins to correct again , it will be in conjunction with an economic downturn .
Stocks will follow suit .
As we wrote back in February : The rest , as they say , is history .
Another index we track each week at RIAPRO.NET is the U.S. Dollar .
• As noted previously : “ The dollar has rallied back to that all-important previous support line .
IF the dollar can break back above that level , @ @ @ @ @ @ @ oil , will likely struggle .
• That is precisely what happened over the last two weeks .
The dollar has strengthened that rally as concerns over the “ coronavirus ” persist .
With the dollar close to testing previous highs , a break above that resistance could result in a sharp move higher for the dollar .
• The rising dollar is not bullish for oil , commodities or international exposures .
• The “ sell ” signal has begun to reverse .
Pay attention .
Much of the bulls rallying cry @ @ @ @ @ @ @ with the onset of QE .
However , over the last couple of months , the long-dollar bias has reverted to a net “ short ” positioning .
Historically , these reversals are markers of more important peaks in the market , and subsequent corrections .
One of the biggest conundrums for the financial market “ experts ” is why interest rates fail to rise .
In March of last year , I wrote “ The Bond Bull Market ” which was a follow up to our earlier call for a sharp drop @ @ @ @ @ @ @ We based that call on the extreme “ net-short positioning ” in bonds which suggested a counter-trend rally was likely .
Since then , rates fell to the lowest levels in history as economic growth collapsed .
Importantly , while the Federal Reserve turned back on the “ liquidity pumps ” in March , juicing markets back toward all-time highs , bonds have continued to attract money for “ safety ” over “ risk.
” Not surprisingly , despite much commentary to the contrary , the number of contracts “ net-short ” the @ @ @ @ @ @ @ at levels that have preceded further declines in rates .
Such suggests we are “ not out of the woods ” yet , economically speaking .
Importantly , even while the “ net-short ” positioning in bonds has reversed , rates have failed to rise correspondingly .
The reason for this is due to rising levels of Eurodollar positioning .
Such is due to foreign banks pushing reserves into U.S. Treasuries for “ safety ” and “ yield.
” There is a probability for rates to fall in the months ahead coinciding with @ @ @ @ @ @ @ , investors seem to be residing in a world without any perceived risks and a strong belief that financial markets can only rise further .
The arguments supporting those beliefs are based on comparisons to previous peak market cycles .
Unfortunately , investors tend to be wrong at market peaks and bottoms .
With retail positioning very long-biased , the implementation of QE-4 has once again removed all “ fears ” of a correction , recession , or bear market .
Historically , such sentiment excesses form around short-term market peaks .
Such @ @ @ @ @ @ @ of the other famous “ Bob Farrell Rule ” to remember : What investors miss is that while a warning doesn ’ t immediately translate into a negative consequence , such doesn ’ t mean you should not pay attention to it .
As I concluded in our recent newsletter : The cost of not paying attention to risk can be extraordinarily high .

by Lance Roberts
As discussed in Is It Insanely Stupid To Chase Stocks, the market has gotten quite ahead of the fundamentals as money continues to chase performance. In the Q2-2020 review of Commitment Of Traders report (COT,) we can see how positioning has moved back to extremes.
The market remains in a bullish trend from the market lows but is very overbought short-term. Despite valuations reaching more extreme levels, economic growth very weak, and a risk of a reduction in stimulus; investors continue to chase markets.
While the S&P 500 is primarily driven higher by the largest 5-market capitalization companies, it is the Nasdaq that has now reached a more extreme deviation from its longer-term moving average.
Moving averages, especially longer-term ones, are like gravity. The further prices become deviated from long-term averages, the greater the “gravitational pull” becomes. An “average” requires prices to trade above and below the “average” level. The risk of a reversion grows with the size of the deviation.
The Nasdaq currently trades more than 23% above its 200-dma. The last time such a deviation existed was in February of this year. The Nasdaq also trades 3-standard deviations above the 200-dma, which is another extreme indication.
Such does not mean the market is about to crash. However, it does suggest the “rubber band” is stretched so tightly any minor disappointment could lead to a contraction in prices.
But it isn’t just the more extreme advance of the market over the past 8-weeks which has us a bit concerned in the short-term, but a series of other indications which typically suggest short- to intermediate-terms corrections in the market.
The “Greed” Factor
Market sentiment is back to more “extreme greed” levels. Unlike a pure “sentiment” based indicator, this gauge is a view of what investors are doing, versus what they are “feeling.”
