Another Weak Day in the Equity Market
We had another weak day in the equity market, so the 4th quarter is starting off on a particularly sour note. The Dow, down 314 points today. Technically speaking, closing right near the lows: down 1.2%. NASDAQ had a much worse day, down 132 points – that’s 1.67%. Russell 2000, similarly beat up: 1.7%, down 25 points. The Transports really took it on the chin. They down 1.85%. 185 points down on the Transports. The money losing stocks, the recent IPO’s continue to get beat up. The real debacle du jour was Smile Direct. That one was down another 15% today: down $2 – it closed at $11.34 right off the new low of $11.20. Remember, this stock came public less than 2 weeks ago and it was $23 a share. The highest it actually traded was $21.10. Now we’re down better than 50% from the IPO.
Fed: QE but not QE
But I really don’t want to spend a lot of time talking about the markets today. In fact, I only want to talk about one thing, and that’s the Fed and the return to Quantitative Easing . I wasn’t even going to do a podcast today; Yom Kippur starts in a couple of hours so I was just going to skip it. In fact, I wasn’t even going to do one tomorrow – I was probably going to wait until Thursday. But then I was watching this press conference with Jerome Powell where basically the Fed came out and said they were doing QE, except they said they weren’t doing QE.
“Increasing Securities Holdings to Maintain an Appropriate Level of Reserves”
There’s an old saying: “Never believe something until it’s been officially denied. Jerome Powell went out of his way today in his statement and in the Q and A that followed to emphatically say that the Fed is not doing QE. This is an exact quote from Powell: “This is not QE. In no sense is this QE.” Except, in every sense it’s QE, because it’s exactly QE. There’s also an old saying,” If it walks like a duck, it looks like a duck and it quacks like a duck, it’s a duck.”
Well, this looks like QE, it smells like QE, it quacks like QE, it walks like it… it is QE! What is the difference between QE and what the Fed is now doing? I wish someone would really ask that question. In his prepared remarks, this is what Powell said:
“As we indicated in our March statement on balance sheet normalization, at some point, we will begin increasing our securities holdings to maintain an appropriate level of reserves,” he said. “That time is now upon us.”
Already? In March they said that “at some point”? Did anybody back then think “some point” meant “NOW”?