Category: zerohedge

While the VIX still has a fair ways to go before it plumbs the all-time single-digits lows that defined the spectacularly serene equity markets in 2017, FX vol is already there: the JPMorgan Global FX volatility index has dropped to 6 year low levels, and is just shy of all time lows.

Of course, most of this stability in the FX realm is due to central banks depressing cross-asset vol; yet the more vol is pushed lower, the higher it will spring back once central banks lose control; as such it is only a matter of time before buying FX vol is a winning trade.

Commenting on this record low FX vol and currency-specific volatility, BofA’s Vadim Iaralov writes that a “dozen FX vols reached new lows last week and most remain close to their all-time lows” in what he calls a “perfect storm of vol, skew and carry.”

Some more details from the BofA FX strategist:

A number of G10 vols have already made new lows last week including nine pairs in G10 of one-month ATM vols, 14 pairs of three-month vol and 11pairs of one-year. Current vols remain low at 1st percentile or lower including 12 pairs of one-month vols, 18 pairs of three-month vols and 16 pairs of one-year vols.

His obvious conclusion: the low vol offers attractive hedging opportunities, especially for investors concerned about against USD gains.

Looking at the dollar alone, in addition to low ATM vols, Iaralov points out that USD call skew is also near historically flat and USD carry remains positive, if somewhat diminished after recent Fed cuts.

FX traders can combine these measures to normalize cost of out-of-the-money options; BofA has done so, and found that out-of-the-money puts on AUD, NZD and EUR are especially attractive, offering topside USD hedges at a historically low cost. By contrast, GBP, NOK and CAD hedges are less affordable. Given Brexit and the UK election ahead, 1m GBP hedges via OTM puts are especially pricey.

In addition, recent JPY gains have cheapened OTM USD/JPY calls of fixed strikes, for example for corporates restructuring existing hedges. As Iaralov adds, the front-end 1m USDJPY benefits from a confluence of attractive vols, skew and carry. However, at the 1y mark the carry has turned less beneficial, pricing in another Fed cut, even though the vols and USDJPY skew are near the lows.

Finally, when constructing low vol hedging trades, keep in mind that spot levels can be incorporated when considering the cost of options struck at specific, fixed strikes rather than in delta terms. OTM USD calls at fixed strikes are cheaper when USD/FX is weaker as it is for USD/JPY and more expensive for USD vs NOK and USD vs AUD.

 

The US and China trade war continues to deepen this week with the increasing chance that a phase one trade deal has been delayed until 2020. In the meantime, we’ve been reporting on a Sino-U.S. technology war developing, something that has been heating up in recent months. 

China understands the tech war with the US is about to erupt, that’s why the country has been pulling forward orders of US chips, reported Bloomberg. It’s an acknowledgment that China is preparing for the worse, and it’s likely the Trump administration could prevent Chinese companies from buying chips if the trade war deepens further. 

We reported earlier this week that the Trump administration considered banning Huawei from using the US financial system as a nuclear option to crush the company.

If White House officials were proposing that, then they’ve also been preparing to ban Chinese companies from buying US chips altogether.

In the past three years, Chinese imports of US chips have jumped, despite ongoing trade war threats that have surged in the last 1.5 years.

As shown below, imports of chips and chip equipment were $1.7 billion in Aug., the most since 1Q17, and continued increasing through Oct.

Bloomberg notes that there’s a severe risk that the Trump administration could impose new measures that would establish a “silicon curtain” to halt all shipments of US chips to China.

“It’s politically intolerable to China that the US has an at-will ability to turn off major companies like ZTE and Fujian Jinhua, as well as being able to deal major operational blows to Huawei,” Dan Wang, a tech analyst at Gavekal Dragonomics in Beijing, told Bloomberg “So the government and the companies are trying to be more technologically independent.”

This past summer, the Trump administration blacklisted Chinese companies, including Huawei, from selling products to certain US firms unless the federal government granted special licenses. This forced Huawei to develop new domestic chips to reduce the dependence on the US.

