Spring Crash Potential Not About China

“Work is hard. Distractions are plentiful. And time is short.” – Adam Hochschild

We all know about the news last week and how stocks suffered.What we don’t know is if the “very real chance of a Spring Crash” is underway.

For weeks, I have been arguing that a storm was building in what has ended up becoming a highly popular interview on Real Vision.. The most notable warning of a high risk period is the divergence of Lumber from the S&P 500. Lumber matters because of its link to housing. Lumber, however, wasn’t the only thing I referenced. While the S&P 500 was pushing towards all-time highs, small-caps were nowhere near the peak of last year, and yields refused to rise in a meaningful way following the December lows.

On Twitter, several started coming around to the idea that my time frame for a high risk period mid-May may actually come true because of the way trade talks were going.I couldn’t help myself and decided to have some fun with the obsession over trade talks by modifying a song I’ve written to tailor the imagery to the news of the moment which personally I think is hilarious.

Why the obsession? Because this is the only thing the news is focused on. I don’t believe a decline is going to be due to China and trade wars. I think something else is happening here which could result in a meaningful breakdown in equities even if a trade deal gets done.

I’ll let my tweets (Twitter: @pensionpartners) below make the case for me.

None of the above has anything to do with China. Lumber is telling you about housing. Small-cap weakness is telling you about consumer trouble. And sentiment is telling you to be contrarian. Something on the domestic front is happening given intermarket trends despite headlines over China making it seem like “that” is the catalyst. My belief is that China is a distraction to bigger underlying divergences that are unrelated.

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Seth Golden 9 months ago Contributor's comment

Just awful

Seth Golden 10 months ago Contributor's comment

Is there a reason you don't explore why Lumber prices rose so significantly last year, dropped within months, housing still near 11-year highs in certain respects? Any reason? Isn't it true that bonds prices and equity prices have risen together in nearly 40% of quarters since 1990s?

Bill Johnson 10 months ago Member's comment

Very good questions Seth Golden, I would like to know this as well.

Seth Golden 10 months ago Contributor's comment

He's done it purposefully, I actually already debunked this lumber theory of ill repute in a previous article and video.

Bill Johnson 9 months ago Member's comment

Thanks Seth, do you happen to have that link?

Seth Golden 10 months ago Contributor's comment

To that extent there's also a reason the chart is so condensed.