WASHINGTON, May 18, 2016 – Short report today as we assess the Wednesday afternoon damage, courtesy of the latest Federal Reserve minutes release. Issued to the public as of 2 p.m. EDT, as is customary (although everyone knows the document is leaked earlier to those in the know), the May minutes indicated that a lively debate is going on within the Fed and may be taking it to a decision to hike interest rates sooner than later.
Markets had been positive to mildly exuberant prior to the Fed’s latest reading of the tea leaves, fully convinced that the U.S. central bank would hold its fire until at least September, given various levels of economic uncertainty both here and abroad. The Dow was up over 100 points not long after the noon hour.
The Chicago Mercantile Exchange, aka the CME Group, has a nifty, live, Flash chart feature that continually updates the odds of the time and likelihood of Fed rate hikes by forward month. As of today’s Fed announcement, odds in favor of a June rate hike doubled almost immediately, jumping from 33.8 percent to a high of 66.3 percent Wednesday afternoon. You can access (and bookmark) this fascinating and useful chart feature by clicking here. Meanwhile, here’s a screen grab of the June 15, 2016, chart projection.
(Note: The business world is still Microsoft-centric. This chart routine runs just fine in Safari as well as other browsers.)
Meanwhile, you could see “the boyz” (illegal inside traders and at least half of Wall Street) making their moves around 1:45 p.m. as the Dow’s mildly irrational exuberance started heading back downhill rapidly. As the afternoon dump-a-thon began in earnest, the averages started sinking into the red zone not long after 2 p.m.
As of 2:45, the Dow is off some 50 points, the S&P 500 is down 5.75 and the NASDAQ, which is holding up better, is still down as well, off 1.52, indicating tech is holding up better than other sectors, largely due to a modest continuation of Apple’s (symbol: AAPL) post-Buffett-buy rally.
The Maven’s preferred stock-heavy portfolio is taking a mild hit Wednesday afternoon, which is to be expected when interest rate-sensitive stocks like preferreds encounter even the rumor of a rate hike. Ditto things like utilities, REITS, junk bonds, you name it—everything that’s based more on income than capital gains, including bonds themselves.
We jettisoned a couple of minor positions when we saw what was going on, including tiny positions in gold and silver ETFs SGOL and SIVR. We’re holding most of the rest, but will keep a watchful eye on the whole thing.
These markets want free government money forever so they can indulge in more share buyback fantasy sports. So they don’t like it when they even catch a scent of any kind of rate hike here.
One way to solve this problem is to start handing all that government money back over to the honest, taxpaying citizens who were forced to front it and/or pay the interest on the Fed’s endless borrowing to support these investment games of the mega-wealthy.
Yet obscenely rich CEOs, hedge fund runners, HFT firms, lobbyists, wholly-owned politicians and the like, largely based in New York, Silicon Valley and Washington, D.C., continue to be mystified as to why so many “crazed” Americans seem to want an iconoclast like Bernie Sanders or Donald Trump to move into 1600 Pennsylvania Ave. and start blowing up the status quo.
It’s actually amazing how dumb the mega-rich and their lapdog media pals really are. Like Louis XVI of France, maybe they’ll figure it out when a screaming, enraged mob escorts them up the steps to the guillotine.
In the meantime, let’s hold positions steady, more or less, as we watch and wait to see how the market ends up sorting out the policy nuances of today’s Federal Reserve tea-leaf reading exercise.