The final November fund flow numbers are in, and as BofA’s Michael Hartnett puts it, November, it was a “watershed” month for fund flows with the largest 5-week
bond outflows in three and a half years at $10 billion…

… the largest 3-week precious metals outflows
in 3.5 years…

… and the largest 5-week equity inflows since October 2013 at $34.5 billion.

Focusing on just the last week, the “Trumpflation rotation” out of bonds and into stocks continued, with $4.4 billion in bond outflows, $0.6 billion precious metals outflows vs $1.2 billion in  equity
inflows according to Bank of America, which writes that investor flows have stabilized following violent post-US election flows; In fact, a mini revulsion may already be forming with the first TIPS outflows in 6 months, first EM equity inflows in 5 weeks, first HY bond inflows in 5 weeks and first utilities inflows in 5 weeks.

Some further observations from Hartnett who notes that while November was “Fast & Furious” there was no Euphoria: despite the strongest 4-week equity inflows in 2 years, a sharp drop in FMS cash to 5.0% and a big US equity rally, our sentiment signals have actually shifted in a more contrarian bullish direction in recent weeks. In fact, our BofAML Bull & Bear Indicator has fallen to 3.0, the lowest reading in 4 months, on the back of big redemptions from high-beta EM equity funds, EM debt funds & HY bond funds.

Broken down by asset class shows that the trend of flows out of active managed funds and into ETFs continued:

• Equities: small $1.2bn inflows (note $6.3bn ETF inflows vs $5.2bn outflows from mutual funds)
• Bonds: $4.4bn outflows (5 straight weeks = longest streak in 14 months)
• Precious metals: $0.6bn outflows (3 straight weeks)

Looking only at Equity Flows:

• Europe: $2.0bn outflows (largest in 11 weeks)
• US: $4.4bn inflows (4 straight weeks)
• EM: ekes out first inflows in 5 weeks (albeit small $0.1bn)
• Japan: small $0.1bn inflows
• By sector: 10 straight weeks of financials inflows ($0.6bn); 4 straight weeks of REITs outflows ($0.1bn)

And then fixed income, which saw 5 straight weeks of outflows from muni bond funds ($1.6bn)

• 4 straight weeks of outflows from IG bond funds ($2.4bn)
• 4 straight weeks of outflows from EM debt funds (albeit small $0.1bn)
• 3 straight weeks of outflows from govt bond funds ($0.7bn)
• First TIPS outflows in 25 weeks ($0.3bn)
• First HY bond inflows in 5 weeks ($0.6bn)
• Inflows to bank loan funds in 20 of past 22 weeks ($0.6bn)

However, it may all go just as fast as it came: according to Bloomberg, U.S. global-focused ETFs saw a net $742.5m of capital outflows on Dec. 1 – the funds have shrunk a net $1.5b in the past five days. Investors have put a net $23.3b into the funds in 2016. Should the risk-off sentiment persist, more outflows are likely.

While the headline November payrolls print came in almost on top of expectations at 178K, vs consensus of 180K there were two big surprises in today’s report, one being the unemployment rate which plunged from 4.9% to 4.6%, well below the 4.9% expected, but the biggest negative surprise was that the Average hourly earnings in November dropped by 0.1%, far below last month’s 0.4% rise, and below the 0.2% expected with the annual increase growing by a far more modest 2.5% than the 2.8% expected.

The change in total nonfarm payroll employment for September was revised up from +191,000 to +208,000, but the change for October was revised down from +161,000 to +142,000. With these revisions, employment gains in September and October combined were 2,000 less than previously reported. Over the past 3 months, job gains have averaged 176,000 per month.

One red flag in the report was the 4,000 drop in manufacturing workers, worse than the -3,000 expected, and following last month’s -5,000 print. Also of note, workers unable to work due to bad weather according to the BLS were 19K in Nov. The historical average for Nov. is 72k employees cannot work due to poor weather conditions.  Another 113k workers who usually work full-time could only work part-time due to the weather last month.

The reason for the steep drop in the unemployment rate is that while the number of employed rose from 151,925K to 152,085K, coupled with a decline in the number of unemployed by 387K, the number of people not in the labor force soared to 95.055 million, a new all time high, which in turn pressured the labor force participation rate to 62.7%, the lowest since June and just shy of the 30 year low.

