Economic Outlook

OK, it Gets Sticky: Job Openings Plunge the Most Since the Great Recession

Let’s make this clear: these are job openings in December and prior months, before the novel coronavirus had shown up on the business-staffing horizon. Let’s also make clear that the two-month drop was so bad that a statistical flaw might have skewed the data, such as some seasonal adjustments gone berserk. But as we will see, the not-seasonally adjusted data looks even worse. And it’s not just one month. With hindsight we see that the trend started in early 2019 in small uneven drips, and it didn’t really matter until it suddenly did.

The number of job openings in December dropped by 364,000 from November (seasonally adjusted), after having already plunged by 574,000 in November, according to the Labor Department’s Job Openings and Labor Turnover Survey (JOLTS). This two-month plunge of 938,000 job openings came after a series of ups and downs with downward trend starting after the peak in January 2019. It brought the number of job openings in December to 6.42 million (seasonally adjusted), same level as in October 2017. Since the peak in January 2019, over 1.2 million job openings have dissolved into ambient air (November and December in red)….CLICK for complete article

Visualizing the 700-Year Decline of Interest Rates

How far can interest rates fall?

Currently, many sovereign rates sit in negative territory, and there is an unprecedented $10 trillion in negative-yielding debt. This new interest rate climate has many observers wondering where the bottom truly lies.

Today’s graphic from Paul Schmelzing, visiting scholar at the Bank of England (BOE), shows how global real interest rates have experienced an average annual decline of…Click for full article.

Market Correction Goes Viral, Is It Time To Buy?

Over the last few weeks, the message from the newsletter has been repetitive:

“The markets are overbought, overextended, overly complacent. A correction is coming so reduce and rebalance portfolio risks.” 

Despite those issues, the markets continued to push higher leaving readers with the assumption the “warnings” were wrong.

As noted last week, there have only been a few points over the previous 25-years where investors were so extremely lopsided in their positioning.  We have shown many charts of investors being “all in” to equities over the last three weeks, but here is the latest Fund Manager’s Survey, which shows cash balances at 6-year lows.

The importance of these measures is not meant to be a “timing” signal to buy or sell positions. These measures are more valuable when thought about as an “accelerator” in a car. When markets are rising, investors press down on the accelerator, taking on more equity risk. As long as the road is straight, and visibility is good, it seems there are no consequences for driving at high speeds. However, if the road suddenly turns, or a hazard presents itself, bad outcomes happen very quickly….CLICK for complete article

Oil Teetering On The Brink Of Bear Market On Coronavirus Fears

After a brief reprieve earlier this week, oil prices tumbled again on Thursday, approaching a bear market, as fears spread that the coronavirus outbreak in China would depress oil demand, at least in the short term.

At 10:52 a.m. EDT on Thursday, WTI Crude was down 2.38 percent at $52.06 and Brent Crude was trading down 2.39 percent at $57.52, both flirting with bear market territory.

Even with Libya’s oil production plummeting by nearly 1 million barrels per day (bpd) due to the port blockade by forces loyal to General Khalifa Haftar, oil prices have seen downward pressure over the past week and a half as fears of oil demand destruction currently outweigh supply outages.

Yesterday’s EIA inventory report was also not supportive for oil prices, after the Energy Information Administration reported a build in oil inventories of 3.5 million barrels for the week to January 24. Analysts had expected a draw of 460,000 bpd, after last week the EIA reported a draw of 400,000 bpd for the seven days to January 17. CLICK for complete article

Bank of America announced a 4 percent drop in net income for the final quarter of 2019, while that of Goldman Sachs fell by 24 percent.

Investors, meanwhile, are eyeing numbers closely as the financial reporting season comes into full swing and income growth of firms listed on the S&P 500 in previous quarters has remained flat.

Stock markets have performed well despite near-zero corporate earnings growth, with many investors anticipating a turnaround in profits in 2020 as global growth stabilizes and trade tensions diffuse.

“The market rally indicates that investors expect higher earnings growth again in 2020,” Alexander Voigt, Founder and CEO at daytradingz.com, told The Epoch Times in an email. “The China trade deal and presidential elections are the main influential factors. I expect a stronger outlook during the current earnings release period and a subsequent higher earnings growth for 1Q20 and 2Q20,” he added.

Others expect lackluster figures…CLICK for complete article

It’s Time to Pay Attention to Commercial & Industrial Loans

Commercial and industrial loans (C&I loans) at all commercial banks fell to $2.33 trillion as of January 1, the lowest since March 2019, according to Federal Reserve data on commercial banks, released on Friday. C&I loans peaked in August last year at $2.38 trillion and have since fallen 1.7%. This has occurred despite three rate cuts by the Fed over the period.

C&I loans are used by businesses for working capital or to finance capital expenditures. Working capital loans are usually collateralized by receivables and inventories. Capital expenditure loans are collateralized by equipment and the like.

These loans are often credit lines with floating interest rates – which are very low and very appealing for borrowers. And banks are eager to extend these loans and are offering them aggressively, even to my little company. So there is no issue at this side of the equation…CLICK for complete article