China’s Yield Curve Inverts (Small Beans Relative to Venezuela’s Curve Inversion And 2,713% Inflation Rate)

Inverted sovereign yield curves are generally bad news. And China’s inverted yield curve is no different. The 5Y to 10Y segment of China’s sovereign curve has inverted … again.

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But before anyone gets hysterical, the rest of China’s sovereign curve is upward sloping like the USA (blue for China, green for the USA).

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For comparison sake, I am including the mac-daddy of curve inversion: Venezuela (red line). Their 3Y sovereign yield is a gut-wrenching 58% while their 20Y yield is lower at 22%. And their 2,712.88% annual inflation rate.

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US Housing Starts And Permits Plunge In September As Fed Raises Rates

The housing construction numbers for September were not great. 1-unit detached starts declined -4.60% while 5+ unit starts (multifamily) declined -6.23%.

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Permits were off for 5+ unit (multifamily) at -17.43% while 1 unit permits rose 2.38% in September.

As a reminder, The Federal Reserve dropped their target rate as a result of the 2001 recession and 1-unit starts took off. Construction was so hot that The Fed had to raise their start rate to cool-off the construction bubble. Rather than cool-off the construction bubble, The Fed sent it into deep freeze.

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Alas, there wasn’t a Fed Funds rate reaction during the housing bubble, but there appears to be a negative reaction to multifamily (5+ unit) starts since The Fed began jacking up their target rate.

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And with an 84% implied probability of a December rate hike, we should watch starts and permits carefully over the next couple of months.

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And here is the path of future rate hikes (forward curve). As Samuel L Jackson said in Jurassic Park, “Hold on to your butts.”

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The International Bubble Team in action!

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S&P 500 And Margin Accounts Near All-time High (Will Fed Rock the Boat??)

The S&P 500 stock market index is near an all-time high. But then again, margin accounts at NYSE firms are also at all-time highs.

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Meanwhile, brokerage call money loan rates on margin accounts continue near the all-time low (despite recent increases in The Fed Fund Target rate).

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Will The Fed’s proposed 25 basis point increase at the December FOMC meeting (which would result in the call money rate rising to 3.25%) result in a slowdown of margin borrowing? Probably not.

Party on Stan, Party on Janet! 

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IMF Says Venezuela’s Inflation Rate May Rise Beyond 2,300% in 2018

(Bloomberg) Venezuela’s triple-digit annual inflation rate is set to jump to more than 2,300 percent in 2018, the highest estimate for any country tracked by the International Monetary Fund.

 

An intensifying political crisis that’s spiraled since 2014 has weighed heavily on economic activity. Gross domestic product is expected to contract 6 percent next year, after shrinking an estimated 12 percent in 2017, the IMF said in its latest World Economic Outlook report published Tuesday.

 

While Venezuela’s central bank stopped publishing inflation data in December 2015, the IMF argues the country’s consumer prices are estimated to leap 2,349.3 percent in 2018, the highest in their estimates, followed by the Democratic Republic of the Congo’s 44 percent. As oil production declines and uncertainty increases, unemployment is forecast to increase to about 30 percent in 2018, also the highest and followed by South Africa’s 28 percent and Greece’s 21 percent.

The Bolivarian Republic isn’t current with most of its key economic statistics, leaving economists scant data to crunch. Before Venezuela’s new legislative super body took over the functions of the country’s only remaining opposition-run institution this year, the sidelined National Assembly had started publishing its own inflation index due to the lack of official data. Bloomberg’s Cafe Con Leche Index puts the annual rate at 650 percent.

Be honest, if you were Maduro, would YOU publish the awful economic data coming out of Venezuela? Steven Hanke pegs Venezuela’s annual inflation rate at 2,276% as of September 26, 2017.

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Here is Venezuelan dictator Nicholas Maduro singing “Ain’t socialism grand?” 

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