But as noted above, the biggest surprise was the negative print in the average hourly earnings which declined by 0.1%, the first negative print in 2016 and the wrst print since 2014.

More details from the report:

 Total nonfarm payroll employment rose by 178,000 in November. Thus far in 2016, employment growth has averaged 180,000 per month, compared with an average monthly increase of 229,000 in 2015. In November, employment gains occurred in professional and business services and in health care.

Employment in professional and business services rose by 63,000 in November and has risen by 571,000 over the year. Over the month, accounting and bookkeeping services added 18,000 jobs. Employment continued to trend up in administrative and support services (+36,000), computer systems design and related services (+5,000), and management and technical consulting services (+4,000).

Health care employment rose by 28,000 in November. Within the industry, employment growth occurred in ambulatory health care services (+22,000). Over the past 12 months, health  care has added 407,000 jobs.

Employment in construction continued on its recent upward trend in November (+19,000), with a gain in residential specialty trade contractors (+15,000). Over the past 3 months, construction has added 59,000 jobs, largely in residential construction.

Employment in other major industries, including mining, manufacturing, wholesale trade, retail trade, transportation and warehousing, information, financial activities, leisure and hospitality, and government, changed little over the month.

The average workweek for all employees on private nonfarm payrolls was unchanged at 34.4 hours in November. In manufacturing, the workweek declined by 0.2 hour to 40.6 hours, while overtime was unchanged at 3.3 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls was unchanged at 33.6 hours.

In November, average hourly earnings for all employees on private nonfarm payrolls  declined by 3 cents to $25.89, following an 11-cent increase in October. Over the year, average hourly earnings have risen by 2.5 percent. Average hourly earnings of private-sector production and nonsupervisory employees edged up by 2 cents to $21.73 in November.

Submitted by Joseph Jankowski via PlanetFreeWeill.com,

Writing for Yahoo News, National Political Columnist Matt Bai provides a suggestion to combat the so-called “fake news” epidemic that has become a major talking point of the mainstream media since Donald Trump’s victory in the presidential election. According to Bai, we should be “teaching our kids how to consume” information in an age where the internet has provided a press to anyone with a computer and a router.

Within his article, titled “The real problem behind fake news“, Bai calls fake news a “searing hot topic these days” and mentions the infamous WaPo article which cites a shadowy, anonymous organization known as PropOrNot (Propaganda or Not) that smears many legitimate conservative and libertarian news sources like Zero Hedge, Infowars, Breitbart, World Net Daily and The Ron Paul Institute as Russian propaganda.

That WaPo article highlighted what was the second blacklist of websites to make its rounds in the mainstream press last month. The first list was put together by a nobody liberal professor from Merrimack College (let me tell you how worthy of circulation that is).

Bai writes:

The emergence of “fake news” is a searing hot topic these days, as you’ve probably heard — a new, truth-free media to go with our new, truth-free politics. The Washington Post reports that a lot of these phony stories, some of which probably influenced the election in at least a tangential way, originate with Russian “bots” programmed to confuse American readers. (Payback, I guess, for all those years when Voice of America did the same thing.)

Under enormous pressure, Facebook and Google have now promised to do a better job of curating the content that populates their sites. Which is all very comforting, if you really want software engineers assuming the role of civic arbiter that has traditionally fallen to journalists. I don’t.

And the problem with cracking down on social media sites is that it’s a little like the war on drugs. You can try to stamp out the supply of garbage news, but the Web is a vast place, and as long as someone can make money off misinformation, it will always find a crack through which to seep.

Aside from citing the WaPo hit piece on basically all effective news outlets outside the MSM realm, Bai is being reasonable. Most will agree, it is better not to have Facebook and Google taking on the role of civic arbiter and information gatekeeper. And the promoting of a crackdown on social media could lead to the very slippery slope of censorship.

The Yahoo News journalist goes on to writes:

No, the long-term solution here is about stemming the demand. The answer doesn’t lie in hectoring tech companies into policing content, but rather in teaching our kids how to consume it.

