Investors Edge – Hour 1
Terry Keenan was a sweetheart. Terry Keenan was brilliant without having to tell you she was brilliant. I loved appearing on her show and was stunned to hear of her passing at such an early age. Make every day matter!
Quote of the week that will not be reported by the national media:
“Don’t let anybody tell you that it’s corporations and businesses that create jobs,”
Yes…corporations and businesses do not create jobs but they sure pay you $250,000/speech!
Two weekends ago, we told you that we expected the Fed to start intervening. This was not a reach as every time markets have cratered over the past few years, the Fed’s minions would just open their mouths…and when markets did not listen, they would just create another program of money printing. They did not fail again.
As markets plunged on Wednesday the 15th, with the Dow down another 460, timely yapping started to occur.
First, James Bullard of the St. Louis Fed said that low inflation could lead to a pause in tapering. He didn’t stop there…adding “if the market is right and it’s portending more serious for the U.S. economy, then the committee would have an option of ramping up QE.” The S&P jumped 1% in 2 minutes. But back-up was needed. Eric Rosengren, the Boston Fed President conveniently came out and stated that same day that “could easily imagine” not raising rates until 2016.
But they weren’t done. Some dude from the Fed by the last name of Williams also came out and stated more QE may be needed if the economy faltered. All this was not enough. We also got the Bank of England announcing they would keep their money printing at 375 billion Euros. We got the ECB going against everything they promised not to do in announcing their own. We got China announcing more easing.
Markets then had two monstrous reversals leading us to tell you a low was in as the washout sucked out all the sellers. We expected a few weeks of upside testing into the 50 day moving average.. After all, the Fed had an election straight ahead. We were wrong. The upside testing did not take a few weeks. It took a few days. There was no way we would believe after breaking down so badly, markets would recover so much in such a short period of time. Then again, trillions matter.
You may not know this but we hate talking about the Fed. We would much rather talk about the markets. We would much rather talk about the two-way trade between buyers and sellers and their fear and greed at a specific price and at a specific time. But the Fed has made that impossible. They have even admitted that their goal was to rig the bond market in order to get interest rates down in order to get people into assets at whatever price. They have been wildly successful. Wildly successful to the point where even 10% corrections have been a thing of the past.
We would love to tell you what is next. After all, in normal markets, we would now tell you the market would have to go through some backing and filling after this latest Fed-induced, “V-shaped move up. But we have another Fed week where we get to hear what one person wants to do with trillions of dollars. Even if the Fed comes through and tapers to zero, we suspect they will include some language about further programs if the data worsens. After all, the Fed is “data dependent!”
We are finding leadership in Utilities, BIOTECH, RAILS and not much else. The Transports is the strongest index while the small-caps continue to lag badly. The small caps have been lagging for the best part of 10 months. All the divergences we have discussed for months are still out there but it’s Yellen time.
We repeat three things we have been saying for a few years.
THE FED IS NEVER GOING TO RAISE RATES UNLESS THE MARKET FORCES THEM TO.
WE HAD BETTER NOT GET TO THE POINT WHERE MARKETS SHOOT A CERTAIN FINGER AT THE FED AND START IGNORING THEIR MANIACAL MOVES.
THE LONGER THEY SUPPRESS THE NORMAL EBB AND FLOW OF THE MARKET AND ECONOMY, THE GREATER THE YONKING WILL BE!
These people were selected to represent their party. One is worse than the other. And Candy Crowley should not be moderating an elemenatary schoold debate! Watch this nonsense!
As bad as the internals and technicals looked, the markets have again been juiced by central banks. Most cannot fathom that we are not dealing with central banks of the past in which they would lower rates by a quarter point. You now have central banks at 0% rates so not much to do there. What are their discussions? How many trillions of money to print! This money printing has staved off bear markets for the past 5 years…and may be doing it again. To repeat, we are not dealing with the norm. TRILLIONS do move markets and they know it. There is no doubt that there will be one day where markets are inflated so much, that regardless of central banks, they have had enough. Maybe we are there…maybe we are not.
We suspect after this recent “V’ shaped move up, we would get some backing and filling. That looks like it started today but we believe more upside could be had. Momentum is momentum. Do keep in mind there remains a clear lack of leadership but as you know, leadership can show up. We continue to be in the midst of earning’s season where we expect a lot of jello to move on the plate. Stay ready!
We break away from our regularly scheduled program on the markets…as we are back to…”they are never going down again!” Actually, we told you we would bounce but as usual, this is more than a bounce as Central Banks around the globe, in a coordinated effort, have juiced markets again. Very simply, they have not lost the ability to goose the markets, even out of freefall.
Mel Watt is the newly appointed Federal Housing Finance Agency Director. Here is a little backround on Mr.Watt. In the past, he pushed government programs to help welfare recipients buy homes. He also was a part of the fabulous programs allowing borrowers with poor credit to buy homes with no down payment. We know what happened from there. Of course, no blame! The financial system was crushed when millions of bad borrowers defaulted on their loans. We have blamed the Fed, the borrowers, the financial institutions and the creators of these assinine programs.
In 2002, Watt teamed up with Freddie Mac and Fannie Mae, Bank of America, BB&T, and UJAMMA Inc., to announce Pathways to Homeownership, a pilot initiative designed to give home loans to welfare recipients.
Fast forward to today. Mr. Watt, with his infinite wisdom and clear lack of memory, now has his agency working with Fannie and Freddie again…and to do what? In order “TO INCREASE ACCESS FOR CREDIT-WORTHY BUT LOWER-WEALTH BORROWERS” his agency is going “TO DEVELOP SENSIBLE AND RESPONSIBLE GUIDELINES FOR MORTGAGES WITH LOAN-TO-VALUE- RATIOS BETWEEN 95 AND 97%!” Yes, Mr. Watt is back to putting the taxpayer on the line again for the same type of loans that almost destroyed the financial system to the same type of borrowers…and all this AFTER HOUSING PRICES HAVE RECOVERED because of the maniacal Fed. No worries…Fannie and Freddie were only rescued to the tune of $188 billion. No worries, housing prices will never fall again as the Fed will print money forever. No worries that just a 3-5% decline on a loan would again put the mortgage holder under water.
We have told you forever that if bad behavior and bad policy are not punished, they will be repeated. Most politicians know it is not their money on the line…so who gives a crap? You are on notice. If this goes through, you will be hearing about another housing/loan disaster going forward. We will remember Mr. Watt. We doubt anyone else will.