The Market Bull – March 19 2019
The major averages closed about even unable to hold their early gains after more news indicating the trade war won’t end anytime soon.
Factory orders gained .1% in January but missed expectations substantially. As the series continues to show very little growth for a 10th month. The proxy for business spending non-defense capital goods ex aircraft advanced a respectable .8% but also shows very little growth now for 7-months.
Globalization has done much to lift people out of poverty and increase global trade over the last 3 decades or so. But a combination of robotics, automation, tariffs, and protectionism are all converging to reverse this process as exports started to go broadly negative as 2018 came to a close.
One thing that has steadily increased in the modern economic era of the last 40-years or so is debt, public, private and corporate. In fact global debt is 50% higher today than it was just prior to the last crisis in 2007. The credit ratings agencies, oblivious to the last crisis as it formed under their noses are quick to assure everyone that this time around it won’t be so bad despite acknowledging that the debt level is far higher, 50%, and far riskier than last time. They go on to note that the debt is largely led by the government kind, unwilling or unable to acknowledge the gargantuan levels of corporate debt or that some 19% of Standard and Poors 500 companies fall into the “zombie” category. In debt up to their eyeballs and cash flow negative, ala most of the tight energy companies.
Further they note that because of high investor confidence in major western government debt that the probability of contagion is minimal. All I can say is if you believe that give me a call as I have a bridge, I would like to sell you. Further any analyst that thinks “confidence” is going to prevent contagion in the event of a crisis is frankly a clueless fool. The amount of leverage, or debt to Gross Domestic Product has increased from 208% in June 2008 to 231% as of June 2018. With the Chinese blowing the mother of all debt bubbles since the last crisis. But I’m sure “cough, cough” it will be different this time.
Standard and Poors 500 Index closed at: 2,832.60 up .35
NASDAQ finished the day: 7,723.95 up 9.47
Gold ended trading at: $1,306.50 up $5.00