Many Chinese firms, including Huawei, have been ramping up purchases of US chips since about 2018, in anticipation of being blacklisted.

Huawei understands what’s coming down the pipe and how the trade war is likely to deepen in 2020. The company has also moved its US research center to Canada to avoid having its US assets frozen. 

Huawei, like many other Chinese firms, pulled forward chip sales to get ahead of new US economic sanctions. So what happens when Chinese firms stop frontloading chip purchases? Does that mean PHLX Semiconductor Sector is in a blowoff top if purchases pullback? 

 

Authored by Patrick Hill via RealInvestmentAdvice.com,

Recently, analysts have been discussing the pros and cons of using negative interest rates to keep the U.S. economy growing.  Despite this, Fed Chairman Jerome Powell has said that he does not anticipate the Federal Reserve will implement a policy of negative interest rates as it may be detrimental to the economy.  One argument against negative interest rates is that they would squeeze bank margins and create more financial uncertainty. However, upon examining the actual rate of inflation we are likely already in a ‘de facto’ negative ­­interest rate environment. Multiple inflation data sources show that actual inflation maybe 5%. With the ten year Treasury bond at 1.75%, there is an interest rate gap of – 3.25%. Let’s look at multiple inflation data points to understand why there is such a divergence between the Fed assumptions that inflation is under control versus the much higher rate of price hikes consumers experience.

In October, the Bureau of Labor Statistics (BLS) reported that the core consumer price index (CPI) grew by 2.2% year over year.  The core CPI rate is the change in the price of goods and services minus energy and food.  Energy and food are not included because they are commodities and trade with a high level of volatility.  However, the Median CPI shows a ten year high at 2.96% and upward trend as we would expect, though it starts at a lower level than other inflation indicators. The Median CPI excludes items with small and large price changes.

Source: Gavekal Data/Macrobond, The Wall Street Journal, The Daily Shot – 11-29-19

Excluding key items that have small and large price changes is not what a consumer buying experience is like. Consumers buy based on immediate needs. When a consumer drives up to a gas pump, they buy at the price listed on the pump that day.  Consumers buying groceries don’t wait for food commodity prices to go down; they have to pay the price when they need the food. Recent consumer purchase research shows that prices of many goods and services continue to increase at a rate much higher than 2.2%.

Gordon Haskett Research Advisors conducted a study by purchasing a basket of 76 typical items consumers buy at Walmart and Target.  The study showed that from June 2018 to June 2019, prices increased about 5%. 

Sources: Gordon Haskett Research Advisors, Bloomberg – 8/10/19

Walmart and Target are good proxies for consumer buying experiences. Walmart is the largest retailer in the U.S. with over 3,000 locations marketing to price-conscious consumers. Target has 1,800 locations in the U.S. and is focused on a similar consumer buyer profile, though a bit less price sensitive. Importantly, both Walmart and Target have discount food sections in their stories.

Housing has been rapidly increasing in cost as well.  Rental costs have soared in 2019 as the following chart shows a month over month shift to .45%, which is an annualized rate of 5.4%.

Sources: Bureau of Labor Statistics, Nomura – 5/13/19

The costs of other services like health care and education have increased dramatically as well. Service sectors, which make up 70% of the U.S. economy, are where wages are generally higher than in manufacturing sectors. Techniques to increase service productivity have been slow to implement due to service complexity. Without productivity gains, prices have continued to rise in most services sectors.

Sources: Deutsche Bank – 11/14/19

Medical care costs have increased by 5.2% per year, and education costs have risen 6.8 % per year. Wages of non-supervisory and production workers have fallen behind at 3.15 % increase per year. Note that the overall CPI rate significantly underestimates the rate of costs in these basic consumer services, likely due to underweighting of services in the cost of living calculation.

