The Fed WILL NEVER RAISE RATES!

“THEY WILL NEVER RAISE RATES!”

By Gary Kaltbaum
Twitter@GaryKaltbaum
garyk.com

Woke up this morning to headlines like “Fed “Patient” No More!’ Cute! Another headline: “Fed Puts Interest-Rate Hikes in Play!” What Fed are these people watching? For quite a long time, we have been telling you that unless the market forces them, the last thing you will ever see is the Fed raising rates. Notice how they tease. Notice how they maneuver but nothing ever happens. What happened to the 6.5% fake unemployment rate threshold?

The bottom line is that the Fed put themselves in a box a long time ago. They have set markets up to being used to 0%. Imagine, how is it that they say the economy is doing well but are so afraid of an itty-bitty move from 0% to 1/4%? Why are we seeing so many supposed pundits begging the Fed to not even raise rates to a nothing 1/4%?

Unfortunately, with all the central banks around the globe moving all over the map, there have been repercussions…like a crashing euro and yen and a soaring dollar. (We hate talking currencies)The fed forgot that a soaring dollar hurts sales, earnings and overall economic growth over here. Oops! If the Fed raised rates yesterday, we could have seen a further yonking in the euro. So Yellen did nothing but comically removed the word “patience” but state that doesn’t mean they will be impatient. Say what!

The other part of the equation is that they are watching markets first and everything else second. Leave no doubt that the timing of QE-Euro and QE-Japan were not by accident as it was exactly when QE-USA stopped…for now!

So…we had the mother of all short covering in all currencies versus the dollar yesterday. This enabled a good move in the worst areas, that being commodities of all stripes and those related countries. But all these areas remain in downtrends and not sure one day will change that. Major indices are now towards the upper end of the range again but must tell you mid-caps and small-caps have moved above range.

We just don’t think much has changed but a big breakout of major indices will go a long way in giving markets another leg up. We’ll have our usual big market report over the weekend.