|Friday, April8, 16|
|[Stockboardasset] S&P futures +68bps|
|[Stockboardasset] Nikkei +282bps|
All quiet on the global front after Japan’s FX woes and Europe’s faltering Banks. Its been a week of emotions as US equities have gone no where, but bracket in measured moves . Overnight, Puerto Rico Bonds crash after Moratorium raises default risk. We turn to auto sales where truck orders plunge 37% as unsold inventories reach 2007 levels. US light auto’s have downside imbalance from an ascending trend line developed at the helicopter drop when cash for clunkers was initiated. So, we turn to crude products to validate transportation concerns, and find gasoline demand has dropped to 14 month lows, and distillate demand are at recessionary levels. It’s been 11 months and counting as the SPX has not made a new high, it’s due to fundamentals realigning as an earnings recession depends. 1Q16 is set to report a terrible quarter marking this the 4th consecutive quarter Y/Y since 2009. We note, companies who use Non-GAAP vs. GAAP are playing a dangerous game of waiting for profits, the earnings recession could be much deeper as 30-40 cycles of corporate profits and commodities are reverting to baseline growth developed when interests rates were >10%. Tech and Biotech are much in focus as in a time of stress market analyst fall back to cash flows and basic fundamentals. To support our view of larger cycles converging present date, Greenberg Chubb’s CEO says, “Unwind in debt financing may stunt growth”. Rising credit risks, HY spreads widening, and the price of oil have been a measure of investment sentiment. US is in a tightening cycle with HY Default rates at Lehman Crisis levels. Yellen is taking a page from the DOT COM FED’s dual mandate, and is slowly deflating bubbles. Price/EBITDA is current at 2000 peak, as the US is in an earnings recession with 23x GAAP PE. IPO participations are at cycle lows, and in 1Q there were no tech IPOs. Us consumer credit rises $17.2bbillion vs. estimate of $14.9 Billion, but retail is sluggish.