Category: zerohedge

Via SchiffGold.com,

The US stock market is coming off its worst week since March. It was also the worst pre-election stock market in history. In his latest podcast, Peter talked about the market, the election and what’s likely ahead.

A weak stock market right before election day doesn’t bode well for President Trump’s reelection, given that he’s touted the stock market as his great accomplishment. Peter has said he doesn’t think Trump will win and that the stock market would ultimately sell off on the reality of a Biden presidency – that it would be “buy the rumor, sell the fact.”

Well, apparently they’re not waiting for the fact and they’re selling on the rumors. They bought on the rumor Biden was going to win and now they’re selling on the rumor that he’s going to win, because a Biden victory is not good for the stock market. It means much higher taxes and that is not going to be offset by the Federal Reserve.”

Most people seem to think that regardless of who wins, even if we have a contested election and don’t know a winner for days or weeks, it really won’t be a problem for the markets because the Federal Reserve will step in and backstop it. Everybody seems confident that the Fed has their back.

The only leg that this market is standing on is the Federal Reserve and money printing. But ultimately, that’s not going to be enough. The market is not going to be able to survive when that is the only support.”

Tech stocks were hit particularly hard during last week’s sell-off. The NASDAQ had the biggest decline on Friday and is down over 11% from its September high. But even with the drop, many tech stocks still have sky-high valuations.

Typically, a big selloff in stocks means a strong bond market, but last week, the bond market was also relatively weak. Long-term interest rates were up. Normally, when you see people running to get out of stock, they move into bonds.

There was no refuge this week because even if you had a diversified portfolio, you were down on your stocks and you were down on your bonds. Yes, your bonds went down less than stocks, but everything went down and nothing went up.”

Peter said he thinks this will compound problems in the stock market. Typically, a surging bond market during a stock market selloff helps mitigate the pain. When bonds rise as stocks fall, the lower interest rates help stock valuations. Rising bond prices also offset stock losses for those with diversified portfolios. But if both stocks and bonds are falling at the same time, you have no gains to offset losses. You just have losses on top of your losses.

So, I think this is going to be particularly brutal, because not a lot of people have hedges that are outside of traditional US stocks and bonds. There’s not a lot of investors that have gold or gold stocks that are hedging their portfolio. I think eventually they will. As I’ve been saying for a while, I think gold is going to be the last safe haven standing and ultimately that’s where all the safe-haven money is going to flow.”

Gold also sold off this week. As we have reported, it looked an awful lot like early March with everything selling off. But gold wasn’t down significantly and it rallied a bit on Friday. Peter doesn’t think we’re going to see a significant drop in gold this time around, even if stocks really crash.

Given where the Fed is, given how much money has already been printed, given how much money is going to be printed, I just don’t think you’re going to see any kind of significant weakness in the price of gold. So, any weakness that you get is going to be a buy signal.”

Meanwhile, the Fed has already thrown out one lifeline, lowering the limit on its Main Street lending program to small businesses to $100,000. Peter asked a key question: why does the Fed even need to run such a program? Why can’t small businesses just get these loans from their banks? Answer: they aren’t credit-worthy.

They know they’re not going to get the money back because these companies are bad credit risks and so private lenders don’t want to make the loans. Now, why should the government do that? If these businesses can’t repay the loans, why is the government lending them any money? And it’s not really a loan. If you’re loaning money to businesses that can’t repay it, it’s not really a loan, it’s a grant, or it’s a gift. But you know it sounds a lot better if you can pretend it’s a loan. But this is all pure inflation. The Fed is just printing up money and handing it out to small businesses.”

Peter said he thinks this explains the number of small businesses being created in the midst of an economic collapse. They can take advantage of this giveaway and get money from the government.

Of course, none of this is constitutional. And it’s bad economics. Peter said the craziest thing is nobody even seems to care.

Last week we reported that thanks to what may be the world’s most sophisticated check kiting scheme, Chinese and Hong Kong banks were giving local retail investors a mindblowing 33x margin leverage with which they could then turn around and purchase stock in what is now the world’s largest IPO – China’s fintech Ant Financial, which is set to raise $34.5BN in new capital for its dual listing in Hong Kong and Shanghai ahead of its trading debut on Nov. 5, surpassing the former champion, Saudi Aramco.

As a result, the retail portion was a ludicrous 870 times oversubscribed as bidding was so intense in Hong Kong that one brokerage’s platform briefly shut down after becoming overwhelmed by orders. This in turn gave confidence to institutions that there is no way the stock would drop, leading to a mindblowing 284x oversubscription for institutional investors (this is real money).

Demand for Hong Kong shares was so strong that Ant stopped taking orders from professional investors a day earlier than scheduled. Institutions and strategic investors may take up about 97.5% of the offering in Hong Kong, according to Ant’s prospectus, though the figures may change due to clawback and greenshoe provisions.

