The following is part of Pivotal Events that was published for our subscribers December 3, 2015.

Signs of The Times

"The loans outstanding of China's biggest banks declined for the first time since 2009."

- Bloomberg, November 15.

"Iron Ore Breaches $40 in Singapore"

- Bloomberg, November 29.

"Iron Ore Hammered In Commodity Rout"

- The Guardian, November 30.

On the relief side, Maurice Strong, who was instrumental in getting the United Nations into the "Global Warming/Climate Change" promotion, passed away on November 28th.

In his auto biography published in 2000 he wrote that the "human tragedy" would be "on a scale hitherto unimagined". For him the brightest prospect lay in forecasts that two-thirds of the world's population might be wiped out. This would provide a "glimmer of hope for the future and its potential for regeneration".

It is uncertain if his remedial "regeneration" would finally result in the Communist "New Man" or just another Stone Age "Old Man".

However, what is certain is that his pitch has been purely Malthusian and the more one reads about Malthus and his followers the more evil they become. The common thing about such intellectuals is that underneath it all they really detest people.

At some point the general public will again become immune to apocalyptic visions.

Credit Markets

The best on the curve (10s to 2s) was reached in June and the financial sectors rallied well. The best was 179 bps and it flattened to 129 bps on August 24th.

Banks and Broker-Dealers peaked in July.

The curve is now at 124 bps and heading towards the 105 bps reached in January.

Credit spreads played their important role when reversing in June and widening in July pushed off the Shanghai Crash.

The BBB spread corrected from 242 bps to 217 bps on November 9th. So far it widened to 224 bps on Friday. At 222 bps now, through 225 bps would be concerning.

There has been far too much talk and writing, not to overlook wringing of hands, about the increase in the Fed rate. (Expectations about the ECB cut fizzled today.)

In looking at the CCC-rated stuff, the yield has increased from 7.94% in June 2014 to 16.61%. The worst in the 2011 Crisis was 16.37 but complacency reigns now.

The 30-year Treasury yield has increased from 2.25% in January to 3.10% two weeks ago.

Market rates of interest usually lead moves in the Fed's administered rates by many months.

Uncertainties in stock and commodities prompted a rally in long Treasuries. The last low in the TLT was 117.75 on November 9th and it has reached 123.

This is OK, but our work has considered that a huge rally for Treasuries would be unlikely. The "flight to quality" story has been employed many times.

European yields were down in anticipating today's "big news" and have increased sharply.

Today's Pivot has been delayed a little. Pre-Christmas lunch.

In reviewing the closes, the action in long-Treasuries became a "fast" market, reminding again of the many comments about vanishing liquidity in formerly very liquid instruments. This is mainly due to "Who would seriously position bonds at such artificially low rates?".

The Treasury market suffered a harsh four-point plunge. The TLT rally was off of support at 118 on November 9th. The rebound was reasonable to 121 when yesterday's pop on the pending ECB move drove it to 123.

This was right at the 200-Day ma which stopped the previous rally at 124.90. The market was vulnerable, technically, as well as to the possibility of a rally in commodities.

Doesn't Happen Often

• This is the Year/Year rate of change.
• This severity only seen in 2009 and in 1982.

U.S.
PMI and Recessions

• This week's report puts the number at 48.6, which compares to the 48.9 reported in November 2012.
• That break below 50 did not hold.
• The drop to 49 in December 2007 was coincidental with the start of that recession.
• The NBER announced in December 2008 that the recession started in December 2007.

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