Since the onset of the pandemic, the U.S. housing market has been sizzling. Record-low interest rates created an unprecedented demand for housing, which only worsened a housing shortage that began before the pandemic. read more.....»»
The housing crunch is still a reality. The housing crunch is still a reality. This is seen in the still-low inventories and the still-soaring prices. And it’s despite the fact that buyers are holding off due to a combination of factors, including market conditions, affordability issues, summer distractions, the fall schooling season, as well as the need to start holiday shopping earlier this year.What the Numbers SayZillow data shows that after increasing at an accelerated rate for each month since January, price increases started moderating in August to $303,288 (including across 43 of the 50 largest major metros). A year-over-year deceleration isn’t expected until Jan 2022.The price moderation is of course related to inventories, which climbed for the fourth straight month in August, while remaining 22.7% lower than last year. So it’s easy to see why the firm sees home values continuing to increase (by 4.7% between August and November this year and 11.7% between Aug 2021 and Aug 2022).So inventories need to increase much more before the situation normalizes.As far as new homes are concerned, the Census Bureau and HUD say that privately-owned housing starts in August were up 3.9% (±11.3%) from July and up 17.4% (±12.1%) from August 2020. But housing completions slowed 4.5% (±11.1%) from July although they were up 9.4% (±10.3%) from August 2020.Also, single-family starts slowed while completions increased. New home sales were 1.5% (±15.1 percent) above July, but 24.3% (±19.1%) below August 2020. Inventory at August-end was 378,000, representing 6.1 months of supply at the current average sales price of $443,200 (median $390,900).According to the National Association of Realtors, existing home sales dropped 2.0% from July and 1.5% from last year with the median price of $356,700 increasing 14.9% year over year. Days on the market was level with July at 17 but down from 22 in Aug 2020. Single-family home sales dropped 1.9% with the median existing single-family home price of $363,800 increasing 15.6% from August 2020. Inventories dropped 1.5% from July and 13.4% from last year, representing 2.6 months of current sales.Lawrence Yun, NAR's chief economist, said, "Although there was a decline in home purchases, potential buyers are out and about searching, but much more measured about their financial limits, and simply waiting for more inventory."Factors Driving Inventory Supply One factor that has driven sales since the pandemic hit is the low mortgage rate, which for the 30-year, conventional, fixed-rate loan was 2.84% in August and sub-3% through 2021. It was 3.11% in 2020. If things continue per plan, the mortgage rate will increase next year, making it that tiny bit harder for buyers and leading to some inventory increase.The second factor that could increase inventories is the mortgage forbearance program, which is set to lapse today. Some of these home owners may now opt to sell these properties, rather than start making payments again. Zillow is looking for existing home sales growth of 5.1% this year, making it the strongest year for existing home sales since 2006. It now expects 5.93 million units to sell this year, up from 5.89 million estimated last month, so it’s an accelerating trend. This acceleration could be on account of existing home owners who had been holding out because of pandemic concerns deciding not to wait any longer to grab the sky-high prices.Third, HUD stats seem to indicate that new home starts and completions are increasing substantially from last year, while permits are increasing faster than starts. So new projects are in the pipeline. Despite the land, labor and other constraints, the trend supports inventory growth.Finally, price increases and limited inventories are keeping most buyers out of the market. Since buyers are researching but waiting, inventories are bound to build up.Final WordsThe August unemployment rate of 5.2%, although above pre-pandemic levels of 3.5% (in Feb 2020), is down substantially from the pandemic high of over 14% in May 2020. So the ability to buy continues to improve. This along with positive demographics and increased staying at home is a highly conducive situation for a strong housing market. Given the above estimates, it appears that the situation will normalize in another six to nine months.Some homebuilder stocks worth considering are # 1 (strong Buy) ranked MI Homes, Inc. MHO and #2 (Buy) ranked Landsea Homes Corp. LSEA and Meritage Homes Corp. MTH. Zacks’ Top Picks to Cash in on Artificial Intelligence This world-changing technology is projected to generate $100s of billions by 2025. From self-driving cars to consumer data analysis, people are relying on machines more than we ever have before. Now is the time to capitalize on the 4th Industrial Revolution. Zacks’ urgent special report reveals 6 AI picks investors need to know about today.See 6 Artificial Intelligence Stocks With Extreme Upside Potential>>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Meritage Homes Corporation (MTH): Get Free Report MI Homes, Inc. (MHO): Get Free Report Landsea Homes Corporation (LSEA): Get Free Report To read this article on Zacks.com click here......»»
The 'Great Game' Moves On Authored by Alasdair Macleod via GoldMoney.com, Following America’s withdrawal from Afghanistan, her focus has switched to the Pacific with the establishment of a joint Australian and UK naval partnership. The founder of modern geopolitical theory, Halford Mackinder, had something to say about this in his last paper, written for the Council on Foreign Relations in 1943. Mackinder anticipated this development, though the actors and their roles at that time were different. In particular, he foresaw the economic emergence of China and India and the importance of the Pacific region. This article discusses the current situation in Mackinder’s context, taking in the consequences of green energy, the importance of trade in the Pacific region, and China’s current deflationary strategy relative to that of declining western powers aggressively pursuing asset inflation. There is little doubt that the world is rebalancing as Mackinder described nearly eighty years ago. To appreciate it we must look beyond the West’s current economic and monetary difficulties and the loss of its hegemony over Asia, and particularly note the improving conditions of the Asia’s most populous nations. Introduction Following NATO’s defeat in the heart of Asia, and with Afghanistan now under the Taliban’s rule, the Chinese/Russian axis now controls the Asian continental mass. Asian nations not directly related to its joint hegemony (not being members, associates, or dialog partners of the Shanghai Cooperation Organisation) are increasingly dependent upon it for trade and technology. Sub-Saharan Africa is in its sphere of influence. The reality for America is that the total population in or associated with the SCO is 57% of the world population. And America’s grip on its European allies is slipping. NATO itself has become less relevant, with Turkey drawn towards the rival Asian axis, and its EU members are compromised through trading and energy links with Russia and China. Furthermore, France is pushing the EU towards establishing its own army independent of US-led NATO — quite what its role will be, other than political puffery for France is a mystery. It is against this background that three of the Five Eyes intelligence partnership have formed AUKUS – standing for Australia, UK, and US — and its first agreement is to give Australia a nuclear submarine capability to strengthen the partnership’s naval power in the Pacific. Other capabilities, chiefly aimed at containing the Chinese threat to Taiwan and other allies in the Pacific Ocean, will surely emerge in due course. The other two Five Eyes, Canada and New Zealand, appear to be less keen to confront China. But perhaps they will also have less obvious roles in due course beyond pure intelligence gathering. The US, under President Trump, had failed to contain China’s increasing economic dominance and its rapidly developing technological challenge to American supremacy. Trump’s one success was to peel off the UK from its Cameron/Osbourne policy of strengthening trade and financial ties with China by threatening the UK’s important role in its intelligence partnership with the US. For the UK, the challenge came at a critical time. Brexit had happened, and the UK needed global partners for its future trade and geopolitical strategies, the latter needed to cement its re-emergence onto the world stage following Brexit. Trump held out the carrot of a fast-tracked US/UK trade deal. The Swiss alternative of neutrality in international affairs is not in the UK’s DNA, so realistically the decision was a no-brainer: the UK had to recommit itself entirely to the Anglo-Saxon Five-Eyes partnership with the US, Canada, Australia, and New Zealand and turn its back on China. But gathering intelligence and building naval power in the Pacific won’t defeat the Chinese. All simulations show that the US, with or without AUKUS, cannot win a military conflict against China. But AUKUS is not a formal model on NATO lines which commits its members by treaty to aggression against a common enemy. While Taiwan remains a specific problem, the objective is almost certainly to discourage China from territorial expansion and protect and give other Pacific nations on the Asian periphery the security to be independent from the SCO behemoth. The trade benefits of closer relationships with these independent nations are also an additional reason for the UK to join the CPTPP — the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. It qualifies for membership through its sovereignty over the Pitcairn Islands. And that is why China has also applied to join. Therefore, AUKUS’s importance is in the signal sent to China and the whole Pacific region, following the abandonment of land-based operations in the Middle East and Afghanistan. The maritime threat to China is a line which must not be crossed. We are entering a new era in the Great Game, where the objective has changed from dominance to containment. Having lost its position of ultimate control in the Eurasian land mass America has selected its partners to retain control over the high seas. And the UK has found a new geopolitical purpose, re-establishing a global role now that it is independent from the EU. The French cannot join the CPTPP being bound into the common trade policies of the EU. Seeing the British escape the strictures of the EU and rapidly obtain more global influence than France could dream of has touched a raw nerve. Mackinder vindicated The father of geopolitics, Halford Mackinder, is frequently quoted and his theories are still relevant to the current situation. Much has been written about Mackinder’s prophecies. His concept of the World Island was first mentioned in his 1904 presentation to the Royal Geographic Society in London: “a pivot state, resulting in its expansion over the marginal lands of Euro-Asia”. In 1943 he updated his views in an article for the Council on Foreign Relations, adding to his heartland theory. Written during the Second World War, his commentary reflected the combatants and their positions at that time. But despite this, he made a perceptive comment relative to the situation today and AUKUS: “Were the Chinese for instance organised by the Japanese to overthrow the Russian Empire and conquer its territory they might constitute the yellow peril to the world’s freedom just because they would add an oceanic frontage to the resources of the great continent.” When Mackinder wrote his article the Japanese had already invaded Manchuria, but their subsequent defeat removed them from an active geopolitical role, and in place of a Soviet defeat China has entered a peaceful partnership with Russia that extends to all its old Central Asian soviet satellites. It is the focus on the ocean frontage that matters, upon which the maritime silk road depends. The article brings into play another aspect mentioned by Mackinder, and that is the Heartland’s tremendous natural resources, “…including enough coal in the Kuznetsk and Krasnoyarsk basins capable of supplying the requirements of the whole world for 300 years”. And: “In 1938 Russia produced more of the following food stuffs than any other country in the world: wheat, barley, oats, rye, and sugar beets. More manganese was produced in Russia than in any other country. It was bracketed with United States in the first place as regards iron and it stood second place in production of petroleum”. Through its partnership with Russia all these latent resources are available to the Chinese and Russian partnership. And the real potential for industrialisation, held back by communism and now by Russian corruption, has barely commenced. After presciently noting that one day the Sahara may become the trap for capturing direct power from the sun (foreseeing solar panels), Mackinder’s article ended on an optimistic note: “A thousand million people of ancient oriental civilisation inhabit the monsoon lands of India and China [today 3 billion, including Pakistan]. They must grow to prosperity in the same years in which Germany and Japan are being tamed to civilisation. They will then balance that other thousand million who live between the Missouri and the Yenisei [i.e., Central and Eastern America, Britain, Europe and Russia beyond the Urals]. A balanced globe of human beings and happy because balanced and thus free.” Both China and now India are rapidly industrialising, becoming part of a balanced globe of humanity. While the West tries to hang on to what it has got rather than progressing, China and India along with all of under-developed Asia are moving rapidly in the direction of individual freedom of economic choice and improvements in living conditions, to which Mackinder was referring. Obviously, there is some way for this process yet to go, displacing western hegemony in the process. America particularly has found the political challenges of change difficult, with its deep state unable to come to terms easily with the implications for its military and economic power. We must hope that Mackinder was right, and the shift of economic power is best to be regarded as the pains of geopolitical evolution rather than conditions for escalating conflict. But in pursuing its green agenda and eschewing carbon fuels, the West is unwittingly handing a gift to Mackinder’s Heartland, because despite diplomatic noises to the contrary China, India and all the SCO membership will continue to use cheap coal, gas, and oil which Asia has in abundance while Western manufacturers are forced by their governments to use expensive and less reliable green energy. Green obsessions and global trade Meanwhile, the West has gone green-crazy. Banning fossil fuels without there being adequate replacements must be a new definition of insanity, for which the current fuel crises in Europe attest. With over 95% of European logistics currently being shifted by diesel power, switching to battery power or hydrogen by 2030 by banning sales of new internal combustion engine vehicles is a hostage to fortune. While it is hardly mentioned, presumably the Western powers think that by banning carbon fuels they will take the wind out of Russia’s energy quasi-monopoly, because including gas Russia is the largest exporter of fossil fuels in the world. Instead, the West is creating an energy shortage for itself, a point driven home by Gazprom withholding gas flows through its pipelines to Europe, thereby driving up Europe’s energy costs sharply and ensuring a far more severe energy crisis this winter. Even if Russia turns on the taps tomorrow, there is insufficient gas storage in reserve for the winter months. And Europe and the UK have got ahead of themselves by decommissioning coal and gas-fired electricity. In the UK, a massive undersea gas storage facility off the Yorkshire coast has been closed, leaving precious little national storage capacity. As we have seen with the post-covid supply chain chaos, energy problems will not only become acute this winter, but are likely to persist through much of next year. And even that assumes Russia relents and moderates its energy stance to European customers. By way of contrast, though its partnership with Russia China is gifted unlimited access to all carbon fuels. She is still building coal-fired electricity power stations at an extraordinary rate — according to a BBC report there are 61 new ones being commissioned. A further 51 outside China are planned. As a sop to the West China has only said she won’t finance any more outside her territory. And India relies on coal for over two-thirds of its electrical energy. While Europe and America through their green obsessions are denying themselves the availability and technologies that go with carbon fuels, the Russian/Chinese axis will continue to reap the full benefits. The West’s response is likely to be to decry Chinese pollution and its contribution to global warming, but realistically there is little it can do. Demand for Chinese-manufactured goods will continue because China now has a quasi-monopoly on global manufacturing for export. In the unlikely event western consumers become avid savers while their governments continue to run massive budget deficits, their trade deficits will rise even more, allowing Chinese exporters to increase prices for consumers and intermediate goods without losing export sales. While there is nothing it can do about China’s production methods, AUKUS members will undoubtedly lean on other exporting CPTPP members to comply with global green policies. But they will be competing with China, and while they may pay lip service to the climate change agenda, in practice they are unlikely to implement it without holding out for unrealistic subsidies from the western nations driving the climate change agenda. Under current circumstances, it seems unlikely that China’s CPTPP application will lead to membership, given the CPTPP requirement for China’s central government to relinquish ownership of its SOEs and to permit the free flow of data across its borders. In any event, China is focused on developing its Regional Comprehensive Economic Partnership (RCEP), a free trade agreement with ratification signed so far by China, Japan, South Korea, Australia, and New Zealand. It will come into effect when ratified by ten out of the fifteen signatories, likely to be in the first half of 2022, and in terms of population will be two and a half times the size of the EU and the US/Mexico/Canada (USMCA) trade agreements combined. With four out of five of the signatories being American allies, RCEP demonstrates that the AUKUS defence partnership is an entirely separate issue from trade. While the US may not like it, if RCEP goes ahead freer trade will almost certainly undermine a belligerent stance in due course. Despite hiccups, the progression of trade dealing in the Pacific region promises to prove Mackinder right about the prospect of a more balanced world. All being well and guaranteed by a balance of naval capabilities between AUKUS and China, a free-trading Pacific region will render the European and American trade protectionist policies an anachronism. But the threat is now from another direction: financial instability, with western nations pulling in one direction and China in another. Since the Lehman collapse and the ensuing financial crisis, China has been careful to prevent financial bubbles. Figure 1 shows that the Shanghai Composite Index has risen 82% since 2008, while the S&P500 rose 430%. While the US has seen financial asset values driven by a combination of QE and investor speculation, these factors are absent and discouraged in China. Government debt to GDP is about half that of the US. It is true that industrial debt is high, like that of the US. But the difference is that in China debt is more productive while in America there has been a growing preponderance of debt zombies, only kept solvent by zero interest rate policies. China’s policy of ensuring that the expansion of bank credit is invested in production and not speculation differs fundamentally from the US approach, which is to deliberately inflate financial assets to perpetuate a wealth effect. China avoids the destabilising potential of speculative flows unwinding because it lays the economy open to the possibility that America will use financial instability to undermine China’s economy. In a speech to the Chinese Communist Party’s Central Committee in April 2015, Major-General Qiao Liang, the People’s Liberation Army strategist, identified a cycle of dollar weakness against other currencies followed by strength, which first inflated debt in foreign countries and then bankrupted them. Qiao argued it was a deliberate American policy and would be used against China. In his words, it was time for America to “harvest” China. Drawing on Chinese intelligence reports, in early 2014 he was made aware of American involvement in the “Occupy Central” movement in Hong Kong. After several delays, the Fed announced the end of QE the following September which drove the dollar higher, and “Occupy Central” protests broke out the following month. To Qiao the two events were connected. By undermining the dollar/yuan rate and provoking riots, the Americans had tried to crash China’s economy. Within six months the Shanghai stock market began to collapse with the SSE Composite Index falling from 5,160 to 3,050 between June and September 2015. One cannot know for certain if Qiao’s analysis was correct, but one can understand the Chinese leadership’s continued caution based upon it. For this and other reasons, the Chinese leadership is extremely wary of having dollar liabilities and the accumulation of unproductive, speculative money in the economy. It justifies their strict exchange control regime, whereby dollars are not permitted to circulate in China, and all inward capital flows are turned into yuan by the PBOC. Furthermore, domestic monetary policy appears deliberately different from that of America and other western nations. While everyone else has been inflating their way through covid, China has been restricting domestic credit expansion and curtailing shadow banking. The discount rate is held up at 2.9% with market rates slightly lower at 2.2%, and the only reason it is that low is because alternative dollar rates are at zero and EU and Japanese rates are negative. It is this restrictive monetary policy that has led to the current crisis in property developers, with the very public difficulties of Evergrande. Far from being a surprise event, with cautious monetary policies it could have been easily foreseen. Moreover, the government has a sensible policy of not rescuing private sector businesses in trouble, though it is likely to take steps to limit financial contagion. In their glass houses, Western critics continually throw stones at China. But at least her policy makers have attempted to avoid contributing to the global inflation cycle. With prices beginning to rise at an accelerating pace in western currencies, a new global financial crash is in the making. China and her SCO cohort would be adversely affected, but not to the same extent. The fruits of China’s policies of restricting credit expansion are showing in the commodity prices she pays, which in her own currency have increased by ten per cent less than for dollar-based competition, judging by the exchange rate movements since the Fed reduced its funds rate to the zero bound and instigated monthly QE of $120bn on 19-23 March 2020 (see Figure 2). And while both currencies have moved broadly sideways since January, there is little doubt that the fundamentals point to an even stronger yuan and weaker dollar. The domestic benefits of a relatively stronger yuan outweigh the margin compression suffered by China’s exporters. It is worth noting that as well as moderating credit demand, China is attempting to increase domestic consumer spending at the expense of the savings rate, so consumer demand will begin to matter more than exports to producers. It is in line with a long-term objective of China becoming less dependent on exports, and exporters will benefit from domestic sales growth instead. Furthermore, with China dominating global exports of intermediate and consumer goods and while western budget deficits are increasing and leading to yet greater trade deficits, Chinese exporters should be able to secure higher prices anyway. There can be little doubt that the budget deficits financed by monetary inflation in America, the EU, Japan and the UK, plus central bank stimulus packages are now undermining the purchasing power of all the major currencies. The consequences for their purchasing powers are now becoming apparent and attempts to calm markets and consumers by describing them as transient cuts little ice. In terms of their purchasing powers, these currencies are now in a race to the bottom. Not only are the costs of production rising sharply, but following a brief pause of three months, commodity and energy prices look set to rise sharply. Figure 3 shows the Invesco commodity tracker, which having almost doubled since March 2020 now appears to be attempting a break out on the upside. Since global competitiveness is no longer a priority, China would be sensible to let its yuan exchange rate rise against western currencies to help keep a lid on domestic prices and costs. It is, after all, a savings driven economy, with the sustainable characteristics of a strong currency relative to the dollar. Conclusions Having failed in their land-based military objectives, America’s undeclared tariff and financial wars against China are also coming to an end, to be replaced by a policy of maritime containment through the AUKUS partnership. Attempts to stem strategic losses in Asia have now ended with the withdrawal from Afghanistan and from other interventions.The change in geopolitical policy is not yet widely appreciated. But the parlous state of US finances, dollar market bubbles, persistent and increasing price inflation and the inevitability of interest rate increases will make a policy backstop of maritime containment the only geostrategic option left to America. By pursuing more cautious monetary policies, China is less exposed to the inevitable consequences of global monetary inflation. While yuan currency rates are managed instead of set by markets, it is now in China’s interest to see a stronger yuan to contain domestic price and cost inflation. Even though fiat currencies could be destroyed by imploding asset bubbles, these factors contribute to a set of circumstances that appear to lead to a more peaceable outcome for the world than appeared likely before America and NATO withdrew from Afghanistan. There’s many a slip between cup and lip; but it was an outcome forecast by Halford Mackinder nearly eighty years ago. Let us hope he was right. Tyler Durden Sun, 09/26/2021 - 08:10.....»»
