PRE MARKET…THE SCRIPT CONTINUES

The script continues. Every time markets get in trouble, the fed starts the easy money rhetoric. If it doesn’t work a first time, try a second time. Two days ago, it was Bullard. Yesterday, it was Evans. None of this is by accident.

Here is  how we believe this plays out:

If markets ignore the 2nd attempt by the fed to stanch the bleeding, we suspect there will be a louder attempt at rhetoric, maybe something to the effect of using the word “imminent!” If that doesn’t work, expect them to take action before the next meeting. After all, it should be evident now it is all abpout the markets for these people. After all, the meeting is Sept-25-26…a long way away. They will not wait that long if markets do not cooperate.

If markets do cooperate with the fed rhetoric, they will be able to wait but it is a mortal lock of  rate cuts at the September meeting. Just keep in mind, if rates stay where they are in the market, a rate cut is meaningless as the market is way head of the fed…or putting it better, the fed is way behind the market.

As far as yesterday, just an very very very oversold market rally. We were oversold but foreign markets a lot worse. Emerging market stocks have been bludgeoned. They have to bounce somewhere. At this juncture, we will know more on how this bounce plays out. If it fails quickly, not good.

As far as rates, the bond bubble may be in the climactic stage. This occurs when maniacal investors buy longer term bonds yielding negative…only to make money on capital gains…AFTER a gigantic bond market run. We also have to mention Austria was able to float a 100 year bond…at 1.2%. Repeat…100 years at 1.2%. But don’t worry, Powell tells us there are no bubbles.

THE FED WILL LOWER RATES IMMINENTLY IF THIS CONTINUES

If markets continue to plunge and more importantly, if yields continue to plunge, expect the fed to act imminently. There is no way they will wait 6 weeks (the next fed meeting Sept 25-26) to lower rates if this continues.

As of this writing, our 10 year yield is now down to 1.64%. Fed funds are 2-2.25%. The fed could cut 1/2 point easily and that is to just play catch up.

The most asked question is how can people continue to buy bonds around the globe that are yielding negative. IT IS SIMPLE. Greed! Forget the yields for a second. BOND PRICES have been skyrocketing. Why do you think people have bought a fake meat company with $200 million of sales with nothing but losses with a $14 billion market cap? Greed. It was moving higher. The hope was just sell to someone else. Screw valuations. That is what you are seeing in worldwide bonds.

We have news for you. There will eventually be gigantic, gargantuan, out of this world losses in world bond markets when this greatest of central bank-induced bubbles ends. We just do not know when it ends but we must tell you it feels like the climactic stage is at hand.

Markets are simple here. We have now entered a bearish phase of unknown price and time. All major indices are trading below the 50 day average. We are now headed towards the longer-term 200 day average. Most leadership has quickly broken support. The big worry remains all the leverage built up in the system enabled by maniacal central banks not to mention the $250 trillion of debt around the globe. Just don’t worry because sycophantic economists and corrupt politicians say it is all manageable. The president made a serious mistake with these latest proposed tariffs. We suspect there was no chance he would follow through with them but China’s reaction may have boxed him in. As always, the fed will again try to defend the markets. Every time in the past, the fed intervention has stanched the bleeding and turned markets back up. Next time?

But the Mets are now 2 games above .500 and very close to the wild card.

ON CUE, HERE COMES MORE EASIER MONEY

—–And again and again and again and again.—–
—–We have told you on several thousand occasions that the fed targets the market. They no longer target the economy. On June 3, at the last low of a measly 7-10% correction, Powell sent out his easy money puppet…ooops, we mean another easy money fedhead by the name of Bullard to leak the news that the fed will move from “being patient” to “lowering of rates!”—–
—–We told you in past days that at any moment, the same would happen. Little did we know it would happen today and little did we know they would send out the same easy money puppet…ooops, we mean easy money fedhead Bullard who just came out and stated:—–
—–“FURTHER RATE ACTION DESIRABLE.”—–
—–This by no accident yapping has nothing to do with the economy. It has everything to do with markets. They are scared crap-less that if they lose markets, look out. After all, they cannot be that dumb to not know what 10 years of ridiculous easy money has done for asset prices…or maybe…—–
—–We suspect very very very oversold markets will not dislike this planted yapping. Whether or not it sticks is another story. As we stated last night, we will know a lot more by how the market bounces.—–
——And yes…we do think it a good chance the easy money dolts out of the Eccles building would cut rates before the next meeting.—–
—–We know. We are not very nice and are quite sarcastic with our words. We are just frustrated that a few ex-tenured professors around the globe can just press a button and create unimaginable amounts of conjured up money to keep asset prices up and to screw savers. How did we ever get to the point where the most powerful people in the world are the ones heading central banks?.Free markets are dead!—–
—–But the good news, the Mets are 1 game above .500 and are nearing wild card.  Serenity now!—–

PRE MARKET

To be brief, last night, futures were down 500…now up 100…yummy.

We will know a lot more as to how this bounces. The big 4 large cap indices broke below the 50 day…bringing a lot with them.

