After many months of signaling it was going to raise interest rates for the first time since 2006, the FED showed its bark is much bigger than its bite.
I believe the FED has not only painted itself into a corner, but is now also paralyzed by deflationary fears and a world economy rolling over.
The main excuse not to tighten is worries about overseas developments. While that’s clearly a concern, the untold worry is that despite massive stimulation here in the U.S., there are clear signs now that the quick fix effect has now wore off and a struggling U.S. economy is becoming a major concern to them as well.
It’s no coincidence that the 170% stock market rally that took place between March of 2009 to the end of 2014, happened while the FED was continuously stimulating the economy with QE 1 through 4. The fact that the rally ended when QE stopped at the end of 2014 is no coincidence either.
Mark my word, the FED realized that even the slightest interest rate rise would prick the biggest bubble they ever greatly help inflate and now are in no-man’s land.
U.S. Stock Market – One of the many “hooks” the “Don’t Worry, Be Happy” crowd uses when it comes to the stock market is “where else can you make a return?” The supposed argument is banks pay zilch, bond yields are extremely low and everything else is “risky”. So if be default if nothing else, you must invest in the stock market
Believe it or not, there’s some validity to that “pitch”. Unfortunately, most who throw that line make up the vast majority of so-called financial advisers who were only a twinkle in their daddy’s eye when a real, long-term bear market existed. It may come as a shock to them and you, but there have been periods where equity prices went nowhere for decades (perish that thought-lol).
I’ve been abundantly clear since the New Year that IMHO, America has entered its worst economic, social and political era. I said I would rather be a live chicken versus a dead duck.
Petey resting comfortably in his foxhole
U.S. Bonds – They remain the lesser of two evils (versus equities) for the moment. I’ve “pleaded” to avoid high-yield (junk) bonds at all costs.
U.S. Dollar – While the FEDs latest action softens the U.S. Dollar argument, here too the “Happy” people argue you need to own it by default (no other currency doing better). Because I feel the bulk of the oil decline is behind us (more in a moment) and the complacency towards U.S. assets is far greater than just about anywhere else in the world, I would begin a process that lessens, not increases, any U.S. Dollar holdings.
It may be the fact that I miss my once extensive travels to America’s best friends north of the border, but I find it difficult to think at .75 to the U.S. Dollar, how over the next several years the Loonie doesn’t end up a much better speculation than Uncle Sam’s paper.
Oil – From above $85 a barrel, I felt oil would find a bottom in the $30s. We briefly hit that target and while in a perfect world we retest it and maybe even make a lower low, buying low and selling high usually ends up a fantasy, not reality.
Gold – I felt my friend and CNBC-TV Contributor Guy Adami was correct that the next “big” thing in the financial markets can be gold.
Just about everybody and his mother was calling for gold’s demise throughout much of 2015. Never in 31+ years in and around the financial markets did I ever see any investment vehicle so universally hated.
While not in the clear yet, these gold haters begin to have problems if gold can get above $1170, and two consecutive closes above $1,200 and the Grim Reaper shall have them in sight.
Please note – If all goes well, a new additional PG company shall become operational before years-end called “Sageness Advisors”. I will update you if and when the time has come to do so