The Daily Shot - 12/28/14
- From: "The Daily Shot" <thedailyshotletter@xxxxxxxxx>
- To: <thedailyshot@xxxxxxxxxxxxx>
- Date: Mon, 29 Dec 2014 01:00:59 -0500
The Daily Shot™
Greetings,
Tonight we start with Japan, where inflation continues to fall in spite of the
yen hovering near the lowest levels since 2007. The National CPI index came in
at 2.4%, which is around 0.6% adjusted for the consumption tax hike.
Moreover the Tokyo CPI print also came in below expectations. This measure
comes out a month ahead of the national number, providing a glimpse into
Japan’s overall CPI for the next report.
Source: Investing.com
Here are some other key developments in Japan – all seem to point to rising
headwinds for the Abenomics policies.
1. Japan’s nominal wages are struggling to grow (chart below) and real wages
are now down for the 17th month in a row. It’s hard to imagine improvements in
consumer spending in this environment.
2. There has been a 94% decline in foreign investments into Japanese shares in
2014 – the worst year for foreign investing since 2008.
3. Japan’s household savings rate fell to negative 1.3% for the first time
since the government started compiling this data in 1955. The elderly in
particular have been tapping their savings.
Moreover, yields on Japanese government securities continue to fall to new lows
as the Bank of Japan is taking paper out of the market. The latest print is
around 32 basis points on the 10-year JGB.
Source: Investing.com
_____
In China the stock market is rising together with trading volumes as more
investors jump on the bandwagon. We are talking about a 55% increase in the
Shanghai Composite over the past 6 months.
The PBoC’s latest operations have arrested the increases in short-term rates
but real rates remain high given the economic slowdown.
1w SHIBOR:
Source: shibor.org
At the same time China’s ports are still flooded with iron ore as industrial
and construction demand growth remains sluggish.
March 2015 China iron ore futures:
Source: barchart.com
_____
Russia’s foreign reserves have now dropped to the lowest point since 2009.
And it’s not just the defense of the ruble that is bleeding Russia’s official
accounts. The headlines tell it all.
Source: Daily Mail
Yes, you read it right – Bruce Willis. The sign says “Business Deposits –
Special Offer”. I guess that’s one way to “halt” a run on banks.
Source: City AM
By the way there is a rumor circulating that on Dec-30 Russia's Duma may have a
bill on the illegality of the USSR dissolution. Supposedly Putin had mentioned
it earlier but I couldn’t substantiate it. A scary thought.
_____
In the Eurozone, inflation expectations just keep falling.
Source: Natixis
And economic reports from the area remain subpar as the French jobless numbers
reach 3,488,300 - the highest on record. French economy minister Macron is
attempting to implement reforms (deregulating certain industries, letting some
businesses operate on Sundays, etc.) in response to the nation’s stagnating
growth - but is facing an uphill battle.
Source: BBC
_____
In the United States we see some potential signs of stabilization in the
so-called “velocity of money”. It’s not clear how sustainable this is, but thus
far it’s a positive indicator for the nation’s ability to overcome
disinflationary pressures.
_____
Labor force participation issues remain a nagging problem for US labor markets.
Some of the explanations include aging population (retirement), higher college
enrollment, and higher disability claims. Many of those who left the labor
force are simply not coming back no matter how good the job market becomes.
Nevertheless the Fed will be paying close attention to this in 2015.
Source: @NickTimiraos
_____
According to some indicators, US shares are in the “richly valued” territory.
Most US analysts remain mildly bullish for 2015.
Source: @NickatFP
_____
Sector correlations in US equity markets have fallen sharply. While some call
this “A Stock-Picker’s Paradise”, this is mostly just the energy and related
shares moving in the opposite direction from the rest of the market.
Source: @wonkmonk_ , WSJ
_____
On the commodities front, here is an interesting chart that brings up bearish
thoughts on crude oil. Bull markets in crude tend to be much sharper than bear
markets.
Source: @Callum_Thomas, @CreditSuisse
_____
Here is the performance across asset classes in 2014. If the ECB doesn’t go
through with QE in the next few months, some of those gains by Eurozone gov.
bonds will be violently reversed next year.
Source: @ReutersGMF
_____
Now some food for thought – 2 items:
1. Manhattan residential property prices are out of control, particularly for
condos. But sales are down. The explanation is simply the lack of available
properties.
Source: @NickTimiraos
2. The rate of women working in the US tech sector is now lower than in 1998.
What happened?
Source: @nytimes
_____
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