The Fed decision yesterday to keep lending rates unchanged was a given, although it is significant to note that the long-term commitment of the Fed to low rates through 2014 may be enough – with just two possible news events to come – set the stage for a massible “super rally” from perhaps month-end lows into the fall elections.
All it would take would be the US Surpreme Court to toss out the Obamacare bill, on the one hand, which I’m willing to bet would cause a thousand point rise in the Dow in a matter of days. That and even a hint that not all is lost in Europe and that it will somehow muddle-through without triggers the end of the financial world via a derivatives blow-up.
Given those two factors, and the idea that so many people are short right now and my trading system being so close to an upside reversal, that I made a small wager on the long side of the market Wednesday, as I had warned Peoplenomics reader that I might do.
This is not to say the market won’t go down: Markets invariably go the other way from these “Wrong Way George” bets. Still, the Economic Fractalist’s work, Landry’s alternate count, and the rising sense of hope that elections mean something this fall, could full a smoker of a rally over the rest of summer.
The Federal Reserve’s FOMC statement isn’t sounding particularly worried:
“To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.
The Committee also decided to continue through the end of the year its program to extend the average maturity of its holdings of securities. Specifically, the Committee intends to purchase Treasury securities with remaining maturities of 6 years to 30 years at the current pace and to sell or redeem an equal amount of Treasury securities with remaining maturities of approximately 3 years or less. This continuation of the maturity extension program should put downward pressure on longer-term interest rates and help to make broader financial conditions more accommodative. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. The Committee is prepared to take further action as appropriate to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability. “
All of which means what? A certain amount of predictability to the Fed’s rates, which will likely keep lending rates low, which is bound to goose household formation, a bunch of delayed marriages among 30-somethings, and bang! There’s reason to think a rally could actually happen.
There was one other report released by the Fed, which gives reason for hope. That’s the Economic Projections report and it looks pretty good when you zoom on the key part of it:
Does this mean the markets – which generally discount future economic gtrowth by 6-months to a year out – are a little behind the knowledge curve?
For example, a few weeks back with my son was here, I mentioned he and his S.O. liked a stock called Zogenix (ZGNX) and I bought a small position (500) at $1.77. I’m out now (personal trading target met) but that stock closed yesterday at $2.34 (32%+) on a 3-week trade. (I’m out of it now, this is not a recommendation or buy or sell, and seek professional advice & psychotherapy before doing anything I mention…it’s bound to be a loser, except for this one trade.)
Point is? Something’s going on, is what I’m saying: If there was really a big “over the falls” event lurking, I just don’t think this kind of smaller high tech or pharma stock would be doing so well.
There’s a fine line between investing and gambling, I’ll grant you that.
Not that we’ll have a straight up moonshot ahead, either, but barring a sudden outright collapse, the possibility of new all-time highs must be considered.
That is the idea that all possible news is already factored into the market. In other words, Europe fears and so forth, exaggerated to the downside, are already cranked in. What’s seems to be missing in my view is the risk of “upside surprises” and that could be where the next big move comes from, as a couple of more down days and fear may be overdone without regards to the political season, the possible supreme corps decision, and Europe working a muddle-through.
Oh, and regardless of what one thinks of the Fed (renting us our own money, etc) I have immense respect for their back-office research teams which are the best there is. If they they growth ahead, the advice in the old Marty Zweig book ( I don’t remember if it’s in Martin Zweig’s Winning on Wall Street or not) is simply this: Don’t fight the Fed.
Gary Lammert, who is The Economic Fractalist, makes the case for new all-time highs, too, in his latest projections.
If being a contrarian is your cup of tea, overblow fear about the future may offer some good returns for those willing to take risk early on.
Unemployment Improves a Tad
Weekly report just out:
“In the week ending June 16, the advance figure for seasonally adjusted initial claims was 387,000, a decrease of 2,000 from the previous week’s revised figure of 389,000. The 4-week moving average was 386,250, an increase of 3,500 from the previous week’s revised average of 382,750. “ The weekly data is noisy, but there you have it.
