Equities and the Economy:

• Stocks close basically unchanged.
• Bitcoin up 20% in 24 hours.

After falling for three days yesterday U.S. stocks ended fairly flat to Tuesday. The Dow fell 40 points to 24,141, the S&P 500 closed flat at 2,629 and the Nasdaq gained 14 points to 6,776. The S&P 500 is trading at 18.4 times earnings, the highest multiple since 2002, but many analysts think the multiple can go even higher driven by the expected steep drop in the corporate tax rate proposed in the tax reform bill which would boost earnings.

Turning to the economic news, the government reported worker productivity in Q3 rose 3%. This was double the 1.5% gain in Q2 and the strongest in 3 years. Both quarters are up materially from the scant 0.1% rise in Q1. These gains in productivity are why we can have an unemployment rate of 4.1% (basically full employment) without much wage inflation pressure. In fact, labor costs fell 0.2% in Q3 after an even bigger 1.2% decline in Q2. That data follows data last week noting GDP grew 3.3% in Q3 which followed a 3.1% growth in Q2. This was the first back-to-back gains of 3% or better in 3 years.

Yesterday the ADP Research Institute reported that U.S. nonfarm private sector employment rose by 190,000 in November. This was above expectations but below October’s increase. Per the Institute’s VP and co-head, “…the labor market continues to tighten…” This is the primary reason why there’s a 90% probability the Fed will raise interest rates at its meeting next week. The ADP report is closely watched as a clue to Friday’s Labor Department Employment Situation report.

Bitcoin has absolutely gone apogee!!! Yesterday its value blew through $13,000 and $14,000 and this morning it’s traded $15,058.30. That is, you gotta sit down for this, a 20% gain in 24 hours!!! If you had bought $1,000 in Bitcoin in July 2010 it’d be worth $286 million right now!!! Full disclosure here. I am not, and have not, been in Bitcoin. Guess I’m too old.

Back to boring equities, the Dow is down 34 points this morning.

Oil

• Prices have largest daily decline in almost 2 months.
• U.S. production continues to increase.

It was a very bad day for the bulls yesterday with oil prices getting bludgeoned. WTI lost $1.66, 2.9%, to $55.96 and Brent fell $1.64, 2.6%, finishing at $61.22. The EIA released its weekly crude and products report yesterday noting that while crude inventories last week fell by 5.6 million barrels, more than forecasts of 4.1 million barrels, traders focused on product inventories. Gasoline inventories had a whopping build of 6.8 million barrels and distillates rose by 1.7 million barrels for an aggregate build of 8.5 million barrels. The market was looking for an aggregate build of 4.2 million barrels. Additionally, remember I wrote earlier this week, the CFTC report showed the “specs” massively long. With the release of the EIA report the longs headed for the door, en masse.

The “crack” spreads (spread between the price of crude and the prices of products) is working well for refiners. Domestic refiners are operating at 93.8% of capacity which is up from last week. In fact, their gasoline production of 9.758 million bpd beat demand of 8.895 million bpd.

The EIA also reported that U.S. production rose to 9.7 million bpd last week, up 25,000 bpd. This is a recent record but short of the all-time highs seen in the 1970’s.

Courtesy of MDA Information Systems LLC

Natural Gas

• Prices end unchanged.
• Getting whacked this morning.

Gas prices chopped around all day yesterday and ended virtually unchanged with January gas up 0.8¢ at $2.922. Chatter. Let’s move on to this morning for natty is getting whacked trading down 9.7¢. You should have guessed it by now. The weather forecast in the 11-15 day time frame shifted materially warmer overnight showing the very cold weather in the Midwest and northeast retreating back to Canada. New York and the New England states will remain cold, but the trend is readily apparent. Except for that area the remainder of the country will actually have above normal temperatures. Prices are getting down to the level where electric generators will start buying more natty which will bring in price support. That level is from here ($2.85ish) down to $2.70. There’s a lot of winter left folks.

The EIA will release its weekly storage report today. Traders are looking for a small withdrawal of 1 Bcf.

Elsewhere

Today is the 76th anniversary of the attack on Pearl Harbor by the Japanese. Here are 12 interesting facts regarding the event.

• The attack commenced at 7:55 AM and lasted 110 minutes to 9:45 AM. Two waves of planes came 45 minutes apart.

• The U.S. aircraft carriers were the primary target of the attack but none were at the base at the time. Because of this, the Japanese cancelled a planned second attack.

• The Japanese fleet, which traveled 3,400 miles across the Pacific, consisted of 353 planes.

• The Japanese specifically chose to attack on Sunday believing the Americans would me more relaxed and less alert on a weekend.

• Many U.S. servicemen were either still in their pajamas or eating in the mess hall when the attack began.

• There were eight battleships at Pearl Harbor that day, which included all the battleships of the U.S. Pacific fleet save one, the Colorado.

• All eight battleships were either sunk of damaged during the attack. Amazingly, all but two, the Arizona and Oklahoma, were eventually returned to active duty.

• The Arizona exploded when a bomb breached its forward magazine (ammunition room). Approximately 1,100 U.S. servicemen died on board, including 23 sets of brothers. The ship is the site of a national memorial and fuel still leaks from the ship even today.

• To aid their airplanes, the Japanese sent in five midget submarines to help target the battleships. The Americans sunk four and captured the fifth.

• A total of 2,335 U.S. servicemen were killed and 1,143 wounded. 86 civilians were also killed and 35 wounded.

• The Japanese lost 28 planes, the 5 midget submarines and 65 men.

• President Franklin Delano Roosevelt made a last minute change to his famous speech changing “a day that will live on in world history” to “a day that will live in infamy.”

There will be no Blog tomorrow. I am travelling to Nawlins.