Mr. Market is becoming anxious… again. Although the US stock market (S&P 500) has recovered all of the lost ground from the recent Aug-Oct correction, several metrics in the Crash Risk Index suite of benchmarks are flashing warning signs. The overall level of danger is still modest and so it’s premature to assume the worst. Nonetheless, risk has recently increased to its highest level since early Oct., when the market was still reeling from worries that China’s slowdown would trigger a global recession.
Continue reading →

● Fed’s Labor Market Conditions Index decelerates in Nov | EconoTimes
● CB’s US Employment Trend Index stumbled in Nov | CB
● US consumer spending unchanged in Nov | Gallup
● US consumer credit growth slows in Oct | WSJ
● China’s exports fell for 5th straight month in Nov | RTT
● Japan’s economy grew in Q3, according to revised data | Bloomberg

Last week’s news that the ISM Manufacturing Index dipped below the neutral 50.0 mark in November for the first time in three years has inspired some folks to declare that the US economy is on the verge of slipping into a new recession. Perhaps, but letting one indicator drive your analysis of the business cycle is a dangerous game that’s prone to a high degree of error. On the other hand, seeing a new contraction on a semi-regular basis makes for exciting TV interviews.
Continue reading →

Yield-sensitive assets in foreign markets topped last week’s performance ledger for the major asset classes via a set of proxy ETFs. iShares International High Yield Bond (HYXU) secured the top spot for the five trading days through Dec. 4 with a strong 2.8% total return. Following up in 2nd and 3rd place: foreign real estate (VNQI) and broadly defined commodities (DJP), respectively.
Continue reading →

● US job growth beats expectations in Nov | Bloomberg
● Solid jobs report for Nov points to Fed rate hike | LA Times
● Summers: doubts about the US ability to absorb real rate hikes | FT
● German industrial output softer than expected in Oct | Bloomberg
● China’s plans for reducing dollar’s influence | Bloomberg
● Oil weakens after Opec fails to agree of output cut | Reuters

● The Midas Paradox: Financial Markets, Government Policy Shocks, and the Great Depression
By Scott Sumner
Summary via publisher (Independent Institute)
Economic historians have made great progress in unraveling the causes of the Great Depression, but not until Scott Sumner came along has anyone explained the multitude of twists and turns the economy took. In The Midas Paradox: Financial Markets, Government Policy Shocks, and the Great Depression, Sumner offers his magnum opus—the first book to comprehensively explain both monetary and non-monetary causes of that cataclysm. Drawing on financial market data and contemporaneous news stories, Sumner shows that the Great Depression is ultimately a story of incredibly bad policymaking—by central bankers, legislators, and two presidents—especially mistakes related to monetary policy and wage rates.
Continue reading →

Private payrolls in November increased by a solid 197,000 (seasonally adjusted) last month, according to this morning’s release from the US Labor Department. Although that’s well below the previous month’s upwardly revised gain of 304,000, today’s update is probably strong enough to give the green light to the Federal Reserve to start raising interest rates later this month.
Continue reading →

● US jobless claims rise but still close to historic lows | Bloomberg
● Challenger’s job cuts report: layoffs fall to 14-mo low in Nov | CG&C
● US Non-Mfg Index: growth moderates in Nov | MarketWatch
● PMI: Service sector growth in Nov improves to fastest since Aug | Markit
● US factory orders rebound in Oct after two monthly declines | Reuters
● US Consumer Comfort Index fell to 1-year low last week | Bloomberg
● ECB stimulus announcement falls short of market expectations | Reuters

Private nonfarm payrolls in the US are projected to increase by 193,000 (seasonally adjusted) in tomorrow’s November report from the Labor Department, based on The Capital Spectator’s average point forecast for several econometric estimates. The prediction marks a healthy gain, albeit one that’s substantially below October’s surprisingly strong increase.
Continue reading →

The 30-day moving average of the Effective Fed Funds rate is inching higher for the first time since early September. The revival of the upward bias for this key rate, although slight, is significant in the wake of yesterday’s speech by Fed Chair Janet Yellen, who said that the central bank is moving closer to raising interest rates later this month.
Continue reading →