The Closing Look

Stocks rallied on Thursday one day after the Bank of Japan and the U.S. Federal Reserve fired their latest easy money bazooka’s. Economic data was mixed. Weekly jobless claims came in at 252k, beating the Street’s estimate for 261k. The Chicago Fed National Activity Index fell to -0.55, missing estimates for 0.15. The FHFA House Price index rose by 0.5%, beating estimates for 0.4%. Existing Home Sales fell 0.9% and came in at 5.33M, missing estimates for 5.38M. Leading indicators also missed estimates and fell -0.2%, missing estimates for +0.1%. Finally, the Kansas City Fed Index came in at 6, which beat the last reading -0.4.

Gary’s Thoughts: Good day…but feeling overbought…and in the midst of resistance. NASDAQ new highs is good news. We head into end of month window dressing.

The Morning Look

Market Update:

Stocks futures are quiet ahead of Friday’s open as the market pauses to digest a strong two day post Fed rally.

Economic Data: Quiet day would be perfect.

  • PMI Manufacturing Index Flash 9:45 AM ET
  • Atlanta Fed Business Inflation Expectations 10:00 AM ET
  • Patrick Harker Speaks 12:00 PM ET
  • Regional Fed presidents panel 12:20 PM ET
  • Robert Kaplan Speaks 12:30 PM ET
  • Baker-Hughes Rig Count 1:00 PM ET

Highlights:

  • Yahoo Confirms Huge Data Breach Affecting 500 Million Accounts
    Gary’s Thoughts: Could this affect their deal?
  • Trump Says Cause of White-Black Tension Is ‘Lack of Spirit’
    Gary’s Thoughts: We think there is a long list!
  • German Lawmakers Are Getting Concerned About Deutsche Bank’s Finances
    Gary’s Thoughts: Deut

The Closing Look

Stocks rallied on Wednesday after the Bank of Japan and The U.S. Federal Reserve both erred on the side of more easy money. Before Wednesday’s open, the BOJ surprised the market and said it will target the yield curve and announced a new catch phrase: YCC (Yield Curve Control). The BOJ also left the door open for more easy money measure to help stimulate inflation. The U.S. Federal Reserve left rates unchanged and hinted that they may raise rates later this year. Elsewhere, the Organization for Economic Co-Operation and Development (OECD), said the global economy is stuck in a “low-growth trap. ” The OECD believes global GDP growth will remain flat at about 3% in 2016, with only “modest improvement” expected in 2017.

Gary’s Thoughts: No rate hike and more easy money! We had no idea!

THE LAST WORD ON THE FED? DOUBT IT!

 “THE LAST WORD ON THE FED? DOUBT IT!”

By Gary Kaltbaum- September 22,2016
We are in hopes this is the last time we have to talk about central banks for now because we must tell you, we are sick of it ourselves. But they run markets. They are the markets. They have put themselves into the position of being the end-all-be-all to markets…
You know our stance. To rehash from earlier this week:
“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. 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.
So imagine our amazement this morning to see the headline of the Wall Street Journal: “FED MAKES CASE FOR YEAR-END HIKE!” Say what? If true, why didn’t they raise rates yesterday? How many times do journalists and pundits have to be fooled by these easy money Keynesians?  What ever happened to the “fool me once” phrase? This is a case of fool me 100 times.
The bottom line…and we repeat…this central bank and the rest around the globe cannot afford to see markets go down. If they hiked rates, markets would swoon. If markets swoon, the wealth effect heads south. If the wealth effect heads south, the steroid economy heads south. If the steroid economy heads south…you get the hint. For now, the bubble continues.
We got another good reaction to more easy money. Just keep in mind, even with the trillions being printed right now, the trillions of negative rates, the 0% rates forever and the outright buying up of markets, major indices are where they were 18-24 months ago depending on which index you look at. But be happy, buyouts of no-sales biotechs is back in vogue and the nasdaq again leads. 
 At least we are not Japan…yet! Japan has decided to just own their whole bond market as they will now peg their 10 year at…drum roll please…0%. Lend money for 10 years and again, get paid nothing for the credit risk. That will work.
We are heading into end of quarter with potential clear sailing for the rest of the year. FOR THE UMPTEENTH TIME, THERE WILL BE NO RATE HIKES! We also expect the ECB,PBOC, BOJ and the MOUSE to continue to add to their nonsense.

The Morning Look

Market Update:

Stocks futures are higher on Thursday as the market digests more dovish action from the U.S. Federal Reserve and the Bank of Japan.

Economic Data: Exactly! Nasdaq at highs. Other indices now attempting to get back above 50 day.

  • Jobless Claims 8:30 AM ET
  • Chicago Fed National Activity Index 8:30 AM ET
  • FHFA House Price Index 9:00 AM ET
  • Bloomberg Consumer Comfort Index 9:45 AM ET
  • Existing Home Sales 10:00 AM ET
  • Leading Indicators 10:00 AM ET
  • EIA Natural Gas Report 10:30 AM ET
  • Kansas City Fed Manufacturing Index 11:00 AM ET
  • Fed Balance Sheet 4:30 PM ET
  • Money Supply 4:30 PM ET

Highlights:

  • More Easy Money From The U.S. Fed and The Bank of Japan
    Gary’s Thoughts: It will not and cannot ever end.
  • Anthem and Cigna Have Accused One Another of Merger Breach
    Gary’s Thoughts: Don’t they have enough issues with the justice department?

THEY WILL NEVER HIKE RATES!

On September 8-9, Janet Yellen sent out a couple of fedeads to talk tough about raising rates. On Friday,September 9, the Dow dropped over 400 points. On Monday, September 12, Janet Yellen sent out two more fedheads to completely roll back what was said on September 8-9. That was the end of any potential rate hike. Simply put, Mrs. Bubble floated a trial balloon to see how markets would react to any rate hike and the balloon popped quickly. So stop listening to the B.S. about the economy, about jobs, about dots, about inflation and about another upcoming terrible season for the Knicks. This is all about markets. This is 100% about the markets. They cannot have markets go down.
If they hiked rates, markets would swoon. If markets swoon, the wealth effect heads south. If the wealth effect heads south, the steroid economy heads south. If the steroid economy heads south…you get the hint. For now, the bubble continues.
This is now getting very, very old. It is affecting too many people, mainly the unwary savers who only want a riskless income investment which has been taken away from them by a bunch of ex- tenured professor’s who shouldn’t be running a lemonade stand. We were utterly amazed by one comment from Mrs. Bubble and that was about being modestly accomodative. Modestly accomodative? 8 years of 0% rates…depending on what abacus you are using, $15-20 trillion of printed money…trillions in negative rates and the outright buying up of markets but “modestly accomodative!” We are speechless and it is very tough to get us speechless.

The Closing Look

Stocks opened higher on Tuesday but drifted lower as the Fed and the Bank of Japan began their latest meetings on interest rates. Before the open, The Commerce Department said residential housing starts slid -5.8% to a 1.14 million annualized rate,missing estimates for 1.190 million. It also missed last month’s revised 1.21 million rate. The report also showed that Permits, which is a gauge for future construction, unexpectedly fell on fewer applications for apartment projects. Elsewhere, Wells Fargo’s CEO (WFC), John Stumpf, apologized, said he takes full responsibility for the fraud and first heard of the unethical sales practices back in 2013.

Gary’s Thoughts: Tommorow…the Fed keeps rates the same. It will be a major surprise if they hike.

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.