Federal Reserve Minutes: ‘We’re confused.’ So is Wall Street

Federal Reserve Minutes: ‘We’re confused.’ So is Wall Street

Washington’s “Happy Days” recovery narrative has begun to fall apart. So has this stock market, and even the Fed is confused about what comes next and when.

Federal Reserve Building.
Marriner S. Eccles Federal Reserve Building, Washington, D.C. (Via Wikipedia entry on Federal Reserve)

WASHINGTON, April 8, 2015 – April’s markets seem to be experiencing the same kind of déjà vu all over again that Bill Murray ran into in his classic movie comedy, “Groundhog Day.” Since April 1, stocks and bonds have been playing April Fool’s jokes on investors again and again and again.

It’s not surprising, then, that most investors, including many seasoned pros, are absolutely baffled by this market, not to mention similar issues in materials, commodities, currencies, precious metals, oil and gas… You name it. Everyone is confused. And it turns out the Federal Reserve’s Federal Open Market Committee (FOMC) is in the same boat.

According to a report today on CNBC, the FOMC “agreed that ‘an increase in the target range for the federal funds rate remained unlikely at the April FOMC meeting but that language in the Fed’s guidance provided the FOMC with the flexibility to begin raising the target range for the federal funds rate in June or at a subsequent meeting.” Language immediately after, though, pointed out that some members believe a rate increase might not be warranted until 2016.

In other words, the mighty Federal Reserve has no clue what to do. It would help if Congress would do something itself to help them along these lines, as former Chair Ben Bernanke begged them to do for years. But Harry Reid still controls the Senate by refusing to allow Republicans to govern, using his minority of committed anti-American leftists to block anything useful that’s initiated by the GOP.

So, the Fed is still out there on its own, as it has been since January 2009, when the disastrous rule of Barack Obama and his hard left supporters set out to destroy the United States as we know it. (Some people still don’t have a clue.)

Earlier this year, markets began to tank, fearing that with interest rate increases imminent if the Fed were really serious about getting back to normalcy, all stocks would immediately go to hell. Likewise, bonds. For legitimate, traditional reasons, sure, but also just because.

But then, Washington’s economic narrative began to fall apart. The euro swooned into an astonishing collapse pattern vs. the dollar as the Eurobank zigged to less-than-zero interest rates while the U.S. dollar strengthened because its zero interest rate environment was allegedly about to end.

The resulting rapid dollar appreciation exacerbated the already collapsing price of oil, since it now took less rapidly appreciating dollars to buy more oil on the open market. Following?

Meanwhile, back in Washington, anyone who could read between the lines of federal government propaganda knew that that rapidly dropping unemployment rate and dramatically strengthening economy narrative was an outright falsehood even if the media refused to report this fact.

Job creation continued to be anemic, and consumers were using their price-at-the-pump windfall to pay down debt in today’s dollars, unlike big banks and their 1 percent owners who were bailed out by the taxpayers. No breaks for the middle class here.

Truth is, as we’ve been writing in this column, everything you read about the government and the Fed these days is all smoke and mirrors, meant to support a fantasy narrative that things are improving all over. They are for Jamie Dimon and Warren Buffett. But for thee and me, hardly ever. Everyone in Washington now seems to be following the Marxist playbook: If you lie about something loud enough and long enough, everyone thinks it’s the truth.

But maybe the oligarchs and the elites have piped this happy tune one too many times without results, and maybe the promises are wearing thin, making the Fed’s attempt to trick the economy into recovering via its failing power of moral suasion to fall flat as they attempt a transition into a normal economic situation.

Regarding the Fed’s apparent confusion as outlined in today’s newly released FOMC minutes, one investment guru was happy to provide his opinion to CNBC:

“‘This dichotomy speaks to the division on the board; they, as a whole, simply aren’t sure what they’re supposed to be doing right now given the divergent messages from any number of places,’ Dan Greenhaus, chief strategist at BTIG, said in a note.”

It would seem that “April Fool!” is still Washington’s message to us and to the financial world. It’s a hell of a way to run the country. We still need a lot more “Joe the Plumbers” in this town.

Today’s trading tips

Again, our ideas are a little sparse here. Markets are moving one way and then another, with most sectors moving in lockstep. This is why so many investors today are sticking with general or sector ETFs and have given up on picking individual stocks to hold. Markets are being manipulated to follow the happy but false Washington narrative, and logic is gone with the wind.

Markets are moving sideways in what appears to be a sinuous, long-lived correction, fearing to go up but still not wanting to go down. It’s a tricky environment in which to make serious investment commitments.

We’re holding our own, aiming to hold at least 30, perhaps 50 percent of our portfolios in cash, awaiting what we think might be a more severe correction sometime relatively soon. Meanwhile, we are holding the short term bonds we have left, along with our non-perpetual preferred stocks (the ones that will get called in roughly five years or less), REITs and a few other random positions.

But we’re not really buying anything until we can read the tea leaves. And alas, today is not one of those days. So we’ll stay on the sidelines for now until it looks like someone is going to win the argument. Maybe you should do the same, but that decision is up to you.

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Terry Ponick
Biographical Note: Dateline Award-winning music and theater critic for The Connection Newspapers and the Reston-Fairfax Times, Terry was the music critic for the Washington Times print edition (1994-2010) and online Communities (2010-2014). Since 2014, he has been the Business and Entertainment Editor for Communities Digital News (CDN). A former stockbroker and a writer and editor with many interests, he served as editor under contract from the White House Office of Science and Technology Policy (OSTP) and continues to write on science and business topics. He is a graduate of Georgetown University (BA, MA) and the University of South Carolina where he was awarded a Ph.D. in English and American Literature and co-founded one of the earliest Writing Labs in the country. Twitter: @terryp17