Putting these numbers in context, last Thursday, the Chinese financial-technology giant said individual investors in mainland China had placed the equivalent of more than $2.8 trillion of orders for their slice of Ant’s record-breaking initial public offering, which is listing simultaneously in Shanghai and Hong Kong.

While it is hardly a surprise that investors, when given free 33x leverage, will go insane this number is simply staggering: according to the WSJ, it exceeds the value of all the stocks listed on the exchanges of Germany or Canada. Mom-and-pop investors in Hong Kong have also clamored to buy into this IPO, betting that Ant will soar in value after it goes public next Thursday.

While the number of orders is in itself mind-blowing, it is even more impressive given the high hurdles for participating in IPOs on Shanghai’s new STAR Market, a Nasdaq-style technology-focused board that launched last year where Ant will trade: Individuals must have at least two years of stock-trading experience and brokerage-account assets totaling at least 500,000 yuan, the equivalent of $74,300. The IPOs are routinely heavily oversubscribed and stocks often soar after listing, which is to be expected: with retail investors putting down just 3% equity, anything less than a surge could lead to a historic crash.

In any case, with unprecedented, record demand for Ant shares, it is hardly a surprise that as Bloomberg reports overnight, institutional investors have been buying Ant’s shares at a 50% premium in the gray-market, signaling the Chinese fintech giant is poised to soar in its debut this week following the world’s largest initial public offering, as some trades were executed as high as  HK$120 ($15.50) in gray-market trading Monday, compared with the listing price of HK$80.

According to Bloomberg, in the so-called gray market, investors can bid for new shares before they officially start trading on a stock exchange.

The over-the-counter mechanism is often seen as an early indicator of investor demand for an IPO. Retail buyers will be able to trade through a similar channel a day before Ant’s Thursday debut.

“This is huge: the largest IPO ever, priced at the top end and now this huge premium in the gray market,” said Gary Dugan, chief executive officer of the Global CIO Office in Singapore, which didn’t take part in the IPO. “It’s pretty extraordinary given the backdrop and it shows you how much Asia is decoupling from the United States.”

“The market’s infatuation with growth stocks is very strong at the moment,” said Arnout van Rijn, chief investment officer for Asia-Pacific at Robeco. With many investors betting China’s domestic economy will be sheltered from the trade war with the U.S., “it’s not surprising that there’s more demand than supply for a stock like this.”

Of course, with retail going all in the stock, it makes the margin of risk for institutions even more attractive as Beijing will not allow Ant to drop, crashing retail sentiment. As a result, the IPO is also attracting interest from some of the world’s biggest money managers.  T. Rowe Price Group Inc., UBS Asset Management and FMR LLC, the parent of Fidelity Investments, are among the money managers angling for a piece of the deal, a Bloomberg source said.

All this foreign interest means that more than HK$252 billion has flowed into the city since September 14, forcing the Hong Kong Monetary Authority, the de facto central bank, to intervene almost 50 times to try to weaken the Hong Kong dollar.

This is also why contrary to the expectations by China skeptics such as Kyle Bass, Hong Kong’s fund flows continue to flood into the territory rather than out, because China has figured out that the simplest way to ensure it never has a dollar shortage is to guarantee that foreign investors will always make money on such massive equity offerings.

And as long as China has companies that go public – and are 1000x oversubscribed – the foreign capital inflows will continue. Which is the Ant IPO is about so much more than the world’s biggest IPO – it explains how HK, and by extension China, funnels foreign (mostly dollar) capital to make sure that there is never a full-blown run on the world’s reserve currency.

Authored by Paul Joseph Watson via Summit News,

Gun stores in Michigan are being “cleaned out” by people buying firearms for the first time over fears that there could be massive civil unrest following tomorrow’s presidential election.

Detroit gun shop owner Bill Kucyk told Sky News that his store was being inundated by people who don’t really know how to purchase or handle weapons but are desperate to acquire them.

“They don’t even know the process,” said Kucyk.

“They just want to buy guns – and I’m getting about a hundred calls a day about it,” he added.

Kucyk said he was struggling to keep up with demand as people clamor to stock up on guns before what many fear could be weeks of intense rioting should the election result be contested.

“Normally I’d have about a hundred guns in this cabinet but they’ve been sold twice over. The store has been cleaned out several times,” he commented.

Lexus Lewis, a young mother of two, was attempting to buy a shotgun but “was struggling to hold up to her shoulder” according to the report, with Kucyk remarking, “She’s going to need some serious training to use that.”

Lewis said that she was scared of what people were capable of doing given recent events.

“All of this is new,” she said. “I’ve always been a little insecure living in Detroit, Michigan, but it’s all new to me… people are doing things that we’ve never even thought about doing before… taking it to limits that we never thought about going before.”

The rest of the article goes on to blame the emergence of “militia groups” as the reason for why people are buying guns, completely ignoring the real reason, which is the fact that left-wing extremists representing Antifa and Black Lives Matter have been rioting in American cities for the last 5 months.

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Elections officials in Cumberland County, Pennsylvania were rattled last week after a Trump campaign aide requested ‘highly specific details’ about the county’s ballot security, according to The Sentinel.

