This Week in Barrons – 12-13-2015:
Thoughts:
“Did I fire 5 shots,
or did I fire 6? Do you feel lucky?”…Clint Eastwood as
‘Dirty Harry’
Dear Ms. Yellen:
Clint Eastwood’s line from
the movie Dirty Harry relied upon the individual at the other end of the gun being
a confused amateur and not totally aware of his surroundings. That’s exactly how you’re treating the
up-and-coming FED rate hike decision on December 18th, 2015. Depending upon how you count them: QE1, QE2,
QE3, Cash-for-Clunkers, Operation Twist (oops – was that QE3?), I actually lost
count of how many monetary injections the FED has architected. So I’m not sure whether you’ve fired 5, 6 or
10 shots.
But Ms. Yellen, if your
goal was to: economically confuse J.Q. Public, create un-payable debts, and
lower our standard of living – you have succeeded. In fact, this is just too darn perfect to be
considered a series of accidents or bad decisions. Honestly, I don’t believe that good people
could screw THIS many things up THIS badly.
I remember a 1983 piece by
Charley Reese called: “The 545 People Responsible for America’s Woes.” Some excerpts follow:
-
One hundred
senators, 435 congressmen, one president and nine Supreme Court justices = 545
human beings (picked from over 300 million) are directly, legally, morally and
individually responsible for the problems that plague this country.
-
Politicians
are the only people in the world who create problems, and then campaign against
them.
-
Have you ever
wondered why, if both the Democrats and the Republicans are against deficits –
we have deficits? Have you ever wondered
why, if all the politicians are against inflation and high taxes – we have
inflation and high taxes?
-
After all:
o We don't propose a federal budget – the President
does.
o We don't vote on appropriations – the House of
Representatives does.
o We don't write the tax code or set fiscal policy –
the Congress does.
o We don't control monetary policy – the Federal
Reserve Bank does.
- These same 545
human beings spend much of their energy convincing you and I that what they did
– is NOT THEIR FAULT.
- - It seems
inconceivable to me that a nation of over 300 million cannot replace 545 people
who stand ‘factually’ convicted of incompetence and irresponsibility.
- - I cannot think
of a single problem (from an unfair tax code to defense overruns) that is not directly
traceable back to those 545 people.
- - Therefore, it
must follow that what exists is what they want to exist. If the tax code is unfair, it's because they
want it to be unfair. If the budget is
in the red, it's because they want it in to be the red.
- - There are no
unsolvable government problems. Do not
let these 545 people CON you into believing that ‘the economy’, ‘inflation’ or
‘politics’ are preventing them from executing their oath of office.
Ms. Yellen, Charley is as
right today as he was in 1983. You do
not take the most successful nation, with the strongest economy, with the
highest morals, and turn it into the mess we are in now – BY ACCIDENT. You couldn't string that many accidents
together. You’re fortunate that on July
2, 2013, Congress repealed the Smith Mundt Act.
What is the Smith Mundt
Act? The Smith Mundt Act was put in
place to make it illegal for the U.S. Government to use coordinated propaganda to
influence people over the airwaves. After
WWII, propaganda was being actively broadcast around the world. The Smith
Mundt Act made it illegal for our Government to turn its massive propaganda machine
against its own citizens. Unfortunately
it was repealed on July 2nd, 2013, and from that moment on the U.S.
Government has the legal right to produce PROPAGANDA and spread it through any
arm of the media.
So Ms. Yellen, without the
Smith Mundt Act to protect me, I don’t know whether you’ve fired 5 or 6
shots. And just like Dirty Harry, aren’t
you simply taking advantage of J.Q. Public being financially unaware and
confused? If I were a betting man, I
think the next bullet that you will be firing is a ‘rate hike’ bullet on December
18th, 2015.
The
Market....
