The Fed Has Given Up: Get Ready For More QE

So The Fed has essentially abondonded it’s previous plan for both “raising interest rates” AND “dramatically reducing it’s current balance sheet”. Both ideas now well off the table.

Authored by Ryan McMaken via The Mises Institute,

The Federal Reserve’s Federal Open Market Committee on Wednesday voted unanimously to keep the federal funds rate unchanged. Overall, the FOMC signaled it has made a dovish turn away from the promised normalization of monetary policy which the Fed has promised will be implemented “some day” for a decade.

Although the Fed began to slowly raise rates in late 2016 — after nearly a decade of near-zero rates — the target rate never returned to even three percent, and thus remains well below what would have been a more normal rate of the sort seen prior to the 2008 financial crisis.

Much of the Fed’s continued reluctance to upset the easy-money apple cart comes from growing concerns over the strength of the economy. Although job growth numbers have been high in recent years — and this has been assumed to be proof of a robust economy — other indicators point toward less strength. Workforce participation numbers, wage growth, net worth numbers, auto-loan delinquencies and other indicators suggest many Americans are in a more precarious position than headlines might suggest.

The Fed’s refusal to follow through on raising rates, however, has highlighted this economic weakness, and today’s front-page headline in the Wall Street Journal reads: “Growth Fears to Keep Fed on Hold”

Abandoning Plans to Reduce the Balance Sheet

For similar reasons, the Fed has also signaled it won’t be doing much about its enormous balance sheet which ballooned to over four trillion dollars in the wake of the financial crisis. Faced with enormous amounts of unwanted assets such as mortgage-backed securities, the Fed began buying up these assets both to prop up — and bail out — banks and to produce an artificially high price for debt of all sort.

This kept market interest rates low while increasing asset inflation — all of which is great for both Wall Street and for the US government which pays hundreds of billions in interest on federal debt.

At best, “total balance sheet will be around $3.8 trillion, down from $4.5 trillion at its peak.” Moreover, “the Fed will soon be a net buyer of Treasurys once again,” analysts said, and some estimate “the Fed is on course to be buying $200 billion of net new Treasurys by the second half of 2020.”

Put simply: the days of quantitative easing are back, and we’re not even in a recession yet.

Some observers might simply respond with “big deal, the economy’s growing, and better yet, the Fed has given us both growth and little inflation.”

But things are not all as pleasant as they seem.

Problems with Easy-Money Policy

First of all, even by the Fed’s own measures, inflation isn’t as subdued as the headline “core inflation” or CPI measure suggests. According to the Fed’s “Underlying Inflation Gauge” which takes a broader view beyond the small basket of consumer goods used for the CPI, inflation growth over the past year has returned to the elevated levels found back in 2005 and 2006.

This hasn’t been great for consumers, and it’s been especially problematic when coupled with ultra-low interest rates. The low interest rates are a problem because people of ordinary means — i.e., the non-wealthy — don’t have the ability to access the high yield investments that wealthier investors do.

Rising Inequality

Earlier this week, finance researcher Karen Petrou explained the problem that comes from ultra-low rates which lead to yield-chasing for the wealthy:

“”When interest rates are ultra-low, wealthy households with asset managers acting on their behalf can play the stock market to beat zero or even negative returns. We’ve shown in several recent blog posts how wide the wealth inequality gap is and how disparate wealth sources help to make it so. However, even where low-and-moderate income households can get into the market, their investment advisers should not and often cannot chase yields. As a result, ultra-low rates mean negligible or even negative return.””

Thus, ordinary people are faced with rising asset prices — driven in part by the Fed’s balance sheet purchases — while also finding themselves unable to save in way that keeps up with inflation.

Meanwhile, the wealthy reap the most benefits from Fed policy as they’re able to more effectively engage in yield-chasing.

Ordinary people get the short end of the stick from Fed policy in other ways. Petrou continues:

“”Historically, pension funds and insurance companies have invested only in the safest assets. These are now in scarce supply due in large part to QE andcomparable programs by central banks around the world . Pension plans and life-insurance companies increasingly have two terrible choices: to play it safe and become increasingly unable to honor benefit obligations or to make big bets and hope for the best. Under-funded pension plans are so great a concern in the U.S. that the agency established to protect pensioners from this risk, the Pension Benefit Guaranty Corporation, faces its own financial challenges . Yield-chasing life insurers are also a prime source of potential systemic risk.””