For many consumers, housing, utilities, health care, debt payments, clothing, and transportation comprise their major expenses. Utility and clothing costs have generally declined. While transportation, housing, and health care costs have increased.  The rate of new car annual inflation was as low as 1 percent in 2018.  Yet, according to Kelly Blue Book, the market shift to SUVs, full-sized trucks, and increasing Tesla sales have caused average U.S. yearly vehicle prices to zoom 4.2% in 2019. The soaring price of vehicles has caused auto loans to be extended out to 7 or 8 years, in some cases beyond the useful life of the car. 

Dealers are financing 25% of new car purchases with ‘negative equity deals’ where the debt from a previous vehicle purchase is rolled into the new loan.  The October consumer spending report shows consumer spending up by .3% yet durable goods purchases falling by .7% primarily due to a decline in vehicle purchases.  A 4.2% increase in vehicle prices year over year is unsustainable for most buyers and indicates likely buyer price resistance resulting in falling sales. The October durables sales decline could have been anticipated if inflation reporting was based on actual consumer purchasing experiences.

The trade wars with China, Europe, and other countries are contributing to significant price increases for consumer goods.  Tariffs have driven consumer prices higher for a variety of product groups, including: appliances, furniture, bedding, floor coverings, auto parts, motorcycles, sports vehicles, housekeeping supplies, and sewing equipment.

Sources: Department of Commerce, Goldman Sachs, The Wall Street Journal, The Daily Shot – 5/13/19

In the chart above, prices increased by about 3.5% over 16 months before mid-May 2019. As uncertainty in the trade wars grows and earlier cheaper supplies are sold, prices will likely continue to rise. The President has announced new tariffs of 15% on $160 billion of Chinese consumer goods for December 15th if a Phase One deal is not signed. On December 2nd, he announced resuming tariffs on steel and aluminum imports from Argentina and Brazil and 100 % tariffs on $2.4 billion of French goods. The implementation of all these tariffs on top of existing tariffs will only make consumer inflation worse. Tariffs are driving an underlying inflationary trend that is being under-reported by government agencies.

Evidently, the prices for goods and services that consumers experience are vastly different from what the federal government reports and uses to establish cost of living increases for programs like Social Security. So, why is there a disconnect between the government CPI rate of 2.2% and consumer reality of inflation at approximately 5%?  The raw data that the Bureau of Labor Statistics (BLS) uses to calculate the CPI rate is not available to the public.  When a Forbes reporter asked the BLS why the data was not available to the public the BLS response was companies could ‘compare prices’. This assumption does not make sense as companies can compare prices on the Internet, in stores, or find out from suppliers. The ‘basket of consumer items’ approach was discontinued in the 1980s for a ‘cost of living’ index based on consumer buying behaviors. There was political pressure to keep the inflation rate low. If real inflation figures were reported the government would have to increase payments to Social Security beneficiaries, food stamp recipients, military and Federal Civil Service retirees and survivors, and children on school lunch programs.  Over the past 30 years the BLS has changed the calculation at least 20 times, but due to data secrecy there is no way to audit the results. The BLS tracks prices on 80,000 goods and services based on consumer spending patterns, not price changes on goods and services per se.  For example, if consumers substitute another item for a higher-priced one it is discontinued in the calculation. 

Economist John Williams has calculated inflation rates based upon the pre-1980s basket approach versus the cost of living formula used by BLS today.  His findings show a dramatically higher rate of inflation using the 1980s formula.

Source: Shadow Government – 10/2019

His calculation using the earlier basket formula sets the present inflation rate at nearly 10%.  Based on our research on various price reporting services, we think the real consumer inflation rate is probably about 5 to 6%.

The implications of this gap between real inflation and reported inflation rates are profound and far-reaching.  Federal Reserve complacency about a low inflation rate to justify a low Fed Funds rates is called into question. In fact the economic reality of today is we are living in a 3.25%  ‘de facto’ negative interest rate environment where the ten year Treasury bond rate is 1.75%, and inflation is 5%. The liquidity pumping into the economy, based in part on low inflation, is overheating risk assets while providing support for corporate executives to take on debt at decade record levels.

