Martin North – Page 151 – Digital Finance Analytics (DFA) Blog

The Inflation Bazooka Wasn’t – Market Update 11 Dec 2021

Markets in the US had a strong end to the week, as investors reacted to the fact that November’s consumer prices gains met expectations, and continue to hope it will fall back, so easing pressure on the Federal Reserve to accelerate it taper and the timing of a rate hike.

Looking to next year, supply chain challenges will continue to drive up prices in the near term but are expected to fade as Americans shift toward more normal consumption patterns. Still, other factors, like labor constraints and housing costs, may keep inflation elevated.

The CPI report from the Labor Department showed consumer prices surged last month to a 6.8% annual growth rate, the highest reading in more than 39 years.

While that was distorted to a degree by upheavals in prices a year ago due to the pandemic, the core rate — which strips out more volatile food and energy prices – also hit a 30-year high of 4.9%. The headline rate rose by 0.8% on the month and the core rate by 0.5%, both chunky increases that suggest that companies are still able to pass on higher costs to their customers more or less at will.

CONTENTS

0:00 Start
0:17 Introduction
1:57 US CPI
4:00 Inflation – Here To Stay?
7:00 Political Reaction
7:45 Market Movements
10:29 Coffee Futures
12:03 Short Sellers Under Scrutiny
12:57 UK Markets on Plan B
15:15 You Can’t “Invest” In Crypto
17:40 China Evergrande
18:45 WCI Index Up Again
19:25 Australian Market
21:38 Summary and End

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Fragility Rules: The DFA Daily 10 Dec 21

U.S. stocks limped lower on Thursday, and the Dow erased meager gains in the final minutes of trade, ahead of an important read of consumer inflation that could deliver a fresh jolt to financial markets. Investors have moved from jitters over the impact of the omicron variant of the coronavirus that causes COVID-19 to concerns about super-charged inflation, which could influence the Federal Reserve’s plan to tighten monetary policy. The consumer-price index will be released at 8:30 a.m. ET on Friday.

The S&P 500 slipped Thursday following a three-day rally as investors weighed up positive labor market data ahead of Friday’s inflation report that could intensify expectations for a faster pace of Federal Reserve monetary policy tightening.

The S&P 500 fell 0.71%, the Dow Jones Industrial Average was flat, the Nasdaq fell 1.7%.

“The broader market is taking a breather after the run up over the last four days going into tomorrow’s consumer price index report,” David Wagner, portfolio manager at Aptus Capital Advisors told Investing.com in an interview on Thursday.

Economists forecast that the CPI Index for November rose 6.8%, up from 6.2%, led by a sharp increase in rising rents. That would the fastest pace of inflation since 1990.

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Payments Shakedown On The Cards!

Whether you are a Buy Now Pay Later User, a Cryptocurrency holder, pay by cash or card, there are big changes ahead, as the RBA outlines some of its thinking.

https://www.rba.gov.au/media-releases/2021/mr-21-30.html
https://www.rba.gov.au/speeches/2021/sp-gov-2021-12-09.html

We look at the implications of Central Bank Digital Currencies, and the possibility that end users will have to pay to use Buy Now Pay Later services in the future.

Go to the Walk The World Universe at https://walktheworld.com.au/

More Banks Behaving Badly

ASIC is taking ANZ to court in the last of the post Royal Commission actions and APRA reported on the latest bank financial data as new high debt to income ratio loans continue to climb.

https://www.apra.gov.au/news-and-publications/apra-releases-quarterly-authorised-deposit-taking-institution-statistics-9

https://asic.gov.au/about-asic/news-centre/find-a-media-release/2021-releases/21-340mr-asic-sues-anz-for-misleading-customers-and-failing-to-provide-promised-benefits-final-royal-commission-investigation/

Today’s post is brought to you by Ribbon Property Consultants.

If you are buying your home in Sydney’s contentious market, you do not need to stand alone. This is the time you need to have Edwin from Ribbon Property Consultants standing along side you.

Buying property, is both challenging and adversarial. The vendor has a professional on their side.

Emotions run high – price discovery and price transparency are hard to find – then there is the wasted time and financial investment you make.

Shoot Ribbon an email on info@ribbonproperty.com.au & use promo code: DFA-WTW/MARTIN to receive your 10% DISCOUNT OFFER.

Will Banks Be Stressed Too?

We just got the results of the Reserve Bank New Zealand Stress Tests, and this year the RBNZ undertook both its regular solvency stress test, challenging the resilience of banks’ capital to a severe downturn, and also put the spotlight on banks’ liquidity and funding resilience through a liquidity stress test ahead of next year’s review of the RBNZ’s liquidity policy. The solvency stress test included the five largest banks – ANZ NZ, ASB, BNZ Westpac and Kiwibank – and the liquidity stress test featured those five plus Co-operative Bank, Rabobank NZ, Heartland, SBS and TSB.

https://www.rbnz.govt.nz/news/2021/12/stress-tests-show-strengthening-bank-resilience

Large banks fared worse than the smaller banks. However, banks were able to identify actions that, if effective, would considerably improve the outcome.

Now the banks is at pains to highlight the stress test scenarios are hypothetical and don’t represent its view of the most likely future path for financial stability risks. And the RBNZ doesn’t release individual banks’ stress test results. Unlike the results from the Federal Reserve in the US, where individual banks results are disclosed. In this respect New Zealand is following the opaque strategy APRA also executes, which is a pity. Not least because in New Zealand, Bank Deposit Bail-In is a thing via the Open Banking Resolution, and the RBNZ has warned people to do due diligence on the individual banks – so why don’t they disclose the detail we ask?

Go to the Walk The World Universe at https://walktheworld.com.au/

Flip To Rally Mode – For Now: The DFA Daily 8th Dec 2021

In today’s show we look at the latest from the markets, consider the proposals for digital currency reform in Australia, and look at a weak report on the Bank of Mum and Dad from the Productivity Commission.

First as expected, we flipped back to buy mode on the markets, as the impact of Omicron is re-calibrated, and ahead of the US inflation number at the end of the week. We keep flipping from buying value stocks to growth and back.

Go to the Walk The World Universe at https://walktheworld.com.au/

Today’s post is brought to you by Ribbon Property Consultants.

If you are buying your home in Sydney’s contentious market, you do not need to stand alone. This is the time you need to have Edwin from Ribbon Property Consultants standing along side you.

Buying property, is both challenging and adversarial. The vendor has a professional on their side.

Emotions run high – price discovery and price transparency are hard to find – then there is the wasted time and financial investment you make.

Shoot Ribbon an email on info@ribbonproperty.com.au & use promo code: DFA-WTW/MARTIN to receive your 10% DISCOUNT OFFER.