Middle class people who have been told for decades to rely on pensions are now imperiled by Fed policy as well.

Not surprisingly, this has led to rising income inequality. While some free-market advocates tend to dismiss inequality as an unimportant metric, this is not a good approach when we’re talking about public policy. Fed policy — and resulting inequality — does not reflect natural trends arising from market transactions. Monetary policy is something imposed on markets by policymakers. And that’s what’s going on when we witness rising inequality due to the Fed’s monetary policy.

This has been going on since the late 1980s when Alan Greenspan relentlessly opened the easy-money spigot to spur economic growth throughout the 1990s. But, there were problems that resulted, as noted by Daniell DiMartino-Booth:

“”[A]t the National Association for Business Economics recent annual conference, University of California-Berkeley economics professor Gabriel Zucman presented his findings on the widening divide between the “haves” and “have nots” in the U.S. His conclusion: “Both surveys and tax data show that wealth inequality has increased dramatically since the 1980s, with a top 1 percent wealth share around 40 percent in 2016 vs. 25 – 30 percent in the 1980s.” Zucman also noted that increased wealth concentration has become a global phenomenon, albeit one that is trickier to monitor given the globalization and increased opacity of the financial system.””

Defenders of ultra-low policy tend to claim low rates aren’t the real culprit here because even middle-class buyers can take advantage of easy money.

But experience suggests this hasn’t been the case. Part of the problem is that banking regulations handed down by the Fed and other federal regulators make loaning to smaller enterprises and lower-income households less attractive. Writes Petrou:

“”But, wasn’t there a burst of lower-rate mortgage refinancings that allowed households to reduce their debt burden and thus accumulate wealth? Did low rates allow higher-risk households at least to reduce their mortgage debt through refinancings? Again, low-and-moderate income households were left behind. They continued to seek refis after the financial crisis ebbed, but subprime borrowers current on their loans regardless of loan-to-value (LTV) ratios were less likely than prime or super-prime borrowers to receive refi loans even though higher-scored borrowers may or may not have been current and lower rates enhance repayment potential.””

The overall effect suggests the accelerating reliance on quantitative easing and near-zero interest rates has been great for some Wall Street hedge fund managers — but for those at the low end of the lending and saving apparatus, things are even more constraining than ever. It’s hard to get a loan, and it’s also hard to save.

But at least the aggregate numbers are great, right?

Well, the Fed can’t brag about even that. A policy that favors billionaires might work on paper, of course, so long as the aggregate numbers point toward sizable growth. But even those numbers are so iffy as to prompt growth fears at the FOMC, and to ensure that the Fed puts an end to its promises to return policy to something that might be called normal.

As it is, it looks like we should expect a continuation of the policies which have coincided with both an unimpressive economy and rising inequality.

If that’s not evidence of the Fed’s failure, it’s hard to imagine what is.

 

Traders Will Survive – Investors Get Smoked

Ok ok ok………you know my motto. “I’m always early…and rarely / if ever late”.

So here we are….a full 48 hours later. Stocks still pushing into “totally and completely over bought”.

Lets Hold Hands

Lets Hold Hands

Overbought – suggesting that the Relative Strength Index is “screaming” sell……all the while – the media ( and Fed for that matter ) keeping the sheep in line with dovish chatter.

All is well….everything going exactly to plan. Feel free to dump your life savings into the stock market here at the highs.

Would we expect anything different?

He he he…..so. You think you’ve bucked the trend. You’re satisfied with “f#^k you Kong –  I know this shit much better than you / don’t tell me to lock in profits cuz I’ve been doin this for years!”.

Your paper profits are immense. Your PAPER profits are HUGE! You are seriously “up massively on paper”, and no one….I mean NO ONE is gonna take that away from you.

Bravo.

Run thru your portfolio. Mark these levels. Imagine your “paper profits” sitting in your bank account.

Bravo.

I can only share with you my thoughts / feelings / insights.

You know what you’re doing.

Let’s just hold hands? Good?

 

 

 

 

Kong Pulls a Doji – Signals Indecision

You certainly can’t time this stuff “to the day” as I pull a doji this afternoon.

You people keeping up with your Japanese candlestick analysis??

doji japanese candle

doji japanese candle

What is a Doji?