Pay no attention to those who just say buy buy buy.

Pay no attention to those who say crash crash crash.

Pay attention to what is holding up best but beware, if this worsens, they usually get them all.

Expect a lot of tweets from the big guy and a lot of rumblings from the Eccles building housing the maniacs at the fed.

 

MARKETS

—–Futures are down another 500 Dow points tonight as the U.S. declared China a currency manipulator, intensifying and escalating the “trade war!”—–
—–If the market opens down 500, that will be almost 2,000 Dow points since the president changed his stance on tariffs. We doubt he expected this.—–
—–Lael Brainard, a fedhead who happens to chair the financial stability committee at the fed has already stated they are watching markets. The people that were one of the main causes of 08 and have enabled the massive debt and leverage we are seeing now have a committee on financial stability. Fill in the joke.—–
—–If we deem China a currency manipulator, what about the other 729 rate cuts in the past 10 years? What about our central bank taking rates down to 0% for 8 years and printing $4-5 trillion? China is indeed a currency manipulator. So is everyone else.—–
—–The market is in somewhat of meltdown mode. We worry about the massive leverage and the one-sided trade in the system that has been enabled by the easy money from our central bank. It is this leverage that magnify losses.—–
—–We expect a 1/2 point cut in rates at or before the next fed meeting. We would not be surprised if we get a leak of this in the next couple of days and we would not be surprised if Powell does the cut beforehand. We are not sure this will help but know it has helped for a long time.—–
—–We believed the president would roll back the proposed tariffs because the market dropped but we think China’s move just boxed the president in. Except for a market being very oversold and sentiment becoming decidedly bearish, we don’t have much in the way of good news. The big cap indices gapped through support and continued down like a hot knife through butter. Foreign markets are being crushed. Leading stocks are imploding. Rates continue to plunge as gold moves higher. We will know a lot more when we see what any bounce looks like and where any bounce comes from. Otherwise, you know the drill.—–

OVERNIGHT NAUSEA

BY GARY KALTBAUM- AUGUST 5, 2019

—-For months, we have had the same thoughts on the China trade issue.—-
—-All evidence in, China is not just going to lie down and play dead.—-
—-China does not have elections.—-
—-The Chinese government are bad players but tariffs are not the answer. Vigorous negotiations outlining the benefits of free trade is a part of the answer.—-
—-Tariffs are paid by the importer and often passed on to the consumer. (Regardless of what the president and Navarro tell you!) If tariffs are so marvelous, why did the president use $28 billion of our tax dollars to pay off the farmers? Tariffs suck!—-
—-Continued back and forth on tariffs creates instability and uncertainty. There is just no way businesses can plan on supply, demand, man power,  expenses, profits or the next day as the president has changed his mind too many times.—-
—–While many here as well as the administration believe China is the weaker country, the problem is that its not what we think, it’s what they think.—-
—-China must cut a deal. NOT!—-
—-We do not want to get to the point where a certain middle finger is shot back.—-
—-OVERNIGHT, THE FIRST MIDDLE FINGER WAS INDEED, SHOT BACK.—-
—–First, China has been reported to ask state buyers to halt U.S. agriculture imports,—–
—-And:—-
—-Futures are getting smoked this morning as foreign markets lead the way down. The yuan broke 7 as China let their currency float down even though China says they have no interest in using their currency as a trade deal. Yeah, that’s the ticket! 7 is a key psychological level. No one expected the latest trade talks to bear fruit just yet but no one, including markets, expected President Trump to again change his stance by hitting China with a 10% tariff on everything under the sun. We do not think it is the 10% that is causing the problems. We think it is the uncertainty of minds being changed as the wind blows. By the way, this goes for both sides. We also suspect this move is to take the ever escalating Hong Kong situation off the front pages as nothing good is happening over there right now.—-
—-And now the president is out this morning slamming the move out of China.—-
—-We suspect you are going to hear some rumblings out of the Eccles building if markets continue to swoon. You know what that means? Another rate cut, possibly before the next meeting? We also have to believe the great market watcher in chief is going to think twice as every 100 Dow points will matter come November 3, 2020. Watch for the rumblings of another pivot.—-
—-Big-cap major indices will open markedly below the all-important 50 day moving average. Before this latest episode, many areas around the globe were already fragile. Fragile just became more fragile.We take no solace in telling you this is some real serious s–t! After all, it’s only the two largest economies in the world totaling close to $35 trillion. Lastly, there continues to be a ton of leverage and a gargantuan one-sided trade out there. You know what that potentially means!—–