Let's take a look at some ETF areas that are looking decent investment options for the investors to park their money in Q4. Investors are having a difficult time on Wall Street after a tough September. Apart from increased volatility, market participants are currently grappling with other issues like inflationary pressure, the Fed’s tapering concerns and supply-chain challenges. Investors are on edge regarding earnings growth in the third-quarter earnings season. Going by Refinitiv data, the September-quarter earnings growth rate might come in at 30% from the year-ago reported figure following a 96.3% rise in the second quarter (as mentioned in a CNBC article).A CNBC Market Strategist Survey reflects that Wall Street major strategists are expecting soft returns for the remainder of 2021 as the average year-end S&P 500 target is 4,433.In another disappointing development, Goldman Sachs (GS) decreased its U.S. economic growth prediction. The investment bank expects 2022 growth in the range of 4% to 4.4% (according to a CNBC article). It has also revised its 2021 estimate downward to 5.6% from 5.7%. It cited various factors like the diminishing fiscal stimulus support from the Congress and the slow pace of recovery in consumer spending for its decision.The latest jobs report for September was quite lacklustre as the U.S. economy has added the lowest number of jobs so far this year. 194,000 positions were added in September, which missed the forecast of 500,000. Nonfarm employment has risen 17.4 million since April 2020 but decreased 3.3% from its pre-pandemic level in February 2020.Against this backdrop, let’s take a look at some ETF areas that are looking decent investment options for the investors to park their money in Q4:Energy ETFsThe energy sector has been attracting investors’ attention on the latest rally in oil prices. Oil prices crossed the $80-a-barrel mark amid the ongoing global power crisis. The price of crude attained a seven-year high. Shrinking crude inventories, supply disruption in the Gulf of Mexico following a couple of hurricanes and surging fuel demand are pushing oil prices higher.Soaring coal and natural gas prices in Europe and Asia due to a supply-demand imbalance before the severe winter season is driving consumption of diesel and kerosene (according to a Bloomberg article). TheOrganization of the Petroleum Exporting Countries (OPEC) and a Russia-led group of oil producers, collectively called OPEC+ decided to raise production by 400,000 barrels a day each month. Also, the coronavirus vaccine rollout is gradually aiding in controllingthe spread of the pandemic. The optimism surrounding the gradual reopening of global economies and increasing demand are painting a rosy picture for cyclical sectors.Considering the bullish energy sector backdrop, let’s take a look at some energy ETFs that are worth adding to your portfolio for boosting returns Invesco Dynamic Energy Exploration & Production ETF PXE, Vanguard Energy ETF VDE, Fidelity MSCI Energy Index ETF (FENY) and The Energy Select Sector SPDR Fund (XLE) (read: Here's Why Energy ETFs Are Sizzling With Opportunities).Dividend ETFsDividend aristocrats are blue-chip dividend-paying companies with a long history of increasing dividend payments year over year. Moreover, dividend aristocrat funds provide investors with dividend growth opportunities compared to other products in the space but might not necessarily have the highest yields.‘Dividend aristocrats’ or ‘dividend growers’ are mostly deemed to be the smartest way to deal with market turmoil. Notably, the inclination toward dividend investing has been rising due to easing monetary policy on the global front and market uncertainty triggered by the pandemic and deceleration in global growth.These products also form a strong portfolio, with a higher scope of capital appreciation as against simple dividend-paying stocks or those with high yields. As a result, these products deliver an excellent combination of annual dividend growth and capital-appreciation opportunity and are primarily suitable for risk-averse long-term investors.Against this backdrop, let’s take a look at some ETFs that investors can consider like Vanguard Dividend Appreciation ETF VIG, SPDR S&P Dividend ETF SDY, iShares Select Dividend ETF (DVY) and ProShares S&P 500 Dividend Aristocrats ETF (NOBL) (read: September's Weak History Turning True: 5 ETF Buying Zones).Technology ETFsTechnology has played an instrumental role amid the ongoing COVID-19 uncertainty in aiding people to maintain safe-distancing norms. The work-from-home model has bumped up sales of PCs, laptops and other kinds of computer peripherals as well. Going by IDC’s Worldwide Quarterly Personal Computing Device Tracker, the global shipment of PCs that include laptops and tablets, desktops and notebooks, reached 83.6 million units in the second quarter, rising 13.2% on a year-over-year basis.Certain other ‘new normal’ trends have also emerged amid the health crisis like work from home, increasing digital payments, growing video streaming and soaring video game sales. The pandemic has also beena boon for the e-commerce industry as people continue staying indoors and shopping online for all essentials, especially food items.Further, the semiconductor space has been gaining from expanding digitization and growing dependency on the Internet. In fact, the growing adoption of cloud computing and the ongoing infusion of AI, machine learning and IoT are expected to keep the sector brewing with opportunities in 2021.Thus, investors could consider ETFs like Vanguard Information Technology ETF VGT, The Technology Select Sector SPDR Fund XLK, iShares U.S. Technology ETF IYW and First Trust NASDAQ-100-Technology Sector Index Fund (QTEC) (read: 5 ETFs & Stocks From the FavoriteSectors of Q3 Earnings).Retail ETFsMarket analysts are expecting an impressive retail sales figure in 2021 anda strong holiday season. Strengthin consumer sentiment can act as a major growth driver as consumers haveenough resources to splurge this holiday season after facing restrictions for more than a year.The retailers are prepping for the start to the holiday season (the late October-December period) that is considered a busy season for severalindustry players and market participants. The quarter is marked by some popular retail events like Halloween, Thanksgiving, Cyber Monday, Black Friday and Christmas, which increase its significance among retailers.According to Mastercard SpendingPulse, U.S. retail sales — excluding automotive and gas — for the “75 Days of Christmas” spanning from Oct 11 to Dec 24 are anticipated to increase 6.8% from the year-earlier tally.Considering the strong trends, investors may park their money in the retail ETFs like Amplify Online Retail ETF IBUY, ProShares Online Retail ETF ONLN, SPDR S&P Retail ETF (XRT) and VanEck Retail ETF (RTH) to tap the sales boom (read: Online Retail ETFs to Gain From Holiday Shopping Craze). Infrastructure Stock Boom to Sweep America A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made. The only question is “Will you get into the right stocks early when their growth potential is greatest?” Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.Download FREE: How to Profit from Trillions on Spending for Infrastructure >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Technology Select Sector SPDR ETF (XLK): ETF Research Reports SPDR S&P Dividend ETF (SDY): ETF Research Reports Vanguard Dividend Appreciation ETF (VIG): ETF Research Reports Vanguard Energy ETF (VDE): ETF Research Reports Amplify Online Retail ETF (IBUY): ETF Research Reports iShares U.S. Technology ETF (IYW): ETF Research Reports Vanguard Information Technology ETF (VGT): ETF Research Reports Invesco Dynamic Energy Exploration & Production ETF (PXE): ETF Research Reports ProShares Online Retail ETF (ONLN): ETF Research Reports To read this article on Zacks.com click here. Zacks Investment Research.....»»
Northern Trust's (NTRS) Q3 results are likely to reflect benefits of higher net-interest income and non-interest income. Northern Trust Corporation’s NTRS third-quarter 2021 results, scheduled for an Oct 20 release, are expected to reflect year-over-year growth in revenues and earnings.In the last-reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate on the release of credit reserves. Results were positively impacted by an increase in trust, investment and other servicing fees. A rise in assets under custody and assets under management was also a driving factor. However, lower net interest income (NII) on the contraction of margin was a negative. Rising operating expenses were a major drag.Northern Trust uses a lag effect to calculate its corporate custody and investment management fees, i.e., the computations are based on the prior-quarter end valuations. Since the performance of equity markets was impressive in the second quarter, the company might have registered gains in custody, servicing and management fees during the third quarter.Notably, Northern Trust had a mixed earnings surprise history. It surpassed estimates in two of the trailing four quarters for as many misses, delivering an earnings surprise of 1.37%, on average.Northern Trust Corporation Price and EPS Surprise Northern Trust Corporation price-eps-surprise | Northern Trust Corporation QuotePrior to the third-quarter earnings release, the company is witnessing downward estimate revision, indicating analysts’ bearish sentiments. The earnings estimate for the current quarter has moved marginally south in the past 30 days. Nonetheless, the Zacks Consensus Estimate for the third-quarter earnings is pegged at $1.67 per share, which suggests a 26.5% increase from the year-ago reported number. Also, the consensus estimate for revenues of $1.61 billion indicates an 8.4% rise.Here are the other factors that are likely to have influenced the company’s quarterly performance:Net Interest Income: Per the Fed’s latest data, the overall lending scenario was soft during the July-September period, with weak home equity, and commercial and industrial loans. Conversely, the real estate, commercial real estate as well as consumer loan portfolios are anticipated to have offered support.The steepening of the yield curve (the difference between short and long-term interest rates) is likely to have supported the bank’s net interest margin. Though the yield on 10-year U.S. Treasury Bond of 1.49% at September-end was relatively stable on a sequential basis, the figure expanded 57 basis points from 0.92% at the end of 2020. Thus, the NII will likely get some support.Excess liquidity, low loan yields, and low reinvestment rates on securities might have put downward pressure on earning asset yields. However, low deposit costs are expected to have been the offsetting factor.The Zacks Consensus Estimate for average interest earning assets of $142.9 million for the quarter indicates a 10.5% year-over-year improvement, while the NII is expected to rise 2.7% to $338 million.Fee Income: Notably, the company provides majority of its asset-management services through the Corporate and Institutional Services unit, which generates more than 50% of total revenues. An increase in revenues in this segment is anticipated to have offered some support to Northern Trust’s overall top line during the to-be-reported quarter. Per the Zacks Consensus Estimate, the C&I segment’s trust, investment and other servicing fees will likely go up 9.1% year over year to $638 million.Moreover, the Zacks Consensus Estimate for security commissions and trading income as well as treasury management fees, at $31.5 million and $12 million, respectively, are likely to have moved up 21% and 3.5%, respectively, on a year-over-year basis.Controlled Expenses: Northern Trust’s expenses in the quarter are anticipated to have been under control, aided by its continued cost-saving initiatives.Let’s have a look at what our quantitative model predicts:Northern Trust does not have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.Earnings ESP: The Earnings ESP for Northern Trust is 0.00%.Zacks Rank: Northern Trust currently carries a Zacks Rank of 3.Banks Worth a LookHere are a few bank stocks that you might want to consider as these have the right combination of elements to post earnings beat in their upcoming releases, per our model.Zions Bancorporation ZION is slated to report quarterly results on Oct 18. The company has an Earnings ESP of +2.49% and currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Fifth Third Bancorp FITB is slated to report quarterly earnings on Oct 19. The company, which carries a Zacks Rank of 2 (Buy) at present, has an Earnings ESP of +0.46%.BankUnited, Inc. BKU is scheduled to release third-quarter results on Oct 21. The company currently carries a Zacks Rank #3 and has an Earnings ESP of +1.90%. Infrastructure Stock Boom to Sweep America A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made. The only question is “Will you get into the right stocks early when their growth potential is greatest?” Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.Download FREE: How to Profit from Trillions on Spending for Infrastructure >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Fifth Third Bancorp (FITB): Free Stock Analysis Report Northern Trust Corporation (NTRS): Free Stock Analysis Report Zions Bancorporation, N.A. (ZION): Free Stock Analysis Report BankUnited, Inc. (BKU): Free Stock Analysis Report To read this article on Zacks.com click here......»»
Futures Jump On Profit Optimism As Oil Tops $85; Bitcoin Nears $60,000 One day after the S&P posted its biggest one-day surge since March, index futures extended this week’s gains, helped by a stellar bank earnings, while the latest labor market data and inflation eased stagflation fears for the time being. . The 10-year Treasury yield rose and the dollar was steady. Goldman Sachs reports on Friday. At 715 a.m. ET, Dow e-minis were up 147 points, or 0.42%, S&P 500 e-minis were up 16.5 points, or 0.37%, and Nasdaq 100 e-minis were up 42.75 points, or 0.28%. Oil futures topped $85/bbl, jumping to their highest in three years amid an energy crunch that’s stoking inflationary pressures and prices for raw materials. A gauge of six industrial metals hit a record high on the London Metal Exchange. Energy firms including Chevron and Exxon gained about half a percent each, tracking Brent crude prices that scaled the 3 year high. Solid earnings in the reporting season are tempering fears that rising costs and supply-chain snarls will hit corporate balance sheets and growth. At the same time, the wider debate about whether a stagflation-like backdrop looms remains unresolved. “We don’t sign up to the stagflation narrative that is doing the rounds,” said Hugh Gimber, global strategist at the perpetually optimistic J.P. Morgan Asset Management. “The economy is being supported by robust consumer balance sheets, rebounding business investment and a healthy labor market.” “After a choppy start to the week, equity markets appear to be leaning towards a narrative that companies can continue to grow profits, despite the combined pressures of higher energy prices and supply chain disruptions,” said Michael Hewson, chief market analyst at CMC Markets in London. Bitcoin and the crypto sector jumped after Bloomberg reported late on Thursday that the Securities and Exchange Commission is poised to allow the first U.S. Bitcoin futures exchange-traded fund to begin trading in a watershed moment for the cryptocurrency industry. Bitcoin traded off session highs having tested $60k during Asian hours, but will likely rise to new all time highs shortly. Also overnight, Joe Biden signed a bill providing a short-term increase in the debt limit, averting the imminent threat of a financial calamity. But it only allows the Treasury Department to meets its financial obligations until roughly Dec. 3, so the can has been kicked for less than two months - brace for more bitter partisan battles in the coming weeks. This week’s move into rate-sensitive FAAMG growth names looked set to continue, with their shares inching up. Moderna rose 3.0% after a U.S. FDA panel voted to recommend booster shots of its COVID-19 vaccine for Americans aged 65 and older and high-risk people. Western Digital slipped 2.5% as Goldman Sachs downgraded the storage hardware maker’s stock to “neutral” from “buy”. Here are some of the key premarket movers on Friday morning: Virgin Galactic (SPCE US) shares slump as much as 23% in U.S. premarket trading as the firm is pushing the start of commercial flights further into next year after rescheduling a test flight, disappointing investors with the unexpected delay to its space tourism business plans Cryptocurrency-exposed stocks rise in U.S. premarket trading after a report that the Securities and Exchange Commission is poised to allow the first U.S. Bitcoin futures exchange-traded fund to begin trading. Bit Digital (BTBT US) +6.7%, Riot Blockchain (RIOT US) +4.6%, Marathon Digital (MARA US) +3.6% Alcoa (AA US) shares jump 5.6% in thin volumes after co. reported profits that beat the average analyst estimate and said it will be paying a dividend to its shareholders Moderna (MRNA US) extends Thursday’s gains; Piper Sandler recommendation on Moderna Inc. to overweight from neutral, a day after co.’s Covid-19 booster got FDA nod for use in older, high-risk people Duck Creek Technologies (DCT US) shares fell 12% in Thursday postmarket trading after the software company projected 2022 revenue that fell short of the average analyst estimate 23andMe Holdings (ME US) soared 14% in Thursday postmarket trading after EMJ Capital founder Eric Jackson called the genetics testing company “the next Roku” on CNBC Corsair Gaming (CRSR US) shares fell 3.7% in post-market trading after it cut its net revenue forecast for the full year Early on Friday, China's PBOC broke its silence on Evergrande, saying risks to the financial system are controllable and unlikely to spread. Authorities and local governments are resolving the situation, central bank official Zou Lan said. The bank has asked lenders to keep credit to the real estate sector stable and orderly. In Europe, gains for banks, travel companies and carmakers outweighed losses for utilities and telecommunications industries, pushing the Stoxx Europe 600 Index up 0.3%. Telefonica fell 3.3%, the most in more than four months, after Barclays cut the Spanish company to underweight. Temenos and Pearson both slumped more than 10% after their business updates disappointed investors. Here are some of the biggest European movers today: Devoteam shares rise as much as 25% after its controlling shareholder, Castillon, increased its stake in the IT consulting group to 85% and launched an offer for the remaining capital. QinetiQ rises as much as 5.4% following a plunge in the defense tech company’s stock on Thursday. Investec upgraded its recommendation to buy and Berenberg said the shares now look oversold. Hugo Boss climbs as much as 4.4% to the highest level since September 2019 after the German apparel maker reported 3Q results that exceeded expectations. Jefferies (hold) noted the FY guidance hike also was bigger than expected. Mediclinic rises as much as 7.7% to highest since May 26 after 1H results, which Morgan Stanley says showed strong underlying operating performance with “solid metrics.” Temenos sinks as much as 14% after the company delivered a “mixed bag” with its 3Q results, according to Baader (sell). Weakness in Europe raises questions about the firm’s outlook for a recovery in the region, the broker said. Pearson declines as much as 12%, with analysts flagging weaker trading in its U.S. higher education courseware business in its in-line results. Earlier in the session, Asian stocks headed for their best week in more than a month amid a list of positive factors including robust U.S. earnings, strong results at Taiwan Semiconductor Manufacturing Co. and easing home-loan restrictions in China. The MSCI Asia Pacific Index gained as much as 1.3%, pushing its advance this week to more than 1.5%, the most since the period ended Sept. 3. Technology shares provided much of the boost after chip giant TSMC announced fourth-quarter guidance that beat analysts’ expectations and said it will build a fabrication facility for specialty chips in Japan. Shares in China rose as people familiar with the matter said the nation loosened restrictions on home loans at some of its largest banks. Conditions are good for tech and growth shares now long-term U.S. yields have fallen following inflation data this week, Shogo Maekawa, a strategist at JPMorgan Asset Management in Tokyo. “If data going forward are able to provide an impression that demand is strong too -- on top of a sense of relief from easing supply chain worries -- it’ll be a reason for share prices to take another leap higher.” Asia’s benchmark equity gauge is still 10% below its record-high set in February, as analysts stay on the lookout for higher bond yields and the impact of supply-chain issues on profit margins. Japanese stocks rose, with the Topix halting a three-week losing streak, after Wall Street rallied on robust corporate earnings. The Topix rose 1.9% to close at 2,023.93, while the Nikkei 225 advanced 1.8% to 29,068.63. Keyence Corp. contributed the most to the Topix’s gain, increasing 3.7%. Out of 2,180 shares in the index, 1,986 rose and 155 fell, while 39 were unchanged. For the week, the Topix climbed 3.2% and the Nikkei added 3.6%. Semiconductor equipment and material makers rose after TSMC said it will build a fabrication facility for specialty chips in Japan and plans to begin production there in late 2024. U.S. index futures held gains during Asia trading hours. The contracts climbed overnight after a report showed applications for state unemployment benefits fell last week to the lowest since March 2020. “U.S. initial jobless claims fell sharply, and have returned to levels seen before the spread of the coronavirus,” said Nobuhiko Kuramochi, a market strategist at Mizuho Securities in Tokyo. “The fact that more people are returning to their jobs will help ease supply chain problems caused by the lack of workers.” Australian stocks also advanced, posting a second week of gains. The S&P/ASX 200 index rose 0.7% to close at 7,362.00, with most sectors ending higher. The benchmark added 0.6% since Monday, climbing for a second week. Miners capped their best week since July 16 with a 3% advance. Hub24 jumped on Friday after Evans & Partners upgraded the stock to positive from neutral. Pendal Group tumbled after it reported net outflows for the fourth quarter of A$2.3 billion. In New Zealand, the S&P/NZX 50 index fell 0.3% to 13,012.19 In rates, the U.S. 10-year Treasury yield rose over 3bps to 1.54%. Treasuries traded heavy across long-end of the curve into early U.S. session amid earning-driven gains for U.S. stock futures. Yields are higher by more than 3bp across long-end of the curve, 10- year by 2.8bp at about 1.54%, paring its first weekly decline since August; weekly move has been led by gilts and euro-zone bonds, also under pressure Friday, with U.K. 10-year yields higher by 3.3bp. Today's bear-steepening move pares the weekly bull-flattening trend. U.S. session features a packed economic data slate and speeches by Fed’s Bullard and Williams. In FX, the Bloomberg Dollar Spot Index was little changed even as the greenback weakened against most of its Group-of-10 peers; the euro hovered around $1.16 while European and U.S. yields rose, led by the long end. Norway’s krone led G-10 gains as oil jumped to $85 a barrel for the first time since late 2018 amid the global energy crunch; the currency rallied by as much as 0.6% to 8.4015 per dollar, the strongest level since June. New Zealand’s dollar advanced to a three-week high as bets on RBNZ’s tightening momentum build ahead of Monday’s inflation data; the currency is outperforming all G-10 peers this week. The yen dropped to a three-year low as rising equities in Asia damped demand for low-yielding haven assets. China’s offshore yuan advanced to its highest in four months while short-term borrowing costs eased after the central bank added enough medium-term funds into the financial system to maintain liquidity at existing levels. In commodities, crude futures trade off best levels. WTI slips back below $82, Brent fades after testing $85. Spot gold slips back through Thursday’s lows near $1,786/oz. Base metals extend the week’s rally with LME nickel and zinc gaining over 2%. Today's retail sales report, due at 08:30 a.m. ET, is expected to show retail sales fell in September amid continued shortages of motor vehicles and other goods. The data will come against the backdrop of climbing oil prices, labor shortages and supply chain disruptions, factors that have rattled investors and have led to recent choppiness in the market. Looking at the day ahead now, and US data releases include September retail sales, the University of Michigan’s preliminary consumer sentiment index for October, and the Empire State manufacturing survey for October. Central bank speakers include the Fed’s Bullard and Williams, and earnings releases include Charles Schwab and Goldman Sachs. Market Snapshot S&P 500 futures up 0.3% to 4,443.75 STOXX Europe 600 up 0.4% to 467.66 German 10Y yield up 2.4 bps to -0.166% Euro little changed at $1.1608 MXAP up 1.3% to 198.33 MXAPJ up 1.2% to 650.02 Nikkei up 1.8% to 29,068.63 Topix up 1.9% to 2,023.93 Hang Seng Index up 1.5% to 25,330.96 Shanghai Composite up 0.4% to 3,572.37 Sensex up 0.9% to 61,305.95 Australia S&P/ASX 200 up 0.7% to 7,361.98 Kospi up 0.9% to 3,015.06 Brent Futures up 1.0% to $84.83/bbl Gold spot down 0.5% to $1,787.54 U.S. Dollar Index little changed at 93.92 Top Overnight News from Bloomberg China’s central bank broke its silence on the crisis at China Evergrande Group, saying risks to the financial system stemming from the developer’s struggles are “controllable” and unlikely to spread The ECB has a good track record when it comes to flexibly deploying its monetary instruments and will continue that approach even after the pandemic crisis, according to policy maker Pierre Wunsch Italian Ministry of Economy and Finance says fourth issuance of BTP Futura to start on Nov. 8 until Nov. 12, according to a statement The world’s largest digital currency rose about 3% to more than $59,000 on Friday -- taking this month’s rally to over 35% -- after Bloomberg News reported the U.S. Securities and Exchange Commission looks poised to allow the country’s first futures-based cryptocurrency ETF Copper inventories available on the London Metal Exchange hit the lowest level since 1974, in a dramatic escalation of a squeeze on global supplies that’s sent spreads spiking and helped drive prices back above $10,000 a ton