Which Way Wednesday - Fed Interest Rate Decision Edition
Stock-Markets / Financial Markets 2010 Jun 23, 2010 - 11:44 AM GMTBy: PhilStockWorld
FOMC rate decision at 2:15, that’s all that matters.
Sure no one on the planet expects anything other than the Fed holding steady but it’s what they say when they do nothing that matters. On April 28th there were a grand total of 17 different words from the March 16th statement but they were, apparently, the wrong words and the market fell over 10% in the next 30 days. The big changes in April were the Fed seeing improving labor markets (data later refuted that) and they gave no indication that rates would rise this year UNLESS the data improved. We’re still down 8% from 11,200 and our Omega 3 pattern tells us today will be an up day, which kept us from being too bearish yesterday even though most of our downside levels were broken.
We were HOPING for a blow-off bottom this morning and then to be "rescued" by the Fed but the Hang Seng got one MoFo of a stick save that took them up 150 points into the close and left them up 35 points for the day and that saved the futures markets as well. Copper made it all the way back to $2.995 from $2.92 yesterday as the Chinese dragon woke up and oil jumped from $77 back to $77.85 and the US futures gained 0.5% so the lipstick is on the pig and now we’ll have to see how many suckers line up to give it a kiss this morning.
We were already very short on oil yesterday and we lightened up into the close at our $77.50 target (see yesterday morning’s post). In fact, I said to members in the morning Alert: "Not too much pressure on the markets today, all they have to do is hold our bounce levels to confirm it wasn’t just a weak bounce but a probably recovery: Dow 10,250, S&P 1,100, Nas 2,260, NYSE 7,000 and Russell 666. So it’s all about the RUT and the NYSE, as usual and we’re watching copper ($3 good, $2.85 bad) and oil (below $77.50 too weak, above $77.50 too strong - $77.50, just right!) for signs of which way things are heading." The Dow (10,293) and the Nasdaq (2,261) were our survivors but the S&P wasn’t so bad at 1,095 and oil was "just right" at the close so we remain watchful and more or less neutral into the morning, hoping for a blow-off bottom we can buy into.
Will the Fed be able to convince us that they are on the ball and…. Oh, sorry, I had to stop laughing before I could continue with that thought… and give the markets a boost or will we be left to drift until the next meeting on August 10th? Between last year’s June 24th announcement and the Aug 12th meeting the Dow went from 8,300 to 8,500 that week, then down to 8,100 after July 4th but THEN we rallied all the way back to 9,400 on Aug 10th so the best thing the Fed can probably do for us is to go away - something Ron Paul has been advocating for years!
I advocated a very simple way to solve the housing crisis near it’s beginning, back in April, 2008 when I proposed "How to Solve the Housing Crisis Tomorrow." My solution was, very simply to offer any homeowner who wanted it $100,000 to pay down the principal of their mortgage in exchange for a 125,000 first note on the home. The money would go straight to the bank and reduce their exposure and the troubled homeowner would IMMEDIATELY save $600 a month in mortgage payments. Bailing out $2Tn worth of these loans would reduce the mortgage payments on 20M homes, put $2Tn back into the banking system and would leave the government with $2.5Tn worth of notes securitized by at least $5Tn worth of homes.
With my plan, the $600 a month saved by 20M homeowners would have pumped $12Bn a month back into the economy or $144Bn a year of direct stimulus that would continue for many, many years. The plan would keep people in their homes, allow them to catch up on other debts and would maintain house price stability by making homes more affordable for our 20M "partners" in housing. Would some homes still ultimately be foreclosed? Sure - even with the best of filters that’s going to happen but let’s look at what the Fed did instead with our money.
They just gave $2Tn of our money to the banks (note this sheet is a year old). What did they get for it? $2Tn worth of already toxic assets for which they paid FACE VALUE. How many homeowners did this help? NONE. How many foreclosures were stopped? None? Did this stabilize housing prices? NO. Did it stimulate the economy? NO. Is anyone putting a stop to these bastards? NO. They need to be stopped - they MUST BE STOPPED!
They are taking OUR money and GIVING it to banks and the banks are not lending it out, they are just filling the bottomless holes in their balance sheets that were caused by their reckless lending and excessive bonus payouts that removed what should have been a cash buffer from the banks and put TRILLIONS of dollars into the pockets of mortgage brokers, loan officers, bank executives and, of course, Investment Bankers who have done nothing but suck the life out of the rest of the economy. WHEN WILL IT END?
All right, I’ve said my piece. Please read "The Creature from Jekyll Island" before you vote for more of the same this November or, in the very least, take 45 minutes to hear what author Edward Griffin has to say. The Federal Reserve is EXACTLY what Thomas Jefferson warned us about when he said:
I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.
It was Lennon (John, not Vladimir) who subsequently warned:
A million workers working for nothing
You better give ‘em what they really own
We got to put you down
When we come into town
Singing power to the people
Power to the people
Power to the people
Power to the people, right on
We’ve been paying close attention to the people power that’s asserting itself in Asia as almost every day now there is another incident of workers waking up and realizing how much they are being screwed. I guess that’s the problem with the internet and today it’s Indian Garment Workers, who have been having violent protests and shut down factories this week until arriving at a better pay deal ($73 a month, up from $30). Of course, every time one of these incidents works - it only encourages more workers to act up. Where’s Senator Joe McCarthy when you need him?
Nissan had to settle wage issues in China but it was quickly handled by Calos Ghosn, whose $9.8M salary alone is enough to pay a full year’s wages for over 5,000 Chinese factory workers. Honda was forced to halt production in China as a strike hit an auto parts supplier. Workers of the World are uniting in Europe as well as Greek strikers (and not the soccer kind) are disrupting the ports in defiance of a court order. Private Sector growth is slowing in the Euro-zone and the UK published what they call an "unavoidable budget" today with very harsh austerity measures but, funny thing, it’s sending the Pound to month-long highs!
[Video Are you a commie, or a citizen? http://www.youtube.com/watch?v=w86QhV7whjs]
There’s nothing to do but brush up on our ability to spot Communism as it creeps ever closer to the American shores (or is that just oil?) while we wait for the Fed.
Remember, it is the American way (post Jefferson) to let the bankers control our lives and to have unelected officials write checks to their friends that become debts that we are forced to pay off down the road while they spend Billions of dollars making sure that Financial Reform Bills are watered down until they are pointless and Billions more defeating any measures that mitigate the plight of the citizens because that would just be--unAmerican, wouldn’t it?
I still expect a selloff ahead of the Fed and we’ll be more inclined to play the upside that way than if we have a silly run-up without a nice blow-off bottom.
By Phil
Philip R. Davis is a founder of Phil's Stock World (www.philstockworld.com), a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders. Mr. Davis is a serial entrepreneur, having founded software company Accu-Title, a real estate title insurance software solution, and is also the President of the Delphi Consulting Corp., an M&A consulting firm that helps large and small companies obtain funding and close deals. He was also the founder of Accu-Search, a property data corporation that was sold to DataTrace in 2004 and Personality Plus, a precursor to eHarmony.com. Phil was a former editor of a UMass/Amherst humor magazine and it shows in his writing -- which is filled with colorful commentary along with very specific ideas on stock option purchases (Phil rarely holds actual stocks). Visit: Phil's Stock World (www.philstockworld.com)
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