The Daily Shot - 12/4/14
- From: "The Daily Shot" <thedailyshotletter@xxxxxxxxx>
- To: <thedailyshot@xxxxxxxxxxxxx>
- Date: Fri, 5 Dec 2014 02:03:35 -0500
The Daily Shot™
Greetings,
Dollar-yen broke 120 today – something we haven’t seen in 7 years. Everything
we are seeing coming out of Japan points to weaker yen in the near-term.
Japan’s “currency war” is hitting China quite hard. The yuan is up nearly 50%
against the yen over the past couple years. This has got to have a negative
impact on China’s competitiveness. Will Beijing be forced to depreciate the
yuan to regain some of the lost ground? Such policy would not be popular in the
US.
_____
Speaking of China, the Shanghai Composite moved above 2900 for the first time
in years, as allocators shift capital.
Source: Investing.com
Also, as can be seen from the chart above, the trading volume has spiked. In
dollar terms the daily volume has shifted from average of $20bn per day to $68
bn.
Source: @PatrickMcGee
One thing is for sure – the stock market rally is about asset reallocation by
global investors, not about bets on China’s growth.
Source: @TomOrlik
_____
Russia is getting pounded again, as the ruble deteriorates to new lows. The
devaluation has been nothing short of spectacular. And bond yields continue to
rise.
_____
In the energy markets, the Saudis are still pressuring US producers. While many
think the Saudis are going after Iran, their actions speak otherwise.
Source: WSJ
_____
In the euro area Mario Draghi admitted that the ECB’s Governing Council has
considered all sorts of asset purchases but punted until next year to consider
a full QE. Markets were a bit disappointed, pushing the euro higher. The
pressure to act is building as the French unemployment rate unexpectedly jumped
again.
Source: Investing.com
And the area’s Industrial Production has remained stagnant since 2012.
Source: @NickatFP
_____
In the UK home price appreciation is moderating but is still above 8%. With
modest wage growth, these prices increases are still too high.
_____
Brazil’s central bank jacked up short-term rates yesterday. I don’t understand
the rationale, other than an attempt to stabilize the real.
The hike had little effect however, as the currency remains near the weakest
levels in years. Brazil is in trouble.
_____
In the United states residential mortgages as a fraction of total bank credit
have declined to historical lows. This is an opportunity for non-bank
participants to enter this market in scale. If people can find a way to
efficiently leverage private (non-GSE) mortgage portfolios, we could see new
entrants in the field.
_____
Lower fuel prices seem to be helping not just consumers but also small
businesses. Small business strength is vital in order for the recovery to
maintain momentum.
_____
We’ve seen 21 weeks in a row of leveraged loan fund outflows now. Good times
for CLOs to accumulate assets.
Source: LCD
Mutual fund outflows and sales by some hedge funds are starting to push loan
prices lower. Some traders who put on long bank debt and short HY bonds (or
CDX) positions are now unwinding.
Source: Stockcharts
_____
The chart below shows one of the reasons equities, particularly those with
consistent dividends have performed well relative to credit.
Source: @spbaines
_____
Now some food for thought – 3 items today.
1. Trends in US birth rate by mother’s age (log scale) show declines in teen
pregnancy and a steady rise in 40-44 age range.
Source: @conradhackett
2. This is why immigration in the US is so important – the nation’s fertility
rate is on the decline.
Source: @NeilShahWSJ
3. Not sure what to make of this – the Google daily misery index. What’s up
with April 23d?
Source: @ReutersGMF
_____
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