Wednesday, December 26, 2018

Making Stocks Great Again?!?

Fred Imbert and Eustance Huang of CNBC report, Dow rallies 1,000 points, logging its single biggest daily point gain ever:
Stocks rose sharply in volatile trading on Wednesday as surges in retail and energy shares helped Wall Street regain the steep losses suffered in the previous session.

The 30-stock Dow closed 1,086 points higher, or 4.98 percent. Wednesday’s gain also marked the biggest upside move on a percentage basis since March 23, 2009, when it rose 5.8 percentage points.

The S&P 500 also catapulted 4.96 percent — its best day since March 2009 — as the consumer discretionary, energy and tech sectors all climbed more than 6 percent. The Nasdaq Composite also had its best day since March 23, 2009, surging 5.84 percent.

Retailers were among the best performers on Wednesday, with the SPDR S&P Retail ETF (XRT) jumping 5.8 percent. Shares of Wayfair, Kohl’s and Dollar General all rose at more than 6 percent. Data released by Mastercard SpendingPulse showed retailers were having their best holiday season in six years. Amazon’s stock also jumped 9.5 percent after the company said it sold a record number of items this holiday season.

Energy stocks also jumped as U.S. crude oil prices catapulted more than 8 percent. Shares of Marathon Oil and Hess were the best performers within the energy sector, jumping 7.6 percent and 6.9 percent, respectively.

John Augustine, chief investment officer at Huntington Private Bank, said he welcomed Wednesday’s rally but added: “We still have a ways to go. We need to have three days of moving higher into the close to stem this wave of selling.”

A strong sell-off on Monday sent the major indexes down more than 2 percent and ended with the S&P 500 falling into a bear market. The S&P 500 was down 20.06 percent from an intraday record high set on Sept. 21 before Wednesday’s sharp rebound. U.S. exchanges were closed Tuesday for the Christmas holiday.

The recent decline in stocks “is a buyer’s strike due to lack of confidence in policymakers around the world,” said Augustine. “It’s going to take a long time to recover that confidence.”

The plunge in stocks on Monday came after Treasury Secretary Steven Mnuchin held calls with CEOs of major U.S. banks last weekend and issued a statement saying, “The banks all confirmed ample liquidity is available for lending to consumer and business markets.”

Monday’s move lower also came after President Donald Trump commented on the Federal Reserve once more, calling it “the only problem our economy has” in a tweet. Trump also said Tuesday the Fed was “raising interest rates too fast because they think the economy is so good. ” Trump has been critical of the Fed’s decisions regarding monetary policy this year. The central bank has hiked overnight rates four times this year.

“With the end of the quarter, we could get a bounce in the next few days,” said Peter Cardillo, chief market economist at Spartan Capital Securities. But “the problem is [President Donald] Trump continues to create a lot of uncertainty. We can’t focus on the fact there are a lot of good bargains out there.”

This is all taking place amid an ongoing government shutdown that started last week. The Trump administration and congressional leaders are at a stalemate over funding for a wall along the U.S.-Mexico border. The administration says the wall is important for national security while opponents of the barrier note it will not solve the U.S.′ immigration issues.

“Government shutdown starts with no end game strategy by either side,” L. Thomas Block, Washington policy strategist at Fundstrat Global Advisors, said in a note to clients. “The President ... remains convinced that fighting for HIS wall is worth a government shutdown and his base loves the confrontation.”
Bulls came out charging on Boxing Day to pick up a lot of post-Christmas bargains in stocks.

What occured on Wednesday was an unprecendented buying panic unlike anything I've ever seen before. It didn't happen right out of the gate, stocks were shaky at the start but when the markets turned around early this morning, KABOOM, stocks exploded up as did oil which gained nearly 10% today despite the strong US dollar (click on image):


So why did stocks melt up today? To understand this, you should begin by reading my last comment on the bad Santa selloff of 2018 which I posted on Friday. Read that comment very carefully to understand what was going on prior to this melt-up in stocks.

Then on Sunday, Treasury Secretary Steven Mnuchin had the bright idea of calling the CEOs of all the major banks to check up on their liquidity and put the "Plunge Protection Team" on standby, and he made all this public in a tweet, leading many on Wall Street to rightly question his judgment:



I truly believe if Mnuchin didn't create undue panic, we would have seen a massive Santa Claus rally on Monday. His timing was terrible and again made me wonder if perhaps he and Trump are in cahoots with hedge funds looking to create panic.

On Wednesday morning, the Wall Street Journal published a lead article blaming computerized trading for the herdlike behavior and market swoon.

No doubt, algorithmic trading is exacerbating the violent market swings but there is something else that really bugs me, the fact that the exchanges still refuse to reinstate the uptick rule for shorting stocks, one of many factors making markets go haywire.

Why are exchanges refusing to reinstate the uptick rule? Because they thrive on volume, it doesn't matter whether stocks are going up or down as long as volume is there, exchanges are making a mint. It's the same reason why they embraced computerized trading, it's all about volume and profits.

