Over the past few months a potent emotional cocktail of fear and confusion has been seeping into the consciousness of market participants. It’s not just that equities are steadily heading lower whilst producing more and more bearish context above to be overcome sometime in the future. What’s worse is that there appear to be very few places remaining to sit out the storm. The exception of course being the two usual suspects – bonds and gold. (more…)
A couple of Thursdays ago, we were all wringing our hands (or at least I was) about the powerful bureaucrat and lifetime government employee Haruhiko Kuroda and what his next move would be. He dropped a big bomb – negative interest rates – and created precisely the kind of market reaction he wanted………….for less than a single day. Since then, his world has once again fallen to pieces, since the cold fact of the matter is that Japan is doomed to be an old age colony, hopelessly mired in debt, with its economic glory of the 1980s an increasingly distant memory.
Even though these moronic central bankers are becoming increasingly impotent (a trait normally assigned merely to those who dared gaze at the hideous visage of Janet Yellen), we’re all still afraid of them and what they might do, simply because the horrid memories of 2009-2014 are too painful to forget. The latest chatter is about the Chinese government, and whatever falsified data they intend to trot out Sunday night. I personally wish they’d all choke on their chopsticks, but the universe seldom heeds the desires of Tim Knight.
Today is the day when we find out whether the Fed will be raising interest rates by 0.25%. In a normal year this might lose a contest for front page space in that event that Angelina Jolie’s dog was lost on the same day, but with the last rate rise a long long long time ago, even this tiny move has assumed a great significance.
Back in the days when The Fed didn’t spend all their time frantically trying to repair the appalling damage caused by previous Fed Chairmen, William McChesney Martin, Fed Chairman from 1951-70 said (paraphrasing) that it was the role of a central bank to ‘take away the punchbowl just as the party was really getting going’. After Volcker in the 1980s though, a persistent deflation took hold in the quality of Fed Chairmen that is perhaps expressed best on the chart below:
Note: This article assumes the reader knows the reasons we are now bearish on the Semiconductor Equipment sector. NFTRH subscribers definitely do and NFTRH.com/Biiwii.com readers should as well. Readers who have been around a few years also know that we became bullish on the Semi’s in Q1 2013 from much the same reason, in reverse, we are becoming bearish now.
This article was originally and simply titled ‘Market Management’ as the opening segment from this week’s NFTRH 372. We then covered US and global stock markets and precious metals in detail, along with brief but ongoing negativity about commodities (but also what to look for regarding signs of change), a currency update and extensive market sentiment and indicator updates.
As noted recently, my trading had become problematic because I do not have the time, inclination or even the raw talent to day trade, which is what this market has seemed to demand lately. There is no better illustration of the reason why trading has been difficult than what happened on Tuesday through Friday as markets popped up to challenge the recovery highs, tanked hard, seemingly launching the bear view and then ramped again toward the highs on Friday (on a policy maker’s jawbone, what else?).
Let’s try to untangle the web of Fed-speak going on here. “Reality” for our purposes is defined as my opinion, obviously.
Yellen Defends Seven Years of Low Interest Rates in Letter to Nader
Warning that “an overly aggressive increase in rates would at most benefit savers only temporarily,” she argued in the letter released Monday in Washington that the Fed’s seven-year era of zero rates had sheltered American savers from dramatic declines in the value of their homes and retirement accounts.
Contributed by Stephan Davied
The world seems to be in the throngs of something very strange. Are we in a recession or are we in a depression or are we in a 10 year period of just super low growth? The world has never coined a term to describe years and years of low growth, probably because it does not happen much.
Generally countries, businesses, schools and even humans go through cycles. The human normally sleeps at night and is awake during the day. This cycle is critical to our survival as we need the proper amount of down time to support our up time. Businesses go through cycles. Retailers are super busy during the holiday season and other times they are less busy. This is a retailers yearly cycle. Bigger than that are economic cycles. During times of robust business activity business struggle to keep up with demand so in turn they invest For example in times of robust growth a concrete company who can’t meet the demand of its customers might build another concrete plant.
What They Said
“In determining whether it will be appropriate to raise the target range at its next meeting, the Committee will assess progress–both realized and expected–toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.”
What They Did
What did the Fed do yesterday? Why, they rolled over once again and held ZIRP. They also got mighty specific with some wording that freaked out precious metals players and put in a reversal, not only in the metals, but importantly, in their ratio. See yesterday’s post on the Silver-Gold ratio’s status… What Thing Looks Like the Other. A reversal in silver vs. gold would put the sector on a correction and also issue a warning to other global markets.