Building the economic framework on erroneous inflation data versus the reality for consumers and businesses lead to massive financial dislocations. This economic bubble is unsustainable and will require a brutal recession to rebalance the economy.  As part of a possible soft ‘landing’ policy, the BLS could make price data available to all economists. Full data access will provide an opportunity for objective comments and feedback based on other consumer price research.

The Fed actually focuses on the even lower Personal Consumption Expenditure rate of 1.6% reported by the Bureau of Economic Analysis for October. The Fed prefers the PCE rate because a consumer survey technique is used, while economists prefer the CPI, which is more granular so it is easier to identify goods and services categories that are driving inflation. Using unrealistically low inflation assumptions leads to misguided policy decisions and perpetuation of the myth that inflation is under control. Yet, in fact inflation it is out of control due to extremely low Fed interest rates, liquidity injections, and trade war tariffs.

The verdict is in: Opinion polls show that weeks of public hearings have done little to change the public’s attitude about whether President Trump deserves to be impeached. By now, the message is clear: The Dems took a gamble on impeachment, and lost. Now, Pelosi is apparently going about clearing the decks so she can get on with her next piece of business: Blaming ‘the squad’ and AOC for the impeachment fiasco while hoping that throwing the progressives under the bus is enough to protect the dozens of moderate Dems in swing-district seats who delivered the Dems their majority in 2018.

Despite having their press credentials revoked by President Trump, Bloomberg’s Washington bureau still apparently has its finger on the pulse of what’s happening in the capital, and its reporters claim that the articles of impeachment could be finished by next Thursday, opening the door to a vote on impeachment the following week before Congress breaks for the holiday.

Though members of the Judiciary Committee are still debating what to include in the impeachment, BBG says they could begin voting on specific articles as soon as Thursday, citing officials familiar with the chairman’s thinking.

That would clear the way for the entire House to vote before Congress heads to recess for the holidays.

Though Pelosi insists she hasn’t set a deadline, it would appear that both she and President Trump support ‘doing it now’ with regard to impeachment, as President Trump put it in a tweet earlier this week.

The Do Nothing Democrats had a historically bad day yesterday in the House. They have no Impeachment case and are demeaning our Country. But nothing matters to them, they have gone crazy. Therefore I say, if you are going to impeach me, do it now, fast, so we can have a fair….

— Donald J. Trump (@realDonaldTrump) December 5, 2019

Both parties have their eyes on the electoral calendar, which “is what it is,” as one Democratic Rep told BBG. It’s also notable that many (including Republican witness Jonathan Turley) have accused the Dems of rushing impeachment.

“We are trying to be sensitive to the fact that it is going to spill over into an election year. And we’re trying to wrap it before that happens here in the House to give the Senate the opportunity to set its own timetable,” said Democratic Representative Gerry Connolly of Virginia, a member of the Oversight Committee. “The calendar is what it is.”

Meanwhile, pressure is growing on Pelosi to bring USMCA up for a vote by the end of the year, from both Republicans and Democrats. BAML global rates and currencies strategist David Woo told Bloomberg that the passage of USMCA by the end of the year is one of the three “make or break” scenarios girding his 2020 markets projections.

An official familiar with Pelosi’s thinking said that the most powerful Democrat on the Hill is acutely aware that the public’s patience with impeachment is limited, and, after weeks of hearings, Americans are still roughly split, with 47% to 48% percent supporting impeachment, and 44% to 45% opposing.

And the longer the process drags on, the worse the numbers will look. Meanwhile, the longer she delays a vote on USMCA, the greater the risk of being blamed for trying to sabotage President Trump’s economic agenda. After all, Trump’s highest approval numbers stem from his handling of the economy. The president’s paranoia about a recession arriving before election day inspired his attacks on the Fed and, arguably, the central bank’s entire ‘midcycle adjustment’, and it underscores how important the economy is to his re-election hopes.