Anyway, what led to the massive melt-up in stocks today? Below, I list some factors in order of importance:
  1. Major rebalancing going on in markets. Zero Hedge discusses a massive $64 billion buy order coming from US corporate DB plans that sold bonds to buy beaten down stocks. I think the real figure is over a trillion dollars when you factor in US public pensions, global pensions and sovereign wealth funds (like CPPIB and bigger players like Norway's pension and Japan's GPIF), mutual funds and hedge funds and other large institutional investors. I read a figure from the Investment Company Institute that on the week ending December 19th, mutual fund outflows topped $55 billion (while inflows into ETFs were around $25 billion). Add to this hedge funds raising cash to meet redemptions and tax loss selling from retail investors and robo-advisors doing tax loss harvesting, and you see signs of capitulation. Trillions were obliterated in markets during the last quarter going into today, so even if one trillion of rebalancing sounds like a lot, it's not as much as was lost in Q4.
  2. Massive short-covering: As I stated on Friday, smart short-sellers don't stand in front of a rebalancing freight train, they cover knowing full well a buying panic will ensue and wait for a better time to short stocks again. And don't kid yourself, they will be back with a vengeance but massive short covering today only exacerbated the natural buying frenzy.
  3. Fed on hold for 2019: I am of the opinion the Fed is done raising rates and there will be a potential halt to the balance sheet reduction next year depending on how bad markets and the economy get. US economic data is softening fast, inflation pressures are non-existent, unemployment will start rising and the Fed will be hard-pressed to justify any more rate hikes or even to leave the balance sheet reduction on auto-pilot. In fact, if stocks didn't melt up today 1000 points and instead melted down 1000 points, I guarantee you the Fed would have called and emergency meeting this week, cut rates and stopped the balance sheet reduction (I'm dead serious about this). Also, there have been numerous press stories questioning whether President Trump can fire Fed Chair Powell and opinions stating this will cause a major disruption in markets. I'm of a different opinion. I believe President Trump made a HUGE mistake appointing Jerome Powell to be the next Fed Chair and this decision might cost him the next election. Had he appointed a dove like Neel Kashkari, someone who understands markets and the threat of global deflation, he might have stood a chance, especially if he dropped these silly tariff wars with everyone. I also think if he does fire Powell and replaces him with a dove, markets will initially tank and then rally like crazy.
  4. Technicals and fear gauges: Most stocks are way oversold. I saw a chart showing rolling new lows from Bespoke Investments earlier which showed we reached extreme levels not seen since 2008, 2011 and 2016. It doesn't guarantee anything but at the very least, we are due for a major relief rally. The same goes for fear gauges which showed extreme levels of pessimism, they too suggested the selloff was way overdone and we were due for a big bounce. There were other signals on Monday which suggested we were nearing our first major bear market bottom. Lastly, the fact that CTAs are now short every major market reassures me from a contrarian perspective (I'm short CTAs!).
  5. Valuations are now compelling: Going into today, the stock market was pricing in no earnings growth whatsoever for next year. None, zero, zilch. So from a valuations perspective, a lot of stocks were compelling, especially those with dividends that yielded much higher than T-bills after the latest rout. In fact, I remember a call with HOOPP's CEO Jim Keohane in early November where we discussed the value of a good pension. That call took place right after the October selloff, the worst October since 2008. Jim was telling me then that stocks moved from 5% overvalued at the beginning of the year to 5% under-valued, so I can just imagine where his valuation indicators were going into today's market. 
  6. President Trump, David Tepper on buying the dip: During his Christmas address, President Trump suggested the stock market swoon is a buying opportunity. He also blamed the Fed for all that ails the market and US economy (but he appointed Powell!!). And hedge fund guru David Tepper stated on Monday the stock market tumbled too sharply and he was ‘nibbling’. Nibbling, my foot, he was buying like a little boy in a candy store on a sugar high! And this was the same guy who came out last week to say he's done with stocks and raising cash. That's why I keep warning you to ignore the hedge fund gurus and their recommendations, pay close attention to what they're buying and selling every quarter (and I guarantee you, Tepper and other elite hedge fund managers were buying beaten-down tech stocks going into this massive rally and even today).
By far, the most important factor driving stocks up right now is major rebalancing and that trillion dollar figure wasn't pulled out of my nose, it's based on a tweet Howard Silverblatt, S&P Dow Jones senior index analyst posted:



Anyway, I covered the factors behind the massive melt-up in order of importance. I've repeatedly warned you, nothing goes down or up in a straight line, after such a massive selloff, we were due for a massive melt-up, one that might last well into January (but obviously not as violent as today's action).

What else? There were signs on Monday that something big was in the offing. Stocks tumbled on Monday, it was a short day (market closed early at 1 p.m.) but I was on it like a hawk and noticed a few things:
  • Even though the Dow tumbled 600+ points on Monday, US long bonds (TLT) posted a mediocre gain, signalling to me investors were taking profits on bonds to buy stocks.
  • More interesting, safe sectors like utilities (XLU) were down 4%, flushing on Monday. And this on a day bonds rallied even if it was a weak rally, suggesting to me investors were rebalancing away from safe sectors to higher risk sectors.
  • My eyes were fixated on Amazon on Monday. It touched its 100-week moving average in the morning, was down 5% and then BOOM, they ran it up 5% before it closed marginally down. That there told me a lot about where the action would be on Wednesday. 
  • Another risk gauge I tracked closely on Monday was biotech stocks (XBI). They were up all day and then puked at the close, down 2%. That also reassured me during a bad market day going into Christmas.
By the way, in case you think I'm lying about all this, I invite you to track me on StockTwits where I regularly post my market thoughts, trying to make sense of these crazy schizoid markets.

For me, the market provides the most important signals, you just have to know how to intepret them. And I'm not just talking about stocks, I track bonds, corporate bonds, currencies and commodities. Macro, macro, macro is what guides my risk-taking behavior and looking at what top funds are doing gives me micro clues into which stocks are worth tracking.

For example, I still like healthcare stocks (XLV) but going into today, I knew some of the generic drug makers were way, way, WAY oversold, especially Teva Pharmaceuticals (TEVA) and Perrigo (PRGO), both of which shot up today, outperforming other generic drug makers (click on image):


Now, don't get excited, I'm swing trading these markets and take risks most of you definitely shouldn't be taking but I'm just showing you there are plenty of opportunities in the stock market and a lot of these stocks remain very oversold on a weekly basis, even after this massive rally.

In terms of major US sectors and industries, all of them performed well today but no surprise, cyclicals outperformed defensives and the tech sector led the charge as FAANG stocks, biotechs (XBI) and semiconductor shares (SMH) all posted huge gains (click on image):


Again, don't extrapolate too much from a massive one-day rally. I still believe defensive stocks (healthcare, utilities, telecoms) are going to outperform cyclical shares (banks, energy, industrials, homebuilders) next year, especially if the US economy slows and we get a synchronized global downturn, but given the violent selloff in high beta stocks (SPHB)  which severely underperformed low volatility (SPLV) in 2018, I'm not surprised to see a big reversal going on now (click on image):


Still, I caution you, we are likely entering a bear market when the next major selloff occurs, and you need to understand that we will see many countertrend rallies -- some more explosive than others -- but that's all they are countertrend rallies that eventually peter out as stocks head lower.

I need to warn everyone reading this because it's easy to get caught up in the excitement or fear that grips markets during these big rallies and selloffs.

Don't get excited, don't be petrified either, just try to take advantage of major selloffs buying good stocks which are way oversold but be ready to sweep the table if they bounce back big.

As far as international stocks, I noticed emerging markets shares (EEM) were up 2% today, far less than US stocks but they remain above their 200-week moving average, for now (click on image):


You really need to pay attention to emerging markets, if they go into a deep bear market, it will only intensify global deflationary headwinds.

