Fed: When in Doubt, Hint the Print

imageCrack head Santa rally to continue:  It’s still the Roaring Twenties.

I bet you didn’t know the Federal Reserve had its own flag, did you?

Well, whatever.

The reason for the massive rally in markets yesterday was that the Fed could see, just as we pointed out to subscribers, that we were sitting on the critical 200-day moving average.

If you hadn’t learned this already, what happens is most money funds will dump equities and run screaming with their hair on fire when the market closes below the 200-day moving average.  So that couldn’t be allowed to happen. 

Of course, it  happened anyway, but for now this is the Santa Rally that we’ve been calling/waiting for.

It is overdone?

Of course.  Reading this part of the Fed Statement you might not see the change:

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators moving toward levels the Committee judges consistent with its dual mandate. The Committee sees the risks to the outlook for economic activity and the labor market as nearly balanced. The Committee expects inflation to rise gradually toward 2 percent as the labor market improves further and the transitory effects of lower energy prices and other factors dissipate. The Committee continues to monitor inflation developments closely.

If you were a wild-eyed trader, though, the only part that mattered was this:

Based on its current assessment, the Committee judges that it can be patient in beginning to normalize the stance of monetary policy. The Committee sees this guidance as consistent with its previous statement that it likely will be appropriate to maintain the 0 to 1/4 percent target range for the federal funds rate for a considerable time following the end of its asset purchase program in October, especially if projected inflation continues to run below the Committee’s 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored.

What that is really saying (without saying it – there’s an art to this stuff) is that the Fed would really like to have a healthier economy, but doggonit, ain’t happening.  So the bargain-basement rents on money will persist.

What this means is there will be easy money to reorganize failing oil shale operations, and so on.  Still, with oil only up to $58 and change, there’s still a massive problem with deflation of energy prices.

This “easy going” Fed has been met with a kind of global “Mikey Likes It”  Japan was up 2 and a third percent overnight and several Euromeister markets were sitting with 2% gains as well, although the staid Brits were up a lousy percent and a fraction earlier.  They get more excited about cricket.  Besides, cozying up to Cuba might hurt Grand Turk or Cayman banks under, lemmesee which flag was that, mate?…

A big winner was gold, but it pulled back a bit when someone besides me figured out the “be patient” doesn’t mean the sky is opening up and money raining down on the public.  We still have problems like deflation, a government that doesn’t listen to the electorate, and oh, yeah, North Korea which has managed to keep Sony from releasing the movie “The Interview” over Christmas.

To recap:  Print more money to continue the illusion, cave in to NK hackers, and keep setting up game pieces for war to come over the energy resources of Ukraine.

The Ukraine Gambit

Speaking of which, the NY Times has a dandy article about how economic concerns may force Russia into a deal over Ukraine.

While the article goes out on a limb and trying to present another US bullying option (additional economic pressures to come), I’d suggest that someone back in the District of Confusion remember the wisdom of that great foreign policy advisor Janis Joplin who wrote:

“When you ain’t got nuthin, y’ah ain’t got nuthin’ to lose…”

Every time we tighten the screws, we are making the red light special that much more appealing.

Russia is (and has been since ICBMs were invented, only one 20-minute push-button from ending such threats.  And has anyone else noticed how Putin is taking a very, very hard line on troubles hitting his country?

Opening With Cuba

President Obama has announced a breakthrough in relations with Cuba that began with an exchange of spies this week.  But, as the Washington Post reports, the deal has been in the making for a year and a half.

The opening, negotiated Tuesday by phone with Raul Castro, sets the stage for there to be a flurry of economic activity in south Florida, which would directly benefit from a resumption of relations.

Still, anti-Castro forces will not be friendly to the warm-up; realizing from bitter experience how strong-man regimes crush opposition.

For now, though, this has to be the first real evidence that the Nobel Committee wasn’t completely wrong back when.  If relations are fully normalized, otherwise it’s just the one worlders taking over Cuba they way they attempted to take over Libya.  And look what it got Muammar Gaddafi in the end.

The China Problem

Meanwhile, although it was hailed when Nixon opened relations with China, look at where that has gotten us:  Gutted our US Industry with offshoring and jobjacking.  In hock up to our butts…  And now we’re reading about how China has launched a missile that has been MIRV’ed.

While China continues to buy up US property and facilities with the money went were forced to borrow from them, seems to me this move to develop MIRV’s could be taken as a sign of something, but I’m not sure what….

Lon as we’re at it, kudos to former prez Bill Clinton for passing on the technology to them to make it possible.

Why just think what Hillary could do, eh?

Scrying the Future

EIA data on energy is due out this morning, which might deflate that 181 point pop that was expected in the Dow open  this morning.

Add to that tomorrow being quadruple witching (options and a bunch of other stuff comes off the table).

Best guess would be a big, hard pop into mid day, and then a retreat Friday, that’s because options indices expire at tonight’s close and with a nice down day Friday, that would give the commercials a nice Christmas & Hanukah present.

Someone’s gotta get rich, just not you or me.

If you really think the market is in a sustainable rally, two thoughts:  Numero uno:  Baltic Dry Index dropped another 13-points this morning to a depressing 814 reading. 

And the robots are still coming to get your job:  Roomba has announced a 3D printable robotic that you can download and print to clean your house; loser: humans.

Now, go yee forth, verily, verily, and  personally save the economy, would you?  And may the Government that passeth all understanding, be with you.


Fed: When in Doubt, Hint the Print — 4 Comments

  1. Hey George, glad to see comments active on your site. I noticed some difficulties posting a comment via cell phone (android) where dragging the verification icon to complete posting a comment. Is this something maybe related to my end or is this a feature that hasn’t been refined?

    Thanks for all you do!

  2. “Russia is (and has been since ICBMs were invented, only one 20-minute push-button from ending such threats.”

    Ever considered that this is what the western banksters want?

    • They want control but not dead people. Dead people are kinda hard to exploit, unless you’re in the funeral biz

    • Well, the Georgia guide-stones indicate a desire for a 90% population reduction. So shares in the funeral biz should go up.