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The Closing Bell; U.S. Stocks Drop As GDP Growth Slows
@Scott: Unfortunately, Wall Street isn't buying Obama's growth numbers. January in the second month in a row the S&P hasn't had positive numbers. With January being a down month there is now an 80% chance the market will close in the red for the year. I'm planning on shifting to a more defensive position next week. Stay tuned ! Regards, Ted
I don't buy the WH numbers either. For one, they took government spending out of the equation. Net exports was the other measurement.
@Ted, I will be interested to see your defensive posture going forward from here. I started to get defensive in the fall. I still call this the polka dot economy but the number of dots are decreasing.
Think this (linked) Friday morning interview with St. Louis Fed Pesident James Bullard on Bloomberg TV may have played a part in the day's markets.
I caught snippets of it over early coffee. Thought it odd at the time that he seemed to imply there's some underlying inflation building (not yet reflected in the official numbers). Certainly, he seemed hell-bent that rates are going up, sooner rather than later.
I'm surprised how the media decides to pick-up on certain "news" stories but ignores others. Couple months ago there was near hysteria about whether or not the Fed would drop the term "extended period of time" or something like that from their statement. Now here's a member of the FOMC telling us that (1) he thinks the economy's getting hot, (2) he's concerned about inflation, (3) interest rates are too low and (4) rates will be going up. Yet the interview received very little coverage. Go figure.
Think this (linked) Friday morning interview with St. Louis Fed Pesident James Bullard on Bloomberg TV may have played a part in the day's markets.
I caught snippets of it over early coffee. Thought it odd at the time that he seemed to imply there's some underlying inflation building (not yet reflected in the official numbers). Certainly, he seemed hell-bent that rates are going up, sooner rather than later.
1. This "good cop, bad cop" routine is getting to be such a tiresome load of garbage. Cue another Fed member going, "Oh no no no we didn't mean it" after a 250 point drop in the market. At some point (and I can't believe it hasn't been already), the credibility goes into the toilet after one too many times of this BS. Yellen the other day meeting with democrats going "No no no, no rate hikes anytime soon" and telling them that the economy is okay (and some of them are going, "Yellen told us the economy was okay" as if they have no bleeping clue what's going on outside of DC beyond what Yellen just told them.)
Now you have Bullard going "rate hike coming up?" Ridiculous.
2. If you're going to raise rates, do it. I don't believe they can and the market may very well call that bluff. They've painted themselves into a corner.
3. OR they are going to attempt to raise rates (and if so, do it. Hike the rate tomorrow and stop with the b***s*** already) so that when the next downturn starts they'll have some room to bring it back down again, but that still looks terrible if that's their grand plan. Additionally, Yellen doesn't seem to have anything against NIRP.
4. At some point in this ZIRP cycle, do pensions and other investment vehicles (social security fund, etc) get in trouble from the standpoint of already low selection of safe yield and current treasury holdings at higher yields begin to mature?
5. The dollar skyrocketing is clearly not a good thing for many companies, nor would it SEEM to be a positive for the Fed. However, there's also the fact that they never admit when anything isn't going right, because if it's not going the way that they planned, then it's.... (drumroll) transitory. As for prices going up, the memo from the cafe at the Fed saying that they were going to have to raise prices because of food inflation is still hilarious.
The whole thing is - to some degree - the Eddie Lampert-ing of America. People love the financial engineering story (QE), but you haven't really done anything to broadly improve the underlying "business" (because we have politicians who can't agree on a street sign and who use that excuse to sit on their hands.) Eventually, the underlying business starts to show some cracks because more effort was put into financial engineering than actually building a solid, sustainable foundation for the business. After that, more aggressive moves have to be taken and the shine comes off the financial engineering story.
And now things are starting to look rocky and the Fed is at ZIRP while other major nations are cutting rates (some to NIRP.) The fact that you have some major nations cutting rates or going into NIRP should give some people pause about the state of the global economy, but no, of course not - especially the financial media. I can't wait for those who go, "The WORLD NEEDS MORE QE, STAT!"
I would not be surprised if we get a "next stage" of the QE era where even more significant and surprising actions are taken. The Fed has continually tried to stop economic Winter from happening. If Winter pushes its way in to a more noticeable degree and the Fed is still at ZIRP, things get interesting in a hurry. NIRP or other new measures wouldn't surprise me. To me, the concern is that QE and ZIRP are not the end of this era, but the beginning.