Bai says that “navigating the news media isn’t intuitive anymore” and compares it to flying a plane rather than driving a car.

“A Big Bang at the genesis of the Internet age” has fractured the entire (Media) industry and its audience into a million pieces,” he says.

“The proliferation of social media and the rise of mindless aggregation” is also causing this problem of “fake news” reaching the masses, Bia writes.

My kids will spend months of their young lives studying the Revolution and the Civil War and the advent of mass production, which is fine. In grade school, they spend some part of every year revisiting the social movements of the ’60s, which is noble and important.

But what’s called “media literacy” in the education world — the ability to consume torrents of information with some level of competence and sophistication — is still an outlier in social studies curricula, despite having been discussed now for decades. Even when it’s taught, it’s crammed into a high school unit, by which time today’s grade-schoolers will have been surfing YouTube for half their lives.

It seems like a great idea, teach kids how to objectively analyze the media. But, if we are to take the mainstream media’s labeling of “fake news” seriously, we will find ourselves telling our children that only big networks like CNN and MSNBC are trustworthy sources.

The real problem with the entire fake news narrative is that “fake news”, by PropOrNot’s definition, is really not a problem at all.

The mainstream media is telling everyone that since Google’s algorithm made a mistake by linking to a false news report, individuals now must surrender their ability to look at things objectively and only trust the big news networks.

Just look at PropOrNot.com’s blacklist, it is full of alternative news sites that now have large enough audiences to bang heads with the corporate controlled press. And considering that the trust in the mainline news is equal to that of trust in congress, this can only be seen as a way to discredit the grassroots news organizations that are threatening the old media’s reign.

The labeling of fake news should be left up the internet user who might stumble across some wrong information or even some disinformation.

It would be foolish to allow the mainstream press, an unknown organization that hides its identity and a leftist professor that teaches feminist media studies, to provide what is real and what is not.

I would also not be too enthusiastic on the public school system, that runs off federal funding, embracing the rise of alternative voices in media that are usually critical of government (the way it is suppose to be).

Matt Bai ends his piece for Yahoo with a very laughable thought.

Here’s a radical thought: If President Trump is looking for a bold and useful education initiative that might serve the incidental purpose of redeeming what’s left of his soul, media literacy would be a pretty good place to start. Getting behind a nationwide push in K-through-12 classrooms could be an important and unifying priority for the incoming education secretary, Betsy DeVos.

Willingly or not, Trump has done more than anyone else to expose the problem. The least he can do is begin to address it.

HA!

You mean the Donald Trump that absolutely ridiculed the mainstream media during a meeting last month over their blatant bias coverage of the election and misrepresentations?

Hate to break it to you Matt, but if Trump were to do that many of the websites on the PropOrNot list cited by WaPo would be presented as “real news” to our children. CNN and ABC would be identified as the establishment government lapdogs that they are.

I hope Trump takes your advice.

Emboldened by his “victory” with Carrier Corp, which agreed to keep 1,100 workers in the US instead of outsourcing them to Mexico in exchange for $7 million in tax incentives over 10 years, as part of his victory tour in Indiana, Donald Trump on Thursday warned that U.S. companies will face “consequences” for outsourcing jobs overseas.

“Companies are not going to leave the United States any more without consequences. Not going to happen,” the President-elect said on a visit to a Carrier Corp plant in Indianapolis cited by Reuters.

U.S. President-Elect Donald Trump speaks at event at Carrier HVAC plant in
Indianapolis, Indiana.

Trump, did not elaborate just what the consequences would be but during the election campaign he frequently threatened U.S. firms that his administration would put a 35% import tariff on goods made by American manufacturers who moved jobs offshore. As part of his “Make America Great Again” campaign, Trump has made keeping jobs in the US one of the main aspirations of his election campaign and frequently slammed Carrier for planning to move production to Mexico as he appealed to blue-collar voters in the Midwest.

Trump said his negotiation with Carrier would serve as a model for how he would approach other U.S. businesses that are tempted to move jobs overseas to save money – which likely means providing further tax concessions in exchange for keeping workers in the US.

In laying out the “carrot”, Trump also pledged to create a healthy environment for business via lower taxes and fewer regulation: “I just want to let all of the other companies know that we’re going to do great things for business. There’s no reason for them to leave any more,” Trump said.

