Broader Market Rallies Right Up a "Wall of Worry"--Weekly Investor Thread March 22, 2015

Weekly investment & finance thread ^ | Mar 22, 2015 | Freeper Investors

[expat_panama]

Prices in both precious metals and stocks are booming again:  metals are soaring as if they're looking for higher bases and stock indexes are within a couple percentage points of all time highs.  The good news is that this time the experts show no sign of confusion as to what's going on and they've all decided what we need to do.  It's all because of the Fed, international tensions, and the NCAA. The bad news is that each expert's saying something different. 

 

Here are a few samples:

 

(excerpt from)  Stocks are likely to struggle during March Madness ...Because March Madness begins next week, you might want to stay out of the stock market until it ends April 6. Come again? What does the NCAA men’s college basketball championship have to do with the stock market? More than you think: Believe it or not, stocks more often than not produce below-average returns during widely followed sports tournaments. Last year’s March Madness was a case in point. Despite an overall positive year for equities, the S&P 500 fell 1.5% between the opening round of the 2014 NCAA championship and the final game. A rigorous study that appeared in the August 2007 issue of the prestigious Journal of Finance suggests that last year’s experience was not a fluke. The study, “Sports Sentiment and Stock Returns,” was conducted by finance professors... [snip] By the way, the non-sports fanatics among you shouldn’t become too holier than thou because of the lunacy of sports hysteria.The relationship between the stock market and investor mood extends well beyond sports. Just take the move to Daylight Saving Time, which took place this past weekend. Another academic study, which appeared in the September 2000 issue of the American Economic Review, found that the stock market’s returns are significantly below normal, on average, following shifts to Daylight Saving Time. To explain those results, the authors theorized: “We have all struggled through a day after a poor night’s sleep, weighed down by weariness, fighting lethargy and perhaps even facing despondency.” The bottom line: Take some (money) chips off the table for the next couple of weeks, and replace them with some (corn) chips while you watch the tournament.		(excerpt from) As Central Banks Battle, Will Global Economy Suffer? As Central Banks Battle, Will Global Economy Suffer? Monetary Policy: A battle is taking shape between our Federal Reserve, which wants to raise rates, and Europe and Japan, which show no signs of ending their easy-money ways. The split threatens the world economy. Since the financial crisis ended in 2009, the world's central banks have experimented with monetary policy like mad scientists in a bad horror movie. Actually, Japan started it 14 years ago, in the middle of a seemingly endless economic slump and deflation, by doing what it called Quantitative Easing (QE) — buying bonds with money printed by the central bank to push down long-term interest rates and boost investment. By 2010, it was actually buying corporate stock on the open market — something unheard of at the time. After the financial crisis, the U.S. Fed cut interest rates to zero — also unprecedented — and created its own Japan-style QE program that added $4 trillion to the balance sheet. Then Europe's central bank slashed rates... [snip] .... Japan and Europe are still slumping. The U.S. recovery and expansion are the worst since the Great Depression. And while stock markets and corporate bond markets appear to have benefited from these moves, incomes have lagged and job growth has been slow. Now the U.S. is poised to go its own way, raising interest rates and ending quantitative easing. The European Central Bank, however, is still printing money like crazy, driving the euro down and the dollar up, while Japan continues to pump up its stock market and weaken its yen to stave off deflation... [snip] ...The soaring dollar and the crashing euro mean eurozone governments and companies that were used to borrowing cheap U.S. dollars at near-zero interest rates now could face major repayment difficulties, and even defaults, as U.S. rates rise and the dollar soars further.
Also: Investors eye data as stocks approach records U.S. multinationals set to face much more pain from strong dollar Investors Must Price Low Rates For a Long Time - John Waggoner, USAT As Central Banks Fight,Will Global Economy Suffer? - Editorial, Investor's Powerful Market Reversal Was All About Dots - Doug Kass, Kass's Corner What Yellen Watches As She Contemplates Rates - Steve Matthews, BBW Gamblers lost a bundle on NCAA first round		This is the thread where folks swap ideas on savings and investment --here's a list of popular investing links that freepers have posted here and tomorrow morning we'll go on with our-- Open invitation continues always for idea-input for the thread, this being a joint effort works well.   Keywords: financial, WallStreet, stockmarket, economy.

[expat_panama]

Happy Naw Ruz Ping!

[palmer]

From the article about malinvestment in oil: How The Fed Fostered The Oil Glut And Price Drop - Wall Street Losing Patience

"Instead of being able to analyze and evaluate market forces, then make informed judgments and take rational actions, Wall Streeters are left to guess what the FOMC members are thinking. Worse, the members’ thinking is vacillating, and they are overriding their previous statements, seemingly by whim. The end result, ironically, is Fed-induced uncertainty, volatility and risk — the opposite of what the Fed should be doing."

