- The Dow Jones finished up almost 140 points – back over 17000
- The Dow has now rallied 1,000 points since its lows on Friday following the lower than expected Non-Farm Payroll number
- The market originally sold off until traders realized that bad news is good news and they bought the dip
- The buying intensified today following the release of the FOMC minutes from the last meeting
- I predicted the markets would experience a rally based on the weak Non-Farm Payrol number
- The U.S. market looks like it’s standing still compared to the markets overseas
- Now that so many traders are starting to connect the dots and realize that a rate hike is not around the corner we’ve seen a huge rally in overseas stocks, particularly in emerging markets
- All currencies continue to gain against the dollar
- Silver prices earlier in the week hit a 3-1/2 month high
- Gold got back above 1150
- Oil prices are close to $50/barrel
- All of this is happening because traders are beginning to pare back their rate hike bets
- In light of today’s release of the dovish September FOMC meeting minutes the trend will intensify
- Why were people surprised by the dovish minutes?
- If you read the minutes, the real reason the Fed did not raise rates is because inflation is too low
- They also said they would risk credibility raising rates below 2%
- Lose credibility with whom?
- If they are afraid to raise rates with inflation below 2%, they why have they been bluffing that they are about to raise rates?
- The official inflation number has been below 2% the entire time they have been talking about a rate hike
- I have been saying that they will continue to pretend to raise rates, but they won’t
- I thought it was funny that Netflix raised their rates 11% – the Fed must have thought this was good news
- The real reason the Fed won’t rais rates is that they don’t want to prick the bubbles
- We have a bubble in the stock market
- A bubble in the real estate market
- A bubble in the bond market
- Auto loans, student loans, consumer credit, art – you name it
- The Fed doesn’t want the government to deal with higher interest rates
- Look at the headline in the Wall Street Journal about foreign central banks beginning to dump treasuries
- Look at how many treasuries China has sold
- This is the tip of a huge iceberg
- How is the Fed going to end QE when it has to take the other side of the mother of all trades?
- CNBC cited overseas problems washing up on our shore as the reason why the Fed won’t be raising rates – these are not overseas problems
- The problems started here – they’re just coming back
- The overseas markets were reacting to higher interest rates and a strong dollar
- This game is going to end – the next time the dollar goes down, it’s down for the count
- Rather than having foreign central banks coming to its rescue, they are going to be joining in the dollar selloff just like everybody else
- I wanted to comment on an Robert Wenzel’s article in the Economic Policy Journal
- Wenzel appears to be referring to me but does not mention my name
- Here’s the title of his piece, dated September 18, following the most recent Fed meeting:
- “The Absurd Idea That The Fed is Not Going to Raise Rates”
- Wenzel refers to “certain so-called Austrians out cheering that they were proven correct in their view that the Fed will not raise rates…”
- Many people commented that he must be referring to Peter Schiff, but he denied this
- Wenzel seems to believe I do not think the Fed should raise rates
- I am not saying what I think the Fed should do, I’m saying what I think they will do
- I don’t think zero percent interest rates and QE is good for the economy – of course not!
- I also know if they do raise rates now, we are going to have a recession
- If Wenzel is an Austrian, he knows the economy is in terrible shape
- Ultimately this article will look absurd because the Fed is not going to raise rates until the market forces them, and not before
- Several comments on the article said “This is about Peter Schiff” and he responded that it is not, however
- I commented that the article asking who the article is about – Wenzel did not approve the comment on his site
- Most people with whom I agree, over the course of the year, did believe that the Fed would raise rates
- I’m the only one I know who said they would never do it
- I am not going to take credit until the Fed launches QE4
- But you’d better believe that if they do not raise rates and they launch QE4 I will take a victory lap
- Also on economic data this week:
- Disappointing ISM Non-Manufacturing number 56.9 against am expected 58
- The worst number we got this week was the Tuesday Trade Deficit number 48.3 billion, which will subtract quite a bit from Q3 GDP
- A symptom of a sick economy
- Weekly jobless claim number 13,000 on the week to 263 -on of the lowest numbers in about 40 years despite the fact that layoff numbers have surged
- /why aren’t people filing for unemployment?
- The labor market is unhealthy and shrinking
- Unemployment may shoot early next year when we’re in recession
- That’s when there will be a lot of pressure on the Fed to stimulate the economy
- I don’t see how the Fed can avoid QE, given their playbook
- The Fed will put off dealing with it until past the election
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