An American Car Bomb

March and April auto sales data were very poor, as reported here. Would we see a bounce back in May? Not a chance. Auto sales declined for the fifth straight month with domestic light vehicles annualizing 12.59 million vehicles, the lowest sales number going back more than three years, despite record incentives and discounts to rental and other fleet customers. Even worse, inventories continued to grow.

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Bonds Don’t Believe (and Neither Do I)

Well, the equity bubble continues. The senior US indices all made new highs last week. The advance was narrow…a very few, very large stocks drove most of the gains. Here’s the proof. This chart shows the ratio of the equal weighted S&P500 to the market cap weighted version you usually see. The equal weighted index values each company equally, whatever its size. As you can see, the trend in this ratio is down, indicating that smaller stocks are underperforming. Probably it’s all those index ETFs buying the same stocks.

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Trump Tremors Shake the Markets

Yesterday (Wednesday) we got a hint of just how fragile equity markets are. The Nasdaq led the rout with a decline of 2.8%, closing on its lows. That’s because market performance is not based on a firm foundation of a strong economy and rising earnings. The markets are hanging on to current elevated levels based solely on a wounded President’s promises, promises of tax cuts and infrastructure spending that we said were a fantasy back when he was elected.

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