The Daily Shot: U.S. Prime-age Population Has Not Increased in a Decade

via  Lev Borodovsky

The United States

1. Let’s begin with the NFIB small business report.

• The overall sentiment index came off the highs but remains elevated.


• More firms are planning to increase inventories over the next few months.


• Small business hiring plans are at the highest level in a decade.


And labor quality remains a problem. Anecdotal evidence suggests that in some areas of the country, finding workers who can pass a drug test has been challenging.


Skilled (and drug-free) worker shortages in construction are especially acute.

Source: John Burns Real Estate Consulting


2. US household economic optimism has worsened. Some of the declines could be related to the hurricanes.


3. US prime-age population has not increased in a decade.


Once the unemployment rate stops declining (and we are close to that level – chart below), it will become increasingly challenging to boost the speed of economic expansion. Slow productivity improvements and a stagnant labor force size will hold back the GDP growth (second chart below). The policy of tightening legal immigration makes the situation worse.


Source: BMI Research


4. As discussed previously (#7 here) the broad money supply growth in the United States is slowing. Does it suggest weaker inflation ahead?

Source: @DriehausCapital


5. Nomura sees the GOP succeeding in its efforts to cut US personal taxes by one trillion dollars over the next ten years (in Q1). The team, however, is skeptical about a corporate tax cut. Here is the impact of the tax legislation on the various economic metrics.

Source: Nomura Global Markets Research


6. According to a forecast from John Burns Real Estate Consulting, residential construction in the US has peaked for now. While single-family building permits are expected to climb gradually, they will be more than offset by fewer multifamily construction projects. We will have more on the topic later in the week.

Source: John Burns Real Estate Consulting


7. Renovations of vacant homes are on the rise.

Source: John Burns Real Estate Consulting


8. The hurricanes have brought forward some of the spending on building materials.

Source: John Burns Real Estate Consulting


9. The amount of equity Americans are taking out of their homes (via refinancing) is a fraction of the peak reached during the housing bubble. Nonetheless, it has been rising as home prices improve.

Source: John Burns Real Estate Consulting

The United Kingdom

1. The UK industrial production and construction output increased more than expected.



2. The nation’s trade deficit hit a record high. The pound’s weakness has failed to boost exports enough to slow this trend. For now, foreign investors keep funding the rising trade gap by buying more of UK’s assets.


3. This chart shows some Brexit scenarios. The “hardest” Brexit (#7) could be quite damaging to the economy.

Source: BMI Research


4. The November BoE rate hike probability remains near 80%.


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The Eurozone

1. Investors have taken quite a bit of money out of the largest Spanish equity ETF.


This Catalonia situation appears to have stabilized for now, sending Spain’s stock market higher.


2. The euro bounced on Tuesday.


Here is the euro risk reversal, pointing to higher demand for EUR/USD call options (investors betting on the currency’s appreciation).


Speculative bets on the euro’s appreciation also remain elevated in the futures market.


3. Italian industrial production continues to improve, beating economists’ forecasts.


Separately, Italy’s Target2 liabilities hit another record. This is the amount of money Italy’s central bank (Banca d’Italia) owes to the Eurosystem (mostly to the Bundesbank). These figures get netted (consolidated) at the ECB level.

Source: @Schuldensuehner


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1. Elsewhere in Europe, Norway’s inflation remains depressed, missing economists’ forecasts.


2. There is little support in the EU member states for leaving the union. However, many still want to hold referendums on the issue in their country.

Source: @pewglobal; Read full article


1. The Nikkei continues to climb.


However, a scandal broke out related to fraudulent accounting at Kobe Steel. The shares tanked. Will other firms be impacted?

Source: The New York Times; Read full article



2. The cross-currency yen swap basis continues to drift lower, suggesting tighter dollar financing for Japanese firms.



1. The renminbi bounced sharply after the holiday week on talk of Bejing widening the currency’s trading band.


2. China’s container shipping index has been declining recently.


Emerging Markets

1. The Turkish stock market bounced despite the spat with the US.


2. Egypt’s inflation seems to have peaked but remains above 30% (due to a massive currency devaluation last year).


3. Mongolia’s stock market has gone vertical on the IMF’s talk of releasing the next batch of the bailout money.


4. The NAFTA negotiations could be in trouble.

Source: @axios; Read full article


As a result, the Mexican peso continues to tumble.


Mexican longer-dated bonds also took a hit.


5. This chart shows the satisfaction with each nation’s president for the largest Latin American economies.

Source: BMI Research



1. Copper prices are climbing again.


Here is the Bloomberg industrial metals index.


2. Is gold a good hedge for stocks? The table below shows what happened during some large market corrections.

Source: @jessefelder; Read full article


3. Florida’s orange crop is at a 76-year low after Irma.

Source:; Read full article


Juice futures continue to climb.


4. US crude oil implied volatility is drifting lower. The market is discounting the risk of a significant near-term decline in prices.



Bitcoin appears to have hit resistance at about $4,900.


Equity Markets

1. The stock market’s historical (realized) volatility is near the lowest levels in decades.


2. Here is an intriguing study pointing to mean-reversion in the stock market. Sharp declines are frequently followed by a bounce. So much for the Markov property assumptions.

Source: Richardson GMP Research


3. Analysts continue to point to low bond yields as one of the factors making the current stock market valuations “reasonable.”

Source: Credit Suisse


And according to Credit Suisse, P/E multiples have more room to expand.

Source: Credit Suisse


Here is how the stock market performed over the decade that followed different P/E multiples.

Source: Credit Suisse


4. This chart shows the trends in free cash flow, dividends, and buybacks for the S&P 500 (ex-financials).

Source: Credit Suisse


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Here is the covenant-light share of the US leveraged loan market.

Source: @lcdnews; Read full article



1. Speculative accounts are betting on a further flattening of the Treasury curve.

Source: BMI Research


2. Are higher industrial metal prices pointing to further Treasury yield increases?




1. Direct lending continues to attract a great deal of money despite increased competition, higher leverage, weaker covenants, and lower spreads.

Source: @theleadleft, @Preqin, @josephncohen; Read full article


2. Private equity investments are taking longer to exit.

Source: @theleadleft, @PitchBook, @josephncohen; Read full article



Global Developments

1. The variability in the GDP growth across countries is the lowest in fifty years.

Source: BofAML, @tracyalloway


2. The IMF’s world GDP growth forecasts have been consistently too optimistic.

Source: Capital Economics


3. Is global trade about to peak?

Source: BMI Research


Food for Thought

1. The upper middle class – by race/ethnicity.

Source: @BrookingsInst; Read full article


2. President Trump’s approval ratings improved after the administration’s response to Hurricane Harvey. But now they are deteriorating again.

Source: RealClear Politics


Here is the change in approval ratings since January – by state.

Source: @businessinsider; Read full article


3. Russian military interventions in Europe.

Source: BMI Research


4. Relative CO2 emissions by region over time.

Source: @simongerman600


5. Teen births in the US.

Source: The Washington Post; Read full article


6. Regional opioid-related fatalities, with heroin and synthetics (such as fentanyl) broken out.

Source: @PotResearch; Read full article


7. Consumers around the world are buying more vitamins.

Source: @FT; Read full article


8. Education by age.

Source: @valuewalk; Read full article


9. Which home repairs do Americans prefer doing themselves (“DIY”) vs. hiring professionals (“Pro”)?

Source: John Burns Real Estate Consulting


And here are the DIY percentages by age.

Source: John Burns Real Estate Consulting


10. California wildfires from space.