What else? High yield bonds (HYG) were up 1.7%, which is good, but we're still not out of trouble yet until it crosses back above its 50-week moving average (click on image):


I wish I could cover a lot more but it's the holidays and I need to recharge my batteries a bit. Tracking, trading these markets and then writing about it is exhausting and quite frankly, I'd rather post some market thoughts on StockTwits for rest of week and finish up my year-end review.

Hope you enjoyed my market comments over this tumultuous holiday season. Please remember to kindly donate/ subscribe to this blog on the right-hand side under my picture using the PayPal options. I thank everyone who takes the time to contribute, it's greatly appreciated.

Below, the Dow surged 1000 points after the worst Christmas Eve ever, posting its best one day gain in history. CNBC's Mike Santoli discusses the current state of the markets with Barbara Doran of BD8 Capital Partners.

Earlier this morning, CNBC's Bob Pisani looked at the day's market action and said the market was discounting a very bad 2019.

And on Monday, chart analyst Katie Stockton said she saw a weeks-long relief rally in stocks that could offer a better selling opportunity.

Lastly, speaking with CNBC on Wednesday, Todd Horwitz, chief strategist at investment advisor Bubba Trading, predicted that next year is going to be “very rough,” dropping another 10, 15 or 20 percent. He may turn out to be right but it's too early for these gloom & doom forecasts.

Update: Michael Sheets of CNBC reports, JP Morgan sees a ‘window of opportunity’ for stocks in the first months of 2019:
The first three months of next year will likely see stocks rally, J.P. Morgan says, so long as the Federal Reserve “skips” its March meeting and does not hike interest rates again.

“Signs of capitulation by institutional investors are creating a window of opportunity for equity markets into Q1 assuming the Fed reacts to market stress,” J.P. Morgan analyst Nikolaos Panigirtzoglou said in a note to investors on Friday.

Last week the central bank raised rates for a fourth time in 2018.

Stocks initially rose after the December meeting, as the Fed lowered its forecast of rate hikes next year to two from three. But equities fell sharply during Fed Chairman Jerome Powell’s post-meeting press conference. Powell was not as “dovish,” or leaning against more rate hikes, as some investors may have wanted, but Panigirtzoglou thinks whether the Fed gets even more dovish next year will be the key factor in determining whether stocks get a boost in the beginning of 2019.

“If such dovish shift does not materialize and the yield curve inversion fails to improve, any equity rally in Q1 would most likely be short lived,” Panigirtzoglou said.

J.P. Morgan also sees an “important headwind” for stocks as “now significantly reduced,” Panigirtzoglou said. The firm said “non-bank investors” around the world, also known as “real money investors,” are no longer bullish on stocks. The S&P 500 briefly entered a bear market on Christmas Eve, a move which Wall Street defines as a 20 percent decline or more from recent highs.

“The equity market declines over the past few months have erased real money investors’ previous equity overweights, reducing the need by these investors to actively sell equities from here,” Panigirtzoglou said.
On Thursday, the Dow closed more than 250 points higher in wild session, erasing a 600-point drop. If the market stabilizes here and continues going up in the new year, it will help build investors' confidence. In the short-run, this is a positive development, it means the market has found a bottom, for now.

Of course, some futures traders I talk to think the S&P is going back to where it was when Trump was elected on November 8th, 2016 ("it needs to retest that mark of 2150").

Also, Carter Worth of Cornerstone Macro joined the 'Fast Money' team on Thursday to discuss why despite the big reversal, markets aren't in the clear just yet and why he sees more trouble ahead for banks.

My technical reading is as long as Financials (XLF) and emerging markets (EEM) ETFs stay above their 200-week moving average, markets are fine but if they fall below, we're headed lower.






Friday, December 21, 2018

The Bad Santa Selloff of 2018?

Thomas Franck of CNBC reports, Dow dives 400 points, heads for worst week in 10 years:
Stocks plunged again on Friday, sending the Dow Jones Industrial Average to its worst week since the financial crisis in 2008, down nearly 7 percent. The Nasdaq Composite Index closed in a bear market and the S&P 500 was on the brink of one itself, down nearly 18 percent from its record earlier this year.

The Federal Reserve’s rate hike on Wednesday drove the losses this week and fears of an extended government shutdown only added to the pain on Friday.

The Dow Jones Industrial Average fell 414.23 points to finish at 22,445.37 in turbulent trading that sent the blue-chip index up as much as 300 points earlier in the day, only to trade back in negative territory less than one hour later. The initial rally upward on Friday came as Federal Reserve Bank of New York President John Williams told CNBC that the central bank could reassess its interest rate policy and balance sheet reduction in the new year if the economy slows.

But those gains slowly disappeared as investors used that short-term pop as a chance to sell more. The broader S&P 500 fell 2.1 percent on Friday to close at 2,416.58, while the tech-heavy Nasdaq Composite shed 2.99 percent to 6,332.99 with big losses in technology stocks including Facebook, Amazon and Apple.

Stocks accelerated to their lows after President Donald Trump’s trade adviser, Peter Navarro, told Nikkei that it would be “difficult” for the U.S. and China to arrive at a permanent economic agreement after a 90-day ceasefire in the trade tensions.

Here’s a tally of the carnage:
  • The Dow lost 6.8 percent and 1,655 points on the week. It was its worst percentage drop since October 2008.
  • The Nasdaq lost 8.3 percent on the week and is now 22 percent below its record reached in August, a bear market.
  • The S&P 500 lost 7 percent for the week and is now down 17.8 percent from its record.
  • The Dow and S&P 500, which are both in corrections, are on track for their worst December performance since the Great Depression in 1931, down more than 12 percent each this month.
  • Both the Dow and the S&P 500 are now in the red for 2018 by at least 9 percent.

The selling had conviction. More than 12 billion shares changed hands on U.S. exchanges on Friday, the heaviest volume in at least two years. The expiration of options also added to the volume.

“The message people should take home, especially if there’s a government shutdown, is that longer term, the prospects for equities are not good,” said Komal Sri-Kumar, president of Sri-Kumar Global Strategies. “There are lots of signs now suggesting that we may be looking at a recession. I would say that the risk here is that a whole lot of confluence is taking place: The trade war is not going to end soon, and the Fed totally misjudged the market in suggesting two more rate hikes next year.”

