Friday, January 6, 2017

The real question for equity bears is when the Fed will cut, not hike, rates

The Fed has promised hawkish policy and a series of aggressive rate hikes in 2017, presumably to counteract the inflationary fiscal policy from the Trump Administration.  Never mind that the larger project to dismantle globalism is profoundly and probably permanently deflationary.

We can expect one rate hike at the very least, as well as the very most.  This would be the third hike since December 2015, and arguably the one to tip the precarious balance in the equity markets.  Let's suppose the Fed members take a pass at the next meeting, in a few weeks, agreeing to wait to see what policy initiatives Trump and the GOP Congress can muster.

Let's suppose we see our next hike at the larger FOMC meeting in March.  There's your spark.  Never mind what was said in December -- that's it, we're one and done for 2017.

We're off to the races.  Solid support is at 1620 on the S&P by about mid-June.


Equity bears that are still among the living today should be asking when the Fed will next cut rates, i.e. when the members will see the face of raging deflation, the oncoming recession, panic, and reverse course.  I propose that we see this as soon as the June FOMC meeting, a desperate effort to restore confidence, animal spirits, inflationary expectations, credit expansion, earnings multiples, home equity loans, social media start-ups, 10-year auto loans, good vibrations, the works.

We'll get one hell of a surprise, and an epic bounce in equities, that's for sure.  Almost to a .618 retrace.

After that, we can look forward to the 10Y Treasury yield making its final lows at 1% or even below.  Rates have not broken out of the Volcker bond-bull channel just yet.

10Y Treasury since Nixon

Short-term, we're looking to tag the 2300 level next week, before a pull-back into mid-February.


But it will be the rate cut, not the rate hike, that marks the end of the epic reflation rally and a prelude to a fall market crash that will humble 2008.  That's when the Fed shows how desperate and powerless it is at the end of the long-credit cycle.


Hugh Jazole said...

The RUT is something to keep an eye on. It seems to be petering out a bit. Does anyone even know the PE of the RUT? It has to be insanely overvalued. The CAPE ratio which no one seems to care about anymore is over 28 now.

Hugh Jazole said...

Seeing a few calls for sub 2100 in Q1.

Christian Gustafson said...

Did you ever see the movie "Margin Call"? I picked it up over Christmas. Solid film.

Hugh Jazole said...

I haven't seen it, I'll have to check it out. Have you ever heard of this book? I just picked up a copy. It wasn't available in the US for a long time, and it's OOP now. I doubt there will be a reprint either.

Permabear Doomster said...

CG, you ARE highlighting the right issue.. about equity bears and the fed cutting rates.

Historically, the moment the fed start cutting rates is when you should be hearing alarm bells for the economy/market.

As stated in my weekend post though... I expect THREE hikes this year. If correct, the equity market is headed a long way higher.

If the fed cut though.. whether summer, or winter.. or 2018... yes.. that will merit alarm bells.

Until then.... broadly long.

yours... bullish Star Destroyers.

TSE said...

CG Sez: "That's when the Fed shows how desperate and powerless it is at the end of the long-credit cycle."

You have limited your thinking to that of Western Civilizations "Settled Science" - which is neither "Settled" nor "Science".

You have missed the Ying and Yang of CONTINOUS CREATION - spawned from the ever living Ether.

The "FED" is a mystical and magical Organization - which facilitates creating ORDERS from DISORDER.

Let us now consider:

Let us now consider nonconservative energy producing technologies of which there are a large variety in existence. These violate the first law of thermodynamics and often Newton’s third law. These over-unity or “free energy” technologies have the potential to yield very inexpensive power, new modes of transportation and to greatly benefit society. However, because their explanation lies outside the domain of standard physics theory, they are opposed by standard physicists and suppressed by governments. The question that the standard physicist most often asks is where does the excess energy come from that these technologies generate?

The reason that physicists are in this dilemma is because they view the physical universe as a closed system, one that emerged into existence through a highly improbable freak event and that inevitably proceeds towards a heat death in the distant future. They have extended the laws of heat engine thermodynamics to apply to phenomena in the universe as a whole, presupposing that the physical universe constitutes the totality of existence and that it is closed, i.e., has no “outside environment”.

