A reminder: This is the Fed's stock market
But the central bank may not be able to give investors the clarity they're hoping for.
Just in case you had forgotten what is driving the current rally in U.S. stocks, let Thursday’s jump in the Standard & Poor’s ($INX), to close at 1675, a new record losing high, serve as a reminder: it’s the Federal Reserve’s market.
All it took to create the 1.4% gain was a speech by Federal Reserve Chairman Ben Bernanke on Wednesday to the National Bureau of Economic Research. In an answer to a question, Bernanke said the Fed will keep its current "highly accommodative monetary policy for the foreseeable future." Unemployment is still too high, Bernanke noted, and inflation too low. "Both sides of our mandate are saying we need to be more accommodative."
Timing increased the power of Bernanke's remarks to move the market. He spoke just three hours after the release of minutes from the Federal Open Market Committee -- that emphasized the disagreements among Fed members on when to begin to taper off the central bank’s program of buying $85 billion in Treasuries and mortgage-backed securities a month.
From the minutes, some investors concluded an early taper was gaining momentum at the Fed -- since you could count the comments to show that about half of the 19 participants wanted to end the purchases by the end of 2013.
Bernanke’s speech and subsequent remarks, then, seemed a refutation of that conclusion.
I think, in truth, the reading of the minutes to show growing momentum for an early taper was an over-interpretation -- based on very hard to parse, short comments -- and that Thursday’s reaction to Bernanke’s remarks is an equal over-reaction, since it really contains no new information. The Fed’s decision on when to begin any taper will depend on the data about unemployment, economic growth, and inflation. That was Fed policy and it still is.
But even though Thursday’s big move may be based on the market’s wish for a clear calendar for any beginning of a taper -- a clarity that I just don’t think the Fed wants to or can provide -- it is nonetheless as big deal.
By closing at 1675 on the Standard & Poor’s, the stock market broke decisively through the old high near 1652-1654 that had capped trading gains recently. Instead of bouncing off that ceiling, U.S. stocks have cleared the hurdle for a new run higher.
Whether that run materializes depends on more than just this technical move. Events in Portugal, Greece and Italy are potentially volatile enough to generate enough fear to stop the move. On Monday we get second quarter GDP numbers from China, that could revive fears that growth in China is slowing too fast and by too much.
But by moving through 1654 to 1675 the market set the trend in a clear upward direction. A move like this is precisely what brings new money in from the sidelines to chase after the new high. That’s powerful momentum. News may disrupt it, but the trend is upward until that disruption arrives -- whenever it does.
You can see the power of that trend in the way that Thursday's rally swept the board. All 10 groups in the S&P 500 rallied, with even such lagging sectors s raw materials posting big gains.
Freeport McMoRan Copper & Gold (FCX) climbed 3.4% on the day and Yamana Gold (AUY) roared ahead 7.5%. (Freeport McMoRan Copper & Gold is a member of my Jubak Picks 50 long term portfolio and Yamana Gold is a member of my 12-18 month Jubak’s Picks portfolio.)
The U.S. dollar fell against both the yen and the euro on the day.
Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. When in 2010 I started the mutual fund I manage, Jubak Global Equity Fund, I liquidated all my individual stock holdings and put the money into the fund. The fund did own shares of Yamana Gold as of the end of March. For a full list of the stocks in the fund as of the end of March see the fund’s portfolio.
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I don't pray for him. I am retired and this "recovery" is on my income. Pity the poor, the elderly, the savers, the retired, your children and the rest of us upon whose backs all you folks are enjoying whatever it is you enjoy. But then who in America pities anyone. We, very willingly, sacrifice whom ever we have to keep the show going.
This is a Fed and Ben bullsh--t market that the tax payers are paying for and will pay for for along time. Get ready for the time is coming for it to hit the fan!!
Shhhh! listen, that creaking and cracking sound is the timber that holds up Wall Street. When Ben leaves in January QE 3 is gone. Going to be a big cave in, you can hear the props creaking and the rumble already down deep in the bowels of Wall Street. 85 billion a month, 1 trillion a year air money. When the wet nurse pulls the sugar tit away, the baby is going to scream like a spoiled child. Been feedin the junkie since 09, hard to see the intrinsic value in a propped up market. It's going to be one hell of a ride to the bottom.
