Odds and Ends: January 2019

The stock market has rebounded, but it has reached the 50% Fibonacci retracement level. This is the point where everyone at Evolution of Democracy sees as a consolidation point. The tell sign has been the trading volume, which has declined with each increment upward. The market will be continually effected by news, especially dealing with the trade tensions with China and the UK Brexit in Europe. With that said, the quarterly earnings reports have begun. The banks were first up and the overall results have been to the upside.
Firm                                                        Results                                        Outlook
*Citi Group> posted better than expected, but cost cuts were the reason.    Fed dependent
*J.P. Morgan>had earnings miss, but better trading improved bottom line.  upbeat
*Wells Fargo>also missed, but the buyback of shares improved bottom line. Court costs are up.
*B of A> beat on earnings and revenue.                                                          upbeat
*Goldman Sachs> solid earnings, but still has Malaysian issue.                    upbeat
*Morgan Stanley>profit fell below expectations.                                          Fed dependent
Note: the 6 biggest banks pulled in $100 billion in profits in 2018.
Large Regionals
*US Bank> profit up big(10%).                                                                      upbeat  
*BB&T>   solid quarter.                                                                                 upbeat
*American Express>record quarter                                                          lowered expectation
*Capital One>missed numbers                                                                      Fed dependent

I will add this very important point that was reported recently. World debt is $340 trillion which is more than 3x the total of the world's GDP. Look at this another way. According to bank lending standards to qualify for a home loan mortgage, the world could not meet the standards for a home loan. We are floating on debt like the pollution floating around in a circle in the Pacific Ocean. This is not healthy and very dangerous.

Housing

Treasury secretary, Steven Mnuchin stated that he has President Trump's blessing to work out a plan to make the government mortgage companies, Fannie Mae and Freddie Mac, private concerns. I don't see it happening.
The housing market itself has shown declines in sales for 5 straight months, but looking closer reveals a more serious problem. The percentage declines for the last three months is very scary. They are -16%, -19% and -18%.
In a related report, it is noted that severe weather could cause the next housing crisis. The report uses the latest causalities in Houston and locations in California that suffered with wildfires. Houston is a strong market with a strong economy and still it suffered many foreclosures. It is too soon to evaluate California, but there point is valid. Your neighborhood could become a ghost village due to weather and calamities.
In still another related story the on-going drama around PG&E, the very large California utility. Reports are surfacing pointing to the utility for causing a few of the wildfires within the state. The stock has plunged. It is getting worse. Shareholders could be wiped out as the utility says that it will seek bankruptcy protection. Funny, your business is dying You are facing bankruptcy and that is your salvation? Only in America.  Anyway, the market cap is $3.8B and the bond holders have $30 billion in notes, but the future liabilities are estimated at $40 billion. Now, there are many institutions holding these bonds and I'm sure some have protection like with derivatives. Can you see where this is going? This will cause a domino of losses and this story is just beginning. Yowza!

Auto

Ford will build an electric F-truck series model with more power than its current gas version.
Goodyear missed on earnings and declining sales continues a negative trend.
Tesla will cut workers as well as GM, but European firms are expanding in the US. I should say the South which is anti union. My southern buddies will regret that point some day.
I give credit and a shout out to Jeep which is expanding and in the Motor City. Good for them!

OIL

OPEC reported its largest monthly drop in exports. They are going to the playbook of supply and demand. They have succeeded in getting the price of oil up. Eventually, this will hit the US consumer in higher gasoline prices. At the moment, I see a consolidation of gains with Iran being a very important cog in the future price of the commodity.

To me, the above are the most important aspects to our economy and global concerns. The January barometer looks good, but the legacy behind it was wrong for 2018. I prefer the Super Bowl theory.
By the way, Happy Birthday to JFL!