So I guess like everything else, a rate hike is priced in and a non event. As long as the lgos trade with the treasury's money it is always up
The Federal Reserve has a big problem if it wants to raise rates again. It will have to pay U.S. and foreign banks enormous sums of money instead of U.S. taxpayers.
Not only would the Fed likely draw the ire of Congress, but it could also become a target of the next U.S. president—be it Clinton or Trump. That’s because the gangbuster profits of $90 billion (plus) per year that the Fed remits to the Treasury could easily dwindle to zero. According to several leading economists, it’s also possible that the Fed will become technically insolvent (though it always has the power to print its way out of such a disastrous state).
Quantitative easing was a Faustian bargain
The putative savior of the financial crisis, quantitative easing, was a Faustian bargain. The Fed got to inject trillions of dollars into the financial sector while simultaneously “sterilizing” the very same money. It did this by incentivizing banks to deposit their digital cash at the Fed, paying above-market interest rates.
Anyone can say whatever they want. Whether people want to take the time and effort and validate the claims is another case. Wall Street and the Federal Reserve need to tell us that everything is fine or else we will panic. If they tell us the truth about jobs, profits, monetary policy, valuation and fundamentals, they claim that 80% of the people wont understand and it will cause a panic. So they are telling us lies, day after day for our own benefit.
As for trading today, the head of the Fed once again told us a rate hike is coming, yet risk is still on at these levels. Everyone has started their holiday and the only ones trading are the machines which will continue to throw massive amounts of Treasury cash to keep values high so that when the hike happens, the net effect for the quarter will be even and people's 401k statements will not reflect the actual situation.
Yellen doesn't want to take responsibility for a market meltdown because of the tightening that is necessary. She has already said in the notes that the market is not paying attention to the fact that a rate hike is coming. Every time a member of the Fed says it is coming, CNBC will wheel someone out the either says it wont come in an election year or will be pushed out. They are going to hike, even though it is more for normalization rather then because the economy needs it but after all, there is a disconnect between the economy and the market.
There is no money on the sidelines, just the Fed backstopping the market to give everyone's 401k the look and feel of wealth. What happens when they want to move their stock & bond portfolios to cash for capital preservation? According to the experts, no one will do that because you always have to chase yield to counteract inflation. There is no inflation, isn't that why we cant raise interest .25%.
if you are receptive to embracing truth and not fiction. Companies are losing money because consumers are not spending. Companies are not using cash for any other purpose then stock repurchased and executive bonuses. They are replacing the number of FTE with twice as many PTE saving money & benefits, are giving the look and feel of hiring. This economy is going towards another recession, but to listen to the wall street experts that never want the party to be over and convince everyone to always be all in, they will not embrace anything but hopium, fueled by the Fed continued backstop and jawboning.
That the oil industry is purposely drawing down on their landed storage inventory and not unloading the tankers overflowing with oil so that they can bring the price back over $50 and screw the American public with high gasoline prices for the summer. With the amount of oil in tankers, the amount of oil being produced and the economic crisis that the commodity based economy countries are in, is there anyone who believes the EIA oil inventory number.
It is common knowledge that the Fed's backstopping of the stock market is to keep the 401k statements of US consumers inflated. Since the US consumer is always "all in" in their 401k, the only real selling pressure is that of the private wealth funds and the hedge funds. The reason why Yellen has since last year, opened the front door and yelled out "interest hike coming" is to allow these funds to unwind in an orderly manner, so that the US Treasury can support their profit taking.
Now we are in the last inning of the game where the meeting notes have said that the market is not listening to the words a rate hike is coming. The last execution of the Feds strategy is to move the market to upper extremes so that when they announce the rate hike, the profit taking will bring it exactly back to where it started the quarter and thus, when the 401k statements are opened, the net effect is zero.
The biggest concern of the Fed in their strategy is that the US consumer moves their 401k portfolio from all stocks and bonds to cash equivalents. Unless we have an unforeseen event, that is not going to happen since the consumer is complacent, uninformed and not educated in these matters.
So expect the market to continue to melt up to ridiculous levels, unsubstantiated by profits, guidance, fundamentals and valuations in prep for the 5% correction after the hike to bring the net to unchanged.
They want you to focus on bouncing off the low band, but the market cannot penetrate the midpoint. The technicians at several of the houses have advised clients to step aside and wait for the flush and get back in 20% lower.