Feds get out of the way and allow true Price Discovery. Even then, it's not a given. It's always easy to say the Market moved higher or lower because of this or that. At the end of the day, it's pure assumption because we can't wind back the Clock and see the Market's Behavior without the Feds actions. Folks were saying the same thing about the Gov't sequester cuts, now they hardly mention them. If anything, the FEDs ever growing Balance Sheet is a long term Negative. It's like drug dependence, at some point, you don't know anything else. That's never a good thing.
"(Propaganda Central) - Federal Reserve officials are considering moving the goal posts on U.S. monetary policy with a promise to keep interest rates low for longer in the hopes of heading off a troubling rise in market-set borrowing costs. Top Fed officials, who have pulled out all the stops to boost the U.S. recovery from recession, have worried for months that investors might drive bond yields up when the time came to reduce the central bank's bond-buying program. Their fears have started to become reality. Yields, which move inversely to the price of Treasury debt, began to climb sharply in May with signs of stronger jobs growth and signals from the Fed that it could begin to scale back its bond purchases, known as quantitative easing, as soon as September. With yields rising, some Fed officials warmed to the idea of anchoring borrowing costs more firmly by pledging to keep overnight rates near zero well after the jobless rate falls below 6.5 percent, the Fed's current threshold for considering tighter monetary policy. Unemployment stood at 7.6 percent in June."
First... there is NO family-sustaining job creation so the job-thing is bogus. The sheer volume of fiat money in the markets pushing up stock prices but doing nothing else is directly validated in White's book: Fiat Money Inflation in France. The gross dilution of a spending dollar vs. the mammoth loss of movement because of the hoarded dollar is the actual cause of the impasse. The more printed money and bond-buying, the less likely actual enterprise can build sufficient momentum to create economy and hire. Basically, every day that Bernanke continues QE, he stagnates Main Street and condemns it into dysfunction. The pendulum never swung back, hog-tied by this manipulation. The fact exists that while the blade is held hostage, the structure supporting the pendulum is breaking apart. What good are a bunch of administrative businesses fully detached from the society economy and nation that gives them existence? Bernanke has painted himself and us into a stupid loop. The FACT cannot be disputed-- QE must end abruptly and business platforms forced into divestiture to restore currency. To Bernanke's Goliath, any competent capable small entrepreneur with tenacity can wipe out every business platform by refusing to cooperate in stocks and bonds. Without a Main Street connection, they are resigned to seniors, whose subsequent death ends the value and tags the association obligation to the shareholder. You hoard- you adopt his created debt. If I no longer recognize his false dollar, I'm not obligated to anything except to move forward alongside millions who no longer recognize it either.
END QE BEN BERNANKE OR FIND ANOTHER PLANET. YOU WON'T BE WELCOME ON THIS ONE VER SOON. PROGRESS OR ELSE.
"Just in case you had forgotten what is driving the current rally in U.S. stocks, let Thursday’s jump in the Standard & Poor’s (), to close at 1675, a new record losing high, serve as a reminder: it’s the Federal Reserve’s market."
Thank you, Jim... and to add- what goes up must come down. Realize that all of you in the markets having fun in the casino, cannot leave with anything in your pockets. No business platform has a sustainable sales volume. No one is hiring the quality and quantity that broadens profitability through internal loyalty. Literally- not one hired-in executive has shown a competence that wasn't funded by the Fed, so... "talent" can be challenged and crushed across the board. These aren't argumentative points, they are the stuff that wars are made of and societies are destroyed by. Flat out, Bernanke would have been better off randomly giving 85,000 consumers $100,000 in any given month and ordered them to spend it or return it. Think about it... 100% of his QE is holed-up in the vaults or greedily hoarded in nuggets and certificates. NONE courses through the economy! NONE! Bernanke needed to say-- go forth with your wealth, divest and create enterprise. If it doesn't happen soon, you can count on a war. For you naysayers-- your perception of war is probably as dim as your actual investing acumen. When you are resolved to only a basic survival option, you EAT, because all other actions require it. Where do you run to once you've screwed the whole world, well-fed on real food rich people? Not all wars involve handheld weapons, not all battlefields are on actual real estate, not all victims have wounds that can be surgically healed. Those are the premises that cannot be manipulated.
Well, once again it's time for a release:
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Stocks are facing some serious resistance as the bears tear into the market's respite.
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