Down goes the Dow

Ghost of Igloi wrote:

Forever,

Don't twist my words. I'm not running for political office. Lower exposure is not a recommendation to sell stocks. I also note how you conveniently left out lower exposure to bonds.

The internet is also a place that is inhabited by the rude and uncultured.

Igy

Those are your unedited words. Nothing was "left out".

If lower exposure is not a recommendation to sell, what is it?

How is quoting you "rude and uncultured".

Sir or madame, I doubt you would try to twist my words to my face. The internet allows nameless people to hide and say anything they want. Your highlights had a point of emphasis. And for the last time I never said sell stocks. That implication is yours and not mine.

Igy

I did not twist your words. You can argue with my interpretation, but that's the way I see it and I'm sure I a not alone. I would have no problem saying that to your face.

Good day to you.

Do not argue with him. You were right, but he will never admit it. Let it go and realize that we know the truth.

Ghost of Igloi wrote:

agip,

Here is a Bloomberg piece on commodities:

http://www.bloomberg.com/news/articles/2015-11-25/if-china-killed-commodities-super-cycle-fed-is-about-to-bury-it

Igy

That is exactly why I have the commodity positions I have--all short. I am not at all in favor of the FED hiking with all the weakness you have globally, but you can sure as hell make money off it now, and you can make money off it later when the stock market tops.

Happy Thanksgiving everyone.

And the internet allows nameless people to say anything they want.

coach d,

I thought the article validated your position and I believe it will influence markets more than most believe.

Have a good Thanksgiving as well.

Igy

The underlying question is to what extent the Fed is a leader--that is, will an increase in fed rate drive an increase in economic activity, rather than the other way around?

I have come to believe that not only is the fed a leader in certain instances, but also that it has informed others that it is a leader; that is, it has positioned itself as a leader.

This is important. There are a lot of bandwagonists out there, who don't even want to lead. They are not just momentum guys, but also people who just want somebody to set a direction, and it doesn't matter what that direction is, as long as someone dictates it. This has been left to the fed, not to the unreliable and equivocal "invisible hand of the market".

I would not at all be surprised to see commodities reverse direction if the fed does raise rates, only I think it will take something more than a de minimus rate hike to do it. Speaking of which, anybody know what the rate hike likely will be, if it happens?

Ghost of Igloi wrote:

And the Constitution allows nameless people to say anything they want.

Fixed.

Maserati,

I agree that many are waiting for the Fed to move, others who want to feed the beast of speculation want more easing. One point on a rise in rates is for most commodities to fall further since the dollar would likely strengthen on any rate rise. Nevertheless, one could envision the bond market going higher (prices higher, yields lower) if the market took a hit on higher rates.

Igy

This week was relatively slow for economic news given the Thanksgiving holiday. According to the Bureau of Economic Analysis, US economic growth in the third quarter was revised up to 2.1%. We want to focus on the recent trends in US inflation and what it could mean for your portfolio.

Inflation is the rate at which prices change. High inflation means prices are, on average, rising quickly. Currently, there is significant focus on how low inflation is in the US. For example, the year-on-year US inflation rate is currently 0.2% according to the Bureau of Labor Statistics. However, this is not the full picture, because energy prices have fallen 17.1% over the last 12 months to October 2015. We believe this move in energy prices is a large enough move in a single category to materially reduce the inflation index, which can make inflation appear a little more subdued than the underlying rate may actually be.

Furthermore, inflation measures the change in a price, so unless energy prices change further, then after 12 months the drag on inflation from energy prices will, all else being equal, stop because the price will no longer be changing when compared to a year ago.

So headline inflation is currently 0.2%. However, when the historically volatile food and energy components are excluded from the inflation calculation, the resulting figure is often described as core inflation. Core inflation is running at 1.9%. This is just below the US Federal Reserve’s 2% goal for inflation. So, we believe the impact of falling energy prices, which could be temporary, is what is creating such a low rate of inflation currently.

Increasing inflation has historically not been favorable for savers or investors and remains a compelling reason why the Federal Reserve is likely to eventually raise interest rates. From this context, you can see how a Fed rate hike is actually a move to protect the domestic economy and the savers and investors in America. This is also another reason why we view Treasury Inflation Protected Securities (TIPS) and Real Estate Investment Trusts (REITs) as an important component of a diversified investment portfolio. TIPS can compensate investors directly for changes in the rate of inflation. REITs derive their value from property, which is an asset that we believe is relatively well protected from the effects of inflation when compared with other asset classes because rents and property values can rise in line with broader price trends.

So remember, though inflation appeared subdued on some measures, on an underlying view it is higher than it first appears due to the impact of energy prices currently bringing inflation down in a manner that may not be sustainable. Should inflation rise unexpectedly, we believe REITs and TIPS in an investor’s portfolio can offer a degree of protection.

Maserati wrote:

Speaking of which, anybody know what the rate hike likely will be, if it happens?

Expect a rate hike of 0.125% next month.

"The stage is being set "for some sort of correction, but I don't know when that will happen," he added. "

Sounds like Igy. :-)

Maybe, just maybe demand is falling:

http://www.theguardian.com/business/2015/nov/28/black-friday-sales-fall

Igy, do you even read those links beyond the headline?

"A big reason for the decline is increased online shopping, as Americans hunt down deals on their smartphones, tablets and computers. Many retailers are also offering bargains long before Thanksgiving, limiting the impact of Black Friday specials.

Online retailers have been bombarding customers with email discounts and bargains for weeks. Online sales jumped 14.3% on Friday compared with last year, according to Adobe, which tracked activity on 4,500 retail websites. Email promotions drove 25% more sales compared with 2014, the company said."

Big Dog Invesrments wrote:

Maserati wrote:

Speaking of which, anybody know what the rate hike likely will be, if it happens?

Expect a rate hike of 0.125% next month.

FED Futures have factored in about a 90% chance of a 0.25 hike in December and a slight chance of more than 0.5% total through June. Some seem to be expecting a 0.5% hike in December The market response is going to be determined by the fact of the move compared to what market expectations for that move was and any language about the progression of further hikes. Remember the old line: Buy the rumor, sell the fact, or in other words, the result may be exactly the opposite of what you might think going in.

Personally, I plan to square commodity positions on Friday through the FED announcement (or sooner if there is a big move up in anything). I would not place any bets on the market response to whatever the FED says.

To point out what should be obvious from the post, perhaps there is another reason for poor Black Friday sales, "just maybe" falling consumer demand.