Equities Are Up

[tabs]

Equities are up in the face of a BAD jobs number, indicating a slowing economy. Which portends a FED interest rate cut. How can that be? What perverse Alice In Wonderland logic is at work here?

The answer is simple, the world is living under the Dictatorship of the FED and other Central Banks since the FED launched QE3 in September 2012. Equity action this week once again proved the validity of that reality.

THE Sp500 will once again test its old high of 2945. Once it crashed through 2800 it was cocked and loaded. As usual the only caveat is if a Black Swan event occurs.

What is not to understand about this equation?

[cabmandone]

FED isn't going to drop rates. The economy isn't slowing.

[fintstone]

The jobs report is very good if you are invested in the stock market mid/long term. Simple questions for you.

What is the unemployment rate? Did it go up? Why not?

What does this do for interest rates?

Will this combination drive the market up or down today? Why?

Then:

What caused this? Fear of the President's proposed tariffs?

What happens when there are lower interest rates and there is a trade deal/no tariffs...and Mexico starts helping with the border? Does the market shoot up significantly or down? Does this combination help or hurt the President's chances of reelection?

The market is so oversold due to bad "fake news" that value play is inevitable.

If this scenario is not planned, one could not have done better.

[tabs]

Originally Posted by fintstone

The jobs report is very good if you are invested in the stock market mid/long term. Simple questions for you.

What is the unemployment rate? Did it go up? Why not?

What does this do for interest rates?

Will this combination drive the market up or down today? Why?

Then:

What caused this? Fear of the President's proposed tariffs?

What happens when there are lower interest rates and there is a trade deal/no tariffs...and Mexico starts helping with the border? Does the market shoot up significantly or down? Does this combination help or hurt the President's chances of reelection?

The market is so oversold due to bad "fake news" that value play is inevitable.

If this scenario is not planned, one could not have done better.

This smells of the pure essence of Jabberwocky.

[pwd72s]

Originally Posted by cabmando

FED isn't going to drop rates. The economy isn't slowing.

Dunno if the fed dropped the overnight rate, but bond rates are down. Currently, the 5 years pays 1.85%, the 10 year 2.08%. Not sure on the jobs report, but I'll assume Tabs is accurate.

[cabmandone]

Originally Posted by pwd72s

Dunno if the fed dropped the overnight rate, but bond rates are down. Currently, the 5 years pays 1.85%, the 10 year 2.08%. Not sure on the jobs report, but I'll assume Tabs is accurate.

I don't see them dropping rates because inflation is still pretty much nonexistent. I don't see a one month low report making the FED panic and it shouldn't make anyone else panic either. Demand is still good from what I've been seeing in business.

[pwd72s]

I've read reports of car manufacturers cutting back on production due to unsold inventory. One close to home example is when I posted some months ago of dealerships asking and getting additional dealer markups of $5-7K for the new '19 Bullitt Mustang. Today? Hundreds of them being offered across the land for $4-5K under sticker.

(edit) If you're totally into equities, I'd suggest a little asset reallocation in the interest of safety.

[cabmandone]

Originally Posted by pwd72s

I've read reports of car manufacturers cutting back on production due to unsold inventory. One close to home example is when I posted some months ago of dealerships asking and getting additional dealer markups of $5-7K for the new '19 Bullitt Mustang. Today? Hundreds of them being offered across the land for $4-5K under sticker.

(edit) If you're totally into equities, I'd suggest a little asset reallocation in the interest of safety.

Just saw and article about a very strong used car market. Probably has something to do with new costs going up. My good friend just bought a 2019 F150 ecoboost for about 40K. I saw a 2016 with about 40,000 miles for around 27K. I had to ask him "are you nuts!?"

[tabs]

Originally Posted by pwd72s

Dunno if the fed dropped the overnight rate, but bond rates are down. Currently, the 5 years pays 1.85%, the 10 year 2.08%. Not sure on the jobs report, but I'll assume Tabs is accurate.

75k when 180k were expected. And the 3 month rate is...2.3%..more interest for 3 months than 10 years of risk...hmmmm

Powell says, "The FED will be closely monitoring the economy and will take the appropriate action. " That is comforting to know.

"1.75% by years end for the 10 year" some think it will push all time lows in the 1.3% range.

It is rather perverse to think that bad economic tidings drive the sp higher. That is Alice In Wonderland. So the question becomes what is wrong with this picture? What fuels that rational and makes it operative?

