Saturday, January 30, 2021

What's going on with this market?

Profit taking and Game Stop.




Transcript

Hello. This is our weekly market alert for the week ended January 29, 2021. Wow. Month is over already. Yesterday, it was New Year’s Eve. It’s so fast. Time flies when you’re having fun, I guess. So, this week, I want to start off with saying that the selling that we’ve seen here in the last couple of days, last 3 days actually, we believe is essentially profit taking. We had a phenomenal run in the stock market since November, and so it’s not unreasonable to have some people say, you know what, with all this stuff going on and, you know, the new administration potentially raising taxes and who knows what, I’m a little nervous, maybe I’ll just take some profits off the table, and so we believe that this selling that we’ve seen here this week is that. It’s not the beginning of the next bear market. In fact, we think it’s the opposite. With stimulus and vaccines, that our economy is probably going to get back on its feet here over the next year or two, and all of that bodes well for profits, and as you know, profits tend to drive stock prices, and if profits are rising, stock prices generally are rising as well. So, the outlook is still positive, although you could make the argument there’s a lot of risk in this market, which is why we are so happy we have our invest and protect strategy in place to help us, should things turn south.

So, I’m kind of wanting to get past that because I want to talk about this whole GameStop and AMC stuff, and I find it fascinating and very, very interesting to watch this battle between what they’re saying is, you know, Wall Street and Main Street. So, let me see if I can explain this to you and give you some, I guess, context as to what’s going on. So, there’s a way of investing that is called shorting. Okay? So, what you and I are mostly familiar with is what’s called going long. Going long means that you buy today with the anticipation that your investment is going to rise in the future, and so you’re going to see a rising value of your investment. That’s called going long. Going short means that you think it’s the opposite. You think that this investment, this company, this stock is going to go down, and so how do you invest to take advantage or make money on a stock that’s going to lose value? That’s called shorting. So, when you short, it’s a reverse trade. You’re not buying today because you hope it goes up in the future. You’re selling today because you think it’s going to go down in value and you’re going to buy it back at a lower price. Okay? So, let’s say for example you sell today at $100.00 price, you have a contract, a short contract, which says that at some point in the future, before then, you have to buy it back, and when you buy it back, you’re hoping it’ll be at a lower price. So, for example, let’s say you sell it today at $100.00. It does what you think, it goes down by 50 percent, that would be in this situation a big profitable move because now you can buy it at $50. So, you sold it at $100.00, and you bought it at $50.00. You made a $50.00 profit. So, that’s what hedge funds do.

So, let’s look at the hedge fund that says we think movie theaters are going to get hit badly by this pandemic. We’re going to see their stock price fall dramatically, so let’s short that. So, they short AMC, since that’s the one that’s been targeted here in the last week, and so a lot of hedge funds have shorted AMC stock because they said people aren’t going to theaters. Stock price in movie theater stock should fall, so we’re going to short that. So, they were right. The price of movie theater stocks has fallen dramatically, and they’re sitting on a huge profit potentially. Now, you get these guys that are on Robinhood and other places, and they’re all getting together in these chat groups on Reddit, and they’re saying to each other, hey, you know what, if we all band together and start buying AMC stock or GameStop, which are hugely shorted, we will drive the price up. If we drive the price up, the hedge funds now are losing money because, remember, they have to buy it back, and they’re hoping at a lower price. So, as the price is rising, they could lose money, and if these Reddit guys, these Robinhood people, if they buy enough of it, they could drive the price higher than where the hedge fund sold it, and now the hedge funds lose billions of dollars. So, how do the hedge funds have to react? This is called a short squeeze. What do they have to do to protect themselves? They have to buy. If they buy, what happens to price of GameStop and of AMC? It goes up, and these guys that are on Robinhood and on, you know, Reddit talking to each other, they make money that way. So, they are forcing the hedge funds to buy to get out of their short contracts before they lose a lot of money, and that’s making the price go up dramatically. So, now, what’s the other side of all of this? When there’s no more shorts, when the hedge funds have been squeezed out, all these people that are still in are going to be holding AMC stock at a 500 percent gain, which is unwarranted, and the bell will go off, and everybody’s going to run for the exits, and anybody still there is going to lose their shirts.

So, I don’t think that this thing should be regulated. I don’t think anybody should be in the way of it. I think we should just let it play itself out. What’s going to happen, in my view, if they do nothing, is that those young investors will learn a very harsh lesson if they’re still in when the big drop comes, and the hedge funds on Wall Street are learning a lesson as well. They can’t keep doing what they’ve been doing, which is going and sending all their analysts out and saying, we think, you know, GameStop is a terrible stock, it’s going to lose a ton of money and you need to sell it, and when you do they make money. So, they’ve been doing that too, over this last quite a while, so that’s how they’ve been making money also. They’re going to learn they can’t do that anymore. I think it’s all good, but in the short run, there’s going to be a lot of money made and a lot of money lost in a big way. So, we’re not invested in any of that, have no desire to play that game, but it is going to be a very interesting thing to watch unfold, and I hope the regulators stay out of it. As much as politicians and everybody else wants to get involved, I hope they just stay out of it. Nothing here that I can see at this moment is illegal about any of this. So, stayed tuned to all of that.

Friday, January 29, 2021

Economic Reports: Week Ending Jan. 29, 2021

Market close 1/29/21


Markets remain choppy, with a decisive drop from record highs

The stock markets retreated decisively from record highs this week, with the elevated frothiness in the markets appearing to fall victim to the vulnerabilities of a shock to the system, which came in the form of a cohort of retail investors taking aim at highly shorted stocks. The Schwab Center for Financial Research (SCFR) discusses the disruption in the article, What Investors Should Know About Recent "Flash Mob" trading.

Meanwhile, the Federal Reserve reiterated its highly accommodative stance to combat the severely elevated unemployment levels as discussed by Schwab's Chief Investment Strategist Liz Ann Sonders in her latest article, Steady as We Go: Fed Keeps Rates Unchanged. Q4 earnings season reached a fever pitch and given that equities had been running hot coming into the season, the reaction on the Street was muted despite mostly stronger than expected results.

Of the 184 S&P 500 companies that have reported thus far, roughly 74% have topped revenue forecasts and approximately 83% have bested earnings projections, per data compiled by Bloomberg. Thus far, y/y sales growth has been modestly positive at a rate just shy of 1.0%, while earnings expansion is on track to be up nearly 5.0%.

Regional manufacturing activity surprisingly slows

The January Dallas Fed Manufacturing Index unexpectedly declined but remained in expansion territory (a reading above zero). The index decreased to 7.0 from 9.7 in December and compared to the Bloomberg consensus forecast of a rise to 12.0. New orders and production both expanded at much slower rates month-over-month (m/m), while growth in employment slowed but remained solidly north of zero.

