What I think I learned last week #52
The big news was obviously Trump and Xi agreeing to a truce in the trade war.
Larry Kudlow, director of the National Economic Council, says the Congressional Budget Office’s economic growth estimates are too pessimistic, and he doesn’t see a recession coming “for the next couple of years at least.” I must admit, as someone who has followed Larry for years as the Bear Stearns Chief Economist, National Review columnist, CNBC talking head (Kudlow & Cramer, anyone?) and now, chief Trump loyalist, Larry’s predictive abilities are questionable. I believe he has predicted zero of the last five recessions; he certainly completely missed the Great Financial Crisis.
The AI World Conference and Expo was held last week in Boston. There were many sessions on Artificial Intelligence in healthcare and pharmaceuticals, represented by speakers from GlaxoSmithKline, AbbVie, Roche, Merck, AstraZeneca, Bristol-Myers Squibb and Sanofi, among others. Of course, the usual suspects also were there, including Microsoft, IBM, Splunk, and Oracle.
How bad has it been in stock markets? How about this fact: The S&P 500 is set to log five one-day drops of at least 3% without a rise of that magnitude for the first time ever in a calendar year, according to Dow Jones Market Data. The last time it got close to this trend was in 1936, when the benchmark recorded four one-day 3% dips and no similar advances. Likewise, the Dow Jones Industrial Average has posted four slumps of 3% or more this year without a rise of that size, which it has never done. The DJIA last posted three 3% down days without a 3% increase in 1897.
On Thursday, European stocks had their worst fall since the Brexit vote of 2016 by dropping more than 3%.
The news keeps getting worse for autos as sales of new vehicles fell in the US during November and European auto sector stock prices hit their lowest level in two years.
European banks are not much better. Deutsche Bank shares hit an all-time low last week following a criminal probe into suspected money laundering.
Universally, yellow means slow down. In France, yellow means come to almost a complete stop, at least economically. The yellow-vested riots have caused already dismal growth expectations to plummet further.
Japan is trying its best French impression as Japanese GDP posted a drop at an annualized rate of 2.5% in the third quarter, doubling the initial estimate of a 1.2% contraction and far worse than the consensus estimate of a 1.9% drop.
China is worried about deflation as both consumer and producer prices fell.
The Canadian province of Alberta forced oil producers to cut their oil production by 8.7%, or 325,000 barrels a day, starting on January 1. The price for Western Canadian Select, the Canadian benchmark, jumped to $32.91 a barrel, up almost $11 on the news. Canada is the sixth biggest crude oil producer in the world.
OPEC is losing a member. Qatar made a shocking decision to quit the oil cartel after 57 years of membership.
OPEC is also losing some barrels of production, agreeing to cut output by 1.2 million barrels a day. Brent crude jumped 5% on the news.
A new study from the US Geological Service has determined that the Wolfcamp Shale and Bone Spring rock formations in the Permian’s Delaware Basin are twice as big as the Midland Basin, containing 46.3 billion barrels of oil. For those interested, EOG Resources has been active in the Wolfcamp.
Despite a slowdown in hiring to just 155,000 jobs created in November, US wage growth held steady at 3.1%.
The spread between two- and 10-year U.S. Treasurys narrowed Monday to 15.6 basis points, the smallest gap since July 3, 2007, while other parts of the curve have already inverted: three-year Treasury yields settled higher than five-year Treasurys on Monday for the first time since January 2009.
After Microsoft claimed the title of most valuable company at the close of Friday, November 30, by Monday, Amazon took the title away, at least for a little bit of time. The three-way battle between Amazon, Apple and Microsoft for this honor looks to continue for some time.
Amazon’s air freight division is planning to more than double its existing fleet of 40 planes flying its products around the US. With two-thirds of Amazon’s planned routes overlapping with UPS and FedEx those companies could lose 2% of their entire revenue this year and 10% by 2025.
China’s renminbi had its biggest two-day rise since its 2005 revaluation as the pseudo-trade truce gave confidence to currency traders, who pushed the renminbi up 1.8% during the first two days of last week.
It was a bad week for Chinese telecom equipment provider Huawei. After the US deemed it a security threat, New Zealand and Australia limited its access to their new 5G networks and Britain’s largest wireless carrier, BT, will remove Huawei’s equipmentfrom its network. Following that, a top Huawei executive, CFO and daughter of the founder Meng Wanzhou, was arrested in Canada and is facing extradition to the US for violating sanctions.
Forbes magazine reports that the highest-earning star on YouTube is a seven-year-old boy, who earned $22 million last year. Ryan of Ryan ToysReview has over 17 million followers who watch him review toys. I feel real good about my life choices now.
Finally, 2018 is turning into a banner year for France. They win the World Cup, and now the country is #1 in taxes, as named by the Organization for Economic Cooperation and Development. Congratulations!
And that is what I think I learned last week.