Bloomberg
“What on Earth Happened to Stocks? Here’s Where to Cast the Blame.”
The sharp sell-off in stocks that started last week and gathered steam this week lacked a specific trigger — unlike the last time U.S. shares fell this much, which came in the wake of the U.S. losing its AAA sovereign rating at S&P Global Ratings in 2011. Experts are pointing to a confluence of factors, from concerns over the path of Federal Reserve interest-rate increases to a rapid unwinding of trades predicated on continued low volatility in markets.
Longer-dated U.S. Treasuries stubbornly refused to budge much after the Fed kicked off monetary tightening in 2015. The narrative was that with a «Goldilocks» economy of growth without much inflation, long-term borrowing costs could stay low. And that was all bullish for stocks. Then yields started popping higher last month. Some warned that if 10-year yields punched through 2.6 percent, it would spell trouble for equities. They were right.
Then a $1.5 trillion tax cut was enacted just as the economy expanded an average 3 percent over the last three quarters of 2017. Friday’s U.S. employment report suggested wage gains are picking up — potentially boosting inflation. Combined with a changing of the guard in Fed leadership, it all raised the question of whether indeed policy makers would stop at around 3 percent for the upper band of the target. And it may be weeks before investors hear from the new chairman, Jerome Powell.
The popularity of short-volatility bets showed its ugly side Monday, as selling from trend-following strategies contributed to the mini flash crash that hit U.S. equities around 3:10 p.m. on Wall Street, according to JPMorgan Chase & Co. strategists Marko Kolanovic and Bram Kaplan. A rise in realized volatility on Friday had been significant as it was a signal for many related strategies to bail out of risk, they wrote. A continued surge will probably spur a total of $100 billion of outflows from U.S. stocks by funds following so-called systematic approaches, they estimated.
U.S. stock valuations were heading to extreme levels, even by the elevated standards of the past three decades. The Shiller P/E Ratio, a measure based on comparing prices with cyclically adjusted earnings, climbed more than two standard deviations above the average of the last century — only for the third time, after the dot-com bubble and the roaring ’20s surge that ended with the Great Depression.
Reuters
“Mexico consumer confidence dips amid NAFTA uncertainty.”
Mexico’s consumer confidence index dipped to 85.9 in January when adjusted for seasonal factors, falling 3.1 percent from the previous month, the national statistics agency said on Tuesday.
Despite the month-on-month drop, consumer confidence was up 23 percent from January 2017, when the inauguration of U.S. President Donald Trump sparked widespread concerns about the prospects for the Mexican economy after he repeatedlly attacked Mexico on the campaign trail.
Nevertheless, ongoing uncertainty continues about the future of the North American Free Trade Agreement, a critical pillar of the nation’s economy, which caused the Mexican peso to vacillate widely in January. Consumers have also been hit by high inflation and interest rates.
Mexicans’ willingness to buy a big-ticket item like a TV or washing machine fell 1.6 percent from the previous month. Similarly, Mexicans’ perceptions of the economic prospects of their households and the nation as a whole fell 1.4 percent and 2.4 percent, respectively.
The unadjusted index was 84.2 during the month..
BBC News
“Elon Musk’s huge Falcon Heavy rocket set for launch.”
Elon Musk will attempt to fly the world’s most powerful rocket later with his own sports car on the top. The US entrepreneur’s Falcon Heavy launcher is designed to have twice the lifting capacity of any other vehicle.
But because of the historic high failure rate of maiden flights, only a dummy payload is being risked. Mr Musk has decided this should be his old cherry-red Tesla roadster with a space-suited mannequin strapped in the driver’s seat.
David Bowie’s classic hit Space Oddity will be looping on the radio as the car is hurled into an elliptical orbit that stretches out to Mars’ orbit around the Sun.
«[The roadster will] get about 400 million km away from Earth, and it’ll be doing 11km/s,» he told reporters in a briefing on Monday. «We estimate it will be in that orbit for several hundred million years, maybe in excess of a billion years.»
Three cameras attached to the car would provide «epic views», Mr Musk added. Thousands of spectators are expected to descend on Florida’s Kennedy Space Center to witness the ascent, which could occur as early as 13:30 EST (18:30 GMT). Mr Musk’s rocket company, SpaceX, has given itself three hours to get the vehicle up on Tuesday. If technical glitches lead to a postponement, a second attempt will be made on Wednesday.
The Falcon Heavy is essentially three of SpaceX’s workhorse Falcon 9 vehicles strapped together. But the triple-booster configuration has demanded a number of specific alterations, including a strengthening of the central core booster.
The 27 Merlin engines at the base of the rocket should be capable of generating almost 23,000 kilonewtons of thrust – slightly more than double that of the world’s current most powerful rocket, the Delta IV Heavy, which is operated by US competitor United Launch Alliance.
Bloomberg
“A Driverless Future Threatens the Laws of Real Estate.”
The link between property and transport has been perhaps the most durable in human history.
Since the ancients, few things have delivered higher land values with more certainty than advances in transport, from roads to canals, railways to highways.
It’s still “a no-brainer” in the 21st century, says Bridget Buxton. She bought a fixer-upper with her husband in a scruffy part of east London in 2016 because it’s a short walk to the high-speed crosstown rail line due to open this year. Prices are up 90 percent in the past five years for homes like hers, far outpacing the whole city.
But now, the dawn of the driverless car—promising a utopia of stress-free commutes, urban playgrounds and the end of parking hassles—threatens to complicate the calculus for anyone buying property.
They’re just starting to think about what to do with all the space that could be freed up in a world where cars no longer sit idle for an estimated 95 percent of the time, whether unloved areas without mass transit might soon become more attractive, whether out-of-the-way greenfield sites will become valuable locations for warehouses.
In New York City, parking covers an area equivalent to two Central Parks, according to estimates published by Moovel Lab, a Stuttgart-based research unit of Daimler AG; London would gain space equal to almost five Hyde Parks without its car-parking spaces.
Then again, the disruption offers blessed relief to the working world’s most harried people—commuters—foretelling a new era of sprawl by encouraging development of outlying areas.