"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Wednesday, November 19, 2014

Fed Downplays Inflation Worries

Going over these FOMC statements is akin to the ancient art of divining the future by the examination of animal entrails. I can see the conversation:

Demetrius: "I see what appears to be a twisted piece of gut. That is a sign from the gods that the future is twisted and unclear. Perhaps we should wait before going to war".

Apollos: " I see the same thing but tells me that our enemies will lie twisted and ruined on the ground. We should to war immediately".

Lydia: " I see a big fat worm. That tells me that this animal is so screwed up on the inside that we should not believe a single thing this entrail reading crap tells us".

The takeaway I get however has to do with inflation. We have been saying here for some time now, much to the chagrin of some of the gold perma bulls, that the market is not the least bit worried about inflation at the moment. That sentiment has been reflected in the flat to lower TIPS spread as well as the sinking commodity indices. Also, the concern of both the ECB and the Bank of Japan as been the LACK of INFLATION and what they like to euphemistically term, 'disinflation'.

Today our Fed said essentially the same thing if I am reading the entrails correctly.

Here is a short excerpt from the statement:

"... inflation edging lower in near term partly due to decline in oil prices..."

There are several other interesting things in the statement but that one seems to have caught the attention of investors/traders. Simply put - if the Fed is not worried about inflation than neither are we going to worry about is how the market seems to have reacted to things.

Another thing was the Fed's remarks on the recent "mid-October turbulence in financial markets". The Fed essentially glossed over that by stating that they saw the impact of those recent "world developments as likely quite limited".

Gold, which has been all over the place in today's session, seemed to finally digest the statement by heading lower. If there is no inflationary concerns and the Fed seems undeterred by any of the recent financial issues buffeting the global economy, traders viewed the statement as "hawkish" or perhaps a better way of saying it, "not dovish".

Like I said when I started this set of comments - deciphering these pronouncements from on high sure is an enormous waste of time but the fact is that the markets respond to them so one might as well at least try to get the flavor of the moment.

Gold has fallen to just above that key $1180 level a second time in today's session. Bulls are trying to hold it there but the mining shares falling out of bed have pretty much undercut any attempt to push it up and away from there at the moment. Maybe that will change before the session is out - give it 5 minutes!


  1. Thanks for the update.
    I found this part interesting...

    "It was observed that if foreign economic or financial conditions deteriorated further, U.S. economic growth over the medium term might be slower than currently expected,”

    It seems to me when they eventually raise rates it'll impact inflation and growth in those foreign economies they mention.
    Seems like a conumdrum of sorts unless their goal is to actually impact those markets in the way they're acutely aware of.
    There's so much USD denominated debt out there that it seems as though the Fed has many economies (China) right where they want them in some respects.
    Imagine the Fed raising rates and the effect on China while a real estate bubble is already stretched thin. Pop!

  2. people might think the stock mkt didn't really sell off, but internally it was quite weak:
    NYSE Vol: 719.1 mln.. Adv: 1177.. Dec: 1916
    Nasdaq Vol: 1.52 bln.. Adv: 776.. Dec: 2088

    RUT closed today at 1158, which is where it opened 1/1/14 ...IWM went down on increased volume.

    in the 20-day MA dance today closing below the 20dsma's were: VIX TLT RUT GLD SLV JJC and GLD/SLV.


    1. Well, gold is not tradeable, but I do enjoy Dan's hilarious humor!

  3. OK, let’s turn the computers into people and see what we get;

    1. Let me read some news today; Holy Shit, they are not going to vote for the Swiss referendum;

    ************Sell button, Sell button, Sell button, Sell button, Sell button, Sell button

    2. The Swiss vote, doesn't really matter that much;

    ************Buy Button, Buy Button, Buy Button, Buy Button, Buy Button, Buy Button

    3. Let me read the FOMC meeting minutes;

    a. Page 2 says they are worried about inflation – rates might not rise anytime soon

    ************Buy Button, Buy Button, Buy Button, Buy Button, Buy Button, Buy Button

    b. Oh shit, I got that wrong – page 10 says that they will indeed raise rates in 2015, Ahhhhhh!

    ************Sell button, Sell button, Sell button, Sell button, Sell button, Sell button

    4. OK, good days work!

  4. HSBC/Markit Flash reading for china manufacturing PMI for November tonite, for aussie to react to if not everything else.