On Thursday, the Dow Jones Industrial Average dropped 464.06 points to close at 22,859.6, bringing its two-day declines — which encompassed the market’s reaction to the Fed’s rate hike — to more than 800 points. The S&P 500 shed 1.58 percent to end Thursday at 2,467.41 while the Nasdaq Composite fell 1.6 percent and closed at 6,528.41. The Cboe Volatility Index — one of Wall Street’s best gauges of marketplace fear — rose above 30 on Thursday, its highest level since February.


Friday rollover

Stocks initially caught an early bid Friday morning after New York Fed President Williams said the central bank was listening to the market, and could re-evaluate its outlook for two rate hikes next year.

“We are listening, there are risks to that outlook that maybe the economy will slow further,” Williams told Steve Liesman on CNBC’s “Squawk on the Street” Friday.

“What we’re going to be doing going into next year is re-assessing our views on the economy, listening to not only markets but everybody that we talk to, looking at all the data and being ready to reassess and re-evaluate our views, ” he said.

U.S. equities quickly staged an about-face thereafter.

The Fed’s decision to raise the benchmark overnight lending rate by one quarter point on Wednesday triggered a new wave of selling across Wall Street earlier in the week. That move was widely expected by markets but investors appeared to be taken off guard by Fed Chairman Jerome Powell’s comments that the central bank was satisfied with its current path to reduce the balance sheet with no plans to change it.

“This is a real magnificent speech and much different from what most of us are accustomed to,” said Anthony Chan, Chief Economist at J.P. Morgan Chase. “The concern of the market was: what is the Federal Reserve going to do with the fed funds rate in 2019? John Williams told us everything’s on the table, they can adjust that path.”

“Then of course the markets are really worried about that autopilot situation on the balance sheet,” Chan added. “Once again, John Williams said even that is on the table, that if things were to shift, that the Federal Reserve would be flexible on that.”

The Fed currently is allowing $50 billion a month to run off its massive debt balance sheet as its securities mature, tightening financial conditions. The balance sheet is mostly a collection of bonds the central bank purchased to vitalize the economy during and after the financial crisis.

Government shutdown concerns

Sentiment was dampened Friday after President Donald Trump aggravated fears of a government shutdown after tweeting:

“The Democrats, whose votes we need in the Senate, will probably vote against Border Security and the Wall even though they know it is DESPERATELY NEEDED. If the Dems vote no, there will be a shutdown that will last for a very long time. People don’t want Open Borders and Crime!”



Equities fell to their lows of the day in the previous session after U.S. House of Representatives Speaker Paul Ryan announced that President Trump would not sign a temporary government funding resolution without funding for a U.S.-Mexico border wall.

Later on Thursday, the House passed a temporary spending bill with more than $5 billion for Trump’s border wall — an inclusion which will likely impede its ability to clear the Senate. The Senate had unanimously approved a bill Wednesday night to keep the government running through Feb. 8 — without border wall money.

However, Trump later told reporters on Friday that there is a very good chance the House funding bill will not pass in the Senate and that the administration is prepared for a long shutdown.

“Although shutdowns get a lot of media hype, the reality is that stocks tend to take them in stride. In fact, the S&P 500 has gained during each of the five previous shutdowns,” explained LPL Senior Market Strategist Ryan Detrick.

Both House Minority Leader Nancy Pelosi and Senate Minority Leader Chuck Schumer have flatly said congressional Democrats will not approve wall money. As Republicans need Democratic votes to pass spending legislation in the Senate, a partial shutdown is all but assured if the GOP insists on funding for the barrier.
What's that old expression, when it rains, it pours?

It's been a disastrous week in markets, I wasn't going to post anything today but given the fear out there, I feel it's only appropriate to go over a few market developments.

First, have a look at how markets fared on Friday (click on image to enlarge):


As you can see, the Nasdaq led the downturn, down 3% in one day and down 8.3% just this week.

I want to show you a chart of the S&P Technology ETF (XLK) which you absolutely need to keep in mind as this selling unfolds (click on image):


The bad news is short sellers are gunning to bring this below its 200-week moving average, which is another 10% drop. Bulls are going to try to defend the 150-week moving average but FAANG stocks have a bullseye on them (click on image):

And it's not just FAANG stocks. Have a look at the S&P Biotech ETF (XBI) which got decimated again this week and is now firmly in bear market territory (click on image):


Not surprisingly, since biotechs are the riskiest stocks, they got clobbered the most after the Fed raised rates a cumulative nine times. Add to this redemptions hitting biotech funds at year-end and you have a wave of selling that makes for a capitulation in this sector (but don't try catching this falling biotech knife!).

The rout in biotechs and fear in markets placing a premium for liquidity are some of the reasons why US small caps (IWM) are suffering one of their worst quarters in history:



Interestingly, while biotechs are getting destroyed, investors are finding refuge in big pharmaceuticals stocks like Merk (MRK), Pfizer (PFE) and Eli Lilly (LLY), all of which have done very well this year.

Other leading sectors of technology are also weakening fast. Semiconductor shares (SMH) sliced below their 100-week moving average and are at risk of going a lot lower here (click on image):


It's hard to see a rally in technology without FAANGs, biotech and semis, this is why it's critical to look at all components when trying to assess price movement in the Nasdaq.

What else? Despite the rate hike this week which normally bolsters big banks, the S&P Financials ETF (XLF) has been falling like a stone and is very close to declining below its 200-week moving average (click on image):


Adding to worries, US banks are stuck with $1.6 billion in buyout loans they cannot sell, heightening fears that the loan market is freezing:



Any normal Fed attuned to markets would be looking at financials tumbling like this and cutting rates and increasing its balance sheet operations.

But not the Fed Grinch who stole Christmas, Mr. Powell is a private equity guy, probably never traded in his life as he made multi-millions in private markets, and doesn't seem concerned about the stock market.

No wonder President Trump is considering firing him, something I discussed in my last comment and made my own personal views public on Twitter:



This won't save the markets from Powell's big blunder but it will reassure many market participants who are concerned that the Fed is out of touch with what's going on in markets.

Interestingly, it didn't take long for New York Fed President John Williams to come out to attempt to do some damage control but it's too little, too late, the damage is already done:



President Trump's obsession with building that bloody wall and threatening another government shutdown only added gas on the fire which makes you wonder if he's in cahoots with hedge funds shorting this market.

All these factors turned this year's much anticipated Santa rally into a disaster:


And that's no laughing matter. The amount of wealth destruction going on in a few short weeks is obscene and many people are rightly concerned, especially those who are looking to retire next year.

