The Boock Report

By

Succinct Summation of the Week’s Events: – 3/13

Positives

1)The pace of virus spread is slowing in Asia. 

2)Central banks are flooding the world with money in order to grease markets and ease funding concerns. 

3)The broad shutdowns are economically damaging but needed in order to slow the rate of spread and give time for millions of test kits to arrive. 

4)For the week ended March 7th, initial jobless claims actually fell by 4k to 211k, 9k less than expected. This unfortunately will soon change. 

5)The NFIB February small business optimism index rose a touch to 104.5 from 104.3 in January. Unfortunately we can throw the data out as the NFIB said “it’s worth noting that nearly all of the survey’s responses were collected prior to the recent escalation of the coronavirus outbreak and the Federal Reserve rate cut.”

6)The drop in mortgage rates (not falling as fast as Treasury yields are as banks are trying to keep some margin) by 10 bps w/o/w and by 25 bps over the past month saw a 79% spike in refi applications w/o/w and which are now up a whopping 479% y/o/y. A great relief for those homeowners. Purchase applications rose 5.6% w/o/w and 12% y/o/y after last week’s decline.

7)The drop in oil prices will help lower gasoline prices giving welcome relief to drivers. 

8)From a contrarian standpoint, the CNN Fear/Greed index got to 2 this week. 

9)China’s year to date exports fell 17.2% y/o/y, a touch worse than the estimate of down 16.2%. Imports fell just 4%, better than the estimate of down 16.1% driven by an increase in some commodities, particularly soybeans and coal.

10)Taiwan’s exports and imports in February grew well more than expected but a lot is timing and the the March number will be much worse. 

Negatives

1)The pace of virus spread in Europe and the US is accelerating. 

2)Central banks are flooding the world with money because things are breaking. 

3)GDP estimates are not surprisingly going negative for multiple quarters.

4)The February headline CPI was higher by .1% m/o/m while the core rate was up by .2% m/o/m. Versus last year, headline CPI was up by 2.3% and which will obviously reverse itself in March with the plunge in oil prices. Core CPI though remains persistent, rising by 2.4% y/o/y, matching the highest level in 11 ½ years.  Core inflation is again being driven by services ex energy with a .2% m/o/m and 3% y/o/y gain. Higher rent and medical care continue to be the factors here.

5)PPI was soft across the board, falling m/o/m and moderating the headline y/o/y increase to 1.3% and the core rate of 1.4%.

6)While slightly better than expected, the preliminary March UoM consumer confidence index fell to 95.9 from 101 with particular weakness in the Expectations component which fell to 85.3 from 92.1, the lowest since October driven by a drop in expectations for business. One year inflation expectations fell by one tenth to 2.3%. Net income expectations held up, down just 1 pt but the unemployment component was down by 7 pts. Spending intentions were little changed. The bottom line from the UoM, “Consumer sentiment fell in early March due to the spreading coronavirus and the steep declines in stock prices.”

7)China reported its loan data for February and it’s only worth looking at combined with January because of the holiday and now with the virus. The first two months of 2020 saw aggregate financing up 4.9% y/o/y. As about half their economy shut down in February, the February loan figure specifically was half as expected.

8)The collapse in oil prices creates massive stress on the entire industry, any business and person that works in it and any country that relies on it. 
9)In Europe, the Sentix March investor confidence index fell to -17.1 from 5.2 last month. That’s the lowest since April 2013. Sentix said simply “The new corona virus, which is now spreading significantly across the globe and requires consistent measures to contain it, is plunging the global economy into recession.”