WASHINGTON. Although trading action still felt nervous this past Friday, the bulls were back in charge. They fought determined bears all last week but finally came out on top. To rally successfully, stocks overcame the abrupt conclusion of China talks on trade, the Jackson Hole Fed confab and the latest MSM frenzy over the Manafort and Cohen convictions.
Elsewhere nice jump in the shares of Netflix (NFLX) assured that both the broad-based S&P 500 and tech-heavy NASDAQ hit another pair of all time highs Friday, while the stumbling Dow at least kept pace.
With regard to Netflix, CNBC provided the details.
“Netflix rose 5.8 percent on Friday after analysts at SunTrust upgraded the stock, noting it will keep going higher because of its success overseas. The stock has had a strong week, gaining more than 10 percent this week.”
As for headline action in this headline-driven market, let’s consider, for a change, a pair of events that had nothing to do with Stormy Daniels, alleged money laundering or any Russian collusion that has nothing to do with the Clinton/DNC Russian collusion. Nothing to see here folks. Let’s move along.
Some expected bad news: China talks on trade are off. Again.
First, hopeful U.S. – China talks on trade broke down almost before they got started. It’s clear this battle is going to drag out for quite some time. The Chinese government has grown accustomed to stealing or free riding on American and European technologies for ages now, due to complacent and outright negligent trade policies nurtured by compliant Western governments.
Given all this free stuff, plus the ease of sending industrial spies to the U.S. and elsewhere to steal technologies they haven’t yet stolen, why would the Chinese give up all this free stuff without digging in their heels? Furthermore, since the Chinese government openly plans for world domination, what business do other countries have trying to get in their way? This is why the U.S. – China talks blew up so quickly. The Chinese want to keep stealing stuff, keep undercutting the price of U.S. manufactured goods, and keep using their own, pre-existing protectionist tariffs to keep our products out of China.
Cold War redux?
Just when you think you’re making political progress, socialists and communists everywhere – not just in China – insist on replaying the Cold War, 1950s style. As they did back then, they simply plan to win, even though they lose all the time. You’d think they’d try to work with another philosophy. But that’s not in the cards.
Perhaps markets have now decided that this one will be a long slog. Those currently getting hurt by China’s retaliatory tariffs, primarily farmers at this point, may move away from their strong support for the trade policies of the Trump administration. That could be a problem for both the president and the GOP in the fall, which is exactly what China expects and what the Democrats hope for. It’s a mess, but someone had to stop the Chi-coms and their trade war before it was too late.
How did the MSM miss this year’s Jackson Hole Fed confab?
Meanwhile, overshadowed by both the China trade situation and the latest Trump-Mueller fake news cycle, the Federal Reserve held its annual confab at Jackson Hole, Wyoming late last week. That’s usually big news. But like we said, China and the latest garbage percolating back up from the depths of The Swamp.
Current Fed Chair Jerome Powell gave a speech to the assembled cast of domestic and international bank gurus concerning the direction of Fed interest rate policies. In perfect Fed-speak, he said he envisions “further, gradual” rate hikes ahead. But he figures today’s clearly robust economy can handle this.
Functionally, there’s absolutely no need to tighten interest rates at this point. At some point, too much of this will kill off the real recovery that the country has been awaiting since around 2009, when Barack Obama decided to “fundamentally change” the way we do business by ignoring the American worker while redistributing more and more of his money.
In other words, we’d be further ahead than we are even at this point if we hadn’t been forced to become yet another country victimized by a failed experiment in socialism.
So why stop this economy from catching up to where it should have been by now?
Why would the Fed tighten interest rates when it doesn’t need to?
I think the Fed effort to hike interest rates at continuing speed is overdone here. Except for one thing. One big thing the Fed is up to is playing the game on defense. In other words, the nation’s central bank is trying to get prevailing interest rates back up to where they used to be. You know, before the Fed started giving away billions of dollars of free money to banks and rich guys to save the banking system but not us. That way, when America encounters the inevitable next recession, the Fed can loosen the purse strings to ease the pain and eventually re-start the economy again.
It’s sort of like “Back to the Future,” the American Banking Edition. It makes sense, at least to Fed confab attendees. Or would have, if the previous administration hadn’t wasted at least a trillion dollars backing failed alternative energy unicorns and destroying industrial jobs since those jobs were “obsolete.”
Now, the country is so far in hock it will never get out of the hole. I have no idea what that will mean in the future, but it doesn’t look good on paper.
Meanwhile, it looks like the Fed will at least try to give the economy and the dollar the look and feel of a successful America, circa the early 1950s and/or the early 1960s before successive crappy governments ruined the whole thing.
Predicting the future after the 2018 Fed confab
Here’s hoping the Fed succeeds. They sort of are, actually, but in a way that the financial news folks find boring. They are selling off a massive amount of the billions of dollars’ worth of bonds they bought during successive editions of Quantitative Easing (QE).
Despite the current Fed interest rate hikes bandied about at the Fed confab, this huge, ongoing reduction in Federal indebtedness essentially withdraws cash from the economy. That’s the real news. But the Fed’s bond sales seem to have made barely a ripple in the economic fabric thus far. Weird.
Who knows what happens next? I’d predict that Powell and his Fed pals will go right ahead and jack interest rates up another notch in September, just to show they’re “independent” of President Trump and remain reliable Deep Staters. But then, they might surprise us and skip the December increase.
This may all depend on November’s election results as well. Plus any serious developments in new China talks, surprise Fed news, or public appearances by Jeff Sessions. So we’ll just have to stay tuned to any real news sources that might give us a (reliable) clue. If we can find them.
Things should roll the way I just indicated. But you never know when the next headline risk or fake rumor will show up, blowing both my prediction and everyone else’s to kingdom come.
That’s why I don’t predict things very often.
See you Monday or thereabouts when Wall Street fun kicks off once again at the 9:30 a.m. ET opening bell.
— Headline illustration: Cartoon by Branco. Reproduced with permission and by arrangement with Legal Insurrection.