So I grabbed my vanilla bean this morning, sat down, and looked through major markets.
I stared at the monitors for a few minutes.
And I stared at them for a few more minutes.
I’ve been doing this for 19 years now. And the current state of the markets continues to hit me like a Mack truck. I’ve said it before, and I’ll say it again … it’s like something out of a Dali painting. It’s like … observing a watch melt on the branch of a tree.
Yeah. Something like that.
It’s just … weird.
For those of you who are new to the markets, it is ‘supposed’ (whatever that means) to go something like this:
First, employment in an economy improves. Then commodities rise in value as does inflation. The Dollar weakens. Why? Because everyone has a job, and they like to spend money, and spend it like mad. During this time, we see the stock market rallying, because it’s histrionic, and that’s what it does. The Fed raises the interest rate, to pull people away from commodities and the stock market, and into the Dollar. This cycle generally continues until a bunch of whack jobs decide to over-leverage the entire economy on instruments based on people who can’t pay their debts, as happened in 1986 and 2008. Then we start the cycle a-new.
But we have had nothing like that, and see nothing like that in the markets today. We have had the Fed funds prime rate set to effectively … zero … for years. Remember, for most of my career (and most of recorded time) we have always received something for having cash. Even during bad times. Nope. Nada. Jack squat for having cash for the last several years.
We also have … no inflation, and the Commodity markets look like they are beginning to roll over and head lower …. again (excepting Gold, which is catching a bid). But the Fed wants to raise the interest rate? Let’s face it, they want to. All of their speech and guidance, has been towards an interest rate hike. The conspiracy nut-job inside of me (let’s face it, we all have one) keeps whispering to me that the true powers that be, want an interest rate hike … and an interest rate hike they shall have. The entire world has been starving for yield for years. And the top 1% of the 1% … are sick of it.
So never mind the fact that GSG is rolling over like a dead dog. Never mind each PPI and CPI print is lower, to non-existent. The Dollar has screamed higher (even counting the recent mild correction of the last few weeks) and absolutely pummeled emerging markets. For some reason, everyone is talking about an interest rate hike.
I’m defensive as we face Fed minutes later today …