First, the scoreboard:
- Dow: 17,734.71, +101.60, (0.58%)
- S&P 500: 2,067.38, +12.37, (0.60%)
- Nasdaq: 4,879.58, +32.95, (0.68%)
- WTI crude oil: $38.32, +$0.04 (0.1%)
Bill Gross
Bill Gross published his latest investment outlook on Wednesday.
As usual, it had words of advice with some pretty scary warnings.
The manager of Janus Capital's Unconstrained Bond Fund told central banks world over that they had better get economic growth going, or risk destroying capitalism - or something close to that.
Here's Gross, with targets for some major economies:
To me, in the U.S. for instance, that means nominal GDP growth rates of 4-5% by 2017 - or else. They are now at 3.0%. In Euroland 2-3% - or else. In Japan 1-2% - or else. In China 5-6% - or else. Or else what? Or else markets and the capitalistic business models based upon them and priced for them will begin to go south. Capital gains and the expectations for future gains will become Giant Pandas - very rare and sort of inefficient at reproduction.
His premise is that the era of negative and artificially low interest rates could run out of steam, and central bankers were wrong to think they could sustain global economic growth with these tools.
As for the advice, Gross said investors should grow up, literally.
He said investing was one-third math, one-third economics, and one-third horse-trading. And investors are failing the first part, much like elementary school kids still learning.
For instance, Gross questions why investors keep buying bonds with negative yields, when someone in the market would eventually have to bear the losses of sub-zero rates.
And so in short, he thinks the combo of slow growth, negative-rate polices and the investors who choose to buy bonds with negative yields are not good at all.
US economy
ADP Research Institute reported a robust 200,000 gain in private payrolls for March.
Good news in the details included a rebound in manufacturing jobs to a gain of 9,000 from a decline of 3,000 in February. The not-so-bad news was a slowdown in jobs in the outsized service sector.
That's because, simply put, "the job market continues on its amazing streak," according to Moody's Analytics' Mark Zandi in the release.
ADP's numbers were published ahead of Friday's official jobs report, which is forecast to show the economy added 205,000 jobs in March.
We would repeat, via several economists, that you shouldn't necessarily take your cue for Friday's report from ADP payrolls.
Pantheon Macroeconomics' Ian Shepherdson, for example, has said that the model is based on lagged official data.
Housing
Lennar reported a solid quarter on Tuesday, as the supply shortage helped to boost home prices and subsequently, its homebuilding revenues.
On the earnings call, CEO Stuart Miller laid out what's causing this new housing crisis:
"Land and labor shortages will continue to constrain supply and constrain the ability to quickly respond to growing demand while the mortgage market will continue to constrain purchaser's access to mortgages."
Quite simply put.
I spoke to the National Association of Homebuilder's chief economist Robert Dietz today.
One of the interesting things he touched on was the misconception that the inventory crisis can be "fixed" just by building more homes. It's not that simple. He said a lot of that sort of clamoring comes from the universe of realtors, where everything is hinged on how much sales and turnover they can generate.
Now, the NAHB interfaces with thousands of small-to-midsize builders across America, who do most of the housing activity we write about. And so people listen to what they have to say.
Dietz touched on the labor issue in the market. Besides the shortage of workers, something perfectly normal is also shaping up to hurt the market even more.
While the rest of us (and construction workers) are hoping for decent wage growth, that would mean homebuilders see their costs continue going up. And you can guess where those costs would filter through to: homebuyers.
Additionally:
Dubai is introducing a service fee at its airports because of the oil crash