A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks traded higher amid tailwinds from the upbeat mood across global peers including the best day for the S&P 500 since March after strong US bank earnings, encouraging data and a decline in yields spurred risk appetite. The ASX 200 (+0.7%) was positive as the tech and mining sectors continued to spearhead the advances in the index in which the former took impetus from Wall St where the softer yield environment was conducive to the outperformance in tech, although mining giant Rio Tinto was among the laggards following weaker quarterly production results. The Nikkei 225 (+1.8%) was buoyed as exporters benefitted from the JPY-risk dynamic but with Fast Retailing failing to join in on the spoils despite an 88% jump in full-year net as its profit guidance underwhelmed with just 3% growth seen for the year ahead, while Taiwan's TAIEX (+2.2%) surged with the spotlight on TSMC earnings which reached a record high amid the chip crunch and with the Co. to also build a factory in Japan that could receive JPY 500bln of support from the Japanese government. The Hang Seng (+1.5%) and Shanghai Comp. (+0.4%) were initially indecisive amid the overhang from lingering developer default concerns although found some mild support from reports that China is to relax banks' mortgage limits through the rest of 2021. Focus was also on the PBoC which announced a CNY 500bln MLF operation, although this just matched the amount maturing this month and there are mixed views regarding prospects of a looming RRR cut with ANZ Bank's senior China strategist recently suggesting the potential for a 50bps cut in RRR or targeted MLF as early as today, although a recent poll showed analysts had pushed back their calls for a RRR cut from Q4 2021 to Q1 2022. Finally, 10yr JGBs marginally pulled back from this week’s advances after hitting resistance at the 151.50 level, with demand hampered amid the firm gains in Japanese stocks and the lack of BoJ purchases in the market today. Top Asian News Hong Kong Probes Going Concern Reporting of Evergrande U.S. Futures Hold Gains as Oil Hits 3-Year High: Markets Wrap Toyota Cuts November Outlook by 15% on Parts Shortage, Covid Yango Group Wires Repayment Fund for Onshore Bond Due Oct. 22 Bourses in Europe have held onto the modest gains seen at the cash open (Euro Stoxx 50 +0.4%; Stoxx 600 +0.3%), but the region is off its best levels with the upside momentum somewhat faded heading into the US open, and amidst a lack of fresh newsflow. US equity futures have remained in positive territory, although the latest leg lower in bonds has further capped the tech-laden NQ (+0.2%), which underperforms vs the ES (+0.3%), YM (+0.3%) and RTY (+0.7%), with traders on the lookout for another set of earnings, headlined by Goldman Sachs at 12:25BST/07:25EDT. Back to Europe, bourses see broad-based gains, whilst sectors are mostly in the green with clear underperformance experienced in defensives, with Telecoms, Utilities, Healthcare and Staples at the foot of the bunch. On the flipside, Banks reap rewards from the uptick in yields, closely followed by Travel & Leisure, Autos & Parts and Retail. Renault (+4%) drives the gains in Autos after unveiling a prototype version of the Renault Master van that will go on sale next year. Travel & Leisure is bolstered by the ongoing reopening trade with potential tailwinds heading into the Christmas period. Retail meanwhile is boosted by Hugo Boss (+1.8%) topping forecasts and upgrading its guidance. Top European News Autumn Heat May Curb European Gas Demand, Prices Next Week Bollore Looking for Buyers for Africa Logistics Ops: Le Monde U.K. Offers Foreign Butchers Visas After 6,000 Pigs Culled Europe’s Car-Sales Crash Points to Worse Year Than Poor 2020 In FX, the Greenback was already losing momentum after a relatively tame bounce on the back of Thursday’s upbeat US initial claims data, and the index failed to sustain its recovery to retest intraday highs or remain above 94.000 on a closing basis. However, the Buck did reclaim some significant and psychological levels against G10, EM currencies and Gold that was relishing the benign yield environment and the last DXY price was marginally better than the 21 DMA from an encouraging technical standpoint. Nevertheless, the Dollar remains weaker vs most majors and in need of further impetus that may come via retail sales, NY Fed manufacturing and/or preliminary Michigan Sentiment before the spotlight switches to today’s Fed speakers featuring arch hawk Bullard and the more neutral Williams. GBP/NZD/NOK - Sterling has refuelled and recharged regardless of the ongoing UK-EU rift over NI Protocol, though perhaps in part due to the fact that concessions from Brussels are believed to have been greeted with welcome surprise by some UK Ministers. Cable has reclaimed 1.3700+ status, breached the 50 DMA (at 1.3716 today) and yesterday’s best to set a marginal new w-t-d peak around 1.3739, while Eur/Gbp is edging closer to 0.8450 having clearly overcome resistance at 1.1800 in the reciprocal cross. Similarly, the Kiwi continues to derive impetus from the softer Greenback and Aud/Nzd flows as Nzd/Usd extends beyond 0.7050 and the Antipodean cross inches nearer 1.0500 from 1.0600+ highs. Elsewhere, the Norwegian Crown is aiming to add 9.7500 to its list of achievements relative to the Euro with a boost from Brent topping Usd 85/brl at one stage and a wider trade surplus. CAD - The Loonie is also profiting from oil as WTI crude rebounds through Usd 82 and pulling further away from 1.5 bn option expiry interest between 1.2415-00 in the process, with Usd/Cad towards the base of 1.2337-82 parameters. EUR/AUD/CHF/SEK - All narrowly mixed and rangy vs the Greenback, or Euro in the case of the latter, as Eur/Usd continues to straddle 1.1600, Aud/Usd churn on the 0.7400 handle, the Franc meander from 0.9219 to 0.9246 and Eur/Sek skirt 10.0000 having dipped below the round number briefly on Thursday. In commodities, WTI and Brent front month futures remain on a firmer footing, aided up the overall constructive risk appetite coupled with some bullish technical developments, as WTI Nov surpassed USD 82/bbl (vs 81.39/bbl low) and Brent Dec briefly topped USD 85/bbl (vs 84.16/bbl low). There has been little in terms of fresh fundamental catalysts to drive the price action, although Russia's Gazprom Neft CEO hit the wires earlier and suggested that reserve production capacity could meet the increase in oil demand, whilst a seasonal decline in oil consumption is possible and the oil market will stabilise in the nearest future. On the Iranian JCPOA front, Iran said it is finalising steps to completing its negotiating team but they are absolutely decided to go back to Vienna discussions and conclude the negotiations, WSJ's Norman. The crude complex seems to have (for now) overlooked reports that the White House is engaged in diplomacy" with OPEC+ members regarding output. UK nat gas prices were higher as European players entered the fray, but prices have since waned off best levels after Russian Deputy PM Novak suggested that gas production in Russia is running at maximum capacity. Elsewhere, spot gold has been trundling amid yield-play despite lower despite the Buck being on the softer side of today’s range. Spot gold failed to hold onto USD 1,800/oz status yesterday and has subsequently retreated below its 200 DMA (1,794/oz) and makes its way towards the 50 DMA (1,776/oz). LME copper prices are on a firmer footing with prices back above USD 10,000/t – supported by technicals and the overall risk tone, although participants are cognizant of potential Chinese state reserves releases. Conversely, Dalian iron ore futures fell for a third straight session, with Rio Tinto also cutting its 2021 iron ore shipment forecasts due to dampened Chinese demand. US Event Calendar 8:30am: Sept. Retail Sales Advance MoM, est. -0.2%, prior 0.7% 8:30am: Sept. Retail Sales Ex Auto MoM, est. 0.5%, prior 1.8% 8:30am: Sept. Retail Sales Control Group, est. 0.5%, prior 2.5% 8:30am: Sept. Retail Sales Ex Auto and Gas, est. 0.3%, prior 2.0% 8:30am: Oct. Empire Manufacturing, est. 25.0, prior 34.3 8:30am: Sept. Import Price Index MoM, est. 0.6%, prior -0.3%; YoY, est. 9.4%, prior 9.0% 8:30am: Sept. Export Price Index MoM, est. 0.7%, prior 0.4%; YoY, prior 16.8% 10am: Aug. Business Inventories, est. 0.6%, prior 0.5% 10am: Oct. U. of Mich. 1 Yr Inflation, est. 4.7%, prior 4.6%; 5-10 Yr Inflation, prior 3.0% 10am: Oct. U. of Mich. Sentiment, est. 73.1, prior 72.8 10am: Oct. U. of Mich. Current Conditions, est. 81.2, prior 80.1 10am: Oct. U. of Mich. Expectations, est. 69.1, prior 68.1 DB's Jim Ried concludes the overnight wrap A few people asked me what I thought of James Bond. I can’t say without spoilers so if anyone wants my two sentence review I will cut and paste it to all who care and reply! At my age I was just impressed I sat for over three hours (including trailers) without needing a comfort break. By the time you email I will have also listened to the new Adele single which dropped at midnight so happy to include that review as well for free. While we’re on the subject of music, risk assets feel a bit like the most famous Chumbawamba song at the moment. They get knocked down and they get up again. Come to think about it that’s like James Bond too. Yesterday was a strong day with the S&P 500 (+1.71%) moving back to within 2.2% of its all-time closing high from last month. If they can survive all that has been thrown at them of late then one wonders where they’d have been without any of it. The strong session came about thanks to decent corporate earnings releases, a mini-collapse in real yields, positive data on US jobless claims, as well as a further fall in global Covid-19 cases that leaves them on track for an 8th consecutive weekly decline. However, inflation remained very much on investors’ radars, with a range of key commodities taking another leg higher, even as US data on producer prices was weaker than expected. Starting with the good news, the equity strength was across the board with the S&P 500 experiencing its best daily performance since March, whilst Europe’s STOXX 600 (+1.20%) also put in solid gains. It was an incredibly broad-based move higher, with every sector group in both indices rising on the day, with a remarkable 479 gainers in the S&P 500, which is the second-highest number we’ve seen over the last 18 months. Every one of the 24 S&P 500 industry groups rose, led by cyclicals such as semiconductors (+3.12%), transportation (+2.51%) and materials (+2.43%). A positive start to the Q3 earnings season buoyed sentiment, as a number of US banks (+1.45%) reported yesterday, all of whom beat analyst estimates. In fact, of the nine S&P 500 firms to report yesterday, eight outperformed analyst expectations. Weighing in on recent macro themes, Bank of America Chief, Brian Moynihan, noted that the current bout of inflation is “clearly not temporary”, but also that he expects consumer demand to remain robust and that supply chains will have to adjust. I’m sure we’ll hear more from executives as earnings season continues today. Alongside those earnings releases, yesterday saw much better than expected data on the US labour market, which makes a change from last week’s underwhelming jobs report that showed the slowest growth in nonfarm payrolls so far this year. In terms of the details, the weekly initial jobless claims for the week through October 9, which is one of the most timely indicators we get, fell to a post-pandemic low of 293k (vs. 320k expected). That also saw the 4-week moving average hit a post-pandemic low of 334.25k, just as the continuing claims number for the week through October 2 hit a post-pandemic low of 2.593m (vs. 2.670m expected). We should get some more data on the state of the US recovery today, including September retail sales, alongside the University of Michigan’s consumer sentiment index for October. That optimism has fed through into Asian markets overnight, with the Nikkei (+1.43%), the Hang Seng (+0.86%), the Shanghai Comp (+0.29%) and the KOSPI (+0.93%) all moving higher. That came as Bloomberg reported that China would loosen restrictions on home loans amidst the concerns about Evergrande. And we also got formal confirmation that President Biden had signed the debt-limit increase that the House had passed on Tuesday, which extends the ceiling until around December 3. Equity futures are pointing to further advances in the US and Europe later on, with those on the S&P 500 (+0.30%) and the STOXX 50 (+0.35%) both moving higher. Even with the brighter news, inflation concerns are still very much with us however, and yesterday in fact saw Bloomberg’s Commodity Spot Index (+1.16%) advance to yet another record high, exceeding the previous peak from early last week. That was partly down to the continued rise in oil prices, with WTI (+1.08%) closing at $81.31/bbl, its highest level since 2014, just as Brent Crude (+0.99%) hit a post-2018 high of $84.00/bbl. Both have posted further gains this morning of +0.58% and +0.61% respectively. Those moves went alongside further rises in natural gas prices, which rose for a 3rd consecutive session, albeit they’re still beneath their peak from earlier in the month, as futures in Europe (+9.14%), the US (+1.74%) and the UK (+9.26%) all moved higher. And that rise in Chinese coal futures we’ve been mentioning also continued, with their rise today currently standing at +13.86%, which brings their gains over the week as a whole to +39.02% so far. As well as energy, industrial metals were another segment where the recent rally showed no sign of abating yesterday. On the London metal exchange, a number of multi-year milestones were achieved, with aluminum prices (+1.60%) up to their highest levels since 2008, just as zinc prices (+3.73%) closed at their highest level since 2018. Separately, copper prices (+2.56%) hit a 4-month high, and other winners yesterday included iron ore futures in Singapore (+1.16%), as well as nickel (+1.99%) and lead (+2.43%) prices in London. With all this momentum behind commodities, inflation expectations posted further advances yesterday. Indeed, the 10yr US Breakeven closed +1.0bps higher at 2.536%, which is just 3bps shy of its closing peak back in May that marked its highest level since 2013. And those moves came in spite of US producer price data that came in weaker than expected, with the monthly increase in September at +0.5% (vs. +0.6% expected). That was the smallest rise so far this year, though that still sent the year-on-year number up to +8.6% (vs. +8.7% expected). That rise in inflation expectations was echoed in Europe too, with the 10yr UK breakeven (+5.6bps) closing at its highest level since 2008, whilst its German counterpart also posted a modest +0.7bps rise. In spite of the rise in inflation expectations, sovereign bonds posted gains across the board as the moves were outweighed by the impact of lower real rates. By the end of yesterday’s session, yields on 10yr Treasuries were down -2.6bps to 1.527%, which came as the 10yr real yield moved back beneath -1% for the first time in almost a month. Likewise in Europe, yields pushed lower throughout the session, with those on 10yr bunds (-6.3bps), OATs (-6.2bps) and BTPs (-7.1bps) all moving aggressively lower. To the day ahead now, and US data releases include September retail sales, the University of Michigan’s preliminary consumer sentiment index for October, and the Empire State manufacturing survey for October. Central bank speakers include the Fed’s Bullard and Williams, and earnings releases include Charles Schwab and Goldman Sachs. Tyler Durden Fri, 10/15/2021 - 07:50.....»»
China has at least 65 million empty homes - enough to house the population of France. It offers a glimpse into the country"s massive housing-market problem.
In the US and Japan, abandoned homes have earned cities the titles of "ghost towns." But China's are different - they're not abandoned, just empty. Unfinished buildings and vacant streets in Xiangluo Bay. Yujiapu & Xiangluo Bay, a new central business district under construction in Tianjin, was been expected to be China's Manhattan. Now it's a Ghost city. Zhang Peng / Contributor / Getty Images One-fifth of the homes in China - at least 65 million units - are empty. That amount of empty real estate is enough to house the population of France. The ghost cities are a testament to China's reliance on real estate as a driver of economic growth. See more stories on Insider's business page. If you drive an hour or two outside Shanghai or Beijing, you'll find something odd. The cities are still tall, and they're still modern. They're also, generally, in good condition. But unlike their bustling, Tier 1-city counterparts, they're basically empty.These are China's ghost cities.Their existence has been well-documented. In one prominent example, CBS' "60 Minutes" ran a 2013 segment on China's ghost towns that opened with the correspondent Lesley Stahl on a major road at rush hour with barely a car in sight.But as China's real-estate market has risen to the forefront of the global conversation with Evergrande's $300 billion debt looming large, so, too, have ghost cities become a renewed source of interest. While they're a testament to China's reliance on real estate as a driver of economic growth and in its belief in the sector as a safe investment, their exact quantity is hard to define.Li Gan is a professor of economics at Texas A&M University and the director of the Survey and Research Center for China Household Finance at Chengdu's Southwestern University of Finance and Economics. He's also considered one of the top experts on China's housing market. When I asked him how many ghost towns there were in China, he didn't have an answer."I don't know if there's any definition of 'ghost town,'" he said. "So I don't know if there's any number."What are China's ghost towns?The best known of China's ghost cities may be Ordos New Town, also known as Kangbashi, in the region of Inner Mongolia.The city was intended in the early 2000s to eventually house a million people, a number that was later scaled back to 300,000. But as of 2016, a mere 100,000 people lived in it. Kangbashi eventually managed to lure residents after China moved some of its top schools into the city, Nikkei reported earlier this year.In 2015, the photographer Kai Caemmerer traveled to China to explore ghost cities. His photos show endless rows of high-rises with barely any indication of human life. They're photos, in fact, that might remind people of what locked-down cities around the world looked like during the coronavirus pandemic.These unoccupied units constitute a significant portion of China's enormous housing market, which is twice the size of the US residential market and hit $52 trillion in value in 2019. Data from the most recently published China Household Finance Survey, which Gan runs, shows that 21% of homes - some 65 million - were vacant as of 2017, The Wall Street Journal reported.That many empty units could house the population of France.But unlike parts of the US and Japan, where homes in various states of abandonment and decay have prompted cities and regions to be called ghost towns, China's are different. They're not abandoned; they're just unoccupied.As Gan put it, these ghost cities are "a unique China phenomenon." The empty street in the Kangbashi district of Inner Mongolia, China, in February 2017. South China Morning Post / Contributor How did China end up with all this empty real estate?The first thing to understand about China's ghost cities is that they are not cities in states of disrepair. Instead, they are full of new builds that were bought as investments. They're also a symptom of mismatched supply and demand."These homes being empty means they are sold out to investors and buyers, but not occupied by either the owners or renter," Xin Sun, a senior lecturer in Chinese and East Asian business at King's College London, told Insider.On the supply side, Sun said, the government gets big sales revenue from leasing out land to developers. "This gives the government very strong incentive to encourage development instead of limiting it," he said.Every year, China starts building 15 million new homes - five times as many as the US and Europe combined, The Economist reported in January.In addition to the government promoting development and driving supply up, there's the matter of China's urbanization rate. Data from the World Bank indicates that 61% of China's population lived in cities as of last year, up from 35.8% just two decades earlier.Gan said there were flaws in China's urbanization-rate metrics, however, one of which is tied to reclassified areas. When rural areas are reclassified as urban, the people in those areas already have houses. So while they never moved, and won't need a new place to live, they still contribute to the urbanization rate, he said."Part of the problem is that China overestimated its urbanization rate - how many people would want to move from rural to urban areas," Gan said.A culture of real-estate investmentOn the demand side, the general upward trend of house prices has spawned huge demand for second and third properties, Sun said."Within two decades, house prices have grown multiple times in many places, including major cities," Sun said. "Most people in China haven't experienced a substantial real-estate bubble burst like what the US experienced in 2008 or Japan in the 1990s.""This leads to a strong popular belief that real estate is the best way to preserve and generate wealth," Sun said. "And this stimulates the demand for buying additional properties."Homeownership rates in China are high: More than 90% of households are homeowners, according to a January research paper on homeownership in China from the National Center for Biotechnology Information. More than 20% of homeowners in China own more than one home. The US, for comparison, has a 65% homeownership rate. Real-estate holdings also account for an outsize proportion of household wealth in China: 70% of household assets - far higher than what you'd find in Western economies - are held in real estate.Demand for units, however - and this is where the mismatch comes into play - has been affected by a series of factors, said Bernard Aw, an economist overseeing Asia Pacific for Coface. Among these factors is the increasing unaffordability of homes, an aging population, and slowing population growth. Aw pointed to China's 2020 census, which recorded the slowest population growth since the 1970s."They built an oversupply, and then they sold it," Gan said. "And that's why you see the vacancies." Residential buildings in which only few people actually lived in Kangbashi in 2017. South China Morning Post / Contributor While the Evergrande crisis looms, China has ways of mitigating risk - including stopping home salesEvergrande has more than 1,300 developments spread across 280 cities in China, which collectively house more than 12 million people, its website says.But Evergrande also has $300 billion in debt, making it the most indebted company in the world; it has 1.6 million undelivered apartments hanging in the balance, and it keeps missing its bond payments.Despite the size of Evergrande's scale and debt, the developer accounts for only a fraction of China's housing woes. "Evergrande is linked to the vacancy problem, but you cannot blame them for it," Gan said. "Their market share in China is still small.""They're both part of a big problem," Gan added, pointing to Evergrande and the vacancy rate. An aerial view from a drone of the Evergrande City last month in Wuhan, China. Getty Images In 2017, Bloomberg described Beijing's nightmare scenario as one in which people rush to sell off their second properties if cracks in the market appear, thereby sending prices on a downward spiral. When I asked Gan whether this was the scenario now unfolding in China, he said it wasn't - but not because there aren't cracks in the market.Instead, the government is making it so difficult to complete a sale that it's dissuading homeowners from selling, Gan said."China can stop a transaction. The government can change the number of years you have to own a home. Or if prices are too low, the government won't give you a certificate of sale," Gan said. "That is what's happening now.""You won't see the price drop substantially, but you will see the transaction volume drop massively," he added. "They'll stop the sale. By doing that, they can prevent the look of a massive price drop. They can prevent the crash."This very move - suppressing home sales - stands to hurt those who need to sell their homes to access cash, Gan said. "Real estate is a massive chunk of people's wealth," he said. "If they need that wealth for education, or health problems, or retirement, the liquidity sellers will suffer."Gan stressed that the stopping of sales was not singularly, or even directly, linked to Evergrande's debt crisis: "This was happening before Evergrande became evident," he said.Heightened contagion fearsIn addition to liquidity sellers, households that own only one home are thought to face the greatest risk."People who own one home, because of high prices and low income, they have some risk," Gan said. "For many of them, their down payment is borrowed from friends, from relatives - not from banks."It's a different story for well-off families with money invested in second and third properties, Sun said: "The risk of default for these families is relatively low unless a massive, unprecedented economic crisis leads to massive unemployment.""But aside from that worst-case scenario, the risk of default is relatively low," Sun added. On a broader scale, Evergrande poses a risk to the larger Chinese economy. Experts say Evergrande's debt problems could affect other property developers in China and might create a new wave of defaults. Just last week, the Chinese property developer Fantasia missed a $206 million repayment deadline. And a leaked letter from September 2020 shows the company's debts are tied to at least 128 banks, Reuters reported.Another danger is that the Evergrande crisis stands to change China's perception of real estate as a safe investment, Sun said. That's a problem when the real-estate sector makes up 29% of the country's gross domestic product."The government is heavily reliant on households continuing to invest in real estate," Sun said. "So if the bubble bursts, it will inevitably compromise people's confidence in real estate and undermine their perception of real estate as the best way to preserve and generate wealth."That means a slowdown in real estate will cause a deterioration of economic growth and government finance."Read the original article on Business Insider.....»»
