Friday, July 22, 2016

Keep on truckin'

I read are really good article this week that explains how the markets have become an incredibly large computer simulation that is virtually devoid of fundamental focus.

While I won't go into all the details here, I think it is a very interesting theory and one that I would love to see us test some day. 

Anyway, the point I'm trying to make is that we continue to separate from reality in the markets.  The latest example of this lies in a little followed stat called Class 8 truck sales.  These are large trucks used to make long hauls across the US.  In the latest data published for June, Class 8 orders were down 8% from May of 2016 and down 34%!! from June 2015 to their worst levels since June 2009.

Every time orders for these trucks has slipped 30-40% year over year a recession has commenced within 6 months.  I'm not yet ready to predict a US recession but I think it is very possible that by the time we head to the polls in November, we will be in a recession.

Given this backdrop remember that stocks are basically the most expensive they've ever been on a variety of metrics.  They say that they don't ring a bell at the top of the markets but I hear a lot of ringing in my head.

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