One day after the latest OPEC summit in Vienna ended in chaos and disarray, with the cartel unable to decide whether it will cut output further or instead punish violators of the current quote, leaving oil journalists asking questions and begging for pizza, on Friday Saudi Arabia and Russia surprised markets when they spearheaded a deal in which OPEC and non-OPEC nations committed to some of the deepest oil output cuts this decade aiming to avert oversupply and support prices amid declining global demand.

The group of more than 20 producers agreed to an extra 500,000 barrels per day in cuts for the first quarter of 2020, taking the total to 1.7 million bpd, or 1.7% of global demand, in hopes of boosting sagging oil prices in an environment where Saudi Arabia has been increasingly vocal in accusing cartel members and other producers of not sticking to pre-agreed quota levels.

Under the new deal, OPEC will agree to 372,000 bpd in fresh cuts and non-OPEC producers – mostly Russia – an extra 131,000 bpd.

Brent jumped more than 2%, rising above $64 a barrel after Saudi Energy Minister Prince Abdulaziz bin Salman said effective cuts could be as much as 2.1 million bpd as Saudi would carry on cutting more than its quota.

The impetus behind the cut was all Saudi Arabia, which has been eager to provide a floor for oil in the aftermath of the Aramco IPO which priced yesterday at the top of its range, yet some $300BN below the $2 trillion target previously revealed by Crown Prince MbS.

“The Saudi goal was not necessarily to push oil prices significantly higher, but rather – fresh on the heels of the Aramco IPO – to put a firm floor under them during the first quarter to temper any seasonal weakness,” said Amrita Sen, co-founder of Energy Aspects, quoted by Reuters.

“Best outcome you could have expected. Puts floor under prices at $60 Brent but (we’re) still likely in $60-65 Brent market until the global economy improves and then we could see $65 to $70 Brent in Q2,” said Gary Ross, founder of Black Gold Investors

As Reuters notes, OPEC+ will deepen cuts for the first three months of 2020, shorter than the six- or 12-month scenarios some OPEC members wanted. That said, the net impact of today’s auction may be a wash as the new cuts merely offset expected increases from non-OPEC nations, including top producer the United States, where shale producers are pumping oil at a furious, record pace – yet unprofitably – in order to stave of defaults.

Eleven of OPEC’s 14 member states are participating while embargo-targets Iran, Libya and Venezuela are exempt. OPEC adds Russia and nine others – Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, South Sudan and Sudan.

Compliance has been a sticking point since the coordinated cuts began in 2017 with Saudi Arabia cutting more than required in order to offset overproduction from Iraq and Nigeria.

Saudi Prince Abdulaziz said he would continue cutting 400,000 bpd below target and its new ceiling would be 9.744 million bpd. It makes sense that Riyadh would should the bulk of the cuts: Saudi Arabia needs prices of at least $80 per barrel – some $15 higher – to balance its budget, much higher than most other producers, and also needs to support the share flotation of its national oil company Saudi Aramco, whose shares are expected to begin trading next Wednesday.

Prince Abdulaziz told reporters he expected the company to be worth more than $2 trillion in a few months, taking a page out of the Trump playbook in that all officials care about is the affirmation of the market.

Despite oil’s kneejerk jump, the question remains: with OPEC’s share of global oil supply now the lowest on record…

… thanks to US shale and Russian production, will today’s deal amount to much if global demands continues to shrink?

 

 

Submitted by Market Crumbs

The retail price of one pound of bananas in the United States was 58 cents in 2018. Right now, you can order one banana on Walmart’s website for 18 cents. You can also order one roll of 3M Multi-Use Duct Tape for $4.99 on Amazon. Why the hell would you want a banana and duct tape?

