Another FOMC meeting and another idiotic focus on the whether or not the word “patience” is going to be removed form the minutes of the meeting or not. This is completely absurd and sad. Here is the deal in my humble opinion: IT DOES NOT MATTER! The bottom line is the only way the bulls win tomorrow is if Janet recognizes the specter of deflation and announces QE4. Absent QE4 then the economy and eventually stocks are going to implode. Lets have a look at the fundamental scorecard shall we.
Bears have:
1) Both Global and US GDP are being revised lower.
2) Oil is crashing again as I write this.
3) High yield debt and emerging market debt spreads are quietly widening again.
4) S&P earnings continue to be revised lower due to a myriad of reasons.
5) Insider selling is at epic levels.
6) Currency crisis across the globe with a parabolic Dollar wreaking deflationary havoc worldwide.
7) Yield curve is flattening and bonds are rallying again.
8) 80% bull to bear ratio.
9) Putin threatening to use nukes if we give tanks to Ukraine.
10) Greece losing its mind again and 3 year bond yields above 20%.
Bulls have:
1) 24 central banks have eased since January.
2) ECB QE has started.
3) The Fed might leave the word “Patient” in.
Basically Bulls are bullish because fundamentals don’t matter and all that matters is central bank liquidity. So if you are long its because you believe that central banks are omnipotent. Its a good belief system. It has worked for six years straight. I get it, I really do. I was with the bulls until last year. The difference now is that the Fed is tightening by ending QE and merely thinking about raising rates. As a result the Dollar has gone parabolic and a deflation is raging from the emerging markets towards the center. A strong dollar imports deflation and will cause revenues and earnings for US companies to go lower. If you think that does not matter and that the multiple of the market will expand while earnings are re-rated lower go for it. I am old fashioned and think that debt defaults, negative earnings revisions, receding dollar liquidity and a global recession will bring equity prices down. I am a heretic.
I think whether Yellen includes or excludes the word “patience” is irrelevant. The deflation Genie has been let loose from the bottle and unless she does full on QE the US stock market is headed south. Nature hates disequilibrium. Everyone is burning their currency and we are not. Stocks will go lower to force Janet to burn our currency as well.
I leave you with Patience by Guns N’ Roses:
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Nice. Can’t wait til Fly sees this after his Guiness celebration.
Blue:
You have strong medicine.You have however left out one ingredient.
==jobs.jobs, jobs.
Now you can say they’re fake but then
everything could be fake.Every job
this report leads to a 1/2 job next report.
This is why I’m a bull
BlueStar, you make a lot of good points but forgot one thing. Nobody cares. Except bears, therefore nobody will listen till they control the tape.
…and you forgot China’s comments that they will intervene if the slowdown affects their captives. I don’t disagree with your points, but right now the bears don’t have the degree of conviction the bulls do.
Gorby,
Job growth is countercyclical to stocks meaning it peak at tops and bottoms out at stock lows. Your point is actually bearish. Jobless claims have bottomed and have begun rising.
velth,
You are 100% correct. NOBODY CARES! Which to me is the most bearish reason of all. Some of my smartest friends who have been bearish have stopped caring about such things and have given into the central bank omnipotence theme just as the Fed is losing control. I can’t find any bears. They are dead and buried. same thing happened in 2000 and 2007. I thank you for your input.
berniecornfeld,
There are no bears. therefore no one to cover shorts as the market slides. Top are never made by bears shorting. They are made by by over confident bulls that are all in and out of dry powder.
Blue. You are right if this was not 2015. This tape is rigged and will be until they decide it should fall. The king died in 99. The new king died in 08-09. The fake king is eternal.
Ironbird,
The Fed has stretched this cycle. No doubt. But to say they decide when we crash is absurd. Nature decides. The dollar is the sign that they have lost control. The die has been cast. We roll within the next 1-6 months. And we roll hard.
Patient..calm, composed, even-tempered, accommodating, cool, tolerant……funny for soo many different reasons.
Thanks for giving the other side.Definitely in your camp.Though i’m probably the definition of wall of worry. Once the bigboys start selling longs are screwed.Maybe the solar eclipse on Fri. will do it.Or Russia.In the meantime long amazing American bioengineering and importantly, hedged.
no panic yet on the model we run. still long, finger on the trigger.
Bluestar, all good points on the bull vs. bear comparison, but the lack of inflation (and to your point deflation) and minimal wage growth would contribute to rates not being increased for a long time. Am I correct on this? Thanks for the insight.
Pazienza per sempre .
Sorry Blue, better luck next time.
boyaj,
They won’t be raising rates for a long time. You are correct.
forgetalpha,
what are you talking about?