But there is a new approach to understanding the physical universe that is being developed. This instead views the universe as an open system and allows for the spontaneous generation of energy with no need of an antecedent high potential physical source. This is the methodology of subquantum kinetics. As mentioned elsewhere, subquantum kinetics has surpassed the prediction track record of general relativity and quantum mechanics in that it has upwards of 12 a priori predictions that were subsequently verified. Moreover it constitutes a unified field theory, explaining the origin of electric charge, gravity, their force interactions, the origin of the nuclear force, spin, magnetism, beta decay, and a host of other phenomena in a unified theoretical framework.

In subquantum kinetics the physical universe is viewed as a pattern epiphenomenon of an inherently unobservable ether composed of etheron units that engage in reaction and diffusion processes throughout space and which proceed as well along a higher dimensional etheric continuum that extends beyond the physical, “above” and “below” our universe. To those familiar with eastern metaphysics, the relation of the physical universe to the higher dimensional etheric realm is the same as that of maya to the greater Maya. Hence the universe is like a water mark on a piece of stationary paper. To us, the watermark is physically real and that seems to us as the totality, but in reality it is the paper that is the true reality, yet it is invisible to us. We become aware that the paper is actually present by conducting laboratory experiments such as those that refute the special theory of relativity (see chapter 1 of Subquantum Kinetics for a list).

"Elliot Waves" are limited - and cannot account for OVER UNITY reactions. Which DO occur.

TSE said...


"Let us put an imaginary boundary around the unobservable etheron states X, Y, and G that are proposed to compose the observable physical universe which itself consists of all existing fields, particles and photons, and call this system U. Then subquantum kinetics holds that there is an etheric environment or outside to system U which is inherently active and maintains all matter, energy, and fields through its ever-present activity. In fact, it views all matter, energy, and fields as mere inhomogeneities (waves or gradients) in this ether that would immediately vanish were the ether’s ongoing activity ever to cease. A universe in which matter can materialize and dematerialize, where photons can spontaneously gain energy or loose energy? To the conventional physicist this sounds like magic! "

It's Magic!

Or, to a Teenager, She's a Cool One!

TSE said...

Junk Science:

Newton's Laws.

Heavisides Equations. ( the junk science of modifying Fourier Transformations to fit the conclusion, to deny the truth of Tesla's Ether-based physics)

The Michelson/Morely Experiment.

Einstein's Theory of Relativity.

Darwin's Theory of Evolution.

Elliott Waves.


"To be able to properly understand the origin of free energy, one must first accept the reality of the inherently unobservable transmuting ether and its higher dimensional extent. One must also come to realize that the physical world, while seeming real and substantial to us, is actually far from being real and substantial. As mentioned above, it is merely a watermark, wave epiphenomena of the underlying ether. Whereas standard physics is based on the positivist notion that only observable entities are real, one must completely reject this view and adopt the perspective that observable entities are actually what is figmentary and that it is the hyperdimensional ether that is the real existent. Like Neo in the movie Matrix realizing that the physical world he was familiar with is actually just a computer generated illusion, “the matrix”, and that the real world lay beyond, but hidden from direct view, we too must make a similar shift of perspective. Although in our case, reports from those that have “seen” indicate that this beyond is not a dark place, but one that is very beautiful and sacred.:

Musical Selection:

Van Halen - A Different Kind Of Truth [Full Album]

TSE said...

Sorry to "Delate You" - BUT....

"So in overview, we find that, as a rule, most energy in the universe is being generated through nonconservative energy generation processes. Free energy is not the exception, but the rule! Only in intergalactic space, where the ether reactions are predicted to be subcritical, is energy spontaneously lost from the universe, again this is a nonconservative process, but one causing energy loss rather than energy gain. This “tired-light” phenomenon accounts for why photons traveling through intergalactic space tend to lose energy and redshift, producing the observed cosmological redshift."

Hugh Jazole said...

