The more I think about it, the less sense it makes. There isn’t a scenario in the world when stark raving mad deflation is met with soaring equity prices. When corn, gold, and wheat plunged, oil traders said nothing because oil was trading at $100. Now that oil has been destroyed, equity holders are silently watching, thankful for elevated, inflated, equity prices.
The deflationary boogie monster is making the rounds. Let’s not kid ourselves: nothing and no one will escape it, which is why I am 100% certain another round of QE will be needed to save us–once again. There are so many mixed signals out there, it’s hard to tell reality from fiction. But, what’s tangible and real is stock price performance, year to date–albeit a young year indeed.
What’s working and what’s not?
Not Working (greater than -10%)
Oil, steel, semis, banks, farm and construction, alt energy, specialty retail, dry bulk shippers, personal products, industrial equipment, credit services, application software
Working (greater than +10%)
gold, silver, biotechs, drugs, chinese burritos, oil tankers, restaurants
Now let’s analyze, shall we?
The weak stocks represent global growth, industrials, consumer oriented retail, software, banks and credit.
The winners represent wanton speculation in chinese black boxes, biotech lottery picks, oil tankers as a result of plunging oil prices and a few restaurants who benefit from lower crude.
Without a doubt, we are off to a dreadful start for 2015 and all of the early signs point towards a market that is on the verge of correction. Considering the extent that commodities have corrected inside of the deflationary vortex, if we are to go down, it is going to be a brutal and vicious affair–swift and barbarous.
Sleep tight.
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