Baltic Dry Index. 985 -47 Brent Crude 70.85
Never ending Brexit now October 31,
maybe.
Day 155 of the never-ending USA v China
trade talks. Everyone’s “optimistic.”
USA v EU trade war 11 days away? No one
optimistic.
The most effective way to destroy people is to deny and
obliterate their own understanding of their history.
George Orwell.
While
English voters outside of London went to vote in the local elections on Thursday, by Friday’s results it was very apparent that
the voters had made plain their contempt for both major parties. Still local
elections are poorly indicative of general election results with this one more
than most, given Brexit feelings, and that Wales, Scotland , and London didn’t
vote.
In
other US news, stocks surged on a “good news” US employment report.
U.S. job growth surges; unemployment rate drops to 3.6 %
May 3, 2019 / 6:59 AM
WASHINGTON (Reuters) - U.S. job growth
surged in April and the unemployment rate dropped to the lowest in nearly half
a century, pointing to sustained strength in economic activity even as last
year’s massive stimulus from Republican tax cuts and spending increases fades.
The Labor
Department’s closely watched monthly employment report on Friday showed the
greater-than-expected 263,000 new jobs created last month were spread across
most industry sectors, and the unemployment rate was just 3.6%, the lowest
since December 1969.
Still, wage
gains did not accelerate as expected, holding at a reading that is consistent
with moderate inflation. Moreover, the decline in the unemployment rate was
driven largely by the most people leaving the labor force in a year and a half.
---- “Employment gains are strong enough to dispel any immediate concerns over the health of the economy, while wage gains are not strong enough to force the Federal Reserve’s hand to tighten the policy stance,” said Harm Bandholz, chief U.S. economist at UniCredit Research in New York.
Aside from
April’s surge in nonfarm payrolls, the economy created 16,000 more jobs in
February and March than previously reported. Economists polled by Reuters had
forecast payrolls rising by 185,000 jobs last month.
More
But all is not quite
as good news as it appears. “The decline in the unemployment rate was driven largely by the most
people leaving the labor force in a year and a half.”
The official unemployment rate, U-3, seasonally adjusted of 3.6 percent, compares with 4.2 percent in April 2018. So far so good.
The unofficial unemployment rate, U-6 (total unemployed, plus all persons marginally attached to the labor force, plus….) came in at a much higher 7.3 percent and compares with 7.8 percent in 2018.
The official unemployment rate, U-3, seasonally adjusted of 3.6 percent, compares with 4.2 percent in April 2018. So far so good.
The unofficial unemployment rate, U-6 (total unemployed, plus all persons marginally attached to the labor force, plus….) came in at a much higher 7.3 percent and compares with 7.8 percent in 2018.
All this is after the Trump tax stimulus, and a cowed Fed reversing
itself in December under intense pressure from President Trump. Even the “greater than expected” seasonally
adjusted rise of 263,000 while welcome and subject to revision, compares to
196,000 in April 2018, 213,000 in April 2017, and 211,000 in April 2016. Good but far from stellar, compared to January
2019s 312,000.
Below,
SocGen thinks that the “real Fed funds rate,” is now about to catch out US
stock markets.
SocGen says this is the best predictor of S&P 500’s volatility over the past half-century
By Sunny
Oh Published: May 3, 2019 3:44 p.m.
ET
Société Générale says the ‘real’ fed-funds rate is the most accurate driver of long-term volatility for the S&P 500
Stock-market investors might not want to take a victory lap even as equities trade near records.As the delayed impact of the Federal Reserve’s rate-hike policy filters its way through the U.S. economy, a pickup in volatility can be expected.
That is according to Jitesh Kumar, a derivatives strategist at Société Générale, who says the most accurate predictor of long-term volatility in the S&P 500 SPX, +0.96% over the past 50 years or so has been the inflation-adjusted fed-funds rate, or the “real” rate.
And real rates — U.S. Treasury yields minus expectations for coming inflation — have steadily risen since the central bank raised its benchmark overnight lending rate in December of 2015, with the Fed raising rates a total of nine times since its last rate increase at the end of last year.
