I loved the excuses this morning….
GDP was revised to solidly-negative for the first quarter, most of it on inventory.
The narrative has been that this was weather-related. Uh huh. That’s why PCE (consumption) was up solidly, right? Weather causedinventory reductions? I think not.
No, what you saw in the first quarter was a response to profit slowdown, which did show up in the corporate profit report. What’s worse is that the profit picture worsened while tax liability rose, which implies quite-strongly that there was a delta-style shift there. One isn’t exactly sure from where, but a decent guess would be Obummercare‘s impact.
Six months ago the “consensus” was that we’d have a ~2-2.5% GDP print in the first quarter. Actual is -1%. And while the stock market is at or near an all-time high the bond market says something else entirely.
You really have two possibilities here: The stock market is a bunch of spinning plates and is about to take a very large nose-dive as the economy is factually entering a recession now or you have the best trade of your life in shorting long-duration bonds — a trade roughly as good as buying long bonds in the early 1980s was.
Which is it?
You can’t have this one both ways folks — but the market says, right now, that both are happening.
One of those positions is going to be proved dramatically wrong over the next 12 months.
Go to responses (registration required to post)