A Tuesday email from Trump aide Leslie O’Shaughnessy requested the names of people transporting ballots from voting machines once polls close, the names of people with access to the ballots, and locations where ballots are stored – including room numbers.

County Commissioner Gary Eichelberger (R) called the request ‘intrusive,’ and suggested that it might disrupt the election process in the county of 253,000 residents.

“It’s almost kind of chilling the sort of data they wanted us to provide,” said Eichelberger. “This is basically the whole security plan. We’ve never received a request of this detail and I find it troubling that one of the interested parties [in the election outcome] feels they have a right to information that obviously could jeopardize the security of the ballots.”

Campaign spokeswoman Thea McDonald told the Washington Post that the request was for “standard election transparency details,” and that the campaign had been in touch with out counties – “some of which transparently provided answers to these important, reasonable questions via less formal requests.”

“As part of the Trump campaign’s efforts to ensure a free and fair election, we have asked county clerks for information so that we can gain a detailed understanding of voting processes — and the similarities and differences that may exist in different jurisdictions,” she told the Post in an emailed statement.

The email contained an attached, bullet-pointed list of the details requested, which O’Shaughnessy described as being pursuant to “your office’s compliance with existing statutes and law.”

“Please respond to these questions no later than 5:00 pm EST, tomorrow, Wednesday, October 28, 2020,” the email stated, asking for the response to be sent to a Gmail account bearing O’Shaughnessy’s name, and also including a phone number.

…

the details O’Shaughnessy asked for in her email do not concern ballot verification; rather, they are specific physical security details for ballots and voting machines.

These include information on “the location(s) that ballots are immediately sent to when polls close (including address and room number)” as well as “the individuals who transport the ballots to the location(s).”

The campaign is also asking for “the time(s) when are ballots are transported to canvass site,” information on any security provided, and “the best point of contact for each storage location(s) of the ballots.” –The Sentinel

“Given that more than 500,000 mail ballots were tossed out in this year’s primaries, we must look into these critical issues ahead of November,” McDonald told the Sentinel, linking to a Washington Post article on the volume of vote-by-mail ballots which were disqualified in the spring due to missing signatures, illegible marks, late arrivals and other reasons.

Read the rest of the report here.

Following Europe’s continued Manufacturing PMI rebound, US manufacturing was expected to have stabilized at September’s  levels through October.

• October US Manufacturing ISM BEAT 59.3 – vs 56.0 exp vs 55.4 prior

• October US Manufacturing PMI BEAT – 53.4 vs 53.3 exp vs 53.2 prior

That is the highest Manufacturing PMI since Jan 2019, and highest ISM Manufacturing since Aug 2018, and these improvements happen as US macro data is serially disappointing…

Source: Bloomberg

Although domestic demand ticked higher, Markit reports that new export orders fell for the first time since July.

However, under the ISM hood, export orders improved…

And overall new orders rose at their fastest pace since Jan 2004…

Source: Bloomberg

And ISM respondents are a lot more positive than the mainstream media suggests…

Chris Williamson, Chief Business Economist at IHS Markit said:

“With clues being sought as to whether the economy can sustain its recovery after rebounding from lockdowns, the rise in the PMI in October is encouraging news. It’s inevitable that the pace of economic expansion will weaken after the surge seen in the third quarter, but the strength of the PMI hints at a recovery for which the underlying trend continues to strengthen at the start of the fourth quarter.

“Producers of investment goods such as business equipment and machinery are leading the upturn in a welcome sign of rising business confidence and corporate investment, but it was worrying to see consumer goods producers report weakened order book growth, reflecting rising virus-related worries. Going forward, much will naturally depend on the extent to which the economy can remain open and functioning in the face of rising virus case numbers.”

Finally, in case you agreed with government data that there’s no inflation…

Maybe tap the brakes Mr.Powell?

Authored by Mike Shedlock via MishTalk,

The Ice cream eatery has estimated liabilities of up to $100 million and no way to pay them.

Friendly’s Goes Under Again

Bloomberg reports Iconic Restaurant Chain Friendly’s Files for Bankruptcy

Friendly’s Restaurants LLC, an iconic chain on the East Coast of the U.S. known for its sundaes, became the latest dining institution to go bankrupt amid the pandemic.

The pandemic and lockdown have dragged down sales at restaurants around the world, and led many already-struggling eateries to buckle under debt loads. Pizza Hut franchisee’s NPC International Inc., the holding company of Chuck E. Cheese CEC Entertainment Inc. and the U.S. arm of Le Pain Quotidien have sought bankruptcy protection since the Covid-19 crisis started. 

This isn’t the brand’s first brush with bankruptcy. In 2011, Friendly Ice Cream Corp. and its subsidiaries, the operator of Friendly’s restaurants and a nationwide distributor of ice cream products, had entered Chapter 11.

More Lockdowns

COVID restrictions and lockdowns rise in US and Europe, as Trump’s rallies are blamed for cases.