A doji is a name for a session in which the candlestick for a security has an open and close that are virtually equal and are often components in larger patterns.

Doji candlesticks look like a cross, inverted cross or plus sign. A doji candlestick forms when a security’s open and close are virtually equal for the given time period, and generally signals a reversal pattern for technical analysts.

In Japanese, “doji” means blunder or mistake, referring to the rarity of having the open and close price be exactly the same.

Tomorrow could just as soon look the same, as these levels have been levels of resistance “3 times” previously so….if youz a trader – then trade.

If you’re an investor………good lord – cut it out. So 2007

10 years up.

Greed now a factor?

Cycle Tops Now – Take Profits and Wait

I harken back to posts some weeks ago – suggesting that “however bumpy”, equity markets would indeed take another shot at the highs.

So here we are. A quick look at both the weekly as well daily chart of the SP 500:

SP 500 Weekly

 

SP 500 Daily

After essentially 8 weeks “straight up”, this massive V Shaped recovery from one of the worst market corrections in years will now complete – bringing about the obvious question of “where to next”?

Well.

If you envision much “higher highs” in the current market environment then…….I surely wish you the best. We can see that the big boys like Apple and Facebook have not come anywhere “even close” to their previous highs…so the market correction / re adjustment of value has clearly taken hold in these.

Remember the stat some weeks ago that valuations where ( at that time ) some 74% above the mean? Suggesting that things needed to “cool off” ohhhh….just a tad?

Guidance from nearly every sector ( this coming from the industry leaders ) all suggest lower expectations for sales / growth moving forward. This is “them” telling “you” so…….not too often that actually happens.

Couple this with some very large “selling on strength numbers” over the past few weeks, again suggesting that the big boy institutions are indeed “off loading” quietly in the background while retail thinks they’ve got this licked.

How about a complete and total “retest” of the previous low of January 1st? Bet that’s gonna hurt eh?

Another 2 week fall straight down to the lows…..and another 2 months “grind” back to ( or most likely lower ) than today?

Fact of the matter is…..market dynamics have changed, the big run has ended, the sideways grind / sell off to retail at the top has clearly begun – and one just has to come to terms with it.

This could literally move side ways for months / never reach “higher highs” / grind you to pieces if you don’t keep tucking away profits and reducing your exposure.

Remember the suggesting to buy gold / silver / oil?

This is a “defensive move” and has clearly been performing wonderful. These “turns of the ship” take time while the big boys unwind all their high flyers, all the while loading up on defensive plays at the same time.

Sell on days with big fat green candles ( cuz you should have bought that stock when it was red! )!

 

Good luck everyone……stay safe the key.

 

 

Aequus Pharmaceuticals – Looking To Breakout

Aequus Pharmaceuticals Breakout Now Imminent! (TSX-V: AQS, OTCQB: AQSZF) Reports Largest Quarterly Revenue in Company History!

Aequus reports largest quarterly revenue in company history with $420,158 in reported revenues for Q3 2018, an increase of 44% compared to the three months ended September 31, 2017 (“Q3 2017”).

Aequus Is Expected To Breakout Fast!

Q3 2018 Key Highlights Show “Significant” Year Over Year Improvement.

Aequus Pharmaceuticals Inc. (TSX-V: AQS, OTCQB: AQSZF) (“Aequus” or the “Company”), a specialty pharmaceutical company with a focus on developing, advancing and promoting differentiated products, has reported financial results for the three and nine months ended September 30, 2018.

On a year-to-date basis, the Company recorded $1,173,013 in revenues in the nine-month period ending September 30, 2018, an increase of 52% compared to the same period in 2017.

The increase in revenues were primarily attributable to increased promotional activities being focused in markets with positive market access and reimbursement listings.

Aequus (TSX-V: AQS, OTCQB: AQSZF) Announces an Expanded Market Opportunity for its Reformulated Anti-nausea Transdermal Patch in Europe!

Having recently received marketing authorization in the United Kingdom under the brand name Xonvea®. Aequus plans to launch AQS1303 in countries where an original oral form has been approved, and an accelerated path to approval may exist for reformulated products.

AQS (TSX-V: AQS, OTCQB: AQSZF) is Now Sitting at a Very Solid Line of Support – Showing Significant Value at These Levels.

