To the superficial observer, October will go down as a time in which nothing much happened, the S&P and the Nikkei basically unchanged on the month and Europe and the UK each off around 1%. Please see below the fold for the rest of Monday’s edition of ‘Two-Minute Markets’ or listen HERE on SoundCloud
Oil, too, is struggling once more – with losses fast approaching 10% now as the specs who hold over a billion barrels’ equivalent longs on the main exchanges are showing increasing signs of impatience at the unending to and fro of all the OPEC/non-OPEC deliberations.
As we noted, Friday, the equity doldrums stretch back a lot further than just the past four weeks, with the average US stock having made no onward progress since mid-July – a period during which, if you squint just right, you can see that prices have traced out one of those ominous patterns the chartists love so much, the dreaded Head & Shoulders.
Part of the explanation for this may lie in the fact that Corporate Executives are no longer resorting to quite such intensive use of accounting smoke and mirrors to boost their results.
As the Trim Tabs agency revealed, announcements of intent to buy back corporate equity are running some 30% below where they were last year, with the number actually carried out by those companies which have reported so far this quarter off by a not wholly dissimilar 26%, according to Standard & Poor’s.
The reason this matters, in case you were wondering, is that we hardly ever hear anyone talk about the actual dollars and cents a company earns in any given period, but only about the amount it earns per share.
Reduce that latter denominator either by diverting the company’s own internal funds to retiring equity or – more pernicious yet – by issuing debt in order to do so and that headline number rises in inverse proportion, so keeping the stock-option superstars in the C-suite smiling sweetly as the champagne corks pop beside them.
Whether the present moderation has its roots in a lack of organic cash flow or the first signs of a chill being caught from a far more frosty bond market, it is too early to tell, but it certainly removes one very important buyer from the market, namely, the company itself.
Finally, a quick word about the increasingly controversial Governor Carney, over there at the super-soaraway, Bank of England.
We shall pass over our distaste for the immodesty of the statement issued on his behalf that he ‘wishes to be at the helm to steer Britain through the challenges which lie ahead’ and simply point out that if the fate of a nation of 60 million-odd reasonably enterprising, fairly well-educated souls is seen to depend principally on whether this or that unelected technocrat has his hands on the levers of power, it is a sorry testimony to our lack of faith in both free markets and human endeavour and, conversely, to our wild overestimation of the ability of experts and central planners, both!
No matter whether this turbulent monetary priest stays or goes – and it would seem that a carefully orchestrated chorus of support has since assured him of a triumph over the increasingly rudderless new Prime Minister – be assured that Albion’s sceptred isle will be set in its silver sea, regardless – though it may be that the currency in use therein may sink a little faster and the tally of unproductive borrowing rise a little more quickly in one case than the other.