Janet Yellen and the FED are so predictable and being so they are allowing some other entity to take control, ie, either; the Market, Global credit conditions, Political Upheaval, or Terrorism. They are trying to keep the game going, raising rates a minimal quarter point, but not touching the balance sheet.
As we outlined yesterday, at some point the balance sheet issue has to be addressed and when it is that is when things accelerate. We believe that the FED is not raising rates because the economy is ok, but solely because they know they need to do something to take everyone’s eyes off the deflationary rout that is building.
Yesterday I spoke with a follower of our Blog. His response was ” I am a stock and bond guy, in reading your Blog it seems that with what you are saying, the easiest thing for me to do is to go to cash, but I have never done that and my adviser would think I had gone crazy, is there a pro-active approach I can take?”
My response was that with my view that the economy is not strong, that the US is the strongest economy in the Global mix, that stock prices are a the fight between FED support and a weak consumer, that a few thing jump out. Possibly a mix of long term bonds, the dollar, a short term long/short stock trading program, and a little buy and hold stock program would seem to have some value at this point. Maybe 25 % long bonds, 25 % long the dollar, 25 % long a stock ETF, and 25 % in a stock trading program. You can also add leverage if you want.
Here is the important thing to keep in mind. When the deflationary rout accelerates to break point, interest rates will rise because Washington will have its hands tied in terms of finding cheap money for the entities in trouble. The deflationary break point is the key point to watch for, that is the point at which you go from long bonds to short bonds, that is the key time for the next 17 years.
That is our view. We are now adding the Eureka-Perspectives Club where members can watch over our shoulders to positions we are taking in short term stock trading (3 day average trade), plus any changes we make to our macro view on bonds, currencies, and commodities.
For information on the club email me at firstname.lastname@example.org.