“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.