The Market Bull – November 7, 2019
The major averages closed with decent gains on mixed economic data. Rumors circulate of another trade war settlement, but I think it’s doubtful at best.
The National Association of Realtors or NAR reports that Metro real estate prices gained 5.1% on a year ago basis in the 3rd Quarter. Out of 178 metropolitan statistical areas with data, 166, or 93%, recorded rising prices year over year, led by gains in the Midwest. The top three metro areas for price gains included Kingston NY (15.2%), Montgomery AL (12.6%), and Spokane WA (12.6%). The largest year-over-year price declines include Peoria IL (5.9%), Elmira NY (5.3%), and San Jose CA (4.6%), San Francisco, San Diego and Anaheim all saw prices fall.
Consumer Credit missed expectations substantially in September advancing just 9.5 billion. Revolving or credit card debt fell for a second month down 1.1 billion. Non revolving, debt primarily student, and auto loans advanced 10.6 billion. This is the slowest increase in consumer credit for over a year.
The Great Financial Crisis of 2008 was primarily driven by mortgage debt and consumers. This time round trouble is most likely to come from the corporate sector as it levered up big time in the last ten-years to fund various share buyback programs. Much of this debt is high-yield or junk rated, and a lot of that is covenant light meaning that investors will get screwed if defaults occur. A recent piece by S&P Global Market Intelligence noted that the number of high yield distressed debt issues hit 263 in September the highest level since November 2009. With a default rate some 8-times higher than non-distressed high yield issues, it’s worth paying attention too especially when one considers that the 3rd quarter is tracking a 3rd consecutive decline in earnings, while unit labor costs are increasing rapidly.
Standard and Poors 500 Index closed at: 3,085.18 up 8.40
NASDAQ finished the day: 8,434.52 up 23.89
Gold ended trading at: $1,469.00 down $24.10