China has at least 65 million empty homes - enough to house the entire population of France. It offers a glimpse into the country"s massive housing market problem.
In the US and Japan, abandoned homes have earned cities the titles of "ghost towns." But China's are different - they're not abandoned, just empty. Unfinished buildings and vacant streets in Xiangluo Bay. Yujiapu & Xiangluo Bay, a new central business district under construction in Tianjin, was been expected to be China's Manhattan. Now it's a Ghost city. Zhang Peng / Contributor / Getty Images One-fifth of the homes in China - at least 65 million units - are empty. That means there's enough empty real estate in the country to house the entire population of France. China's ghost cities are a sprawling testament to its reliance on real estate as a driver of economic growth, and in its belief in the sector as a safe investment. See more stories on Insider's business page. If you drive an hour or two outside of Shanghai or Beijing, you'll find something odd. The cities are still tall, and they're still modern. They're also, generally, in good condition. But unlike their bustling, Tier 1-city counterparts, they're basically empty.These are China's "ghost cities."Their existence has been well-documented. In one prominent example, CBS' 60 Minutes ran a 2013 segment on China's ghost towns that opened with correspondent Lesley Stahl on a major road at rush hour with barely a car in sight.But as China's real-estate market has risen to the forefront of the global conversation with Evergrande's $300 billion debt looming large, so, too, have ghost towns become a renewed source of interest. While they're a testament to China's reliance on real estate as a driver of economic growth and in its belief in the sector as a safe investment, their exact quantity is hard to define.Li Gan is a professor of economics at Texas A&M University and the director of the Survey and Research Center for China Household Finance at Chengdu's Southwestern University of Finance and Economics. He's also considered one of the top experts on China's housing market. When I asked him how many ghost towns there are in China, he didn't have an answer."I don't know if there's any definition of 'ghost town,'" he said. "So I don't know if there's any number." What are China's ghost towns?The most famous of China's ghost towns may be Ordos New Town, also known as Kangbashi, in Inner Mongolia.The city was designed to house one million people, a number that was later scaled back to 300,000, Insider's Melia Robinson previously reported. But as of 2016, a mere 100,000 people lived in it. Kangbashi eventually managed to lure in residents after China moved some of its top schools into the city, prompting students and their families to follow suit, Nikkei reported earlier this year.In 2015, photographer Kai Caemmerer traveled to China to explore ghost cities. His photos showcase endless rows of high-rises with barely any indication of human life. They're photos, in fact, that might remind people of what locked-down cities around the world looked like during the pandemic.These unoccupied units constitute a significant portion of China's enormous housing market, which is twice the size of the US residential market and hit $52 trillion in value in 2019. Data from the most recently published China Household Finance Survey, which Gan runs, shows that 21% of homes - some 65 million homes - were vacant as of 2017, The Wall Street Journal reported.That means there are enough empty units in China to house the entire population of France.But unlike parts of the US and Japan, where unoccupied homes in various states of abandonment and decay have earned cities and regions the titles of "ghost towns," China's are different. They're not abandoned - they're just unoccupied.As Gan put it, these ghost cities are "a unique China phenomenon." The empty street in Kangbashi district, Ordos city, Inner Mongolia, on Feb. 16, 2017. A large number of new style buildings were built, but many were suspended due to lack of continuous financial support. South China Morning Post / Contributor How did China end up with all this empty real estate?The first thing to understand about China's ghost cities is that these are not cities in states of disrepair. Instead, they are full of new builds that were bought as investments. They're also a symptom of mismatched supply and demand."These homes being empty means they are sold out to investors and buyers, but not occupied by either the owners or renter," Dr. Xin Sun, a senior lecturer in Chinese and East Asian Business at King's College London, told Insider.On the supply side, Sun said, the government gets big sales revenue from leasing out land to developers. "This gives the government very strong incentive to encourage development instead of limiting it," he said.Every year, China starts building 15 million new homes - five times as many as the US and Europe combined, the Economist reported in January.In addition to the government promoting development and driving supply up, there's the matter of China's urbanization rate. As of 2020, 61% of China's population lives in cities, up from 35.8% of its population 20 years earlier, data from the World Bank shows. However, Gan said there are flaws in China's urbanization rate metrics, one of which is tied to reclassified areas. When rural areas are reclassified as urban, the people in those areas already have houses. So while they never moved, and won't need a new place to live, they still contribute to the urbanization rate, he said."Part of the problem is that China overestimated its urbanization rate - how many people would want to move from rural to urban areas," Gan said.A culture of real-estate investmentOn the demand side, the general upward trend of house prices has spawned huge demand for second and third properties, Sun said."Within two decades, house prices have grown multiple times in many places, including major cities," Sun said. "Most people in China haven't experienced a substantial real-estate bubble burst like what the US experienced in 2008 or Japan in the 1990s.""This leads to a strong popular belief that real estate is the best way to preserve and generate wealth," Sun said. "And this stimulates the demand for buying additional properties."Homeownership rates in China are high: More than 90% of households are homeowners, according to a January research paper on homeownership in China from the National Center for Biotechnology Information. More than 20% of homeowners in China own more than one home. The US, for comparison, has a 65% homeownership rate. Real-estate holdings also account for an outsized proportion of household wealth in China: 70% of household assets - far higher than what you'd find in western economies - are held in real estate.However - and this is where the mismatch comes into play - demand for units has been affected by a series of factors, said Bernard Aw, an economist overseeing Asia Pacific for Coface. Amongst these factors is the increasing unaffordability of homes, an aging population, and slowing population growth. Aw pointed to China's 2020 census, which recorded the slowest population growth since the 1970s."They built an oversupply, and then they sold it," Gan said. "And that's why you see the vacancies." Residential buildings in which only few people actually living in Kangbashi district, Ordos city, Inner Mongolia, on Feb. 16, 2017. South China Morning Post / Contributor While the Evergrande crisis looms, China has ways of mitigating risk - including stopping home salesEvergrande has more than 1,300 developments spread across 280 cities in China, which collectively house more than 12 million people, its website states. As Insider's Matthew Loh recently reported, that means more people live in Evergrande properties than in entire countries, like Greece, Portugal, or Sweden.But Evergrande also has $300 billion in debt, making it the most indebted company in the world; it has 1.6 million undelivered apartments hanging in the balance; and it keeps missing its bond payments.Despite the enormity of both Evergrande's scale and debt, the developer accounts for a fraction of China's housing woes. "Evergrande is linked to the vacancy problem, but you cannot blame them for it," Gan said. "Their market share in China is still small.""They're both part of a big problem," Gan added, pointing to Evergrande and the vacancy rate. An aerial view from a drone of the Evergrande City on September 24,2021 in Wuhan, Hubei Province, China. Getty Images In 2017, Bloomberg described Beijing's nightmare scenario as one in which people rush to sell off their second properties if cracks in the market appear, thereby sending prices on a downward spiral. When I asked Gan if this is the scenario currently unfolding in China, he said it's not - but not because there aren't cracks in the market.Instead, the government is making it so difficult to complete a sale that it's dissuading homeowners from selling, Gan said."China can stop a transaction. The government can change the number of years you have to own a home. Or if prices are too low, the government won't give you a certificate of sale," Gan said. "That is what's happening now.""You won't see the price drop substantially, but you will see the transaction volume drop massively," he added. "They'll stop the sale. By doing that, they can prevent the look of a massive price drop. They can prevent the crash."This very move - suppressing home sales - stands to hurt those who need to sell their homes to access cash, Gan said. "Real estate is a massive chunk of peoples' wealth," he said. "If they need that wealth for education, or health problems, or retirement, the liquidity sellers will suffer."Gan stressed that the stopping of sales is not directly, or singularly, linked to Evergrande's debt crisis: "This was happening before Evergrande became evident," he said.Heightened contagion fearsIn addition to liquidity sellers, households who own only one home face the greatest risk, the experts said."People who own one home, because of high prices and low income, they have some risk. For many of them, their down payment is borrowed from friends, from relatives - not from banks," Gan said.It's a different story for well-off families with money invested in second and third properties, Sun said: "The risk of default for these families is relatively low unless a massive, unprecedented economic crisis leads to massive unemployment.""But aside from that worst-case scenario, the risk of default is relatively low," Sun added. On a broader scale, Evergrande poses a contagion risk to the entire Chinese economy. Experts say Evergrande's debt problems could affect other property developers in China and potentially create a whole new wave of defaults. Just last week, Chinese property developer Fantasia missed a $206 million repayment deadline. And a leaked letter from September 2020 shows the company's debts are tied to at least 128 banks, Reuters reported.Another very real danger is that the Evergrande crisis stands to change China's perception of real estate as a safe investment, Sun said. Given that the real estate sector makes up 29% of the country's GDP, a softening of trust could send shockwaves through the Chinese economy. "The government is heavily reliant on households continuing to invest in real estate. So if the bubble bursts, it will inevitably compromise peoples' confidence in real estate and undermine their perception of real estate as the best way to preserve and generate wealth," Sun said. "That means a slowdown in real estate will cause a deterioration of economic growth and government finance."Read the original article on Business Insider.....»»
LHC Group (LHCG) to expand in Virginia Beach with the completion of the previously announced acquisition agreements with two providers, one in home health and the other in hospice. LHC Group, Inc. LHCG recently finalized its acquisition agreements for one home health and one hospice provider situated in Virginia Beach, effective Oct 1, 2021. The acquisition agreements for the two providers were announced on Sep 14, 2021.The acquisition deals consist of the Generations Home Health and Freda H. Gordon Hospice and Palliative Care. It is important to note that both agencies will continue to operate under their existing titles.This buyout aims at expanding LHC Group’s home health and hospice businesses.Significance of the DealsBoth the acquisitions align with LHC Group's co-location strategy to offer multiple in-home healthcare services in certain markets as well as its strategy of retaining and operating under a family of well-known local brands. Additionally, the buyouts expand the company’s scope of services in Virginia, precisely the Virginia Beach region.Per management, the combined expertise of LHC Group and the two recently acquired providers -- one in home health and one in hospice -- coupled with their incredible reputation will help ensure broader access to quality, in-home service in patients’ preferred setting, like their homes.LHC Group projects annualized revenues of approximately $7 million from these acquisitions. However, the company noted that the acquisition deals will not materially impact its 2021 diluted earnings per share.Industry ProspectsPer a report published in MarketandMarkets, the global home healthcare market size is set to witness a CAGR of 8.6% by 2025. Factors driving the market include a surge in the elderly population, rising incidence of chronic diseases, growing need for cost-effective healthcare delivery and technological advancements of home care devices.In addition, the global hospice market is expected to see a CAGR of 9.1% between 2021 and 2026, going by a report published in Market Data Forecast. The growing use of hospice services and the increasing prevalence of chronic disorders can be attributed as key factors fueling global hospice market growth.Given the substantial market prospects in the global home healthcare and hospice markets, the conclusion of LHC Group’s Sep 14-announced acquisition deals seem strategic and well-timed.Notable Developments by LHC GroupIn September 2021, LHC Group entered into an agreement to acquire Brookdale Health Care Services agencies from the home health, hospice and outpatient therapy venture between HCA Healthcare HCA and Brookdale Senior Living Inc. This buyout significantly expands the company’s nationwide footprint, resources and service capabilities. The transaction is expected to be completed in the fourth quarter of 2021, upon fulfillment of customary conditions.In the same month, the company announced the finalization of its previously announced acquisition of Heart of Hospice from EPI Group, LLC. By bringing 16 new hospice locations into the LHC Group family, this buyout expands the company’s hospice footprint across five states. Notably, these recent locations will continue to function under the Heart of Hospice name.In July 2021, the company entered into a strategic partnership with SCP Health to jointly develop and deliver advanced clinical care services at home. The partnership will offer a comprehensive offering of in-home healthcare services, including skilled nursing facility (SNF)-at-home and hospital-at-home programs to existing and new hospital and health system partners. This partnership is intended to meet the increasing demand for value-based care models and at-home care solutions.Recent Home Health & Hospice Market DevelopmentsThe home health and hospice markets are competitive with the presence of niche players.In this regard, Amedisys, Inc. AMED recently acquired regulatory assets that will enable the company to operate in Westchester County, NY. The terms of the agreement provide Amedisys the right to conduct certified home health care services in Westchester County and the New York Borough of the Bronx. The company plans to open a start-up care center in the newly acquired service area, offering access to 375,000 Medicare enrollees and 165,000 Medicare Advantage enrollees.Encompass Health Corporation EHC has also been progressing well in the home health and hospice markets after completing its previously announced acquisition of Frontier Home Health and Hospice. This acquisition expands the company’s footprint with the addition of nine home health and 11 hospice locations. This enables Encompass Health to serve markets in Alaska, Montana and Washington while strengthening its existing presence in Colorado and Wyoming. Zacks Names "Single Best Pick to Double" From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all. You know this company from its past glory days, but few would expect that it's poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks' Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.Free: See Our Top Stock and 4 Runners Up >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Amedisys, Inc. (AMED): Free Stock Analysis Report HCA Healthcare, Inc. (HCA): Free Stock Analysis Report LHC Group, Inc. (LHCG): Free Stock Analysis Report Encompass Health Corporation (EHC): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»
Strict COVID-19 policies in Democratic-led states worked, new research found. Republican-led states saw more illness.
States with strict COVID-19 rules saw 8% fewer infections than models would predict, a study found. Those states tended to have Democratic governors. Gov. Andrew Cuomo of New York issued a mask mandate, social-distancing rules, and gathering limits in 2020. Spencer Platt/Getty Images Democratic-led states had stricter COVID-19 responses and better health outcomes, a new study found. States with stricter COVID-19 rules saw 8% fewer cases, on average, than models would've predicted. The study's researchers said the results showed politics shouldn't influence public-health policy. After nearly two years of politically charged battles over whether strict COVID-19 restrictions work - and whether they're worth the consequences - scientists awarded a point to Democratic governors this week.A study published in the American Journal of Preventive Medicine on Monday found that COVID-19 rules in states with Democratic governors were, on average, linked to 8% fewer daily COVID-19 cases in 2020 than a mathematical model would have predicted otherwise.Republican-led states, by contrast, had 8% more cases than the model would have expected.To assess the strength and effectiveness of various states' COVID-19 policies, the researchers behind the study created a system they called the "Public Health Protective Policy Index." The index factored in daily COVID-19 case counts in 2020, a range policies enacted at the state level, and governors' political affiliations, then assigned quantitative values to these many factors. Then the team compared the resulting scores.Those results showed that the public-health measures Democratic governors put in place last year were, on average, 10 percentage points more stringent than those put in place by Republican governors. And that had an observable effect on how many people got sick."Eight percent is not huge, but it's there. If you're wondering if policies actually matter, apparently they do," Olga Shvetsova, a political-science professor at Binghamton University who led the study, told Insider.Shvetsova said her team did not do state-specific analyses, opting instead to look at trends across multiple states. A clear political pattern emerged - one that probably would look even more dire for Republican-led states if it included data from 2021, Shvetsova added."What we see in Republican states is really tragic right now. They squandered their initial good fortune - badly," she said.The link between Democratic leadership and lower COVID-19 infections does not necessarily mean governors' actions directly drove down COVID cases, however - it's just a correlation. The new study also did not examine the relationship between political leadership and hospitalizations or deaths from the virus. Nor did it assess the degree to which states enforced governors' policies or how much residents actually complied.What's more, a governor's politics didn't always predict the degree of strictness in a state's COVID-19 policies. In Vermont, Massachusetts, and Maryland - which have Republican governors but tend to be more liberal - GOP governors pursued more aggressive COVID-19 policies and restrictions that were more similar to Democrat-led states.Other studies also found links between political affiliations and health outcomes Gov. Ron DeSantis at a press conference in Lakeland, Florida. Paul Hennessy/SOPA Images/LightRocket via Getty Images The new study builds on previous research, published in the American Journal of Preventive Medicine in July, that found a link between the political leanings of US governors and the number of COVID-19 infections and deaths by state. The researchers behind that study pointed to differences in state policies as one of the reasons Republican-led states had recorded more infections per capita since June 2020.Up to that point, Republican-led states were recording fewer COVID-19 cases, deaths, and positive tests per capita than Democratic-led states. But after June 3, 2020, Republican-led states had 1.1 times as many daily cases per 100,000 people, on average.A handful of other studies have also found that overall, Democratic states had lower test-positivity rates from May to December 2020, a metric that suggests more rigorous testing and infection containment. Republican governors were also slower to issue stay-at-home orders and mask mandates, while Democratic leaders were both more likely to implement those rules and to leave them in place. Republican governors, meanwhile, were quicker to roll back COVID-19-related restrictions in 2020. A waiter outside the Da Gennaro restaurant in Little Italy on November 15 in New York City. Alexi Rosenfeld/Getty Images "Governors' political affiliation might function as an upstream progenitor of multifaceted policies that in unison impact the spread of the virus," the authors of the July study wrote. (They noted, however, that Maryland and Massachusetts bucked the trend.)In both studies, researchers came to a similar conclusion: If politicians' priority is to keep their constituents from getting sick, they should delegate public-health policy decisions to medical and public-health professionals.Or, as Shvetsova put it: "Politicians are creatures of their public. The public cannot be its own doctor."Read the original article on Business Insider.....»»
Strict COVID-19 policies in Democrat-led states worked, new research found. Republican-led states saw more illness.