The rapid acceleration in price has sent our technical composite gauge back towards extreme overbought levels as well. (Get this chart every week at RIAPRO.NET)
What we know is that markets move based on sentiment and positioning. Such makes sense considering that prices are affected by buyers and sellers’ actions at any given time. Most importantly, when prices, or positioning, become too “one-sided,” a reversion always occurs. As Bob Farrell’s Rule #9 states:
“When all experts agree, something else is bound to happen.”
So, how are traders positioning themselves currently?
Positioning Review
The COT (Commitment Of Traders) data, which is exceptionally important, is the sole source of the actual holdings of the three key commodity-trading groups, namely:
Commercial Traders: this group consists of traders that use futures contracts for hedging purposes and whose positions exceed the reporting levels of the CFTC. These traders are usually involved with the production and/or processing of the underlying commodity.
this group consists of traders that use futures contracts for hedging purposes and whose positions exceed the reporting levels of the CFTC. These traders are usually involved with the production and/or processing of the underlying commodity. Non-Commercial Traders: this group consists of traders that don’t use futures contracts for hedging and whose positions exceed the CFTC reporting levels. They are typically large traders such as clearinghouses, futures commission merchants, foreign brokers, etc.
this group consists of traders that use futures contracts for hedging and whose positions exceed the CFTC reporting levels. They are typically large traders such as clearinghouses, futures commission merchants, foreign brokers, etc. Small Traders: the positions of these traders do not exceed the CFTC reporting levels, and as the name implies, these are usually small traders.
The data we are interested in is the second group of Non-Commercial Traders.
This is the group that speculates on where they believe the market is headed. While you would expect these individuals to be “smarter” than retail investors, we find they are just as subject to “human fallacy” and “herd mentality” as everyone else.
Therefore, as shown in the charts below, we can look at their current net positioning (long contracts minus short contracts) to gauge excessive bullishness or bearishness.
Volatility
The extreme net-short positioning against the volatility index was an excellent indicator of the February peak. The sharp sell-off in March, not surprisingly, sharply reduced the short-positions outstanding.
With the markets continuing to rally from the March lows, investors are again becoming encouraged to take on risk. Currently, net shorts on the VIX are rising sharply and are back to more extreme levels. While not as severe as seen in 2017 or 2020, the positioning is large enough to fuel a more significant correction. The only question is the catalyst.
Investors have gotten used to extremely low levels of volatility, which is unique to this market cycle. Due to low volatility, the complacency has encouraged investors to take on greater levels of risk than they currently realize. When volatility eventually makes it return, as we saw in March, the consequences will not be kind.
Crude Oil Extreme
The recent attempt by crude oil to get back above the 200-dma coincided with the Fed’s initiation of QE-4. Historically, these liquidity programs tend to benefit highly speculative positions like commodities, as liquidity seeks the highest rate of return.
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While prices collapsed along with the economy in March, there has been a sharp reversion on expectations for a global economic recovery. Interestingly, with the economic recovery showing signs of slowing, crude oil has stalled below its 200-dma. As we discussed recently with our RIAPRO subscribers:
The rally in oil has stalled at the 200-dma and the 50% Fibonacci retracement level.
Importantly, the lower pane “buy/sell” signal is the most overbought in 25-years. (We see the same in many other areas of the market as well like Technology, Materials, Discretionary, Communications, Etc.) A correction is coming, and it will likely be large.
There is currently little support for oil and a break of $35 will lead to a retest in the $20’s.
Long-Term Positioning: Bearish
Despite the decline in oil prices earlier this year, it is worth noting crude oil positioning is still on the bullish side with 543,826 net long contracts. While not the highest level on record, it is definitely on the “extremely bullish” side.
Oil Leads Stocks & The Economy
Importantly, there is a decent correlation to the rise, and fall, of oil prices and the S&P 500 index. If oil begins to correct again, it will be in conjunction with an economic downturn. Stocks will follow suit.
As we wrote back in February:
“The inherent problem with this is that if crude oil breaks below $48/bbl, those long contracts will get liquidated. Such will likely push oil back into the low 40’s very quickly. The decline in oil is both deflationary and increases the risk of an economic recession.”
The rest, as they say, is history.
U.S. Dollar Extreme
Another index we track each week at RIAPRO.NET is the U.S. Dollar.
