And this is from one of the bigwigs at Merrill Lynch.
The last time the NFIB inventory plan number was this low there was an $11 billion inventory withdrawal in the ensuing four quarters that ended up shaving almost 2 percentage points (annualized) from real GDP.
The bottom is NOT in, all the profits are a sham, the banks have all failed the stress test (or are poised to do so when the economy tanks more) job losses and unemployment are at RECORD highs almost everywhere (since statistics began in 76). If you bought the dip, sell the high because another crash will be coming soon (probably next month? who knows, but it’s coming), and get ready to short financials if you want to take profit, otherwise you’ll be losing your ass again. If, like me, you’re not investing at all, you’re probably gonna be fine.
But, I mean, sweet Einstein:
The NFIB job openings index inched lower in March to 10 from 11 in each of the previous two months to stand at its lowest level since November 1991. If memory serves us correctly, a sustained and robust recovery – one that is usually confirmed by a bear market in Treasuries – was at least two years away. And, in the 35-year history of the series, the hiring intentions component, at -10, has never been as low as it is today.
And yet…
Careful. We’ve seen a nice bounce to clear an oversold condition, coupled with the very ordinary “ebb and flow” of economic data that periodically offers intermittent relief even in the worst economic downturns. What we haven’t seen to any real extent is “revulsion.” Quite to the contrary, investors have frantically bid up the worst credits – distressed financials, homebuilders, and heavily leveraged cyclicals, while the percentage of bullish investment advisors has quickly surged above the percentage of bearish advisors.
Just as soon as someone makes a red cent, the gold rush is on again. Only the shovel salesmen (or in this case the guy booking $12 bucks of profit when you’ve sold your stocks at a crushing loss) make money in this time, which is why the investment advisors (shovel salesmen) are getting out the bullhorns and cheering anything that looks like it’s “good.” And yet, you and I, the smart money savers on the sidelines, are the ones getting royally rogered. To wit:
Fundamentally, my view is that the U.S. economy is on very thin ice, and that by focusing on the bailout of corporate bondholders rather than the restructuring of debt, we are courting the risk of a far deeper downturn. Last year, I didn’t think it was conceivable that policy-makers would attempt to address this problem by making lenders whole with public funds. This is an ethical abomination, putting the public in the position of absorbing the losses that should properly be borne by those who provided capital to these institutions. It is not sustainable. What it does is place the public in the position of losing first, but it will not, and cannot prevent the ultimate failure of the debt – for the simple reason that without restructuring, the debt can’t be serviced.
As if that wasn’t scary enough, it looks like I am (unfortunately) going to be right about Depression 2.0.
As Harvard historian Niall Ferguson observed last week, “Only somebody who studies financial history could say, as I was trying to say, ‘Look, something as big as the liquidity crisis of 1914 or as big as the banking crisis of 1931 is imminent.’ We don’t really have a great many options here. If we stay the present course, you’re going to see the tailspin continue. To be effective, a large-scale restructuring of household indebtedness would need to be mandatory. The Great Depression was initially a U.S. financial crisis. But what made it a depression was its global contagion, and then the breakdown of trade and the retreat into protectionism. All of that can happen. All of that is in fact happening with terrifying speed.”
People did know, and the only ones claiming they weren’t warned were the people who refused to listen when they were warned. Only this time, the grasshopper is in charge of the whole world.