Sure baby, mañana. It was always mañana. For the next few weeks that was all I heard––mañana a lovely word and one that probably means heaven. - Sal Paradise, main voice in Jack Kerouac's "On The Road"That famous line from "On The Road" came to mind after I read a summary of the Fed's Bill Dudley's speech today in which he admitted that the Fed is often "too optimistic" in its economic forecasts but that he himself saw a stronger economy in 2014: "Tomorrow and tomorrow and tomorrow...It's a tale told by an idiot, full of sound and fury, signifying nothing" (Macbeth).
For two days in a row now, the stock market - as represented by the S&P 500 - opened up with big moves higher, only to reverse course and close well off its highs of the day. As I write this, the SPX has sold off into negative territory. If the outlook is for a better economy, why this market action? In fact, yesterday the Dow Jones homebuilder Index closed negative and over 2% off of its early-day highs. This is the action of a market that wants to go lower and it wants to go lower because fundamentals are deteriorating.
I wrote an article last Friday published by Seeking Alpha in which I outline the real numbers beneath the headline facades reported by the media - the tales told by idiots. You can see the true facts here: Economy Is Headed Down The Tubes
Since that was published, some more statistics presented bullishly in the headlines further reinforce my thesis. Yesterday was the Chicago Manufacturing PMI index, which registered a slight gain primarily because of the prices paid component (inflation) but the employment sub-index was not only lower, it hit a low not seen since September 2009.
And today's factory orders headline gain - although it missed expectations - was driven by defense orders (we borrow to pay for defense spending, by the way). Technology and electronic orders both registered big drops and inventories were flat (per my article linked above, inventory-build represented 33% of Q1's lower-revised GDP number).
The economy is not in good shape, despite what "they" say. The last gasp in the housing market is being fueled by homebuilders and mortgage brokers pushing 5-yr ARM mortgages (remember those in the last bubble?) and auto sales are being fueled by 0% financing from all auto manufacturers now.
If I don't post anything tomorrow, have a happy and healthy July 4th holiday. With Greece, Italy and France imploding on derivatives, the fun begins on Monday and my forecast calls for much higher gold and silver prices by the end of July as my thesis on both housing and the economy proves accurate and the market begins to price in a new round of QE. Ciao et buon fine settimana lungo.