Everybody has opinions on the recent election outcome but as usual most of the opinions are from the echo chamber and not factual in any way. This blog is dedicated to seeking profitable investment and trading opportunities as I sort through the noise of the financial media. As with Brexit, the punditry found itself trapped in its own rhetoric and every prediction but the weakness of the pound proved to be WRONG, at least in the short to medium-term. British Gilts (10-year notes) rallied substantially in the post-Brexit confusion and most importantly the Footise stock index rallied 15% off its election night bottom. The POUND did weaken substantially against the U.S. dollar and the euro currency but I have argued for a few years that the British current account made the relative strength of the POUND to its key trading partners unsustainable.
Posts Tagged ‘Equities’
The markets are in turmoil and it gets the mind to thinking: What could possibly have caused today’s reversal in the stock market and the long end of the BOND MARKET? The market seemed like it was on the edge of a complete risk capitulation. The dollar was dropping, bonds all over the world were in rally mode and the precious metals were finally finding some technical strength as the GOLD (in pure dollar terms) had finally rallied through its 200-day moving average. Even the SILVER was able to synchronize with the GOLD and break out of three months of resistance. (The silver 200-day is at 15.13, still a bit above its closing price.) The global stock markets were cascading lower as the Nikkei and German DAX took out their lows made the night of the BOJ’s surprise move to a three-tiered negative interest rate policy.
Long-time readers of NOTES FROM UNDERGROUND are well aware that one of my key rules about global finances is MONEY IS FASCIST. In an interview with Rick Santelli today, I reiterated my views about how global capital needs to secure stability (hence the idea of money being fascist) as the world’s equity markets suffered from the “new ” uncertainty of geopolitical events over the weekend.
One of the great contemporary financiers warned on September 29 that the stock market was “extremely overheated ” and was being “supported by an “unsustainable earnings mirage.” Well, since that video release from Carl Icahn, the SPOOS have rallied more than 7 percent, defying the wisdom of Ichan, as well as many other highly regarded investors. Today’s equity rally was in the face of what has been a continuing onslaught of negative economic releases. The market has rallied off the August 21-24 lows but has paused when confronted with weak data, such as September’s unemployment report. But today the weak economic releases failed to dent the powerful rally: a weak Empire State, a weaker-than-expected Philly Fed Manufacturing report.
Notes From Underground: The Fed Will Raise Rates at the October Meeting (Wait For The Press Conference)October 6, 2015
This afternoon, San Francisco Fed President John Williams delivered a speech that I believe signals a rate rise at the October meeting. It seems that the chorus of criticism from all corners of the political and economic spectrum is causing the FED to reconsider its September decision to keep rates at zero bound, even with the weak September jobs data. The voices of Summers and Krugman have been drowned out by the criticisms from investors and other academics. Why do I think the rate increase is coming? Williams gave three hints in a speech he delivered today, “The Economic Outlook:Live Long and Prosper.”
Before we review Friday’s action, I would like to present a quote from Tolstoy sent from a long-time reader and is representative of the 2+2=5 basis of Notes From Underground. While I have respect for the theoretical basis in the continued search for knowledge, I try to write NOTES with a deeper understanding of the fundamentals that drive markets on a short- and long-term time scale.
As we head into decision day on U.S. interest rates it is important to note that all the major equity indices remain under their 200-day moving averages, despite recent rallies amid short covering (and bargain hunting remains an active sport). The consensus based on the pricing of FED FUNDS futures contract has the odds in favor of a NO CHANGE in policy by the FOMC. I caution that bargain hunters have been on the prowl as the voices of Summers, Lagarde, World Bank and others have given fortitude to those needing to put cash to work. If the FOMC stays the present course the immediate impact MAY be an initial equity rally but be patient to see how the market is reacting after at least 12 hours.
The global markets were anxious by the action of the 200-day moving averages and their reference points to the global equity markets. As of writing, the DAX, SPOOS and CAC have joined the others that began the week below their 200-days. The NASDAQ 100 futures index is struggling to hold support on the vaunted moving average, currently at 4381.01 on the CQG daily continuation chart. While equity markets have swooned, gold and silver found buyers as investors have momentarily sought refuge from what has been the great haven of the last three years: Large cap, high dividend stocks combined with a growth piece have provided the consummate investment vehicle for investors leaving the REPRESSIVE returns from low-risk credit markets. While volume has been low in typical summer fashion, the breakdown in favored moving averages and strength indicators suggests there is definitely nervousness in global equity markets.
Six months ago the world woke up to learn that the Syriza Party had been elected in Greece. It was a dream for some and a nightmare for the European ruling elite. Yes, there is a ruling elite that is very similar to what C. Wright Mills wrote about America in the 1950s. This is not conspiratorial but rather a sociological commentary and the ruling elite is not beholden to an electorate but operates with a sense of noblesse oblige. The Brussels eurocrats are in the image of Plato’s Philospher King, only there are too many Kings all believing themselves to be the most capable ruler. For two years I have written about that the European leaders feared REFERENDA more than anything for direct democracy was an affront to the wisdom of the self-anointed elite. The European project was too important to be left to the capricious voters.