Also note  Fauci, Warning of Bleak Winter, Draws White House Rebuke

As Mr. Trump toured the country assuring Americans that the U.S. has “turned the corner” on the coronavirus, Dr. Fauci looked ahead to the coming winter and declared that “you could not possibly be positioned more poorly.”

“We’re in for a whole lot of hurt,” Dr. Fauci said in an interview with The Washington Post published on Saturday.

Mr. Trump, in a battle for re-election and eager to portray the virus as tamed, has preferred the counsel of another pandemic adviser, Dr. Scott W. Atlas, who has questioned mask use and offered a number of other contrarian philosophies.

Ordinarily circumspect, Dr. Fauci directly criticized Dr. Atlas in the interview.

“I have real problems with that guy,” he said.

Agree with them or not, more lockdowns are coming.

This will be the final death bell for many chains and independents.

[ZH: In addition to Friendly’s, mall-owner CBL & Associates and Pennsylvania REIT also announced bankruptcy this morning.]

The South China Morning Post cited multiple trade sources on Monday to say China’s customs is delaying imports of lobster from Australia, and is further expected to impose bans on Australian imports of copper ore, copper concentrate, and sugar at some point this week – at a moment relations between the two countries have hit the lowest point in decades. This after last week a ban was placed on some timber and barely shipments, commonly used in animal fodder and beer production, already partially banned since September 1.

Further Australia’s Seafood Trade Advisory Group noted that some Australian lobster shipments have been subject of increased import inspections once arriving in China, causing most exporters to temporarily halt their shipments there until more is known. Local media reports have said in at least one instance tons of premium shellfish were left on a Chinese airport tarmac. 

Australia’s agriculture minister David Littleproud said he has “serious concerns” over reports of what appears the unnecessary excuse of inspectors checking for trace elements of minerals and metals (given it’s already tested upon leaving Australia) and questioned why such actions are being taken.

Crucially, China accounts for 94% of Australian rock lobster exports, estimated at over half a billion dollars in 2018-2019. Imports of premium shellfish only stay fresh for three days unless quickly put into holding tanks. Barley was also recently hit with tariffs while wine was subject of additional stringent import procedures.

Australia’s Trade Ministry is protesting the delays and significant rumors of further import bans, with Trade Minister Simon Birmingham urging “Chinese authorities should rule out the use of any such discriminatory actions.” In the Monday statement he said that all importers must be treated equally.

This also as the government probes both China’s suspension of imports of Australian coal and possibly fiber used by Chinese cotton mills. 

“So far as any industry concerns imply a breach of World Trade Organisation or China-Australia Free Trade Agreement commitments, Chinese authorities should rule out the use of any such discriminatory actions,” Birmingham said.

Via Trading Economics: Australia exports to China was US$103 Billion during 2019, according to the United Nations COMTRADE database on international trade. 

Prime Minister Scott Morrison has recently slammed Australia’s biggest trading partner as practicing blatant “economic coercion” with regard to an increasing array of its exports. This following political leaders over the summer spotlighting Beijing for its role and neglect in the spread of the COVID-19 pandemic.

Things took a more intense turn when Beijing recently began discouraging tourists and students from visiting Australia, also as China detained some high profile Aussie media figures working in the country. 

Prior to the pandemic, Chinese travelers made up by far the largest source of tourism for Australia, according to one industry report accounting for $12.4 billion of the $45.4 billion tourism brought into to the country each year.

With about a month left of the hurricane season, Tropical Storm Eta was upgraded Monday morning to a Category 1 hurricane while moving towards Central America, the U.S. National Hurricane Center (NHC) reported. 

Eta is the 28th named storm and the 12th hurricane in a super active season. The hurricane could strengthen to a Category 2 or 3 before making landfall in Nicaragua on Tuesday morning. 

As of Monday morning, Eta had maximum sustained winds of 90 mph, an increase of 15 mph from 75 mph in the overnight hours. The hurricane’s center was about 140 miles east of the Nicaragua-Honduras border and moving west at 10 mph. 

Nicaragua and Honduras could see upwards of 25 inches of rain, life-threatening storm surge, damaging winds, and flash flooding. 

According to CBS News’ David Parkinson, Eta “will jump from a Category 1 to a Category 3” before making landfall Tuesday morning as a major hurricane. 

Parkinson said the hurricane would be “devastating” to Central America.

Philip Klotzbach, a research scientist at Colorado State University in Fort Collins, tweeted that only three other Atlantic hurricane seasons on record had recorded 12 hurricanes: “1969 (12 hurricanes), 2005 (15 hurricanes) and 2010 (12 hurricanes).” 

#Eta is now a #hurricane – the 12th hurricane of the 2020 Atlantic hurricane season to date. Only 3 other full Atlantic hurricane seasons on record have had 12+ hurricanes: 1969 (12 hurricanes), 2005 (15 hurricanes) and 2010 (12 hurricanes). pic.twitter.com/vlALX2ZzH4

— Philip Klotzbach (@philklotzbach) November 2, 2020

Keep an eye on Eta’s path, after landfall Tuesday, it could shift towards the Yucatan Peninsula by the weekend. 