[Sooner or later]

Originally Posted by cabmando

I don't see them dropping rates because inflation is still pretty much nonexistent. I don't see a one month low report making the FED panic and it shouldn't make anyone else panic either. Demand is still good from what I've been seeing in business.

With inflation low they could afford to drop rates,. They don't want to drop rates when inflation is high.

I do agree that they won't react to one months data set.

[Shaun @ Tru6]

The reaction to this month is nothing more than an educated hedge on, well, nothing.

June, that's what you want to look at. July even more so.

Nothing to see now, move along.

[cabmandone]

Originally Posted by Sooner or later

With inflation low they could afford to drop rates,. They don't want to drop rates when inflation is high.

I do agree that they won't react to one months data set.

Yeah, I could have worded that better.

[pwd72s]

Originally Posted by tabs

75k when 180k were expected.

Powell says, "The FED will be closely monitoring the economy and will take the appropriate action. " That is comforting to know.

"1.75% by years end for the 10 year" some think it will push all time lows in the 1.3% range.

It is rather perverse to think that bad economic tidings drive the sp higher. That is Alice In Wonderland. So the question becomes what is wrong with this picture? What fuels that rational and makes it operative?

Very good question Tabs. My answer is that I dunno... It must go a bit beyond because interest rates are low, so people have nowhere but equities to pour money into.

[tabs]

Originally Posted by Shaun @ Tru6

The reaction to this month is nothing more than an educated hedge on, well, nothing.

June, that's what you want to look at. July even more so.

Nothing to see now, move along.

I am looking at the REACTION to the bad news and not the news itself.

[Shaun @ Tru6]

Originally Posted by tabs

I am looking at the REACTION to the bad news and not the news itself.

Who cares about the reaction? People are ****ing morons. Why would you care how morons react?

[Sooner or later]

Originally Posted by tabs

75k when 180k were expected.

Powell says, "The FED will be closely monitoring the economy and will take the appropriate action. " That is comforting to know.

"1.75% by years end for the 10 year" some think it will push all time lows in the 1.3% range.

It is rather perverse to think that bad economic tidings drive the sp higher. That is Alice In Wonderland. So the question becomes what is wrong with this picture? What fuels that rational and makes it operative?

Those bond rates are set by market expectations and not by the Fed.

Buyers are concerned about global economic health so more money tends to move to bonds and out of more risky holdings. When more money chases bonds the price is higher which translates to a lower yield.

Basically, bond buyers are concerned about economic growth and are trying to lock in long term rates that they think will be lower moving forward.

[tabs]

Originally Posted by pwd72s

Very good question Tabs. My answer is that I dunno... It must go a bit beyond because interest rates are low, so people have nowhere but equities to pour money into.

Yes it is the only game in town...but it is the FED guarantee that opens the door and allows it to happen.

The guarantee is that they will do what it takes to keep the economy afloat. Cut rates print money.

Everything else is just meaning less noise. A blip on the screen.

[tabs]

Originally Posted by Shaun @ Tru6

Who cares about the reaction? People are ****ing morons. Why would you care how morons react?

I am talking about the "fking morons" who have their hands on the lever, the ones who run your life.

[Sooner or later]

The bond market is concerned about a looming recession.

More money is going long term which is driving down yield. Less money is going into short term which drives up yield. If you can't sell your short term bond because of lack of demand you have to accept less for the bond which drives down yield.

They are going long to lock in a perceived a higher long term yield vs an expected future lower yield due to expected future fed rate cuts.

Personally, I think they are correct.

Also, a lower/higher yield does not necessarily mean that we are printing more or less money.

[tabs]

Originally Posted by Sooner or later

Those bond rates are set by market expectations and not by the Fed.

Buyers are concerned about global economic health so more money tends to move to bonds and out of more risky holdings. When more money chases bonds the price is higher which translates to a lower yield.

Basically, bond buyers are concerned about economic growth and are trying to lock in long term rates that they think will be lower moving forward.

This means the Institutional guys are REAL Worried about the economy. Which in a normal world would dampen Equities...but that is not the case..money is flowing into Equities.

The FED REASSURES investors with their guaranteed activism. It is providing a monetary safety net. Since 2012 except for part of 18.That gives the investors license to move money into equities..so that many pension funds can remain solvent. The risk of equities becomes acceptable with the FED guarantee

Take awAy that FED guarantee and equities tank like in December. Which was a normal world response to the real .economic conditions.

The rational behind the machinations is to keep the lights on and the economy turning. Otherwise.......