Archive for October, 2018

• Morning News: October 12, 2018
  Eddy Elfenbein, October 12th, 2018 at 7:03 am

  Behind Market Turmoil, Potentially Good News

  100 Million Barrels: The World Hit a Daily Oil and Liquids Record

  World’s Largest Car Market Faces Historic Drop

  Interest Rates Are Rising for All the Right Reasons

  U.S. Treasury Staff Finds China Isn’t Manipulating Yuan

  The Biggest Buyers of American Stocks Are on the Sidelines Right Now

  BlackRock Wins $40 Billion Chunk of Lloyds Investment Pile

  JPMorgan Profit Boosted by Higher Interest Rates

  SoftBank Picks Nomura, Goldman, Three Others to Lead Mobile Unit’s IPO

  Retail’s New E-Commerce Headache: Delivering Workers to Warehouses

  Tencent Music Pauses IPO Amid Market Turmoil

  Why Google Could Be in Trouble Over the Google Plus Bug

  Joshua Brown: And Then They Came for the Tech Stocks…

  Blue Harbinger: Do You Pretend To Understand The Market?

  Cullen Roche: Telling People Not to Panic Isn’t Good Enough

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• Morning News: October 11, 2018
  Eddy Elfenbein, October 11th, 2018 at 7:15 am

  Stock Rout Spreads as Bonds, Currencies Stay Calm: Markets Wrap

  Europe Stocks Extend Loss in Global Selloff

  Not Just ‘Loco’ Fed: Why Equities Are Suddenly Selling Off Now

  Interest Rates Are Rising. That’s Great News for Most.

  In New Slap at China, U.S. Expands Power to Block Foreign Investments

  At IMF-World Bank Meetings, Powell Praised as Trump Calls Fed ‘Crazy’

  Mounting Costs Add to Worries About 2019 U.S. Profit Growth

  CVS Health and Aetna $69 Billion Merger Is Approved With Conditions

  BMW to Take Control of China Joint Venture in $4 Billion Deal

  WarnerMedia Plans to Unveil Streaming Service by End of 2019

  Wells Fargo Touts Good Deeds to Get Back in Lawmakers’ Good Graces

  A Future Where Everything Becomes a Computer Is As Creepy As You Feared

  Jeff Carter: Sometimes You Have to Look at Accounting

  Roger Nusbaum: Because Every Now And Then The Market Goes Down

  Michael Batnick: U-G-L-Y

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• The Market Finally Cracks
  Eddy Elfenbein, October 10th, 2018 at 1:03 pm

  At 1 pm, the S&P 500 is currently down about 1.4%. That would make it the worst day for stocks since April. Of course, that really says more about the last six months than it does about today.

  

  Yesterday was a bad day for anything involved in building. Today’s pain is more concentrated on tech. There are also losses in high-end retailing. Also, most footwear stocks are getting hit.

• Morning News: October 10, 2018
  Eddy Elfenbein, October 10th, 2018 at 7:16 am

  Two-Decade Rupture in Stock-Bond Link Flashes Global Market Pain

  Big Oil’s Bet on Natural Gas Is a Slow Burn

  Soaring Rice Prices are Dulling Duterte’s Luster in the Philippines

  China’s About to Sell Dollar Bonds in Middle of a Trade War

  The Unknowable Fallout of China’s Trade War Nuclear Option

  Powell Places Risky Bet as He Stokes Too-Good-to-Be-True Economy

  Sears Hires Advisers to Prepare Bankruptcy Filing

  Google Appeals $5 Billion EU Fine in Android Case

  New Pixel Phones and Other Gadgets Keep Google in the Hardware Hunt

  Millennials Kill Again. The Latest Victim? American Cheese

  Shipping Industry Stares Down New Fuel Restrictions

  Amazon Scraps Secret AI Recruiting Tool That Showed Bias Against Women

  Nick Maggiulli: Why The Best Predictor of Future Stock Market Returns is Useless

  Joshua Brown & Michael Batnick: What Are Your Thoughts: Interest Rate Freakout

  Ben Carlson: The Case for Bonds

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• Ford Drops Below $9 per Share
  Eddy Elfenbein, October 9th, 2018 at 2:15 pm

  Shares of Ford (F) are now below $9. The current dividend of 60 cents works out to a yield of more than 6.6%, assuming it’s not cut.

  But Ford is still making money. The data on this is hard to come by but Yahoo Finance shows that Ford’s stock was higher in May 1987. (I don’t find that data to be 100% reliable.) Here’s the chart I could find going back to 1984.