States with strict COVID-19 rules saw 8% fewer infections than models would predict, a study found. Those states tended to have Democratic governors. Former New York Gov. Andrew Cuomo issued a mask mandate, social distancing rules, and gathering limits in 2020. Spencer Platt/Getty Images Democrat-led states had stricter COVID-19 responses and better health outcomes, a new study found. States with stricter COVID-19 rules saw 8% fewer cases, on average, than models would have predicted. The results show that politics shouldn't influence public-health policy, researchers say. After nearly two years of politically charged battles over whether strict COVID-19 restrictions work - and whether they're worth the consequences - scientists awarded a point to Democratic governors this week. A study published in the American Journal of Preventive Medicine on Monday found that COVID-19 rules in states with Democratic governors were, on average, linked to 8% fewer daily COVID-19 cases in 2020 than a mathematical model would have predicted otherwise.Republican-led states, by contrast, had 8% more cases than the model would have expected.To assess the strength and effectiveness of various states' COVID-19 policies, the researchers behind the study created a system they called the "Public Health Protective Policy Index." The index factored in daily COVID-19 case counts in 2020, a range policies enacted at the state level, and governors' political affiliations, then assigned quantitative values to these many factors. Then the team compared the resulting scores. Those results showed that the public-health measures Democratic governors put in place last year were, on average, 10 percentage points more stringent than those put in place by Republican governors. And that had an observable effect on how many people got sick."Eight percent is not huge, but it's there. If you're wondering if policies actually matter, apparently they do," Olga Shvetsova, a political science professor at Binghamton University who led the study, told Insider.Shvetsova said her team did not do state-specific analyses, opting instead to look at trends across multiple states. A clear political pattern emerged - one that likely would look even more dire for Republican-led states if it included data from 2021, Shvetsova added."What we see in Republican states is really tragic right now. They squandered their initial good fortune - badly," she said.The link between Democratic leadership and lower COVID-19 infections does not necessarily mean that governors' actions directly drove down COVID cases, however - it's just a correlation. The new study also did not examine the relationship between political leadership and hospitalizations or deaths from the virus. Nor did it assess the degree to which states enforced governors' policies or how much residents actually complied.What's more, a governor's politics didn't always predict the degree of strictness in a state's COVID-19 policies. In Vermont, Massachusetts, and Maryland - which have Republican governors but tend to be more liberal - GOP governors pursued more aggressive COVID-19 policies and restrictions that were more similar to Democrat-led states.Other studies also found links between political affiliations and health outcomes Florida Gov. Ron DeSantis at a press conference at the Lakeland, Florida, Police Department. Paul Hennessy/SOPA Images/LightRocket via Getty Images The new study builds on previous research, published in the American Journal of Preventive Medicine in July, that found a link between the political leanings of US governors and the number of COVID-19 infections and deaths by state. The researchers behind that study pointed to differences in state policies as one of the reasons Republican-led states have seen more per-capita infections since June 2020.Up to that point, Republican-led states were recording fewer per capita COVID-19 cases, deaths, and positive tests than Democrat-led states. But from June 3, 2020 on, Republican-led states had 1.1 times more daily cases per 100,000 people, on average.A handful of other studies have also found that overall, Democratic states had lower test-positivity rates between May and December 2020, a metric that suggests more rigorous testing and infection containment. Republican governors were also slower to issue stay-home orders and mask mandates, while Democratic leaders were both more likely to implement those rules and to leave them in place. Republican governors, meanwhile, were quicker to roll back COVID-19-related restrictions in 2020. A waiter wearing a mask stands outside the Da Gennaro restaurant in Little Italy on November 15, 2020 in New York City. Alexi Rosenfeld/Getty Images "Governors' political affiliation might function as an upstream progenitor of multifaceted policies that in unison impact the spread of the virus," the authors of the July study wrote. (They noted, however, that Maryland and Massachusetts bucked the trend.) In both studies, researchers came to a similar conclusion: If politicians' priority is to keep their constituents from getting sick, they should delegate public-health policy decisions to medical and public-health professionals.Or, as Shvetsova put it: "Politicians are creatures of their public. The public cannot be its own doctor."Read the original article on Business Insider.....»»
"Don't Buy The Dip": BofA Explains Why The Fed Has Lowered Its Put Strike One week ago, Bank of America's derivatives team observed that "equity investors are losing confidence in Buy The Dip" and warned that after suffering a "meaningful setbacks in recent weeks," the coast appears far from clear. The bank pointed to recent episodes of increasing market fragility, and highlighted the recent market volatility manifesting in the second daily selloff of 3 standard deviations or more in just 7 trading days, only the 24th time since 1928 that the S&P experienced two or more 3-sigma shocks within 10 trading days. Fast forward a week and BofA's increasingly bearish derivatives team led by Riddhi Prasad and Benjamin Bowler has intensified their warning, and pointing to the market's increasing trouble to rebound from its recent slump - it has now been 27 trading days without a record high, the longest such stretch since September 2020 - they note that momentum has been fading this fall, "and investor confidence in buying the dip may only keep waning the longer this sideways price action persists." In the absence of proactive buyers - such as retail investors who have recently turned their back on the market, or aggressive stock buybacks which are currently in a blackout period due to the coming earnings season - the "market may for the first time since the Covid shock, need to test the Fed put in the next selloff," BofA warns. Then, of course, we have the Fed's tapering. In an amusing interlude, BofA explains that the last time it warned that tapering is bearish, it got the usual "tapering is not tightening" platitudes from clients (spoiler alert: tapering is tightening as even Morgan Stanley now admits), adding that "the main pushback we received was that tapering asset purchases has a smaller economic impact than hiking rates, and is therefore a more minor threat than that of prior hiking cycles." In response, the strategists counter that investors’ should focus "not just on the way tapering and hiking change the underlying economics, but on their impact on investor sentiment in today’s environment. For instance, just like the S&P thrived against 3 rate hikes in 2017 but choked on the 2018 hikes, a tapering cycle today could turn out as painful for the equity market as a prior hiking cycle." Elaborating on that point, BofA starts with the obvious, namely "that unparalleled monetary policy contributed to the historic returns and valuations achieved post-Covid." But with tapering looming and lacking such explicit Fed support, and with momentum fading this fall, "the market may need a period of bad news to get the Fed back on its side or reach more attractive valuation levels. The longer the recent sideway action persists, the weaker the momentum and confidence that investors require to buy the dip." To be sure, the Fed will have one key lever to push stocks higher once tapering begins, namely jawboning about the timing of the first rate hike. That’s the lever Fed famously used to reverse falling stocks leading up to the first hike post-GFC. In October 14, St. Louis Fed President Bullard stepped in to calm markets fearful of a growth shock. In 2015, on the back of another bout of stock market weakness, Yellen pushed back a largely-expected hike around the Sep FOMC meeting and then delayed the next hike for an entire year. However, BofA cautions, "the option to delay hiking rates doesn’t rule out a period of higher volatility", as: we still haven’t seen how the market will react to the actual taper today, the change in Fed tune means the Fed put might have to be tested (vs. the dip getting bought in anticipation), and overshooting inflation might limit the Fed’s ability to rescue the equity market as easily as it did during the last taper/tightening cycle (with inflation breakevens today well above anything experienced in the last taper and tightening cycles). In a potential double-whammy, the fact that fixed income markets are not pushing back against the Fed’s taper announcement lowers the Fed put strike, in BofA's view. That's because while traders generally tend to focus on equity market tantrums as the Fed’s signal to intervene, major U-turns in Fed stance were often encouraged by the bond market ‘disagreeing’ with the Fed’s plans. For example, the 2013 taper tantrum was by far most felt in fixed income markets, while both inflation breakevens and expected rate hikes fell sharply as Powell raised rates through the second half of 2018, indicating that well ahead of the infamous Powell pivot they already knew he was on the right path. Today, on the contrary, Eurodollar futures implied rates and inflation breakevens are rising in line with an uninterrupted hiking cycle ahead (Exhibit 9) - perhaps because investors don't even bother to sell ahead of a market drop they know the Fed will step into and "rescue", while rates vol has remained muted through the latest rise in long-term yields (unlike in the short-lived Treasury selloff of 1Q21; Exhibit 10). This price action - driven by bonds - has raises the Fed’s bar to easily change course if the equity weakness continues, and, as BofA warns, it calls into question where the Fed put strike is. To summarize BofA's argument, between the coming taper and frequent recent warnings about euphoric markets from both FOMC talking heads and even the IMF today cautioning about a risk of sudden and steep declines in global equity prices and home values, the risk is the Fed put strike is (much) lower than the market anticipates, as: Equity valuations & returns have accelerated to extremes post-Covid, The bond market is projecting tightening is needed and Risks of inflation overshooting are increasingly real, with 5yr inflation break-evens well-above any level witnessed during the 2014-2018 taper/tightening cycle. As a result, Prasad warns that "the Fed may be less willing to so easily deviate from tapering plans and talk the market back up as during the last cycle, further adding to risks." His conclusion - "bad news (delaying the Fed) would be the best news equities can wish for." Translation: It's almost time for another crisis. Tyler Durden Tue, 10/12/2021 - 22:23.....»»
Pool Corp (POOL) continues to focus on remodeling and replacement activities to drive growth. Higher expenses and pandemic-related woes are a concern. Pool Corporation POOL is likely to benefit from its expansion efforts, remodeling and replacement activities as well as solid base business. However, a rise in labor and delivery expenses along with coronavirus-related woes is a concern.Let us discuss the factors that highlight why investors should retain the stock for the time being.Factors Driving GrowthPool Corp focuses on expansion initiatives to boost revenues. The company is foraying into newer geographic locations to expand in existing markets and launch innovative product categories to boost market share. It is also trying to expand through various acquisitions. In this regard, the company is assimilating the TWC Distributors acquisition and expanding in the Florida market with nine additional sales centres. The company expanded its Horizon network in the Florida and California markets. The company continues to progress with organic growth, the greenfield expansion and acquisitions. Notably, the acquisitions and new locations are likely to boost customer relationship and services, which will boost the top line. So far this year, the company has opened nine new locations (seven on the blue side and two on the green side).Pool Corp continues to benefit from the company’s remodeling and replacement activities. During second-quarter 2021, building materials sales increased 33% year over year following growth rates of 34% (as of first-quarter 2021), 42% (as of fourth-quarter 2020) and 29% (as of third-quarter 2020). The company is gaining from strong demand in the construction and remodel markets. Equipment and chemical sales increased 35% and 28% year over year, respectively, in the second quarter. The upside was primarily driven by solid demand for heaters, pumps, filters, lighting, automation and pool remodeling. Chemical sales benefited from increased dichlor and trichlor product pricing. The company believes that the flexibility of the new work-from-home norm is likely to act as a catalyst for investments in home improvements. It expects to benefit from new products (such as automation and the connected pool), continuation of the de-urbanization trends and the strengthening of the southern migration.Pool Corp is also gaining from the solid performance of its base business segment. In second-quarter 2021, the company’s base business segment contributed 94.4% to total revenues. During the quarter, revenues from base business increased 31.9% year over year to $1,687.7 million. In the previous four quarters, revenues from base business increased 50.7% (as of first-quarter 2021), 39% (fourth-quarter 2020), 27% (third-quarter 2020) and 14% (second-quarter 2020) on a year-over-year basis.Given the company’s ability to drive organic growth and manage cost structure through execution and capacity creation, it raised its guidance for 2021. Pool Corp anticipates 2021 earnings per share in the range of $13.75-$14.25, up from the prior estimate of $11.85-$12.60. The company anticipates robust demand to continue backed by strong single-family housing market, new product launches as well as higher maintenance and repair activities.ConcernsPool Corp, which shares space with Vista Outdoor Inc. VSTO, Acushnet Holdings Corp. GOLF and Academy Sports and Outdoors, Inc. ASO in the Zacks Leisure and Recreation Products space, has been affected by the coronavirus pandemic. Risks stemming from resurgence of COVID-19 cases in some markets, new stay-at-home orders or government mandates and unfavorable economic conditions triggered by the crisis could negatively impact the business. The company stated that it expects tougher year-over-year comparisons and industry capacity constraints for the second half of 2021.The company is continuously shouldering higher expenses, which are denting margins. Higher labor and delivery costs and investments in information technology systems as well as hardware are increasing expenses. During second-quarter 2021, cost of sales surged 36.2% from the prior-year quarter’s number. Selling and administrative expenses also increased 27.1% year over year. We believe that the company has to work hard toward cutting expenses in order to achieve high margins. 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Click to get this free report Pool Corporation (POOL): Free Stock Analysis Report Acushnet (GOLF): Free Stock Analysis Report Vista Outdoor Inc. (VSTO): Free Stock Analysis Report Academy Sports and Outdoors, Inc. (ASO): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»
SPRINGFIELD, N.J., Oct. 12, 2021 (GLOBE NEWSWIRE) -- Village Super Market, Inc. (NSD-VLGEA) today reported its results of operations for the fourth quarter ended July 31, 2021. Fourth Quarter Highlights Net income of $9.5 million, an increase of 3% compared to $9.2 million in the fourth quarter of the prior year Adjusted net income of $8.7 million, an increase of 50% compared to $5.8 million in the fourth quarter of the prior year Same store sales increased 0.1%; on a two-year stacked basis same store sales increased 7.4% Same store digital sales decreased 22%; on a two-year stacked basis same store digital sales increased 172% Fiscal 2021 Highlights Net income of $20.0 million, a decrease of 20% compared to $24.9 million in fiscal 2020 Adjusted net income of $18.9 million, a decrease of 18% compared to $23.1 million in fiscal 2020 Same store sales increased 1.8%; on a two-year stacked basis same store sales increased 7.5% Same store digital sales increased 68%; on a two-year stacked basis same store digital sales increased 219% Fourth Quarter of Fiscal 2021 Results Sales were $536.3 million in the 14 weeks ended July 31, 2021 compared to $501.3 million in the 13 weeks ended July 25, 2020. Sales increased $35.4 million, or 7.1%, due to fiscal 2021 containing 53 weeks, with the additional week included in the fourth quarter. Excluding the impact of the 53rd week, sales decreased 0.1% due to the closure of the Silver Spring, Maryland store in February 2020 partially offset by the Fairway acquisition completed on May 14, 2020 and a 0.1% increase in same store sales. Average basket sizes decreased, transaction counts increased and same store digital sales decreased as we cycled against the initial months following the COVID-19 outbreak in our trade area. Additionally, food inflation and increased Supplemental Nutrition Assistance Program ("SNAP") benefits positively impacted sales. Sales levels in Manhattan continue to be negatively impacted by residential population migration out of the city and less commuter and tourist traffic. New stores and replacement stores are included in same store sales in the quarter after the store has been in operation for four full quarters. Store renovations and expansions are included in same store sales immediately. Gross profit as a percentage of sales decreased to 28.31% in the 14 weeks ended July 31, 2021 compared to 28.91% in the 13 weeks ended July 25, 2020 due primarily to decreased departmental gross margin percentages (.29%) and increased warehouse assessment charges from Wakefern (.75%), partially offset by a favorable change in product mix (.21%) and lower promotional spending (.22%). Operating and administrative expense as a percentage of sales decreased to 23.65% in the 14 weeks ended July 31, 2021 compared to 25.29% in the 13 weeks ended July 25, 2020. Adjusted operating and administrative expenses decreased to 24.29% in the 14 weeks ended July 31, 2021 compared to 25.65% in the 13 weeks ended July 25, 2020. The decrease in Adjusted operating and administrative expenses is due primarily to decreased costs related to COVID-19, including enhanced wages and benefits, security and outside sanitation services (1.45%) and lower payroll costs (.19%). Payroll costs decreased due to productivity initiatives and labor shortages despite minimum wage and demand driven pay rate increases. Impairment of assets in the 14 weeks ended July 31, 2021 includes non-cash charges related to the Fairway trade name of $2.4 million and the long-lived assets of one Gourmet Garage store of $0.5 million due primarily to the uncertainty regarding the duration and extent of the impact of the COVID-19 pandemic on Manhattan. The Company's effective income tax rate was 31.2% in the 14 weeks ended July 31, 2021 compared to 4.1% in the 13 weeks ended July 25, 2020. The 13 weeks ended July 25, 2020 includes a $2.5 million benefit from a federal net operating loss carryback at a rate higher than the current statutory tax rate. Excluding the impact of this adjustment, the effective income tax rate was 31.5% in the 13 weeks ended July 25, 2020. Net income was $9.5 million in the 14 weeks ended July 31, 2021 compared to $9.2 million in the 13 weeks ended July 25, 2020. Adjusted net income was $8.7 million in the 14 weeks ended July 31, 2021 compared to $5.8 million in the 13 weeks ended July 25, 2020. Fiscal 2021 Results Sales were $2.03 billion in fiscal 2021 compared to $1.80 billion in fiscal 2020. Sales increased $35.4 million, or 2.0%, due to fiscal 2021 containing 53 weeks. Excluding the impact of the 53rd week, Sales increased due to the Fairway acquisition completed on May 14, 2020, the opening of the Stroudsburg replacement store on November 1, 2019 and a same store sales increase of 1.8%. Excluding the impact of the 53rd week, same store sales increased 7.5% in fiscal 2021 on a two-year stacked basis compared to fiscal 2019. Since the beginning of the COVID-19 pandemic, we have experienced higher average basket sizes and decreased transaction counts as customers have consolidated shopping trips. Additionally, both food inflation and increased Supplemental Nutrition Assistance Program ("SNAP") benefits positively impacted sales. Same store digital sales growth accelerated through both ShopRite from Home and partnerships with online grocery picking and delivery services, increasing 68% in fiscal 2021 compared to fiscal 2020 and 219% on a two-year stacked basis. During the COVID-19 pandemic, fiscal 2021 sales at Fairway and Gourmet Garage locations in Manhattan have been significantly negatively impacted due primarily to residential population migration out of the city and less commuter and tourist traffic. Gross profit as a percentage of sales decreased to 27.83% in fiscal 2021 compared to 28.07% in fiscal 2020. Higher margins associated with Fairway increased gross profit (.22%) despite higher costs as we transition and integrate commissary operations into our business. Excluding the impact of Fairway, gross profit as a percentage of sales decreased .46% due primarily to decreased departmental gross margin percentages (.48%) and increased warehouse assessment charges from Wakefern (.34%) partially offset by a favorable change in product mix (.17%), lower promotional spending (.16%) and increased patronage dividends and rebates received from Wakefern (.03%). Departmental gross profits decreased due partly to price investments. Operating and administrative expense as a percentage of sales decreased to 24.57% in fiscal 2021 compared to 24.65% in fiscal 2020. Adjusted operating and administrative expense as a percentage of sales increased to 24.76% in fiscal 2021 compared to 24.63% in fiscal 2020. Adjusted operating and administrative expense increased due primarily to increased occupancy costs due primarily to the Fairway acquisition (.56%) and increased external fees and transportation costs associated with digital sales (.42%), partially offset by decreased costs related to COVID-19, including enhanced wages and benefits, security and outside sanitation services (.62%) and lower payroll and fringe benefit costs (.24%). Payroll and fringe benefits decreased primarily due to leverage from higher sales, reductions in service department offerings, labor shortages and productivity initiatives partially offset by the addition of Fairway, growth of ShopRite from Home and minimum wage and demand driven pay rate increases. Depreciation and amortization expense was $34.2 million in fiscal 2021 compared to $31.4 million in fiscal 2020. Depreciation and amortization expense increased in fiscal 2021 compared to the prior year due to depreciation related to assets acquired as part of the Fairway acquisition. Impairment of assets includes non-cash charges related to the Fairway trade name of $2.4 million and the long-lived assets of one Gourmet Garage store of $0.5 million due primarily to the uncertainty regarding the duration and extent of the impact of the COVID-19 pandemic on Manhattan. Interest expense was $3.9 million in fiscal 2021 compared to $2.6 million in fiscal 2020. Interest expense increased in fiscal 2021 compared to fiscal 2020 due primarily to interest expense related to the credit agreement entered into on May 6, 2020. Interest income was $3.6 million in fiscal 2021 compared to $4.1 million in fiscal 2020. Interest income decreased in fiscal 2021 compared to fiscal 2020 due primarily to lower interest rates for amounts invested in variable rate notes receivable from Wakefern and demand deposits invested at Wakefern. The Company's effective income tax rate was 30.7% in fiscal 2021 compared to 21.4% in fiscal 2020. Fiscal 2020 includes a $2.5 million benefit from a federal net operating loss carryback at a rate higher than the current statutory tax rate. Excluding the impact of this adjustment, the effective income tax rate was 29.3% in fiscal 2020. The increase in the effective tax rate in fiscal 2021 is due primarily to favorable return to provision adjustments in fiscal 2020 and increased state taxable income in higher tax rate jurisdictions. Net income was $20.0 million in fiscal 2021 compared to $24.9 million in fiscal 2020. Adjusted net income was $18.9 million in fiscal 2021 compared to $23.1 million in fiscal 2020. Village Super Market operates a chain of 34 supermarkets in New Jersey, New York, Maryland and Pennsylvania under the ShopRite and Fairway banners and three Gourmet Garage specialty markets in New York City. Forward Looking Statements and Non-GAAP Measures All statements, other than statements of historical fact, included in this Press Release are or may be considered forward-looking statements within the meaning of federal securities law. The Company cautions the reader that there is no assurance that actual results or business conditions will not differ materially from future results, whether expressed, suggested or implied by such forward-looking statements. The Company undertakes no obligation to update forward-looking statements to reflect developments or information obtained after the date hereof. The following are among the principal factors that could cause actual results to differ from the forward-looking statements: risks and uncertainties related to the COVID-19 pandemic, including among others, the duration and severity of the pandemic, shifts in customers' buying patterns, disruptions to supply chains, inability of the workforce to work due to illness, quarantine or government mandates, including travel restrictions and stay at home orders, the effectiveness and duration of COVID-19 stimulus packages; general economic conditions; competitive pressures from the Company's operating environment; the ability of the Company to maintain and improve its sales and margins; the ability to attract and retain qualified associates; the availability of new store locations; risks, uncertainties and challenges associated with the Fairway acquisition, including under-performance relative to our expectations, additional capital requirements, unforeseen expenses or delays, imprecise assumptions or our inability to achieve projected cost savings or other synergies, competitive factors in the marketplace and difficulties integrating the business, including merging company cultures, cultivating brand strategy, expansion of food production and conforming the acquired company's technology, standards, processes, procedures and controls; the availability of capital; the liquidity of the Company; the success of operating initiatives; consumer spending patterns; the impact of changing energy prices; increased cost of goods sold, including increased costs from the Company's principal supplier, Wakefern; disruptions or changes in Wakefern's operations; the results of litigation; the results of tax examinations; the results of union contract negotiations; competitive store openings and closings; the rate of return on pension assets; and other factors detailed herein and in the Company's filings with the SEC. We provide non-GAAP measures, including Adjusted net income and Adjusted operating and administrative expense, that we believe are useful to analysts and investors to evaluate the Company's ongoing results of operations. These non-GAAP financial measures should not be considered as an alternative to GAAP measures such as net income, operating income, operating and administrative expense or any other GAAP measure of performance. These measures should not be reviewed in isolation or considered as a substitute for our financial results as reported in accordance with GAAP. We believe Adjusted net income and Adjusted operating and administrative expense are useful metrics to investors and analysts because they present more accurate year-over-year comparisons of our net income and operating and administrative expense because adjusted items are not the result of our normal operations. Other companies may have different definitions of Non-GAAP Measures and provide for different adjustments, and comparability to the Company's results of operations may be impacted by such differences. The Company's presentation of Non-GAAP Measures should not be construed as an implication that its future results will be unaffected by unusual or non-recurring items. VILLAGE SUPER MARKET, INC.CONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, except per share amounts) (Unaudited) 14 Weeks Ended 13 Weeks Ended 53 Weeks Ended 52 Weeks Ended July 31,2021 July 25,2020 July 31,2021 July 25,2020 Sales $ 536,283 $ 501,302 $ 2,030,330 $ 1,804,594 Cost of sales 384,469 356,397 1,465,286 1,298,119 Gross profit 151,814 144,905 565,044 506,475 Operating and administrative expense 126,820 126,781 498,786 444,833 .....»»
