1. Big drawdown in oil inventories.
I'm not a big fan of oil, but it doesn't matter at the moment. Here is the thing...
Big drawdown in inventories means that economy is firing on all cylinders .
2. Bond auctions ....
Bond auctions were oversubscribed by near record numbers. Santelli on CNBC kept talking about it over and over. Why is it bullish ? Its bullish in 2 ways...
First of all it means there is huge liquidity out there.
And second it means that liquidity is scared, since they are oversubscribing bond auctions AFTER a huge rally in bonds already. And to move the bond market so much so fast you need a lot of liquidity. Remember that this is the most liquid market in the world.
So we have a lot of very scared liquidity and economy that is consuming high amount of energy....
My conclusion is.... once people figure out that economy isn't falling apart, that massive liquidity will be looking for its way back into stocks.
First off, refined products and natgas are well off their highs. These are a better measure of domestic energy demand since it's possible that crude inventory draw downs are the result of a drop in imports and not an increase in demand.
Refined product and natgas on the other hand are produced domestically for domestic use. And thus, a better indicator.
Another useful, macro indicator of the health of the domestic economy is the ATA Tonnage Index. From the ATA website:
"On a seasonally-adjusted basis, the tonnage index increased to 110.9 (2000 = 100) in July, which was the highest reading since April. Despite July’s sequential gain, tonnage was down 3.7 percent from a year earlier. Year-to-date the tonnage index was 2.6 percent lower than the same period in 2006.
So truck tonnage is down 3.7% yoy.
IMO, we were headed for a recession before the credit market collapsed. A fed rate cut will confirm that we are actually in one. And it will come too late to prevent the deflationary spiral (in fact, unless they cut 100bp, they are probably already too late)
In the meanwhile, no more LBO's, no more stock buybacks.
And if the fed doesn't cut rates in September. Watch out!
And even if they do, shorting the dollar will yield better results than going long stocks.
As for CNBC...
What you pay for information is exactly what it's worth. How much are you paying CNBC?
