Thursday, December 17, 2015

Don't Believe the Fed

They know nothing.  Even if they do know something that's gonna spook the crowd, they aren't going to say it.  The part that Yellen said about oil prices was laughable.  Since when did she become an oil expert?

And the Fed dot plots?  They've been completely wrong ever since they first came out.  Let's not forget those claims in 2010, 2011, and 2012 about the Fed funds rate being such and such by 2015, way higher than they are now.  And these aren't all hawks either, one of them was asking for negative interest rates this year (Kocherlakota)!

4/7/2011 – Fed Governor Jeffrey Lacker – “Rate hikes by year end certainly possible

5/5/2011 – Fed Governor Narayana Kocherlakota – “Under my baseline forecast, it would be desirable for the (Fed) to raise the fed funds target interest rate by a modest amount toward the end of 2011

2/6/2012 – Fed Governor James Bullard (as reported by Reuters) – “Fed should raise rates in 2013”

Are these Fed officials fortune tellers?  More like contrarian indicators to me.

We got the sell the rumor, buy the fact reaction yesterday.  Everyone was waiting for something horrible to happen with the rate hike that when it did finally come, there were no more scare crows left holding stock.  They had already sold into the hole on Friday and Monday ahead of the FOMC meeting.  You were left with strong hands holding stock and when the expectations were met, you had vigorous buying by those holding too much cash.  The leftovers of that buying power are spilling over to today in the form of another gap up.  After the big gap down on Friday, as the market's tendency to do, you have 4 straight gap ups, one of them being a monster gap up.

When there is no clear trend in place, you have to buy the fear and sell the greed.  This trendless market will not last for much longer.  I expect there to be a last gasp rise in the first half of next year followed by a bear market.

As for now, you have to be leaning bullish in bonds and stocks for the next few months.  I am neutral on oil, and have changed my mind on gold.  Gold just looks like its stuck in a stagnant area, probably stuck in a narrow range.  Too many bears for it to go down much, and with its blood brother, oil, this weak, not enough potential gold bulls for it to go much higher.

Expecting a short term pullback in stocks over the next few days starting today or tomorrow.