Small-Business Confidence Stays at Near-Record High The National Federation of Independent Business said its optimism index remains strong at 107.4 in October. Although down slightly, that was still close to the index’s 1983 high.
On Tuesday, the NFIB said its small-business optimism index remains strong at 107.4 in October, albeit down slightly for the second consecutive month following August’s record reading of 108.8. The August reading broke the previous record of 108 set in July 1983. (…)
Hmmm…Enjoy the good times.
Apartment Developers Are Slowing Construction. That Could Mean Higher Rents. Rising construction costs and a tight labor market are slowing a nearly decadelong apartment boom, likely easing a burgeoning glut at the top end of the market that has been forming across the U.S.
OIL
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Risking Trump ire, OPEC builds case for oil supply cut OPEC built a case on Tuesday for cutting oil output when it meets next month, warning that a supply glut could emerge in 2019 as the world economy slows and rivals increase production more quickly than expected.
In a monthly report, the Organization of the Petroleum Exporting Countries said world oil demand next year would rise by 1.29 million barrels per day, 70,000 bpd less than predicted last month and the fourth consecutive reduction in its forecast.
“Although the oil market has reached a balance now, the forecasts for 2019 for non-OPEC supply growth indicate higher volumes outpacing the expansion in world oil demand, leading to widening excess supply in the market,” OPEC said in the report.
“The recent downward revision to the global economic growth forecast and associated uncertainties confirm the emerging pressure on oil demand observed in recent months.”
In the report, OPEC said its oil output rose further in October by 127,000 bpd to 32.90 million bpd after the June deal.
OPEC said the world would need 31.54 million bpd from its 15 members in 2019, down 250,000 bpd from last month. This suggests there will be a 1.36 million bpd surplus in the market should OPEC keep pumping the same amount and other things remain equal. (…)
Non-OPEC supply will rise in 2019 by 2.23 million bpd, the Vienna-based organization said, 120,000 bpd more than previously thought and far more than the increase in world demand.
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Oil majors spending ‘sweet spot’ to last to 2020: BlackRock Big Oil is today in a spending sweet spot as years of cost cuts and rising oil prices converge but investments will need to rise after 2020 to boost output, BlackRock, the world’s largest asset manager, said on Tuesday.
Oil and gas giants such as Royal Dutch Shell (RDSa.AS), Chevron (CVX.N) and BP (BP.L) are generating as much cash at today’s oil prices of around $70 a barrel as they did in 2014, before crude spiraled down from over $100 a barrel to lows of below $30 a barrel.
As they emerge from the deepest downturn in decades, boards have vowed to remain thrifty and stick to lower spending targets in order to return value to shareholders after years of pain. (…)
The richest areas will have been exploited by the mid-2020s, meaning the average well drilled in 2025 will be less productive than today, the agency said in its annual World Energy Outlook. The U.S. will still be pumping large quantities of crude from shale rock — also known as tight oil — but output will taper off because a larger number of wells are needed to be completed to maintain or increase production. (…)
SENTIMENT WATCH
From MarketWatch
According to Goldman, its indicator at 73% marks the highest bear-market reading since the late 1960s and early 1970s, which (with a few exceptions) is consistent with returns of zero over the following 12 months. Any reading above 60% signals that subsequent returns will be lower (see chart below):
(…) For one, the bank’s Bull & Bear indicator, which tracks investor sentiment is hanging around 3.1, meaning no “contrarian buy signal” is being flagged, he says. The gauge runs from 0 to 10, with the high end representing extreme bullishness and the low end extreme bearishness. (…)
Managers surveyed believe the peak of this bull run is not here yet, with 12% upside seen from current levels, taking the S&P 500 to 3,056 (weighed average). That said, one of three respondents said they think the market has already peaked. (…)
Cash levels also dropped in November to 4.7% from 5.1%, meaning investors bought into that October correction, upping exposure to U.S. and emerging-markets stocks, REITs and health care, which is now the No. 1 overweight, in the survey.
And in a surprise to few, allocation to global techs fell out of bed, with just a net 18% of managers saying they’re overweight the sector. (…)
Ned Davis Research has its own Crowd Sentiment Indicators, courtesy of Steve Blumenthal:
- NDR Crowd Sentiment Poll: Neutral Pessimism (S/T Bullish for Equities). Current weekly sentiment reading is 57.4. It was 53 last week.
