Waiting On The Fed
Markets rallied a little more Wednesday as it appears no rate hike is the consensus for most bulls. After all when Goldman Sachs head Lloyd Blankfein suggests, and being the Fed’s best client, there is no reason to hike interest rates now. Janet must comply wouldn’t you think?
The only fly in the ointment for this thinking is, why are long term Treasury bonds falling sharply if the Fed’s not going to raise interest rates? Perhaps “da boyz” have some complicated hedge strategy in play. The bullish stock tape combined with bond yields rising may mean, wait for it, interest rate hike combined with (cough) QE4.
Finally given recent stock market rallies, are prices already baked-in for no interest rate hike? We shall see.
One major effect of the Fed’s 7-year ZIRP policy has been to increase wealth inequality and the destruction of normal corporate financial policies. A glaring yet typical example of this was Hewlett-Packards announcement yesterday laying off nearly 30,000 workers and at the same time buying back $1 billion of stock financed by cheap interest rates courtesy of ZIRP. Clearly all stock holders benefit in the short term but corporate insiders with lucrative stock options benefit the most. No funds are added for corporate research or any other long term actions to “grow the company” vs growing the stock price”.
There has been of litany of these cheaply funded actions from many companies including Intel, Caterpillar, IBM, Apple, GE and many others. Remember, buybacks create fewer shares outstanding boosting stock prices.
Below are the telling data for just HPQ:
And if you think further about Blankfein’ s interest rate comments, remember Goldman Sachs does much of the financing for all these stock buybacks.
It’s not just curious any longer the PBOC are in full and direct stock market manipulation as last night’s price action proves. From Zero Hedge: “The biggest one day surge, plus 4.9%, since March 2009 - and nearly erasing the 6.1% drop from the past two days in just about 60 minutes of trading, providing a solid hour of laughter to bystanders and observers in the process.”
Market sectors moving higher included: Volatility (VIX), S&P 500 (SPY), Dow (DIA), Tech (QQQ), Small Caps (IWM), Energy (XLE), Financials (XLF), Materials (XLB), Industrials (XLI), Retail (XRT), Consumer Discretionary (XLY), REITs (IYR), Consumer Staples (XLP), Emerging Markets (EEM), Europe (IEV), EAFE (EFA), UK (EWU), Spain (EWP), Brazil (EWZ), China (FXI), Japan (EWJ), Hedged Japan (DXJ), Russia (RSX), South Korea (EWY), Asia ex-Japan (AAXJ), India (EPI. Mexico (EWW), Canada (EWC), Taiwan (EWT), Australia (EWA), Gold (GLD), Silver (SLV), Crude Oil (USO), Commodity Tracker (DBC), and many others.
Market sectors moving lower included: Bonds (TLT), Natural Gas (UNG), Junk Bonds (HYG) and Dollar (UUP).
The top ETFs daily market movers by percentage change in volume whether rising or falling is available daily.
Volume was light and breadth per the WSJ was positive.
The only fly in the ointment for this thinking is, why are long term Treasury bonds falling sharply if the Fed’s not going to raise interest rates? Perhaps “da boyz” have some complicated hedge strategy in play. The bullish stock tape combined with bond yields rising may mean, wait for it, interest rate hike combined with (cough) QE4.
Finally given recent stock market rallies, are prices already baked-in for no interest rate hike? We shall see.
One major effect of the Fed’s 7-year ZIRP policy has been to increase wealth inequality and the destruction of normal corporate financial policies. A glaring yet typical example of this was Hewlett-Packards announcement yesterday laying off nearly 30,000 workers and at the same time buying back $1 billion of stock financed by cheap interest rates courtesy of ZIRP. Clearly all stock holders benefit in the short term but corporate insiders with lucrative stock options benefit the most. No funds are added for corporate research or any other long term actions to “grow the company” vs growing the stock price”.
There has been of litany of these cheaply funded actions from many companies including Intel, Caterpillar, IBM, Apple, GE and many others. Remember, buybacks create fewer shares outstanding boosting stock prices.
Below are the telling data for just HPQ:
And if you think further about Blankfein’ s interest rate comments, remember Goldman Sachs does much of the financing for all these stock buybacks.
It’s not just curious any longer the PBOC are in full and direct stock market manipulation as last night’s price action proves. From Zero Hedge: “The biggest one day surge, plus 4.9%, since March 2009 - and nearly erasing the 6.1% drop from the past two days in just about 60 minutes of trading, providing a solid hour of laughter to bystanders and observers in the process.”
Market sectors moving higher included: Volatility (VIX), S&P 500 (SPY), Dow (DIA), Tech (QQQ), Small Caps (IWM), Energy (XLE), Financials (XLF), Materials (XLB), Industrials (XLI), Retail (XRT), Consumer Discretionary (XLY), REITs (IYR), Consumer Staples (XLP), Emerging Markets (EEM), Europe (IEV), EAFE (EFA), UK (EWU), Spain (EWP), Brazil (EWZ), China (FXI), Japan (EWJ), Hedged Japan (DXJ), Russia (RSX), South Korea (EWY), Asia ex-Japan (AAXJ), India (EPI. Mexico (EWW), Canada (EWC), Taiwan (EWT), Australia (EWA), Gold (GLD), Silver (SLV), Crude Oil (USO), Commodity Tracker (DBC), and many others.
Market sectors moving lower included: Bonds (TLT), Natural Gas (UNG), Junk Bonds (HYG) and Dollar (UUP).
The top ETFs daily market movers by percentage change in volume whether rising or falling is available daily.
Volume was light and breadth per the WSJ was positive.
Let’s not be naïve, in this environment and with insiders like Goldman Sachs, leaks and other nefarious actions remain ever-present.
Also in this environment, nothing should surprise anyone.
There’s a reason for a short commentary as everything might change Thursday and Friday.
Let’s see what happens.
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