“The key takeaway from our work over the past few years analyzing the impact of macro factors on equity volatility is that it is the real central bank policy rate that drives the (subsequent) volatility in equities,” said Kumar, in a research note on Friday.
Read: Here’s one sign in bonds that the U.S. is poised for a sharp economic slowdown in 2019
Higher interest rates can make stock-market investors nervous because it translates into higher borrowing costs, which can, in turn, crimp corporate investment, earnings and ultimately hamstring economic momentum.
Kumar didn’t clarify if the expected uptick in volatility would lead to lower equity values. But since 1990, periods of higher daily volatility have been more associated with days when stock prices fall rather than when they rise, according to Cumberland Advisors.
In the chart below, changes in the inflation-adjusted fed-funds rate foreshadowed changes in the S&P 500’s SPX, +0.96% realized volatility 2½ years later. In other words, investors have to wait for around 30 months before the real fed-funds rate’s rise starts to lead to turbulence in equities, said Kumar.
Thirty months is usually too far into the future to matter to investors looking for more short-term sources of potential stock-market turbulence.
But equity volatility may start to ramp up from here, given that the central bank had started to steadily increase its key lending rate starting from December 2016, around 30 months from now.
After plumbing as low as negative 3% in 2016, the real fed-funds rate now stands slightly below 1%, back into positive territory.
Yet as the Fed raised rates throughout 2017 and 2018, equities have advanced higher, even if the way up has been paved with sharp corrective pullbacks at the beginning and at the end of 2018.
Since the December selloff, the S&P 500 SPX, +0.96% has climbed more than 17% year-to-date, and is within a hair’s breadth of its April 30 all-time high at 2,945.83.
More
Add
in Brexit, Asian growth slowing, the Eurozone’s big four economies all at stall
speed, a new Trump trade war against Europe possibly starting later this month,
and Brent crude oil still trading in the
70s, plus the ending of Iran oil waivers likely to further drag on Asia, and
other than the usual northern hemisphere seasonal uplift and a possible iffy
USA v China trade deal, the forecast for summer and autumn ahead looks stormy
to say the least.
Warren Buffett says no textbook could have predicted the strange economy we have today
T
- Buffett highlights that unemployment remains so low, yet interest rates and inflation are not rising. At the same time the U.S. government continues to spend more money than it takes in.
- These conditions are not sustainable for the long term, Buffett says.
- “No economics textbook I know that was written in the first couple of thousand years that discussed even the possibility that you could have this sort of situation continue and have all variables stay more or less the same,” he says.
“I don’t think our present conditions can exist in terms of fiscal and monetary policy and various other elements across the political landscape,” he said. “I think it will change, I don’t know when, or to what degree. But I don’t think this can be done without leading to other things.”
Buffett, in his pre-shareholders meeting interview that aired on “Squawk Box, ” also revealed that Berkshire Hathaway has been buying shares of Amazon. However, he said Berkshire has not changed its Apple stake.
The “Oracle of Omaha” also spoke out for the first time about how quickly his $10 billion role in the Anadarko saga came together.
The billionaire chairman of Berkshire also weighed in on the challenges bankers face in Washington, saying anyone on Wall Street who takes the vacant Wells Fargo CEO job “would be pinatas from now until the election time.”
https://www.cnbc.com/2019/05/03/buffett-no-textbook-predicted-the-strange-economy-we-have-today.html
Finally, in food news, is it still to
wet to plant in much of America? Will China’s pig crisis set off global food
price inflation.
Mississippi River in Davenport now higher than historic 1993 flood levels — and rising
Des Moines Register Published 3:42
PM EDT May 3, 2019
During the
historic flooding in July 1993, the Mississippi River near Davenport rose to
its highest level ever: 22.63 feet.
That record
is no more.
The river
hit 22.64 feet shortly before noon Thursday, the National Weather Service
reported, and the water continues to rise.
