Inventory! The Dirty Little Devil in the GDP Details!

Stocks came to within a hair's breadth of another new all-time record high yesterday and throughout the night, but what Wall St seems to be shrugging off is that the recent stronger-than-expected GDP contains a real devil in the details. The recent GDP growth has been based all on inventory builds.

"...of the $534 billion rise in nominal GDP in the past year, a whopping 56% of this is due to nothing else but inventory hoarding.

"The problem with inventory hoarding, however, is that at some point it will have to be "unhoarded." Which is why expect many downward revisions to future GDP as this inventory overhang has to be destocked."

And when that "destocking" takes place in future quarters, it must be accomplished with REDUCED profit margins and REDUCED payroll. This means that we are robbing the future's GDP Peter, to pay today's GDP Paul. In other words, unless the American people suddenly find a strong and compelling urge to buy, buy, BUY, future quarters will be weak and there will be lay-offs in jobs.

So that dirty little devil in those GDP details forebodes disappointment ahead.

What's worse, economists over the past few days have now assessed that last Friday's surge in consumer confidence wasn't really an IMPROVEMENT at all. It was just a return to a more normal level following the the temporary shutting down of part of the government in October. It wasn't a surge in sentiment. It was just a return to the same level of malaise that has dominated for the past few years.

And there is a growing cacophony of voices -- even on Wall St -- calling for the Fed to begin tapering its debt monetization scheme NOW! The Fed board meets next Tues and Wed, and will release a policy statement at the end of their Wed meeting.