And the Fed!

Another Fed day. Yippee! And then we get a presser. Double yippee! None of it matters to the economy. Unfortunately, central banks here and around the globe have enabled the build-up of massive debt and leverage. This is the headwind to economies growing. How can one grow when a government spends double what it spent 16 years ago? How can one grow when debt is now $20 trillion and growing leaps and bounds? Do you hear either of our candidates talking about this?

 

Central bankers have been taunting and haunting us for the past 6 weeks changing their stance almost every day. But it is not just us. Japan did something this morning that juiced their market but was utter nonsense. They are already in negative rates, already buying up their markets and continue to repeat the things that have not worked. It is amazing that the people that have created this situation are still trying to fix the problem with the same solutions they have been using for years which have not worked. Today, Yellen once again will roll back any of the teasing they have done in the past 6 weeks. Blame it on this or that but as usual, there will be an excuse to not raise rates. There is only one reason not to…they are scared s—less of markets dropping. Do not believe a word when they say they target the economy. At this juncture, there is only one target…keep the markets from going down.

Our thoughts on Wells Fargo

One has to wonder when WE were actually rooting Elizabeth Warren on. Unfortunately for the CEO of Wells Fargo, instead of looking from the outside in at the company, he has been looking from the inside of the company out. This simply means that they forgot the #1 rule of public relations. It’s not what you think, it’s what the rest of the world thanks. And when your industry is already in the cross hairs, when you have been found that your company screwed the little guy and when you know you are going to face incoming fire on Capital Hill, one needs to get out in front of it. Wells Fargo has not been proactive in making things right. It is not good enough to say it will not happen any more and it is not good enough for the company to pay the fine.  We we believe that before getting in front of the committee, the CEO should have cut his pay in half during the time the violations occurred. This shows that he was willing to show, not just say…”the buck stops here.”  We believe the company needed to meet with the person who was most responsible who is now getting over $100 million severance and convince her to cut severance in half. No one would have been worse for wear as both still made tens of millions. But when you are in your own bubble, amazingly these very smart people show no ability to understand that this whole episode sucks and people in power are going to draw blood…and draw blood they did…and deservedly so. On top of all this, 5300 underlings were fired but we hear that not one in senior management has been removed. And now, things worsen. Talk of criminal investigations now pervade the air. The millions and millions of dollars the company spends on advertising now pale in comparison to the bad press the company now gets.  It’s never too late to get in front of a bad situation but so far, nothing doing.

The Morning Look

Market Update:

Stocks futures are higher ahead of Wednesday’s open after the Bank of Japan announced more easy money measures to stimulate markets. They are targeting their yield curve and left the door open for more easy money. The new catch phrase is YCC or Yield curve control because the BoJ wants to help inflation get and stay above 2%. In the U.S., investors wait to hear from the Federal Reserve.

Economic Data: Futures up as Japan did blah blah blah…and the fed will say blah blah blah!

  • MBA Mortgage Applications 7:00 AM ET
  • EIA Petroleum Status Report 10:30 AM ET
  • FOMC Meeting Announcement 2:00 PM ET
  • FOMC Forecasts 2:00 PM ET
  • Fed Chair Press Conference 2:30 PM ET

Highlights:

  • Wells Fargo CEO Heard of Unethical Sales Tactics in 2013
    Gary’s Thoughts: If true, he should be gone.
  • West Virginia Opens Medicaid Fraud Case into Mylan
    Gary’s Thoughts: Mylan=crosshairs.

The Morning Look

Market Update:

Stocks futures are higher ahead of Tuesday’s open as investors digest another volatile session on Wall Street. Elsewhere, the U.S. Fed and the Bank of Japan both began their latest meetings that are scheduled to conclude tomorrow.

Economic Data: Sell off big gain yesterday and get mini-gap to upside today.

  • FOMC Meeting Begins
  • Housing Starts 8:30 AM ET
  • Redbook 8:55 AM ET
  • 4-Week Bill Auction 11:30 AM ET

Highlights:

  • Police Capture Suspect Sought in New York-Area Bombings
    Gary’s Thoughts: Maybe the athletes that think it is ok to piss on men and women in uniform can give them some cred for capturing this scumbag so quickly.
  • Wells Fargo’s Chief Risk Officer for Retail Bank Takes Leave
    Gary’s Thoughts: Leave of absence. Will be a long absence. We usually are not in camp of just getting rid of someone but we think CEO should be gone also. This was no small occurrence.

 

The Closing Look

Stocks opened higher but quickly lost ground and ended lower as the market continued trading all over the map. Apple fell which dragged the market lower as it pauses to digest a very strong rally last week. Elsewhere, several small biotech stocks rallied nicely after the FDA approved a controversial drug from Sarepta (SRPT).  Economic data was light. The housing market index came in at 65, easily beating the Street’s estimate for 60. A few housing stocks edge higher on the news.

