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References

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(IDEX Online) – Holiday sales increased 5.1% to more than $850 billion this year – the strongest growth in the last six years with a robust shopping season from before Thanksgiving through Christmas, according to Mastercard SpendingPulse.<?xml:namespace prefix = "o" ns = "urn:schemas-microsoft-com:office:office" /?>

Online shopping also saw large gains of 19.1% compared to 2017.

“From shopping aisles to online carts, consumer confidence translated into holiday cheer for retail,” said Steve Sadove, senior advisor for Mastercard. “By combining the right inventory with the right mix of online versus in-store, many retailers were able to give consumers what they wanted via the right shopping channels.”

The Mastercard SpendingPulse report details holiday shopping from November 1 through December 24. Key findings of the report indicate that despite weather challenges, this was a winning holiday season for retail overall. However, the story was different category by category, with total apparel having a strong season with a growth rate of 7.9% compared to 2017, and recording the best growth rate since 2010.

Department stores finished the season with a 1.3% decline from 2017. This follows two years with growth below 2%, some of which can be attributed to store closings. However, the online sales growth for department stores indicated a more positive story, with growth of 10.2%.

Mastercard SpendingPulse reports on national retail sales across all payment types in select markets around the world. The findings are based on aggregate sales activity in the Mastercard payments network, coupled with survey-based estimates for certain other payment forms, such as cash and check, the firm said....

December 26, 2018

The net result is capital is impaired in eras of uncertainty.

As we look ahead to 2019, what can we be certain of? Maybe your list is long, but mine has only one item: certainty is fraying.

Confidence in financial policies intended to eliminate recessions is fraying, confidence in political processes that are supposed to actually solve problems rather than make them worse is fraying, confidence in the objectivity of the corporate media is fraying, and confidence in society's ability to maintain any sort of level playing field is fraying.

When certainty frays, capital gets skittish. Predicting increased volatility is an easy call in this context, as capital will not want to stick around to see how the movie ends if things start unraveling. The move out of stocks into government bonds is indicative of how capital responds to uncertainty.

The coordinated efforts of global central banks to backstop and boost markets also backstopped confidence in the banks' monetary policies. Regardless of the long-term impact of the policies of quantitative easing and repression of interest rates, capital could count on the policies remaining in force and act accordingly.

With the Federal Reserve apparently ending the Fed Put and normalizing interest rates after a decade of near-zero rates, certainty about global central bank policies and the impacts of those policies has dissipated.

With valuations at historic highs and real estate rolling over, confidence that gains are essentially permanent is also fading. Buying at the top and holding onto the asset as it loses value is a predictable way to destroy capital, and so capital's willingness to exit is rising, as is its preference for...

As the world celebrates Christmas, stock markets are cratering around the world, with the US leading the way. Since October, when the Dow Jones Industrial Average (DJIA) peaked at 26,951.81, it’s lost nearly 4,000 points, down 15.1%. The S&P 500 has lost even more: 15.8%.

The red ink in share prices has erased trillions of dollars from global balance sheets. The stocks comprising the S&P 500 have lost $2.39 trillion in December alone.

When asked why stock prices are falling, the talking heads on television and the internet point to the Fed’s continuing interest rate hikes and the ongoing trade war with China. Those factors are important, but there’s another component that gets less attention: soaring levels of debt. Much of that debt is of highly dubious quality. 

Earlier this month, the International Monetary Fund reported that the total world debt load is an incredible $184 trillion. That’s 225% of the entire world’s GDP and nearly double what it was in 2007 at the eve of the last financial crisis.

You may recall that the 2007 to 2008 financial crisis was set off by excessive debt. What started the ball rolling were a series of interest rate increases by the Fed. Homeowners with adjustable mortgages in which payments were tied to interest rates started to default in droves.

Many of the mortgages that ended up in default were “subprime;” extended to borrowers with poor credit ratings or who weren’t asked for proof of creditworthiness. In many cases, the mortgages were for 95% or more of the value of the home being financed. Meanwhile, the financial wizards on Wall Street turned sub-prime mortgages into mortgaged-back securities called collateralized debt obligations that were greedily lapped up by individual investors, hedge funds, and even pension funds....