Reversal and Breakout Highly Probable Here

Reversal and Breakout Highly Probable Here

Considering the Strong Earnings Growth and Continued Positive News Flow from Aequus Pharmaceuticals (TSX-V: AQS, OTCQB: AQSZF) – Upside Potential Remains High.

 

Aequus Pharmaceuticals Inc. (TSX-V:AQS ) is a growing specialty pharmaceutical company focused on developing and commercializing high quality, differentiated products.

Aequus has grown its pipeline to include several commercial products in ophthalmology and transplant, and a development stage pipeline in neurology and psychiatry with a goal of addressing the need for improved medication adherence through enhanced delivery systems.

These Levels Unlikley To Last! Get Aequus Pharmaceuticals (TSX-V: AQS, OTCQB: AQSZF) Before The Anticipated Move Higher!

 

 

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How Can Oil Go Any Lower? – It Can’t

It’s absolutely amazing how easy it is, to allow the mainstream media to influence your trading.

We see the headlines, we hear the talking heads go on and on… and a part of us just “defaults” to accepting the daily banter as “the way it is” or……just assuming these people must know right? They’re on T.V. and I’m just sitting here in my trailer.

I also advocate doing as much research as you can and formulating your own investment views, and perhaps even more importantly – sticking to the basics!

So!?

How about the age-old principle of SUPPLY and DEMAND!? Remember that one? It’s a good one!

Let’s take OIL as an example.

Oil Around 45 Bucks = Low

                                                                Oil Around 45 Bucks = Low

You know….oil – the single most important commodity on Earth (or a least to the degree that puny humans have based their entire global economy on it). One would really never have to question it’s “demand” and from what we all are led to believe – the supply shouldn’t really be in question either.

Then factor in global population growth and any number of other horrible / consumer related facts and figures and there you have it.

Long term demand (in today’s day and age) will easily counter this short-term oversupply, as humans will consume this sludge until the last possible drop has been squeezed from this planet.

The support area is very near, so you start doing a bit of research NOW, and keep the price of oil on your daily trades / watch list.

Find a couple decent plays and set the trap.

Let the price come to you.

 

 

Count Your Lucky Stars – Fed To Talk Down Hike

Everyone needs to take this “shot across the bow” and the “survival of said shot” – to count their lucky stars. Talk about complacent eh? Damn! I bet a whole lotta folks just got 100% cleaned out!

I don’t mean YOU….I mean the market, and it’s participants “in general”. Everyone still not willing to accept how “flimsy” and “phony” things truly are. How soon we forget.

lucky_stars

lucky_stars

Gone are the company buy backs…..now the Fed “tightening not loosening” monetary policy, guidance for 2019 all pointing down ( these are the companies you invest in TELLING YOU – we aren’t gonna hit the mark in 2019) and then of course….the “incredibly significant” trade war / tensions building with China.

These stocks don’t exist in a bubble right?

There is nowhere to hid when the “entire planet” (or at least those institutions with large enough positions to affect markets) turn from buy to sell . NOTHING survives.

So hey…..this time around we catch a break.This time.

The Fed meetings get underway tomorrow. This is everything now.

The idea of interest rates climbing higher is the absolute foundation for this sell off. You get it right? You realize how leveraged to the freakin balls these big trading houses  / investment firms / wall st. gangsters are? Another basis point higher, and that nice new house out in the Hampton’s you’ve double mortgaged and now taken additional loans against gonna be the banks soon. You don’t own shit.

So here’s how it goes down.

  1. Fed holds out and doesn’t make the hike = markets are back off to the races for a final shot to the highs. USD tanks / final roll over / another fantastic short entry – post fed. Gold and commods final bottom. Crypto as well.
  2. Fed makes hike ( as it’s already priced in fok……look at the slide ) but TALKs down the next few = markets are back off to the races for a final shot to the highs. USD tanks / final roll over / another fantastic short entry – post fed. Gold and commods final bottom. Crypto as well.

There it is.

You’ve got one more shot at the highs, before May of 2019 and it’s time to get down in your bunker.

Buy water and gas…..buy crypto / silver n gold, and consider moving inland.

There’s more than a little problem up north, and it’s coming a lot sooner than 2030.

 

 

 

 

Dow Weekly Swing Low – Back To The Highs

The completion of this “intermediate cycle” is now within striking distance, after several days of extremely frustrating / volatile trading. Wow – what a shake out.