    Nov 20 08:30 ET CPI Oct
    Nov 20 08:30 Core CPI
    Nov 20 10:00 Existing Home Sales
    Nov 20 10:00 PhiladelphiaFed
    Nov 20 10:00 Leading Indicators

    so inflation off the bat in CPI, and finishing with the ole time fed fav LEI

    thurs export sales in the ags, cattle on feed is friday.

  5. Rum is for trying to play the markets. a nice wine is just right for sitting on the sidelines. going with a nice white this week.

    1. You means today's action makes no sense? How could you not have predicted that? LOL

      I am amazed anyone would want to trade gold right now. I wonder what these crazy hedge funds are doing with their crazy whacko computer algorithms. How on earth are they making money?

    2. I'm on the sidelines also.
      I'm content just watching the yen for now.
      I just clicked on a chart showing the USDJPY for the past 5 days.
      Pretty intense movement since it hit 117 and fell back quickly to 15.50 and since then it's just steadily risen to 118.25 at the moment.
      How low will it go this time around?

      I just checked a 25 year USDJPY chart while typing this and it revealed a USDJPY of 159 in 1990.(((159!!!)))

      And that was back when the US wasn't engaged in the recent massive QE that just wrapped but not before pumping 10-20 TRILLION$ of USD across the planet to anyone deemed systemically important or connected.

      Sooo...it seems to me the USDJPY could EASILY take out 160 this time around if the current trend continues.
      In an era of loose monetary policy around the world with tens of trillions of dollars, yen, euros, yuan etc already circulating out there the yen hitting 160 doesn't seem real farfetched in 2015 or 2016 more likely.

      The only real speed bump I see short term is if Abe is defeated in this upcoming snap election he called for. It would change things in a big way if it happened.
      But that seems unlikely right now and USDJPY slicing through 120 after some initial resistance seems like a given.

      I should've shorted the JPY at 90 but it still might not be too late especially if Abe looks like he'll win again.

      I realy like being a spectator from the sideline right now. Nice and safe.

    3. DPH - I do not think you should be trading at all. You gotta get out there and shovel some serious snow! BTW - you can get paid $10/hour and get free tickets to Bills game if you are willing to shovel out RW Stadium.

    4. That's funny, I was just telling my son about that tonight and how they quickly employ lots of people for 2-3 days.
      I think they'll play the game. Winning might be a challenge.

      Hard to believe the Pegula's will someday help build a brand new stadium like Dallas or Indy. Loving it!

    5. I am wondering if the Bills will make the playoffs before my 3 year old son becomes a 30 year old man. Talk about torture!

  6. Mark,

    Sorry to steal your thunder, but I just saw Williams-Sonoma crushed it on earnings. Up 7% after hours. If companies like Williams-Sonoma and Macy's are crushing it, then the nation is crushing it.

    Condolences to those here whose view of the Fed, or the President, or their misplaced devotion to long and deservedly dead Austrian economists totally precludes the idea that someone, somewhere might be doing well. To paraphrase a regular here, deep down, you really wanna lose.

    1. Eric, I did not think anybody paid attention to that thought, but it is clearly a fact. Good trading to you, chief and play Toledo tonite.

    2. I think that retail anything is going to kill it right now because of the reduced energy cost. The improvement in bottom line is immediate.

      Further I project that retail and service industries will take this moment to slide in overdue price increases while Jack and Jill Consumer are feeling good with cheaper oil and positive economic news in the media.

      And Hi back Eric O

  7. ransquawk dot com likes metals and they have a free section- so they put up the GLD tonnage early afternoon before most:
    today GLD declined 0.3% to 720.91 metric tonnes.

    USD/JPY hit 118.26 recently for a new hi of move!

    the NIKK/TNX correlation has been fairly tight since the oct. low:

    VIX ended just above it's 200 day MA and did not get thru the 100-day MA above.


  8. Gold action similar to its running 1 month ago. Try to have a legitimate up leg but the price of yesterday when DMI crossing violated. Welles Wilder would have considered this is severed for the bullish case. ADX so low and volatility great, meaning gold can be up and down both way but recently its behavior suggests a downside move ahead

  9. Stock symbol is an unique series of letters assigned to a security for trading purposes as informed by Epic research.


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