  

• Powell Warns
  Eddy Elfenbein, October 9th, 2018 at 10:17 am

  The Fed is much less powerful than people assume. So what’s the real role of the Fed chairman? You can almost sense a pattern:

  Powell Warns Against Overstating Impact of Fed Policy on Global Financial Conditions

  In veiled message to Trump, Powell warns against meddling on Fed rates

  Powell warns not all US problems can be solved by Fed

  Trade wars hurt the economy, warns Powell

  Fed’s Powell warns of digital currency’s risks

  Fed’s Powell warns agriculture could suffer if tariffs in place for extended period

  Fed Chair Powell warns some asset prices are ‘elevated’ including stocks

  Bank of Japan ‘put’ to replace Fed’s as Powell warns no bailouts

  Federal Reserve’s Powell Warns About Failure to Raise Debt Ceiling

  Fed’s Powell warns US at risk of being trapped in low growth

  Fed’s Powell warns that dollar-based Libor could disappear

  Powell warns interest rate rises are a fine balance as he hikes in his first Fed meeting

  Dollar index pares gains as Powell warns on inflation optimism

• Morning News: October 9, 2018
  Eddy Elfenbein, October 9th, 2018 at 7:09 am

  Stocks Retreat as Treasury Yield Hits 7-Year High

  The Bond Market’s $1 Trillion Deficit Spiral Has No Political Fix

  IEA Urges OPEC to Open the Taps as Oil Market Enters ‘Red Zone’

  When Imported Steel Makes Sense, Despite Tariffs

  China Slashes U.S. LPG Imports Amid Trade War

  Tencent’s $220 Billion Rout Is Breaking All Kinds of Records

  Tesla’s Value Sinks by $10 Billion in a Week as Rout Deepens

  Google Drops Out of Pentagon’s $10 Billion Cloud Competition

  Google Plus Will Be Shut Down After User Information Was Exposed

  Hope Floats for Offshore Oil Drillers

  Orsted, A Giant in Offshore Wind Farms, Makes a Move in the U.S.

  Microsoft’s $7.5 Billion GitHub Deal Set for EU Approval

  Michael Batnick: Built to Break

  Howard Lindzon: Momentum Monday – Do You Buy The Dip?

  Cullen Roche: The Cost of Having a Taper Tantrum

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• The Fed Backs Off from the Natural Rate
  Eddy Elfenbein, October 8th, 2018 at 3:54 pm

  Tim Duy recently noted in Bloomberg that the Federal Reserve is no longer guided by the natural rate of interest. Let me explain a bit. With monetary policy veering off into unchartered territory, the Fed needed some new ways of measuring what they were doing. John Williams, who had been at the San Francisco Fed and is now at the New York Fed, had advocated for watching the natural rate of interest, also known as R-star.

  The idea of the natural rate is that there’s some sort of perfect rate of interest that exists everywhere in the globe, and at this rate, everything comes into perfect balance. The thing about this rate is you never know what it is exactly. You can only tell by inference. If we’re above it, then X, Y and Z are supposed to happen. If we’re below, then A, B and C are supposed to happen.

  Is this right? I’m not sure but I think this is one of those things where it’s probably wiser to act as if it’s true. Importantly, the natural rate is expressed as a real rate, meaning after inflation.

  Williams has argued that the natural rate has fallen, and I suspect he’s right. However, he recently gave a speech saying there’s been an overemphasis on the natural rate. He doesn’t say that it’s bad, but now that things are back to something like normal, tracking a natural rate is far too blurry to use as an effective monetary tool.

  “At times r-star has actually gotten too much attention in commentary about Fed policy,” Williams said. “As we have gotten closer to the range of estimates of neutral, what appeared to be a bright point of light is really a fuzzy blur.”

  Some market participants are concerned that interest rates have increased. Let’s remember that real short rates have gone from -2% to 0%. If I had to guess, I’d say the natural rate is at 1%. The Fed is far from putting the breaks on the economy.

• Weakness in the Semis
  Eddy Elfenbein, October 8th, 2018 at 12:10 pm

  The semiconductor sector has been looking weak lately. This is notable because the sector has been strong consistently for the last 10 years.

  Consider this performance. On November 20, 2008, the VanEck Vectors Semiconductor ETF (SMH) closed at $14.70 per share. On March 12 of this year, the SMH closed at $113.07. That’s an increase of 669% in 9-1/2 years.

  But lately….

  

• Nordhaus and Romer Win Nobel
  Eddy Elfenbein, October 8th, 2018 at 10:34 am

  Congratulations to William Nordhaus and Paul Romer for winning this year’s Nobel Prize in Economics. (Yes, I know. The Econ Nobel isn’t a Nobel Nobel. But still, it’s nice recognition.)

  Nordhaus, a professor at Yale University, is best known for his work on climate economics. Romer, of NYU’s Stern School of Business, is a proponent of a theory that examines how the world can achieve sustainable growth.

  “This year’s Laureates have designed methods for addressing some of our time’s most basic and pressing questions about how we create long-term sustained and sustainable economic growth,” the Royal Swedish Academy of Sciences said in a statement.

  Nordhaus developed an influential model that examines the consequences of climate policy interventions, including carbon taxes, on the global economy.

  His work on climate was recognized the same day that a key UN panel warned that governments around the world must take “rapid, far-reaching and unprecedented changes” to avoid disastrous levels of global warming.

  A former chief economist at the World Bank, Romer has shown that economic forces govern the willingness of companies to innovate. The concept is the foundation of what is now called “endogenous growth theory,” which states that new ideas and technology help drive economic activity.

  Romer is a particular hero of mine for his criticism of poor economic writing. He threatened to block a development report if it contained too many “and’s.” Romer determined the acceptable “and” level to be 2.6%.

  Here’s Romer’s TED Talk on charter cities.