- Best buying opportunities occur at “Extreme Pessimism” readings below 57.
- Gain/Annum for the S&P 500 Index (data from December 1, 1995 to present).
- Current indicator score highlighted in yellow:
Source: Ned Davis Research
NDR Disclosure; CMG Disclosure.
- NDR Daily Trading Sentiment Composite: Extreme Pessimism (S/T Bullish for Equities). Current reading highlighted below.
- Current daily sentiment reading is 31.11. It was 25.56 last week.
- Best buying opportunities occur at “Extreme Pessimism” readings below 41.5.
- 1994 to Present and 2006 to Present below (current indicator score shaded below):
Source: Ned Davis Research
NDR Disclosure; CMG Disclosure.
TECH WRECK
The NDX is down 10.7% from its Oct. 1 peak of 7700 and its 200dma has flattened:
The equal-weight NDX is down 8.6% from its peak and its 200dma is declining:
Why would anybody be surprised? You can’t buy growth only from price increases.
The global smartphone market over time:
Source: ANZ Research (via The Daily Shot)
U.S. Adopts New Battle Plan for China’s Theft of Trade Secrets The Trump administration is broadening its China trade battle beyond tariffs with a plan to use export controls, indictments and other tools to counter the theft of intellectual property.
(…) The officials hope that the unprecedented actions taken to defend Micron—the largest American memory-chip maker—will encourage more U.S. companies to work with the government to counter intellectual property theft. (…)
The Commerce Department announced on Oct. 29 that it would effectively bar exports and transfers of U.S.-origin technology to Fujian Jinhua Integrated Circuit Co. The startup, backed by $5.7 billion in state funding, is one of China’s best hopes to build a world-class semiconductor industry. Because Jinhua depends on U.S. technology to produce its own chips, the restrictions could kill its business.
The announcement was unique in the way that it defined Jinhua as a national-security threat: U.S. officials said the Chinese company’s alleged theft of Micron’s IP could threaten the U.S. military supplier’s ability to stay in business. (…) China wants Jinhua to become its own homegrown producer of DRAM, but the nascent firm still relies on tools from U.S. suppliers to make its chips. (…)
PIKy Times in China
Unit of China’s HNA Offers Investors Airline Vouchers in Lieu of Cash
Last week we learned that holders of 271 million yuan ($39 million) of Agro-Pastoral Group Co. debt agreed to take ham or pork gift packages instead of interest payments, according to a filing on the Shenzhen Stock Exchange on Thursday reported by Grant’s which added its own suggestion that Payment in Kind be replaced by “Payment-In-Swine”
Fewer International Students Head to the U.S. American colleges and universities face growing challenge amid rising competition from other countries, concerns about safety and immigration policies
The number of new international students enrolling at American institutions fell by 6.6% during the 2017-18 academic year, on top of a 3.3% decline the year before, according to a report by the Institute of International Education released Tuesday.
Meanwhile, the total number of international students in the U.S. plus those working here on a student visa rose by just 1.5% this year. That was down from average annual growth of 6.1% over the past decade, a period during which enrollment of international students doubled.
Foreign students are big business: They pumped $42 billion into U.S. college and university coffers in the 2017-18 school year alone. (…)
The slowdown comes as U.S. schools struggle with demographic and revenue challenges due to the falling number of Americans graduating from high school. As a result, U.S. colleges and universities have become increasingly dependent on revenue generated from international students. Public schools often charge international students more than what domestic students pay. (…)
China remained the largest single source of international students, accounting for about a third of all students who come to the U.S. for postsecondary degrees. The number of students coming from Canada and Mexico, meanwhile, fell by 4.3% and 8.1%, respectively. (…)
Carol Spradling, director of the school of computer science at Northwest Missouri State University, said international enrollment began declining precipitously two years ago, following a “perfect storm” that included President Trump’s election with his tough talk on immigration and the shooting of an Indian immigrant worker in Olathe, Kan. The downturn, she said, had a huge impact on her school’s finances. (…)