https://www.barrons.com/articles/the-debt-clock-the-yield-curve-productivity-growth-51568422838
The Debt Clock, the Yield Curve, Productivity Growth
"Mario's Last Bazooka"
by BCA Research
Sept. 12: Mario Draghi's penultimate meeting at the helm of the ECB [European Central Bank] delivered fireworks. Monetary policy has been eased and forward guidance has been strengthened via an open-ended QE [quantitative easing] program. The program's effectiveness remains dependent on global growth bottoming. Nonetheless, the reward-to-risk ratio of owning the euro, European banks, and selling safe-haven bonds is improving...
The market implications from today's measure will be dominated by the trend in global growth, something out of the ECB's control. Global safe-haven bonds, including German Bunds, are currently very expensive and overbought, making them extremely vulnerable to the recent improvement in the Sino-U.S. relationship. However, the greatest risk for bonds is a rebound in global growth, which we expect to happen by early 2020. As a result, any pullback in yields should be used to build bigger negative bets on this asset class. In Europe, favor Italian bonds over German ones. Italian political risk is receding, and Italian growth will benefit from both easier financial conditions and the coming global growth rebound. Additionally, European banks are attractive. They remain very cheap, trading at half of book value, and they will greatly benefit as European yields rise.
—Mathieu Savary
Long Live the Bull
Invest for Tomorrow
by Heritage Capital
Sept 12: Today, stocks are a stone's throw from all-time highs, at least on the Dow Industrials, S&P 500, and Nasdaq 100. Reversing lower before hitting a fresh high would certainly cause me to become concerned about a deeper pullback. While semis [semiconductor stocks] have really been strong lately, other areas of tech have struggled a bit. Discretionary, yet again, has regrouped and is poised for new highs. I can't even count the number of times people have written off the American consumer, only to be proven wrong. Banks and transports have really stepped up over the last week as one of the most vicious rotations in 10 years has seen buyers stampede into the laggard sectors.
At the same time, high-yield bonds have quietly kicked it up a notch, when many left the key canary for dead. The NYSE A/D [advance/decline] line has hit another all-time high, much to the bears' consternation. Bull markets simply do not end with this type of strong behavior. Sorry, bears.
—Paul Schatz
Debt Clock Shocker
Daily Pfennig
by Aden Research Group
Sept. 12: Have you ever just pulled up the Debt Clock at usdebtclock.org and sat there for 10 minutes and watched the numbers? It's amazing folks…Really, to think that the debt per taxpayer is $183,137…Hey, that's chump change, right, just fire off a check to the government and hope they don't cash it!
Further down on the Debt Clock's website, they have something called: Personal Debt to Income…OK, no biggie right? I mean we should be making more than we spend, right? Ahem…No, actually, the debt to income ratio is 1.724…And that's the part that scares the bejeebers out of me, for if consumers can no longer go deeper into debt, then who's going to support the economy?
--Chuck Butler
Welcome Back, Productivity
Paulsen's Perspectives
The Leuthold Group
Sept. 12: We have an unemployment rate of only 3.7%, fairly strong wage inflation despite an economic slowdown, job openings exceeding the total number of unemployed workers, and we're in the midst of the longest-ever recovery in U.S. history. Is there a more opportune moment for productivity to finally make an appearance in this expansion?
At a time when many worry that a recession lingers nearby, it is comforting to remember that productivity is inherently a "recovery extender!" It allows a fully employed economy to continue to grow without aggravating the forces that often bring its demise (higher inflation, higher yields, policy tightening, profit margin pressures, and real income erosion). Without productivity gains, once full employment is reached, the economy often becomes a zero-sum game—either business takes most of the economic fruits in profits, or scarce labor wins by demanding a larger and larger share of the overall budget. However, with rising productivity...profits and labor incomes can both rise together.
—James W. Paulsen
Job-Market Slack
by Regions Financial
Sept. 10: Over the past 34 months an average of 4.55 million people per month have transitioned from being not in the labor force in one month to being employed in the next month and, over the past 12 months, the number has been well above that longer-term average. Even allowing for growth in the labor force over time, this is still a large number, and one that illustrates our point about there being more slack in the labor market than is implied by the "headline" unemployment rate.
—richard moody
The Yield Curve's Message
Avalon's Weekly Market Guide
by Avalon Investment & Advisory
Sept. 9: The yield curve has historically provided an accurate forecast of future recessions when the difference [in certain Treasury yields] turns negative, also known as inversion. Yield curves are one of the major indicators that we monitor to judge recession risk, but these inversions typically happen more than a year in advance of an economic recession. In addition, stocks have historically had significant advances post-inversion...Our view remains that the odds of a recession in 2019 are low, and Avalon expects two to three additional 0.25% rate cuts from the Federal Reserve in 2019.
Bill Stone
Fresh Fuel for Energy Stocks
The Institutional View
by The Institutional View
Sept. 9: The percentage of Russell 2000 Energy Index stocks trading above their 200-day moving averages has risen steadily since year-end! While the Index was virtually unchanged, the 200-day percentage increased from 1% to 10%. This is the first time that the energy stocks have diverged bullishly from the price index since the sector peaked in 2014!
If this continues, then it would project energy stocks to assume a leadership role once tax-loss selling has run its course. Certainly something to monitor as year-end approaches.
--Andrew Addison
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The U.S. Debt Clock Is an Alarming Sight, Indeed