Cass Transportation Index Report November 2019
(…) Shipment volumes, which have been negative y/y all year, fell 3.3% y/y in November. We’ve been talking for several quarters now about how we’re in another freight recession (the other being 2015-2016) during this long-tenured economic expansion in the U.S., which shows most clearly in the rail carload, LTL tonnage, and Cass shipment data. Some of this is due to an inventory destock (primarily at the retail level), while much is due to the softening industrial economy (where we believe inventories are still elevated). Moving into 2020, we expect volumes to flatten out but not surge much, and a turn to positive y/y comps in the shipments index could be seen as soon as January 2020.
(…) we show in the graph below that the Cass TL Linehaul Index has a strong correlation to the quarterly yield metrics reported by the publicly traded TL carriers. This index should be watched intra-quarter to see any changes to trends that may impact the stocks. Presently, going off this data and from conversations we’ve had with several carriers this past week, we see 4Q19 as a soft quarter for both pricing and volumes among trucking companies.
Trump Administration Weighs Plans to Reduce Student Debt President Trump has asked advisers for a plan to help Americans with their student-loan debt, according to senior administration officials. Proposals being discussed would aim to counter Democrats’ debt-forgiveness plans.
Chinese State Investors Extend Help to Troubled Lender China’s sovereign-wealth fund is bailing out troubled lender Hengfeng Bank, the latest show of government support for the banking sector, which has come under intensifying financial stress as the economy slows.
Negative-Rates Pioneer Goes to Zero Sweden’s central bank, one of the pioneers in wielding negative interest rates, became the first to end that policy, a move closely watched by other institutions that have resorted to what was supposed to be a radical and short-lived measure.
(…) On Thursday, the Riksbank raised the key rate to zero from minus 0.25%. The bank moved because a majority of its policy makers expect inflation to be close to its 2% target over the coming years. Some policy makers have also become more concerned that a longer period of negative interest rates could lead businesses and households to take on too much debt, or force banks to charge to accept deposits, which could lead to a rush into cash.
But it signaled caution, indicating it has no plans to raise its key rate further in the coming year. Underlining that caution, two of the six members of the executive board— Anna Breman and Per Jansson —opposed the move, preferring to wait until it’s clear that inflation will remain around target. (…)
In the eurozone, negative rates are exceedingly controversial in countries like Germany, where many fear they keep unproductive companies alive, hurt bank profits and subsidize profligate governments by making debt extremely cheap. (…)
By discouraging commercial banks from parking their money at central banks, negative rates prod financial institutions to lend at low cost to other banks, businesses and consumers, in turn pushing people to borrow more, spend more and save less. Negative rates can also weaken the national currency, delivering a boost to exports and increasing prices of imported goods to fuel inflation.
That dynamic has partly worked in Sweden, helping to boost growth and employment. Swedish economic growth surged in 2015, and remained above that of the neighboring eurozone in most subsequent years, while its jobless rate has edged lower. (…)
Subzero rates have also pushed more money into equities and bonds, with holdings in mutual fund reaching all-time highs since rates went negative, said Gustav Sjöholm, savings economist at the Swedish Investment Fund Association. (…)
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European Bond Yields Rally After Sweden Abandons Subzero Rates European government bond yields rallied after Sweden’s central bank became first to exit negative interest-rate regime, leading to speculation that others may follow.
(…) “If the ECB would also make this move, Denmark would move automatically as it’s pegged, the Swiss would also be likely to follow through and we would see a move away from negative rates in the Eurozone. This is basically our bet.’’ (…)
Might also push U.S. yields higher and the USD lower…
Sanctions-hit Huawei plans components plant in Europe
(…) The chairman added: “In the area of 5G technology, we are already no longer dependent on the supply of chips and other components from American companies.” (…)
THE “TRADE DEAL”
Mike Pillsbury, Hudson Institute, interviewed by Lou Dobbs (via China Debate):
DOBBS: ‘I want to establish first whether there is text to all of it.’
PILLSBURY: ‘There are some limited texts. Whether the President wants to announce the whole thing with the long, written agreement, I’m not sure.’
- ‘There’s a matter here that the Chinese may have given him so much that he doesn’t really want to embarrass them by making it all public.’
Gao Feng, a spokesman at the Chinese commerce ministry (Reuters):
“After the official signing of the deal, the content of the agreement will be made public,” Gao said.