Apparently, because duct-taping a banana to a wall is all the rage in the world of high-end art. This may sound like something out of The Onion, but this week at Art Basel Miami Beach, a banana duct-taped to a wall sold for $120,000. Even worse, a second banana duct-taped to a wall sold for $120,000. Yet even worse than that, a third banana duct-taped to a wall is expected to sell for $150,000 because…art.

Italian artist Maurizio Cattelan is the artist behind the banana, which was “sourced from a local Miami supermarket,” that is aptly named “Comedian.” The first two “editions” of the banana duct-taped to a wall reportedly sold to two different French buyers. A third “edition” of the banana duct-taped to a wall already had two institutions express interest, according to the gallery handling the sale, Perrotin.

Despite Cattelan being known as an “art world prankster,” the gallery said the piece is not a joke. “Every aspect of the work was carefully considered, from the shape of the fruit, to the angle its been affixed with duct tape to the wall,” said Perrotin. In a sign of how those who are privy to the world of fine art will say anything to sound sophisticated, one attendee said “It’s best of show!”

Cattelan worked on the idea for “Comedian” for about a year, creating versions in both bronze and resin. “Wherever I was traveling I had this banana on the wall. I couldn’t figure out how to finish it,” Cattelan said. Finally, Cattelan had an epiphany, saying “In the end, one day I woke up and I said ‘the banana is supposed to be a banana.'”

The price was determined by coming up with an “insignificant number that would trivialize the work, and an outlandish one that would be completely ridiculous.” So what’s stopping everyone from selling a duct-taped banana to a wall for $120,000? Perrotin said “Without the artist’s certificate of authenticity, it reverts to being just a banana.”

So while this could be an actual sale, money laundering, a prank, PR move or anything else, it’s a reminder of how some people have more money than brains. Either way, it provided a good laugh for those who are not fortunate enough to drop $120,000 on a banana duct-taped to a wall.

A dispute between lawyers turned ugly when attorney Christopher Hook of Culver City, California sent a series of vulgar, threatening emails to attorneys for Allstate, after the insurance company rebuffed his attempt to collect over $300 million on a $200,000 water damage dispute.

Allstate, represented by firm Shepherd Mullin partner Peter Klee, filed an ex parte application for relief after they say Hook “bombarded” Klee and colleagues with “over 100 emails,” according to Above The Law.

Not only did Hook threaten to “let the long dick of the law fuck Allstate for all of us,” he threatened :shit for brains” Klee to “pay up fucktard or you will be lucky to work as a notary public in El Cajon.”

“Karma is a bitch mother fucker,” Hook continued, adding “You are going to learn that in spades. I know where you live pete.“

2/ “Well karma is a bitch mother fucker. You are going to learn that in spades. I know where you live pete” pic.twitter.com/ItI8jUBuvH

— Keith Lee (@associatesmind) December 5, 2019

4/ Threatens to waterboard witnesses?!? pic.twitter.com/vyl2kt4snm

— Keith Lee (@associatesmind) December 5, 2019

On November 26, Allstate asked the court to throw out the lawsuit, disqualify Hook as the plaintiffs’ attorney, slap Hook with a restraining order, and halt all depositions.

Hook responded to Klee’s filing by claiming he was using a “confidential negotiating tactic” and he admitted that his language may have “crossed the line” out of “frustration and anger.”

In response, Judge Otis D. Wright ordered both plaintiffs – an elderly California couple – and attorneys for both sides, to appear in court on December 16 and explain why “Mr. Hook should not be disqualified as Plaintiffs’ Counsel,” as well as “why this Court should not issue a restraining order” or sanction Hook.

So much for finally holding Goldman Sachs accountable.

Anyone who feared Goldman might suffer a massive fine or, worse, criminal penalties (possibly involving current and former senior executives such as Hillary Clinton’s very close friend, Lloyd Blankfein) can breathe a sigh of relief.

Goldman shares jumped 2.5% Friday morning after Bloomberg reported that the DoJ is seeking a settlement of between $1.5 billion and $2 billion for Goldman’s involvement in the 1MDB affair.

