Today’s data: Weekly Jobless claims drop a bit, good news.
Our markets this morning are churning again as volatility is the order of the day and there is true confusion within the herd. The followers are unsure who, what or when to follow. The next leader could be a trend, a shift in expectations or a policy move of some sort. Yesterday, in case you were otherwise occupied, was trolling along just fine (the fish were not biting) and then the release of the January FOMC meetings were released — kaboom! The
Street had a pretty good sense prior to the release, going back to the post-meeting communiqué, that the Fed was getting all riled up and ready to start raising rates (normalizing them in the jargon). Bonds had been getting hammered after a huge rally in January and the usual cast of characters was busy explaining how horrific a year this will be for bonds — just as they did in 2014 and were all proven categorically incorrect. Well, reset time after the release and it is carrying on into today.
The Big Picture: Our economy is slowing down, the reasons why are growing.
You and I are going to hear a lot more about this in the next couple of months methinks as the ‘headwinds’ pushing against the forward momentum of our economy grow stronger and the momentum grows weaker. Without question the Fed’s “blinked” in the meetings in late January and that was clearly captured in the minutes as we saw yesterday. Since those meetings ended, virtually all of the data has surprised us all with its lack of achievement; very modest expectations were set for all of the data sets and all of them failed to even make the understated goals. In spite of this the market tone has been all about a Fed ready to rush in, June being the likely first step and bonds as we mentioned have been getting hammered. If you have a chance read the minutes; two things will become apparent. One, the writer is new and writes with a clarity that the previous writer avoided diligently; they are now real rather than clearly filtered with a bias. Second, the amount of time spent discussing the inflation mandate was far greater than the jobs discussion and the tone of the inflation conversations portrays an unease that is palpable. The minutes completely dash any chances of a June move, they dash any chances of a later in 201054 move as well – as we have been opining since 2013 I might add. Now, finally, they truly are questioning whether this 33 month failure to achieve their 2.00% lower bound is in fact transitory. Finally as they come to see that headline and core readings will move significantly lower in 2015 and with that any chance that they will normalize rates is gone.
Investment Portfolio: So we have the stunning minutes and this morning Germany says nein.
The Greek’s presented their letter of suggestions to re-craft their debt repayments to the bail-out funders, Germany being the largest and most influential, and the response was an immediate (and expected) go fish. This was expected (not unexpected, as the confused are saying today); Greece is so caught up in its own madness at the moment that it is unable to tell the difference between wants and needs and it thinks its wants are more important than the needs of the hand that feeds them. Something will soon give in here; the petulant child enamored of its own self-importance will soon understand that it will not get its way. It really is that simple.
Weekly Market Data
Current Market Levels from Bloomberg daily
- Monday: 2/16
- Tuesday: 2/17
- Wednesday: 2/18
Jan. Housing Starts expected at 1.070mm >>1.065mm
Jan. Building Permits expected at 1.069mm >>1.053mm
Jan. PPI expected at -0.4% >>-0.8%
Jan. Cap U expected at 79.9% >>79.4%
- Thursday: 2/19
Weekly claims expected at 288k >>283k
- Friday: 2/20
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