(TNS)—Maybe the millennial generation values having a good time more than their baby boomer parents and Generation X siblings. Perhaps this cohort’s financial tastes have been shaped by historically low mortgage rates and soaring home prices. Whatever the reason, Americans ages 25 to 40 display noticeably different attitudes about tapping their home equity than do […] The post Millennials Go Their Own Way When it Comes to Tapping Home Equity, Survey Finds appeared first on RISMedia. (TNS)—Maybe the millennial generation values having a good time more than their baby boomer parents and Generation X siblings. Perhaps this cohort’s financial tastes have been shaped by historically low mortgage rates and soaring home prices. Whatever the reason, Americans ages 25 to 40 display noticeably different attitudes about tapping their home equity than do older homeowners. According to a recent Bankrate survey, fully 14% of millennial mortgage holders say they’d tap home equity to bankroll a vacation, compared with just 4% of Generation X (ages 41 to 56) and 3% of baby boomers (ages 57 to 75). And 10% of millennials say they’d pull cash from their homes for non-essential purchases, such as electronics or a boat. Just 3% of Gen Xers and boomers say that sounds like a good idea. On the other hand, only 49% of millennials say they’d tap equity for home improvements, compared with 64% of Generation X and 66% of boomers. Michael Golden, co-founder and co-CEO of @properties, a 4,000-agent real estate brokerage in Chicago, says the differing attitudes aren’t a surprise. Millennials long have been said to value work-life balance more than their parents and older siblings. “They’re a little bit more balanced,” Golden says. “Life experiences are a little more important to them. They’re willing to spend money in a different way, and they’re willing to tap equity in their home in a different way.” Traditionalists urge caution when it comes to tapping home equity. Melinda Opperman, president of Credit.org, recalls that many homeowners regretted pulling cash from their homes during the boom that preceded the Great Recession. “Building up wealth in a home is a long, deliberate process, and that wealth creation increases the longer one stays in a home,” Opperman says. “In general, we wouldn’t advise anyone to cash out that equity unless they’re using it to improve the property, thereby increasing the value of the home and rebuilding equity faster.” A Much Different Rate Picture Part of the generation gap is simple: millennials have entered their home-buying years with mortgage rates at microscopic levels. By contrast, baby boomers lived through 30-year mortgage rates topping 18% in the early 1980s. Gen Xers experienced rates hovering at 9% in the 1990s. Millennials barely recollect 5% rates—from Jan. 1, 2010, to Jan. 1, 2020, the average rate on a 30-year loan was just above 4%. Then came the COVID-19 pandemic, and 30-year mortgage rates fell below 3%, the lowest levels ever. With borrowing so cheap, old rules about avoiding debt might strike some as less relevant. “Now you’re borrowing in the two’s or the low three’s,” Golden says. “When interest rates are so low, the psychology of debt is much different. It makes sense to have debt.” Another reality: Americans ages 25 to 40 are focused on living their lives rather than saving for a distant future. “Millennials have a longer runway,” Golden says. “They’re not thinking about retirement; they’re in the building mode now.” Home Values Are Soaring An additional factor plays a big role in millennial homeowners’ feelings about home equity: They were fortunate enough to buy during the hottest housing market in U.S. history. Nationally, home values jumped a record 19.7% from July 2020 to July 2021, according to the latest S&P CoreLogic Case-Shiller home price index. Tapping home equity is possible only if you have equity, and homeowners have it in unprecedented amounts. According to mortgage data firm Black Knight, Americans possessed more than $9.1 trillion in “tappable” home equity as of mid-2021. “Some of the attitudes toward home equity may be influenced by the recent surge in home prices,” says Greg McBride, Bankrate’s chief financial analyst. “Those that recall the housing bust and how highly leveraged homeowners got squeezed are likely more reluctant to tap equity unless absolutely necessary.” Why You Should Tap Equity, and Why You Shouldn’t Here’s a breakdown of reasons to pull cash out of your home, along with guidance about whether that rationale makes financial sense: Home Improvements and Repairs: Green Light Boomers and Generation Xers give the thumbs-up to this reason for tapping equity. Not much argument from financial experts. Home improvements are likely to last for years, a timeframe that matches the horizon of mortgage debt. Kitchen renovations and bathroom updates are no-brainers. But non-essential projects, such as a swimming pool or a game room, won’t necessarily reward you with a corresponding increase in property value. However, if you need a new air conditioner or an updated electrical system, a mortgage is the cheapest money you’ll find. Consolidating Debt: Yellow Light If you’re carrying credit card debt and paying double-digit interest rates, it could make sense to swap out expensive revolving debt for historically cheap mortgage debt. This strategy comes with a big caveat, however: Pull cash out of your house to pay off the credit cards only if you’re not going to simply run up more credit card debt. “Using home equity to do a debt consolidation really depends on whether the root cause of the debt has been addressed,” McBride says. “A pattern of overspending could lead to running the credit card debt back up all over again, plus now carrying home equity debt as well.” Opperman says homeowners who use home equity as a lifeline can dig themselves a deeper hole in the long run. “You only get to cash out that equity once, then it’s spent,” she says. If you follow up your cash-out refi with more spending, you’ll face what she calls a “second reckoning”—but this time, with less of a home equity cushion to pad the fall. Investing: Yellow Light Millennials are more likely than other generations to use home equity to invest. While 26% of that age group said they liked that idea, just 17% of Gen X and 10% of baby boomers signed off on the notion of redirecting home equity to another investment. As with using home equity to pay down debt, the calculus around investing is nuanced. If you want to tap cheap mortgage money to fatten up your retirement savings, and to put those proceeds in a well-diversified portfolio, financial pros give their blessing. There’s a solid case to be made for using cheap mortgage money to shore up your retirement account. On the other hand, if you aim to tap equity to day-trade stocks or to play the cryptocurrency boom, the smart advice is to think again. Such a gambit might pay off, or you might lose big. Paying Down Student Loans: Yellow Light This one is a bit of a gray area. If you owe student loans from private lenders, it can make sense to pay those down by tapping home equity. In contrast to federal loans, private student loans carry higher rates and less flexibility. On the other hand, if you have federal loans, you need not rush to pay them down, McBride says. Their reasonable interest rates and income-based repayment plans mean federal student loans may not be a crippling form of debt. Going on Vacation or Buying Electronics: Red Light Here’s one where financial experts agree with those prudent elders of the baby boom and Gen X. Think of it this way: Your home loan’s term is 15 or 30 years because real estate is a long-lived asset that will give you years of use and almost certainly gain value. A Caribbean cruise or a gaming console, on the other hand, will be long forgotten even if you’re paying it off for decades. If a cash-out refi is your only option for paying for a vacation or another big-ticket item, better to put the purchase on hold. Keeping Up With Household Bills: Red Light Millennials are more likely than other generations to tap home equity just to pay the bills. Fully 28% of 25- to 40-year-olds say they’d pull cash out for that purpose, compared to just 17% of Gen X and 14% of baby boomers. Yes, the economic reality is harsh for many millennials: Home price appreciation has far outpaced wage gains over the past decade. And many young adults are saddled with hefty student loans. However, this is another area where financial planners’ advice aligns with the wisdom of older generations. Borrowing for 30 years to pay this month’s child care, groceries and car repairs isn’t a sustainable lifestyle. If that’s your situation, look for ways to boost your income or to tighten your budget. ©2021 Bankrate.com Distributed by Tribune Content Agency, LLC The post Millennials Go Their Own Way When it Comes to Tapping Home Equity, Survey Finds appeared first on RISMedia......»»
America's Funding Challenges Ahead Authored by Alasdair Macleod via GoldMoney.com, This article looks at the Fed’s funding challenges in the US’s new fiscal year, which commenced on 1 October. There are three categories of buyer for US Federal debt: the financial and non-financial private sector, foreigners, and the Fed. The banks in the financial sector have limited capacity to expand bank credit, and American consumers are being encouraged to spend, not save. Except for a few governments, foreigners are already reducing their proportion of outstanding federal debt. That leaves the Fed. But the Fed recently committed to taper quantitative easing, and it cannot be seen to directly monetise government debt. That is one aspect of the problem. Another is the impending rise in interest rates, related to non-transient, runaway price inflation. Funding any term debt in a rising interest rate environment is going to be considerably more difficult than when the underlying trend is for falling yields. There is the additional risk that foreigners overloaded with dollars and dollar-denominated financial assets are more likely to become sellers.Not only are foreigners overloaded with dollars and financial assets, but with bond yields rising and stock prices falling, foreigners for whom over-exposure to dollars is a speculative position going wrong will undoubtedly liquidate dollar assets and dollars. If not buying their own national currencies, they will stockpile commodities and energy for production, and precious metals as currency hedges instead. The Fed will be faced with a bad choice: protect financial asset values and not the dollar or protect the dollar irrespective of the consequences for financial asset values. And the Federal Government’s deficit must be funded. The likely compromise of these conflicting objectives leads to the risk of failing to achieve any of them. Other major central banks face a similar quandary. Funding ballooning government deficits is about to get considerably more difficult everywhere. Introduction Our headline chart in Figure 1 shows the excess liquidity in the US economy that is being absorbed by the Fed through reverse repos (RRPs). With a reverse repo, the Fed lends collateral (in this case US Treasuries overnight from its balance sheet) to eligible counterparties in exchange for overnight funds, which are withdrawn from public circulation. As of last night (6 October), total RRPs stood at $1,451bn, being the excess liquidity in the financial system with interest rates set by the RRP rate of 0.05%. Simply put, if the Fed did not offer to take this liquidity out of public circulation, overnight dollar money market rates would probably become negative. The chart runs from 31 December 2019 to cover the period including the Fed’s reduction of its funds rate to the zero bound and the commencement of quantitative easing to the tune of $120bn every month —they were announced on 19th and 23rd March 2020 respectively. Other than the brief spike in RRPs at that time which was a wobble to be expected as the market adjusted to the zero bound, RRPs remained broadly at zero for a full year, only beginning a sustained increase last March. Much of the excess liquidity absorbed by RRPs arises from government spending not immediately offset by bond sales. Figure 2 shows how this is reflected in the government’s general account at the Fed. The US Treasury’s balance at the Fed represents money not in public circulation. It is therefore latent monetary inflation, which is released into the economy as it is spent. Since March 2021, the balance on this account fell by about $800bn, while reverse repos have risen by about $1,400bn, still leaving a significant balance of liquidity to be absorbed arising from other factors, the most significant of which is likely to be seepage into the wider economy from quantitative easing (over two trillion so far and still counting). The US Treasury has draw down on its general account because had it accumulated balances from bond funding in excess of its spending ahead of the initial covid lockdown. And its debt ceiling was getting closer, which is currently being renegotiated. But this is only part of the story, with the Federal deficit running at about $3 trillion in the fiscal year just ended. That is a huge amount of government “fiscal stimulus”, and clearly, the private sector is having difficulty absorbing it all. The scale of this deficit, debt ceilings aside, is set to increase under the Biden administration. If the US economy is already drowning in dollars, it is likely to worsen. Assuming the debt ceiling negotiations raise the Treasury borrowing limit, the baseline deficit for the new fiscal year must be another $3 trillion. Optimists in the government’s camp have looked for economic recovery to increase tax revenues to reduce this deficit enough together with selective tax increases to allow the government to invest additional capital funds in the crumbling national infrastructure. A more realistic assessment is that unexpected supply disruption of nearly all goods and rising production costs are eating into the recovery, which is now faltering. And it is raising costs for the government in its mandated spending even above the most recent assumptions. It is increasingly difficult to see how the budget deficit will not increase above that $3 trillion baseline. This article looks at the funding issues in the new fiscal year following the expected resolution of the debt ceiling issue. The principal problems are its scale, how it will be funded, and the impact of price inflation and its effect on interest rates. Assessing the scale of the funding problem There are three distinct sources for this funding: the Fed, foreign investors, and the private sector, which includes financial and non-financial businesses. Figure 3 shows how the ownership of Treasury stock in these categories has progressed over the last ten years and the sum of these funding sources up to the mid-point of the last US fiscal year (31 March 2021). Over that time total Treasury debt more than doubled to nearly $30 trillion. The funding of further debt expansion from these levels is likely to be a significant challenge. Initially, the Fed can release funds by reducing the level of overnight RRPs, some of which will become absorbed directly, or indirectly, in Treasury funding. But after that financing will become more problematic. Since 2011, the Fed’s holdings of US Treasury debt have increased from 11% to 19% of the growing total, reflecting QE particularly since March 2020. At the same time the proportion of total Treasury debt owned by foreign investors has fallen from 32% to 24% today, and now that they are highly exposed to dollars, they could be reluctant to increase their share again, despite continuing trade deficits. Private sector investors, whose share of the total at 57% is virtually unchanged from ten years ago, can only expand their ownership by increasing their savings and through the expansion of bank credit. But with bank balance sheets lacking room for further credit expansion and consumers inclined to spend rather than save, it is difficult to envisage this ratio increasing sufficiently as well. Clearly, the Fed has been instrumental in filling the funding gap. But the Fed has now said it intends to taper its bond purchases. Unless foreign investors step in, the Fed will be unable to taper. Excess liquidity currently reflected in outstanding RRPs can be expected to be mostly absorbed by expanding T-bill and short-maturity T-bond funding, which might buy three- or four-months’ funding time and not permit much longer-term bond issuance. But after that, the Fed may be unable to taper QE. Foreign funding problems While we cannot be privy to the bimonthly meetings of central bankers at the Bank for International Settlements and at other forums, we can be certain that there is a higher level of monetary policy cooperation between the major central banks than is generally admitted publicly. On matters such as interest rate policy it is important that there is a degree of cooperation, otherwise there could be instability on the foreign exchanges. And to support the dollar’s debasement, policy agreements between important foreign central banks may need to be considered. This is because the dollar’s role as the reserve currency gives the US Government and its banks not just an advantage of seigniorage over the American people, but over foreign holders of dollars as well. Dollar M1 money supply is currently $19.7 trillion, approximately 50% of global M1 money stock.[i] Therefore, its seigniorage and the world-wide Cantillon effect from increasing public circulation is of great advantage to the US Government, not only over its own people but in transferring wealth from foreign nations as well. This is particularly to the disadvantage of any other national government which, following sounder monetary policies, does not expand its own currency stock at a similar rate while being forced to use dollars for international transactions. Ensuring currency debasement globally is therefore a compelling reason behind monetary cooperation between governments. By agreeing on permanent currency swap lines with five major central banks (the ECB, the Bank of Japan, the Bank of England, the Bank of Canada, and the Swiss National Bank) they are drawn into supporting a global inflationary arrangement which ensures the stock of dollars can be expanded without consequences on the foreign exchanges. Ahead of its massive monetary expansion on 19 March 2020, to keep other central banks onside temporary swap arrangements were extended to nine other central banks, ensuring their compliance as well.[ii] But notable by their absence were the central banks whose governments are members and associates of the Shanghai Cooperation Organisation, which will have found that their dollar holdings and financial assets (mainly US Treasuries) have been devalued without consultation or recompense. It is therefore not surprising that foreign governments other than those with permanent swap lines are increasingly reluctant to add to their holdings of dollars and US Treasuries. By selectively excluding major nations such as China from swap line arrangements, by default the Fed is pursuing a political agenda with respect to its currency. International acceptability of the dollar is being undermined thereby when the US Treasury is becoming increasingly desperate for inward capital flows to fund its budget deficits. Even including allied governments, all foreigners are now reducing their exposure to US dollar bank deposits, by 12.9% between 1 January 2020 and end-July 2021, and to US T-Bills and certificates by 20.7% over the same period. The only reason for holding onto longer-term assets is in expectation of speculative gains. The situation for longer-term Treasury bonds is not encouraging. The US Treasury’s “major foreign holders” list of holders of longer-maturity Treasury securities, shows the list to be dominated by Japan and China, between them owning 31.5% of all foreign owned Treasuries. Japan’s cooperative relationship with the Fed was confirmed by Japan increasing her holdings of US Treasuries, but only by 1.3% in the year to July 2021, while China and Hong Kong, which between them hold a similar amount to Japan, reduced theirs by 3%.[iii] The ability of the US Treasury to find foreign buyers other than for relatively smaller amounts from offshore financial centres and oil producing nations therefore appears to be potentially limited. We should also note that total financial assets and dollar cash held by foreigners already amounts to $32.78 trillion, roughly one and a half times US GDP — dangerously high by any measure. This total and its breakdown is shown in Table 1. If foreign residents are to increase their holdings in US Treasuries, it is most easily achieved by foreign central banks on the permanent swap line list drawing them down and further subscribing to invest in T-Bills and similar short-term securities. As well as being obviously inflationary, that recourse has practical limitations without reciprocal action by the Fed. But a far greater danger to Federal government funding comes from dollar liquidation of existing debt and equity holdings, especially if interest rates begin to rise, bearing in mind that for any foreign holder of dollars without a strategic reason for holding a foreign currency, all such exposure, even holding dollars and dollar-denominated assets, is speculative in nature. The question then arises as to what foreigners will buy when they sell their dollars. Governments without a strategic imperative may prefer at the margin to adjust their foreign reserves in favour of the other major currencies and gold. But out of the total liabilities shown in Table 1 official institutions only hold $4.284 trillion long- and short-term Treasuries, which includes China and Hong Kong’s holdings, out of the $7.2 trillion total shown in Figure 2 earlier in this article. The $3 trillion balance is owned by private sector foreign investors. Excluding China and Hong Kong’s $1.3 trillion, US Treasury debt held by foreign governments is under 10% of all foreign holdings of dollar securities and cash. What is held by foreign private sector actors therefore matters considerably more, bearing in mind that it can all be classified as speculative, being a foreign currency imparting accounting risk to balance sheets and investment portfolios. If interest rates rise because of price inflation not proving to be transient, it will lead to significant investment losses and therefore selling of the dollar, triggering a widespread repatriation of global funds. A global increase in bond yields and falling equity values will also force sales of foreign securities by US investors. But with US investors being less exposed to foreign currencies in correspondent banks and with a significantly lower level of foreign investment exposure, the net capital flows would be to the disadvantage of the dollar. Some of the proceeds from dollar liquidation by foreigners are likely to lead to commodity stockpiling and at the margin some of it will hedge into precious metals, driving their prices higher. The long-term suppression of precious metal prices would to come to an end. Domestic problems for the Fed Clearly, the resumption of government deficit funding will no longer be supported by foreign purchases of US Treasuries at a time when trade deficits remain stubbornly high. This throws the funding emphasis onto the Fed and domestic purchasers of government debt. But as stated above, the private sector will need to reduce its consumption to increase its savings. Alternatively, banks which have limited capacity to do so will have to expand credit to purchase Treasury bonds, which is not only inflationary, but diverts credit expansion from the private sector. Consumers are charging in the opposite direction from increasing savings, drawing them down in favour of increased consumption. This is partly due to them returning to their pre-covid relationship between consumption and savings, and partly due to a shift against cash liquidity in favour of goods increasingly driven by expectations of higher prices. With their fingers firmly crossed, the latter is believed by central bankers and politicians to be a temporary phenomenon, the consequence of imbalances in the economy due to logistics failures. But the longer it persists, the more this view will turn out to be wishful thinking. Increasing prices for energy and essential goods, which are notoriously under-recorded in the broader CPI statistics, are emerging as the major concern. So far, few observers appear to accept that they are the inevitable consequence of earlier currency debasement. There is a growing risk that when consumers realise that rising prices are not just a short-term and temporary phenomenon, they will increasingly buy the goods they may need in the future instead of buying them when they are needed. This alters the relation between cash liquidity-to-hand and goods, increasing the prices of goods measured in the declining currency. And so long as consumers expect prices to continue to rise, it is a process that is bound to accelerate until it is widely understood by the currency’s users that in exchange for goods, they must dispose of it entirely. If that point is reached, the currency will have failed completely. It is this process that undermines the credibility of a fiat currency. Before it develops into a total rout, it can only be countered by an increase in interest rates sufficient to stop it, as well as by strictly limiting growth in the stock of currency. And even then, some form of convertibility into gold may be required to restore public trust. This, the only cure for fiat currency instability, is too radical for the establishment to contemplate, and is a crisis that increases until it is properly addressed. The rise in interest rates exposes all the malinvestments that have grown and persisted while interest rates were suppressed from the 1980s onwards, finally ending at the zero bound. The shock of widespread business failures due to rising interest rates will impact early in the currency’s decline when it becomes obvious that initial increases in interest rates will be followed by yet more. Importantly, the supply of essential goods is then further compromised by business failures instead of being alleviated by improving logistics. And consumer demand shifts even more in favour of the essentials in life and away from luxury and inessential spending. The poor are especially disadvantaged thereby and the middle classes begin to struggle. The private sector’s growing economic woes further undermine government finances. Unemployment increases and tax revenues collapse, adding to the budget deficit and therefore to the government’s funding requirements. Mandatory costs increase more than budgeted. Interest charges, currently about $400bn, add yet more to the deficit. Today, in all the major currencies control over interest rates by central banks is being challenged. Like the Fed, other major central banks are also insisting that rising prices are temporary, while markets are beginning to suspect the reality is otherwise. All empirical evidence and theories of money and credit scream at us that statist control over interest rates is being eroded and lost to market-driven outcomes. The consequences for markets and government funding costs There is growing evidence that accelerating monetary expansion in recent years is feeding into a purchasing power crisis for major currencies. Covid and logistics disruptions, coupled with lack of inventories due to the widespread practice of just-in-time manufacturing processes have undoubtedly made the situation considerably worse. But in the history of accelerating inflations, there have always been unexpected economic developments. Shifting consumer priorities expose hitherto unforeseen weaknesses, so it would be a mistake to disassociate these problems from currency debasements. It is leading to a situation which confuses statist economists, who tend to think one-dimensionally about the relationships between prices and economic prospects. For them, rising prices are only a symptom of increasing demand. And so long as expansion of demand remains under control and is consistent with full employment, it is their policy objective. They do not appear to understand rising prices in a failing economy. But classical economics and on the ground conditions militate otherwise. Inflation is monetary in origin, and it is the destruction of the currency’s purchasing power that is evidenced in rising prices. And when the public sees prices of needed goods rising at an increased pace, they begin to rid themselves of the currency. And far from stimulating production and consumption, high rates of monetary inflation act as an economic burden. Monetary policy now faces the dual challenge of rising prices and rising interest rates as the economy slumps. When central banks would expect to reduce interest rates, they will now be forced to increase them. When deficit spending is deployed to stimulate the economy, it must now be curtailed. Just when they matter most, bond yields will rise along their yield curves from the short end, and equity market values will be undermined by changing yield relationships. Falling financial asset values become a consequence of earlier monetary inflation undermining a currency’s purchasing power. The Fed, the Bank of England, the Bank of Japan, and the ECB have all acted together to accommodate government budget deficits, to be funded as cheaply as possible by suppressing interest rates. That they have acted together has so far concealed the consequences from bond markets, whose participants only compare one government bond market with another instead of valuing bond risks on their own merits. And through regulation, banks have been made to view investment in government bonds as being risk-free for counterparty purposes. All this is about to change with the turn in the interest rate trend. Monetary policy will have two basic options to weigh; between supporting the currency’s purchasing power by increasing interest rates, or to support financial markets by suppressing them. If the latter is deemed more important than the currency, it will most likely require more quantitative easing by the Fed, not less. Expressed another way, either central banks will pursue the current policy of maintaining domestic confidence and the wealth effect of elevated financial asset values and let the currency go hang. Alternatively, they can aim to support their currencies, and be prepared to preside over a collapse in financial asset values and accept the knock-on consequences. It is a dirty choice, with either policy option likely to fail in its objective. The end of the neo-Keynesian statist road, which started out lauding the merits of deficit spending is in sight. Mathematical economics and the state theory of money are about to be shown for what they are — intellectualised wishful thinking. As the most distributed currency, the dollar is likely to lead the way for all the others, slavishly followed by the Bank of England, the Bank of Japan, and the ECB. And all their high-spending governments, addicted to debt, will face unexpected funding difficulties. Tyler Durden Mon, 10/11/2021 - 17:40.....»»