I've been reading a book called The Sovereign Individual. Written in 1999. Here's a quote from the book. Sound familiar?

"In its twilight, with a faltering capacity to redeem promises of something
for nothing from an empty pocket, the welfare state found it expedient to
foster new myths of discrimination. Many categories of officially "op-
pressed" people were designated, especially in North America. Individuals
in groups with designated status as "victims" were informed that they were
not responsible for shortcomings in their own lives. Rather, the fault was
said to lie with "dead white males" of European descent, and the oppressive
power structure allegedly rigged to the disadvantage of the excluded groups.
To be black, female, homosexual. Latino, francophone, disabled, etc. was to
be entitled to recompense for past repression and discrimination."

Christian Gustafson said...

Nietzsche covered all of this in great detail 140 years ago in his Genealogy of Morals, slave-morality, ressentiment, the hatred of the good and noble by the weak and inferior, hatred of the world for an afterlife or for "grace", the inversion of ideals and invention of a new ethic grounded in all of this.

The Great Books of Western civilization are still your best guide to being a right proper human being in this life.

What is shocking is just how evident and obvious this is in the Left nowadays, and yet they are so ignorant and uneducated that they fail even to notice.

Hugh Jazole said...

I love Nietzsche, and I agree that modern leftists fail to see their similarity to past religious movements/slave revolts. I agree with his assertion that mainstream Judeo-Christianity, was/is just another intoxicant. Most modern leftists are non-religious in a conventional sense, but have created a whole new set of "virtues" and "sins." As the passage above asserts, there are also entire new classes of "oppressed" people, most of which have never experienced anything close to oppression. The modern welfare state though, is something Nietzsche could have never fathomed. Recently I read about a women observed in a convenience store, she purchased 2 2 liter bottles of soda, a large Redbull, and snack cakes with an EBT card.

john said...

If the market rallies on "news" of the president elect's longstanding collusion with a country whose GDP = Italy's, and steeple still don't get it , well then, I'm really going long stawks!

john said...

Or this is the trigger for the bear

Christian Gustafson said...

Meme magic is real, gentlemen.

4chan has now defeated the CIA bĂȘte noire.

Hugh Jazole said...

The internet has allowed an incredible playing ground/battleground for memes. They have been decentralized, and move at amazing speeds. The printing press was great, but still allowed for major corruption. Whoever controlled the printing press, and eventually the television had their narrow memes foisted on everyone. This is why I have felt for some time that there will be an attempt to control the internet in the US, much like many other countries have. Those who want control information aren't going to go quietly into the night.

TSE said...

H.J. sez: "I've been reading a book called The Sovereign Individual."

I thought we went over this before -

The Constitution has no inherent authority or obligation. It has no authority or obligation at all, unless as a contract between man and man. And it does not so much as even purport to be a contract between persons now existing. It purports, at most, to be only a contract between persons living eighty years ago. And it can be supposed to have been a contract then only between persons who had already come to years of discretion, so as to be competent to make reasonable and obligatory contracts. Furthermore, we know, historically, that only a small portion even of the people then existing were consulted on the subject, or asked, or permitted to express either their consent or dissent in any formal manner. Those persons, if any, who did give their consent formally, are all dead now. Most of them have been dead forty, fifty, sixty, or seventy years. And the Constitution, so far as it was their contract, died with them. They had no natural power or right to make it obligatory upon their children. It is not only plainly impossible, in the nature of things, that they could bind their posterity, but they did not even attempt to bind them. That is to say, the instrument does not purport to be an agreement between any body but “the people” then existing; nor does it, either expressly or impliedly, assert any right, power, or disposition, on their part, to bind anybody but themselves. Let us see. Its language is:

We, the people of the United States (that is, the people then existing in the United States), in order to form a more perfect union, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity, do ordain and establish this Constitution for the United States of America.