So what now? The only thing I can tell you is to keep in mind certain things before reacting irrationally:
  1. Pension funds and sovereign wealth funds rebalancing: Large institutional investors need to rebalance at the end of the month, quarter, year, especially after such a violent move. I'm talking about large multi-billion dollar funds who need to maintain their equity allocation at a certain weight and will likely sell some bonds which fared well this quarter to buy more stocks which got clobbered. Zero Hedge today warned to brace for "seismic" volatility as pension funds are set to buy a record $60 billion in stocks in coming days but I think that figure is on the low side when you include international pension behemoths like Norway's pension and Japan's GPIF.
  2. Large leveraged players are now net long equities: A friend called me earlier to tell me the latest CFTC commitment of traders report which came out Friday afternoon, shows speculators are more net long equities than in the previous week. Just two weeks ago, they were net short.
Still, there are things that concern me. First, the high yield bond ETF (HYG) had a terrible week and fears of a credit crisis don't portend well for stocks (click on image):


What else? I'm keeping my eye on interest rate sensitive sectors like the S&P Homebuilders (XHB) which tend to lead the overall market lower or higher and they rolled over this week and remain firmly in bear market territory (click on image):


But Fed Chair Powell thinks the US economy is fine, firing on all cylinders. Yeah, right!

I will end by showing some fear gauges I track. First, the VIX was up 6% today and settled at just above 30 (click on image):


A lot of commentators like Gundlach stated the VIX needs to spike above 40 for there to be an interim bottom to the selloff.

Maybe but when I look at the weekly chart of the iPath S&P 500 VIX ST Futures ETN (VXX), I'd say we reached an important fear inflection point this week (click on image):


Also, Zero Hedge posted a comment on panic in the air which showed more gauges of fear reaching extreme levels which typically suggests the selling is way overdone. You can read it here.

So, to all my readers, try not to let this bad Santa selloff rattle you, markets are there to inflict maximum frustration and angst among all participants.

I'm not saying there won't be a bear market or things can't get worse, but the ferocity of this downtrend leads me to believe that cooler heads will prevail and smart short sellers will cover and wait for a better opportunity to short stocks again.

Alright, that's enough market talk, wasn't supposed to blog today but I felt compelled to discuss this week's nasty selloff because many people are rightfully scared, confused and worried.

Below, New York Fed President John Williams says the Fed could re-evaluate view in 2019. Again, too little, too late, the Fed blew it this week, making a monumental mistake of epic proportions.

With stocks on a brink of a bear market, and many leading sectors already in a bear market, I expect NO rate hikes next year, and possibly a few rate cuts and more QE if we get a crash (always hedge your equity exposure with US long bonds!).

Second, CNBC Markets Now provides a look at the day's market moves with commentary and analysis from Michael Santoli, CNBC Senior Markets Commentator.

Third, Mark Yusko, Morgan Creek Capital, discusses his take on markets and the volatility hitting stocks and why he thinks there's a lot more pain ahead. He tells you to hide out in the same defensive stocks I told you about in July, namely, healthcare (XLV), utilities (XLU), consumer staples (XLP), REITs (IYR) and telecoms (IYZ). He also rightly notes that US long bonds (TLT) might outperform the S&P again next year, especially if a nasty bear market ensues.

Lastly, the trailer of Bad Santa. If you want to forget these dreaded markets, my advice is to watch something funny and relax this holiday season.

That's it from me, I'll be back next week to discuss pensions, markets and do a quick recap of the year.

I remind all of you reading this blog to please contribute to it on the right-hand side, under my picture, using PayPal options. I thank all of my supporters and wish you a Merry Christmas, Happy Holidays and a Happy & Healthy New Year!





Thursday, December 20, 2018

The Fed Grinch Who Stole Christmas?

Brian Sozzi of Yahoo Finance reports, How Fed Chair Powell just triggered the next wave of the bear market in stocks:
The bears have embraced the final speech of the year from their best friend, Federal Reserve Chairman Jerome Powell. And that could lead to a fresh wave of selling.

The former partner at The Carlyle Group strode to an altar in front of reporters on Wednesday in DC and shrugged off the stock market’s two-month plus beating, slowing global economic growth and the ongoing verbal lashing from the guy who hired him (president Trump). Mr. Market quickly showed what it thought of Powell’s performance. The Dow Jones Industrial Average tanked 352 points to its lowest level of the year.

“Regardless, markets were looking for more signals from Chair Powell that he hears their concerns. He is now in a tough spot,” said Datatrek co-founder Nicholas Colas.

SunTrust Chief Markets Strategist Keith Lerner told Yahoo Finance there is a “buyer’s strike” in the market right now. Oof.


The average investor is probably wondering how one person — albeit one powerful person — managed to send stocks into a fresh tizzy within an hour. It’s not enough to say “Powell jacked up interest rates again, the market hates higher rates.” Per the usual on Fed decision days, there is a good deal of psychology at play. A single word could upset investors, which was obviously the case on Wednesday.

Yahoo Finance compiled a checklist for the average investor to use to help understand what Powell just did and why the market responded so harshly.

Feeding recession fears: The Fed forecast two years of slowing GDP growth in its economic projection materials. GDP is expected to take a step down to 2.3% in 2019 from 3% this year. That’s a downgrade of the Fed’s September protection for 2019 of 2.5% growth. For those increasingly worried about a U.S. recession next year, the downgrade only feeds the concerns. Not helping matters is Powell saying there is a “mood of angst” amongst businesses he speaks with on the economy.

Missing inflation: The Fed forecast 1.9% inflation in 2019 as measured by their preferred personal consumption expenditure (PCE) gauge, down from 2% previously. That is also below the Fed’s long-term goal of 2%. Powell downplayed the ongoing undershoot of the target. “Well, we’re pretty close to 2%,” Powell told reporters. Bottom line: if the economy was as healthy as Powell suggests, there would be more inflation and the Fed wouldn’t have downgraded its outlook.

The psychological: The market has a long-held view the Federal Reserve closely watches the stock market and gets worried when it declines. And when they get worried, the Fed will be more inclined to be dovish with their policy. Powell stuck a fork in that view on Wednesday, which likely spooked some investors. The Fed chair downplayed the market’s slide since October and said it wasn’t much a factor in the monetary policy body’s decision.

How investors read that: The market could keep declining into 2019 and the Powell led Fed will continue to hike interest rates. Nobody on Wall Street is keen on that prospect.