 

The coming week will be the busiest and most important 5 days of the year, if not decade. It is a “huge week” for investors with the election, a Fed decision, 128 S&P earnings, October payrolls, ongoing pandemic lockdowns and a ton of economic data all due.

“Whichever way you look at it, this coming week will be huge for U.S. and global markets,” said Simon Ballard, chief economist at First Abu Dhabi Bank PJSC. “We see the potential for a sharp rise in volatility around these events — and all in the context of a still deteriorating Covid-19 situation across much of the U.S., Europe and elsewhere.”

Starting with the pandemic, as DB’s Jim Reid writes this morning, Europe is facing up to a harsh winter ahead. The question to be asked to all the European countries is can they come out of these measures in some form towards the end of November/early December as is hoped or will they be extended further. The hit to the U.K. economy which just announced a new round of lockdowns will be softened by an extension of the furlough scheme but that will only add more to the debt. The hope everywhere is that well before the winter/spring peak virus season is over we’ll have the start of a vaccine program or more realistically in the near term a huge advance in rapid result testing. The latter has to be the greatest hope of restrictions being eased before a vaccine has mass rollout. Meanwhile, overnight Bloomberg reported that Italy might tighten restrictions further today with PM Conte wanting more localised curbs depending on virus transmissions – something some regional authorities are resisting.

Covid aside, of course the top event this week be tomorrow’s US election off the front pages for the next few days: 93.29 million have already voted so far, which is 67.7% of 2016’s total, and as Reid notes, “It’s fair to say markets could look very different on Wednesday morning as a “Blue Wave”, if it happens, should get the stimulus junkies hungry to buy and a divided government could remind people of the long winter ahead. So a very big week.“

While it is possible that we will not know the winner tomorrow night, due to the high number of mail-in ballots and the various state procedures around them, we will likely have some indication of how the race is leaning, according to DB. Florida and North Carolina could give a firm signal on the state of the race early on, as both have seen large numbers of early voters and are able to process and count mail-in ballots ahead of tomorrow’s poll closures. Without either of those states, President Trump’s path to re-election narrows. Polling averages continue to show a consistent lead for former Vice President Joe Biden, who is ahead by +8.5pts in the FiveThirtyEight national average, and by +7.2pts in the RealClearPolitics average. However, he leads by a lesser +3.3pt margin in RCP’s average of top battleground states. There will also be a big focus on the Senate races, with the FiveThirtyEight model giving Democrats a 76% chance to win control as we type.

Looking forward, attention will also be back on central banks for a second straight week, with both the Federal Reserve and the Bank of England announcing their latest monetary policy decisions on Thursday. Starting with the Fed, the central bank is expected to remain in a holding pattern this meeting but may lay groundwork for action at future ones. We are also likely to hear even more on the need for fiscal stimulus, as the minutes from the last meeting showed that many central bankers had included it in their outlooks. It could also be interesting to hear how the election results, if we have them, alter that outlook. For the Bank of England meeting that’s also on Thursday, our economists expect (link here) a dovish committee, with the November Monetary Policy Report highlighting further downside risks to the UK and the external growth outlook. They also see the majority of the MPC voting for additional stimulus, with £60bn added to the Bank’s Asset Purchase Facility. The latest lockdown could easily see this increased or see the probability of greater action.

On the data front, the final October global manufacturing PMIs continue today in addition to the US ISM reading, before we see services and composite PMIs on Wednesday and Thursday. Also on Wednesday, we will see October inflation data for the Euro area. The week will end with US October payrolls and unemployment data on Friday. Never has payrolls been so far down the pecking order.

Lastly, it’s another big week on the earnings side too, with a total of 128 companies in the S&P 500 reporting over the week, along with a further 96 from the STOXX 600. In terms of the main highlights, today we’ll hear from Siemens, Clorox, Estee Lauder, PayPal Holdings and SBA Communications. Then on Tuesday, we’ll get releases from BNP Paribas, Bayer, Ferrari, Johnson Controls International, Humana, and Eversource Energy. Wednesday then sees reports from Danske Bank, Consolidated Edison, Vestas Wind Systems, QUALCOMM, MetLife, Allstate Corp and Public Storage. Then on Thursday, releases include Bristol-Myers Squibb Co, Zoetis, Linde, AstraZeneca, Regeneron Pharmaceuticals, Microchip Technology, Electronic Arts, American International Group and T-Mobile US. Lastly, on Friday, there’s Hershey, Allianz SE, CVS Health Corp and Marriott International.

