While I am convinced there is no pricing power for retailers and deflation is here to stay for the foreseeable future today’s PPI data was not encouraging. Of course, Steve Liesman has no idea how to look at the data and refuses to acknowledge that this data shows higher prices in any form. Whether you believe it or not, and I do not believe much in terms of government data anymore, this data shows higher prices.
However, Liesman does not seem to understand higher prices and ignores any inflationary numbers. He seems to think that zero interest rates is a great thing. He also claims, in the clip below, that all the data is getting much, much better, huh? Yes, the data is marginally better, but it is still bad news and Liesman just simply has no clue. After all, this is the same Steve Liesman who missed the Russia meltdown as it happened in front of him, only to take credit for calling it later when he took the Pulitzer later on. Mr. Liesman, I had respect for you 1 year ago, but now you are just a clown.
Santelli really hammers Liesman, rightfully so. Keep in mind this is the same morning show where they hammered Ron Paul for the audit the Fed Bill, which the media, most Liesman, has grossly distorted and framed as taking the Fed’s “independence” away. That is a joke and totally inaccurate as the bill merely removes secrecy away from the Fed, nothing more. Read the bill Mr. Liesman, you idiot.
What started out as a huge bull run today floundered big time by the end of the day which is a sign of something big to come, in my opinion. At first I actually thought that the Fed might tighten by .25%, why not rates are at .13% at it would merely be a ceremonial move, but most thought I was nuts as it was a black swan event. Not only that, but any rate increase would mean the Fed would actually be interested in defending the dollar and we know that will never happen. However, I was wrong, but I knew one thing was going to happen, the market was not going to like what it heard no matter what.
I was not 100% sure I was going to be right so it is not as if I doubled down or anything, but initially I was right and the market sank. That turned and reversed course, for whatever reason, only to have the most spectacular close in a long time and a close that should make anyone long a little nervous. To have a reversal of that magnitude on news that would keep the reflation trade going is not good news. In fact, the dollar sank and stocks reversed this also happened yesterday as well. Yesterday the dollar had some strength, somewhat at least, but stocks reversed higher by the end of the day, for the most part.
First, I believe we are at the point were too much of a good thing is just that. We all like candy, but if you eat too much you are going to get sick and I think this is the markets issue with just stupid low interest rates and reckless monetary policy. I also believe we are diverging from the weak dollar, strong stock trade which is really all the bulls had, besides mildly better economic data, anemic data at best. This could prove disastrous for the markets as it will end the carry trade, possibly, simply because of this divergence.
Second, the transports had zero follow through today which is not good. Sure, the index was saved by Mr. Buffet’s bold buying spree yesterday, but Con-Way quickly brought reality back to that index, the economy stinks. The theory is as goes the transports goes the rest of the markets and guess what happened today? The transports spent most of the day negative and the markets followed by the end of the day. Tech stocks are also struggling as the NASDAQ closed negative, that was the bulls leadership, but Cisco released good earnings, I am sure most of the positive growth was from Asia, but somehow that is a US green shoot.
Third, the technicals look pretty terrible, to me at least, with the S&P 500 rejected at 1061, multiple times, it eventually rejected 1052 and even 1047. That is not good news at all for the bulls, baring any really good news of course, as it looks like the S&P 500 will test 1021 soon, but only time will tell. Of course, the NASDAQ looks terrible as do the transports, so pick your poison as to what will weigh down the market. What really caught my eye today was Goldman, it got clobbered today which caused further bleeding in the financials, SKF did very well actually. I am not sure what caused them to decline almost 2 points, but that is another leader gone, for now.
The market looks and is acting toppy and failed to hold a rally on, presumably, good news. If that is not a warning sign than I do not know what is, but it could reverse with a good initial claims report tomorrow, doubtful though. I also fully expect the employment report, depending what kind of magic the BLS works into it, will be higher than expected, perhaps +210K for October with a revision up for September, which is far above estimates. Watch for Goldman’s last minute employment revision tomorrow, they blew it with the GDP, but they are great with the employment report. If they up their estimates, I would run for the hills because that will push the market lower, in my opinion.
The bottom line is that today was as bearish as you can get there is no other way to describe it. That was a huge reversal in 22 minutes I might add which is reminiscent of how things traded last year, but I guess last year never happened. Perhaps it was the FHA news in the WSJ that has people concerned or the fact the WFC is turning a ton of upside down loans into interest only loans for 10 years, smart move guys! Who knows what the reason is, but the one thing that is for sure is that this reversal plays into the bears favor and, although it was a whacky call, I was kind of right, even though I had no real conviction.
Disclaimer: I own various puts on the S&P 500, SDS and SKF.
As expected the markets opened to the downside and has been volatile today. Although the volatility is more reminiscent of years past rather than the 4% swings we have seen in the previous weeks.
With only a 200 or so point swing it reminds us of the good old days before the FMOC revealed their interest rate decision. This is good news and even better news is the fact that the Dow is holding above 9,000. While the decision is still 45 minutes away we do suspect that the Fed will cut only by .50%.
Anymore would signal that the Fed is panicking and any less would send the markets plummeting. We believe only a .25% rate cut is enough, but the Fed has gone from making monetary decisions to now accommodating the equity markets. Even upon the news of the .50% cut we suspect that profit taking will ensue as the markets tend to buy on the rumor and sell on the news.
The pundits will be out saying that they should have cut more, but that is an opinion based on greed rather than necessity. Banks carry the US government backed guarantees now, they have plenty of funding and the last thing the Fed wants to do is take all of its recession fighting power away with one single huge cut, of the 1 – 1.25% some nut jobs say they should do.
So, as far as the markets, no matter what the decision it will more than likely lead to a selloff today. We could be wrong, but with the huge run up from yesterday before the news it is a pretty good bet that negativity will take over.
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