CFNAI shows continued recovery at yearend 

The Chicago Fed National Activity Index (CFNAI) increased 0.21 points in December to 0.52, indicating a pickup in growth at the end of 2020, despite a surge in COVID cases. The three-month average of the CFNAI edged up slightly to 0.61. While the headline index and its trend are lower than what they were in Q3, they indicate continued economic recovery in Q4, albeit at a slower pace. Additionally, the pace of growth is consistent with neutral inflationary pressures. 

Three of the four broad categories of indicators made positive contributions to the CFNAI in December, led by production-related indicators. The CFNAI Diffusion Index, which is based on 85 individual indicators, slipped only 0.01 point to 0.54, positive for the seventh consecutive month, and near its highest level since December 1999. Such strong indicator breadth also suggests continued economic recovery. 

Texas factory activity softens, but outlook up 

The Texas Manufacturing General Business Activity Index fell 3.5 points in January to 7.0, a six-month low, indicating notable growth deceleration in the region. The assessment of individual company conditions was also the least favorable since last July. Production, new orders, shipments, and capacity utilization all posted slower growth rates. Employment growth also moderated, although hours worked pushed up higher. Raw material prices rose at the fastest rate in nearly a decade, while finished goods inflation eased, suggesting some downward pressure for profit margins. 

Despite softer current conditions, manufacturers expressed more optimism about the near-term growth outlook.

Consumer Confidence improves slightly as Fed began first meeting of 2021

The Conference Board's Consumer Confidence Index increased to 89.3 in January from December's downwardly revised 87.1 level, and versus the Bloomberg consensus estimate calling for a slight improvement to 89.0. The positive read came as a decline for the Present Situation Index portion of the survey was more than offset by a solid gain in the Expectations Index of business conditions for the next six months. On employment, the labor differential—consumers’ appraisal of jobs being "plentiful" minus being "hard to get"—moved further into negative territory, posting a reading of -3.2 following the -1.9-level posted in December.

Finally, the Federal Open Market Committee (FOMC) began its two-day monetary policy meeting today, which will conclude with tomorrow's statement and the customary press conference from Fed Chairman Jerome Powell. Powell's comments are likely to be highly scrutinized given the backdrop of optimism of a second half economic recovery in 2021, rising inflation expectations, the recent steepening of the Treasury yield curve, Fedspeak as of late suggesting mixed feelings regarding tweaking asset purchases, and the disappointing start to the rollout of vaccines.

Home price index up 9 percent

The 20-city composite S&P CoreLogic Case-Shiller Home Price Index posted a 9.08% y/y gain in home prices in November, versus estimates of an 8.70% increase. Compared to the prior month, home prices were up 1.42% on a seasonally adjusted basis, above forecasts of a 1.00% gain.


Oil industry alarmed at drilling restrictions

The Biden administration may suspend new leases on federal lands – the administration already issued a 60-day moratorium – sending the stock prices of oil drillers tumbling. New Mexico may have a lot to lose. However, the industry has already stockpiled permits that could take years to work through, so the practical impact may be limited.

Drilling restrictions bullish for oil

“[P]olicies to support energy demand but restrict hydrocarbon production (or increase costs of drilling and financing) will prove inflationary in coming years given the still negligible share of transportation demand coming from EVs (and renewables),” Goldman Sachs wrote in a report. 

Durable goods orders report mixed, mortgage applications decline

December preliminary durable goods orders rose 0.2% month-over-month (m/m), versus the Bloomberg consensus estimate of a 1.0% rise and compared to November's upwardly revised 1.2% increase. Ex-transportation, orders grew 0.7% m/m, above forecasts of a 0.5% gain and compared to November's favorably adjusted 0.8% rise. Moreover, orders for non-defense capital goods excluding aircraft, considered a proxy for business spending, were up 0.6%, compared to projections of a 0.5% rise, while the prior month's figure was revised upward to a 1.0% increase.

The headline figure was bogged down by a sharp drop in nondefense aircraft and parts orders, along with a decline in defense aircraft and parts. However, demand for motor vehicles, machinery and fabricated metal products rose solidly to more than offset a decline in orders for computers and related products.

The MBA Mortgage Application Index decreased by 4.1% last week, following the prior week's 1.9% decrease. The drawdown came as the Refinance Index fell 5.0% and the Purchase Index dropped 4.0%. The average 30-year mortgage rate increased 3 basis points (bps) to 2.95%.

Q4 GDP growth slowed more than expected

The first look (of three) at Q4 Gross Domestic Product, the broadest measure of economic output, showed a quarter-over-quarter (q/q) annualized rate of expansion of 4.0%, versus the Bloomberg consensus estimate of a 4.2% gain after the unrevised 33.4% jump in Q3. Personal consumption rose by 2.5%, compared to forecasts of a 3.1% increase, and following the unadjusted 41.0% surge recorded in Q3.

Inflation below expectations (but still bears watching)

On inflation, the GDP Price Index came in at a 2.0% increase, below expectations of 2.2% gain, and versus the unrevised 3.5% rise seen in Q3, while the core PCE Index, which excludes food and energy, moved 1.4% higher, compared to expectations of a 1.2% increase, and following the unadjusted 3.4% gain in Q3.

Jobless claims below expectations, but still at historic highs

Weekly initial jobless claims (chart) came in at a level of 847,000 for the week ended January 23, south of estimates of 875,000, and compared to the prior week's upwardly revised 914,000 level. The four-week moving average rose by 16,250 to 868,000, and continuing claims for the week ended January 16 dropped by 203,000 to 4,771,000, below estimates of 5,088,000. The four-week moving average of continuing claims declined by 106,750 to 4,998,000.

Leading Economic Indicators up slightly

The Conference Board's Index of Leading Economic Indicators (LEI) (chart) for December rose 0.3% month-over-month (m/m), in line with estimates and following November's upwardly revised 0.7% increase. The LEI was positive for the eighth-straight month after the plunges in March and April, due to positive net contributions from ISM new orders, building permits and stock prices, which more than offset weakness in jobless claims and average consumer expectations.

New home sales higher

New home sales (chart) increased 1.6% m/m in December to an annual rate of 842,000 units, versus forecasts calling for a rate of 870,000 units, and compared to November's downwardly revised 829,000 unit level. The median home price was up 8.0% y/y at $355,900. New home inventory rose to a 4.3-months supply at the current sales pace from the 4.2-months level in November. Sales in the Northeast and South declined m/m, while sales in the Midwest and West jumped. Sales in all regions, except the Northeast, were higher y/y. New home sales are based on contract signings, offering a timelier read on housing activity compared to the larger contributor of existing home sales, which are based on closings.