Should the carrot fail however, there is a “stick” and Trump warned that If that approach did not work, there would be penalties.

U.S. President-elect Donald Trump and Vice-President Elect Mike Pence tour the
Carrier factory in Indianapolis

The Carrier deal marked a quick, and high profile win for Trump, who has spent most of his time since the Nov. 8 election in New York building his team ahead of the handover of power from President Barack Obama.

Arriving early in the afternoon, Trump toured the plant in Indianapolis and shook hands with workers on an assembly line. Some workers yelled out “Thank you Mr. Trump” and “Thanks Donald” as he greeted them. Carrier confirmed that Indiana agreed to give the company $7 million in tax incentives. A source briefed on the matter said the tax incentives are over 10 years and the company has agreed to invest $16 million in the state, which is run by Governor Mike Pence, Trump’s vice president-elect.

Donald Trump greets a worker as he tours a Carrier factory with Greg Hayes,
CEO of United Technologies in Indianapolis, Indiana, U.S., December 1, 2016.

Trump’s victory however was not without blemishes: Carrier still plans to move 600 jobs from the plant to Mexico, the Wall Street Journal said. Reuters reported earlier this week Carrier also still intends to close a factory in Huntington, Indiana, that employs 700 people making controls for heating, cooling and refrigeration and move the jobs to Mexico by 2018.

* * *

And while Trump was enjoying the first stop of his victory parade, he was slammed by Bernie Sanders who, in a WaPo op-ed, warned that the Carrier deal is incomplete and leaves the incoming Trump administration open to threats from companies, echoing a concern we noted last night.

Sanders’ concerns were actually quite valid, by highlighting the shift in the negotiating calculus between corporations and the new administration. In the very worst case, Sanders is right that companies will now feel empowered – with a vivid case study – to demand concessions in order to keep jobs in the US.

“Trump has endangered the jobs of workers who were previously safe in the United States. Why? Because he has signaled to every corporation in America that they can threaten to offshore jobs in exchange for business-friendly tax benefits and incentives,” Sanders wrote in a Washington Post opinion piece on Thursday. He is not wrong. Sanders also noted that Trump had originally said he would save 2,100 jobs that Carrier planned to move to Mexico.

“Let’s be clear: It is not good enough to save some of these jobs,” Sanders said although it was unclear what his alternative – if any – would be to keep jobs in the US.

Sanders wasn’t the only one to slam the Trump deal. Moments ago, Reuters reported that according to a senior Mexican state official, Trump’s intervention to stop jobs at a plant in Indiana going to Mexico “is typical of what happens in countries that Americans call “banana” republics.”

Trump’s deal with Carrier created an “uncomfortable” situation for the company, and went beyond politicians’ remit, Fernando Turner, economy minister for Nuevo Leon, said in an interview. “It’s not our job. It’s up to companies to take their own decisions, not politicians; that’s what’s done in Latin American countries that they call banana (republics) in the United States,” he said, laughing.

“It’s not something that was done up until now in the United States. But anyway, things change.”

Turner also said that Mexico had not been a winner from NAFTA. The trade deal had both failed to lift Mexican economic growth and had cost the country millions of jobs, he argued. In that case, we can only add, since both the US and Mexico are against NAFTA it should probably be scrapped immediately.

“(Trump) is sending a message to (U.S.) workers, to unions that they don’t need to change, that everything is fine, that Mexico is the problem. But the problem is not Mexico,” Turner added. “They’re barking up the wrong tree.”

Still, Turner said Trump was “intelligent” and his ambition to grow the U.S. economy would benefit Mexico if it came off. “Trade between Mexico and the United States did not begin with NAFTA,” he said.

* * *

While it remains to be seen how Trump will deal with Mexico – whose ambassador to the US Carlos Manuel Sada Solana told the Arizona Republic that “we have said time and again Mexico is not paying for the wall” – Trump may have to to resolve other domestic issues first: despite Trump’s deal, employers elsewhere in Indiana are laying many more thousands of workers because of foreign competition. If Trump is indeed serious about them facing “consequences”, we may soon find out just what these will be.