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Macro: Wholesale Trade: sales and inventories

Sales of durable goods at wholesalers remains in decline versus a year ago. The drop is from professional equipment (computers and software) and minerals…

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Sales of durable goods at wholesalers remains in decline versus a year ago. The drop is from professional equipment (computers and software) and minerals and metals. Non-durable has returned to growth. The growth is not broad but mostly about petroleum and to a lesser extent, drugs.

Durable goods’ inventories remain high while non-durable goods inventories have dipped just below the historic average.

Apparel stocks have been extremely weak. Much of the weakness is likely a result of ordering way too much inventory coming out of the pandemic and navigating supply chain issues. Inventory is still elevated, but coming down. We see the same dynamic in appliances/electronics and hardware/plumbing/heating.

One call out and area of concern is machinery, equipment and supplies. This would be everything from belts and hoses to pavers. The concern is about both levels and that it is not reversing. Why do we have so much of this stuff sitting around and why is it still building up?

Disclaimer: This information is presented for informational purposes only and does not constitute an offer to sell, or the solicitation of an offer to buy any investment products. None of the information herein constitutes an investment recommendation, investment advice or an investment outlook. The opinions and conclusions contained in this report are those of the individual expressing those opinions. This information is non-tailored, non-specific information presented without regard for individual investment preferences or risk parameters. Some investments are not suitable for all investors, all investments entail risk and there can be no assurance that any investment strategy will be successful. This information is based on sources believed to be reliable and Alhambra is not responsible for errors, inaccuracies, or omissions of information. For more information contact Alhambra Investment Partners at 1-888-777-0970 or email us at info@alhambrapartners.com.

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International

English football is ready for a rule change when it comes to financial management

Why creating an independent regulator is a good move.

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27 mins ago

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November 10, 2023

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Billion Photos/Shutterstock

Football fans are frequently involved in heated arguments over the rules of the game. Soon it will be the turn of elected politicians to debate new regulations which govern how the sport in England will be run.

On November 7 2003, the UK government announced a new bill which aims to “safeguard the future of football clubs for the benefit of communities and fans”.

Central to the new legislation would be the creation of an independent football regulator to address “systemic financial issues in football”. It would also seek to preserve club heritage, protect the voice of fans, and safeguard against breakaway competitions such as the doomed attempt by six Premier League clubs to form a European Super League in 2021.

When that happened, fans were quick to show their anger, the government threatened a “legislative bomb” and eventually the English clubs backed down.

But that episode was part of what led to the fan-led review of English football being published in November 2021. And one of its main recommendations was the creation of an independent football regulator to deal with the finding that “without intervention, football at many levels risks financial collapse”.

Ultimately, the concern is that English football club finances are not in a strong position, with many clubs losing money both before and after the pandemic. This has been particularly bad in the Championship (English football’s second tier), where efforts to get promoted to the extremely lucrative Premier League have led to risky behaviour.

The potential disastrous outcome of weak finances was illustrated in 2019 by the sad demise of Bury FC, which was expelled from the English Football League (EFL) after 125 years of membership for being unable to pay its bills. (Fans have since worked hard to rebuild the club, which now plays in a regional league.)

The saga at Bury showed how football clubs going into administration has a wider impact on local communities, with businesses losing custom and people losing jobs. The independent regulator is due to oversee changes that will seek to avoid a repeat of this happening elsewhere in the top five tiers of men’s football in England (Premier League, Championship, League One, League Two and the the National League).

The precise make up of the independent regulator – who will appoint the key personnel, where the funding will come from, what scope it will have in terms of sanctions and punishments – is yet to be made clear. But so far, the idea has received plenty of backing from the football world.

Fans appear supportive, as has the EFL. Research also indicates that regulators in other industries have been known to fix issues where the market has failed its customers (which in this case would be fans and local communities).

Financial fitness

But not everyone is cheering. The Premier League has objected to the idea, fearing that increased requirements over financial reporting and monitoring may put off future investors. Research suggests they may have a point, and that heavy regulation can lead to inefficiency and reduced resources.

