Oh Look, Spinning Plates!

I loved the excuses this morning….

GDP was revised to solidly-negative for the first quarter, most of it on inventory.

The narrative has been that this was weather-related.  Uh huh.  That’s why PCE (consumption) was up solidly, right?  Weather causedinventory reductions?  I think not.

No, what you saw in the first quarter was a response to profit slowdown, which did show up in the corporate profit report.  What’s worse is that the profit picture worsened while tax liability rose, which implies quite-strongly that there was a delta-style shift there.  One isn’t exactly sure from where, but a decent guess would be Obummercare‘s impact.

Six months ago the “consensus” was that we’d have a ~2-2.5% GDP print in the first quarter.  Actual is -1%.  And while the stock market is at or near an all-time high the bond market says something else entirely.

You really have two possibilities here: The stock market is a bunch of spinning plates and is about to take a very large nose-dive as the economy is factually entering a recession now or you have the best trade of your life in shorting long-duration bonds — a trade roughly as good as buying long bonds in the early 1980s was.

Which is it?

You can’t have this one both ways folks — but the market says, right now, that both are happening.

One of those positions is going to be proved dramatically wrong over the next 12 months.

The Market Ticker

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