(…) After struggling with slowing loan growth throughout much of 2017, U.S. regional bank executives said the promise of lower taxes spurred a pick-up in commercial loan demand in the fourth quarter, as well as a rise in consumer spending on credit and debit cards. That, along with increased interest rates, prompted many of the lenders to raise their loan growth and profit outlooks for the coming year.
“It was almost like a dam broke when the tax legislation got enacted,” said Steve Steinour, chief executive officer of Huntington Bancshares Inc. in Ohio. “We had a massive amount of activity in those final three weeks of the year.” (…)
The chart is as of Jan. 10. The biz end has yet to really bounce.
A Shortage of Trucks Is Forcing Firms to Cut Shipments or Pay Up A nationwide truck shortage is forcing thousands of shippers into a tough choice: postpone all but the most important deliveries, or pay dearly to jump to the front of the line.
(…) Freight volumes in December hit near-record levels for that time of year, on the back of a strengthening economy. Retailers are replenishing stocks after one of the strongest holiday sales seasons in recent years. Manufacturers are also shipping more cargo; in December, industrial production had the largest year-over-year gain since 2010, according to the Federal Reserve.
What’s more, bad weather and a new federal safety rule that took effect in December have crimped the supply of available trucks. Diesel prices are near a three-year high, adding to transportation costs. (…)
Spot-market prices for dry vans, the most commonly used big rig, are up more than 20% year-over-year. Analysts expect long-term contract rates that shippers negotiate with carriers to rise by between 5% and 8% this year. (…)
January is typically a quiet month for freight. But in the first three weeks of January, national average spot truckload rates were higher than during the peak season in 2017, according to DAT. (…)
Analysts expect capacity to become scarcer in April, when produce shipments pick up and full enforcement of the ELD rule kicks in. Vehicles without the devices may be removed from the road.
The normal seasonal decline in shipments has not happened:
Expenditures are up more than twice the rate of shipments growth:
Because costs have exploded:
Consumer goods manufacturers use a lot of trucking, yet their operating margins are already under pressure:
Price War Pressures Consumer-Goods Giants Household goods from diapers to toilet paper to razors are getting cheaper, but what is a boon for shoppers is squeezing profits at the world’s biggest consumer-goods companies.
(…) The dynamics are setting up a tug of war this year between consumer-products companies that are pouring money into new products and marketing in hopes of commanding higher prices, and retailers and shoppers increasingly accustomed to discounts.
Kimberly-Clark Chief Executive Tom Falk said in an interview that P&G ’s discounting, along with pressure from retailers and a decline in the U.S. birthrate, have reduced demand for the company’s baby-related products and other items. That is driving the industrywide push to cut prices, he said. (…)
- US Treasury secretary says weakening currency “good” for the US
South Korea has responded quickly and forcefully to a US decision to slap tariffs on imported washing machines and solar panels, with officials in the east Asian nation seeking to reinstate levies on imported American products. (…)
Davos Warms to Trumponomics Tax cuts are popular with global elites, but their effects will likely melt with the snow.
(…) Stephen Schwarzman, the CEO of Blackstone who led the president’s Strategic and Policy Council before it was dismantled last summer, said there would be “a lot” of financial inflows into the U.S. “There are companies from all around the world who are looking at the U.S. and saying this is the place to be,” he added. (…)
History suggests Trump tariffs could backfire Studies show past levies likely caused the loss of more jobs than they saved
New Rules Could Make U.S. a Tax-Friendly Regime A provision in the newly revised tax code slashes the income tax that companies pay on royalties from the overseas use of intellectual property, making it more attractive to house these rights on American soil.
The new tax break, for what is dubbed foreign-derived intangible income, effectively reduces tax on foreign income from goods and services produced in the U.S. using patents and other intellectual property to 13.125% until the end of 2025, after which the rate rises to 16.4%. Previously, royalties paid to a unit in the U.S. would have been taxed similarly to other U.S. income, for which the top corporate tax rate was 35%. The new headline corporate rate is 21%. (…)
The new U.S. deduction comes as Ireland is set to phase out, by the end of 2020, the most storied version of this maneuver, the Double Irish—which has been used by large firms, including Facebook Inc., Google parent Alphabet Inc. and drugmaker Allergan PLC. (…)
“Now the U.S. has to enter your consideration, absolutely,” said Anna Scally, head of the tech and media practice in Ireland for accounting firm KPMG. She added that firms are currently crunching numbers to find the best alternative locales that comply with tax rules. “It’s not a slam dunk,” Ms. Scally said of the U.S. “But it is an option.” (…)
The U.S.’s elevation as a tax-efficient locale may face challenges from other countries that claim the new foreign-derived tax deduction is an unfair trade subsidy, tax advisers say. Also, the effective FDII rate is set to rise to 16.4% in 2025—without taking into account additional U.S. state taxes—and could make the break less attractive.
The possibility of a political reversal has also made businesses more cautious, experts say.
“I don’t think any firm would be well served by betting the ranch on the stability of the new tax law,” said Edward Kleinbard, a former U.S. tax official who is now a tax professor at the University of Southern California law school.
The bank’s cross-asset measure of risk appetite around the world is the highest since it started the gauge in 1991. Euphoria is turbo-charging global equities while 10-year U.S. government bonds are suffering their worst performance in risk-adjusted terms, according to Goldman. (…)
“While high risk appetite increases risk of disappointment, we find historically that the signal from macro data tends to trump the signal from risk appetite,” Goldman said.
- The S&P 500 Relative Strength Indicator (RSI) (The Daily Shot)
- Here’s a 67-year chart of RSI (courtesy of Lance Roberts at Real Investment Advice)
Not scared enough? Lance Roberts ante up (What Exactly Is “RSI?”):
This is not only the highest level for RSI on a “weekly” basis but also one of the highest levels on a “4-year quarterly” basis as well.
Number of stock indices at 3m dwarfs tally of quoted companies Proliferation reflects investor focus on ‘top-down’ analysis of markets
There are now more than 70 times as many stock market indices as there are quoted stocks in the world, according to a groundbreaking survey by the Index Industry Association. A census of its members found that they publish and regularly re-calculate 3.28m indices, of which 3.14m cover stock markets. According to the World Bank, there are only 43,192 public companies in existence. (…)
How about ETFs and ETNs?
- Like tech stocks, FANG? How about 3 x FANG? Here is a scary new ETF for you. (The Daily Shot)
For you? Be aware that:
- The underlying FANG+ Index comprises equal weighted holdings of Facebook, Inc., Apple, Inc., Amazon.com, Inc., Netflix, Inc., and Alphabet, Inc., plus Alibaba Group, Baidu, Inc., Nvidia Corporation, Tesla, Inc., and Twitter, Inc,. I will let you calculate the average P/E of this ETN.
- ETNs are no ETFs. ETNs don’t own a portfolio of stocks. They are simply debt issued by banks that promise a return to the investor linked to the performance they track. Sounds familiar.
- A leveraged ETF keeps its leverage constant by boosting its indebtedness – drawing on its swap arrangements – as the value of its assets appreciates.
Maybe we should start buying the VIX!