Over the past month we have documented the surreal reemergence of China's latest housing bubble (recall the first one burst in early 2014 which forced Beijing to reflate the stock market bubble, which also burst over a year later), in recent articles such as:
The 2016 market can be described as a sequential bursting of pain trades: first it was the momentum trade; then it was the whipsawed action in Treasurys where record shorts were burned on the way up, and then longs screamed when central banks unleashed the latest coordinated attempt at reflation, then it was the FX whipsaws where central bank easing led to the opposite reaction in the underlying currencies (as noted earlier), then the sudden trapdoor under the USD which many had expected would continue rising, then it was the healthcare sector where hedge fund hotels got crushed in the late
But, but, but - low gas prices, high stock prices... everything is awesome. It appears not even the average joe American consumer is fooled by the latest manufactured rally in stock prices as UMich confidence tumbles to 5-month lows (90 vs 92.2 exp) with future expectations "hope" perfectly anti-correlated with the surge in stocks...
On the bright side, inflation expectations picked up modestly... but that hardly helps given the overall confidence hovers near 18 month lows.
It has been over half a year since we first downgraded the industrial recession to an all-out global depression by using Caterpillar retail sales data, which have been so counterintuitive to what the company's earnings have been reporting that last September we had to ask "What On Earth Is Going On With Caterpillar Sales?."
Today, we must admit that something simply does not compute.
On one hand, CAT stock has soared by over 30% from its 2016 lows....
It seems like only a blurry, distant memory but February 11 - the day the S&P hit its 2016 lows - was just over 4 weeks ago. In the subsequent 4 weeks, the market has unleashed one of the most furious short covering/record corporate buybacl/central bank easing-driven "risk on" rallies ever, and nowehere is this more obvious than in recent inflows into credit markets (the same bond market which just one week ago the ECB made "risk-free" by announcing it would monetize corporate bonds for the first time ever).