Personal income and spending better than expected, regional manufacturing jumps

Personal income (chart) rose 0.6% month-over-month (m/m) in December, versus the Bloomberg forecast of 0.1% gain, following November's downwardly revised 1.3% decline. Personal spending dipped 0.2%, versus estimates of a 0.4% decline and compared to the prior month's negatively adjusted 0.7% decrease. The December savings rate as a percentage of disposable income was 13.7%. The PCE Deflator gained 0.4% m/m, topping expectations of a 0.3% rise and compared to November's unadjusted flat reading. Compared to last year, the deflator was 1.3% higher, above estimates of a 1.2% rise and November's unadjusted 1.1% gain. Excluding food and energy, the PCE Core Index increased 0.3% m/m, north of expectations of a 0.1% increase and versus November's unrevised unchanged reading. The index was 1.5% higher y/y, versus estimates of a 1.3% increase and November's unadjusted 1.4% gain.

The January final University of Michigan Consumer Sentiment Index (chart) was revised lower to 79.0, versus expectations of a slight increase to 79.4 from the preliminary reading of 79.2. The downward revision came as the current conditions portion of the survey was adjusted lower, while the expectations component was revised higher by a smaller amount than anticipated. The overall index was also lower versus December's 80.7 level. The 1-year inflation forecast rose to 3.0% from December's 2.5% rate, and the 5-10 year inflation forecast increased to 2.7% from the prior month's 2.5% pace.

The Chicago PMI surprisingly jumped further into a level depicting expansion (a reading above 50). The index rose to 63.8—the highest since the Summer of 2018—in January from December's 59.5 level, and versus estimates calling for a decline to 58.5. Growth in new orders and production expanded at faster paces, but the contraction in employment intensified and prices paid accelerated.

Pending home sales dipped 0.3% m/m in December, versus estimates calling for a 0.5% decrease after November's 2.5% decline. Sales were 22.8% higher y/y, compared to November's 16.1% increase. Pending home sales reflect contract signings and are a gauge of the pipeline of existing home sales.

The Q4 Employment Cost Index increased 0.7% quarter-over-quarter (q/q), exceeding estimates calling for it to match Q3's unadjusted 0.5% increase.

Treasuries finished mixed with the rate on the 2-year note dipping 1 basis point (bp) to 0.11%, while the yields on the 10-year note and the 30-year bond rose 3 bps to 1.07% and 1.84%, respectively.

Saturday, January 23, 2021

Cut These People Off

 You are a product of your environment. You are a product of who you hang out with. And how to deal with people you can't cut off.

https://youtu.be/d3uAaz1jaDg



Economic Reports: Week ending Jan. 22, 2021


Mortgage applications decline 

The MBA Mortgage Application Index decreased by 1.9% last week, following the prior week's 16.7% jump. The pullback came as the Refinance Index fell 4.7% to more than offset a 2.7% gain for the Purchase Index. The average 30-year mortgage rate increased 4 basis points (bps) to 2.92%.

Builder confidence off slightly 

The NAHB/Wells Fargo Housing Market Index (HMI) slipped three points in January, down for the second straight month, to 83, below the consensus of 85. All three index components fell, led by reduced prospective buyer traffic. The report noted that the surge in lumber prices and the relentless increase in COVID cases weighed on builder confidence, amid ongoing concerns about the dearth of affordable lots and skilled labor, as well as increased regulatory uncertainty. 

Even so, the HMI remains close to a record high level, indicating elevated builder confidence, which bodes well for the near-term outlook for housing starts. 

More weakness in architecture billings 

The Architecture Billings Index (ABI) fell 3.7 points in December to 42.6, a four-month low, and in contraction territory for the tenth consecutive month. The index has partially recovered since its low in April, but its recent readings suggest a renewed decline in the demand for design service and continued weakness in nonresidential construction spending in 2021. Demand was weaker across sectors and regions. 

Amid forward looking indicators, the Project Inquiries Index ticked up slightly, but the Design Contracts Index edged deeper into negative territory, implying that future demand is mixed-to-lower. 

ATA truck tonnage ends 2020 strong 

The ATA For-Hire Truck Tonnage Index jumped 7.4% in December, up in three of the past four months, and surpassing its previous high that was reached in March 2020. The index was also up 2.3% from a year ago. The increase in freight activity reflects the ongoing economic recovery from the pandemic and the recession, retail inventory restocking, and a pickup in homebuilding. The report noted that with fiscal stimulus already in place, and more likely coming in the near future, truck freight volume is expected to continue rising. 

Jobless claims slow, housing construction activity strong

Weekly initial jobless
claims came in at a level of 900,000 for the week ended January 16, below the Bloomberg consensus estimate of 935,000, and compared to the prior week's downwardly-revised 926,000 level. The four-week moving average rose by 23,500 to 848,000, and continuing claims for the week ended January 9 fell by 127,000 to 5,054,000, south of estimates of 5,300,000. The four-week moving average of continuing claims declined by 67,000 to 5,126,250.

Housing starts for December rose 5.8% month-over-month (m/m) to an annual pace of 1,669,000 units, above forecasts of 1,560,000 units, and compared to November's upwardly-revised pace of 1,578,000 units. Also, building permits, one of the leading indicators tracked by the Conference Board as it is a gauge of future construction, grew 4.5% m/m at an annual rate of 1,709,000, north of expectations of 1,608,000 units, and compared to the unrevised 1,639,000 unit pace in November.


Regional manufacturing jumps

The Philly Fed Manufacturing Index unexpectedly jumped further into expansion territory (a reading above zero) for January, rising to 26.5 versus estimates to tick higher to 11.8 from December's 11.1 level. Growth in new orders, shipments and employment all accelerated sharply.

Existing home sales top estimates

Existing home sales ticked 0.7% higher month-over-month (m/m) in December to an annual rate of 6.76 million units, versus expectations of a decline to 6.56 million units from November's upwardly-revised 6.71 million rate. Existing home sales are up 22.2% y/y.

Of the four major regions, the Northeast and South experienced m/m sales gains, while sales in the Midwest were unchanged and fell in the West. All regions saw sharp gains y/y. Sales of single-family homes and purchases of condominiums and co-ops were both up m/m and y/y. The median existing home price was up 12.9% from a year ago to $309,800, marking the 106th straight month of y/y gains as prices rose in every region. Unsold inventory posted an all-time low of a 1.9-months pace at the current sales rate, down from 2.3-months in November and the 3.0-months pace a year earlier. Existing home sales reflect contract closings instead of signings and account for a large majority of the home sales market.