Speaking of hedges, we began to accumulate a long-dollar position in portfolios this past week. There are several reasons for this: When the financial media discusses the dollar’s demise, such is usually a good contrarian signal. The dollar has recently had a negative correlation to stocks, bonds, gold, commodities, etc. The surging exuberance in gold also acts as a reliable contrarian indicator of the dollar. The dollar is currently 3-standard deviations below the 200-dma, which historically is a strong buy signal for a counter-trend rally. Given our portfolios are long weighted in equities, bonds, and gold currently, we need to start hedging that risk with a non-correlated asset. We also trimmed some of our holdings in conjunction with adding a dollar hedge.
As noted previously: “The dollar has rallied back to that all-important previous support line. IF the dollar can break back above that level, and hold, then commodities, and oil, will likely struggle.
That is precisely what happened over the last two weeks. The dollar has strengthened that rally as concerns over the “coronavirus” persist. With the dollar close to testing previous highs, a break above that resistance could result in a sharp move higher for the dollar.
With the dollar close to testing previous highs, a break above that resistance could result in a sharp move higher for the dollar. The rising dollar is not bullish for oil, commodities or international exposures.
The “sell” signal has begun to reverse. Pay attention.
Much of the bulls rallying cry has been based on the dollar weakening with the onset of QE. However, over the last couple of months, the long-dollar bias has reverted to a net “short” positioning. Historically, these reversals are markers of more important peaks in the market, and subsequent corrections.
Interest Rate Extreme
One of the biggest conundrums for the financial market “experts” is why interest rates fail to rise. In March of last year, I wrote “The Bond Bull Market” which was a follow up to our earlier call for a sharp drop in rates as the economy slowed. We based that call on the extreme “net-short positioning” in bonds which suggested a counter-trend rally was likely.
Since then, rates fell to the lowest levels in history as economic growth collapsed. Importantly, while the Federal Reserve turned back on the “liquidity pumps” in March, juicing markets back toward all-time highs, bonds have continued to attract money for “safety” over “risk.”
Not surprisingly, despite much commentary to the contrary, the number of contracts “net-short” the 10-year Treasury, while reduced, remains at levels that have preceded further declines in rates. Such suggests we are “not out of the woods” yet, economically speaking.
Importantly, even while the “net-short” positioning in bonds has reversed, rates have failed to rise correspondingly. The reason for this is due to rising levels of Eurodollar positioning. Such is due to foreign banks pushing reserves into U.S. Treasuries for “safety” and “yield.”
There is a probability for rates to fall in the months ahead coinciding with further deterioration in economic growth.
Conclusion
Amazingly, investors seem to be residing in a world without any perceived risks and a strong belief that financial markets can only rise further. The arguments supporting those beliefs are based on comparisons to previous peak market cycles. Unfortunately, investors tend to be wrong at market peaks and bottoms.
With retail positioning very long-biased, the implementation of QE-4 has once again removed all “fears” of a correction, recession, or bear market. Historically, such sentiment excesses form around short-term market peaks.
Such is a excellent time to remind you of the other famous “Bob Farrell Rule” to remember:
“#5 – The public buys the most at the top and the least at the bottom.”
What investors miss is that while a warning doesn’t immediately translate into a negative consequence, such doesn’t mean you should not pay attention to it.
As I concluded in our recent newsletter:
“There remains an ongoing bullish bias that continues to support the market near-term. Bull markets built on ‘momentum’ are very hard to kill. Warning signs can last longer than logic would predict. The risk comes when investors begin to ‘discount’ the warnings and assume they are wrong. It is usually just about then the inevitable correction occurs. Such is the inherent risk of ignoring risk.’”
The cost of not paying attention to risk can be extraordinarily high.


investmentwatchblog--2020-08-04--The RBA is financing the Australian government as well as pumping the housing market

It is time for another trip to a land down under as even commodity rich Australia has found its economy affected by the Covid-19 pandemic .
It raises a wry smile as I used to regularly reply to the World Economic Forum which periodically trumpeted Australia ’ s lack of a recession that with its enormous resources that was hardly a surprise and thus meant little about economic policy .
However we eventually found something which did create a recession .
From the Reserve Bank of Australia earlier .
I would be careful about saying things are not as bad @ @ @ @ @ @ @ if I was the RBA .
So let us send our best wishes to those affected there as we note the detailed breakdown of the forecasts .
So they are expecting lower falls than in Europe but there is a familiar rebound next year which frankly feels based on Zebedee from The Magic Roundabout rather than any grounding in reality .
Like so often this is what it boils down too .