Now the technicals are “just a hair away” from confirming a “weekly swing low” (when the close of the weekly candle is “higher” than the close of the previous weekly candle).

You see it here? Just a few more points and the swing will be complete.

Dow Weekly Swing Low

Dow Weekly Swing Low

I would also take note of the “screaming double top” There around 26,900. Yo can clearly see rejection back in Jan/Feb as well as here in October.

The average stock today (ok a few days ago) is trading at 73% above its historical average valuation.

There are only two other times in history that stocks were more expensive than they are today: just before the Great Depression hit and in the 1999 run-up to the dotcom bubble burst.

One would have to ask themselves ‘What possible upside could remain” considering the gong show in evaluations, the bleak earnings we just saw in Q3, the trade war as well both China and Russia dumping BILLIONS of U.S Dollar Debt…..and the results of the mid term elections likely to have “significant impact” if indeed democrats steal back the house or senate.

Since March, Russia has dumped 84% of it’s American debt holdings! 84%! The bond selling has now reached “waterfall levels” with no real signs of support.

The U.S Dollar is set for the next “dumping” here as of today as well.

With the weekly swing low “essentially in” one might expect that stocks shoot for the highs here once again BUT! Mid terms could put a rook in those plans.

Generally speaking……what we will see over the next few weeks will be those retail investors who have “finally gotten off the couch” thinking this time it will be different.

It’s never different.

10 years straight up……..unprecedented. How does 2-4 years down sound? 

Totally normal, as we’ve got 150 years of data to work from.

10 years up? Common…….the “down” is gonna look equally nutty.

 

 

 

2018 Gains Erased – Bitcoin To Surge

OK so………

Let this simply be a lesson to you. You are NOT PREPARED for a market melt down. You are not protecting your gains……you are NOT PREPARED for “this” in any possible sense, as you’ve just seen the entire year of 2018 ERASED in a matter of days.

No judgement here. We are all learning. We are all doing the best we possibly can.

Or are we?

History repeats itself ( or so you’re told ) so Ok….let’s take a quick look at that.

This is the longest BULL RUN ( now going on 10 years ) in THE ENTIRE HISTORY of the stock market. Stop for a second and ponder….the longest bull run EVER, on the heels of the largest money printing experiment in the history of mankind…now 10 years out! This has NEVER HAPPENED before. EVER!

The brainwashing at a maximum as…….when you look in the mirror tonight before bed and you actually consider things are just going to “keep moving higher”?? Madness. This is pure madness, and in my eyes….completely irresponsible.

Impossible.

Did you learn anything the last time around?

If this “shot across the bow” hasn’t been enough to shake you out of your complacent / oxy driven sleep well…….I have little sympathy. This is a blessing for those who care to open their eyes.

THE ALGO’S HAVE SWITCHED FROM BUY TO SELL.

The big boys are essentially already out!!! Bam! Just like that….one years worth of CNBC hype –  your cash now transferred to your broker / bank as you capitulate / sell at the bottom. Indeed…..history repeating itself. THE BIG BOYS ARE ALREADY OUT!

So….what happens next?

Retail buys the dip.

The media swings back into full-blown promo, the numbers keep coming in / data not “too terrible” ( fok…….are you nuts?? Housing will never recover the previous highs, tech “might” push on, transports not going to recover the previous highs etc…..) – The list goes on.

Housing Off A Cliff

Housing Off A Cliff

While you where off golfing in Phoenix. The algo changed. This will NEVER recover as indication quite similar to the fall of 2007-8. Housing hooped and interest rates GOING UP!

So what do I do?

If you have anything left at all ( which for most is likely a big fat “0” ) you do indeed buy this dip……as one of the last runs towards the highs. IF! – The highs are reached again.

Throw greed out the window = you lost. You are now a bag holder. Period.

If lucky…..my suggestion is simply to sell every fokin thing you own prior to May 2019 – IF NOT SOONER as……the profits you saw on paper a month ago are very unlikely to return. THEY WILL NOT RETURN!

So this is not a time of greed……this is not a time for complacency..this is a time for protection / caution / plan for the fall out.

2008 gonna look like a total picnic. Stocks to shed some 50-60% value / market cut in half. Total economic destruction. Why on earth would you hold thru 4 years of that? ONly to find yourself below break even?

I won’t allow it.

Prepare now.

Selling is your goal. Not buying.