National Association of Realtors Chief Economist Lawrence Yun said, "Home sales rose in December, and for 2020 as a whole, we saw sales perform at their highest levels since 2006, despite the pandemic," adding that "What's even better is that this momentum is likely to carry into the new year, with more buyers expected to enter the market." Yun also noted that, "Although mortgage rates are projected to increase, they will continue to hover near record lows at around 3%," and he expects economic conditions to improve with additional stimulus forthcoming and vaccine distribution already underway.

Oil prices pause over demand worries

Oil posted some losses at the close of the week, with Brent dipping back below $55 per barrel and WTI down below $52. More travel restrictions in Hong Kong, Shanghai, and the UK led to demand pessimism, and a temporary jump in the dollar also weighed on crude.

Biden’s first actions on energy. As expected, President Biden signed a litany of executive orders related to energy and climate, including canceling Keystone XL, rejoining the Paris Climate Agreement and beginning the process of undoing a long list of regulatory actions under the Trump administration.

Chamber, API open to methane regulations. The Chamber of Commerce and the American Petroleum Institute (API), the most powerful business and oil lobbies in the U.S., respectively, said that they were open to the reimplementation of methane regulations on oil and gas operations, after supporting a rollback in the Trump era. The industry has long supported voluntary actions only. “This is a new position for API, but we think given where the industry is at this time and the continued importance of reducing methane, it was critical we update this position as the administration changes,” API CEO Mike Sommers told the Washington Examiner.

OPEC looks to build ties with Biden. OPEC’s secretary general said that the group will seek to strengthen its relationship with the Biden administration, although thorny questions over the Iran nuclear deal and climate change loom.

Friday, January 22, 2021

What the Biden Administration may mean for your money

Taxes

Biden has proposed sweeping changes to the tax code, including returning the top income tax rate to 39.6% from its current level of 37%. He has pledged to not raise taxes on anyone making less than $400,000.

Yet, he wants to raise taxes on long-term capital gains from investments and qualified dividends. Taxpayers with income above $1 million would be subject to a capital gains tax rate of 39.6%, instead of the current 20%.

Meanwhile, the corporate tax rate would jump to 28% from 21% and there would be a 15% minimum tax on book income for corporations that have profits of $100 million or higher.

Bank of America Securities estimates that Biden's tax plan would reduce S&P 500 earnings by 7%, mostly because of the higher corporate taxes.

In addition, the wealthy will face a higher estate tax bill. Currently, under the Tax Cuts and Jobs Act, individuals can gift or make a bequest of $11.7 million, or $23.4 million for a married couple, before facing the 40% estate or gift tax.

That provision expires at the end of 2025, reverting back to about $5 million per individual. However, Biden would cut that to $3.5 million and limit individual gift transfers to $1 million, according to the Tax Policy Center. Estate and gift taxes could also rise to 45%, the center’s analysis found.

Retirement savings

On the campaign trail, Biden called for equalizing benefits of retirement plans.

Currently, workers contribute to a traditional 401(k) plan on a pre-tax basis, which helps lower their taxable income. The size of the tax savings varies, with those in a higher tax bracket seeing a bigger reduction in their tax bill.

Biden proposes replacing that with a credit of approximately 26% of the amount contributed, according to an analysis by the Tax Policy Center.

Depending on how it is structured, lower-income workers may be encouraged to save more money and may see a higher tax savings when they file returns, analysts have said. 

Social Security

Benefit increases are a part of the president’s plan to overhaul Social Security.

Eligible workers would get a guaranteed minimum benefit equal to at least 125% of the federal poverty level. Those who have received benefits for at least 20 years would receive a 5% increase. Widows and widowers could get approximately 20% more a month.

He plans to pay for the changes and extend the program’s solvency by hiking Social Security payroll taxes to 12.4% on those making $400,000 and up. In April, the Social Security Administration projected its funds could run out in 2035. 

Covid relief package

Before taking office, Biden outlined a plan to help Americans recover from the coronavirus pandemic, which included:
  • Increase stimulus checks to $2,000
  • Boost weekly unemployment benefits by $400
  • Raise the federal minimum wage to $15 per hour, up from $7.25 per hour
  • $30 billion in rental assistance and another $5 billion help those experiencing or at risk of homelessness find housing
  • Boost child tax credit to $3,000 for qualifying children aged 17 and under, and $3,600 for kids under age 6. It would be fully refundable and is for one year.
  • Increase the child and dependent care tax credit to a maximum of $4,000 for one child under age 13, or $8,000 for two or more children. Families earning between $125,000 and $400,000 in income will receive a partial credit. It is for one year and is refundable.
  • Create a $25 billion emergency fund to help child-care centers stay open; and expand child-care assistance by $15 billion to help subsidize child care for low-income families.
Thought bubble: How raising the minimum wage helps, is beyond me. In most economic scenarios and outcomes, raising the minimum wage hurts unskilled, lower income workers, which Covid has affected the most. Most wages are above the minimum anyway. And if you add up the cost of direct Covid relief, it's less than $1 Trillion. Where's the other $1 Trillion going? 

Ban on evictions

In an executive order on Wednesday, Biden extended the federal ban on evictions through March 2021. The existing ban, which has helped millions of Americans struggling during the pandemic, was set to expire at the end of January. 

Student loans

The president also signed an executive order to extend the payment pause and interest waiver for federal student loans through at least September 2021.

Before the inauguration, Biden also said he would call on Congress to cancel $10,000 in student debt for all borrowers, but it was not part of his initial Covid relief plan.


NYT: Has the U.S. passed the peak of Covid cases?

 After months of soaring case numbers, the U.S. is beginning to show some signs that the latest surge is slowing.

New cases have dropped significantly in the last week, falling to a seven-day average of about 194,000 on Wednesday from about 246,000 a week earlier — a roughly 20 percent dip. Across the country, 30 states are reporting sustained declines in cases, and no states with low case counts are reporting rises. It’s a striking difference from mid-December, when nearly every state was seeing record numbers of new infections. Even hospitalizations are starting to decline.

While these indicators are positive, it’s still too early to know if the U.S. has definitively turned a corner, or if it’s simply plateauing before another spike. The biggest wild cards are the new, faster-spreading variants, which are finding footholds across the country, even as the vaccination campaign is moving more slowly than anticipated.

According to the numbers reported below, the mortality rate is below 1.6%.




Saturday, January 16, 2021

Economic Reports: Week ending Jan. 15, 2021

Note: If you subscribe to this blog, please check this story frequently for updates. The blog system will send an e-mail first time I publish, but I update when new economic reports are issued.

