JUST 3 CHARTS
ON THE CURRENT ECON CRISIS
As the cracks in the veneer of
central bank omnipotence grow ever wider, some brief reflection on the
following three charts may awaken some 'animal' spirits
of a different sort as the gap between fundamental reality and 'market'
perception has never been wider...
Bottom-Up - It's Ugly...
Before-tax corporate earnings
fell 4.9 percent in the second quarter from a year earlier, the fifth
consecutive decline and the worst streak since the end of the recession in
mid-2009, Commerce Department figures showed on Friday. The profit
slump, included in the report on revisions to gross domestic product, softens
the outlook for already-weak business investment and also poses a risk to
continued strength in hiring, which has been a bright spot for consumer
spending and for the economy.
Top-Down - It's Worse...
Since the reality-awakening lows in February, global
central banks have unleashed over $1.8 trillion of freshly minted QE across
various asset classes (e.g. corp bonds in Europe, Equity ETFs in Japan, gilts
in UK) which has enabled the facade of confidence to spread - lifting US equity markets (and just look at EM inflows) to
record highs as every fundamental indicator (except the well-managed jobless
claims and payrolls data) shifts from bounce to bad to worse.
And The Wall Of Worry has Fallen...
Those trillions of dollars have enabled the biggest surge
into short VIX futures bets in history as the so-called 'most-hated' rally of all time is now, by far, the most speculatively
embraced with Dow and Nasdaq futures also having never been so speculatively
long positioned.
***
We are sure none of this
matters though... corporate profits
disappear, economic growth turns negative, industrial production and
productivity collapse, but Dow hits 100,000 thanks to VIX slamming to
zero as the world's central bank balance sheets go to
the moon alice...
Bonus Chart: It seems one
asset class was paying attention...
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