Are we there yet?
Barron's doesn't think so but, this morning, the Chinese markets fell 12.5% in seconds, erasing 3 months of gains but immediately (same minute) recovered and finished the day up 2.5%, for a 15% intra-day swing. Overall, China's CSI 300 is down 16% for the year so, technically, not a bear market – yet.
Of course, we started the year 30% off the highs so, technically, it's totally STILL in a bear market. Interestingly, short interest on China's ETF (FXI) climbed to record highs last week – just ahead of this morning's test crash. Yes, I said test crash because that's what these "flash-crashes" tend to be – some program spiking the bottom to see where the real buyers are so they can set up their cascading sell orders for the month ahead.
I know – yawn! – China's a mess, Japan's a mess, Europe is toxic and perhaps about to fall apart, oil is barely holding $49.50 after the busiest driving week of the year… so what? We've had the same concerns for ages and we're STILL at 2,100 – testing the record high for the S&P 500. While that's true, couldn't you say the same thing about a car that's about to fall apart but making "record" mileage? You KNOW it will die one day – just maybe not today.
Check out the also record-high price to sales ratio on the S&P 500. Never before has so much money been paid for so little actual sales. We are now paying 20% more for Corporate Revenues than we did before the last collapse and about 130% over the historic average. That seems like a lot, doesn't it? Of course, never before have the books been manipulated to the extent they are today, with a record 58% of the S&P companies reporting non-GAAP numbers this year.
If you listen to analysts, Q2 earnings are the trough and Q3 and Q4 should be much better, which is good – because they can hardly get any worse, can they? Of course, now that we're done with Q1 earnings reports, we'll begin to get those crappy…