Economics Recap (Details below)

Better (or higher) than expected:
  • JOLTS report for Nov: 6.527M vs. 6.450M est
  • Import Prices for Dec: +0.9% vs. +0.7% est
  • Export Prices for Dec: +1.1% vs. +0.6% est
  • Industrial Production for Dec: +1.6% vs. +0.5% est
  • Capacity Utilization for Dec: 74.5% vs. 73.6% est
On Target:
  • CPI for Dec: +0.4% vs. +0.4% est
  • Core CPI for Dec: +0.1% vs. +0.1% est
  • Business Inventories for Nov: +0.5% vs. +0.5% est
Worse (or lower) than expected:
  • NFIB Small Business Optimism Index for Dec: 95.9 vs. 100.2 est
  • Treasury Budget for Dec: -$143.6B vs. -$143.5B est
  • Initial (weekly) Jobless Claims: 965k vs. 789k est
  • PPI for Dec: +0.3% vs. +0.4% est
  • Core PPI for Dec: +0.1% vs. +0.2% est
  • Retail Sales for Dec: -0.7% vs. -0.2% est
  • University of Michigan Consumer Sentiment for Jan: 79.2 vs. 79.5 est

Employment trends stall 

The Employment Trends Index (ETI) was practically unchanged in December, following seven consecutive gains, as the improvement in labor market conditions stalled at yearend. Three of its eight components made negative contributions, led by more initial jobless claims. The deterioration in the ETI comes on the heels of the first decline in nonfarm payrolls since April, as the surge in COVID cases weighed heavily on the leisure and hospitality industry. The Conference Board noted that "it appears unlikely that the labor market will resume its recovery over the next few months." This raises the risk of a double-dip recession in early 2021, but also increases the odds of more fiscal stimulus from the incoming Biden Administration.

Small business optimism falls, job openings dip by smaller amount than expected

The National Federation of Independent Business (NFIB) Small Business Optimism Index for December fell to 95.9 from November's 101.4 level, compared to the Bloomberg estimate of a decrease to 100.2. The index fell below its average value since 1973 of 98 as nine of the ten index components declined and only one improved. The uncertainty index, the percent of the owners thinking it's a good time to expand, sales expectations, and earnings trends all decreased, while current inventories increased. The report added that, "This month’s drop in small business optimism is historically very large and most of the decline was due to the outlook of sales and business conditions in 2021, and small businesses are concerned about potential new economic policy in the new administration and the increased spread of COVID-19 that is causing renewed government-mandated business closures across the nation." On the jobs picture, plans to increase employment also declined.

The Labor Department's Job Openings and Labor Turnover Survey (JOLTS), a measure of unmet demand for labor, showed 6.53 million jobs were available to be filled in November, versus forecasts calling for 6.45 million jobs, and down from October's downwardly-revised 6.63 million figure. The report showed the hiring rate remained at October's 4.2% rate, but separations rose to 3.8% from the prior month's 3.6% pace.

Energy prices surge, markets respond

Oil prices shot up to a 10-month high, posting further gains in the wake of the OPEC+ cuts, and edged a bit higher by a weaker dollar. Some analysts are starting to argue that the rally is getting a little overdone. WTI is above the 200-week moving average, and “it may soon top out,” according to Commerzbank.

LNG prices skyrocket. JKM prices for LNG in northeast Asia are shooting through the roof. Cold weather and higher demand in China and Asia have JKM prices for February delivery well above $21/MMBtu, while individual spot cargoes have traded in the high $30s/MMBtu, breaking all-time record highs. The cost to rent LNG tankers is also breaking records.

OPEC cuts could help shale. The jump in crude oil prices could finally bring positive cash flow to much of the U.S. shale industry, according to Rystad Energy. The firm says cash flow could increase by 32% this year.

OPEC+ compliance slips to just 75%. OPEC+ group’s compliance with the oil production cuts fell to 75% in December 2020—one of the lowest levels since the pact was enacted in May 2020, tanker tracking firm Petro-Logistics said on Tuesday.

Kansas City Fed: shale needs $56 WTI. According to the latest survey from the Kansas City Federal Reserve, oil and gas firms reported that oil prices needed to be on average $56 per barrel for a substantial increase in drilling to occur, and natural gas prices needed to be $3.28 per Btu. The industry’s expectations for future activity improved.

Consumer price inflation rises, mortgage apps jump

The Consumer Price Index (CPI) rose 0.4% month-over-month (m/m) in December, matching the Bloomberg consensus estimate, and compared to November's unrevised 0.2% increase. The core rate, which strips out food and energy, ticked 0.1% higher m/m, in line with expectations and just shy of November's unadjusted 0.2% gain. Y/Y, prices were 1.4% higher for the headline rate, modestly above forecasts projecting a 1.3% increase and north of November's unadjusted 1.2% rise. The core rate was up 1.6% y/y, matching projections and November's unrevised increase.

The MBA Mortgage Application Index jumped by 16.7% last week, following the prior week's 1.7% gain. The sharp increase came as the Refinance Index spiked 20.1% and the Purchase Index grew 8.0%. The noticeable rise in mortgage activity has come amid the recent jump in interest rates, which continued last week as the average 30-year mortgage rate increased 2 basis points (bps) to 2.88%.

Jobless claims surge at the start of 2021 

Initial claims for unemployment insurance surged 181,000 last week to 965,000, the highest level since last August, and well above the consensus of 800,000. It was the biggest jump in claims since March, as layoffs sped up at the start of the year along with the relentless rise in COVID cases and more partial shutdowns across the country. Continuing jobless claims in the prior week increased 199,000 to 5.271 million, while the insured jobless rate picked up 0.2 ppt to 3.7%. 

Both initial and continuing jobless claims, as well as the insured jobless rate, are several times higher than pre-recession, as the labor market remains under immense stress nearly a year after the start of the pandemic. Additionally, almost 12 million people received pandemic unemployment assistance or emergency unemployment compensation in the week of December 26. The latest COVID relief bill extended those benefits until March 14, relieving some of the financial stress on households. This, along with more fiscal support from the incoming Biden Administration, should stem the weakness we are seeing in a number of high-frequency economic indicators at the start of this year and should support the economic recovery in 2021. 

Consumer comfort continues to decline 

The Bloomberg Consumer Comfort Index fell 1.2 points last week to 43.2, down for the eighth consecutive week, and to its lowest level since last July. Surging COVID cases, local government restrictions, and mounting layoffs (as discussed above) likely weighed on Comfort. The survey was completed on January 10, after the Senate runoff elections in Georgia and the attack on the Capitol, which may have additionally depressed consumer attitudes. Comfort declined much more for Republicans than for Democrats or Independents. 