When the FED raises
interest rates by 25 basis points on Wednesday, it will be a strategy employed
to quiet Congress, the markets, and the media. It is designed to sell some confidence about
the economy and to boost economic moral. It also gives the FED room to cut again when
needed. The markets currently sit
precariously back at support levels, awaiting the FED. But even with the upcoming meeting, this past
week’s market activity was ‘odd’ at best.
On Friday futures were in
the toilet heading into the open, and we closed down 309 DOW points and 39
S&P points. Why did that happen?
-
Europe was weak
on Thursday night.
-
Oil was
plunging.
-
High Yield
credit was falling.
-
Another hedge
fund stopped paying out redemptions.
-
And the Chinese devalued
their currency.
But, I think that the big
culprit was tax selling by some big funds, coupled with portfolio adjustments surrounding
Wednesday’s interest rate hike. While I
expected the rate increase in September and they punted – I don't think they will
punt this time. The argument for ‘no
hike’ is that the FED should not be raising rates going into weakening economic
data. And that’s a fine analysis if you’re
talking about honest people actually trying to fix an economy. The FED (however) is nothing of the sort. The FED knows that it can't save the middle or
lower class, so it’s simply trying to save the system. The FED is not our friend, and is not there
to create jobs or bolster our currency. The
FED is there to further a banking agenda.
The common thinking is
that this will be a ‘one-and-done’ rate increase. I (for one) disagree. If they increase rates, the dollar will
strengthen, and that’s certainly bad for exports. But the FED doesn’t care about exports, jobs,
or the middle class. The FED cares about
the carry trade, the financiers – the money people. It is those people that can do very well
playing currency games with a strong dollar positioned against the Euro and the
Yen.
But for the FED to initiate
a rate hike campaign as the economy fades – means that something pretty big is
coming. I don't know what, but I do know
that this FED will NOT take the blame for a recession. So if they're putting on the brave face and
hiking rates – they must know that something significant is right around the
corner.
There are many strange
things that can happen between now and the end of the year. The market could get pretty volatile, it could
put on a brave face and soar higher, or both. I can assure you one thing; it will NOT be a
time of calm.
Tips:
DOW INDU
(17,265): This index has been rattling around
with some significant volatility. We
will test 17,200 next week. The upside
stall area is just above 17,800. I don’t think we see a breakout in either
direction until after the FOMC meeting.
NASDAQ NDX
(4,537): We did have a ‘gap-fill’ moment down to
4,500 before we bounced back in mid-November. Since then we have been in the 4600 to 4700
range. A drop to 4500 will certainly
happen, and I suspect the index will stay in the 4,400 to 4,500 range until after
the FOMC meeting.
S&P SPX
(2,012): Much like the Dow Jones we saw this
index bottom out in mid-November, rally back, and pretty much stick in the 2040
to 2100 range. We are testing the 2000
range, again and could see a drop back to the recent lows of 1950 and
potentially 1900. We must wait for the
Fed’s FOMC meeting to determine if we are going to sell-off or rally above 2100
into year-end.
RUT
(1,124): The Russell (RUT) continues to be the
best measure of order flow. The Russell
has been in a bear market since June, and finally bottomed out in late
September. Since then we have not been
able to rally back to the June 1280-1290 highs. The Russell index will be the tell-tale sign
for the market heading into year-end.
I am looking for:
-
Google (GOOGL) (@
750.42) to test the 733 level,
-
Amazon (AMZN) (@
640.15) to possibly test the 600 level,
-
SPX (@ 2,012) to
test the 1950 and then the 1900 level,
-
NDX (@ 4,538) to
test 4500 and then the 4400 level,
-
TLT (bond ETF)
currently is experiencing the largest short interest in its history. Either a lot of people are going to be right,
or there will be a huge short-covering rally in TLT following the FED decision
on Wednesday.
I am:
-
Long various mining stocks: (AG, AUY, EGO, GFI, IAG, and FFMGF),
-
Long REN @ $0.56
To
follow me on Twitter.com and on StockTwits.com
to get my daily thoughts and trades – my handle is: taylorpamm.
Please
be safe out there!
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