The Market Bull – January 17, 2020
The major averages finish a solid week with modest gains. Since Monday the S&P 500 is up 59 points or 1.8%, the NASDAQ added 178 points or 1.9%.
Construction activity handily beat expectations in December with housing starts jumping 16.9% to 1.608 million units annualized, a second large gain in the last 5-months. Permits fell 3.9% to 1.416 million units annualized. On a year ago basis starts advanced 40.8%. At a regional level starts in the West rose 19.8% and were up 72.7% from December 2018. It seems that the recent hiccup in the economic data was simply that, and not the beginning of a weakening trend.
Industrial production slipped .3% in December on a large decline in motor vehicle and parts production. This series has been particularly volatile in the last few months. Capacity utilization fell from 77.4% in November to 77% in December. Recent trade deals with China, Canada and Mexico should help the sector going forward. That said the ongoing Boeing 737 Max fiasco will continue to pressure this series and is likely to shave a few tenths of a percent off 1st quarter GDP, with aircraft and parts production expected to fall some 20%.
The latest review of the total costs involved with the bailouts from the Great Financial Crisis of 2007-2009 by the MIT Sloan School of Management pegs the total cost at just 500 billion or about 3.5% of 2009 GDP or Gross Domestic Product. The largest direct beneficiaries of the bailouts were the unsecured creditors of financial institutions. The estimated cost stands in sharp contrast to popular accounts that claim there was no cost because the money was repaid, and with claims of costs in the trillions of dollars. A more reasoned and fair approach that takes much of the sting out of the fact that taxpayer funds were used to bailout various bank and financial institutions for their reckless and irresponsible behavior. The fact that the too big to fail or jail crowd was allowed to get even bigger I find particularly disturbing and I believe that the banksters should face a special assessment of some sort so as to make taxpayers whole. Public bailouts of private corporations is not capitalism, and the institutions involved need to have it made crystal clear to them that what they did was, and is, completely unacceptable.
Standard and Poors 500 Index closed at: 3,329.62 up 12.81
NASDAQ finished the day: 9,388.94 up 31.81
Gold ended trading at: $1,556.60 up $6.10