@scott Yup. We've hashed this marketing stuff before, eh? I wonder at times if these "Fed" moments are a pissing contest among members, ego or something else. But, these statements are not generally productive, IMO. Rants are okay, scott. A form of investment therapy for me. Take care of yourself, Catch
@scott Yup. We've hashed this marketing stuff before, eh? I wonder at times if these "Fed" moments are a pissing contest among members, ego or something else. But, these statements are not generally productive, IMO. Rants are okay, scott. A form of investment therapy for me. Take care of yourself, Catch
Thanks.
Some have said that 90% of Fed meetings are discussion of communication and 10% are discussions of policy. Wouldn't surprise me.
Sometimes the second and third moves on the old checker board better determine the outcome over the opening move although it is important to control the center of the board ...
Welcome to the defensive side of the board.
With utilites, health care and consumer staples well in overbought territory ... this leaves _________________?
So where are you headed? To cash? To precious metals? To long dated bonds?
Heck I am staying tuned in as I am indeed interested to see how a master investor is going to play this.
It seemed like a combination of things pushed the markets down. The GDP numbers for sure, the Fed rumours as mentioned above, and Russia cutting its rate by two points in a surprise move. Too much negativity for the markets to swallow.
First - I said Bullard's comments "may have played a part" in Friday's market action - since Friday's market action seems to be the topic of this thread.
Second - I reported Bullard's remarks as I understood them and provided a link for any who wished to listen.
Third - I am aware of FedSpeak and how various members are used to sway public perceptions. Possibly, this is just meaningless "garbage" as one has described it. What's different, I think, is the absence of the usual qualifiers. Typically, FedSpeak is heavily sprinkled with qualifying words like: "may", "might", "could", "would", "possibly", "perhaps" or "in the event of". Seems to be an absence of these in Bullard's comments.
Significance of all this? Some if you are a market timer or short-term focused. None if you are a longer term investor. ---
Scott: Do you have a link for Yellen telling democrats the other day "No no no, no rate hikes anytime soon"?
I'm not upset you posted what you posted or are my comments against what you posted or that you posted them or anything of that nature.
I'm simply tired of the endless back-and-forth of - Bullard said what he said and the market drops and I'm sure another Fed member (probably Kocherlakota?) will probably talk it back on Monday.
Again, nothing against what you posted, simply a rant over the endless Fedspeak that never seems to be united. It's either denied a day later (no no no, market didn't like it so we didn't mean it) OR the goalposts are moved or whatever isn't going their way is "transitory."
I'm sure that Bullard's comments were a core reason as to why the market did what it did on Friday. And I'm sure it will be walked back - but there's going to be a point where the "he said, she said" is going to result in credibility eroding entirely.
"Significance of all this? Some if you are a market timer or short-term focused. None if you are a longer term investor."
I don't disagree with you on that, but there is a point where, with the Fed at the zero bound and things looking as if they're slowing down, things will get interesting and possibly for a long while. What do you do if there's a recession and you're already at ZIRP? I guess we'll probably find out sooner than later.
Lastly, I couldn't agree more with this:
"...In other words, their job is not to analyze actual economic conditions, but to condition economic thought toward the end goal. If they convince you that they believe the economy is on track they further believe you will act accordingly (“you” being both investor and economic agent). The more the economy diverges from the “preferred” projection, the more emphatic the cries of “recovery” become. At some point, desperation becomes palpable."
From FPACX 4Q Commentary Conclusion Not only is the stock market at a new high but so is the dollar and that’s despite continued low interest rates. It does beg the question: Are stocks in developed economies only as good as their respective central banks allow them to be? At some point, the market intervention will end, hopefully plying us with opportunity, but we are careful for what we wish for. We are investors who have had the good fortune of like-minded people like you placing their hard-earned money alongside ours.... we don’t particularly worry about what happens over the near -term. Right now, we continue to feel like it is summer in the Rockies and we’re looking at the slopes hoping for snow. Respectfully submitted, Steven Romick President January 26, 2015
(Hopefully the approaching snow/winter Mr Romick is looking for, will not culminate in a far reaching avalanche)
From your second story: “Her message is that the economy’s getting better but there’s still a ways to go in terms of job creation,” New York Senator Charles Schumer said today in an interview on Capitol Hill. “That worry seems, in her mind, to be paramount and that’s why she is not going to raise rates immediately.”
I guess .... Schumer's pretty bright .... If that's the impression he took away from the meeting.
