It Feels Like a Climax is Building

Whether we are talking about Economics, Markets, or Politics, things seem to be building to a Climax through the next 20 days with Super Tuesday primaries and the March FED meeting on the 15th and 16th.

Lets take Politics first:

  1. To me it kind of feels like Trump is in the midst of a long-term flame-out with all the pundits who said he would never get this far, capitulating.  He may become the Republican nominee but the issues he is pushing are not issues that will help him in the General Election.  As much as I enjoy someone running on the Republican ticket who calls out all the absurdity in the party that has been going on for the past 35 years, the fact remains that the reason Trump can say those things is that he is not a Republican.  His biggest strength is based around the anger in voters of what has been happening in Washington.  He probably decided not to run as a Democrat because he felt Hillary was too entrenched in the party. It is even more absurd that no Republican running against him has built a campaign on that single issue.
  2. Democrats are in a tizzy also because the so-called leaders did not anticipate the anger that Trump and Sanders are utilizing.  What is different with the Democratic leaders and the general media is that they are putting all their marbles with the Establishment candidate.  That could lead to some tense times in the General Election with an Anger Candidate, Trump, running against a weak Establishment candidate, Clinton. So the big question over the next 20 days is whether Sanders can pull off a major upset.  He could if he would draw on the economic implementation ideas of  Stiglitz and Reich, and make it about more than his one issue talk. In the end, I think if the General Election came down to two Anger based candidates, Trump vs. Sanders, Sanders would win.

Now lets take on the FED, Economics and the markets.

The move to Normalizing monetary policy and getting interest rates up to the 1 to 2 percent area is important, regardless of what the economy or markets do.  Decisions on where to put ones money should be based on alternatives based on something beyond zero interest rates.

As long as the 10 day average on the S&P index gets above and stays above 1900 between now and March 15th (the average coming into today is 1899) we should see another hike.

Oil has not made a bottom but I do think the 29-37 range will be a decent trading range for the next few months.  On the other hand Oil stocks are still very vulnerable to new 52 week lows as they are way overpriced compared to crude.

We were wrong on getting out of long Gold at the 1150 area.  Gold has now become a safety trade that is divorced from deflation. With that said, I can see reasons for a move up to the 1450 area.  Not being  Gold bugs we will probably not be involved in the trade.  It will be an interesting play however as the Dollar is still in the early stages of a Macro up move and periods with both a strong Dollar and strong Gold, are unusual these days.

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