"Tailwinds"?

I visit a number of financial sites, both mainstream and not-so-mainstream, and one of the mainstream ones commonly highlights videos on the side of the article that may be of interest.  I have from time-to-time clicked on some and did so on one yesterday.  As usual, it started with a 30 second financially oriented commercial.

I will not name any names but in this commercial a rather genuine sounding woman is speaking to the viewer and noting how stocks are still a good value investment, especially in Europe, which is benefiting from the strengthening U.S. dollar.  Indeed, she referred to this currency variance as a "tailwind" for European stocks, "especially Germany."  The whole piece is to get you to put your hard-earned money with these investing intellectuals so they can invest wisely in German and other European stocks.

Now I do not know when this particular ad was first aired or when it was recorded, but I am really scratching where the sun does not shine and wondering why they would still be running it.  It undoubtedly is achieving the opposite of what it was intended to achieve, at least with anyone who is conscious and has a pulse.  It is certainly not promoting this company well at the moment.  You see EuroStoxx 600 is down nearly 6% this week and Germany's DAX has had a slight one week slip of 7.4%. 

But this is not the worst of it.  The DAX peaked way back in early April and is down 18% since the peak.  I know this ad has been running for a while, weeks at least.  So two questions, why would you want to invest with a company that was recommending investing in Germany during a prolonged stock decline in a market that was highly overvalued to begin with?  And why would you invest with a company stupid enough to run this ad during months while the German market is plunging?

Now I could see perhaps selling the story that the strongest economy in Europe has had a market correction leading to an investing opportunity (mind you, I am not saying this is indeed the case as I think Europe and Germany have a long way down to go).  At least such a line in the present environment would be plausible, but this tailwind crap is not winning any converts today.

Fed Up with Fed Up Expectations

I have been saying for months, since April to be specific, that the Fed ain't raisin' no rates!  They want to do so, they should do so, they should have done so a long, long time ago, but they are not going there this year and are more likely to do more QE than raise rates.  It's the economy stupid, and it is starting to show its dark underside for all to see.

Mish earlier this week at his site noted expectations were for a 1/8 point increase in September followed by another 1/8 point in December.  Well, after the past couple of days that old forecast has been revisited just a tad and now calls for there to be no increase in September and 1/8 point in December.  We will see.

http://globaleconomicanalysis.blogspot.com/2015/08/yield-curve-flattens-in-recessionary.html

You Stand Corrected

Well, actually, the markets stand corrected.  The Dow, Nasdaq and Russell 2000 all ended the day in correction territory today.  Who could have seen that coming . . .

Do You Feel Lucky, Punk?

Based on market activity today, not so much apparently.  Lance Roberts emphasizes today a valid point that market direction is only loosely tied to valuations and more directly tied to market sentiment.


http://seekingalpha.com/article/3453466-all-bubbles-are-different?ifp=0&app=1


Thus, an undervalued market can continue to fall and, as we have been seeing, an overvalued market can continue to climb. 


It would seem we have passed through the light and are turning to the more pessimistic side of emotions.  Indeed, we generally did so some time ago, but the market has been artificially propped up for some time by corporate share buy backs and the like.  During a downturn last week, for example, all sectors were selling except the corporations themselves, thereby obviating what would have been a rather nasty negative market fall.  As Zero Hedge observed, Goldman Sachs, who does the buybacks for many corporations, set a new record that day.  You have to wonder whether any of said corporations exceeded their daily limits on buybacks that day.


Obviously there can be other manipulations impacting the market running counter to emotions, with China government intervention being the most stark.  Government wonks in the U.S. do their best to calm jitters as well, though not to the point of arresting those who dare short the market.


But alas, in the long term true valuations tend to rule the day on people's emotions and computer programs will in time multiply that effect.

Oh Dear, This is a Quandary

Janet has a bit of a quandary on her hands and I think it will get worse before it gets better.  The old CPI came in today at a MoM increase of just .1%, half of the forecasted .2%. 


http://www.zerohedge.com/news/2015-08-19/consumer-prices-rise-slowest-pace-2014-airfares-plunge-car-costs-slide-rents-jump


Oh what shall she do, where shall she go?  Now with inflation no where near the desired annual 2%, a rate increase in September is growing harder to justify.  And the market agrees, which is why Treasuries and the stock markets have all reacted pretty strongly to the news.


http://www.zerohedge.com/news/2015-08-19/low-inflation-print-sparks-panic-selling-treasuries


Oh my, my, my, this just will not do.


There are, however, a few ways out my dear Janet.  Behind door one we have the stand-by of making up or relying on other bogus stats to still justify an increase, with this abysmal number just being a flash in the pan that can be ignored.  While I would wager on this one, I think there are a few more stats coming out before the Fed meeting in September that will be equally bad and will be harder to brush off.  Specifically:





If these are as bad as I believe they will be, door number one may be locked.


Behind door number two is the old simply not doing the increase yet and telegraphing it will be likely in the near future, like December.  This I fear is the most likely scenario.


But then there is good old door number three.  This one is the Fed finally fessing up what they already know, that ZIRP and QE are not working as expected and Bernanke is a sack full of doo doo.  They can confess their sins and raise rates anyway as leaving them where they are will cause more long term damage from the ultimate recession upon us than the known short term damage from a rate increase.  This is the best door, with nice natural wood and brass fixtures and all, but Yellen ain't knockin' on this door any time soon.  Folks at the St. Louis Fed, however, are starting to see the light of day:


http://www.zerohedge.com/news/2015-08-19/after-6-years-qe-and-45-trillion-balance-sheet-st-louis-fed-admits-qe-was-mistake


As the St. Louis Fed sees it, all the stuff ZIRP and QE was supposed to bring us - and other countries - just is not happening and there is no proof it ever will.  Indeed, they go so far as to say that evidence shows QE has been "ineffective" at increasing inflation.  If they CPI number above does not take you there, then just look at Japan for good measure.


Yes, reality is setting in - or at least the ability to speak the truth about it seems to be.  Perhaps there is hope after all.


Let me add now, since positing the above this morning, minutes of the Fed July meeting were released and they eased market concerns over any rate increase happening in September, especially with the changes since that meeting dampening inflation expectations even further.  Most at the Fed seemed to still be taking a bit of a wait-and-see approach, wanting further employment improvement and higher inflation expectations before raising.  If we are like Japan, it could be a very, very long wait. 


http://www.bloomberg.com/news/articles/2015-08-19/u-s-index-futures-decline-amid-global-growth-concern-before-fed


And so the stock market has erased most of its earlier losses.  Yeah - more continuation of the stupid ZIRP policy that will destroy us!  Looks like most "investors," speculators, manipulators, economists now expect door number two as well.  What a shocker.