- George Magnus long article on China in 2020 and beyond.
- “China is certain to experience slower economic growth in the years ahead, but the bigger surprise may be that, in US dollar terms, this narrative could be a factoid because of a fault-line that leads to a precipitous fall in the Yuan.“
Macroeconomics
Snippets on the big picture.
Hedge Fund Gross
- Hedge fund gross exposure is at 2 year highs.
Causes of US Recessions
- Great table from GS Research showing the main causes of US Recessions since World War I.
- “A review of the last century of US recessions highlights five major causes: industrial shocks and inventory imbalances; oil shocks; inflationary overheating that leads to aggressive rate hikes; financial imbalances and asset price crashes; and fiscal tightening.”
Driving Less
- Miles driven used to match economic growth but this started to diverge since the 1990s in the US.
Household Debt
- US household debt burden is at very low levels.
Household Wealth
- US household wealth is at record levels up 50% since the last peak.
US Oil Patch Struggling
- Interesting chart showing hotel room rates year on year in oil producing regions of the US.
- Shows clearly how investment is coming out of those markets as drillers focus on cash flows.
- This hurts periphery services likes hotels.
- h/t 361 Capital
Fund Launches
- The number of new US investment fund launches peaked in 2011.
- Suggests an industry under significant pressure.
Brexit and the UK
- Interesting chart showing how investment has stalled in the UK after the 2016 vote for Brexit.
- Now that we have a clear political majority and mandate could investment start to return?
- There is a 9% gap to make up which is very substantial.
Wage Growth Continues
- Wage growth in the US continues apace – a solid late cycle sign.
- It is also seen in the low income portion of the wage curve.
Markets Get the Fed Wrong
- The market almost always gets the Fed wrong.
- Dotted lines are predictions in a given year of the Federal Funds rate and the red line is the actual outcome.
Wealth Distribution
- Amazing chart showing how in the US the top 0.1% of the net wealth distribution own as much as the bottom 90%.
- This trend in income inequality started in 1980s and is likely to have ramifications across society.
Consumer Loan Delinquency
- Interesting to see Consumer Loan delinquencies rising.
- Consumer loans consist of eight loan types including automobiles.
- Credit card delinquencies have been better behaved.
Primary Dealer Inventory
- US Bonds outstanding continues to grow.
- However, inventory of bonds at primary dealers has stayed low since the financial crisis.
- This creates a very risky situation in terms of liquidity.
- Especially problematic now that Bond ETFs have hit $1 trillion.
Building
US Homebuyers
- The median age of US homebuyers used to be 31 in the 1980s.
- It has now risen to 47.
- 8 years have been added to the median age since the financial crisis.
Americans Moving
- An amazing chart showing the percentage of Americans moving home has fallen from 18.1% in 1987 to just 9.4% now.
- This is having profound effects on economics and society.
Central Bank Cutting
- Global Central Banks are cutting again – at the fastest rate since 2009.
- Interesting set up for 2020 market performance – is the absolute level that matters or the second derivative?
M&G suspends property fund
- M&G have suspended their UK commercial property fund – the largest.
- It is a £2.5bn fund.
- It has suffered £1bn of outflows over the last 12-months.
- They cite Brexit uncertainty. There was a 4-month suspension in 2016 post the referendum.
- Performance since 2016 relative to the sector has been poor.
New Orders vs. Inventories
- The Purchasing Managers Index (PMI) contains several components.
- Two of these are new orders and inventories.
- The ratio of these two tends to lead the overall series – as we see now.
- It makes sense – if orders are rising and inventories are low we could see a snap back in manufacturing.
