NFIB
The Index of Small Business Optimism gained 2.0 points in January, rising to 106.9, again one of the strongest readings in the 45-year history of the NFIB surveys.
The gap between sales expectations and actual sales has gapped up! Actual sales are just a little better than at their last peak (Q4’11) and have not improved much in recent months:
Small biz owners have little pricing power, unlike their employees…
Nonetheless, earnings are booming!
But for how long? 
Shale Output Hasn’t Grown This Fast Since Oil Was at $100 Unyielding U.S. shale production is expected to overwhelm global oil demand and weigh on prices this year, the International Energy Agency warned.
In its closely watched monthly oil-market report, the IEA said crude output by the U.S. and some other producers outside the Organization of the Petroleum Exporting Countries will likely outpace demand in 2018, undermining the market rebalancing over the past year.
The agency called the current climate “reminiscent of the first wave of U.S. shale growth” at the start of this decade, which ultimately flooded the market and caused oil prices to plummet in late 2014.
“Today, having cut costs dramatically, U.S. producers are enjoying a second wave of growth so extraordinary that in 2018 their increase in liquids production could equal global demand growth,” the IEA said. (…)
U.S. crude output in January climbed by 1.3 million barrels a day from a year earlier, according to the IEA, meaning the U.S. is soon expected to surpass Saudi Arabia’s production and “might also overtake Russia to become the global leader.” (…)
The IEA on Tuesday slightly raised its demand growth outlook for 2018, to 1.4 million barrels a day, largely on the back of a strong global economy. That compares with demand growth of 1.6 million barrels a day last year.
The agency also said that commercial oil inventories in the Organization for Economic Cooperation and Development—a group of industrialized, oil-consuming nations, including the U.S.—fell by 55.6 million barrels in December, the largest drop since 2011. (…)
Source: OPEC (via The Daily Shot)
- Another way to look at it (RBC):
(…) the backdrop of multi-year price highs, coupled with topped-up hedges, provides a license to drill. Producers may continue to pick away at locking in price protection for this year, but attention has shifted toward firming up 2019 hedges over the last several weeks. This clearly suggests that anti-fragile domestic producers are principally price agnostic for this year, meaning that “drill, baby, drill” will likely continue to be the mantra irrespective of potential turmoil in spot pricing. (…)
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Oh-Oh!
Sizing Up the Trumponomics Gamble on Deficit Spending and Inflation Two of the biggest legislative deals in Donald Trump’s presidency—a $1.5 trillion tax cut and a $300 billion spending package—illustrate an emerging feature of Trumponomics: a willingness to tolerate larger budget deficits deep into an economic expansion.
Which means that neither the Fed nor Congress will have any ammo if and when needed. The fact is that nobody cares about debt anymore, because interest rates are too low.
- The budget deficit is expected to climb to 5.5% of the GDP as soon as next year.
Source: Credit Suisse (via The Daily Shot)
Mark Doms, Nomura Securities: – We estimate GDP growth will be boosted by 1.2pp by DC’s fiscal largess over the next two years. The price? Over the next three fiscal years, changes in fiscal policy will increase the deficit by about an average $300bn/year (and that accounts for the dynamic effects of the stimulus).
Historically speaking, this fiscal boost is anomalous in two regards: stage of cycle and fiscal outlook. The only other times the US had deployed such large stimulus at this stage of the business cycle was in the Korean and Vietnam wars. Further, the fiscal outlook is much worse now than at any other time of substantive fiscal policy since WWII.
TECHNICALS WATCH
LR saw an 80% Up Day yesterday. A second consecutive 80% Up Day could signal a major trend reversal according to LR.