Lies, Damned Lies

The London market feels a bit shell-shocked this morning, either because of last night's melt-up in equities or because of the sad deaths of both Michael Jackson and Farrah Fawcett, icons of many a punter's youth. Markets being markets, the tasteless jokes were already flying at 7 am this morning; alas, decorum prevents Macro Man from sharing any in this space.

And so we're left with markets, which at this juncture are hardly more tasteful to talk about. The melt-up in Spoos seemed to be driven by the Fed's announcement of the extension of some of its liquidity programs. That's all well and good, of course, but given that they didn't do a damn bit of good in stopping the SPX from falling more than 50% from December 2007 through February of this year, Macro Man's at a bit of a loss to discover why their extension is met with such good cheer. No wonder so many punters in the comments section seem to have an eye on the beach!

Regardless, VIX plunged below 30 yesterday, taking it to its lowest level since there was such a thing as "Lehman Brothers." Sign of the bull or sign of complacency? Judge for yourselves.
Speaking of bull, Macro Man had a chat with a few punters last night at a leaving do. We shared rather a good chuckle at the, shall we say, slanted viewpoint presented by some banks, disseminating only that information which fits their view.

Rarely has Winston Churchill's (edit: Disraeli's) grumbling over "lies, damned lies, and statistics" been more apt than during this recent wave of green shoots and second derivativism. In fairness, the perversion of truth is often perpetrated by both bears and bulls, but it seems as if certain houses are more prone to pimping a foregone conclusion than others.

So it was no small amusement that Macro Man saw in his email box an analysis of China's industrial profits data, released last night. The quarterly data, which is not seasonally-adjusted, is depicted below.

As you can see, May-quarter profits undershot 2008's by Y115 billion, or 15%. In monetary terms, this was slightly better than the February quarter, which undershot 2008 by Y129 billion, or 37%. That Q2 profits were higher than Q1 is, as you can see, a simple product of seasonality. The y/y profit growth is still pretty clearly down.

So what do we get from our friends at Goldman? "Industrial profits growth rebounding strongly". Uhh......OK. The beach is looking ever more tempting.....