The party ended two days ago and the market is still nursing itself. The euphoria of the Fed pulling back on its almost promise to start tapering in September is long gone. Now, the market needs some catalyst to get itself up and out of bed. Then again, it might decide to remain in bed because of the upcoming political circus working its way into the “news” cycle.
Yep. The debt ceiling, budget battle is on the way and the Republicans are firing away as I write with a vote to cut food stamps by $40 billion and a vote to tie defunding the Affordable Health Care Act to raising the debt ceiling. Both are moves designed to instigate a fight with President Obama and the Democrats. My guess is the market has had enough of this nonsense, so it might just roll over in bed and pull the covers over its head.
In the meantime, more evidence that the US economy is still chugging along is floating to the surface. The first piece is real data and the second is anecdotal, although the anecdote comes from Brian Moynihan, CEO of Bank of America, a bank with its finger on the pulse of the US economy – the US consumer.
- U.S. home resales surged in August to a 6-1/2-year high and factories grew busier in the Mid-Atlantic region this month, signs that rising borrowing costs are weighing only modestly on the economy.
- We still see consumers spending. I mean, in the data that we see, the spending for the month of September so far is about 5% to 6% over last year’s September. The Internet spending growth is at twice that rate, so you might hear different retailers have different outcomes depending on whether they’re on the Internet more or less.
My advice is to settle in, hold on to what you have, if you believe it has growth potential, and then wait to buy. Bargains are hard to find right now, but they might not be so hard to find after the breathless media starts the chatter about the debt ceiling and budget battles. As well, Syria is still on the back burner. What happens there could drive the market down temporarily, as well. Yes, sit tight and wait …
- In the wake of the biggest broadside to the collective economic world in years, it seems only fair that we scrutinize some of the other so-called “consensus opinions” to see if they are as vulnerable as Wednesday’s botched projection on Fed tapering.
I admit I too believed in the “consensus opinion” about QE tapering. It appeared the Fed had signaled this since May. This reality demonstrates two things – 1) just because everyone is saying it, that does not mean it is fact, or that it will become fact and 2) even though I recognize this, sometimes I too get caught in the fast moving water.
- Not only did they get it wrong that the Fed was about to begin reining in its monthly bond buying program, but this same group now expects us to believe them when they say with authority that Federal Reserve vice chair Janet Yellen will be Ben Bernanke’s successor.
Okay, I don’t know who will succeed Mr. Bernanke, but I do know that if is Ms. Yellen, the market will expect more of what has been the policy of Mr. Bernanke and the Fed. I don’t know if this is good or bad for the market, but I do know the policies are known and “consensus’ suggests that the market likes the known, specifically, what is known about the current Fed QE program.
The market is stirring now, down quite a bit as I write. The buyers have done what I suggest you do – pull back and wait. Let the sellers take their profits and then get in when the bargain sales arrive.
In the meantime, I came across an opinion this morning (featured on financial TV and in print). I will share it with you, but understand I do not share this opinion. In fact, I believe it is a dangerous opinion, given what we went through in the financial collapse of 2008.
- No matter what you hear to the contrary, greed didn’t create the housing bubble. People are always greedy and anyone suggesting otherwise is selling you something. What unleashed the worst of our greedy instincts was a series of horrifically ill-conceived regulations crafted by buffoons on both sides of the political aisle. Through the power of misguided regulations, elected officials created a system that violated the basic laws of economics. The result was a systemic promotion of our most base greed instincts at the expense of collective common sense.
It seems the writer of the opinion managed to craft an opinion that contradicts the opening sentence (which is the dangerous part), while laying blame not on greed, but on the government for promoting greed. The fact is no matter how you couch it (the writer does a good job of obfuscating the truth he admits), greed was the underlying problem for the collapse.
It was not government regulation that promoted the greed; rather it was government deregulation that unleashed the banks to gamble and it was the banks who promoted greed with their pervasive push to create and then sell mortgage loans. The banks were greedy and buyers were greedy, and the government allowed it to happen. Take that!
Trade in the day; Invest in your life …