End of all financial life on earth is not the problem, apparently. Ignoring the cause of the data gap next year…
Waiting on the Court
There’s a pretty good-sized bet in Washington that surepme court decisions on either the Obamacare legislation or alien rights cases will be announced today, though the administration has made it clear that regardless of the laws of the land on things like immigration, they’ll rule by excuctive fiat…
Supreme Court is trying to accomodate a big press from the MSM…
The Nixonian Democorp
President Obama’s decision to cite “executive priviledge” in the Gunwalker/ Fast & Furious case is an insult to truth-seeking people. Hence, a contempt citation against the Attorney General becomes almost a sure bet, but unless congress puts a little more teeth in its rules, this just means another Washington cover-up is likely to be successful.
Not that I’m surprised, but I’d have loved to see any memos between the State Department and Justice brought to light. I can’t believe there wouldn’t have been at least some coordination.
The Assad Game Show
The US and Britain are reportedly offering clemency to president Assad of Syria if he will join in peace talks.
I’m assuming Assad is no dummy since this keeps him at the center of a bidding war between Russia (here, take these tanks and choppers) on one side, versus the West (here take a buyoff and not having your offshore money seized) on the other.
Really, this all comes down to international diplomacy being very much like being on a game show. The West puts up contestants, whether they like it or not. And, when the big wheel of “Spin the Governor” is wound up, losing contestants end up dead, all over the TV just about dinnertime in the US.
So how will Assad play his guest appearance? I’m was pretty sure Assad would do one more “bonus round” and try for whatever’s behind curtain number threee…he just seems like that kinda guy.
But, this is an international game of “The Price is Right” and if Assad lays it down in the current round (maybe after buying millions in close in call options on the Dow through offshore proxies, for example) he could make the quiz show choice “I think I’ll take the cash and stick with that….“
“You’re sure you don’t want to try for all the cash, the tanks AND curtain number three?”
“No thanks, George, I’ll take the cash and call it good…I remember the last contestant…Quadaffi? And who was that other guy? Mubarak?“
Of course Hillary ain’t Vanna and I’d think thrice before buying a vowel (or anything else) from her…
[Gong!} Time's Up!!! Next contestant?
Intergenerational Warfare Notes
I've written a fair bit in the past about intergenerational tensions - mainly going to the idea that young people are unhappy with the grays because they are still working, which prevents them from moving up the food chain and making more money on the one hand. On the other, the grays look at young people (under 40, or so) and mostly disrespectful twits who don't much 'get it' and are not hustling enough to move ahead and who forgot the "respect your elders" idea, more of less completely. The good news is, both sides are right.
So along comes our Winniped news analyst this morning to throw some light on what's going on...maybe...
"Dear Mr. Ure, The BBC has quoted a Clinton adviser speaking at LeWeb London warning future government action will arise to counter citizen web networks. The Ruling Paradigm and Generation Y are at odds? Is it really generational cycle theory in the driver's seat of economic cycles? "
Add another axis to the chart, then: Silly right-left charades, net consensus and self-ogranizing axis, and our old friends the age and income axes.
Naturally, there's a crime axis, and several others, such as the government payment axis and so forth, such that most people being limited to 2-dimensional visualizations, maybe doing 3D with some help, can't fathom a half-dozen or more, which sadly is what makes understanding the Fourth Turning and the blender's worth of psychographic drift in this cohort of humans to be so frothy.
Considering modern times is a lot like laying on your back as a kid, looking up at the clouds and see which ones can be visualized as animals, faces, and what have you. In today's world, you lay on your back and look up and what seems to be there mostly is floating lumps of dark brown...
Lippy Kids, II
Say, that NY bus monitor getting verbally worked over by kids is resulting in rethinking how society puts the little ankle-biters on pedestals.
In the old days, I'd remind you of the W.C. Field's line "I like children. Broiled."
But that ain't so funny down in Miami, lately, so discretion is the better part of writing...
More after this...