[expat_panama]

Fed-induced uncertainty, volatility and risk — the opposite of what the Fed should be doing

Right after I posted this there was a Forbes response to the article that began the thread: How The Fed Fostered The Oil Glut And Price Drop - Wall Street Losing Patience.  Funny but is sure seems to me that blaming the Fed for everything is sounding more and more like how everything got blamed on Bush.  The real problem of course is as always the left's war on business.

[ForYourChildren]

“The lefts war on business.”

I agree.

The narrative is how the monetary policy should be this or that or whatever.

The discussion over time has devolved and has completely left out any discussion regarding getting government out of the way of business and let businesses grow. Remove the government from business, remove taxes and regulations and watch the economy grow like crazy. But this isn’t even in the discussion anymore.

[expat_panama]

...Remove the government from business, remove taxes and regulations and watch the economy grow...

You, me, and a few others know it but the loony left press has somehow dumped a lot of conservatives into getting off track and wandering into this blind Fed-bashing fest..  A number of very good conservative politicians have followed suit too, either because they don't know any better or because they want the votes more than than they want doing what they know is better.  Not sure which is worse...

[Rich21IE]

My thought is that it’s about time to start taking profits off the table. The Fed will doubtless raise rates and that’ll tank the bond market. Higher interest rates will slow consumer spending; all the while...the market will go up as money flows into stocks out of bonds; that’s the beginning of the making of a market blow-off-top. The market will start to fall in the wake of poor earning’s news, probably this fall or after crappy Christmas sales this December.

[expat_panama]

Fed will doubtless raise rates

--and it's for sure the sun will expand and fry all life on our planet.  If it's not happening any time soon then we've got a lot to do in the mean time.   While we can set aside worrying about the sun, the Fed's time frame is a bit less certain but so far I'm hard pressed to see any serious reason why a rate hike is needed any time in the foreseable future.  Somehow everyone's got it in their heads that the Fed has to raise rates as soon as possible just so they can lower 'em again later.  The only reason the Fed does rates is for inflation, and if there's no inflation there's no rate hike. Ever.

[expat_panama]

Good morning, we're looking at an "interesting" week here and today's shaping into 'prep-work' for it.  This morning we just get the Existing Home Sales but later in the week comes CPI day followed by GDP finals.  Right now futures are down -0.18% for stock indexes and -0.27% for metals --trending downward.

[fumbling for coffee...]

[bert]

Did I tell you before?

If not, thanks so much for your efforts

[Wyatt's Torch]

I think they hike 25bps by the end of the year. Just to show that they can and will. 25bps won’t make a damn bit of difference to anything especially considering the mess the ROW is in.

[expat_panama]

tx, partly for my ego (no small issue) but it’s mainly good to know when others concur. Missing stuff can be expensive.

[expat_panama]

...if there's no inflation there's no rate hike. Ever.

...they hike 25bps by the end of the year. Just to show that they can and will...

There really is that possibility, and I deeply hope a better reason comes up.  If we continue with our flat/negative inflation numbers then imho a hike would be a disaster ala 1930.   Of coruse a lot can happen over the next 3 quarters and rising prices would make a hike or two necessary, but raising rates on a whim is crazy. 

OK, so I'll admit it, "crazy" never stopped anyone...

[citizen]

Financially, Greece is still....Greece.
Greece’s leader warns Merkel of ‘impossible’ debt payments
http://www.ft.com/intl/cms/s/0/ae9d0cb8-d0b5-11e4-982a-00144feab7de.html#axzz3VD9FzbfX

[citizen]

The only reason the Fed does rates is for inflation...

Really, they only consider inflation you figure? Zero political influence?

[citizen]

I work in civil engineering. I see ROW and all I get is right-of-way. What is tour term?

[Wyatt's Torch]

LOL. ROW = Rest of World

[Rich21IE]

I will continue to research the issue of if/why the Fed will raise rates. I completely agree that its crazy. However, as I’ve seen and heard of late, they’ve been laying the ground work for this rate increase for quite some time now and Yellin is getting impatient to make the move.

The best reason I’ve come across, and its a lousy one, for why the Fed feels compelled to raise rates is that rate control is one of the very few tools in their tool box and to the extent that rates remain near zero, they are essentially deprived of the use of this “tool”. Frankly, I think there’s something more to this, but I’ve not been able to parse it out. I will continue to try to discover it.

The greatest problem I see with this is that albeit the endless volume of speculation over hyper inflation, what the Fed has really been fighting is Deflation and we presently stand at the precipice of a Deflationary spiral. It would thus seem to me that to raise rates would be to push this economy off the cliff into that Deflationary spiral and with their history laid out before them, I have to believe the Fed knows that.

[expat_panama]

they only consider inflation you figure? Zero political influence?

You mean that there is political influence at the Fed?

[expat_panama]

see ROW and all I get is right-of-way.

Me too (RCE Calif.) and all this time I was trying to work around some mess was in the right of way all for nothing.