The river is
expected to reach 22.7 feet by Friday, the weather service said. Even with a
dry weekend, it's not projected to fall below 22 feet until late Sunday.
Also on
Thursday, authorities said they had begun pushing sewage back into
rivers. The wastewater plant in Davenport has reached capacity, and the Iowa
Department of Natural Resources signed off on the sewage diversion to prevent
backups in surrounding cities, according to Scott County Emergency Management.
"Officials
are trying to find other relief mechanisms and will employ them as soon as
possible," the agency said in a news release.
---- Thunderstorms brought more rain Thursday morning, causing run-off to worsen the situation. The extra rain is adding pressure to local infrastructure, officials said Thursday.
Gov. Kim
Reynolds is scheduled to meet with Quad Cities government officials and tour
flood damage on Friday. Her disaster proclamation Wednesday for Clinton County
means that 61 of Iowa's 99 counties now have been designated as disaster areas
by state or federal officials, making money and other resources available for
recovery in those counties.
Unusually
high snowmelt and untimely heavy rainfall have been culprits for widespread
flooding this spring in Iowa, particularly on the western and now eastern edges
of the state.
Dry weather
is forecast for the Quad Cities area Friday and Saturday, but more showers are
possible early next week.
More
Pig ‘Ebola’ Virus Sends Shock Waves Through Global Food Chain
By Dan Murtaugh and Enda Curran
2 May 2019, 22:01 BST Updated on 3 May 2019, 04:53
·
Virus will move markets, may influence
geopolitics: Rabobank
What started with a few dozen dead pigs in northeastern China is sending shock waves through the global food chain.
Last August, a farm with fewer than 400 hogs on the outskirts of Shenyang was found to harbor African swine fever, the first ever occurrence of the contagious viral disease in the country with half the world’s pigs. Forty-seven head had died, triggering emergency measures including mass culling and a blockade to stop the transportation of livestock. Within days, a government notice proclaimed the outbreak “effectively controlled.”
It was too late. By then, the disease had literally gone viral,
dispersed across hundreds of miles in sickened animals, contaminated food, and
in dirt and dust on truck tires and clothing. Nine months later, the contagion
has spread nationwide, crossed borders to Mongolia, Vietnam and Cambodia, and
bolstered meat markets globally.
While official estimates count 1 million culled hogs,
slaughter data suggest 100 times more
will be removed from China’s 440 million-strong swine herd in 2019, the Chinese
zodiac’s “year of the pig.”
The U.S. Department of Agriculture forecast in
April a decline of 134 million head -- equivalent
to the entire annual output of American pigs -- and the worst slump since the
department began counting China’s pigs in the mid 1970s.
“This is an unprecedented situation,” said Arlan Suderman, chief economist for INTL FCStone Inc., who has been analyzing commodity markets for almost four decades. “This will impact food prices globally.”
The strain of African swine fever spreading in Asia is undeniably nasty, killing virtually every pig it infects by a hemorrhagic illness reminiscent of Ebola in humans. It’s not known to sicken people, however.
The harm to pigs is especially critical for China,
with a $128
billion pork industry and the world’s third-highest per-capita
consumption.
China’s hog herd may decline as much as 30 percent, said Juan R. Luciano, chief executive officer of Archer-Daniels-Midland Co., one of the biggest agricultural commodity traders.
“China will clearly need to import substantial amounts of pork and likely other meat and poultry to satisfy demand,” Luciano told analysts on an April 26 conference call.
More
If
liberty means anything at all, it means the right to tell people what they do
not want to hear.
George
Orwell.
The monthly Coppock Indicators finished April
DJIA: 26,593
+51 Down. NASDAQ: 8,095 +89 Down. SP500: 2,946 +55 Up.
The S&P has reversed to up largely as a result of
the Fed falling into line with President Trump’s demands, but with President
Trump wanting to be judged by the performance of the stock market and the Fed’s
Plunge Protection Team now officially part of President Trump’s re-election
team, probably the safest action here is still fully paid up synthetic double
options on most of the major indexes. This could all go very wrong very fast.
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