All three Comfort components fell last week. Notably, despite an extension of unemployment benefits and stimulus checks to most households, the personal finances component dropped 2.2 points to 55.9, its lowest level since last May. Weak Consumer Comfort may translate into slower spending growth in the near-term. OECD U.S. CLI indicates stable growth The OECD U.S. Composite Leading Indicator (CLI) rose 0.3 points in December to 99.2, its best in nearly a year, although still below the break-even level of 100, which shows that economic activity remains below trend. This was the eighth consecutive increase in the CLI, indicating a continued recovery since the shutdown trough in April. The rebound in the index was much stronger early in the recovery, but has leveled off to 0.3 points in each of the past three months, pointing to stable growth. 

Import prices up, as U.S. dollar weakens 

Import prices increased 0.9% in December, matching the most in five months, and above the consensus of 0.7%. It was led by a 7.8% rise in fuel prices (mostly petroleum). Nonfuel import prices rebounded 0.4%, driven by nonfuel industrial supplies and materials, such as unfinished metals, chemicals, and lumber. On a y/y basis, import prices were off just 0.3%, the smallest decline in nearly a year. While fuel prices were still nearly 20% lower than a year ago, nonfuel prices increased 1.9% y/y, the most since March 2018, reflecting the notable depreciation in the U.S. dollar. Import prices from most trading regions increased. Notably, import prices from China rose 0.5% y/y, the most since May 2014. 

Budget deficit swells

The federal government posted a budget deficit of $143.6 billion in December, about in line with the estimate from the Congressional Budget Office. On a 12-month total basis, the deficit rose to $3.348 trillion, representing a record 16.0% of GDP. With the latest $900 billion COVID relief bill, signed into law on December 27, and more fiscal stimulus expected from the incoming Biden Administration, the budget deficit will continue to swell in the coming months. 

The 12-month total federal outlays increased a record 49.7% versus a year ago, while receipts fell 2.3% y/y. Government outlays for income security, health, and Medicare surged at record y/y rates, due to the huge fiscal stimulus response to the pandemic and the recession. Even so, net interest payments declined 8.8% on a y/y trend basis, as low interest rates have created fiscal space for the government to support the economic recovery.

Retail sales and wholesale inflation miss forecasts

Advance retail sales for December fell 0.7% month-over-month (m/m), versus the Bloomberg forecast of a flat reading and following November's negatively-adjusted 1.4% decline from a previously-reported 1.1% drop. Last month's sales ex-autos dropped 1.4% m/m, compared to expectations of a 0.2% decrease and November's figure was unfavorably revised to a 1.3% decline from a 0.9% fall. Sales ex-autos and gas were down 2.1% m/m, compared to estimates of a 0.3% decline, and November's reading was adjusted lower to a 1.3% decrease from a 0.8% drop. The control group, a figure used to calculate GDP, declined 1.9% m/m, versus projections of a 0.1% increase and November's downwardly-adjusted 1.1% decrease from a 0.5% decline.

The disappointing report came as nonstore retail sales—which includes online activity—fell, along with sales of electronics & appliances and food & beverages, while activity at food services & drinking places and department stores also dropped. However, sales of motor vehicles, building materials, clothing and gasoline all posted gains. The data shows the impact of the reinstated COVID-19 measures aimed at containing the resurging virus cases, while likely illustrating the sense of urgency of delivering further fiscal relief that President-elect Joe Biden detailed last night in his $1.9 trillion plan.

Inflation still tame

The Producer Price Index (PPI) showed prices at the wholesale level in December rose 0.3% m/m, below forecasts of a 0.4% gain and compared to November's unrevised 0.1% increase. The core rate, which excludes food and energy, increased 0.1% m/m, south of estimates of a 0.2% rise and matching November's unadjusted increase. Y/Y, the headline rate was 0.8% higher, in line with projections to match the prior month's unadjusted gain. The core PPI increased 1.2% y/y last month, below estimates of a 1.3% increase, and compared to November's unrevised 1.4% rise.

Consumer sentiment declines again

The January preliminary University of Michigan Consumer Sentiment Index (chart) declined to 79.2 versus expectations of a dip to 79.5 from December's 80.7 reading. The larger-than-expected decrease for the index came as both the current conditions and the expectations portions of the index declined. The 1-year inflation forecast jumped to 3.0% from December's 2.5% rate, and the 5-10 year inflation forecast increased to 2.7% from December's 2.5% level.

Industrial production up

The Federal Reserve's industrial production rose 1.6% m/m in December, comfortably above estimates of a 0.5% gain, and versus November's upwardly-revised 0.5% increase. Manufacturing and mining output both rose solidly, accompanying a jump in utilities production. Capacity utilization increased to 74.5% versus forecasts calling for a modest gain to 73.6% from the prior month's upwardly-revised 73.4% rate. Capacity utilization is 5.3 percentage points below its long-run average.

The Empire Manufacturing Index, a measure of activity in the New York region, declined to 3.5 in January from 4.9 in December, and below forecasts of a rise to 6.0. However, a reading above zero denotes growth. The report marks the seventh-straight month of expansion, as employment growth decelerated but the expansion in new orders accelerated.

Friday, January 15, 2021

Covid relief and shot records

Biden proposes Covid relief, plus a lot more

President-elect Joe Biden began laying out his economic agenda last night, saying he would ask Congress for $1.9T in immediate relief to fight the coronavirus pandemic. The plan includes $1,400-per-person direct payments to most households, a $400-a-week unemployment insurance supplement through September, as well as funds for Covid testing, vaccine distribution and state and local governments. The proposal is the first phase of a two-part strategy, with a broader program to be unveiled in subsequent weeks focused on infrastructure and climate change.

Not only is further fiscal aid on the table, but Fed Chair Jerome Powell doubled down on the monetary side as weekly jobless benefit claims rose to their highest level since last August. "Now is not the time to be talking about exit" from easy money policies, he said in a webcast with Princeton University, pledging to give plenty of notice before scaling back the central bank's bond buying program. In addition to high unemployment, inflation isn't on a path to reaching 2% on a sustained basis, even though it might shoot higher this year.

Thought bubble: Biden's plan includes ideas that Republicans have rejected, including raising the minimum wage to $15 an hour (see Are minimum wages too low?), while some legislation will need 60 votes in the Senate, which would require GOP members to get on board. "Joe Biden did not propose a COVID package tonight - he proposed a liberal takeover of the American economy," said Rep. Jason Smith (R., Mo.), the top Republican on the House Budget Committee. "Americans aren't asking for trillions of dollars in new spending. They just want our government to open our economy, get their kids back to school, and create jobs."

Covid immunity passports

Thought bubble: Way in the past, like the 1970s, I remember carrying around "shot records." Some countries would not let you travel unless you showed these with your passports. Is this a big deal? 