That substantially less than most analysts had anticipated. Earlier this year, senior Malaysian officials made a big show of demanding that Goldman pay back all of the money stolen from 1MDB with interest, as well as any fees that the bank collected for its work underwriting three separate bond offerings that helped seed the fund. In total, the sum demanded came out to about $7.5 billion.

We know now that senior Goldman bankers, including then-CEO Lloyd Blankfein, signed off on the deals, ignoring warnings from the compliance department about Malaysia’s point man for the project, the mysterious financier Jho Low. Which may explain why even the DOJ is now rushing to get this episode in the history books.

Low is now an international fugitive, and at least one Goldman banker has pleaded guilty and agreed to cooperate with the government; a settlement could be announced as soon as next month (though the bank also faces charges in Malaysia), although BBG’s sources warned that the terms of the deal could change.

It’s unclear from the report whether the DoJ will also seek a guilty plea from the bank, which could be a game-changer if it happens.

The notion that the DoJ is going easy on Goldman is hardly a surprise. Attorney General William Barr has reportedly directly involved himself in the case, which is unusual because his former law firm, Kirkland & Ellis LLP, represents Goldman, and Barr had to secure a waiver to excuse this conflict.

But this type of special treatment would be nothing new to Goldman: After all, its alumni occupy some of the most powerful jobs in the world. Goldman is the very definition of ‘too big to jail’.

As the US was basking in the warm glow of the best jobs report since January, it was a different story over in Canada, where BMO’s chief economist Robert Kavcic had one recommendation to clients: “avert your eyes.” Here’s why: Canadian employment unexpectedly tumbled by 71,200 in November, the biggest decline since the financial crisis.

For those hoping that the details might serve up better news, they too were disappointed: Full-time employment was down 38.4k, and the private sector shed 50.2k. The jobless rate also rose sharply, up four ticks, and also the biggest monthly jump since the recession, to 5.9%.

Hours worked fell 0.3%, and remain an area of persistent disappointment—they’re now up just 0.25% y/y, much more muted than the 1.6% annual job gain. Oddly enough, the one area of strength was wages, with growth accelerating to match a cycle high at 4.5% y/y, according to Kavcic.

Putting it together, BMO’s “grading system” gave this report a 12.1 rating out of 100, which is pretty much as bad as it can possibly get (it is in fact the worst rating in about six years of tracking).

The BMO economist wasn’t alone in slamming the report: it’s a “terrible jobs report,” said Wells Fargo strategist Brendan Mckenna. “There’s really not much you can point to that is positive about those numbers. We’ll probably hover around these levels til year-end.”

With that said, the LFS has been known to have some violent swings, and we could be getting a lot of payback for previous outsized strength in one fell swoop. Looking at 1.6% y/y job growth, and an average monthly gain of 26k through November, those numbers look pretty consistent with underlying economic performance.

The “terrible” number may force the BOC to reassess its monetary policy. Earlier this week, the Bank of Canada presented a strong defense of its decision to stand pat on its policy rate for a ninth straight meeting. Deputy Governor Timothy Lane said policy makers believe Canada’s economy is near capacity. Recent developments, both domestic and global, have bolstered the central bank’s confidence that growth is poised to accelerate over the next couple of years, despite “enduring” uncertainty, he said.

In response to the jobs report, and anticipating a resumption in central bank easing, the loonie plunged as much as 0.7% to 1.3259 per dollar, its biggest decline since October…

.. putting it in a neck-and-neck race with the British pound for the No. 1 spot among major currencies in 2020 and threatening its status as one of this year’s top performing major currencies. Both the loonie and the pound have strengthened close to 3% this year against the greenback.

Authored by Pat Buchanan via Buchanan.org,

The “Our diversity is our strength!” Party is starting to look rather monochromatic in its upper echelons these days.

The four leading candidates for its presidential nomination — Joe Biden, Elizabeth Warren, Bernie Sanders and Pete Buttigieg — are all white.