I'll go out on a twig here and tell you there will be a rate hike by year's end. A token one at first to gage market reaction. May not last. Just MHO based on watching all the Fed jabber for a long time. Others may have a different opinion. We will see.
Personally, it doesn't change a thing. 70% buy-and-hold (mostly conservative hybrid funds). The other 30% I play around with. It's heavily tilted towards commodities and natural resources now - and that's how it will remain for the foreseeable future.
Comments
http://www.marketwatch.com/story/white-house-says-q4-gdp-was-pretty-steady-at-39-rate-2015-01-30?link=MW_home_latest_news
Regards,
Ted
@Ted, I will be interested to see your defensive posture going forward from here. I started to get defensive in the fall. I still call this the polka dot economy but the number of dots are decreasing.
Edit PS; The early futures are not good at all.
Lousy week.
Lousy month.
Ted, I'll be even more edgy if you turn defensive.
I caught snippets of it over early coffee. Thought it odd at the time that he seemed to imply there's some underlying inflation building (not yet reflected in the official numbers). Certainly, he seemed hell-bent that rates are going up, sooner rather than later.
I'm surprised how the media decides to pick-up on certain "news" stories but ignores others. Couple months ago there was near hysteria about whether or not the Fed would drop the term "extended period of time" or something like that from their statement. Now here's a member of the FOMC telling us that (1) he thinks the economy's getting hot, (2) he's concerned about inflation, (3) interest rates are too low and (4) rates will be going up. Yet the interview received very little coverage. Go figure.
http://www.bloomberg.com/news/articles/2015-01-30/bullard-warns-of-asset-bubble-risk-if-fed-keeps-rates-too-low
Now you have Bullard going "rate hike coming up?" Ridiculous.
2. If you're going to raise rates, do it. I don't believe they can and the market may very well call that bluff. They've painted themselves into a corner.
3. OR they are going to attempt to raise rates (and if so, do it. Hike the rate tomorrow and stop with the b***s*** already) so that when the next downturn starts they'll have some room to bring it back down again, but that still looks terrible if that's their grand plan. Additionally, Yellen doesn't seem to have anything against NIRP.
4. At some point in this ZIRP cycle, do pensions and other investment vehicles (social security fund, etc) get in trouble from the standpoint of already low selection of safe yield and current treasury holdings at higher yields begin to mature?
5. The dollar skyrocketing is clearly not a good thing for many companies, nor would it SEEM to be a positive for the Fed. However, there's also the fact that they never admit when anything isn't going right, because if it's not going the way that they planned, then it's.... (drumroll) transitory. As for prices going up, the memo from the cafe at the Fed saying that they were going to have to raise prices because of food inflation is still hilarious.
The whole thing is - to some degree - the Eddie Lampert-ing of America. People love the financial engineering story (QE), but you haven't really done anything to broadly improve the underlying "business" (because we have politicians who can't agree on a street sign and who use that excuse to sit on their hands.) Eventually, the underlying business starts to show some cracks because more effort was put into financial engineering than actually building a solid, sustainable foundation for the business. After that, more aggressive moves have to be taken and the shine comes off the financial engineering story.
And now things are starting to look rocky and the Fed is at ZIRP while other major nations are cutting rates (some to NIRP.) The fact that you have some major nations cutting rates or going into NIRP should give some people pause about the state of the global economy, but no, of course not - especially the financial media. I can't wait for those who go, "The WORLD NEEDS MORE QE, STAT!"
I would not be surprised if we get a "next stage" of the QE era where even more significant and surprising actions are taken. The Fed has continually tried to stop economic Winter from happening. If Winter pushes its way in to a more noticeable degree and the Fed is still at ZIRP, things get interesting in a hurry. NIRP or other new measures wouldn't surprise me. To me, the concern is that QE and ZIRP are not the end of this era, but the beginning.
Rant over.
Yup. We've hashed this marketing stuff before, eh?
I wonder at times if these "Fed" moments are a pissing contest among members, ego or something else. But, these statements are not generally productive, IMO.
Rants are okay, scott. A form of investment therapy for me.
Take care of yourself,
Catch
Some have said that 90% of Fed meetings are discussion of communication and 10% are discussions of policy. Wouldn't surprise me.
Sometimes the second and third moves on the old checker board better determine the outcome over the opening move although it is important to control the center of the board ...
Welcome to the defensive side of the board.
