Morning Report: Global growth engines are stalling 2/9/16

Markets are down after yesterday’s blood bath. Bonds and MBS are up small.

Since the Fed tightened rates at the December meeting, the 10 year bond yield has fallen by 58 basis points. Fun fact: The Japanese 10 year bond yield is now negative.

In economic data, the NFIB Small Business Optimism Index fell from 95.2 to 93.9 last week. This is surprisingly tame given the activity in the markets over the past couple months. That said, small business optimism didn’t ride the post-2009 rally in the markets up, so it probably will be a little insulated on the way down. Hiring plans remain intact, which is a good sign, however finding qualified applicants continues to be an issue.

Job openings are pushing close to new highs, according to the JOLTS job report. Quits are increasing, which is a bullish sign for the labor markets.

Wholesale sales and inventories both fell in December. We are seeing a buildup in inventory, which is bearish for the economy.

Bottom line: the markets are signalling pain in the global economy, but it is hard to draw the conclusion that conditions in the US are driving it. If anything, the US appears to be taking its historical role of the engine of growth in a soft global economy.

The canary in the coal mine (besides oil) has been the absolute carnage in the banking sector, especially overseas. Deutsche Bank has been cut in half since September. Same as Credit Suisse. Citigroup is down 27% since Jan 1. So is BNP Paribas. Not sure what this is signalling (exposure to energy? exposure to China?) but it is a big warning button for the global economy and it is flashing red.

Even though the economy has recovered, the hatred of the financial sector hasn’t changed, and it is being channeled through Bernie Sanders. The ironic thing is that the “Wall Street” they are railing against hasn’t existed for 10 years. Regardless it isn’t an environment conducive to risk-taking.

Speaking of politics, the New Hampshire Primaries are today. Clinton and Sanders look neck and neck, and Trump looks to be ahead of the pack for the Republicans.

Completed Foreclosures fell to 32,000 in December, which is down 2.4% from November and 22.6% year-over-year.

13 Responses

  1. NoVA – Social Justice Warriors really shouldn’t be let near military policy at all.

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  2. @jnc4p: just caught some of your debate on women and the draft over at PlumLine. It amazes me that folks on the left can turn the forcible conscription of people to fight and possibly die in some godforsaken war zone into an issue where it’s unfair to women that they aren’t also being involuntarily forced into combat.

    If we’re gonna have a draft, I’m all for women being drafted. But not because it’s somehow unfair to women that they aren’t included in this involuntary forced battle. Unfair to men, sure. But to women? Holy moly, these people. It’s unfair to argue that women can’t get shot up in foreign war zones just as good as men! I demand the right for women to go die involuntarily immediately!

    ??

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    • So the left is complaining that women aren’t subject to the draft? Or are they complaining the Republicans are contemplating making them be part of the draft?

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      • Probably both out in the larger world, but on Plumline jnc4p was arguing against including women in selective service and the lefties were all arguing for including women, because the more bodies you have to throw into the gears of war, the more likely you are to win it, or something. But it kept being framed as someone diminishing of women not to include them in an involuntary draft.

        Because they can have their rights to self-determination taken away just as good as any man!

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      • Its the: by conscripting everyone there will be no more wars. Nonsense.

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      • The main objection was to the claim I was making that there are physical strength differences between average men and women and that those are relevant to military service.

        The racism analogy was of course invoked.

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  3. How come they can’t seem to “fix” the economy and arguably were the cause of it’s downfall yet are seen, by people much smarter than me, as being indispensable?

    http://hosted.ap.org/dynamic/stories/U/US_FEDERAL_RESERVE_YELLEN?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2016-02-10-08-32-00

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  4. True?

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