Gary’s Thoughts: Strong up day fizzles but wouldnt sweat it. Fed and BOJ this week will dictate. We suspect it will be about easy money…as usual. We never want to see a big gain sold off but repeat, it will be all about central banks this week.

5 THOUGHTS AND THINGS YOU MAY NOT KNOW!

Hillary says we need tougher vetting of immigrants. Is she now a racist?

To Colin Kaepernick and the rest who are trying to make a point. Here is a point. Those same terrible men and women in uniform just risked their lives and caught a terrorist alive. This means there is a good chance we get others and get good intel. Do we hear any applause?

In case you are being told China is getting better, China’s total credit reached 255pc of GDP at the end of last year, a jump of 107 percentage points over eight years. Outstanding loans have reached $28 trillion, as much as the commercial banking systems of the US and Japan combined.

France has banned the use of plastic cutlery and crockery to aid in the battle of climate change. Love them priorities!

A study shows 15% of Venezuelans are on the brink of famine, saying they can only feed themselves with food waste discarded by commercial establishments while nearly 50% say they have to take time off from work to search for food!

Weekend notes!

Our overall central bank theme remains the same. We believe every asset price, every data point and every economic statistic is working off of the easiest monetary policy in the history of time…and to the trillionth power. Because of this, we believe central banks can never roll back their nonsense. We simply believe they are boxed in like mixed nuts. Every time markets get in trouble, easy money is ramped up around the globe. Leave no doubt, this is the reason why despite teasing, yapping, telegraphing rate hikes, we have had only one in 22 months. That’s after having no rate hikes in many years.

WE BELIEVE THERE IS ZERO CHANCE RATES GET HIKED THIS COMING WEEK. We believe the fed is not independent thus they do not want to shake the trees. The last and only rate hike led to a worldwide 10% drop. That’s our take. Keep in mind, we do not know what is in these people’s brains as they contradict each other on a daily basis. Lastly, we are sickened that the man who ramped up all this maniacal nonsense, Ben Bernanke, was out this week calling for negative rates if necessary. Imagine…not getting paid to take on credit risk.

As far as markets, after 8 weeks of little index movement, volatility has shown up. The first move was to the downside as a few major indices broke support/50 day moving average. The area that has held best is the NASDAQ/NDX as the resurgence of Apple and everything in sympathy with Apple has helped tremendously.

But underneath the surface, we have seen tops in many areas in past weeks. Most all have followed to the downside. Fewer and fewer areas are working. Fewer and fewer names are in uptrends. More and more names have buckled. But most of the damage is of a shorter-term nature thus a good central bank reaction can turn the tide but only to a certain extent. Keep in mind, major indices are just a few percent below their highs.

Bearish areas include Reits, utilities, consumer staples like tobacco,food, beverages, household
products, cruise lines, hotels, a ton of retail, housing and housing related, a ton of healthcare, most commodities and many oils and now we are seeing a ton of industrial-type names rolling over.

One other note: watch financials. They have lost a little bit of relative strength here. If they break down badly…?

The good news is there remains a select group of big-cap tech,internet,semiconductors that holds up well. Remember, major indices are hardly down from their highs but some damage has been done. Also, we are heading into end of quarter soon. This takes us into Fed week. We freely say we have no clue how the market reacts to any of the nonsense that comes out of Yellen and the Fed.

5 THINGS YOU MAY NOT KNOW!

1) Apple’s market cap is up over $60 billion since the upside surprise pre-order announcement.
2) Wells Fargo’s market cap is down almost $20 billion since the announcement of its chicanery.

3) A Dr. Natalie Azar was brought on MSNBC Thursday just to say Donald Trump “has some risk factors for heart disease.” No tests on him. No facts on him. Never met with him. Just bring her on so they can give cover to the other side. And they ask why national media’s popularity numbers are the lowest ever.

4) Actual headline from yesterday!  “S&P rises 1% on slumping economic data”
5) Ground zero for the bubbles we are seeing, Ben Bernanke came out of his cave to state that the Fed should try negative rates. We will hold off on the expletives.

The Morning Look

Market Update:

Stock futures are a lower ahead of Friday’s open as the market tries to bounce back after last Friday’s steep sell-off.

Gary’s Thoughts: But not much lower. Intel just raised guidance turning the lower market back near even.

Economic Data:

  • Quadruple Witching
  • Consumer Price Index 8:30 AM ET
  • Consumer Sentiment 10:00 AM ET
  • Baker-Hughes Rig Count 1:00 PM ET
  • Treasury International Capital 4:00 PM ET

Highlights:

  • Trump Lays Out Economic Vision for a Record Decade of Job Growth
    Gary’s Thoughts: We liked it.
  • Harvard report: Main Street has starkly more negative views of economy than big business
    Gary’s Thoughts: This is always the case.