The six candidates who have qualified for the Dec. 19 debate — the front four, plus Amy Klobuchar and Tom Steyer — are all white.

Speaker Nancy Pelosi and House Democratic Majority Leader Steny Hoyer are both white, as are Senate Minority Leader Chuck Schumer and Whip Dick Durbin.

The chairs of the House Intelligence and Judiciary Committees managing impeachment, Adam Schiff and Jerry Nadler, are both white. And as Congressman Al Green railed Wednesday, all three experts Nadler invited to make the Democrats’ case for impeachment were white law professors. How come?

Absent affirmative action by the DNC, neither Cory Booker, the leading black candidate for the nomination, nor Julian Castro, the leading Hispanic, will be on the stage Dec. 19.

But though there is zero racial diversity among the top six Democrats in the presidential field, there is gender, ethnic and ideological diversity.

Warren would be the first woman president; Sanders, the first Jewish nominee; and Buttigieg would be the first gay nominee.

Yet the lack of racial diversity across the party hierarchy is going to put immense pressure on Joe Biden, should he win the nomination. If he hopes to reunite the Obama coalition, a woman and/or person of color as his running mate would seem an absolute imperative.

And before Biden gets there, he has other problems.

His “No Malarkey” bus tour across Iowa is all about his fear that, if he loses Iowa on Feb. 3 and New Hampshire on Feb. 11, he may not survive to reach his South Carolina firewall on Feb. 25.

Though he leads in the national polls, Iowa and New Hampshire polls have Biden running as low as fourth. Never has a candidate contested and lost both those states and then gone on to win the nomination.

Nor are these Joe’s only problems.

Call them what you will — gaffes, mental lapses — his repeated verbal miscues, some of which have caused debate rivals to laugh out loud at Joe, are a cause of alarm among Democrats who fear a Biden-Trump TV debate could produce a debacle for their man.

Nor are the other front-runners without racial-ethnic problems.

African Americans are a bedrock constituency of the Democratic Party. In recent presidential elections, they have voted 90% for the party’s nominee, and even higher for Barack Obama.

How is Mayor Pete doing with this constituency?

While running first in some polls in Iowa, his share of the African American vote in South Carolina, in a recent poll, was zero. Buttigieg had no black support in a state where African Americans constitute more than 60% of the Democratic vote.

Bernie Sanders, an unapologetic socialist who went to the Soviet Union, Reagan’s “Evil Empire,” for his honeymoon, is holding on to half of the loyal base from his impressive 2016 race against Hillary Clinton.

The other half of Bernie’s base, however, has been captured by Warren. In October, she took the lead in national polls, only to lose that lead when she could not explain how, without major new taxes on the middle class, she could abolish private health insurance and put the entire country on the Medicare rolls.

And, like Bernie, she is weak with black Democrats, who will decide South Carolina one week before Super Tuesday, when 40% of all the Democratic delegates will be chosen.

How did Democrats arrive at this pass?

As the 2019-2020 campaign began, the party divided into two camps.

There is first the moderate-centrist-pragmatic wing, whose goal is the removal of Trump, and who will go with the Democrat who is the most certain to deliver that. Biden, who spent four decades in the Senate and as vice president, was liked by many and offended few, and was first in the polls, was their natural choice.

Then there is the ideological left of the party that wants not only to win but also to remake America. It was to this huge slice of the party that Warren and Bernie have made their radical appeals.

The promise of victory offered by Biden and the ideological agenda offered by Sanders and Warren trumped the ethnic appeal of Booker, Castro and Kamala Harris.

Now, with the arrival of moneybags Mike Bloomberg and his tens of millions of dollars in ads, almost certain to reach hundreds of millions before Super Tuesday, there is the possibility that four or five candidates will survive to the convention, with no one having a majority of delegates. And the horse-trading will begin.

My view: Super Tuesday will cut the field to two or three. And the nominee will be one of the six palefaces on the stage Dec. 19.