Whether it happens in June, July, this year or next, the Fed made it clear to Wall Street that they are not hearing or listening to the words that QE is over and rate hikes will happen. Whether Wall Street wants to continue to ignore the reality and keep spending taxpayer money to make their bonus targets is the choice of the American public to support with their continued participation or withdrawal from the continued speculation made on their behalf. The market has never gone up when rates have increased and the least eight years of free money has gone beyond risk on. So this week the Fed said possibly June and yet every wall street pundit is discounting the move, saying it is already priced in or saying it will never happen, just to keep everyone "all in" and not jeopardize their bonuses.
With lower U.S. refinery runs and increases in domestic crude oil production, U.S. commercial crude oil inventories at the end of February provided the most days of supply since the mid-1980s. Commercial crude inventories were sufficient to supply 29 days of U.S. refinery demand, based on expected refinery runs in March.
As explained in This Week in Petroleum, commercial crude oil inventories across all Organization for Economic Cooperation and Development (OECD) countries are also high, but to a lesser extent than U.S. inventories considered alone. OECD crude oil inventories in January were sufficient to supply almost 28 days of OECD crude oil demand. However, unlike in the United States, OECD inventories have exceeded 28 days of supply in several months over the previous two years.
XLE is trading at $65 bbl oil. What the speculators would you have believe is that "disruptions" are taking massive inventory out of the market. Three things to keep in mind
1. Inventory is not counted by EIA until it is unloaded, so reported numbers are wrong
2. disruption flow is less then consumption so inventory continue to rise
3. Every energy analyst not speculating is calling for $25 bbl by summer
You don’t have to be an economics or financial MBA to see exactly what and why is going on in the US stock markets. You don’t have to be a mathematician or accountant to figure out the numbers. All you have to do is be able to ask the correct questions to yourself and answer them yourself, because the Street will never get you anything but static and interference.
How can it be that in retail, energy and banking we have missed profit estimates, guided lower and yet the averages are a few points below record lows? How can it be that funds are making massive withdrawals from the market, we have record low trading volume and the market breadth is anemic?
How can it be that the market made record highs on QE and that has been taken away? How can it be that real employment, wages and spending is down, being reflected in the earnings and forecast of stocks, yet the market moves higher? How is it that Oil is down over 50% yet energy stocks are down a few percentage points. The market is a forward looking mechanism, but how far in the future is it looking and has it ever reflected poor earnings, poor spending, poor employment, real inflation?
The answer is simply that the US government continues to backstop the market, or in Street terms, “buy the dip”. According to insiders that remain nameless, they do this for “our” benefit. First the claim it is unpatriotic to short the market. Second, our national security depends on a strong stock market, lastly, since the US is a consumer based economy, we need to give the consumer the “look and feel” of wealth through their 401ks, so they spend.
They shut it down and rope it off until the technician readjusts the internal weights to pay more appropriately.
This is what will happen to the computer alogos in the near term. Either a virus is going to hit them just like the banking system or the AI will start to think about capital preservation and will gap sell down. Either way, they will shut the market down until the technicians can figure out what happened.
When will you stop buying US equities and what is your strategy to unwind those buys
Twice as many shares down as up, VIX up 4%, Dollar up, Oil Lower.
The algos can play the technical lines and run the market up on low volume, but until we have a flush down, we will continue to move lower in May.
The Fed has signaled and although the street has their hands over the ears refusing to hear the words like a spoiled child, the writing is on the wall. The next 24 hours will show the short term direction of the equity markets. The signal of rising rates will rally the dollar and move commodities lower. The international funds flow will sell existing bonds and risk will be off. Asia will follow lower and EU will follow.
The CNBC experts are trying to discount the effect that 1/4 pt will make, but rates have never moved higher with equities moving higher. If the street is banking on continued bad economic data over the next week to suppress the move, forget about it. Corporate profits are lower, the higher dollar will add pressure to earnings, ARMS will move up, taking the extra money found on lower fuel prices. The consumer is cutting back and no we have higher rates on lower growth.
When you see indicators, earnings and guidance that fit our bull case, believe them. When you see indicators, earnings and guidance that do not, it is seasonal adjustments, weather related, one number doesn't make a trend, or just we think the number is wrong.
So the actual retail sales being reported by retailers is forwarding looking. The consumer lead economy that low oil prices was supposed to create by the permabulls seems to have been another of their failed theories.
Its bad enough we have to listen to Tim everyday, tell the bull case for buying everything in site, including other countries stocks, but when you see a stock down +20% why do you need to tell people its a great buying opportunity rather then say, can you see the downward trend and how about capital preservation.