GOVERNMENT RUN MARKETS

“GOVERNMENTS GETTING DEEPER INTO THE MARKETS”
April 11,2016

We do not make this stuff up! The first two paragraphs are from this morning:

Italian Treasury and central bank officials will meet with executives of major banks, including UniCredit
SpA and Intesa Sanpaolo SpA, on Monday to discuss the creation of a fund that would buy bank shares and help the institutions tackle non-performing loans, according to people with knowledge
of the talks.

In the latest revelation of just how far China, and its central bank, are willing to go to prop up its ailing local stock market, on Thursday the official Shanghai Securities News reported that China’s foreign exchange regulator has bought mainland stocks worth over 27 billion yuan ($4.18 billion) via three low-profile investment firms it controls.

So…

With a bunch of countries going deeper into negative rates, with a bunch of countries continuing to print money as well as add to the printing of money and recently, Janet Yellen’s money quote:
“Even if the federal funds rate were to return to near zero, the FOMC would still have considerable scope to provide additional accommodation. In particular, we could use the approaches that we and other central banks successfully employed in the wake of the financial crisis to put additional downward pressure on long-term interest rates and so support the economy–specifically, forward guidance about the future path of the federal funds rate and increases in the size or duration of our holdings of long-term securities.  While these tools may entail some risks and costs that do not apply to the federal funds rate, we used them effectively to strengthen the recovery from the Great Recession, and we would do so again if needed.”

In case you did not know, this quote (which was under-reported) specifically states the potential for not only going back to 0% rates, but the potential for more printing of money. Remember these people say and do nothing by accident. It is all planned out. It is all coordinated and it is all in concert. The fact is only a quarter point hike here in the US was having world markets melting down thus they have come to the conclusion they have to roll it back or else. Notice the word “economy” in bold. Replace the word “economy” with the word “market!”

Earnings growth does not matter. Sales growth does not matter. GDP does not matter. (expected GDP this quarter is expected to be around a big fat 0%) Debt, we mean massive debt does not matter. Leverage, we mean massive leverage does not matter. Communist presidential candidates do not matter. Crooked presidential candidates do not matter. A presidential candidate who changes moronic stances every hour does not matter. All that matters is back to all that has mattered over the past several years and that is the maneuvers of a select few maniacal central bankers around the globe. We have already written to you on numerous occasions about what they have done. 0% interest rates going on a decade now with negative interest rates becoming something of the new norm. It’s no longer the printing of trillions. It is the printing of tens of trillions. No number is too high! The fact is and it is our contention the only thing that matters to the select few is markets holding up or going up.

We hear Obama is meeting with Yellen today. We suspect the prez will give her big hugs and kisses for keeping rates at 0% and all the coordinated printing of money as it has propped things up while masking the underlying problems and enabled this “debt president” to increase debt over $8 trillion while in office.

As we come into this week, a few thoughts:

The not so good:

Big and small financials are still acting poorly and are a drag on the markets.

Retail stocks are rolling over badly.

Small caps continue to woefully underperform large caps.

Europe and Asia (especially Japan) continue to underperform the U.S. by a wide margin.

The good:

Our markets refuse to pull back in a meaningful fashion.

Gold stocks are breaking out…leading the metal, which is usually a bullish occurrence.

Biotechs may have bottomed for now. They have been a huge drag on the Nasdaq.

Energy-related issues continue to hold their recent moves off the lows…but plenty of work left to do. Other commodity areas like steel also continue to have the bid. The same for commodity countries as we had told you in recent weeks that everything that led down for 18 months had turned the corner.

Most of the talk is about how bad earnings are going to be. When everyone is talking about something, it is usually already in the market. We’ll know starting next week.

Other areas that remain stronger are Food, drugs, beverages, alcohol, household products, reits, utilities.

Gary Kaltbaum