The balance sheet: Powell also suggested the Fed will continue to wind down its $4 trillion balance sheet. The process, which is running at a $50 billion a month clip, is seen on Wall Street as leading to tighter financial conditions. In other words, less friendly conditions for stocks.

"I think that the runoff of the balance sheet has been smooth and has served its purpose," Powell said during the conference."I don't see us changing that."
In my last comment, I discussed why Ron Mock, OTPP's president and CEO, is worried about tariffs and stated the following:
As far as the Fed, this interview took place yesterday, a day before today's meeting where the Fed raised rates and signaled two more rate hikes for next year. Ron said if the "Fed goes or holds, it won't make much of a difference" but he added "moderation is appropriate" as the yield curve is flat and global growth is slowing.

I couldn't agree more but it seems the Fed is on a different page, looking at lagging economic indicators.

Ron is worried about rising trade tensions and volatility. I'm more worried about three scenarios:
  1. An emerging markets crisis: As the Fed raises rates, sucking liquidity out of the global system, the odds of another crisis in emerging markets are on the rise, and so is the likelihood of a global synchronized downturn next year. This is why US long bonds (TLT) rallied today following the Fed's decision. That and everyone panicked so there was a massive flight to safety. I would say the odds of an emerging markets crisis went from 30% to 50%.
  2. Trump gets impeached in 2019: There is increasing chatter that President Trump gets impeached next year but some think the Mueller probe could turn out to be a disaster — for the Democrats. So, I would say the odds of a Trump impeachment are 30% right now going into the new year but truth be told, the stock market is acting like it's a done deal.
  3. Trump fires Fed Chairman Powell: After today, I would place the odds of Trump firing Powell and replacing him with Treasury Secretary Steven Mnuchin or Larry Kudlow or some other dove at roughly 60%. Trump follows the stock market very closely, he tweets about it and for him, it's a direct measure of the success of his presidency. He wants to be reelected and there's no way he will allow Jerome Powell or any other Fed Chairman to  engineer a recession going into 2020. He has the power to fire and replace him and while the stock market will sell off hard on the news, it will recover and rally if a far more dovish Fed Chair takes over.
What about tariffs? That's what Ron Mock and Teachers' are worried about. Well, Trump's protectionist policies got us into this mess and it's up to him and his team to manage them appropriately because if trade tensions only get worse, it will impact stock markets, and he can kiss his reelection bid goodbye.

Trump is ruthless, he has proven it time and time again. He has made many mistakes but he will do whatever it takes to win another election, including firing Powell and backing off on tariffs if that's what it takes.

If he wins a second term, the Chinese will have to start negotiating harder on trade and concede something significant
.

I'm getting way ahead of myself here but stay tuned, volatility isn't over, not by a long shot.

The only good news I can tell you is large global pensions, sovereign wealth funds, and institutional leveraged players need to rebalance their portfolio come the end of the month, away from bonds and back into stocks. So we may get a bit of a breather as we approach the end of the year and start a fresh new year.

Maybe. That all remains to be seen. These markets are insane, scaring off retail investors and hurting a lot of institutional investors as well.

No wonder everyone is looking to increase their allocation to private markets, the high-frequency algos and short-sellers shorting with no uptick rule have ruined public markets, for good in my opinion.
I also added this:
The FOMC could ignore Trump but it should listen to Druckenmiller, Gundlach and others who are more forward-looking. And it should read Francis Scotland's analysis on why the balance sheet matters and stop stating nonsense that the balance sheet reduction program will continue to proceed as planned. That's just foolish and dangerous. 

In his post-Fed meeting observations, Martin Roberge of Canaccord Genuity shared these thoughts today:
Missing expectations: Contrary to our expectations and that of many investors, the Federal Reserve did not strike a dovish tone yesterday. Jerome Powell simply stuck to the dot-plot message projecting two rather than three Fed hikes. Unfortunately, fewer rate hikes had become the consensus among investors. More was needed to reverse the ongoing bearish mentality. We believe investors would have welcomed some guidance as to when or under which conditions these two rate hikes would be implemented. In other words, the Fed had to go one step beyond the data dependency narrative and mention, for example, that “the two rate hikes projected by FOMC members are to be conditional to a halt in US/global economic momentum and/or a renewed increase in inflation expectations”. This would have sent a clear message that the two Fed hikes would likely be a H2 story and this would have been just fine we believe. Rather, investors are left to guess and the next hike could be as soon as March, June…

The Fed/FOMC’s domestic bias. We understand the crowd saluting the Fed decision and seeing it as a pre-emptive strike against future asset bubbles. The problem is that asset inflation also works the other way around and with investors all-in in equities, the stock market has become intertwined with the business cycle through the financial conditions channel. The same stock market generates about half of its sales/earnings into foreign markets. These foreign markets account for 85% of the global economy and the latter has been slowing down at a very fast pace and leading economic indicators point to further downside. This is where we part ways with the Fed, its members and several pundits supporting the Fed decision based on relatively strong US growth conditions. Figure 1 will come as a shock to these people as it reminds us that every time the OECD LEI diffusion index has fallen near/below 20%, the US ISM manufacturing survey dipped below the 50 boom-bust line. The last reading is 12%! In our view, history will show that Jerome Powell’s error will have been his failure to drop his domestic bias and account for the global economy when it comes to running the Fed’s monetary policy.

Too little too late? Obviously, the bond market cheered the Fed decision by rallying a full point. Bond investors, likely informed by their equity counterparts, knew that the stock market setup going into the Fed meeting was the January 2016 playbook. As such, they remembered that the Yellen pause was followed by a ~100bp decline in US T-bond yields in less than 6 months. We like to remind investors that in December 2015, the Fed dot-plot projected four hikes in 2016. We ended up having only one hike in December. Our point is that the Fed comments through the press conference likely compounded a curve flattening that should not have occurred. The risk is that flatter curves, lower equities and wider credit spreads tighten financial conditions even more which will force the Fed to surrender and pause when it will likely be too late to raise the odds of a soft landing as the ISM drifts to 50 in H1 (see scary Figure 1).

