Morning Report: Tough start to 2016 1/4/16

Markets are getting rocked to start the new year, with China limit down overnight and Euro markets down anywhere from 2% to 4%. Bonds and MBS are up.

The ISM Manufacturing Index fell to 48.2 from 48.6 in December, which is the second month of contraction in the manufacturing sector. Blame the dollar. A 48.2 reading in the manufacturing PMI would normally be associated with GDP growth of around 1.6%.

Construction Spending fell 0.4% in November and October’s number was revised downward from 1.0% to 0.3%.

Foreign demand for US real estate will continue to grow in 2016. Foreign purchases of US real estate were $87 billion last year compared to $9 billion in 2009. Berlin, London, New York City, and San Francisco are the markets where global hot money are headed.

Tensions are increasing in the Middle East, with Saudi Arabia cutting diplomatic ties with Iran over the execution of a cleric. Saudi Arabia is struggling since its economy is based on redistributing oil money and there hasn’t been a lot of oil money to redistribute lately. They may have miscalculated on trying to drive out fracking – it can be turned on and off with very little expense and time.

%d bloggers like this: