Baltic Dry Index 1401 +36 Brent
Crude 60.28
In central banking as in diplomacy, style, conservative
tailoring, and an easy association with the affluent count greatly and results
far much less.
John Kenneth Galbraith
This weekend the big question is, are stocks in a correction
or the first phase of a Trump trade war collapse? While I suspect the latter, for
technicians it all depends if February – May support can hold around 24,000 on
the Dow. I suspect it won’t hold for long, given the ugly reality unfolding in China
and Europe, and I suspect about to hit in the USA next year once the Democrats
get control of the House of Representatives in January.
Not for nothing are investors fleeing US stock funds at a
record pace. A pace that will likely pick up again next year when America’s
large retailers report a rout to internet sales. A tidal wave of creative
destruction from the internet is about to sweep over department stores and
malls. I suspect it will soon engulf how we buy autos and trucks.
For now though, most of the “experts” say don’t worry, there’s
no recession in sight. But then again, when was the last time the experts or
central banksters warned “recession dead ahead, get out now.”
If economists could manage to get themselves
thought of as humble, competent people on a level with dentists, that would be
splendid.
John Maynard Keynes
Investors flee U.S. stock funds at record pace: Lipper
Lipper data shows largest weekly outflow from U.S. stocks since tracking began
Investors fled U.S. equity funds at the fastest pace on record in the week ended Wednesday, according to data from Lipper.More than $46 billion was redeemed from U.S. stock mutual funds and ETFs between Dec. 5 and 12, the largest weekly outflow since Lipper began tracking weekly flows in 1992. The data comes amid a continued stock market selloff that’s driven the S&P 500 SPX, -1.91% into correction territory and left it on track for its biggest quarterly loss since the third quarter of 2011.
The figure is also nearly twice as large as any other week on record, underscoring the increasingly cautious stance being taken by investors in the final quarter of 2018.
According to Tom Roseen, head of research services at Lipper, investor caution has been the result of a growing number of macro headwinds, from uncertainty surrounding trade talks, to Brexit and Italian budget negotiations, and growing volatility in U.S. equity markets.
“This record
outflow is alarming and unusual,” Roseen told MarketWatch, arguing that it may
be evidence of a “final capitulation” on behalf of equity investors.
At the same
time, there are transitory factors he pointed to that may result in money
flowing back into equities before long. One is that several major funds went
“ex-dividend” on Dec. 12, meaning they paid out capital gains and income
distributions for the year, and much of that money will be immediately
reinvested. Other transitory factors could be tax related, as investors close
out losing positions to reduce their capital-gains taxes for the year.
More
Dow tumbles nearly 500 points to enter correction territory as stocks fall on global growth fears
Stocks fell sharply Friday, ending the week on a bleak note and sending the Dow Jones Industrial Average into correction territory after a batch of weaker-than-expected economic data out of China and Europe sparked fresh worries about the state of the world’s second-biggest economy and prospects for global growth.The Dow DJIA, -2.02% fell 496.87 points, or 2%, to end at 24,100.51, for its lowest close since May 3. The S&P 500 index SPX, -1.91% shed 50.59 points, or 1.9%, to close at 2,599.95, its lowest finish since April 2. The Nasdaq Composite Index COMP, -2.26% dropped 58.59 points, or 0.8%, to finish at 6,910.66, marking its lowest close since Nov. 20.
The drop left the Dow more than 10% below its Oct. 3 record high, meeting the widely used definition of a correction. The blue-chip gauge joined the S&P 500 and the Nasdaq in correction territory.
Fresh evidence that global trade tensions are hitting the world’s second-biggest economy emerged Friday, as China released data that showed both industrial output and retail sales for November missed economists’ forecasts. China’s National Bureau of Statistics attempted to cool concerns, saying the economy “performed within the reasonable range.”
However, those words appeared to fall on deaf ears as investors continued to push aside trade optimism, and instead focused on collateral damage from the back and forth. Investors have been weighing several pieces of news over the past few days showing that trade tensions between the U.S. and China may be cooling, with optimism driving investors into equities.
Economic data out of Europe was no more encouraging, after IHS Markit’s purchasing manager’s index, released Friday, showed the German and French private sectors slowing sharply in November.
---Investors, meanwhile, appeared to take little solace in strong U.S. retail sales data. Meanwhile, purchasing managers index readings for the U.S. manufacturing and services sectors fell to multi-month lows, showing activity was still expanding but at a slower pace.
The S&P 500 financial sector entered bear-market territory, defined as a 20% pull back from a peak, with Friday’s close, according to Dow Jones Market Data.
More
Janet Yellen is worried about the next financial crisis
By Francine
McKenna Published: Dec 13,
2018 5:13 p.m. ET
Janet Yellen is worried about the next financial crisis and told a small,
intimate audience at an event Wednesday night in Washington, D.C., that her
biggest concerns were the potential for reversal of financial safeguards put in
place after the crisis and growing corporate debt.“I am worried that we are in a deregulatory mode and I see a lot of pressures building in the system to go further to really weaken fundamental safeguards that were created in Dodd-Frank. We are a decade after the financial crisis so that would be worrisome and wrong to do,” Yellen told the audience at the Women in Housing and Finance holiday event.
See also: Ten years after Lehman, IMF’s Lagarde warns fallout from financial crisis far from over
Her new role, as a Distinguished Fellow in Residence at the Brookings Institution, a nonprofit public policy organization, “is a little less stressful,” she said.
Her Fed chair predecessor, Ben Bernanke, is in the office next to her and next to him is another Fed veteran, Don Kohn.
“We call ourselves the FOMC – former open market committee,” said Yellen.
One of the most important questions she and her colleagues face, she said, is what monetary policy tools exist to address the next recession. Although interest rates will rise from the zero levels we had for seven years, they are likely to stay relatively low. That means, said Yellen, that monetary policy’s traditional short-term interest rate lever is not available to address a new downturn in the economy.
In response to a question about high levels of corporate debt she said that the issue is similar to what triggered the financial crisis.
----Yellen is not as worried these loans present a risk to the banking system. However, “if the economy experiences any kind of negative shock where rates go up more than expected there will be a lot of corporate bankruptcies, a lot of distressed credit crunch a lot of downgrading of loans, a lot of investor losses,” said Yellen.
She believes this is a risky
form of lending and is “disturbed” that she does not see regulators having the
tools to address it.
More
https://www.marketwatch.com/story/janet-yellen-is-worried-about-the-next-financial-crisis-2018-12-13
Trump says he hopes Fed won't raise interest rates anymore
By
Robert
Schroeder Published: Dec 13, 2018 1:29 p.m. ET
President
Donald Trump said Thursday he hopes the Federal Reserve "won't be raising
interest rates anymore." It was Trump's latest criticism of the central
bank's policy, which came in a Fox News interview shortly ahead of the next Fed
meeting. Economists' consensus is that the Fed is likely to raise its benchmark
interest rate by a quarter-point to a range between 2.25% and 2.5% at the end
of their meeting on Dec. 19. The Fed also is expected to cut its forecast of
2019 rate increases.
Recession Signs Hard to Miss If Stock Message Is Taken Seriously
By Lu Wang
Updated on 14 December 2018, 21:56 GMT
German private sector growth hits four-year low in December - PMI
December 14, 2018 / 8:38 AM
BERLIN, Dec
14 (Reuters) - Germany’s private sector expansion slowed to a four-year low in
December, a survey showed on Friday, suggesting growth in Europe’s largest
economy may be weak in the final quarter.
IHS Markit’s
flash composite Purchasing Managers’ Index (PMI), which tracks the
manufacturing and services sectors that together account for more than
two-thirds of the economy, fell to 52.2 from 52.3 in the previous month.
The index
has dropped eight times in 2018, including in the final four months of the
year, as the economy cools due to one-off effects like car registration
bottlenecks as well as more lasting headwinds from trade frictions.
Markit
economist Chris Williamson said he expected the economy to grow by 0.2 percent
in the final quarter after a contraction in the July-September period.
He said that
while the economy was not facing an immediate risk of recession, the outlook
remains gloomy, especially as the possibility of Britain leaving the European
Union next year without an agreement on future relations lurks on the horizon.
“The risk of
a recession has increased, but we still don’t see this happening in our
projections,” said Williamson.
More
In any great organization it is far, far safer to be wrong with the majority than to be right alone.
John Kenneth Galbraith.
Once again, another year draws to a close and it’s
time for my annual appeal. If you are one of the regular LIR readers of this
usually six days a week update, that helps support my efforts with the
occasional donation via the Paypal button, once again I sincerely thank you. A
special thanks this year to the very kind reader that so generously helped me
with my vet bills for the operation on my late border collie Rosie. After 12
years, Christmas won’t be the same without Rosie.
If you are a regular reader who finds the LIR
informative, interesting, occasionally amusing or entertaining, please consider
making a small donation via the Paypal button on the right of the LIR website.
For obvious reasons in our new age of mainstream media fake news, I want to
keep the LIR advertising free. But in any event thank you for reading and
sending along helpful articles and suggestions.
"In
economics, hope and faith coexist with great scientific pretension."
John Kenneth
Galbraith.
The monthly Coppock Indicators finished November.
DJIA: 25,538 +157 Down. NASDAQ:
7,331 +205 Down. SP500: 2,760 +129 Down.
All three slow indicators are
signalling more correction to come, although not necessarily ahead of the
year-end. However, if a tidal wave of stock fund redemptions hit in December,
2018 could end in a great rising wave of panic selling into a generally thin
markets trading year-end.
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