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Awaiting the Fed interest rate news, Mr Market screws with traders’ minds

Written By | Jul 31, 2019

WASHINGTON.  So far this week, Mr. Market’s negative antics have stunk for most investors. You’d think that with most Wall Street analysts absolutely, positively, totally for sure that the US Federal Reserve oracle will announce a 0.25 interest rate reduction mid-afternoon Wednesday that the bulls would be all excited and raring to go. But stocks just piddled around in the red zone for pretty much all of Monday’s trading action. And Tuesday’s. And both stocks and broader market averages are doing it again today. Looks like Mr Market is seriously into messing with traders’ minds.

Fed interest rate news and the China Syndrome

But, as Wednesday’s 2 p.m. “foregone conclusion” 2 p.m. Fed interest rate announcement looms, all is not exactly well, either on Wall Street or deep in the bowels of “The Swamp” right here in Washington, D.C.

First, this “renewed US / China trade talks” news item, crisply offered  via ZeroHedge.

“The unexpectedly early end to the latest round of trade talks in Shanghai, indicating that any goodwill to restore US-China trade is now dead and buried, weighed on global stocks on Wednesday ahead of the highly anticipated Fed meeting, even as US equity futures levitated higher on the back of strong results and even stronger guidance from Apple (which is expected to surpass a $1 trillion market cap again today), with Treasury rates unchanged, the dollar holding firm and Britain’s pound subdued amid rising fears of no-deal Brexit.”




“Levitated” is hardly the way to describe current Wednesday trading action thus far, at least as of 10:50 a.m. ET. Once all three major averages opened tepidly up, give or take +0.25 percent, they began to bleed that green ink back.

Tech rises while major tech stocks take a nasty hit. Go figure…

Currently, the Dow Jones Industrials (DJI) are off nearly 20 points for a 0.06 percent loss. The broader-based S&P 500 is down nearly 3 points, 0.09 percent to the downside. And the tech-heavy NASDAQ composite is up 0.08 percent, currently jumping between 6.4 and 7 percent to the upside but looking pretty wobbly. Indeed, the tech stocks in our portfolios – Cisco (trading symbol: CSCO), Microsoft (MSFT) and Micron Tech (MU) – are all down rather unpleasantly right now, with Micron taking the worst hit.

The latter stock’s action, we are told, is because Advanced Micro Devices (AMD) earnings disappointed analysts this morning causing them to re-think their former enthusiasm. AMD got clobbered in the process. And, as is so often the case in the microchip sub-sector and others, most of the other stocks went down in sympathy. Weird, silly, but typical.

I’ve watched this “pin action” many times in my over 40 years of actively investing. But it’s frustrating when you own perfectly decent stocks, like, say, Microsoft and Micron, that take a hit right along with the daily miscreant’s shares. It’s yet another way Mr Market messes with investors particularly when he’s gotten out of the wrong side of the bed in the morning.

Back to Fed interest rate news and Mr Market

Getting back to the Fed’s interest rate verdict, we’ll be interested to see what Mr Market does when the absolutely, positively for sure 0.25 percent interest rate cut hits the wires circa 2 p.m. ET today. Typically, Mr Market likes to be perverse, and, after a 15-30 minute post-announcement interval, skyrocket – or plunge – in exactly the direction you didn’t expect.

In other words, since everyone desperately wants an interest rate cut, if they get it, they’ll be “disappointed” in its size and they’ll start dumping stocks. We may be seeing a bit of this already, as neither the DJI nor the S&P look like they’re very happy right now, the NAZZ to the contrary (except for our holdings).

The problem with Wall Street and Washington elites

Skull & Bones logo. Public domain image via Wikipedia entry on Skull & Bones

That’s because “they” (the Wall Street equivalent of Washington’s Deep State elites) always know in advance what the Fed report will say. The law forbids this kind of advance knowledge plus those who know it and dispense it to the Chosen. But hey, who cares if your trusted inside source joined Skull & Bones when you did? Which is why small investors are always at some disadvantage when attempting to execute a quick sell or an astute buy on Fed news. All this is illegal, of course, but what the hell? The dudes who get the news are all rich, all graduated from Harvard or Yale, and they’re all smarter than us, so what do we expect, right?

At any rate, the Harvard and Yale guys who typically dominate the Fed already demonstrated how smart they were by jacking up interest rates toward “normal” when there was no sign of inflation at all. On top of the worsening China trade situation, foolishly high interest rates were starting to nip the Great Trump Recovery Rally in the heels. And just in time to hint at an Election 2020 Recession, too. (Which may have been the Deep State’s plan to begin with.)

What do Chairman Powell and the Fed really think? Or do they actually think?

With all the talk of Trump’s “ill-advised” jawboning against Fed Chair Powell, Powell and his palls never listen to Trump anyway since they think he’s an ass. But now they need to look at the reality of what their poorly timed interest rate “normalization” moves really mean to the US economy. And they don’t want to serve as target-practice for a pissed-off working class demographic still hurting due to their earlier, thorough screwing by Obamanomics.

2020 is shaping up to be a real, literal donnybrook of a political year. The Fed has not helped. And they’ll have to cut rates again at least one more time in 2019 to stave off the damage they intentionally caused to the US economy. But they’d rather President Trump take the blame for this, even though he never wanted it to happen.



If they really cut interest rates 0.25 this month, they know full well that it won’t be enough. So they’ll have to do it again. They’d cut 0.50 percent right now, except that, as is always true in “The Swamp,” they don’t want to “lose face” and have the left-wing media propagandists accuse them of caving in to the irrational rantings of Orange Man.

Harvard and Yale advanced degrees no longer mean jack. So why are they running the national show?

D.C. has turned into a government-dominated urban jungle that probably boasts more advanced degree holders than any other jurisdiction in America, including Silicon Valley and NYC. But, as in those two jurisdictions, here in The Swamp, there’s no indication whatsoever that all those advanced degree holders have the capacity to exercise the gifts of reason and common sense on behalf of the average American citizen they purportedly work to “serve.”

We’ll update this column briefly later Wednesday afternoon when we see what kind of rapture – or catastrophe – the Fed’s announcement has on a very disgruntled Mr Market.

UPDATE: We wrote an additional article on the unpleasant market reaction to today’s announced rate cut. Link right here.

– Headline image: Edvard Munch was probably responding to Mr Market and Fed interest rate policies in this famous painting. (Public domain image via Wikipedia entry on “The Scream.”)

 

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 Senior 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