- On Friday we finally got the Non-Farm Payroll numbers for July
- The consensus is that this reports indicates that an interest rate hike is inevitable
- This is the rate hike that everybody has been expecting and this report see
- The report is weak, relative to previous months, but slightly ahead of the consensus
- It seems like we are going in the wrong direction
- Labor Force Participation Rate is stagnant at the lowest in decades
- Q2 GDP was much lower than expected
- the Atlanta GDP Now Forecast for Q3 at 1% – a third of the official forecast
- If the Fed was not willing to raise rates last year, when the economy grew at 5%, why would they raise rates now?
- The Fed may have backed themselves into a corner where they have to raise rates
- If so, Yellen has already prepared the market for a tiny raise
- They recognize that the market is fragile
- It would be a more credible move for the Fed to not raise rates at all
- The market’s reaction to the jobs data and the “certainty” that rates are going up
- The dollar sold off somewhat
- Gold rose slightly
- Higher interest rages are expected to be bullish for the dollar – Why didn’t the dollar rise?
- The old adage, “Buy on the rumor, sell on the fact”
- If the Fed raises rates in September, it will be the most highly anticipated rate hike ever
- If the market buys on the anticipation of a rate hike, the actual rate hike will be the sell signal
- The market is telling us it has gained all that it is going to gain from any future rate hike
- The Fed will deliver much less in the way of rate hike than the market expects
- The reaction in the stock market was more interesting – The market was down again
- The longest losing streak in the Dow in about 4 years
- The fact that the U.S stock market is still falling indicates whereas the currency markets may have factored in a rate hike, the equity markets have not
- I have been hearing the refrain,”There is no reason to fear a rate hike!”
- This is a very naive to look at the market because there is no historical precedent for interest rates to stay low for so long
- These are not “normal” times
- More importantly, the market only expects a rate hike if the economy get better
- But now the data shows that the economy is continuing to slow down
- The crowd that believes a rate hike will not harm the economy should reassess their thinking
- Corporate earnings, already under pressure will be further weakened by an interest rate hike
- The consumer is barely surviving with rates at zero
- 2015 is probably going to be the weakest year of the entire so-called recovery
- If the Fed really begins to raise interest rates, what is going to happen in 2016?
- We will be in a bear market, the real estate market will drop and a recession will follow
- The Fed’s only medicine at that point will be QE
- The truth is, the economy did not need the first round of QE and it nees QE4 even less
- This is going to be the mother of all money drops and all the people who have been saying,”The Fed was right!” are taking a premature victory lap
- Hopefully it will shock the Keynesians into abandoning central banking and central planning
- And finally embracing a real market recovery based on free market principles
- Those of us who have seen the writing on the wall will be rewarded in the investment front
- For having the fortitude to maintain our positions and not throw in a winning hand
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