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Fed’s Mester favors 75 bp hike under current conditions

On April 22 this BITCH with her fellow Fed Reserve  ASSHOLES where blowing blue sky up our asses. As you can see at that time she said a 75 bases point increase in Fed Funds were not necessary…. AND at the last FED meting she voted for a FED FUNDS increase of 75 bases points. NOW on June  29 she thinks another 75 bases point rate hike IS necessary. See the video below

President of the Federal Reserve Bank of Cleveland, Loretta Mester, noted on Wednesday that she would vote for an interest rate increase of 75 basis points in July if the current economic conditions remain unchanged next month. “If conditions were exactly the way they were today going into that meeting – if the meeting were today – I would be advocating for 75 because I haven’t seen the kind of numbers on the inflation side that I need to see to think that we can go back to a 50 increase,” Mester told CNBC. The Fed already decided to increase rates by 75 basis points earlier this month in response to record inflation in the United States. The next meeting of the Federal Open Market Committee is scheduled for July 27, after which a new rate decision will be announced. NN: obviously since endless easing and “transient” inflation the FED and their Doctoral Einsteins have wandered off the reservation….. AGAIN.

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We need to see capitulation and panic before the bear market is over

U.S. stocks haven’t yet seen the extreme investor capitulation that’s typical of market bottoms.

The end of the bear market is not close. That’s according to a contrarian analysis of stock market sentiment: the U.S. stock market hasn’t yet experienced the extreme pessimism seen at major bottoms. It may certainly feel like there’s plenty of pessimism and despair on Wall Street. But that bearishness seems a mile wide and an inch deep. My sentiment indices, based on market timers’ recommended equity exposures, continue to indicate an underlying eagerness to declare that a bottom has been formed. Of course, the stock market could stage a sizeable rally at any time. But the analysis suggests that any upside would probably not amount to more than a bear-market rally. I base these conclusions on the failure of the two stock-market sentiment indices my firm maintains to not only drop into their respective zones of extreme pessimism (the bottom 10% of their historical distributions) but to stay there for more than a day or two. These two indices — the Hulbert Stock Newsletter Sentiment Index (HSNSI) and the Hulbert Nasdaq Newsletter Sentiment Index (HNNSI) — reflect the average recommended equity exposure level among a particular subset of short-term stock market timers. I’ve written before about these indices’ failure to remain within the bottom deciles of their distributions. The metric I have proposed is the number of trading days over the trailing month in which both indices stay in their bottom deciles. This currently stands at 23.8%, well-short of the levels to which this percentage rose on the occasion of prior market bottoms. For example, at the bottom of the 2007-09 bear market that accompanied the Global Financial Crisis, the comparable total was 81.0%.A similar conclusion comes from the absence of what technical analysts refer to as “capitulation.” Investopedia defines this as “the dramatic surge of selling pressure… that marks a mass surrender by investors.” While analysts define capitulation differently, none of those I follow believe that capitulation has yet occurred.  One such analyst is Manuel Blay, editor of TheDowTheory.com, an advisory service founded by Jack Schannep. Though their particular criteria for capitulation are proprietary, their website indicates that they are based on a “Short-term Oscillator which measures the percent of divergence between the three major stock market indices (Dow Jones Industrial Average DJIA, -0.11%, Standard & Poor’s 500 SPX, +3.06% and the New York Stock Exchange Composite) and their ten-week, time-weighted moving averages.” The required levels change each week. But for now, Blay said in an email, it would require at least two of the three market averages to close below these levels: Dow below 28,407; S&P 500 below 3,553; and the NYSE Composite below 13,532. Each of these market benchmarks currently are several percentage points higher. Another technical analyst who is waiting for capitulation to signal the end of the bear market is Sam Stovall, chief investment strategist at CFRA Research. In an email to clients this week, Stovall said that he bases his definition of capitulation on a “15-day average of daily percent differences between intra-day highs and lows for the S&P 500.” Capitulation is indicated “when spikes [are] well above two standard deviations.” In an email, Stovall wrote that the market currently “is above 1 standard deviation, but below two standard deviations, implying we have further to fall.” The absence of capitulation doesn’t guarantee that the bear market has further to go, I hasten to add. Blay points out that, while capitulation is a reliable indicator the bear market is coming to an end, not all bear markets end with capitulation. No indicator is perfect, after all. Still, history teaches us that this bear market will most likely end in capitulation. So be on the lookout for a selling climax, as evidenced by extreme bearishness among market timers, spikes in volatility, and big drops in the market averages. If such a climax occurs, contrarian investors would sit up and take notice. By Mark Hulbert. NN: I see a little more work to the upside. I want to see what the markets look like during the coming earning season. The July FOMC meeting the last one till September should give us another 75 bases point increase…

