Tuesday, September 27, 2016

Bonddad's Tuesday Linkfest

I'm a financial adviser with Thompson Creek Wealth as well as a tax and business attorney with The Law Office of Hale Stewart.




1-Year Chart of the XHB ETF




Mario Draghi on the Pros and Cons of the EU Outlook


On the positive side, incoming information continues to point to the euro area economy being resilient to global and political uncertainty, notably following the UK referendum outcome. The initial impact of the vote has been contained and the strong financial market reactions, such as equity price falls, have largely reversed.

At the same time, the substantial weakening of the foreign demand outlook since June is expected to dampen export growth. Along with other factors, it will continue to pose downside risks to the euro area’s growth prospects. According to the September ECB staff macroeconomic projections, annual real GDP growth is expected to increase by 1.7% this year, and by 1.6% in each of the next two years.

Latest Markit Numbers




OECD Report on Trade


Over the past few years, the rate of global trade growth has halved relative to the pre-crisis period, and it declined further in recent quarters, with the weakness concentrated in Asia. While low investment has played a role, rebalancing in China and a reversal in the development of global value chains could signal permanently lower trade growth, leading to weaker productivity growth. Lack of progress – together with some backtracking – on the opening of global markets to trade has added to the slowdown. 


BOJ Head Kuroda's Observations On the New BOJ Policy

The first point is that, during the three years since the introduction of QQE, Japan's economic activity and prices, as well as financial conditions, have improved substantially, and Japan's economy is no longer in deflation. 

The second point is that, despite such a positive turnaround, the price stability target of 2 percent has not been achieved.

The Bank has come to the conclusion that it can facilitate the formation of a yield curve, which is deemed most appropriate for achieving the price stability target of 2 percent, through the appropriate combination of a negative interest rate and JGB purchases. 

The fourth point is the impact of monetary easing on the functioning of financial intermediation...Although the direct impact of these developments on economic activity as a whole is unlikely to be substantial, it is possible that such developments can cause uncertainty regarding the sustainability of the financial functioning in a broad sense, in that they could have a negative impact on economic activity through a deterioration in people's confidence. In facilitating the formation of an appropriate yield curve, the Bank should take account of these points. 


Dallas Fed on August's and September's Economic Numbers


Economic indicators released in August and September have been mixed. Consumption spending got off to a strong start in the third quarter, and employment growth slowed but remains solid. However, the more timely purchasing managers’ surveys were unusually downbeat. Still, forward-looking indicators and professional forecasts point to stronger growth in the second half of the year. Inflation remains muted and below the Federal Reserve’s target rate of 2 percent, with goods and services inflation exhibiting differing trends.

Monday, September 26, 2016

Little Stevie Hayward of Powerline: Still an Economic Jackass

Today, Little Stevie Hayward of Powerline has a post up titled, "Don't Look Now, But."  It's his usual cut and paste job masquerading as economic analysis.  He first points to the weak state of corporate earnings, noting they are headed for another decline.   But, it's obvious that he has no idea what's behind this number.  The big issue is weak oil company revenues.  Consider this chart from Factset.com:


Notice the very large drop in energy revenues.  China's switch from a manufacturing economy to one driven by consumer demand is another cause (Stevie might want to take a look at information from the RBA -- that's Reserve Bank of Australia -- for context).  In fact, 7 industries reported positive earnings growth.  So, this isn't exactly the Armageddon he's predicting. 

He then notes the China and Japan are selling treasuries.  Let's place that move in context.  Here's a chart of the 30-year treasury yield for the last 30+ years:



Interest rates have been declining for the last 40 years.  There's a lot of reasons for this.  To get caught up on that, read Bernanke's Global Savings Glut theory or Larry Summers Secular Stagnation argument.  Which little Stevie Hayward won't do, because it uses big words and contains math.  
  
  I realize that criticizing Little Stevie Hayward of Powerline is like shooting fish in a barrel.  He's that stupid.  But, so long as he keeps writing, I'll keep pointing out how incredibly stupid he is.