But despite those concerns, change to the financial side of football looks to be gaining momentum. Uefa has updated its regulations to limit squad costs to 70% of income for all clubs playing in European competitions .

And there have already been governance changes in English football since the publication of the fan-led review. The English Football Association brought in a rule to protect team strip colours and club crests from unwanted changes, as well as a code of governance which includes board member term limits and targets for diversity and inclusion.

Meanwhile the Premier League has introduced a “fan engagement standard” designed to improve the involvement of fans in decision-making, and have moved to strengthen ownership tests.

All of these changes are designed to make the sport more resilient; to prevent the collapse of clubs which have been part of their communities for decades. Football fans throughout the leagues will be hoping they succeed.

Christina Philippou has consulted with DCMS, teaches on the Premier League's Workforce Learning and Development program and is affiliated with the RAF FA.

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Government

Outsized Yield Swings Defy Bond Traders Bets For Calm

Outsized Yield Swings Defy Bond Traders Bets For Calm

By Garfield Reynolds, Bloomberg Markets live reporter and strategist

Treasuries tumbled…

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56 mins ago

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November 10, 2023

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Outsized Yield Swings Defy Bond Traders Bets For Calm

By Garfield Reynolds, Bloomberg Markets live reporter and strategist

Treasuries tumbled to undo part of this week’s sharp rally, and once more the longer end of the curve was a key pain point.

Federal Reserve Chairman Jerome Powell’s pushback against the idea that interest rate hikes are done undoubtedly played a role, the spike in yields was the largest for 20- and 30-year notes.

That was more about fresh concerns that investors will struggle to absorb the swelling supply of US government securities.

The result was another day of outsized yield moves, as Treasuries defy traders’ expectations for a calmer market now that the Fed is at the very least close to the end of its tightening cycle. Just take a look at the widening gap between actual and implied volatility for the iShares 20+ Year Treasury Bond ETF.

Actual 30-day price swings for the $42 billion fund keep climbing to make fresh post-pandemic highs, despite the drop in expected volatility to the lowest in September.

 

Tyler Durden Fri, 11/10/2023 - 10:20

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Uncategorized

Consumption leads (longer term) unemployment, too

  – by New Deal democratOnce again there is no new economic data, so let me follow up some more on the issue of longer term unemployment.Earlier this…

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1 hour ago

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November 10, 2023

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 - by New Deal democrat


Once again there is no new economic data, so let me follow up some more on the issue of longer term unemployment.


Earlier this week I pointed out that just as initial claims lead continuing claims, so does short term unemployment (under 5 weeks) lead long term unemployment (15 weeks and over). Think of unemployment as a pipeline, and the intake flows before the main body of the pipeline.

Yesterday I followed up by noting that just as initial claims lead the unemployment rate, so continuing claims lead long term unemployment.

Because one of my persistent themes over the years has been that consumption leads employment, let me take a little time and briefly examine a variant of this: does consumption lead *unemployment* as well?

The answer is, generally speaking, yes it does.

First, let’s look at the YoY% change in real retail sales going back 75 years to the inception of the series in 1948 (red) and compare it with the YoY% change in unemployment for 15 weeks and over (inverted, blue):




With the sole exception of the 2001 recession, where the consumer barely participated at all, the answer is pretty clear: while real retail sales are noisier, they clearly turn up and down before longer term unemployment turns.

Now let’s look at the post-pandemic record:



Once again real retail sales turned down YoY about 6 - 9 months before longer term unemployment rose. 

Next, let’s compare real retail sales with continuing claims, which as noted above, lead longer term unemployment as well:



Although sales are much noisier than continuing claims, and there is clearly no one-to-one relationship, in general sales turn up or down coincident with to slightly before the turn in  continuing claims.

Here is the post-pandemic look at that relationship as well:



Sales decayed first, although both crossed the zero line coincidentally. 

YoY real sales have been getting “less negative” and turned slightly positive in September. October’s retail sales will be reported next Wednesday. If the recent improving trend continues, this would be more confirmation suggesting that long term unemployment is not going to significantly worsen in coming months, contra the historical pattern highlighted by Cullen Roche and others.

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