Bank of America Explains All You Need To Know About The Market: "Down In The Morning; Rally In The Afternoon"Want to be a consummate stock picker and investor? Forget all you have learned in business school, from fundamental or technical analysis, or from years of trading: the only thing that matters is the position of the sun: if it is rising, sell. If it is setting, buy. Rinse. Repeat. Bank of America explains it just slightly more scientifically.
Earlier today, following the collapse in wholesale inventories, we noted the "the second leg of the stool of main GDP drivers appears to be splintering as Wholesale Inventories dropped MoM for the first time since Dec09 (-0.1% vs +0.5% expectations). We patiently await LaVorgna's GDP downgrade." As it turns out, JPM's Daniel Silver is the first to pull the plug on the blind hope that US GDP is rising despite the rest of the world imploding, and in the process euthanising the latest iteration of the decoupling thesis which always appears to give the bulls some hope that things in the US just may be fine this time around. They never are.
The last month has been a violent one for stock and bond investors but a look at the forward curve for Crude Oil also tells a story of hugely volatile moves. Oil has shifted from contango to backwardation in the last month but it is today's dramatically disconnected move that has many scratching their heads. As we approached the European close today, oil started to rally and rally fast. Initial rumors of ECB printing were quickly dismissed as gold and silver slid back but crude kept going - all on its own. After being perfectly in sync with BTPs for the last few days, we wonder if traders were short oil as their hedge against European long risk exposures and the LCH margin call forced liquidations and unwinds - idiosyncratically cracking the oil market back over $97.50.
This is No Cyclical Recession… It is a Secular DE-pression