All sorts of economic troubles are brewing, perhaps not so much in the US but in pretty much any other part of the world:
“It was just a few days ago when the market was panicking again, as it has done so periodically since early February. This has usually been a characteristic of market tops, but it is also another characteristic of market tops to ignore the past and find all kinds of excuses that “this time is different.”
“I wrote in early February about my pessimistic views for 2018, and one thing that few looked at back then – real estate – has already entered the early stages of panic in some markets. A recent WSJ article documents the panicky high-end New York housing market, but the situation is similar in many other frothy markets all around the world. Back in February I had written about falling rents, because of oversupply in major US cities, which were the earliest signs of a weakening housing market. Weakness in the housing market has accelerated and it is spreading.
“But it is not just the housing market. All sorts of economic troubles are brewing, perhaps not so much in the US but in pretty much any other part of the world. These troubles do not seem to be catching up to the US just yet, but they are strengthening the US dollar (I have written about this in more detail) and a too powerful dollar is not, fundamentally, good for most US stocks. Almost half of S&P 500 sales come from overseas. The strength of the dollar is not critical yet, but… China and Europe continue to weaken while the Fed is bent on raising their benchmark rates again in December…”
“We haven’t had ruinous levels of inflation since the early 1980s… We have, however, had a severe recession and a weak recovery, beginning a decade ago, and it is not at all clear the Fed is well-equipped to prevent a recurrence. There are several reasons for concern about how the Fed will respond to the next downturn. Because it targets inflation, it may be tempted to tighten money inappropriately after a negative supply shock.”
“Liquidity is like good health. You don’t really appreciate it until you lose it. Investors are starting to appreciate it. As volatility has surged, first in the stock market and now in credit markets, liquidity is starting to dry up across segments of the corporate bond markets.
“The ominous widening of spreads in the high-yield bond market — from 322 basis points on Oct. 2 to 422 points on Nov. 20 — could be a sign of trouble to come.”
“Automakers sold slightly fewer vehicles overall in November, compared with last year, according to analysts’ forecasts, including one from Edmunds. com, which projected auto sales fell 1.3 percent last month…
“Part of the decline may be due to rising interest rates, which are making car payments more expensive.”
“There are fears a sharp drop in house prices could result in an Australian retail slump as struggling homeowners slash spending. Economists have warned of a $800billion wipeout in consumer spending after Australian of Bureau of Statistics data released on Monday revealed retailers are struggling to shift stock…
“Sydney was hit the hardest, where the housing market is down 9.5 per cent and on track to eclipse the previous record peak-to-trough decline set during the last recession when values fell 9.6 per cent between 1989 and 1991.”
“More than a quarter of all retail floor space in England and Wales disappeared in the aftermath of the 2008 financial crisis… The analysis covers the period before the latest crisis to hit the UK retail sector, which has led to the collapse of high street brands including Toys R Us and Maplin. Many others including Marks & Spencer and Debenhams are closing stores and cutting staff…
“Alongside the rapid rise of online shopping, retailers have been affected by consumers’ weak income growth.”
“France’s prime minister met with opposition leaders on Monday as President Emmanuel Macron sought a way to defuse nationwide protests over high living costs that led to widespread rioting in Paris at the weekend and are hurting the economy.
“The “yellow vest” revolt caught Mr Macron unawares when it erupted on Nov 17 and poses a formidable challenge to the 40-year-old as he tries to counter a plunge in popularity over his economic reforms, which are seen as favouring the wealthy.”
“Will Sweden’s central bank raise interest rates in December or February? The answer, much to the chagrin of those who have been calling for an end to negative rates, may be neither. Headwinds are mounting for the central bank, with economic growth slowing both at home and abroad…
“Sweden’s economy unexpectedly shrank in the third quarter.”
“Italian manufacturing shrank for a second straight month in November, further bad news for the economy amid a budget battle that’s undermining confidence. In its monthly report, IHS Markit said an index of factory activity fell to 48.6 from 49.2 in October. That’s a sharper fall than economists forecast and takes the gauge to its lowest in four years.”
“Euro zone finance ministers said on Tuesday Italy’s draft 2019 budget was breaking European Union rules and they agreed with the European Commission that Rome should amend it. Italy, which already has the second highest debt in Europe at 133 percent of GDP, wants to borrow and spend more to deliver on election promises, breaking EU rules that say debt has to fall every year until it is below 60 percent.”
““But look underneath the surface and we are not looking at an economy on the same scale as before 2008. Perhaps we never will.”
“…Mari Carmen Rodríguez, 63, a divorcee who lives alone in Barcelona, says it “makes her stomach turn” when she hears people talk about the crisis ending. “The recession never ended. I have not noticed life getting any better. Life is just the same for me,” she said.”
“Stocks in Asia mostly slipped on Tuesday amid uncertainty about the future of U.S.-China trade relations.
“Japan’s Nikkei 225 fell by 2.39 percent to close at 22,036.05 while the Topix index shed 2.36 percent to 1,649.20 by the end of the trading day.”
“Analysts at Standard Chartered note that China’s official manufacturing PMI registered the lowest reading since July 2016 in November, staying on the dividing line between expansion and contraction.”
“Premiums for imports of copper into China, the world’s biggest copper consumer, sank to an 18-month low on Monday in a sign that demand for physical metal is waning.”
“Japan’s leaders have their work cut out for them as they attempt not only to lead their nation to a brighter future, but also to convince the public that better days are ahead, not behind, for Japan, say two Pew Research Center experts.
“…a majority of Japanese (55 per cent) still describe the current economic situation as bad. Moreover, there are doubts about whether everyone is better off: Only about a quarter of Japanese (26 per cent) believe that the financial situation of the average Japanese is better today than it was two decades ago.”