Texas Suffers a Deep Freeze That Pushes Energy Offline… The Lone Star State experienced historically low temperatures that brought some of the nation’s energy complex to a halt as refiners shut down and the Houston Ship Channel stopped traffic.
What it means— This is no fun. Roughly 1.4 million people were without power just in the Houston area for days, as the temperature remained below freezing and dropped to the mid-teens. As the power came back online, frozen pipes that had burst then thawed, wreaking havoc and leading to a water shortage. Adding to the human misery, portions of the energy complex shut down, causing gasoline shortages. The ripple effect drove oil prices higher, and now Saudi Arabia plans to bring more production back online instead of continuing with current quotas.
January Retail Sales Jumped 5.3%, Far Surpassing the Expected 1.2% Gain… Flush with stimulus checks approved in December, consumers were out in force last month.
What it means— The boost in retail sales last month provided a shot of good news after retail sales fell 1% in December. Government officials around the nation slowly reopened the economy at the same time that consumers received the latest round of stimulus checks. The good news likely will fuel a debate over the need for President Biden’s proposed $1.9 trillion relief package or at least over the size of the measure.
January Housing Starts Fell 6% From December and Were Down 2% From Last Year… Builders started construction on homes at an annualized rate of 1.58 million units last month.
What it means— Not much. The statistics on housing starts are
notoriously volatile, and when we add in the craziness of winter weather, the seasonal adjustments just make it worse. Housing starts didn’t fall off a cliff or shoot to the moon, and we still have a supply issue in the real estate market, with too many buyers picking over too little inventory. That’s about the most we can get out of the latest figures.
Minutes of January Fed Meeting Show Consensus on Easy Money… The minutes reflected that the meeting was more optimistic than previous meetings and that the voting members agreed on low rates and bond buying to keep the recovery on track.
What it means— Inflation’s not a four-letter word, but it might as well be, considering how hard the central bankers are working to avoid the subject. In the latest minutes, the voting members of the Fed’s Open Market Committee agreed that there are good signs of growth across the economy, but they also agreed that they’re not concerned about inflation.
In fact, they see a greater risk from low inflation than rising prices. The minutes matched Fed Chair Powell’s comments after the last meeting, so they contained no surprises.
January Existing Home Sales Up 0.6% Over December, and Up 23.7% Over Last Year… The annualized sales rate increased to 6.69 million units, the second-highest rate since 2006.
What it means— The real estate market didn’t take a break in January, as sales shot higher and available inventory shrank. At the current sales pace, inventory sits at just 1.9 months’ supply. Almost all of the action is at the higher end, with sales of homes priced for less than $100,000 dropping 28% over the last year, and million-dollar-home sales increasing 77%.
The heavier weighting toward pricier homes drove the median sales price to $303,900, the highest level ever recorded for a January. With rates low and the equity markets high, people with assets are buying homes like crazy and clearly are willing to pay up.
Japan’s Nikkei Index Breaks 30,000 Again, after a 30-Year Wait… Japan’s stock market last reached that milestone in the spring of 1990.
What it means— Japan was the economic miracle of the 1970s and 1980s, but the debt- and cheap currency–fueled bubble eventually burst in 1989, when the Nikkei reached almost 39,000. The Japanese economy rolled over, as debt went unpaid and the markets imploded. The Nikkei fell below 8,000 in late 2002 and fell below 9,000 as recently as 2012, just before Abenomics took hold.
Pushed by former Prime Minister Shinzo Abe, these economic policies included printing gobs of yen, which the Bank of Japan first used to buy almost all available government bonds and then used to buy stocks becoming the country’s largest stockholder. The country’s economic growth has been tepid over the last nine years, but the Japanese stock market has been on fire.
Business Software Solution Provider MicroStrategy Becomes Bitcoin Hedge Fund… MicroStrategy made waves last summer when it announced that it had spent $500 million in cash reserves to buy Bitcoin. The company then issued $650 million in debt in December to buy more Bitcoin and is now offering a $900-million convertible security with a zero coupon, and the proceeds will be used to buy more Bitcoin. The company’s stock is up more than 350% since last summer, because Bitcoin has zoomed higher. MicroStrategy has transformed from a company that decided to hold Bitcoin into a Bitcoin fund that happens to own a company.
It’s all fun and games until the cryptocurrency hits the next rough patch, but then we can expect both Bitcoin and the shares of MicroStrategy to fall from the stratosphere.
Data supplied by HS Dent Research
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