Containerboard vs. oil. Which is a better indicator of the U.S. economy? I've been struggling all day with the price increase in containerboard that has held up when the macro guys and the analysts who go macro all said it couldn't stick.
I am struggling with it because it is a definitive outlier. Meanwhile, we see oil going down, and people jump to the conclusion that therefore economic activity is weak.
Now, normally I wouldn't quibble. Containerboard doesn't matter all that much, I would say, but everyone uses oil.
But right back at me, I think, containerboard can't be tossed around by hedge funds trading illiquid markets like oil -- and it is illiquid, as we have seen time and again. It is in that sense a really valuable economic commodity that can't be jibed with the rest of the economic indicators.
Plus, how could the containerboard price increase stick at a time when United Parcel Service (UPS) and FedEx (FDX) are disappointing, unless UPS and FedEx are simply reflections of international malaise, especially China, and to a lesser extent, Europe?
Here's where I come out on it, ultimately. Containerboard makes me more suspicious of the domestic slowdown and less suspicious of the international doldrums. When you couple containerboard with retail sales and with the commentary from KB Home (KBH) and Lennar (LEN) in the last 72 hours, plus Ford Motor (F) and General Motors (GM) from last week, you get a pretty sanguine picture of the U.S. economy.
And while that's at odds with the international data and fiscal cliff worries, it is in keeping with a gradual improvement in the U.S. economy and not a deceleration, as so many believe to be the case.