Not the time to overreact to the Fed. Yesterday was the last “liquid” day to de-risk. Tax-loss selling certainly compounded the sell-off. Today and Friday, however, are key days. In our view, the market must and should bounce back very hard given the deep oversold conditions. Otherwise, we think it will confirm an important break in psychology, the bear market thesis and reinforce the sell-on-strength mentality. For now, we believe the bears are in firm control of this market. While we could be right on an oversold bounce, the Fed’s rate strategy has likely capped the upside to the 200-dma ~2,750. We believe the Fed has performed an uncommon policy mistake due to a domestic bias that is failing to account for global growth considerations, hence contagion risk. We believe that the Fed has hiked for the last time in this business cycle. As such, our December 7 incubator suggests the maintenance of a defensive sectoral posture for now.
Bears are in full control of the market, no thanks to Chairman Powell and the FOMC. They gave them a green light to keep shorting the market.

On LinkedIn, Chen Zhao, Chief Global Strategist at Alpine Macro, shared this following the Fed's decision to raise rates (click on image):


If you cannot read it, let me go over what Chen stated below:
Fed Chairman J. Powell had a chance to reverse the falling stock market today, but he chose to ignore market signals. By projecting a hawkish stance, the Fed is playing a game of chicken with financial markets. This is potentially dangerous because falling stock prices and weakening business confidence could become self-enforcing, driving the U.S. economy into uncharted territory. Today’s rate hike is a mistake, and the key questions are: What does the Fed’s hawkish stance mean for global financial markets and how should investors position themselves? We will address all these questions and much more in our 2019 Global Investment Outlook, to be released early in the New Year. Stay tuned.
I totally agree, I think the Fed failed miserably yesterday, they blew it big time and the market is going to teach Chairman Powell and the folks at the Fed following silly econometric models a very expensive lesson.

Today, Chen put out an Investment Alert titled “Brinkmanship” in response to the Fed’s decision to raise rates yesterday and explained why the Fed’s hawkish stance is a mistake.

In addition, Alpine Macro published a Special Report titled “Volatility Candidates For 2019”. It pinpoints three major areas that could heighten fi­nancial market volatility in 2019: the rapid surge in leveraged loans and collateralized lending obligations (CLOs), an oil-induced nominal slump and a repeat of the tech mania in the 90s’.

My readers can contact the folks over at Alpine Macro to read their insights, all great stuff.

So what does the Fed's decision to raise rates by 25 basis points, continue with two more rate hikes next year, and leave the balance sheet reduction program intact mean for investors?

According to hedge fund guru David Tepper, it means the Fed is done supporting stock prices, so cash is ‘not so bad’ as an investment now:
Hedge fund titan David Tepper said Thursday the Federal Reserve is sending the market a message, and it’s not a good one.

A day after the Fed raised interest rates for the fourth time this year, the influential investor made the following points in an email to Joe Kernen and CNBC’s Squawk Box:
  1. "Powell basically told you the Fed put is dead.
  2. Everyone is tight. Chinese money growth plummeting. ECB cutting the last of QE. And Fed still in tightening mode.
  3. The net biggest issuance of Treasuries and worldwide fixed income is coming next year. Something is going to get crowded out. Bonds stocks etc.
  4. Oh and there is this trade war question. I think we should be having a fight with China on different issues. But it is not conducive to confidence. Freezing some worldwide activity.
  5. Cash is not so bad. ”
The Dow Jones Industrial Average dropped by 350 points to a new low for the year on Wednesday after the Fed hiked its benchmark rate, the ninth such increase since 2015. Fed Chairman Jerome Powell indicated the the central bank would stay the course with hiking at least two times in 2019 and that it would continue to shrink its balance sheet at the same pace, another monetary tightening action.

“The Fed doesn’t care about the stock market within 400 SPX (S&P 500) points,” Tepper added in the email. “It’s the real economy stupid."

The so-called Fed put Tepper refers to is the notion that the central bank would take action to support stock prices in times of volatility, without explicitly saying it was doing so. A put is an option that pays off when a security’s price falls below a certain level.

The S&P 500 is now down 6 percent this year, battered by the ongoing trade battle with China and fears of what the Fed increases are doing to the economy. The benchmark is down more than 14 percent from its record high reached in late September. The U.S. budget deficit could hit almost $1 trillion next year, Nomura Instinet estimates, which will cause the Treasury to increase the supply of debt it auctions. That, in turn, could weigh on the prices of bonds and other assets, Tepper speculates.

Tepper is the founder of Appaloosa Management, which has $14 billion under management. His calls have moved the market in the past like when he predicted in September 2010 that the stock market would surge as the Fed sought to inject the market with more liquidity. The S&P 500 is up 164 percent since that call, known as the “Tepper Rally,” in part because of additional stimulus from the Fed in the form of quantitative easing. That’s now being reversed with the Fed’s balance-sheet reduction.

Tepper, who also owns the Carolina Panthers, told CNBC in September that the bull market was in the late innings and he was selling some holdings.
So, is Tepper right? Is cash king? It sure looks like it the day after the Fed's big bomb. Here is a market snaphot at the close on Thursday (click on image):


But I also have to warn you, you need to be careful with David Tepper and all these hedge fund gurus coming on television spreading fear as markets get clobbered. The Fed put is dead? Want to bet on that? Let's see markets crash and you will see the Fed cutting rates back down to zero and engaging in QE infinity faster than you can possibly imagine.

And don't forget, I track David Tepper's stock portfolio very closely every quarter when I go over top funds' activity, and he's getting killed on his top long stock picks like many other gurus (he hedges and has other strategies), so he could be saying one thing on CNBC but come February 15, 2019, I'd like to see what exactly he bought and sold in Q4.

Notice how quiet Warren Buffett has been? He too is getting killed on his top stock picks this year but if I were betting on it, I'm pretty sure he's adding to many of his positions, like Goldman Sachs (GS) which has gotten killed and is now at very interesting levels for long-term investors like Buffett (click on image):


But as I've been telling my readers, ignore Buffett and the bond king's ominous warnings about US long bonds, in this environment, US long bonds (TLT) are the ultimate diversifier and will save your portfolio from getting decimated (click on image):


Will long bond prices make a new high (yields a new low)? Well, if my forecast of a synchronized global downturn in 2019 materializes, you bet they will.

Still, I caution my readers, nothing goes up in a straight line and nothing goes down in a straight line. Don't let your emotions get the best of you as you watch stocks sink lower and lower.

At the end of the month, there is going to be major rebalancing going on away from bonds and into stocks. You might not see it next week in time for Christmas but it's coming, that much I guarantee you.

In fact, I am already seeing it at the end of the day today and will watch for more rebalancing tomorrow and next week.

