You can't not have your cake and not eat it either.
That's how I feel sometimes about the dollar, bond, commodity and currency stories floating around here right now.
Let's establish something first: tell me the last time you read a story that was deemed as positive about anything involving any of those assets?
I want to just go over a couple of the bear cases and then ask you, did you sell anything in equities because of those cases?
Start with the Chinese and our bonds. How many times did you read that the Chinese would most likely be gigantic sellers of our bonds and that would put tremendous pressure on the Treasury at the exact same time that the Fed's not a buyer of bonds and the Treasury has to sell a lot of them to finance the new, gigantic trade deficit. The Chinese, we heard, held us hostage and that their selling would disrupt the markets and send rates soaring higher.
We just got the Treasury Department's holdings and lo and behold, how many billions of dollars did the Chinese sell? Are they at last under one trillion dollars in holdings after being almost at that threshold? How much did they dump during March - the latest month available?
Oops, they BOUGHT bonds, not sold them. That's right, they bought $11 billion in bonds bringing their holdings to a five month high! Right in the midst of the heaviest trade tensions.
Now the hostage stories went on forever and were a major prop of the "going through three" narrative we've had to battle for ages. The story was wrong.
Does anyone really care, though does it even matter to those who propounded it?
Now we have a story about how the thirty year Treasury is dangerously close to the ten year Treasury. Every time I read one of these stories that story is written to freak out investors, and it will always manage to drive equity people out of their holdings. Well, not all of them. The greatest investor of all time, Warren Buffett, isn't freaked out. But lesser investors - lesser because of stuff like this - can't comprehend the stories so they sell their positions.
The truth is that we don't know why the thirty year is so close to the ten year. We don't know why because, in truth, who the heck is so stupid as to buy the thirty year this low in yield except someone who perhaps is mandated to do so? It makes no sense whatsoever. Perhaps it's because someone thinks that the dollar is going to get even stronger? If that's the case that's the long maturation to play a strong dollar. You go much shorter.
For all we know that's just money fleeing Europe. Why not? The Italian ten year is at 2% and there's not even a functioning government there.
Or how about the fact that the ten year yield is the highest since 2011. What does that tell us? The S&P started 2011 at 1259 and finished at 1277. Of course there was a pitstop at 1100 but that was when the S&P foolishly downgraded the credit rating for US Treasurys.
I guess we are supposed to sell stocks because we are back to 2011 rates? I don't know what else to do with that story.
Or how about the oil story? We have gasoline back to some level that is higher than it was not long ago. Is it going to crimp consumer spending? Maybe. But the issue is that we found very little increase in spending when gasoline was lower. Are we supposed to sell stocks because of higher gasoline prices? I guess if we bought them if they were lower even if that turned out to be wrong?
Anyway, tax rates for the vast majority of Americans went down in a fashion that far exceeds the cost to the average American of higher gasoline. And there are whole states that are booming not just because of higher oil prices but also because natural gas prices - which are almost NEVER quoted - have fallen through the floor. But then again low nat gas is a positive story. So why bother telling it? Lower natural gas creates tens of thousands of manufacturing jobs because it makes the US. a much cheaper place to do business. Nat gas fuels more business development than oil, another nonsensically good story?
I will give you that there are competitive disadvantages to a stronger dollar, but I would also point out that the dollar is still weaker versus the euro when we had a dramatic run up in stocks. Sell stocks because of the five month high in dollars? I guess so. But why?
My whole point: it is so easy to scare people. It is so hard to set them at ease. I think stocks are due for a pause but it is because they run so much, not because of these stories. Does anyone care though when you have all of this negative fodder? I don't think so.