It is plain, in the first place, that this language, as an agreement, purports to be only what it at most really was, viz., a contract between the people then existing; and, of necessity, binding, as a contract, only upon those then existing. In the second place, the language neither expresses nor implies that they had any intention or desire, nor that they imagined they had any right or power, to bind their “posterity” to live under it. It does not say that their “posterity” will, shall, or must live under it. It only says, in effect, that their hopes and motives in adopting it were that it might prove useful to their posterity, as well as to themselves, by promoting their union, safety, tranquility, liberty, etc.


Washington is NEXT!

TSE said...

From Vox Popoli:

The purpose of the Constitution is laid out in the Preamble:

We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.

Many, if not most, descendants of immigrants are not the Posterity of the then-People of the United States. Neither are people living in Mexico, Germany, Israel, or even Great Britain. The U.S. Constitution was not written for them, nor was it ever intended to secure the Blessings of Liberty for them.

The idea that the Constitution was intended to do anything at all for immigrants, resident aliens, or foreigners is as absurd as the idea that its emanations and penumbras provide them with an unalienable right to an abortion. The fact that courts have declared otherwise is totally irrelevant.

The proposition nation is a lie. There is no such thing, there never was any such thing, and there never will be any such thing.

TSE said...

Real? OR Fake?

Hanger 18:

Hugh Jazole said...

Inauguration sell off stetting up nicely. Gloom and doom will take over the markets in the first quarter, only to reverse and scream higher for the rest of the year. No idea how low we'll go, 2090ish? Probably 2018+ before more bearish fun returns. We shall see.

Christian Gustafson said...

Have we started on W4 yet? No 2300 s&p / 20K djia for now?

I'm celebrating the coronation of Emperor Trump next week by going to a couple of Kurosawa films.

The Grand Illusion is THE arthouse cinema here in the Seattle. A fine institution.

Hugh Jazole said...

Headline from Investing "Dow tumbles triple-digits on Trump policy uncertainty, eyes on Fedspeak" LOL.

TSE said...

"Dow tumbles triple-digits on Trump policy uncertainty, eyes on Fedspeak"

That's the cue:

Buy The Dip:

Here in Tennessee we are working 6-7 days a week, 12 hour shifts, just to meet the demands for "The World's Largest Automaker".

On average, I crank out 1,000 machined aluminum castings a night! If my breaks and lunch period are worked - it's closer to 1,200. Almost EVERY. SINGLE. DAY.

The hiring signs are everywhere - and even fast food pays more.

The Aluminum ingots come from Alcoa - and just down the road in Maryville is Denso.

As long as the cheap oil flows - the good times will roll!

Jetboy- Heavy Chevy:

TSE said...


Is an 84 Month Auto Loan Right for You?

Schoolhouse Rock: Money - Tyrannosaurus Debt Music Video


Hugh Jazole said...

"As long as the cheap oil flows - the good times will roll!" I agree completely, but there are a growing number of people who claim we can't keep using it.

Christian Gustafson said...

S&P hanging in here ... vapor crawl up to 2304 for the Inaugural? Then our pullback.

My thoughts on renovating the Woodlawn neighborhood in the Chicago.

Ken Barrows said...

The magic trick is that oil is cheap to consume but not so cheap to produce (on the margin). Viva la debt!

Christian Gustafson said...

On a related issue, South Side Chicago, apparently they put a Whole Foods in Englewood, one of the most violent and depraved neighborhoods in the city.

It used to have a population of almost 100K, now it's maybe 30K. I used to run over there once in a while to an Aldi chain grocery to get cheap canned food, and for the thrill of visiting hell. Aldi is about the pace of Englewood, not Whole Paycheck.

Remember, South Shore could not keep a Dominick's open at 71st and Jeffery. I used to shop here.

How long will the Englewood experiment last?

Bryan Franco said...

What is going on with the Nasdaq 100. QQQ. Is it ever going to end?

Hugh Jazole said...

I had a neighbor once whose daughter was an attorney in Chicago. She said the city is pretty much ran by the mob.

Hugh Jazole said...

CG, you might enjoy this video from a brave Canadian gal, not afraid to speak the truth. For those who are unaware, Canada is becoming fertile ground for radical leftists. My tinfoil hat opinion is that it's a testing ground, for ideas they plan to spread to the US.

