Somehow more Money has to get into the Hands of Consumers
The on going debate of whether the FED should raise rates or continue to sit on their hands has been going on ever since QE3 was instituted back in September 2012, three years ago. Points that we have made over this time, and points which still hold up are:
- The FED has tried to fix a Fiscal problem with a Central Bank Solution, it made no sense then and even less now.
- Central bankers around the Globe have jumped on this wagon, even though other than for paper assets, which react quickly to funny money, nothing solid in the economy really has built up.
- Now we see the results, speculators and producers used the funny money, stocks went up and commodities went down through peak production.
- By the same token, the vast majority of the domestic and global consumer class has not shared in this wave.
- And now we see some of the repercussions. Retail stocks in relation to the overall market have a double top (October 2013 through April 2015) and are declining. Walmart yesterday put a face on that picture.
- So what has to happen? I would say three things. First we need to get an adult in the room at the FED, the last one we had was Volcker. Second we need to get a congress that works and actually works for the people not the special interests, and then we need to get an administration that puts equality as their number one priority and makes selection of a Treasury Secretary as the Top member of the Cabinet, no more Paulsons or Geithners.
As to the Markets:
- Our Macro view remains Short Stocks, Long Dollar, Long Bonds, and the long standing bear market in Commodities is not over by a long shot.
- The Direction is Deflation not Inflation.
- At the moment with a few exceptions, overall stock markets and sectors around the world are higher than they were on September 15, 2015, the day before the last FED meeting. In the era of a data dependent FED that says the odds for a rate increase in October are increasing. The FED cannot wait until December when the House Republicans will shut down government.
- We are hoping for a shot up to 2070 on the S&P before the meeting to add to our short stock positions.
- And last but not least, Gold Bugs who are good at looking for problems, should be able to push Gold up to maybe the 1240 level before deflationary forces take over. Remember most Gold Bugs earned their wings in an Inflationary environment.