It was also worth noting that emerging markets stocks (EEM) ended the day up on huge volume, so there is likely some rebalancing going on there away from US stocks to international ones that got clobbered this year (click on images):



In times like these, you can't let emotions get the best of you but admittedly, it's easier said than done when watching the Dow plunge 500+ points every day with no end in sight.

You can thank Jerome Powell for the latest selloff, he and the rest of the FOMC really bungled it up yesterday, that's why he's the Fed Grinch who stole Christmas this year and possibly next year too if a full-blown bear market develops.

Below, Jim Bianco, Bianco Research president, explains why the market is worried about two more rate hikes next year. And CNBC's Jim Cramer gives his take on the Fed Chairman Powell's announcement to tighten monetary policy.

Third, global macro legend Stanley Druckenmiller discusses the outlook for the US economy, his investment strategy for stocks and bonds, President Donald Trump's attempts to sway Federal Reserve policy and the prospects for a solution to the US-China trade dispute. He talks with Bloomberg's Erik Schatzker. Any interview with Mr. Druckenmiller is always a treat.

Lastly, watch Fed Chair Jerome Powell's conference following the Fed's decision to raise rates. You can read the FOMC statement here.

Don't let the Fed Grinch and markets get you down, enjoy your holidays, I'll be back sometime next week to discuss markets and a quick recap of the year.

I remind all of you reading this blog to please contribute to it on the right-hand side, under my picture, using PayPal options. I thank all of my supporters and wish you a Merry Christmas, Happy Holidays and a Happy & Healthy New Year.



Wednesday, December 19, 2018

Ron Mock Worried About Tariffs?

Ron Mock, president and CEO of the Ontario Teachers’ Pension Plan, joined BNN Bloomberg yesterday to discuss his investment prospects for 2019. Mock says global tariffs and government policies will be crucial to future market activity.

I embedded the interview below and you can also watch it here. Ron spoke about concerns of tariffs and rising trade tensions because that's where "politics, egos and all sorts of things can come into play."

Interestingly, he said that 18 months ago, Teachers' started bringing its equity allocation down "very substantially" from mid 40% to 33% "not as a view but as need to take volatility out of the portfolio as we felt we are going into a volatile period." He also said that Teachers' took $70 billion of foreign exchange exposure out of the portfolio and added "we've tried to insulate the portfolio as best we can against volatility" all while they maintain the return profile.

He said the diversification benefits of having a global portfolio allows them to rebalance because what is going on in Asia isn't the same as Europe or the US.

But he said they have people and boots on the ground all over as they have offices in Asia (Hong Kong), South America (Santiago, Chile), and Europe (London) and are keenly aware of government policies in these regions and how it impacts their portfolio.

As far as the Fed, this interview took place yesterday, a day before today's meeting where the Fed raised rates and signaled two more rate hikes for next year. Ron said if the "Fed goes or holds, it won't make much of a difference" but he added "moderation is appropriate" as the yield curve is flat and global growth is slowing.

I couldn't agree more but it seems the Fed is on a different page, looking at lagging economic indicators.

Ron is worried about rising trade tensions and volatility. I'm more worried about three scenarios:
  1. An emerging markets crisis: As the Fed raises rates, sucking liquidity out of the global system, the odds of another crisis in emerging markets are on the rise, and so is the likelihood of a global synchronized downturn next year. This is why US long bonds (TLT) rallied today following the Fed's decision. That and everyone panicked so there was a massive flight to safety. I would say the odds of an emerging markets crisis went from 30% to 50%.
  2. Trump gets impeached in 2019: There is increasing chatter that President Trump gets impeached next year but some think the Mueller probe could turn out to be a disaster — for the Democrats. So, I would say the odds of a Trump impeachment are 30% right now going into the new year but truth be told, the stock market is acting like it's a done deal.
  3. Trump fires Fed Chairman Powell: After today, I would place the odds of Trump firing Powell and replacing him with Treasury Secretary Steven Mnuchin or Larry Kudlow or some other dove at roughly 60%. Trump follows the stock market very closely, he tweets about it and for him, it's a direct measure of the success of his presidency. He wants to be reelected and there's no way he will allow Jerome Powell or any other Fed Chairman to  engineer a recession going into 2020. He has the power to fire and replace him and while the stock market will sell off hard on the news, it will recover and rally if a far more dovish Fed Chair takes over.
What about tariffs? That's what Ron Mock and Teachers' are worried about. Well, Trump's protectionist policies got us into this mess and it's up to him and his team to manage them appropriately because if trade tensions only get worse, it will impact stock markets, and he can kiss his reelection bid goodbye.

Trump is ruthless, he has proven it time and time again. He has made many mistakes but he will do whatever it takes to win another election, including firing Powell and backing off on tariffs if that's what it takes.

If he wins a second term, the Chinese will have to start negotiating harder on trade and concede something significant.

I'm getting way ahead of myself here, but stay tuned, volatility isn't over, not by a long shot.

The only good news I can tell you is large global pensions, sovereign wealth funds, and institutional leveraged players need to rebalance their portfolio come the end of the month, away from bonds and back into stocks. So we may get a bit of a breather as we approach the end of the year and start a fresh new year.

Maybe. That all remains to be seen. These markets are insane, scaring off retail investors and hurting a lot of institutional investors as well.

No wonder everyone is looking to increase their allocation to private markets, the high-frequency algos and short-sellers shorting with no uptick rule have ruined public markets, for good in my opinion.

Below, Ron Mock, president and CEO of the Ontario Teachers’ Pension Plan, joins BNN Bloomberg to discuss his investment prospects for 2019. Great interview and very timely.

Second, supporting what Ron stated, Charles Dumas, chief economist at TS Lombard, gave a gloomy outlook for the global economy in 2019, stating the trade war has had ‘huge’ impact on growth.

Lastly, I embedded Fed Chair Jerome Powell's conference following the Fed's decision to raise rates. You can read the FOMC statement here.

I wasn't very impressed with how this meeting was handled. I think at the very least the Fed could have stopped its balance sheet reduction and Powell was almost praising himself and their decision to raise rates (listen to news conference below).

The FOMC could ignore Trump but it should listen to Druckenmiller, Gundlach and others who are more forward-looking. And it should read Francis Scotland's analysis on why the balance sheet matters and stop stating nonsense that the balance sheet reduction program will continue to proceed as planned. That's just foolish and dangerous.

All this to say if Trump fires Powell and replaces him with a more dovish Fed Chair, I think a lot of people will publicly grumble but privately they will welcome the decision. Stay tuned.