So even resources rich Australia found itself unable to resist the supermassive black hole pull of ZIRP and central bankers being @ @ @ @ @ @ @ shall explain in a minute they have stopped slightly short of 0 % because of fears for the banking sector .
But the crucial point we are noting here is the control agenda for the bond market which mimics in concept if not level that applied by the Bank of Japan .
Why does the government need financing ?
Well there is this .
As to how much the Australian Office of Financial Management reinforced this last week .
The major shift in fiscal policy is highlighted here .
So a near doubling @ @ @ @ @ @ @ bothered about issuing debt .
To a spell when they could not issue at all .
They would have been burning the midnight oil before International Rescue arrived .
If we return to the RBA statement let me present you with two outright lies .
If they are then why is this needed ?
Then the next lie .
Actually it will remain in place until the government no longer needs financing .
This may be open ended as we note that the only place which has this ( Japan ) only ever @ @ @ @ @ @ @ .
The initial salvo in Australia was this .
In another example of pack animal behaviour they have pretty much copied and pasted a Bank of England policy .
So they are avoiding calling them banks .
Oh and whilst they get this .
You may note how bank costs are “ reduced ” whereas it is “ helping to reduce ” them for others .
We know who it will help and it is not these .
Well not unless they are in the mortgage or house price market .
For those @ @ @ @ @ @ @ policies were applied here small business lending did nothing but in a “ completely unexpected development ” mortgage rates plunged and lending surged .
So far just over 27 billion Australian Dollars have been supplied via this route .
Much here is familiar as we see a central bank implicitly financing its government and pumping up the housing market too .
The RBA must have thought all its Christmases had come at once when the Aussie bond market had trouble at the shorter maturities and it could intervene at a place likely to @ @ @ @ @ @ @ feel the banks need help or it would have cut the official rate to 0 % .
Thus has led to a money supply surge with narrow money going from 909 billion in June of last year to 1260 billion on June of this .
Quite a shift for an aggregate which we had noted in the past was going nowhere and at times had fallen .
Switching to external events the Aussie Dollar or as some call it the little battler has been doing well .
The trade weighted index which went @ @ @ @ @ @ @ familiar to regular readers but the 19th of March for newer ones is now 61.4 .
As for influences I guess the relative hopes for the economy are in play as well as this .
So an improvement for the resources base and looking ahead Gold is 7.5 % of the index .
Although the compilers of the index have just reduced its weight from 8.7 % and will now find themselves in the deepest dark recesses of the RBA bunker where the cake trolley never goes .

by Shaun Richards
It is time for another trip to a land down under as even commodity rich Australia has found its economy affected by the Covid-19 pandemic. It raises a wry smile as I used to regularly reply to the World Economic Forum which periodically trumpeted Australia’s lack of a recession that with its enormous resources that was hardly a surprise and thus meant little about economic policy. However we eventually found something which did create a recession. From the Reserve Bank of Australia earlier.
The Australian economy is going through a very difficult period and is experiencing the biggest contraction since the 1930s. As difficult as this is, the downturn is not as severe as earlier expected and a recovery is now underway in most of Australia. This recovery is, however, likely to be both uneven and bumpy, with the coronavirus outbreak in Victoria having a major effect on the Victorian economy.
I would be careful about saying things are not as bad as expected after the reverse in Victoria if I was the RBA. So let us send our best wishes to those affected there as we note the detailed breakdown of the forecasts.
In the baseline scenario, output falls by 6 per cent over 2020 and then grows by 5 per cent over the following year. In this scenario, the unemployment rate rises to around 10 per cent later in 2020 due to further job losses in Victoria and more people elsewhere in Australia looking for jobs. Over the following couple of years, the unemployment rate is expected to decline gradually to around 7 per cent.
So they are expecting lower falls than in Europe but there is a familiar rebound next year which frankly feels based on Zebedee from The Magic Roundabout rather than any grounding in reality.
Financing The Government
Like so often this is what it boils down too.
At its meeting today, the Board decided to maintain the current policy settings, including the targets for the cash rate and the yield on 3-year Australian Government bonds of 25 basis points.
So even resources rich Australia found itself unable to resist the supermassive black hole pull of ZIRP and central bankers being pack animals. I suspect as I shall explain in a minute they have stopped slightly short of 0% because of fears for the banking sector. But the crucial point we are noting here is the control agenda for the bond market which mimics in concept if not level that applied by the Bank of Japan.
