Day two of the new world: A one-and-wait fed. What does it portend? All I think it does is put more pressure on the President to make a deal with China to avert a coming 2019 slowdown -- and I don't think we will get it.
Isn't that the real problem?
Now we have the guessing game. What did Fed Chief Jerome Powell see when he capitulated on Wednesday, doing a radical about face from his hardline stance at the beginning of October?
Was it fear of 25% tariffs? Was it lay-offs coming in housing and retail to complement those of the auto industry? Was it coming failures in the numerous non-banks that now dominate the $2 trillion in mortgages, many of them floating? Or was it simple prudence, an inflation war done in by the peak in the U.S. economy, the price wars among Amazon (AMZN) and Walmart (WMT) and so many others, and the crash in oil prices?
You can bet that those who believed that the economy was too strong, the ones thrown under the speeding F-150 now going in reverse, will play that guessing game. They didn't see it coming, so what else do they have to talk about?
That, I fear, is what they will scramble to uncover -- the rot in the system that was obscured by strong employment figures, that I think have gotten as hot as they can be now that the single-biggest generator of hiring besides tech, the oil patch, has simply cratered in record time. Don't believe me? Consider that the average independent oil company's stock is below where it was in 2016 when oil traded in the $20s, and the drillers and service companies are in extreme bear market status.
When will we see these weaker numbers? I think they will start after the Fed pushes through one more rate hike, the one that's going to be done to insure that hiring slows down and more workers have a chance to join the workforce, not that they will necessarily be needed. The usual sources of growth -- housing, service, retail, health care and manufacturing -- are now all waning because rates are so high, even as the Fed's lackeys will tell you there's no way that can be occurring with short rates north of two and long rates hanging at three. That's because the real rates for money are much higher and the demand is therefore lower than most are looking for.
So, keep your powder dry until Monday. Maybe even do some trimming, as we are for Action Alerts Plus -- especially our weaker stocks, not the winners -- and brace yourself for some weaker data, the data that caused the Fed to recalibrate and slow the rate of its injudicious tightening just when the economy peaked and the tax cuts ran out and the Fed keeps taking liquidity out of the system in a de facto tightening that could have been avoided had it just sold hundreds of billions of dollars of bonds when they were most needed.