WASHINGTON, September 19, 2017 – We returned to D.C. Monday evening after a whirlwind weekend in his former hometown of Cleveland, Ohio, where this writer’s spouse and a few score ladies of a certain age celebrated their 50th Class Reunion this weekend.
The trip was a welcome respite from the weirdness of stocks and bonds thus far in September, a situation this writer is finding maddeningly complex. Fortunately for the psyche, the Reunion included tickets to this past Sunday afternoon’s Indians-Royals game, held in downtown Cleveland’s still relatively new Progressive Field, formerly known as “The Jake.”
Tension built as Cleveland’s hometown baseball heroes got off to an early lead before Kansas City sneaked up on the Tribe – an ominous reminder of the previous evening’s game in which the Royals finally snapped the Indians’ record-breaking win streak.
Fortunately for the eager fans in the nearly sold-out stadium – standout Cleveland pitcher Corey Kluber held his own, though he needed a little relief help to launch the Tribe on their next win streak as the Indians finally defeated the Royals by a score of 3-2.
Fittingly, Kluber was picked as American League Player of the Week for the week ending September 17, even as his team and the fans celebrated Cleveland’s clinching of the AL Central Division Title after the game.
The only bad part: As the upcoming MLB playoffs get underway, will the Indians end up squaring off against my current hometown’s baseball heroes, the Washington Nationals, for the seven games that Ring Lardner’s endearingly illiterate baseball players once called the “World Serious”? This would be a tough dilemma for yours truly. Which baseball cap to wear?
The nod might go to the Midwest team with the delightfully politically incorrect team mascot. After all, like the Cubbies, who clipped the Indians in last year’s World Serious, got rid of their long-time World Serious curse in 2016. The Tribe’s current Series drought has not been quite as long, given that their last MLB title was won back in 1948, only a couple of months prior to this writer’s first appearance on this planet. So this writer’s call might just go to Chief Wahoo, the mascot of his hold home team that continues to drive PC types insane.
Why dwell on baseball here in a financial column? Simple. A sunny Sunday in a Cleveland ballpark and the Cleveland Indians’ enthusiastic fans proved a far better diversion than the current wash-rinse-repeat stock market. Back and forth we go, each and every day, with major averages relentlessly inching higher, then backing off before tacking on another tiny record.
Stocks are trading as if traders investors and even those ubiquitous supercomputers are stuck in a pattern that has them jockeying back and forth for tiny profits and losses. In the meantime, more conservative investors who like to buy and hold are getting seasick trying to figure out if anything they’re holding is still worth holding, or if it’s time to just get out.
The world’s political situation continues to get more tense, as President Trump laid his take firmly on the line in his UN speech today, pointedly calling North Korea’s current, roly-poly psychopath of a leader “rocket man,” while also calling out countries like Iran and Venezuela for their evil deeds. Truth telling like this makes a lot of investors nervous, as defending our national interests these days is viewed in “intellectual” quarters as foolish and dangerous.
But far more dangerous – and likely another cause for this very indecisive market – is the Fed’s ongoing September meeting. Results will be out Wednesday afternoon as usual, though the privileged few probably already have them.
The big questions for the Fed in September: Do we banking geniuses telegraph another rate increase? Are we really going to start making the Fed’s balance sheet healthier by beginning to liquidate all those bonds we bought back in the days of our QE efforts to jump-start the U.S. economy? And if so, how many bonds do we start dumping and for how long?
What many may not realize is that this gradual bond portfolio liquidation by the Fed may actually be the cause of interest rates that rise of their own accord since, by taking bonds out of their portfolio will pull liquidity out of the banking system and elsewhere, as the private sector begins to re-absorb this massive bond horde, potentially pulling liquidity out of the system.
Far from being inflationary, it seems at least to this writer that this likely incoming Bond Sale of the Century will, over time, prove to be quite deflationary. So how does that square with the Fed’s alleged 2 percent inflation target?
It’s all a mess, and we’ll probably have to figure out how it works as we go along. Financials were up today, after getting whacked earlier in this month – a sign that at least some investors figure the ongoing sale will start scotching interest rates higher, something the major banks would eagerly embrace.
We’re also dealing with the lingering effects of Hurricanes Harvey and Irma, even as José swirls around the Atlantic in the on-deck circle with another nasty Category 5 Hurricane, Maria, currently in the hole and drawing a bead on Puerto Rico, which has enough financial problems of its own. The potential for more epic damage in the Caribbean once again makes the CEOs of property and casualty insurers nervous, not to mention their investors.
It would be nice if the smoke, mirrors and clouds would clear at least just a bit from the political arena as well as from the weather reports and the Fed’s inscrutable bafflegab. Maybe we could see what’s really going on in the market and make some really good buy and sell decisions, just like Corey Kluber fired strike after strike on Sunday, whiffing an impressive number of generally hard-hitting Royals opponents.
Lacking Corey’s skill set, it looks like we’ll just have to keep watching and wondering until Mr. Market makes his autumn desires just a bit more clear.