BULLARD SAYS TAPER POSSIBLE [IN OCTOBER] AFTER CLOSE QE
CALL (Bloomberg)
“Federal Reserve Bank of St. Louis President James Bullard, a voter on policy this year who
has backed record stimulus, said a small tapering of bond buying is possible
next month after the Fed made a close call this week in deciding not to slow
purchases. “That was a borderline
decision” after “weaker data came in,” Bullard said today on Bloomberg
Television’s “Bloomberg Surveillance” with Tom Keene and Sara Eisen. “The committee came
down on the side of, ‘Let’s wait.’” Story at…http://www.bloomberg.com/news/2013-09-20/bullard-says-weaker-data-prompted-borderline-fomc-taper-delay.html
Here’s another example from another FED voice.
THE LONE FED
DISSENTER BLASTS FED DECISION (Business Insider)
“Kansas City Federal Reserve President Esther George was
the only FOMC member against the central bank's Wednesday decision to not taper its asset purchase program known
as quantitative easing. In a speech this
afternoon, George blasted the decision, saying it "created confusion,
created a disconnect," according to Bloomberg...George said that reducing
QE would have allowed markets to adjust gradually….But by hinting at a taper
and then walking it back unexpectedly, the Fed's credibility is at risk,
according to George.”http://www.businessinsider.com/fed-president-george-blasts-no-taper-2013-9
A “Put” option limits downside risk, so that’s what Steen
Jakobsen is referring to in the “Morning After” piece below that was posted
(originally) the day after the FED non-taper.
THE MORNING AFTER [THE NON-TAPER] (Global Economic
Advisors)
“…we now effectively have not only a put on the stock
market, but also a put on the bond market. The whole financial market is now
“government controlled…I have no doubt inflation, or lack of, played bigger
role than anything else in taking decision to not taper… Fed also de facto
yesterday stated: the unemployment rate is invalid to use as gauge for future
monetary policy but also as statistical indicator.” - Steen Jakobsen, Chief economist
at Saxo Bank in Denmark…Some people prefer short-term stability even when the outcome is long-term disaster. – Mish Shedlock
Mish’s full blog on the FED, Inflation, market manipulation and more is located at…
http://globaleconomicanalysis.blogspot.com/
FED ECONOMIC PROJECTIONS (Advisor Perspectives)
“Each quarter the Fed releases their assessment of the economy
along with their forward looking projections for three
years into the future…The problem has, and continues to be, that
their track record for forecasting has been left wanting….The FOMC lives in a fantasy world. The economy is not improving materially and deflationary pressures are rising as the bulk of the globe is in recession or worse. The problem is that the current proposed policy is an exercise in wishful thinking. While the Fed blames fiscal policy out of Washington; the reality is that monetary policy does not work in reducing real unemployment or interest rates. However, what monetary policy does do is promote asset bubbles that are dangerous; particularly when they are concentrated in riskiest of assets from stocks to junk bonds”. - Lance Roberts of Streettalk Live, September 19, 2013. Posted at dShort.com at…
http://advisorperspectives.com/dshort/guest/Lance-Roberts-130919-Fed-Projections.php
It is hard to know if Lance is right when he says, “the
economy is not improving,” because it seems like the economy has been improving. Unfortunately, it has improved so slowly that
any turn down may hardly be visible. One
area that is visible is corporate profits and forward-guidance from compainies in the S&P 500 is not good (see FACTSET piece,
below.) By that measure, Lance IS right.
EXCERPT FROM “FACTSET EARNINGS INSIGHT” (Factset – 13 Sep
2013)
“At this point in time, 106 companies in the [S&P
500] index have issued EPS guidance for the third quarter. Of these 106
companies, 88 have issued negative EPS guidance and 18 have issued positive EPS
guidance. As a result, 83% (88 out of
106) of the companies that have issued EPS guidance for the third quarter have
issued negative EPS guidance. This percentage is consistent with the percentage
recorded in the previous quarter at this time (80%), but well above the 5-year
average of 62%.”http://www.factset.com/websitefiles/PDFs/earningsinsight/earningsinsight_9.13.13
In the end – the stock market is all about earnings.
MARKET REPORT
Friday, the S&P finished down 0.7% to 1710 (rounded) at the close.
VIX rose 1% to 13.32.Friday, the S&P finished down 0.7% to 1710 (rounded) at the close.
MARKET INTERNALS (NYSE DATA)
Volume on the NYSE was over twice normal with “normal” defined as the monthly
average. I don’t think panic is the
right word, but clearly a lot of investors wanted out today. It’s been about 3-months since the volume on
the NYSE was that high.
The 10-day moving average of stocks
advancing on the NYSE was 58% at the close.
(A number above 50% for the 10-day average is generally good news for
the market.)
New-highs outpaced new-lows today, Friday,
leaving the spread (new-hi minus new-low) at +129 (it was +313 Thursday), with
the 10-day moving average of change in spread still barely positive.
The Internals are positive on the market in
the short term, but may be rolling over.
NTSM
Friday, the overall long-term NTSM analysis remains
HOLD at the close.All indicators are now neutral.
MY INVESTED POSITION
I remain about 20% invested in stocks as of 5 March (S&P 500 -1540). The NTSM system sold at 1575 on 16 April. (This is just another reminder that I should follow the NTSM analysis and not act emotionally – I am under-performing my own system by about 2%!) I have no problems leaving 20% or 30% invested. If the market is cut in half (worst case) I’d only lose 10%-15% of my investments. It also hedges the bet if I am wrong since I will have some invested if the market goes up. No system is perfect.
