SLL WILL BE ON A BUSINESS TRIP 6/15-6/17 AND WILL NOT BE POSTING. POSTING WILL RESUME 6/18.
This too—central-bank deranged prices and markets—shall pass. From David Stockman at davidstockmanscontracorner.com:
For months the talking heads had been saying that the economy is resilient owing to the “strong” monthly jobs numbers. But this morning one of Bubblevision’s usual suspects pivoted to the reverse. The May jobs barf-bag can be safely ignored, he advised, because a bunch of other stuff is “strong” including industrial production, autos and today’s retail sales report for May.
Let’s see. May retail sales were actually up just 2.5% over prior year, and that was down from the prior three month average, which was up by 2.8% from the comparable 2015 period. That looks more like deceleration than rebound, and most definitely not evidence that consumers are fixing to shop until the drop at any time soon.
Besides, with inflation in the 1.5%-2.0% zone—-or even higher by our more accurate Flyover CPI—–what’s so strong about real spending growth of less than 1%?
Likewise, there is nothing which spells a steaming rebound in the industrial production data. The overall index is down nearly 4% from last summer’s peak, while mining and oil production are down 12%. Even consumer goods production is flat, and still nearly 10% lower than its pre-crisis level.
In the case of auto sales, where $350 billion of new auto debt outstanding since early 2010 has funded virtually the entirety of a $360 billion gain in retail sales, they have apparently run out of borrowers who can fog a rearview mirror.
For the last 18 months sales have been flat as a pancake. And they are likely to rollover as soon as the flood of 18 million off-lease cars hits the market during the next three years, and thereby sends used car prices and auto buyer borrowing capacities skidding sharply lower.
The point is that what passes for market commentary is just sell-side jabberwocky. It consists of random selections from the in-coming headlines designed to keep the punters in the casino.
But the casino has become an exceedingly hazardous place. That’s because the central banks have completely destroyed honest price discovery. What is left is pure gambling funded by the ocean of artificial liquidity supplied by the Fed, the ECB, the BOJ and the rest of the money printers.
In much of the financial system the price action is no longer just frothy, frisky or even frenetic. It’s absurd.
Another marker on that front was passed yesterday in the German government bond market. Not only has 5-year debt been in the sub-zero zone for most of the last 18 months, but now the second most important debt security in the world—the 10-year bund—has plunged through the zero bound.
That means the yield has plunged more than 300 basis points during the last four years, and there is only one explanation. It has absolutely nothing to due with the German economy, fiscal policy, global growth, the euro FX rate—-or even the trend rate of inflation.
To continue reading: Bubble News From The Nosebleed Section
