Fedspeak Tower of Babble gums up early Santa Claus Rally, killing volume and conviction. Interest rate “Waiting for Godot” game is exasperating for investors.
WASHINGTON, November 5, 2015 – Let me start out today’s column with a hat tip to Dave Fry of ETF Digest, aka “Dave’s Daily.” The Maven subscribes to Dave’s service which is devoted to the art and science of trading and investing in ETFs for fun and profit. In his (mostly) daily free market recap Wednesday, he compared current market conditions to a meat grinder: a stunningly apt yet simple metaphor that actually describes the quality of much of the market action in 2015 thus far.
Inspired by this insight, the Maven has found his own meat grinder photo to decorate today’s column, as it’s hard to think of anything that more aptly describes what investing in this confusing year has felt like for the dwindling number of home gamers who are still somehow managing to play.
After a couple of fun days earlier this week, we could feel the market sour Wednesday, and things have been sourer still as of Thursday’s noon hour. Major averages all opened down, rallied decently after European markets closed at 11 a.m. ET—as almost always is the case—and then proceeded to drift downward once again. As of a shade after 1 p.m., the Dow is up a miniscule 4.71 points, while the broader-based S&P 500 is off fractionally, with the NASDAQ off a bit worse at minus 15 and sinking.
The Maven has made numerous and valid excuses for the Federal Reserve Bank over the years, even as so many investment pros blame it and its QE (quantitative easing) and ZIRP (zero interest rate) policies for our continuously stagnant economy. Again and again, we have insisted that the Fed’s given mandates under the legislation that enabled it are to help keep employment steady to up and, above all, protect the American banking system. Those and only those. And this they’ve done since the 2007-2010 disaster that’s still generally termed “The Great Recession.”
While Ben Bernanke was at the helm, nearly every time he testified before Congress, he quietly urged them to do something useful about the economy, knowing the Fed itself was limited by its charter as to what else it could do to get things out of the deep rut into which they had fallen. But, under the Obama-Reid-Pelosi Triumvirate, Congress did precisely nothing for six years until Reid and his socialist thugs were finally ousted from the Senate leadership in the 2014 midterm elections.
Prior to this, Reid and his boys in particular simply refused to pass anything that resembled a budget, essentially abdicating their Constitutional responsibility for budgetary and spending matters, allowing Obama to do what he always wanted, which was to don his socialist emperor cloak and rule by fiat, obviously what the Founding Fathers intended. Or so imagined our narcissistic Constitutional Lawyer-in-Chief.
With Reid and his Socialist senate majority sent to the showers at long last just a year ago this month, hope rose that the Republicans could finally start doing what Bernanke had been begging Congress to do for years—start the hard work of reforming the budget, stimulating the economy for real, and repairing the nation’s—and its citizens’—balance sheets, the better to launch a return to prosperity.
What do we have today? Congress may very well pass a budget in the December time frame. But the new Republican Senate and House leadership will likely do it in pieces, fearful of the blame they always get for any real or imagined government shutdown, but still needing something in return, like maybe cutting the free money our government sends every year to those baby butchers at Planned Parenthood. It’s the same old, same old. The Washington Merry-Go-Round continues its free spending budgetary whirl, with retirees and Obamacare recipients likely getting it in the ear.
Which gets us back to the Fed. Say what you will about Uncle Ben, but at least he kept things relatively predictable, and at least we had some confidence in the Fed’s consistent fiscal line, given its already discussed constraints.
But now we have Janet Yellen and her yellin’ Fed governors, all of whom are constantly out in the hustings, it seems, each giving contradictory speeches and proclamations and utterly confounding everyone as to the central bank’s intentions and timing, particularly with regard to that legendary or real (pick one) interest rate hike we were supposed to see in September, oops maybe in 2016 or 2017, oops, maybe in time for (*trigger warning*) Christmas.
Do these over-educated idiots have any idea what they’re doing?
Anyone who’s owned or even works for a business knows that you have to plan ahead to pay the rent, create new and desirable product lines, manufacture your products and get them out to consumers at a competitive price. And at the right time. I.e., you don’t want to be peddling pumpkin pies for Easter. To everything there is a season. But how are you going to do that if you don’t have a clue as to what stupid rule, regulation or other impediment Washington will throw in your way tomorrow?
Problem is, Washington now is almost entirely run by a privileged elite—primarily attorneys and accountants—who know how everything works in government, know how to game the system, but know less than zero about capitalism and how to make money. And could care less, since the taxpayers are paying them handsomely for doing nothing to jeopardize their so-called careers.
Which again gets us back to this Fed, which, under the inarticulate, over-her-head Yellen, acts like a snobbish cadre of Lost Boys (and Girls) who know how to blab about this and that, but don’t have a clue as what they’re actually supposed to do: keep banks healthy and work toward higher employment goals.
As long as the Fed and Congress fiddle while the nation slowly burns, Emperor Barack I will continue to destroy the brilliant work of our Founding Fathers, unhindered and unchecked. This is why the economy has continued to fizzle in 2015, brave government pronouncements notwithstanding.
There’s zero confidence in anything today, particularly if it’s the latest batch of lies, damned lies and statistics coming out of the Swamp on the Potomac. Businesses can’t plan, so they create fake profits by buying back their own shares and laying off more workers.
And all this leaves investors like you and the Maven holding the bag, prone to buy at the wrong time and sell at the wrong time, to get optimistic when we should be pessimistic and negative when we should be positive.
And that’s why this market continues in Dave’s meat grinder mode: No volume, no conviction and utter confusion all around. Which is once again what we have today, as our too-early Santa Claus Rally begins to stall.
Don’t miss the next anemic episode. Meanwhile, we’ll put a hold back on our trading tips. The one’s we’ve dribbled out recently are still valid in our scheme of things. But we’re not confident enough to make any more at this time. They could end up in that meat chopper this afternoon or tomorrow latest.
Follow the Maven, aka Terry, on Twitter @terryp17
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