Flood insurance rates skyrocketing by 1,000% overnight. Property values plummeting in coastal communities as markets dry up. And buyers obliviously drawn into purchases before being slammed with enormous, rapidly increasing premiums. These are the fears that have echoed around the Federal Emergency Management Agency’s (FEMA) massive overhaul of its flood insurance arm, the National Flood […] The post With Flood Insurance Overhaul, Industry Hopes for Minimal Disruption appeared first on RISMedia. Flood insurance rates skyrocketing by 1,000% overnight. Property values plummeting in coastal communities as markets dry up. And buyers obliviously drawn into purchases before being slammed with enormous, rapidly increasing premiums. These are the fears that have echoed around the Federal Emergency Management Agency’s (FEMA) massive overhaul of its flood insurance arm, the National Flood Insurance Program (NFIP). Dubbed “Risk Rating 2.0,” the changes went into effect Oct.1, and policymakers are saying it is the biggest single adjustment to how the federal government manages flood insurance in at least 50 years. But are any of these fears grounded in reality? What, if anything, should professionals in the real estate industry be concerned about? Nothing catastrophic, according to agents and experts. Though due to the complex and sprawling nature of the new rules, it remains impossible to fully predict long-term ramifications. Most are expecting some (maybe significant) short-term bumpiness, but not a dramatic collapse of markets, as both agents and homeowners adjust to what amounts to a complete rewrite of flood insurance policy across the country. “It’s a transformational change in the program,” says Chad Berginnis, executive director of the Association of State Flood Plain Managers (ASFPM), a non-profit that has lobbied in support of Risk Rating 2.0. “We have been supportive of this notion that people are finally able to get and understand their full risk rates, because that then drives behaviors and actions. “We think that is hugely important.” What Is Risk Rating 2.0? At an essential level, Risk Rating 2.0 is completely changing how properties are assessed for flood risk, relying less on broadly drawn (and often outdated) flood maps and instead making an actuarial calculation for every individual property. This is meant to give a more realistic picture of flood risk to homeowners and homebuyers, as well as distributing the cost burden more equitably between high-risk and low-risk properties. A vast majority of policyholders will see only a modest increase in their premiums in the first year of the new program, according to FEMA—less than $10 a month. About a quarter of people will actually see decreased premiums. Also important, the program sets a cap on the maximum a homeowner will pay for a premium at just about $12,000 annually, with rates established for a full year. This is in contrast to previous rules, which effectively allowed premiums to rise indefinitely based on risk and flooding events with rates that could change at a moment’s notice. Those who will see an increase still have the relief of a previously approved rule that prevents premiums going up by more than 18% in most cases (25% in some rarer circumstances). But there is no limit on how many annual increases a property will experience, meaning a homeowner might see a small bump to their premium annually for several years, with bigger increases concentrated in later years. FEMA has made it clear it will continue to evaluate risk and also that the $12,000 cap could change. New policies are reflecting the Risk Rating 2.0 changes as of Oct. 1, while current policyholders will not see updated numbers on their renewals until after April of next year. Policyholders can still transfer their policies to a new owner, maintaining any discounts they have, according to FEMA. Where the Land Meets the Sea Cyndee Haydon has a front-row seat to any kind of flood-related issue in real estate. Working for independent brokerage Future Home Realty on the perennially hurricane-prone Florida coast, she herself lives “on a peninsula on a peninsula.” The name of her team—”Sandbars to Sunsets”—aptly describes her market on the state’s gulf coast, which includes a scintillating strip of vacation beaches home to celebrities like NFL superstar Tom Brady and Hollywood actor Tom Cruise. Haydon says that Risk Rating 2.0 is fundamentally a good thing—creating more equity, resiliency, certainty and scientific underpinnings for flood insurance. “Common sense tells you that there’s a lot of logic [in the new system],” she says. Because of government subsidies, homeowners and homebuyers did not actually know the true actuarial costs of insuring a given property with the NFIP until now. Though congress tried to eliminate those subsidies in 2012 (with the program around $20 billion in the red), elected officials and advocates balked as insurance costs ballooned for property owners, threatening to push people out of their homes. Haydon says only about 0.2% of policyholders in Florida would eventually end up at the top rate of $12,000. Even for those markets that will be hit the hardest though, she argues that the most important thing for the real estate industry is transparency—something that Risk Rating 2.0 has promised, though not yet proved it will deliver. Essentially, if people are going to choose to live—or not live—in a flood-prone area, they should do so with both eyes open, Haydon says. “I do think that there’s various decisions that people make, but they will be wiser now,” she says. “I think consumers may get better long-term options that they can evaluate in that process…in my perception, in many places people will understand the real cost of ownership and be able to make better informed decisions.” Somewhat surprisingly, the state that will experience the highest proportion of what FEMA calls “substantive” first-year premium increases (more than $20 per month) is not Florida, and is not located anywhere in the hurricane-prone southeast. In the small New England state of Connecticut, Michael Barbaro is a broker and also president of the state’s consolidated MLS system, SmartMLS. He says he is not sure why his state is bearing such a heavy burden in Risk Rating 2.0, though he speculated that two large storms—Hurricane Irene in 2011 and Hurricane Sandy in 2012—probably figured into the calculation. In the short term, Barbaro says he is most worried about the fact that right now, as Risk Rating 2.0 goes into effect, the new insurance adjustments remain opaque and the specific policy changes are not being fully explained. “What has the most significant impact on the real estate market at any one time is uncertainty,” says Barbaro. “Without certainty and until there is certainty in the market—and it’s not based on some table, it’s actually what the prices are going to be—I fear we’ll see the same impact we saw [in 2012].” Ideally, flood insurance quotes will be delivered quickly and with at least some idea of the reasoning behind the underlying actuarial calculation, Barbaro says—something real estate agents cannot do themselves, and must depend on the insurance industry to provide to clients. Both Haydon and Barbaro refer to that 2012 legislation, which was known as the Biggert-Waters Act, with distaste. Though again, the goal of that policy change was well-intended and necessary, they say that a lack of good communication, and the suddenness in which property owners were swamped with huge new premiums, rocked markets. “For the longest period of time after [Hurricanes] Sandy and Irene, people were calling up and just saying, ‘Is this property in a flood zone?’ And if it was, they were just hanging up the phone,” says Barbaro. Haydon says she hopes now, in 2021, people are more aware of flooding issues after years of increasingly severe weather events, and will not be surprised by flood danger reflected in their insurance premiums. She adds that the overall state of the economy and housing is more likely to allow people flexibility in their living choices compared to 2012. “I can’t think of a better time for a homeowner to have more options. And so what’s really been lacking has been information,” she says. “REALTORS® and our code of ethics are really about standing up for the consumer to have the information to make good decisions.” Though Haydon says she has had occasional clients who have simply walked away from the idea of living in flood-prone areas, she does not expect towns and regions like hers to suffer too much in the long-term. “We’re going to be figuring this stuff out,” she says. The Big Picture Real estate agents and other stakeholders are not particularly worried that Risk Rating 2.0 will cause the same major problems that Biggert-Waters did a decade ago. Though the National Association of REALTORS® (NAR) lobbied in favor of Biggert-Waters (and has also supported Risk Rating 2.0), changes in both the new policy’s language and implementation, as well as the larger resiliency landscape seem designed to avoid a repeat of 2012. NAR’s support spokesperson Tori Syrek tells RISMedia that Risk Rating 2.0 fixes the problems of Biggert-Waters, which the organization says was flawed from the beginning. “We did not know that FEMA was using a 50-year-old rating methodology and only one or two pieces of information in a zone to rate each and every property in [Biggert-Waters],” Syrek says. “This resulted in untenable and scientifically un-defensible outcomes.” Risk Rating 2.0 evolved with support from an NAR-convened insurance committee, which Syrek says worked closely with FEMA to develop the “state-of-the-art system” utilizing the input of flood experts and other scientists. The $12,000 cap and the continuation of the max 18% annual increase in premiums will certainly help people adjust to the changes with a “glidepath,” according to Berginnis. Still, over the longer term, there are even more potential supports that will allow property owners to increase the flood resilience of their homes—and likely offset their insurance costs at the same time. “I don’t know if it’s serendipity right now, but we potentially have a once in a lifetime surge of mitigation funding that’s coming out of FEMA that can actually help property owners do something about that risk,” he says. The federal government has already earmarked just under $3.5 billion through an initiative called the Hazard Mitigation Grant Program (HMGP), which is meant to fortify regions against all kinds of natural disasters. The “Build Back Better” budget reconciliation bill proposed by Democrats in Congress contains an additional $1 billion meant for disaster preparedness, and the bipartisan infrastructure bill allocates another $3.5 billion specifically for highest-risk or repeatedly flooding properties. Berginnis calls this investment—much of which is at least partially facilitated through various COVID disaster declarations—a “historic” opportunity to prepare for future flooding. If both bills pass, the total monies available to potentially help homeowners do things like lift their homes, fix grading issues or even fully rebuild structures would reach about $8 billion. “The timing couldn’t be better,” Berginnis says. But like the short-term effects of the changes, much of the specifics around these grants remain unknown. Much of the $8 billion would be distributed to state and local governments, which would then have some discretion on how to allocate and prioritize them, Berginnis says. Other chunks of money are directly administered by FEMA, and recently those grants have gone to larger projects—though they could theoretically be directed toward individual homeowners or properties according to Berginnis. Additionally, federal elected officials have proposed means-tested financial assistance to help lower-income property owners with premiums—something Berginnis says has been popular across the political and geographic spectrum. “Now Congress has just gotta get the job done,” he says. Buyers and Sellers Barbaro is less optimistic than some, at least in the short term. Recent transactions his company is involved in have already hit hiccups, he says. A relatively modest, inland multifamily home Barbaro just sold was quoted as needing $8,700 in flood insurance right off the bat. That might not have had anything to do with Risk Rating 2.0, he posited, but because no one has been able to say for certain, buyers are getting skittish. “When people get scared and they have uncertainty in the real estate market, they react pretty quickly—particularly the negative things,” he says. In Florida, Haydon compares adjustments in the real estate market to computer programmers bug-testing code in software that has already been released—adjusting on the fly as they encounter problems. She credits FEMA with taking a slower approach, and NAR for putting out plenty of guidance for REALTORS® so this process can happen as painlessly as possible. “We’ve been out in front…trying to educate our members to be able to communicate to the consumer in a way that gets in the facts,” she says. Regular, damaging hurricanes have not consistently driven people away from certain neighborhoods or towns in Florida, Haydon points out, positing that some consumers will always be willing to take on flood risk. But apart from wealthier homeowners whose insurance premiums are a relatively small portion of their incomes, Barbaro cautions that policymakers need to adjust to protect the little guy—those who might have smaller, older homes that they inherited or purchased decades ago at a lower price point. “These families can no longer keep that property,” he says. But he also agrees that communication is probably the most important way to protect markets in the short-term. He says he can see a scenario where disruptions are mitigated—maybe even limited to a few months between now and April 2022 when Risk Rating 2.0 is applied to policy renewals. “This one appears to have more certainty in the policies,” he says. “This one is much more organized, much more well-thought out. So I think if there is any disruption, my hope is that it’s going to [last] a much shorter period of time.” Jesse Williams is RISMedia’s associate online editor. Email him your real estate news ideas to email@example.com. The post With Flood Insurance Overhaul, Industry Hopes for Minimal Disruption appeared first on RISMedia......»»