TSE said...

"CG, you might enjoy this video from a brave Canadian gal, not afraid to speak the truth. For those who are unaware, Canada is becoming fertile ground for radical leftists. My tinfoil hat opinion is that it's a testing ground, for ideas they plan to spread to the US."

They have been there and done that already.

There are simply too many wrongs here to be discussed - in other words - the attack by the Left is overcoming and represenative oif "WAVE TACTICS".

Needed more than ever:

TSE said...

The Battle of Kursk:

What the Germans didn't know then - and what is still being researched today - in Black Budgets - is that timing and the yield of nuclear weapons is dependent upon Planetery Alignments - and the effects which access the Zero-Point energy present in the Universe and alter realities.

Stuff you ain't supposed to know:

TSE said...

Ancient World Mysteries from a Forgotten Age

TSE said...

Besides the deadly miscalculation at Castle-Bravo - whereas the USAF intewrviewed Dr. Ronald Richter in Argentina, esp. regarding Lithium 7 Isotopes,

ZPE may be here.

You just can't OFFICIALLY talk about it.

And I hate secrets.SO don't go there.

TSE said...
This comment has been removed by the author.
TSE said...

One of The Best:

john said...

The Donald has discovered TSE!


TSE said...

Its all that and more!TRUE and then some!

Straight outta Seattle....

The KINGS! Switching to Glide

TSE said...

Now I must admit that I have never heard The KINGS live in concert - but I have seen Milwaukee's Boogeymen!

TSE said...

And no doubt.

Where did the rubble go?

Because there should have been PILES and PILES of it.

But it all disappeared before your lying eyes - and was dustified.


Where is the rubble pile?

Shipped to China.


TSE said...

No escape from the mass mind rape
Play it again jack and then rewind the tape
And then play it again and again and again
Until ya mind is locked in
Believin' all the lies that they're tellin' ya
Buyin' all the products that they're sellin' ya
They say jump and ya say how high
Ya brain-dead
Ya gotta fuckin' bullet in ya head

Hugh Jazole said...


Bryan Franco said...

GS reports before the bell tomorrow. Largest weighting in the Dow Jones Industrials.

sooner said...

The nightmare's over....

TSE said...

Pope Francis Warns Against "Saviours" Like Hitler, But Says "We Must Wait And See" On Trump

Do you now understand the irony?

Michael Whittmann was Hitler's right hand man.

Who will BE Trump's?

It's the dedication to the cause with which we are concerned with. Right, wrong, left, conservative or liberal.

Two steps back with Obama & CO. has been a complete disaster, and his adherents are numerous and prepared to act out.

Trump is our Cicero:

Though he was an accomplished orator and successful lawyer, Cicero believed his political career was his most important achievement. It was during his consulship that the second Catilinarian conspiracy attempted to overthrow the government through an attack on the city by outside forces, and Cicero suppressed the revolt by executing five conspirators without due process. During the chaotic latter half of the 1st century BC marked by civil wars and the dictatorship of Gaius Julius Caesar, Cicero championed a return to the traditional republican government. Following Julius Caesar's death, Cicero became an enemy of Mark Antony in the ensuing power struggle, attacking him in a series of speeches. He was proscribed as an enemy of the state by the Second Triumvirate and consequently executed by soldiers operating on their behalf in 43 BC after having been intercepted during attempted flight from the Italian peninsula. His severed hands and head were then, as a final revenge of Mark Antony, displayed in the Roman Forum.

What do the Muses from the Oracle at Delphi predict for Trump?

TSE said...

BTW - I recognize that Putin and the Russian Federation are our friends and cooperation is in our best interest.

It is Obama, Hillary, and the neo-cons who are pressing for war with Russia.

Hugh Jazole said...

How does the Pope feel about Stalin?

Ken Barrows said...

T Berry, give us a shout out! This is a day meant for you to speak your peace/piece.

Ken Barrows said...

T Berry, give us a shout out! This is a day meant for you to speak your peace/piece.