A tech and healthcare coalition that includes members like Microsoft (NASDAQ:MSFT), Oracle (NYSE:ORCL), Salesforce (NYSE:CRM) and U.S. nonprofit Mayo Clinic are working together to create a COVID-19 vaccination passport. The Vaccination Credential Initiative (VCI) would allow businesses, airlines and countries to check if people have received a coronavirus vaccine to "demonstrate their health status to safely return to travel, work, school and life while protecting their data privacy."

How would it work? "VCI's vision is to empower individuals to obtain an encrypted digital copy of their immunization credentials to store in a digital wallet of their choice. Those without smartphones could receive paper printed with QR codes containing W3C verifiable credentials."

Some hurdles: Privacy and ethical concerns surround whether a person who can prove they are vaccinated should have more freedoms than someone who is not. Another obstacle is getting health centers to participate. Even if they would want to, they would need resources to incorporate these credentials to VCI's digital standard (people in the U.S. are currently given paper cards when they get their COVID-19 vaccines, while patient information is logged in their state immunization registries).

Looking abroad, Israel is launching a "green passport" program to residents who have received a vaccine or those who have recovered from COVID with antibodies. The passport will lift some restrictions, including mandatory quarantine following exposure to an infected person or traveling abroad, and may even be used for visiting malls or attending cultural and sporting events. The country of 9M people has been lauded for deploying what is currently the fastest COVID vaccination campaign in the world, with 25% of its citizens inoculated with a first dose in just three weeks, as well as 72% of its population over the age of 60. 

Wednesday, January 13, 2021

Where did Americans move in 2020?

States compete with each other in a variety of ways, including in attracting (and retaining) residents.

Sustained periods of inbound migration lead to (and reflect) greater economic output and growth. On the other hand, prolonged periods of net outbound migration can strain state coffers, contributing to revenue declines as economic activity and tax revenue follow individuals out of state.

The 2020 National Movers Study, while showing only a subset of all moves, still provides a targeted look at the types of interstate migration patterns we can expect to see in government-issued data once it becomes available.







Tuesday, January 12, 2021

Corporate America pulls political funding

Following in the footsteps of Marriott (NASDAQ:MAR), JPMorgan Chase (NYSE:JPM) and Citigroup (NYSE:C), a growing number of big businesses have decided to suspend or review their campaign donations in the wake of last week's riot at the U.S. Capitol. The storming led to five deaths, including one police officer, prompting many C-suite executives to take action. There is widespread anger in the business community at what they see as a challenge against any disruption in the "peaceful transition of power," or the democratic stability on which business depends. Pausing all political spending: American Airlines (NASDAQ:AAL), Archer Daniels Midland (NYSE:ADM), BlackRock (NYSE:BLK), Boston Scientific (NYSE:BSX), BP (NYSE:BP), Charles Schwab (NYSE:SCHW), ConocoPhillips (NYSE:COP), Facebook (NASDAQ:FB), Google (GOOG, GOOGL), Kroger (NYSE:KR), Marathon Oil (NYSE:MRO), Microsoft (NASDAQ:MSFT), Union Pacific (NYSE:UNP), U.S. Bancorp (NYSE:USB) and UPS (NYSE:UPS).

Suspending donations to Republicans who objected to electoral votes: Airbnb (NASDAQ:ABNB), Amazon (NASDAQ:AMZN), American Express (NYSE:AXP), AT&T (NYSE:T), Comcast (NASDAQ:CMCSA), Dow Inc. (NYSE:DOW), General Electric (NYSE:GE), Mastercard (NYSE:MA) and Verizon (NYSE:VZ).

Some statistics: In the 2020 election, Republican candidates and committees received a total of $205M in campaign donations from corporate PACs, according to the Center for Responsive Politics, while Democratic candidates and causes received $155M.

Thought bubble: This is not the period in the political cycle when candidates are out raising money. Since most PACs donate closer to presidential and legislative votes, it'll be interesting to see how much lasting pain Corporate America will inflict as the midterm elections approach in November 2022. (Thanks to Seeking Alpha)

Monday, January 11, 2021

How many stimulus checks ended up in the stock market?

(From Seeking Alpha) Direct payments have provided a financial lifeline to millions of Americans, but for others, they represent an opportunity to boost their savings. That is thanks to the $2.3T CARES Act and the latest $908B stimulus bill, which provided $1200 and $600 to all Americans making under $75,000 - regardless of their employment and financial situation.

In fact, securities trading was among the most common uses - across nearly every income bracket - for the government stimulus checks issued in May, according to software and data aggregation company Envestnet Yodlee. For many consumers, trading was the second or third most common use for the funds, behind only increasing savings and cash withdrawals. In fact, Americans that earned between $35,000 and $75,000 annually traded stocks about 90% more than the week prior to receiving their stimulus check.

Quote: "Where are the Robinhoodies going to invest their newfound wealth?" asked Mark Tepper, president and CEO of Strategic Wealth Partners. "Of course they're going to buy a 10th of a share of Tesla (NASDAQ:TSLA). Of course they're going to buy a sliver of Bitcoin (BTC-USD)."

The trend also illustrates how the fallout from the pandemic is dividing the U.S. economy. Claims for unemployment benefits averaged 1.45M a week last year, compared with about 220K in 2019, while at the same time the percentage of disposable income that households managed to stash away has increased, property prices have jumped and the stock market is soaring.

"I would rather support those that do not have a job. We don't need the $1,200 check to everybody anymore because a lot of those people have now found work," Kevin O'Leary, chairman of O'Shares ETFs and Shark Tank investor, said before the latest coronavirus aid package was passed by Congress. "I would prefer to have a transitional support unemployment for those that are leaving industries and sectors that are out of favor, like movie theaters, airlines, cruise ships and certain restaurants that are never going to come back."

Go deeper: There might be more direct payments in sight. Stocks ended at all-time highs on Friday after President-elect Joe Biden said he was assembling a multitrillion-dollar relief package that would boost stimulus payments for Americans to $2,000.

Saturday, January 9, 2021

CNBC: Where the jobs are

The U.S. economy ended seven months of job gains and posted its first net payrolls loss since April last month as restaurants laid off droves of workers with the arrival of the winter months.

The Labor Department reported Friday that total nonfarm payroll employment fell by 140,000 in December as fears over a Covid-19 resurgence sparked a backslide in travel and hospitality job numbers. The unemployment rate held at 6.7%.

The decline in total payroll employment was worse than the net loss of 50,000 that economists had forecast.

CNBC studied the net changes by industry for December jobs based on data contained in the employment report.

The broad leisure and hospitality sector saw outsized job losses thanks almost entirely to a torrent of layoffs at bars and restaurants as winter weather begins across much of the U.S.



