Richmond Fed to the rescue? What has to happen to pull us back from the precipice of the terrible place: 1. We need the Fed to know it is wrong, and 2. We need the president to make a trade deal.
I think the market is rallying because of the second, the possibility that the president may be able to do something with China that benefits both sides without giving in anything too critical to the nation's interests.
But a scrutiny of the Richmond Fed's numbers this morning shows, unassailably, that the weakness I am seeing in what was a very bullish part of the economy is setting in and the Fed itself will soon have to recognize that as Richmond goes...
Look at these numbers: Manufacturing down 22 ticks to minus 8 with a 37 point drop in shipments to minus 25, THE LOWEST READING SINCE APRIL OF 2009, the bottom of the Great Recession. A sharp drop in local business conditions -30 points to minus 25, THE LOWEST READING ON RECORD.
One and wait...
Backlog in orders? Down 22 to minus 18. Capacity utilization down 25 points to minus 16.
One and wait....
Average workweek down 8 points to 3. Wages down 3 points to 31.
One and wait.
Yes, there is still hiring. But no, there's not a lot of capital expenditures and there sure is a lot of fear, the fear that matches the incredible amount of money out.
It's pretty incredible that, without a sign of recession we have the most money out since 2008 when the republic was at stake. Again, it makes sense because the Fed has made it so difficult to stay in the markets. (Although insider buying has jumped substantially.)
We know that oil has been the key to any short-term bounce. Sustaining it will take more bad news is good news and the Richmond Fed is super bad.
But the data has to stay Super-bad. And the employment has to crest to get one and wait.
I know it is a lot to ask: a deal with China, one and wait data, oil stabilizing, insider buying turned on all when the market sells at around 13x and the minus 12 on the S&P oscillator is lower than almost any time than the Great Recession or post 9/11.
But the Richmond Fed flies in the face of the Christmas data and that's what I have been worried would come to pass. It's coming to pass, and I think the president knows it is time to play the art of the deal with China.
It would make sense with the nadir of the moment coming from the weird Secretary of Treasury Mnuchin call to the banks of all places, the exact opposite of 2008, when the banks were at the epicenter of the real economy decline. Now they are the safest - it's just the financial ETFs that are hazardous.