Day-by-day calendar of events, courtesy of Deutsche Bank:

Monday

• Data: Final October manufacturing PMI in Japan, China, Spain, Italy, France, Germany, Euro area, UK, and US, US ISM  manufacturing and new orders, and September construction spending
• Earnings: Siemens Healthineers AG, Clorox, Waste Management Inc, Estee Lauder Cos, PayPal Holdings Inc, SBA Communications Corp, Mondelez International Inc

Tuesday

• Data: France September budget balance, US September factory orders, durable goods, durables ex-transportation and October total vehicle sales
• Central Banks: Minutes of Bank of Japan September Meeting
• Earnings: BNP Paribas SA, Sinch AB, Bayer AG, Eaton Corp PLC, Emerson Electric Co, Sysco Corp, Ferrari NV, Johnson Controls International, Exelon Corp, Humana Inc, WEC Energy Group Inc, Securitas AB, Eversource Energy
• Politics: Voting ends in the US Election

Wednesday

• Data: Final October services and composite PMIs for China, Spain, Italy, France, Germany, Euro area, UK and US, Euro area PPI, US ADP employment change, trade balance and ISM services
• Earnings: Danske Bank, Consolidated Edison, Vestas Wind Systems, QUALCOMM Inc, MetLife Inc, Allstate Corp, American Water Works Co, Public Storage

Thursday

• Data: Final October services and composite PMIs for Japan, October construction PMIs for Germany and the UK, Germany September factory orders, UK October new car registrations, Euro area September retail sales, US weekly initial jobless claims, continuing claims and preliminary Q3 nonfarm productivity
• Central Banks: Federal Reserve rate decision and Fed Chair press conference, Bank of England rate decision and BoE Governor press conference
• Earnings: Bristol-Myers Squibb Co, Zoetis, Linde, AstraZeneca, Regeneron Pharmaceuticals, Dominion Energy, Ball Corp, Parker-Hannifin Corp, Cigna Corp, Duke Energy Corp, General Motors Co, Microchip Technology, Electronic Arts, American International Group, T-Mobile US Inc

Friday

• Data: Germany September industrial production, France 3Q private sector payrolls, September trade balance, current account balance, preliminary wages data, US October change in nonfarm payrolls, unemployment rate, average hourly earnings, final September wholesale inventories and consumer credit
• Earnings: Hershey Co, Allianz SE, CVS Health Corp, Marriott International Inc

Finally looking at just the US, where Goldman notes that the key economic data releases this week are the ISM manufacturing report on Monday, ISM non-manufacturing report on Wednesday, jobless claims on Thursday, and the employment report on Friday. The November FOMC meeting is this week, with the release of the statement at 2:00 PM ET on Thursday followed by Chair Powell’s press conference at 2:30 PM. There are no other scheduled speaking engagements from Fed officials this week reflecting the FOMC blackout period. Election Day is on Tuesday, and states will report results over the course of the night.

Monday, November 2

• 10:00 AM ISM manufacturing index, October (GS 56.1, consensus 55.8, last 55.4): We expect the ISM manufacturing index to edge up by 0.7pt to 56.1 in the October report, reflecting strength in regional manufacturing surveys and foreign PMIs.
• 10:00 AM Construction spending, September (GS +1.2%, consensus +1.0%, last +1.4%): We estimate a 1.2% increase in construction spending in September, with scope for increases in private residential and public construction.

Tuesday, November 3

• Election Day: Results for 435 House elections, 35 Senate elections, and the presidential election will be reported over the course of the night.
• 10:00 AM Factory orders, September (GS +0.9%, consensus +1.0%, last +0.7%); Durable goods orders, September final (last +1.9%); Durable goods orders ex-transportation, September final (last +0.8%); Core capital goods orders, September final (last +1.0%); Core capital goods shipments, September final (last +0.3%): We estimate factory orders increased by 0.9% in September following a 0.7% increase in August. Durable goods orders rose by 0.8% in the September advance report, and core capital goods orders rose by 1.0%.

Wednesday, November 4

• 08:15 AM ADP employment report, October (GS +575k, consensus +650k, last +749k); We expect a 575k gain in ADP payroll employment, reflecting jobless claims declining at a slower pace in October.
• 08:30 AM Trade balance, September (GS -$63.6, consensus -$63.9, last -$67.1bn); We estimate the trade deficit decreased by $3.5bn in September, reflecting a decline in the goods trade deficit.
• 10:00 AM ISM non-manufacturing index, October (GS 57.0, consensus 57.5, last 57.8); We estimate the ISM non-manufacturing index declined by 0.8pt to 57.0 in October, reflecting sequential weakness in retail, leisure, and hospitality. In addition, the index appears elevated compared to regional surveys.

Thursday, November 5

• 08:30 AM Initial jobless claims, week ended October 31 (GS 745k, consensus 735k, last 751k); Continuing jobless claims, week ended October 24 (consensus 7,350k, last 7,756k): We estimate initial jobless claims decreased to 745k in the week ended October 31.
• 08:30 AM Nonfarm productivity, Q2 preliminary (GS +5.3%, consensus +5.0%, last +10.1%); Unit labor costs, Q2 preliminary (GS -10.5%, consensus -10.0%, last +9.0%): We estimate nonfarm productivity grew by 5.3% in Q3 (qoq saar), reflecting a relatively larger increase in business output than in hours worked. We expect Q3 unit labor costs—compensation per hour divided by output per hour—to decrease by 10.5% qoq ar.
• 02:00 PM FOMC statement, November 4-5 meeting: As discussed in our FOMC preview, we expect the FOMC to eventually provide a timeline for asset purchases, but not at the November meeting. Without further discussion of policy changes, the meeting should be fairly quiet, and we expect few changes to the FOMC statement.