With utilites, health care and consumer staples well in overbought territory ... this leaves _________________?
So where are you headed? To cash? To precious metals? To long dated bonds?
Heck I am staying tuned in as I am indeed interested to see how a master investor is going to play this.
My best,
Old_Skeet
With utilites, health care and consumer staples well in overbought territory ... this leaves "a nice game of chess"?
Ah, "War Games" !
The full list of scenario names is here; and no winners.
First - I said Bullard's comments "may have played a part" in Friday's market action - since Friday's market action seems to be the topic of this thread.
Second - I reported Bullard's remarks as I understood them and provided a link for any who wished to listen.
Third - I am aware of FedSpeak and how various members are used to sway public perceptions. Possibly, this is just meaningless "garbage" as one has described it. What's different, I think, is the absence of the usual qualifiers. Typically, FedSpeak is heavily sprinkled with qualifying words like: "may", "might", "could", "would", "possibly", "perhaps" or "in the event of". Seems to be an absence of these in Bullard's comments.
Significance of all this? Some if you are a market timer or short-term focused. None if you are a longer term investor.
---
Scott: Do you have a link for Yellen telling democrats the other day "No no no, no rate hikes anytime soon"?
http://www.bloomberg.com/news/articles/2015-01-29/yellen-tells-senators-no-immediate-rate-rise-amid-concern-abroad
This was literally two days ago.
I'm not upset you posted what you posted or are my comments against what you posted or that you posted them or anything of that nature.
I'm simply tired of the endless back-and-forth of - Bullard said what he said and the market drops and I'm sure another Fed member (probably Kocherlakota?) will probably talk it back on Monday.
Again, nothing against what you posted, simply a rant over the endless Fedspeak that never seems to be united. It's either denied a day later (no no no, market didn't like it so we didn't mean it) OR the goalposts are moved or whatever isn't going their way is "transitory."
I'm sure that Bullard's comments were a core reason as to why the market did what it did on Friday. And I'm sure it will be walked back - but there's going to be a point where the "he said, she said" is going to result in credibility eroding entirely.
"Significance of all this? Some if you are a market timer or short-term focused. None if you are a longer term investor."
I don't disagree with you on that, but there is a point where, with the Fed at the zero bound and things looking as if they're slowing down, things will get interesting and possibly for a long while. What do you do if there's a recession and you're already at ZIRP? I guess we'll probably find out sooner than later.
Lastly, I couldn't agree more with this:
"...In other words, their job is not to analyze actual economic conditions, but to condition economic thought toward the end goal. If they convince you that they believe the economy is on track they further believe you will act accordingly (“you” being both investor and economic agent). The more the economy diverges from the “preferred” projection, the more emphatic the cries of “recovery” become. At some point, desperation becomes palpable."
It's a MOPE (Management of Perspective Economy.)
http://www.zerohedge.com/news/2015-01-31/market-calls-feds-bluff-desperation-becomes-palpable
That's all.
From FPACX 4Q Commentary
Conclusion
Not only is the stock market at a new high but so is the dollar and that’s despite continued low interest rates. It does beg the question: Are stocks in developed economies only as good as their respective central banks allow them to be?
At some point, the market intervention will end, hopefully plying us with
opportunity, but we are careful for what we wish for.
We are investors who have had the good fortune of like-minded people like you placing their hard-earned
money alongside ours....
we don’t particularly worry about what happens over the near
-term. Right now, we continue to feel like it is summer in the Rockies and we’re looking at the slopes hoping for snow.
Respectfully submitted,
Steven Romick
President
January 26, 2015
(Hopefully the approaching snow/winter Mr Romick is looking for, will not culminate in a far reaching avalanche)
From your second story: “Her message is that the economy’s getting better but there’s still a ways to go in terms of job creation,” New York Senator Charles Schumer said today in an interview on Capitol Hill. “That worry seems, in her mind, to be paramount and that’s why she is not going to raise rates immediately.”
I guess .... Schumer's pretty bright .... If that's the impression he took away from the meeting.
I'll go out on a twig here and tell you there will be a rate hike by year's end. A token one at first to gage market reaction. May not last. Just MHO based on watching all the Fed jabber for a long time. Others may have a different opinion. We will see.
Personally, it doesn't change a thing. 70% buy-and-hold (mostly conservative hybrid funds). The other 30% I play around with. It's heavily tilted towards commodities and natural resources now - and that's how it will remain for the foreseeable future.