This morning I had some personal things to do, so I had today off. I was able to hang around and read headlines and watch the CNBC channel for a while before and after the FED rate decision. I must say, it was a very confusing day. It was a strange feeling watching grown adults that are allegedly employed in the financial arena parade silly ideas around all day. I do not mean they said things that I personally do not agree with, that what makes a horse race, but just absolutely silly and/or contradictory things that make no sense at all. The really funny part is that not one talking head or analyst ever questions any of the dumb stuff that is said on TV. Journalists, and I use the term very loosely, do not even try any analysis in their reports, they just trumpet whatever their press piece says. I tried to jot a few notes of the really good stuff for tonight's post. In no particular order, here is today finest of financial coverage!
The FED Sets the FED Funds rate, Unless the Market Does
I am extremely loosely paraphrasing above, but this exact sentiment was uttered during "The Closing Bell" segment by some guy. The FED acts independently after reviewing all available data. The data has shown that a cut was not needed at this time. The markets had already baked a cut into the ever expanding cake of help they expect, so the FED had no choice but to cut. Circular logic at its finest.
The FED statement was Hawkish, but the Language does not Matter
The FED statement today could only be read as at least weakly signaling no more rate cuts this year. Stocks went down pretty hard. Then a new idea swept the markets! The FED has to say that hawkish stuff so the market does not "price in" more rate cuts, so that when they do cut, we will be surprised! So that means they are going to cut more, so lets reset the cake bake mix and put that in as well. Markets rallied strongly to the close. Confused? I am too.
Speculation is Reckless, Hurtful, and Irresponsible, Unless its in Things we Need Speculation In
The rise in Oil prices was lambasted a pure speculation. One talking head said that easily 30% or more of the price of Oil is pure speculation by traders. Ditto for Gold. The consensus was that greedy nasty speculators were pushing up commodity prices across the board, and something needs to be done to reign that in. However, speculation is desperately needed in housing to push prices back up because all the reckless folks bidding up homes are now underwater. Google busts out over $700 a share and that kind of trading is all good. I am not kidding that this kind of stuff was going on today. To add to a wonderful Minyanville phrase of "Inflation in things we need, and Deflation in things we want" the new phrase should read "Speculation in things we own, and No speculation in things we need to get". I'll tell you what Mr. market, lets go ahead and chop off 30% from Gold and Oil, and you chop off 30% from homes and the DOW and lets stop speculation today. Just say no as the saying goes.
Housing is only 5% of the Economy, But we Need Rate Cuts to Save the Financial System
This was easily the most repeated and most confusing idea going on today. Person after person repeated the "housing is 5% of the economy" mantra. Not one talking head or analyst asked where that number came from. Lets assume its true. In the same breadth these people are calling for rate cuts and other FED help to end the housing bust? If I had 95% of a Big Mac, I would be just as full. If I had 95% of my paycheck I would be fine. If housing is only 5% of the economy, why do we need such drastic intervention to prevent banks from failing? Why do we need to stop foreclosure rates from skyrocketing? If its only 5%, then really all this stuff is way overblown. Obviously this one wins for super silly idea of the day, and again not one analyst or talking head ever brought up the issue.
That's a collection of some of the better chatter going on today. I fully admit that I can offer nothing on these matters. I could dig out data, charts, a Ouija board and still not get through to anyone that can buy the crap listed above. The totally absurd things I saw and read today have convinced me of two things:
- There will be NO downward movement is stocks in the next calendar year
- The housing bust will be bailed out on the banking end, but through blind instruments and FED shenanigans. Do not get me wrong, home prices are going to continue to fall, foreclosures are going to go parabolic, and the home buying industry will be crushed. Just do not expect to see any macro fallout involving banks or major brokerage firms. They will be well cared for. In time the housing problems will not even get a headline, as its only 5% of the economy anyway!
That's my take from today. The dollar continues it push to the 70 mark on the dollar index. Gold almost topped $800 an ounce. I have another poll on the dollar up today, please check it out.
Have a good, if confusing, night.