That’s because the Fed is in the midst – whether they realize it, or not – of replaying the same Fed decision-chain that led to the market blow-off in the 1920’s and that set the stage for the End of the Financial World, Episode 1. (The Great Depression if you are caffeine-deprived/depraved.)
Most of the time, we save our charts for subscribers to our www.peoplenomics.com site, but this is a big enough deal that I think it’s fair to share our Big Picture work with non-subscribers to let them know what they’re missing.
So here goes:
Yes, let’s look at the historical rate data: Discount rate going into the Great Depression.
Does this mean – for sure – that the market will be heading for a high in the low 20,000’s on the Dow before we go pull levers at the polls this fall?
Not necessarily (and no, this is not financial advice…think of it as ravings of a lunatic since it will make it more palatable), but there are how the data sets line up and there is where we are as of the Friday close.
Not to put too fine a point on it, but I was the only one on a national radio show interview in early January who was talking about the likely all-time highs by summer.
The all-time high of the S&P is 2,117.39. And don’t look now, kiddies, but as of Friday that is only 95.2 points up from here.
And three trading days like Friday would put us over the top.
So, while all the alarmists, charlatans, and fear-mongers were busily predicting the End of the World Any Minute, once again the tortoise is winning the race.
We shall continue to be cautious, but clearly the Fed has an interesting decision to make this week that essentially comes down to two choices.
1. They rain again now and risk the market going sideways a bit more, but within a month the deliberate raise will begin to force staid pools of cash/bonds to seek higher returns and that will drive gold, silver, and oh yeah, the stock market up.
2. OR, they could pass on the rate hike now and while that would cause a short-term pop in the markets now, that also leads to overheating in certain sectors and then we get to the problem of wage-driven inflation so it ensures another hike down the road.
Frankly, in the greater scheme of things, this doesn’t really matter one way, or the other. The market will either do a “buy the rumor, sell the news” of the decision, or it will “sell the rumor, buy the news.”
No matter what, though, globalism’s greatest challenge for the next two or three years will be the matter of dialing back spending by government’s worldwide and paying off some debt. That the IMF and the G20 and all others with skin in the game are where they are is a testament to back room computer modeling.
The chart right (from the Fed H.6 report here) says money growth is presently running somewhere around 4% for cash in the system and around 6.5% for cash, CDs and some of the other wider-based instruments.
We also know that since the Fed has articulated a “2% inflation growth target”
that we can assume that 4% money expansion less 2% inflation target means that deflation might just be moderating a bit.
The judgment call is whether to raise now to hold to the target, or to pass.
If I were Janet Yellen (which would be difficult without going transgender, lol) the smart move would be to do a tiny raise now because if real inflation kicks in, then the national debt’s time bomb ticks faster.
But that’s just a guess and Wednesday isn’t that far off.
It does make me want to sneak of to a casino again, though, since I can’t help but believe that when there is a global change in the force that casino odds might bounce around a bit during the period of the Fed deliberations.
Last time we tried that, we did OK, but the timing of the “change in the luck streak” seemed to be the night before which, in all likelihood, is when the real change in luck occurs – at the decision-point, not the announcement.
Hmmm….wonder if Elaine can pack tomorrow?
The Week’s Fight Card
As we line up the week’s “Capitalist’s Fight Card” we have a ton of data coming starting tomorrow.
Tuesday will bring Producer Price data.
And it will be Retail Sales.
And it will give us the Empire State Manufacturing report from the NY Fed.
All in all, that’s great by me since I can rely on press releases to fill a good bit of tomorrow’s column and I won’t have to think as much.
Wednesday we get the Consumer Price Index. It will be out just ahead of the Fed decision which comes in the afternoon. Somewhere in the morning, we will pick up Housing Starts and the Industrial Production data.
That gets us to Thursday where either the market will be down (if the Fed raises, but only in the short-term) or it will be up. Between the Philly Fed report and the Treasury Current Account report, that promises to be an easy day around here, as well.
Friday, of course, we have options and some Fed speaking going. But this, too, will be interesting since it is the quarterly quadruple witching. It’s called that because stock, stock index, stock index futures and single stock futures options all go dead from Thursday through Friday. There are four of these per year. The next one is in June, then September and December.
And in Other News
There ain’t much.
Oh, sure. “Trump turns eyes toward pivotal primaries” could be read if you really haven’t made your mind up about the election, although that’s hard for me to fathom. We need a good CEO for America and there aren’t that many around to chose from. Dropping out the professional politicians you don’t have any choice, as I see it.
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If you get a terminal illness, you might want to get hold of the democrats. We notice how another State Department employee seems, from this distance, will to fall on his sword for the former boss.
Know how many have fallen on their swords for Clintons? Am I the only one who read all he books on Whitewater?
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Up in Kansas there were a lot of rains over the past week, and we have to ask whether that had anything to do with a “Chicago-bound Amtrak train derails in Kansas, 20 injured.”
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Angela (let’s flood Germany with Middle Eastern people on the Islamic version of reconquista) Merkel lost ground in Germany this weekend as “Germany’s Alternative fuer Deutschland Posts Gains in Regional Elections.”
The Germans, as we have model it, got hooked on a bad idea to stimulate short-term economic growth. But with German voters not being completely stupid, they have moved to the right a good ways which leads to Merkel’s ouster at some point.
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We note, speaking of the Global Caliphate, that they are pretty well focused on economic objectives with a report on how Al Qaeda gunmen kill 16 in Ivory Coast beach attack. Almost 40% of Ivory Coasts exports are oil and another 30 percent for cocoa.
Something to think about when you have that latte with a shake.
Bordering on Idiocy/ Idiocy on Bordering
Not to sound like a broken record on this, but two stories you absolutely much read:
Coin of the Realm
Does Microsoft know something? Here’s why I ask:
“Microsoft Store turns its back on bitcoin payments for Windows 10…” says a ZD Net article.
Hmmm: 121/71 pulse 54…must not be too bad a day…