Von Greyerz: Will Gold Reach Unthinkable Heights? Authored by Egon Von Greyerz via GoldSwitzerland.com, It serves no purpose to hold gold. Why should anyone hold gold when it has lost value against most other assets since 2009. At the end of this article, I will tell you when you must not hold gold and why I think gold will reach new highs shortly. Making money is a cinch in today’s stock markets so why do I need gold? For the investors who have managed to combine a good portion of luck with modest investment skills, they could have made 2,000X their money since 1997 on Apple or 2,170X on Amazon, also since 1997. So $10,000 invested in both Apple and Amazon in 1997 would today be worth a neat $40 million. BITCOIN IS UP 470,000X And what about Bitcoin? If you spent $10,000 on Bitcoin in 2010 at 10 cents, you would today have 100,000 BTCs worth $4.7 billion. If you did, you hopefully haven’t lost your key. But to rely solely on electronic entries on a computer or memory stick is clearly a very inferior form of wealth preservation. Also, hindsight is a wonderful investment method and the most exact of all sciences. Yet, you didn’t need to be an expert stock picker to make money in recent decades. If you for example spent $10,000 on the Nasdaq in 2009, you would today have over $140,000 and that without selecting one single stock. But by using 2009 as starting point, you will have conveniently forgotten that you had before that lost 80% on the Nasdaq since 2000. So we can always prove the ultimate performance by choosing the right starting point. GOLD – WORST ASSET CLASS SINCE 2011 AND BEST SINCE 1999 When gold antagonists want to disprove gold’s virtues, they choose the 1980 top as $850 as starting point. They then deride gold investors that it took 28 years before that level was reached again. They conveniently forgot to mention that gold reached new highs between1971 and 1980, going up 24X. Stock investors could also point out that they have outperformed gold by 200% since 2011. But they forget to mention that since 1999 the Dow has lost 60% against gold (excluding dividends). Again, this shows is that you can always prove the investment performance by picking a suitable starting point. Still, it is an undeniable fact that gold has been the best asset class in this century. STOCK MARKET – A LOTTERY WITH ONLY WINNERS How can anyone go wrong today. Investing is a lottery where you are guaranteed to win the top prize every time. Virtually no investor believes this will stop. Just look at US Margin Debt for example which is at $900 billion up from $250 billion in 2009. What we must remember is that the leverage effect of margin debt works much faster on the downside than on the way up. When markets tank this leads to forced liquidations and panic. And this is what we will see in the not too distant future. I still believe that before this investment cycle ends that stocks will lose 90%+ in real terms. BUY THE DIPS HAS WORKED EVERY TIME – UNTIL NOW For at least half a century, no investor has had to worry about the dips. What seemed horrendous crashes at the time in 1987, 2000, 2007 and 2020 are just blips on the chart. What few people worry about when looking at the quarterly chart above, is that every top since the 1998 top has had weaker momentum on the indicator at the bottom. THAT IS A VERY BEARISH LONG TERM SIGNAL. Take Black Monday on October 19, 1987. The Dow dropped 40% in a matter of days. I remember this day extremely well. I was in Tokyo for the listing of the UK FTSE 100 company I was Vice-Chairman of. It certainly wasn’t the best day for listing a consumer electronics retailer. The market clearly had bigger things to worry about. BUY AND HOLD – “THE MARKET ALWAYS GOES UP” As the buy and hold principle has worked without exception for 50 years at least, there is no reason to believe that it won’t for another 50 years. Because, money printing, credit expansion, loose monetary and fiscal policies, low interest rates and unlimited availability of capital have today totally eliminated the need for any investment skills. There is only one investment rule that counts – The Market Always Goes Up! But are there no exceptions to this rule? Of course there are. Take 1929 for example. By 1932 you would have lost 90% of your investment in the Dow. To recover that loss, you needed to wait 25 years! Again, hindsight is the most perfect investment method since it is always right. But what counts is of course what happens from this moment on. DON’T MEASURE YOUR WEALTH IN ILLUSORY MONEY The fallacy of most investors is that they measure their wealth with a stick that creates illusory wealth. To measure your wealth in a currency that has lost 98% of its value over 50 years is like living in Fantasyland. You have the illusion that your wealth is growing whilst in fact it is the money you measure it in that is falling. The mighty dollar has lost 79% against the Swiss franc since 1971 and 98% against real money which is gold. So if you look at the REAL growth in your assets since 1971, you should discount it by 98%. Hmmm – where is my money gone? Well your money has been confiscated by your government. The US has since the early 1930s spent more money than it has collected in taxes and made up the difference by creating fake money called dollars. Consistent budget deficits led to an ever increasing debt and more money printing. And when you create money out of thin air like the US and most of the world have done at an accelerated level since 1971, your currency takes the hit. But since 2/3 of Americans don’t have a valid passport, they never realise that their currency is being destroyed. Americans who went to Switzerland in 1971 and come back today will find that their dollar has lost 80% of its purchasing power. So much better to be Swiss and find that when you travel to the US that everything is 80% cheaper when measured in Swiss francs. MEASURE YOUR WEALTH IN BIG MACS So my advice to any investor is to measure your wealth in real terms like the cost of a Big Mac. In 1970 a Big Mac was around 60 cents. Today the same Big Mac is $4 which is an 85% loss of the dollar in purchasing power. Even better is to measure grammes or ounces of gold. As the only currency that has survived in history and also the only currency which has maintained its purchasing power for thousands of years, Gold is clearly the King of Money. An ounce of gold bought a good quality suit for a man in Roman times and still does today. So over time, gold doesn’t go up in value. All it does is to maintain stable purchasing power. Why should we then invest in gold? Well, it serves no purpose to hold gold if: Government maintains surpluses. Neither government nor private debt, nor money supply increase by more than (a very modest) inflation. There is a sound monetary policy with no money printing. Inflation is at zero or almost zero. A 2% inflation target is nonsense since it doubles prices over 36 years. The currency maintains its real value which is almost inevitable with above policies. Under such conditions, there is no possibility gold will reach new highs, so welcome to Shangri-La! A financial and monetary system described above has never existed in history except for over very limited periods. That is why no currency has ever survived – No Currency – Nada! In modern times, Switzerland is probably the only country with a system that somewhat resembles the above definition. So in these epic stock markets what purpose does it serve to hold gold? Firstly physical gold is the best asset to hold for wealth preservation purposes. Gold owned directly outside the financial system protects against the following risks: Systemic Financial Monetary Counterparty No other asset in history has acted as the perfect insurance for 5,000 years. Land is arguably also a good long term wealth preservation asset but it is not transportable, not easily divisible and not liquid. Risk in financial markets is now greater than anytime in history as we approach the end of the Epic Everything Bubble as I wrote in a recent article. Anyone who today doesn’t hold physical gold as insurance against these risks must be regarded as totally irresponsible vis-a-vis his stakeholders whether that is his family, shareholders, investors or pensioners. But the irresponsible protector now has a final chance as gold today is as cheap as it was in 1971 at $35 or in 2000 at $290 in relation to US money supply. GOLD WILL REACH NEW HIGHS THAT FEW CAN IMAGINE TODAY My colleague Matt Piepenburg recently covered Why Gold Is Not Rising in an excellent article. In that he stated that gold will reach new highs of $4,000 before the end of the decade. I believe that he based that on the In Gold We Trust Report by our good friend and MAM advisor Ronni Stoeferle who has a $4,800 target by 2030. Personally I believe that target is much too conservative. I am on record for more than 10 years saying that gold will reach $10,000 in today’s money. But that projection, like all others, is totally meaningless. As I discuss above, it serves absolutely no purpose to measure gold in a currency which is being debased by the day. Much better than to measure gold in for example Big Macs. But there is only one valid measure of gold. That is how many ounces or grammes you hold. Any other measure is totally nonsensical. The most valuable asset that most people hold is their family. Who values that in dollars? The bubble property market is also valued in money, especially since cheap and unlimited money pushes the prices up daily. But your own house should not be valued in dollars. You buy a house that you can afford and thereafter you should never think about its value but just as a home. Still most people cannot distinguish between an investment asset or and asset acquired for pleasure or wealth preservation purposes and will insist on looking at its value daily. At least as long as in appreciates. GOLD FORECASTS Coming back to gold forecasts, as usual there is a massive spread between high and low. Two extremes are for example, the In Gold We Trust Report forecast of $4,800 in 2030 or Jim Sinclair’s $50,000 in 2025 and $87,000 in 2032. If I was forced to make a bet I would go for Jim’s $50,000 in 2025. We can only be certain that gold will reach new highs. But I come back to the unit of measure i.e. the dollar in this case. If someone can tell me what will happen to the dollar by 2025 for example, I will give you a more precise forecast. Personally, my view has for very long been that we will see hyperinflation as the penultimate phase to end this century old cycle in an hysterical and desperate attempt by central banks to save the system. These futile attempts will of course fail but will lead to a total debasement of the dollar and all currencies. What will the value of gold be when the dollar goes to ZERO? Well, whatever level that will be is totally meaningless since the other side of ZERO is INFINITY. What is more relevant is that gold will reach new highs and maintain purchasing power as well as outperform all asset classes by a massive margin. For reference, gold reached 100 trillion Marks in the Weimar Republic. As I mentioned above, the hyperinflation which is likely to occur in the next 5 and maximum 10 years is only the penultimate phase of the current monetary system. The final phase will be a total implosion of all asset classes such as stocks, bonds and property and a deflationary depression. Gold will then also come down from excessive highs. But since Gold will be the only money for a period, it will continue to do very well relative to other assets. As von Mises said: Remember that this is nothing new. It has happened throughout history. But because of the size of the bubble, the implosion will be greater than any time in history. In such a depression everyone will suffer greatly, even gold holders. But just as in any crisis in history, physical gold will serve as the best insurance you can own. Tyler Durden Mon, 10/11/2021 - 06:30.....»»
Homeowners can expect a 30% increase in the cost of their natural gas bill this winter as the world faces an energy crisis. Joern Pollex/Getty Images The price of natural gas has surged more than 180% over the past 12 months. Homeowners can expect a 30% increase in the cost of natural gas this winter, experts say. Harsh winter weather also increases demand that suppliers may not be able to keep up with. Home heating prices are expected to rise this year as parts of the world face an increasing energy crisis.Americans have been paying more to fill their cars with gas since 2014, and the same problem is expected to hit homeowners this winter as the cost of natural gas continues to increase. Homeowners can expect a 30% increase in the cost of their natural gas bill this winter, the National Energy Assistance Directors Association told Insider. The average residential gas bill is expected to increase from $572 to $859, while heating oil could climb from $1,272 to $1,900. About 61 million households use natural gas to heat their homes, according to a recent report from the US Energy Information Administration."If we have a colder winter, prices could go much higher because of increased demand," Mark Wolfe, NEADA's executive director, told Insider. "The impact on low-income households will be significant."The price of natural gas, which heats about 48% of American homes, has surged more than 180% over the past 12 months, CNN reported. Wolfe says any increase in the cost of natural oil prices will have a "significant impact" on a struggling household's ability to pay their energy bills. Last year, 29% of families surveyed by the US Census Bureau said they had to reduce spending on other essential items like groceries, medication, and other utilities.Weather can also have a large impact on the cost of oil. Winter storms can increase home heating oil prices, as people typically use more at the same time that winter storms interrupt delivery systems, according to the EIA. Harsh winter weather also increases demand that suppliers may not be able to keep up with, ultimately causing the price of home heating oil to rise. In February, Texas was hit with a devastating winter storm that left millions without power, water, and heat. Some Texas residents were hit with bills up to $5,000 after the mass outage because their bill was tied to the wholesale market. The price increase came as natural-gas plants, Texas' main sources of electricity, went offline in the freezing temperatures. At the same time, the cold weather also meant that overall energy consumption in the state went up as residents of the state turned up their heaters to stay warm.This winter, the Natural Gas Supply Association expects prices of home heating to increase citing a multitude of factors like demand, production, and storage in the oil and gas industry's supply chain, according to a recent press release. The US Department of Energy recommends setting the thermostat for the lowest temperature that still allows you to remain comfortable, this is typically around 68 degrees during the day and 58 degrees at night to save about 10-15% off of your bill. Cleaning and replacing your furnace's filters will also help lower the cost of your monthly bill because it helps it run more efficiently, the Department of Energy says. During winter, keeping the shades open on south-facing windows during the day to allow the sunlight in and closed at night to keep in the heat. Blocking any potential drafts from doors and windows will also help keep costs down by reducing the strain on your furnace. Read the original article on Business Insider.....»»
While growth in non-interest income is likely to have supported Wells Fargo's (WFC) Q3 earnings, muted loan growth and mortgage banking revenues are expected to have been spoilsports. Wells Fargo & Company WFC is slated to announce third-quarter 2021 results, before the opening bell, on Oct 14. The company’s earnings are expected to have improved year over year, while revenues are projected to have declined.In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate on improved investment advisory and other asset-based fees, aided by higher market valuations as well as lower costs. However, reduced net interest income (NII) on lower rates and lower loans was the undermining factor.Over the trailing four quarters, Wells Fargo’s earnings have surpassed the consensus estimate on all four occasions, the surprise being 31.3%, on average.Wells Fargo & Company Price and EPS Surprise Wells Fargo & Company price-eps-surprise | Wells Fargo & Company QuoteIn late August, Wells Fargo announced the combination of its Treasury Management and Global Payment Solutions businesses under the Global Treasury Management umbrella.Legal hassles escalated for Wells Fargo in early September when the Office of the Comptroller of the Currency (“OCC”) assessed a $250-million civil money penalty on the company on the grounds of “unsafe or unsound practices” related to the home-lending loss mitigation program. With the failure of the program, which required the bank to repay customers, who were charged excessive or improper fees, the company has violated the terms of the 2018 consent order that condemned its risk management systems. The penalty is likely to have escalated the company’s expenses for the third quarter.In addition to the hefty fine, the banking giant has been slapped with an enforcement action, limiting it from acquiring certain third-party residential mortgage servicing, while ensuring that borrowers are not transferred out of its loan portfolio until the remediation actions are executed. In the following week, U.S. Senator Elizabeth Warren addressed a letter to the Fed, urging the central bank to revoke Well Fargo’s license as a financial holding company.The senator stated that the $250-million fine against the bank shows it to be an "irredeemable repeat offender". Hence, the company’s core traditional banking activities should be separated from its other financial services and Wall Street operations. The bifurcation, if executed, will ensure that the bank’s customers stay protected until its transition is completed.Legal woes aside, lets now look at the other factors that might have influenced Wells Fargo’s quarterly performance:Muted Net Interest Income and Margin Growth: Overall growth in loans was moderate in the third quarter. Per the Fed’s latest data, real estate, consumer loan, auto loan and card loan portfolio growth has supported the lending business. In the third quarter, the yield curve spread widened, with the 10-year Treasury yield rising significantly at the quarter end, thereby, likely propelling NII. Additionally, the deposit balance is likely to have been stable or grown modestly, supported by government stimulus. This too is likely to have aided NII.Conversely commercial and industrial loan portfolio remained weak as the low-interest rate environment has made borrowing through other avenues like capital markets more attractive. Also, high levels of pay downs and payoffs as well as uncertainty surrounding tax, regulatory and economic backdrop have likely been dampeners.Amid these considerations, the Zacks Consensus Estimate for Wells Fargo’s NII is pegged at $8.9 billion, suggesting a 4.6% decline from the prior-year quarter’s reported figure.The bank’s net interest margin is expected to have continued to be affected by the low-rate backdrop, excess bank liquidity being invested in cash-like investments offering low yields, muted loan growth and competitive loan pricing landscape.Declining Mortgage Banking Revenues: Mortgage originations, both purchase and refinancing, continued to normalize in the third quarter. Mortgage banking revenues are facing tough comps from the origination boom in 2020, thanks to ultra-low mortgage rates.In the quarter under review, mortgage rates increased sequentially. Mortgage origination activities are estimated to have decreased dramatically, with rising rates discouraging refinancing activity. Nonetheless, given the strong housing market conditions, homebuying activities continued in the quarter under review. Hence, purchase originations are likely to have offered some relief.Management expects mortgage originations to decline in the third quarter, with retail origination volumes declining less than the industry on the back of its efforts to improved capability to cater to the mortgage financing needs.The Zacks Consensus Estimate for Wells Fargo’s mortgage banking revenues is pegged at $1.19 billion for the third quarter, which suggests a 25.4% decline from the prior-year quarter’s reported number.Overall Non-Interest Revenue Growth: Equity markets held strong in the third quarter, boosting market-driven revenues. This is expected to have supported wealth, trust, trading and asset management revenues.Moreover, with additional stimulus and continued economic reopenings; card fees are anticipated to have supported consumer spending in the quarter under review. Deposit service charges should have continued to normalize as the pandemic-related concessions continue to retract.High volatility in the equity markets in September due to the Fed meeting is expected to have spiked trading volumes in equities, providing decent support to trading revenues. This is likely to have been offset by low fixed-income trading activities.Similar to the past several quarters, deal-making continued at a faster pace in third-quarter 2021. This was primarily driven by robust macroeconomic expectations, companies deploying their cash reserves and increasing confidence in the economic recovery.High Expenses: Wells Fargo’s costs are expected to have continued to flare up in the quarter under review, given its franchise investments in technology and digitalization efforts. Additionally, customer remediation expenses and ongoing litigation hassles are anticipated to have resulted in elevated legal costs in the quarter to be reported.Asset Quality: Card delinquency rates and commercial bankruptcies were low in third-quarter 2021. Given the backdrop of continued improvement in credit trends, Wells Fargo is expected to have witnessed additional reserve releases in the third quarter.The company’s second-quarter results were supercharged with the impact of a $1.6-billion decline in allowance for credit losses, backed by an improving economic environment and lower net charge-offs. This is likely to have continued in the third quarter as well, supported by hefty government stimulus.Here is what our quantitative model predicts:Wells Fargo has the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.Earnings ESP: The Earnings ESP for Wells Fargo is +1.15%.Zacks Rank: Wells Fargo currently carries a Zacks Rank of 3.Prior to the third-quarter earnings release, Wells Fargo’s activities during the July-September period were adequate to gain adequate analyst confidence. Notably, the Zacks Consensus Estimate for third-quarter earnings has been revised upward to $1.04 over the past month. Also, it suggests a year-over-year increase of 86%.However, the consensus estimate of $18.7 billion for quarterly revenues indicates a marginal decline from the prior-year quarter’s reported number.Stocks That Warrant a LookHere are a few bank stocks that you may want to consider as these have the right combination of elements to post earnings beat in their upcoming releases, per our model.The Earnings ESP for JPMorgan JPM is +1.77% and it carries a Zacks Rank #2 (Buy) at present. The company is slated to report third-quarter 2021 results on Oct 13.Bank of America BAC is scheduled to release third-quarter results on Oct 14. The company currently carries a Zacks Rank #3 and has an Earnings ESP of +0.30%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. U.S. Bancorp USB is scheduled to release earnings on Oct 14. The company, which carries a Zacks Rank #3 at present, has an Earnings ESP of +0.93%. Infrastructure Stock Boom to Sweep America A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made. The only question is “Will you get into the right stocks early when their growth potential is greatest?” Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.Download FREE: How to Profit from Trillions on Spending for Infrastructure >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Bank of America Corporation (BAC): Free Stock Analysis Report Wells Fargo & Company (WFC): Free Stock Analysis Report JPMorgan Chase & Co. (JPM): Free Stock Analysis Report U.S. Bancorp (USB): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»
Challenges might persist but retailers - be it Macy's (M), Signet (SIG), Hibbett (HIBB), Best Buy (BBY) and Costco (COST) - are finding innovative ways to make the most of the season. While the word pandemic very well remains in headlines, retailers are all geared up to walk the extra mile this holiday season to capitalize on any surge in demand. Supply chain bottlenecks, rising freight charges and labor shortages are issues that the industry is currently grappling with but retailers still remain hopeful of a fabulous festive season. Well, pent-up savings, stimulus measures, and eagerness among consumers to venture out and shop for loved ones should help keep the cash register ringing.The season, which accounts for a sizable chunk of yearly revenues, is a make or break for retailers. With global supply chains in disarray, retailers are ensuring they stock enough to fulfill predicted consumer demand. They have even ramped up hiring to make sure that they are adequately staffed before the holiday season kicks off to deal with curbside and in-store pickup of online purchases as well as doorstep delivery.Keeping in mind consumers’ product preferences, retailers are replenishing shelves with in-demand merchandise. They are increasing product visibility on online platforms, enhancing customer engagement on social channels, making logistics improvements and offering flexible payment options. The industry players are rapidly embracing the “buy now, pay later” model to entice shoppers amid higher retail prices. Per Salesforce, global "buy now, pay later'' service is expected to account for 8% of online orders for this shopping season.Challenges might persist but retailers are finding innovative ways to make the most of the season. Per Mastercard SpendingPulse, U.S. retail sales — excluding automotive and gas — for the “75 Days of Christmas” that runs from Oct 11-Dec 24 are anticipated to increase 6.8% from a year earlier. With e-commerce still being one of the preferred modes for shopping, Mastercard SpendingPulse foresees online sales to rise by 7.5% during the aforementioned period.The survey further projects year-over-year increase in sales for myriad categories during the “75 Days of Christmas” — 45.4% for apparel, 11.8% for electronics, 60% for jewelry and 92.2% for luxury items (excluding jewelry). Department stores are likely to register sales growth of 14%, per the report.That said, we have highlighted five stocks from the Retail - Wholesale sector that look well positioned based on their sound fundamentals and earnings growth prospects. These stocks have either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.Price Performance Year-to-Date Image Source: Zacks Investment Research5 Prominent PicksMacy's, Inc. M, one of the nation’s premier omni-channel retailers, is worth betting on. In spite of a tough retail landscape, the company has managed to stay afloat, courtesy of its Polaris Strategy. The strategy includes rationalizing store base, revamping assortments and managing costs prudently. Markedly, customers have been responding well to the company’s expanded omni-channel offerings such as curbside, store pickup and same-day delivery. In this respect, its tie-up with DoorDash for expediting delivery service is encouraging. Macy's also collaborated with Sweden-based buy-now, pay-later group — Klarna — for offering online shoppers financial ease and payment flexibility. The company is constantly improving its mobile and website features to deliver enhanced shopping experience. This Zacks Rank #1 company has a trailing four-quarter earnings surprise of 269.8%, on average. The Zacks Consensus Estimate for its current financial year sales and earnings per share suggests growth of 37.3% and 269.7%, respectively, from the year-ago period.Investors can count on Signet Jewelers Limited SIG, a renowned jewelry retailer. The company has been witnessing market share growth, backed by growth across stores and digital platforms. Prudent efforts undertaken as part of the Inspiring Brilliance strategy have also been yielding results. This strategy focuses on expanding big banners, boosting service revenues, broadening the Accessible Luxury and Value segments, and accelerating digital commerce, among others. As part of the Inspiring Brilliance growth strategy, the company makes use of data-driven insights to target new and existing customers. The company has been expanding assortments across its Zales, Kay and Jared brand lines. Impressively, this Zacks Rank #1 company has a trailing four-quarter earnings surprise of 77.5%, on average. The Zacks Consensus Estimate for its current financial year sales and earnings per share suggests growth of 33% and 329.4%, respectively, from the year-ago period.You may invest in Hibbett, Inc. HIBB, an athletic-inspired fashion retailer. Management anticipates that pent-up demand and compelling merchandise coupled with superior customer service and a best-in-class omni-channel platform should continue to drive top and bottom-line performance. The company’s focus on both in-store and online experience, distribution capabilities and vendor relationships will help generate sustainable profitable growth. The company expects mid-teens growth in comparable sales for fiscal 2022. This Zacks Rank #1 company has a trailing four-quarter earnings surprise of 124.6%, on average. The Zacks Consensus Estimate for its current financial year sales and earnings per share indicates an improvement of 18.3% and 84.6%, respectively, from the year-ago period.We suggest betting on Best Buy Co., Inc. BBY. This specialty retailer of consumer electronics and related services has been witnessing robust demand across channels. Continued growth in online revenues backed by robust omni-channel capabilities and customer-centric approach is a key upside. During second-quarter fiscal 2022, Best Buy witnessed robust sales across the Domestic and the International segments, owing to strong demand for technology products and services. It is on track with programs like Total Tech Support, which provides support for fixing computers, laptops, appliances, smart home devices and connected devices. Best Buy has expanded its In-Home Advisor program that includes advisors who guide customers to select the right technology solution. This Zacks Rank #1 company has a trailing four-quarter earnings surprise of 31.9%, on average. The Zacks Consensus Estimate for its current financial year sales and earnings per share suggests growth of 9.5% and 26.2%, respectively, from the year-ago period.Costco Wholesale Corporation COST is another potential pick. The company’s growth strategies, better price management, decent membership trends and increasing penetration of the e-commerce business have been contributing to its upbeat performance. Cumulatively, these factors have been aiding the Issaquah, WA-based company in registering impressive sales numbers. Costco’s net sales increased 15.8% to $19.50 billion for the retail month of September — the five-week period ended Oct 3, 2021 — from $16.84 billion in the last year. This followed an improvement of 16.2%, 16.6% and 16.9% in August, July and June, respectively. Remarkably, this Zacks Rank #2 company has a trailing four-quarter earnings surprise of 7.7%, on average. The Zacks Consensus Estimate for its current financial year sales and earnings per share suggests growth of 8.2% and 7.2%, respectively, from the year-ago period. Infrastructure Stock Boom to Sweep America A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made. The only question is “Will you get into the right stocks early when their growth potential is greatest?” Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.Download FREE: How to Profit from Trillions on Spending for Infrastructure >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Macys, Inc. (M): Free Stock Analysis Report Best Buy Co., Inc. (BBY): Free Stock Analysis Report Costco Wholesale Corporation (COST): Free Stock Analysis Report Hibbett, Inc. (HIBB): Free Stock Analysis Report Signet Jewelers Limited (SIG): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»