Friday, November 6

• 08:30 AM Nonfarm payroll employment, October (GS +500k, consensus +600k, last +661k); Private payroll employment, October (GS +600k, consensus +700k, last +877k); Average hourly earnings (mom), October (GS +0.1%, consensus +0.2%, last +0.1%); Average hourly earnings (yoy), October (GS +4.5%, consensus +4.6%, last +4.7%); Unemployment rate, October (GS 7.7%, consensus 7.7%, last 7.9%): We estimate nonfarm payrolls rose 500k in October after +661k in September. The smaller number of workers on temporary layoff (4.6mn in September, down from 18.1mn in April) reduces the scope for the rapid job gains seen in the summer, and the virus resurgence and softer Big Data employment signals are consistent with a deceleration in underlying job growth. While continuing claims declined sharply during the payroll month, much of the drop reflected the expiration of program eligibility (as opposed to reemployment). Our forecast also reflects a decline in retail payrolls due to the accelerating shift to ecommerce in the upcoming holiday season. We also expect another weak education reading due to virtual schooling (the October seasonal factors assume half a million support staff returning to work). We also expect a 125k drop in Census jobs in Friday’s report. We estimate the unemployment rate declined by two tenths to 7.7%, reflecting an increase in household employment partially offset by higher labor force participation. We estimate average hourly earnings rose 0.1% month-over-month, lowering the year-on-year rate by two tenths to 4.5%. This forecast reflects a continuing unwind of the composition shift from lower – to higher-paid workers.
• 10:00 AM Wholesale inventories, September final (consensus -0.1%, last -0.1%)

Source: Deutsche Bank, BofA, Goldman

Authored by Bill Blain via MorningPorridge.com,

“Give me a ping, Vasilli. One Ping Only.”

This is going to be… a very “interesting” week. The Global Pandemic, US Elections, Central Bank meetings and a veritable deluge of signs, portents and warnings of greater pain and strife to come.  In any normal world, investors would be running for the hills and shelter. Not this week… this is not a normal world. This is a world where doom, gloom and imminent catastrophe spells only one thing – More Stimulus! Yay! 

Despite last week’s slide, and the fact October proved a down month, markets are holding up better than a rational man would expect.  The upside is how resilient parts of the global economy are proving despite the pandemic – stemming contraction as new tech is quickly adopted. It’s the mainstream economy that’s increasing suffering – and will suffer more. We’ve got stories of imminent disaster in hospitality, airlines and oil is another couple of dollars cheaper. 

Markets seem immune, buoyed by expectations of large, larger or massively larger US stimulus packages to follow the election, while renewed lockdowns in Europe will cause the EBC and BOE to dig deeper into the pots of gold they are apparently sitting on. 

It’s a sad state of affairs when the main driver on markets is going to be the largesse of governments and monetary authorities.

Occidental markets are pricing in QE Infinity, NIRP (Negative Interest Rates) and further stimulus for eternity – and its ultimately unsustainable. Every financial professional knows that… but it’s little wonder an increasing number of retail investors, and even smarter middle aged savers, increasingly believe stocks can only continue rising. 

It’s a dangerous notion.. Blain’s Number One Market Mantra is screaming in my ear: The Market Has But One Objective: To Inflict the Maximum Amount of Pain on the Maximum Number of Participants.

When the bubble pops… it won’t be an “Ouch” moment. Check out the Wilhelm Scream!

The upside is that we all know governments and central banks can’t risk a market meltdown unravelling what fragile confidence is keeping the economy together. 

Without the implicit promise of further support, I suspect we’d not only be looking at negative interest rates, but negative financial asset prices as well! That’s a fascinating concept – could we ever get to a stage where zombie companies come at negative stock prices…? Limited liability makes that improbable in equity (unless laws change to allow dividends to be recouped… (like maybe in some Private Equity scams? why not?)) … but in real terms financial asset stagflation has pushed essentially valueless insolvent assets to record levels in the face of economic meltdown… if the situation was to change, I could see a position where worthless and illiquid stocks and bonds are valued less than zero in real terms. Park that thought… 

Meanwhile..  Pennsylvania will be the state to watch… 

There isn’t much point saying anything about the US election this morning – but I suppose I must. Whatever the Democrats want to believe, Trump has been narrowing the gap. Cutting through the noise and multiple polls, it looks like a slim 5-6 point Biden lead. That’s better than Clinton had in 2016, but no guarantee of success. The Democrats need to power through to the finish even as Trump finds new legs.  

