My colleague David Isham may have raised your bullish hopes in my absence, but I’m going to get back on my own skeptical, pessimistic track with tonight’s edition. There are numerous good reasons for this. For one, the chart reproduced with the latest E-Mini S&P update shows the failure of the futures, after three weeks of trying, to get past a key peak at 2744.00 recorded three weeks ago on the way down. For two, even allowing for Mr. Market’s unflagging determination to stand logic on its head whenever this suits him, I cannot buy into the idea that stocks are about to move significantly higher when: 1) they have failed to do so with earnings at a years-long crest; 2) crude oil prices are about to rise into the $80s; 3) a strong dollar is about to eat into the earnings of America’s largest multinational companies; 4) housing has peaked; 5) U.S. Ten-Year rates have hit the 3.11% target I projected here six months ago and could go even higher, putting a choke-hold on the U.S. economy. There are a dozen other factors I haven’t mentioned, but you get the idea. We’ll be in recession before the year is over, and although such a trivial event is not likely to disturb the simple-minded plans of the buy-the-FAANGs chimpanzees who manage Americans’ Fed-induced ‘wealth’, neither is it likely to produce a dramatic resuscitation of the nine-year-old bull market.
Even with Recession Coming, Don’t Look for Drama
- May 21, 2018, 5:16 pm
C’mon Rick…..the Fed hasn’t even started running their existing playbook yet for getting the proper setup for a recession. And even then the actual recession itself comes later still. Quite often the setup can be the Fed funds rate set above the 2 year Treasury yield, when they go too far with rate hikes. But after some more study I really like the M1 money supply setup where it eventually flatlines or declines into the 20 month MA (or below it). I assume this occurs due to a combination of the Fed and the banking system. But it is a very precise setup that has been working since 1989. That’s 3 perfect setups with guaranteed recessions later on in time. The separation appears to be atleast a year, but it can vary.
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You seem to have much more faith in the Fed than I do, Lee. To me. they are just a bunch of imbeciles who make it up as they go along. Remember PhD Greenspan telling us that inflated home values constituted “wealth’, and that America supposedly was having a capital investment ‘boom’ when household savings growth was in fact negative? The men and women who run the Fed couldn’t pass a high school economic course, let alone command the economy more than haphazardly even as they drive it toward inexorable, deflationary collapse. RA