MURDERS AND MARKETS

—–Here is your next week. The left and the national media blame Trump for the murders. The right blames it on mental health. Lots of whining and complaining from both sides before the bodies are even removed from the crime scene. On about day 8, this will be all but forgotten until the next tragedy. But until then, it will be back to elections and re-election. You expect anything more from 535 people who through the years have put the tax payer on the hook for $22.5 trillion and counting? You expect anything from the administration? We don’t! We would love to be wrong but we bet on horses by their past performance. All our thoughts and prayers to those affected.—–
—–It used to be that markets were great at telegraphing the future. Markets would go on their merry way to the upside and would then top a few months ahead of recessions. As markets wound their way through the downturn, the fed would start to lower rates. After a few rate cuts, markets would start looking at the light at the end of the tunnel and start to bottom. Bottoming would be a process but eventually turn back up again. During the late innings of the bear phase, a keen eye and hard work can see which names held up best during the last leg down. Those names would start building the stair steps upwards before the market bottomed. Thus, we can find the relative strength. We know by precedent that many of these names will lead when the next bull market resumes. Thus the motto: “it is easiest to isolate strength when the market is weak!” These names would quietly and without fanfare rally towards new yearly highs but are held back by the market. This is called the base building. They want to go higher but the overall market weakness does not allow it just yet. They become what we call “coiled springs!” They build up energy and pressure, just waiting to shoot out of a cannon once the market allows it. Some call this trying to keep basketballs under the water. And then markets bottom. How do we know markets are bottoming? The first thing to happen is these new leaders indeed shoot out of a cannon. The basketballs indeed jump out of the water. This is the first clue. But we then start to get a series of up days on heavy volume and pullbacks on light volume. We start to see the stair steps heading up as the market finally makes a series of higher lows and higher highs. But most importantly, more and more names break out to new highs as points continue to be put up on the scoreboard.—–
—–We just gave you the road map to how things worked for a very long time. Unfortunately, it just ain’t that easy any more. Central banks have interfered beyond any comprehension, both here and around the globe. They have made it the norm to step in front of any market downdraft with easier money. They do not even pretend any more what their goal is. As we have explained, just look at the past two lows. They coincided with two pivots from our central bank. Both times, the excuse was worry over the economy. But economic numbers and employment numbers kept coming in with decently good numbers. What is the common denominator? Both times we were in the midst of bearish action.—–
—–But we now have to add another fly in the ointment, that being President Trump. Leave no doubt he is tweeting and setting policy by market moves. We have watched this for months. We have watched how he says the fed is independent and then rips them to shreds. We have seen proposed tariffs cause market corrections only to see those proposed tariffs magically disappear because of the market correction. Mexico tariffs out of the blue….markets drop…Mexico tariffs disappear. European auto tariffs? Gone 4 days before they were supposed to start without any negotiation. China tariffs? How many times have there been threats only to see the threats go away? The latest being the G-20 meeting. This brings us to our point.—–
——Again, out of nowhere, with absolutely no warning, the president announces 10% tariffs on everything coming from China. Markets swoon. But that’s not the problem. The problem is that our expectation is that any further market drop will get the president changing his mind again. Again, policy dependent on markets. Frankly, we wouldn’t be surprised if these new tariffs are taken off in just days. This is how much we trust right now. We never, ever, ever had to deal with something like this. The fact we believe there is very little chance this latest tariff proposal will not happen tells you everything you need to know.—–
——No longer are markets on their own. They are being run by central banks and now being run by a president’s whims. It is not a reach to say all the losses the market just incurred could be recaptured overnight on just another tweet. We used to be able to say “when all is said and done, markets will do what they want to do!” We can no longer say this any more. We just hope that this constant interference does not lead to dislocations. Unfortunately, we think it a gimmee that eventually, markets are going to shoot back a certain finger at all this nonsense but don’t know when.—–
—– Fast forward to now. Under normal circumstances:—–
—–A bunch of stuff  looks toppy, topping or topped. A bunch of leading names have broke the all-important 50 day average on volume. Big names like AMZN, NFLX smacked on earnings and even AAPL off the latest Trump move has buckled. Foreign markets act terrible. Small and mid caps have lagged for months. The transports have been lagging for months also. The good news is the big 4 that have led, the DOW, S&P, NASDAQ AND NASDAQ 100 all held the 50 day average on Friday as markets rallied decently off the lows. To be blunt, if the leading indices break those levels, get the fork. At the very least, things are now a tougher proposition as we head into what are normally a couple of weaker months. But again, these are not normal times as we know Powell is watching and the president is watching. We really do believe another 500-1,000 points down get the tariffs going bye-bye or Powell throwing a little more “insurance” at the markets with a cut before the next meeting.Welcome to our world.—–
—–And lastly, the longer term worries.—–
—–This latest fed cut was number 729 global central bank cuts since Lehman…yet many areas around the globe have either flat-lined or worse.—–
——The German 30 year yield is now negative. Not sure we need to repeat that. The 10 year yield is -0.5%. Just wondering what this means. Germany is supposedly the engine of Europe.—–
—–Our 10 year is down to 1.855% and the 30 year at 2.391.—–
—–The bad guys and girls just raised federal spending again…simply sticking another gigantic middle finger back at the tax payer. Notice how many are retiring? We would get the hell out of Dodge also if we were in their shoes.—–
—–And now, central banks are going easier again, enabling all this, what should be criminal activity to continue.—–
—–Our motto stands. We have never been more optimistic on the people of this country. We have never been more pessimistic on the people that were elected to run this country.—–