Why does the government need financing? Well there is this.
Government bond markets are functioning normally alongside a significant increase in issuance.
As to how much the Australian Office of Financial Management reinforced this last week.
On the 3rd of July we announced a weekly issuance rate for Treasury Bonds of $4-5 billion, with a weekly rate of issuance for Treasury Notes of $2-4 billion. We are confident this guidance will be reliable until the October Budget; absent of course a sharp unanticipated change in the fiscal position.
The major shift in fiscal policy is highlighted here.
Although to date we have only announced a weekly issuance rate and new maturities, the current plan for gross Treasury Bond issuance this year is around $240 billion. This will comprise about $50 billion to fund maturing debt and $190 billion of net new issuance. This is materially higher than the $128 billion issued last year, although almost $90 billion of that was issued in the last quarter.
So a near doubling as they went from not being that bothered about issuing debt.
Less than six months ago the AOFM was rationing issuance to best manage a market maintenance objective.
To a spell when they could not issue at all.
Temporary loss of access to funding markets is certainly something we had thought possible (and indeed likely at some point), but combined with the scale and timing of the increased pandemic financing task it was a more sobering experience than we could have imagined.
They would have been burning the midnight oil before International Rescue arrived.
We will never know how long the market would have taken to recover had the RBA not intervened.
If we return to the RBA statement let me present you with two outright lies.
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Government bond markets are functioning normally alongside a significant increase in issuance.
If they are then why is this needed?
The yield has, however, been a little higher than 25 basis points over recent weeks. Given this, tomorrow the Bank will purchase AGS in the secondary market to ensure that the yield on 3-year bonds remains consistent with the target. Further purchases will be undertaken as necessary.
Then the next lie.
The yield target will remain in place until progress is being made towards the goals for full employment and inflation.
Actually it will remain in place until the government no longer needs financing. This may be open ended as we note that the only place which has this ( Japan) only ever seems to do more and never less. The initial salvo in Australia was this.
To date, the Reserve Bank has bought around $47 billion of government bonds ( April 21st)
The Precious! The Precious!
In another example of pack animal behaviour they have pretty much copied and pasted a Bank of England policy.
The Reserve Bank has established a Term Funding Facility (TFF) to offer three-year funding to authorised deposit-taking institutions (ADIs).
So they are avoiding calling them banks. Oh and whilst they get this.
to reinforce the benefits to the economy of a lower cash rate, by reducing the funding costs of ADIs and in turn helping to reduce interest rates for borrowers.
You may note how bank costs are “reduced” whereas it is “helping to reduce” them for others. We know who it will help and it is not these.
The scheme encourages lending to all businesses, although the incentives are stronger for small and medium-sized enterprises (SMEs).
Well not unless they are in the mortgage or house price market. For those unaware of the UK situation when the policies were applied here small business lending did nothing but in a “completely unexpected development” mortgage rates plunged and lending surged.
So far just over 27 billion Australian Dollars have been supplied via this route.
Comment
Much here is familiar as we see a central bank implicitly financing its government and pumping up the housing market too. The RBA must have thought all its Christmases had come at once when the Aussie bond market had trouble at the shorter maturities and it could intervene at a place likely to impact on mortgage rates. It must feel the banks need help or it would have cut the official rate to 0%.
Thus has led to a money supply surge with narrow money going from 909 billion in June of last year to 1260 billion on June of this. Quite a shift for an aggregate which we had noted in the past was going nowhere and at times had fallen.
Switching to external events the Aussie Dollar or as some call it the little battler has been doing well. The trade weighted index which went as low as 49.9 on a day familiar to regular readers but the 19th of March for newer ones is now 61.4. As for influences I guess the relative hopes for the economy are in play as well as this.
Preliminary estimates for July indicate that the index increased by 0.9 per cent (on a monthly average basis) in SDR terms, after decreasing by 0.2 per cent in June (revised). The non-rural and base metals sub-indices increased in the month, while the rural sub-index decreased. In Australian dollar terms, the index decreased by 0.2 per cent in July. Over the past year, the index has decreased by 12 per cent in SDR terms, led by lower coal, iron ore, LNG and oil prices. The index has decreased by 12.1 per cent in Australian dollar terms. ( RBA earlier today)
So an improvement for the resources base and looking ahead Gold is 7.5% of the index. Although the compilers of the index have just reduced its weight from 8.7% and will now find themselves in the deepest dark recesses of the RBA bunker where the cake trolley never goes.