Hell is Thawing
Even as the underlying economic data continues to improve from the previous "hell just froze over” levels, the fear in the markets is increasing.
And cash is piling up everywhere.
When you think about the size of the pile, it becomes very hard to imagine just how much cash this is.
Because beyond just the savings accounts, when you add up all the other forms of cash, there’s a lot of zeros:
Running Out of Houses...
The virus has done two things:
- Caused a "surge to the suburbs,” and
- Caused huge delays in the already paltry level of building.
Folks, we were running out of supply before the shutdown.
And we’re damned near out of supply now.
Another heavy wave of buying and the end of summer could see a squeeze on supply not witnessed in decades.
The markets have significantly misunderstood this surge and have not priced in the velocity that this demand will drive into the ever-widening recovery spread.
After a sharp drop in sales in March and early April, applications for new home mortgages have surged to levels last seen almost 12 years ago.
The housing market is responding to incentives in a healthy fashion, and we’re now closing in on 80 days of supply in America.
Ok, it’s ugly, but rapidly improving.
I’ll give you two different perspectives – the short and long-term windows.
America’s Transportation Security Administration (TSA) is processing almost 5 times as many people today as it did at the lows of April.
But there is still a long way to go to return to last year's levels:
The timeliest indicator of just how fast the US economy is recovering can be found in the TSA throughput statistics.
They’re released every day with a 1-day lag.
As the two snapshots above show, Americans are rapidly returning to the skies. Passenger traffic at US airports, as we can infer from these numbers, has doubled since May 16, and has quadrupled since the April 17th low.
Is it still far lower than last year at this time? Yes. But are things improving rapidly? Yes.
Good as well?
Here’s the high-speed indicator of gas deliver and consumption:
As with travel, yes, it’s still lower this year than last, but there’s a vast improvement between now and about five weeks ago.
Beyond the Virus
The new normal is coming at us faster than we think.
And the Barbell Economy© is doing exactly what we expected it to do: Disrupt everything, and mostly for the better.
Staying on your path will demand an amount of trust, faith, patience, and discipline that only a few in the crowd can muster.
Fear Remains Rampant
Despite cash levels making it clear we have a $multi-trillion rainy-day fund, outright bearishness amongst investors remains strong.
That, my friends, is a very, very good thing:
Buying into the hype of the crowd being too bullish is a major league error.
Don’t be thrown off your track. Do not let the headlines shake you. Stay focused on the long-term underlying currents driving us all forward together.
The same data that showed ZERO bullishness in the BAML surveys of 6 weeks ago now shows a read of 1.4 on a scale of 1 to 10.
The AAII data shows more than double the number of bears than bulls - over 75% of the crowd does NOT LIKE the market, and the bullish reading of 24.4 is less than 5 points away from the readings seen in March of 2009. That was 19,000 Dow Jones points ago.
Keep in mind that we’re also seeing the 8-week moving average of the bullish sentiment (last chart above). It takes much longer to recover and fall, and it is now dredging levels seen only on rare occasions in the past - and all of which defined windows of long-term opportunity thereafter.
Every start of every bull market has always been viewed in the light of the latest disaster.