New home sales continue uptrend as expected from lower mortgage rates


 - by New Deal democrat

All things being equal, lower mortgage rates typically translate into increase new home sales -- and even though August was a decrease from July, in 2016 that relationship is holding fast and is the most positive aspect of the important and leading housing market.

This post is up at XE.com.

Bonddad Monday Linkfest

Weekly Performance of US Sectors




RRG Chart for US Industries




1-Year Chart of the XLKs




RRG Graph of the XLKs 10 Largest Members




Financial Performance of 10 Largest XLK Members






1-Year Chart of the XLFs




1-Year RRG Chart of the Largest XLF Members




Financial Performance of the 10 Largest XLK Members





Sunday, September 25, 2016

My Weekly Columns Are Up at XE.com

International Economic Week in Review

US Bond Market Week in Review

US Equity Market Week in Review

Steve Hayward of Powerline Continues to Be an Economic Jackass

     Today, Steve Hayward of Powerline wrote a blog post titled, The Economy in Pictures.  He uses a whopping 4 graphs to argue that the economy is near a recession.  You can stop laughing now.  
 
     Over at XE.com I have a post that uses 18 different indicators -- and these are indicators that have a long track record of being accurate predictors of economic activity -- to argue that we're still looking at a modestly growing economy.  

     Once again, we have Steve Hayward proving that he's an economic jackass of the highest order. But on a good note, we can also start to argue that he's a great contrary indicator: do the exact opposite of what he does and you'll make out like a bandit in the market.


Saturday, September 24, 2016

Weekly Indicators for September 19 - 23 at XE.com


 - by New Deal democrat

My Weekly Indicators post is up at XE.com.  Commodities undid their recent wobble, but the trend in several interest rate indicators is of concern.

Thursday, September 22, 2016

Bonddad's Thursday Linkfest

New Fed Projections




BOJ Adds to QE (FT)

The Bank of Japan has launched a new kind of monetary easing as it set a cap on 10-year bond yields and vowed to overshoot its 2 per cent inflation target on purpose.

Its decision demonstrates that even eight years after the global financial crisis, central bankers are still willing to experiment with monetary policy tools as they struggle to escape from low inflation around the world.

The move marks another effort by Haruhiko Kuroda, BoJ governor, to surprise market expectations by expanding his monetary policy toolkit to signal his determination that Japan escape its decades of on-and-off deflation.


Weekly Chart of the Japanese ETF






The global economy is projected to grow at a slower pace this year than in 2015, with only a modest uptick expected in 2017. The Outlook warns that a low-growth trap has taken root, as poor growth expectations further depress trade, investment, productivity and wages.

Over the past few years, the rate of global trade growth has halved relative to the pre-crisis period, and it declined further in recent quarters, with the weakness concentrated in Asia. While low investment has played a role, rebalancing in China and a reversal in the development of global value chains could signal permanently lower trade growth, leading to weaker productivity growth. Lack of progress – together with some backtracking – on the opening of global markets to trade has added to the slowdown. 

Exceptionally low – and in some cases negative – interest rates are distorting financial markets and raising risks across the financial system.  A disconnect between rising bond and equity prices and falling profit and growth expectations, combined with over-heating real estate markets in many countries, increases the vulnerability of investors to a sharp correction in asset prices.

“The marked slowdown in world trade underlines concerns about the robustness of the economy and the difficulties in exiting the low-growth trap,” said OECD Chief Economist Catherine L. Mann. “While weak demand is surely playing a role in the trade slowdown, a lack of political support for trade policies whose benefits could be widely shared is of deep concern.

”Monetary policy is becoming over-burdened. Countries must implement fiscal and structural policy actions to reduce the over-reliance on central banks and ensure opportunity and prosperity for future generations.”







Table of the 20 Largest Shipping Companies by Market Cap (FinViz)




Chart of the Shipping Sector (Finviz)