Key States look tied – Florida, North Carolina, Georgia, Iowa, Ohio and Texas. Then there are Pennsylvania, Arizona and Michigan which look Biden marginals. Penn will be the one to watch. If Trump wins all the ties, and Biden takes all his marginals, then it’s a new man in Washington – but its tight. Much has been written about how the polls are wrong, and why they are right.. 

• If the polls are right, then it looks like a toss up between Biden plus a Democratic Congress (both Senate and Representatives) or a Biden Presidency and Republican Senate because many of the Senate races also look like ties – coin tosses too close to call. 

• If the polls are wrong then we get 4 more years of Donald. There is a chance we get Trump plus a Democrat senate – which will leave China rolling on the floor convulsed with hysterical laughter… (Who ever thought a mild new flu would so utterly convulse and destabilise democracies so effectively..)

Unfortunately.. it won’t end on Wednesday morning as Trump warns he’s already planning to go to the lawyers. There is plenty to worry about in terms of immediate and post-election volatility and uncertainty – but everyone already knows that. The likelihood is a still divided, polarized US and the prospect of another four years of low grade, weak and/or chaotic government – at the time when strong, intelligent leadership has never been more necessary to address the Pandemic, Climate Change and China. 

The long-term immediate consequence will be felt in the dollar and an increasing investment shift to real growth and returns from Asia – meaning China. That’s hardly the result Trump intended when he identified the China threat. For all his “efforts” to repatriate manufacturing and seize back the initiative, China will emerge stronger. 

Thus far the US, and UK, stand out for their chronic dither through the pandemic crisis. Believe what you want to believe, but the virus is not fake. It’s a massive challenge to the West to steer economies to avoid hospital’s being swamped while minimising economic damage. Null points thus far to both nations. 

Over here in Blighty.. 

When the only good news is that a Brexit agreement on Fish is apparently in reach, you just know it’s likely to be yet another hope about to be dashed. Some fisherman down in Cornwall will be interviewed saying something about being “stabbed in the back” by the Tories, and that’ll be-that. 

The UK will enter Pandemic lockdown later this week through till December…. It will just be another tick on the lengthening list of reasons to sell the UK and buy… just about anything else. At some point either things get better or UK financial asset prices will be so cheap we won’t be able to resist buying.. but buy what?

Name me a world class and world-size UK firm that screams its worth buying? HSBC? BP? Rolls Royce? Or what about Aston Martin (CCC rated and just paid 10.5% to borrow another billion..) PLEASE, but no to all of them. Brits have an awesome reputation for being inventive & innovative so why isn’t there a single UK big tech firm anyone has ever heard of?  We’ve more Nobel Prize winners than you can shake a sharp pointy stick at and nothing to show for it..  Our big companies are decaying dinosaurs or struggling anachronisms, while our embryonic unicorns are carved up while still far below the viable stage.

Why? 

Some grown up policies on industrial strategy and growth might help. A focus on reform, social and physical infrastructure, education and health…? Zero chance.  Brexit uncertainty and the Pandemic hitting harder than anywhere else share the common source of crap government.  As we keep being reminded, last year the UK was reckoned to be one of the countries most likely to cope well with the “big one” epidemic when it came. Instead we’ve tripped over everything from PPE, ‘world-class test and trace..”  and communication.

I think its God’s way of punishing me for Voting for Boris. It’s all so depressing… I’m thinking of becoming a Liberal…  

Finally… 

If I come down with a ranging dose of the dreaded lurgi I know who to blame. She-who-is-Mrs-Blain and I spent the weekend on the Isle of Wight – a Yoga retreat. (Yep.. I know what you are thinking: I may be the least likely Yogi ever… but it gives me a perverse sense of achievement to gracelessly morph from Sphinx into Warrior pose… or something like that.) 

Our trip home was “challenging” – catching an incredibly busy Ferry, which was then delayed for hours because of a “welfare incident” involving one person struggling with mental health issues refusing to get off the boat we’d boarded. 

The situation was pretty tragic – but over 1000 passengers were crammed into tiny public spaces on a warm, dank ferry that must have favoured virus transmission for hours as the Ferry crew tried to resolve the situation over the one passenger. I’m told the police initially declined to intervene while the crew attempted to contact local mental health support on the Island (good luck at 4.30 pm on a damp Sunday afternoon.) Eventually passengers were calling 999 and she was removed. It was tragic, pretty awful and upsetting to hear the woman screaming.

It must have been terrible for the crew. Mental health is in crisis, but there were over 1000 people, including loads of unmasked kids running around, while elderly people were visibly upset. We were all trapped on a virus incubator. It must have been even worse for passengers on another ferry stuck out in the Solent (the sea between the Isle of Wight and the real world) waiting for the ferry berth to become free – it was blowing a Force 9 gale on Sunday evening! 

The correct response would have been immediate police and medical response to protect all the passengers swiftly – but no.. we had to go through a bureaucratic litany of delay and frustration… Pretty much the whole UK in miniature.  If I start coughing…