Friday, January 8, 2021

Economic Reports: Week Ending Jan. 8, 2021


The markets appear to be pleased with the clarity on the political front as the outcome of the runoff elections in Georgia gave the Democrats a slim majority in Congress, which could prove pivotal in future legislation, notably implications for tax policy, regulation, further fiscal relief, and infrastructure spending. However, this week's violence at the U.S. Capitol remains a sore spot.

December manufacturing activity revised higher

The final December Markit U.S. Manufacturing PMI Index was unexpectedly revised higher to 57.1 from the preliminary level of 56.5, above the Bloomberg forecast of a slight downward adjustment to 56.3 and November's 56.7 level. A reading above 50 denotes expansion and this was the highest level since September 2014 amid further substantial increases in output and new orders. However, Markit noted that supply chain disruptions were the most severe on record and the industry saw the sharpest rise in cost burdens since April 2018. The release is independent and differs from the Institute for Supply Management's (ISM) report, as it has less historic value and Markit weights its index components differently, while it surveys a wider range of companies.

Construction spending rose 0.9% month-over-month (m/m) in November, versus projections of a 1.0% gain, and following October's upwardly-revised 1.6% increase. Residential spending rose 2.6% m/m but non-residential spending declined 0.6%.

December ISM Manufacturing Index shows strength

The December Institute for Supply Management (ISM) Manufacturing Index (chart) showed manufacturing growth (a reading above 50) unexpectedly accelerated. The index rose to 60.7 from November's unrevised 57.5 level, and versus the Bloomberg consensus estimate of decline to 56.8. This was the highest level since August 2018 as new orders and production growth accelerated, with both figures north of 60, and employment returned to expansion territory. Prices remained elevated, jumping 12.2 points to 77.6, a level not seen since the peak of the last manufacturing expansion cycle reached in the summer of 2018.

The ISM said, "Manufacturing performed well for the seventh straight month, with demand, consumption and inputs registering strong growth compared to November. Labor market difficulties at panelists' companies and their suppliers will continue to restrict the manufacturing economy expansion until the coronavirus (COVID-19) crisis ends."

Oil prices showing strength

Oil had a particularly strong day on Tuesday, with the price of West Texas Intermediate crude oil rising 4.9% to settle at $49.93, the highest since February. The rise came after the Organization of the Petroleum Exporting Countries (OPEC) reached an agreement with Russia and other large producers to keep production steady until March. Saudi Arabia will also cut supply.

ADP employment change surprisingly falls, mortgage apps up

The ADP Employment Change Report showed private sector payrolls declined by 123,000 jobs in December, versus the Bloomberg forecast calling for a 75,000 gain. November's rise of 307,000 jobs was revised to a 304,000 increase. Today's ADP data, which does not include government hiring and firing, comes ahead of Friday's broader December nonfarm payroll report, expected to show headline employment grew by 73,000 jobs and private sector jobs rose by 50,000 (economic calendar). The unemployment rate is forecasted to tick higher to 6.8% from 6.7% and average hourly earnings are projected to rise 0.2% month-over-month (m/m) and be up 4.5% year-over-year (y/y).

The MBA Mortgage Application Index rose by 1.7% last week, following the prior week's 5.8% drop. The increase came as a 3.0% rise in the Refinance Index more than offset a 1.6% decrease in the Purchase Index. The average 30-year mortgage rate declined 4 basis points (bps) to 2.86%.

U.S. services index revised lower, factory orders rise

The final Markit U.S. Services PMI Index for December was revised lower to 54.8 from the preliminary estimate of 55.3, and versus forecasts of a modest downward adjustment to 55.2. The index was down from November's 58.4 figure but above the 52.8 reading a year ago. A reading above 50 denotes expansion. Markit's release is independent and differs from the Institute for Supply Management's (ISM) report, as it has less historic value and Markit weights its index components differently, while its survey respondents include those that vary more in size, including small and medium-sized companies.

Factory orders rose 1.0% m/m in November, versus estimates of a 0.7% gain, and compared to October's upwardly-revised 1.3% gain. This was the seventh-straight monthly rebound from the historic 13.5% tumble in April which followed the 11.0% fall in March.

Jobless claims decelerate, trade deficit widens

Weekly initial jobless claims came in at a level of 787,000 for the week ended January 2, below the Bloomberg consensus estimate of 800,000, and compared to the prior week's upwardly-revised 790,000 level. The four-week moving average declined by 18,750 to 818,750, while continuing claims for the week ended December 26 fell by 126,000 to 5,072,000, below estimates of 5,200,000. The four-week moving average of continuing claims dropped by 177,250 to 5,274,750.

The trade balance showed that the November deficit widened more than anticipated, coming in at $68.1 billion, compared to forecasts of $67.3 billion, after October's unrevised deficit of $63.1 billion. Exports rose 1.2% month-over-month (m/m), and imports gained 2.9%.

Energy bulls are back

Brent topped $55 per barrel at the end of the week, as the pledge from Saudi Arabia to cut deeper has built a solid rally. Other forces are at play as well, including monetary stimulus, the prospects of deeper fiscal stimulus in the U.S., and vaccine optimism. “The past 10 weeks of trading have seen only one weekly decline, which was comparatively small,” said Carsten Fritsch, an analyst at Commerzbank AG. “This is testimony to the strength of the oil market in the last 2 1/2 months.”

Cold winter rallies coal and gas. Thermal coal prices in China are shooting up, and JKM prices for LNG are skyrocketing. Spot prices for liquefied natural gas (LNG) delivery in Asia jumped to a six-year high. A cold winter across the northern hemisphere is contributing to price gains. Javier Blas of Bloomberg notes that at least one LNG spot cargo was sold for $33-$36/MMBtu, which would be a historically high price.

Georgia Senate races open up more aggressive Biden plans. 

The twin wins in Georgia by two Democrats flipped control of the Senate. That opens up a lot more possibilities for the Biden administration on a range of energy and climate initiatives. S&P Global Platts gives a rundown.


Wednesday, January 6, 2021

After Georgia, what's next? Higher corporate taxes?

Now that it looks like the Senate will be 50-50, with Kamala Harris as the tie-breaker, what now? It seems that Biden will get his wish for more taxes...maybe. We'll see. Markets today didn't freak out. Dow up, NASDAQ down, so maybe money is moving from high-tech to blue chip. Too early to tell, in my estimation. Though energy was also up today.

Here's a good article on corporate taxes by an economist. 


What's in the second round of Covid-19 relief?

The new covid-19 relief package contains approximately $900 billion of programs for individuals and businesses. It includes renewal of many programs created in the CARES Act, including the Paycheck Protection Program, the Employee Retention Tax Credit, direct payments to individuals, unemployment insurance expansion, and more.

Read the full story here




Some Raw Data on People Killed by Police

This is in no way meant to be an in-depth analysis, but just a cursory examination of the data would conclude that the leftist narrative of ...