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Johnson fears Ukraine will have to take ‘bad’ peace deal

https://youtu.be/RpyG4XE_zj4

KIGALI (Reuters) – British Prime Minister Boris Johnson said on Saturday that he feared Ukraine could face pressure to agree a peace deal with Russia that was not in its interests, due to the economic consequences of the war in Europe. “Too many countries are saying this is a European war that is unnecessary … and so the pressure will grow to encourage – coerce, maybe – the Ukrainians to a bad peace,” he told broadcasters in the Rwandan capital Kigali, where he is attending a Commonwealth summit. Johnson said the consequences of Russian President Vladimir Putin being able to get his way in Ukraine would be dangerous to international security and “a long-term economic disaster”. NN: Ukraine lost the war the minute NATO refused to provide air cover and or troops. As we speak the G7 is arranging a continuation of buying Russia oil and gas by trickery. Remember the agreement was to halt all buying of Russian gas and oil by year end. That will never happen. Putin has won. He will get what he wants…… And he will be back for more after he consolidates these recent gains

 

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Most Expensive, Manic Minutes of the Trading Year…. will the LI effect make us money?

Exactly at the NY open Friday the stock market bases the NASDAQ 100 soared from 11,700 to 12,000 by 10:00 am. To a lot of traders this was a surprise since fund rebalancing usually occurs on the close. In the overnights we got a sniff of movement and spread our positions. When the zoom zoom started we went long and then went flat. In the last few minutes of trading on Friday, equity volumes  exploded as funds managing trillions finished up adjusting for the annual reconstitution of the FTSE Russell indexes, instantly making this one of the busiest days of 2022.  But on the close (since most of the trades were made on the open) the NASDAQ100 only was up around 200 point.. From 11950 to a high of 12100. We took advantage of the final hurrah to turn our spread bet to a bias to the short side.

Trading volumes surge every June for FTSE Russell reconstitution

We are fundamentally negative on stocks overall. But our Fridays action was taking advantage of what i call the Li effect. In it, Li — then a PhD student at the University of Illinois Urbana-Champaign — crunched data through 2020 to show that a share rises 67 basis points on average in the five days before it’s bought by a transparent U.S. equity exchange-traded fund and slips 20 basis points in the subsequent 20 days. The 67 basis-point “execution shortfall” he found compares to 24 basis points for other institutions, according to an earlier research paper.

relates to Brace for the Most Expensive, Manic Minutes of the Trading Year

Li showed that stocks gain before “sunshine” ETFs (transparent index followers) buy them and fall after.

The idea is that passive vehicles are hitched to the public rebalance schedules of indexes like the S&P 500 and Russel 2000, so when stocks are added to the gauge, the trillions tracking it have to snap them up typically on the same day. That bombards the market with such massive and predictable orders that the funds end up paying a premium. Other academics and researchers have fretted over these kinds of distortions for years. In fact, last July FTSE Russell itself announced an internal review of its rebalance frequency.  Turnover during the 2021 reconstitution jumped 45% from a year earlier, the firm said after the event. It noted that “a record 2.37 billion shares representing $80.8 billion were executed in the Nasdaq Closing Cross in 1.97 seconds, while 2.1 billion shares were traded on NYSE — their fifth largest NYSE Closing Auction ever, with $105.1 billion in notional value traded.” Li’s claim that arbitrageurs are pushing up trading costs is a contentious one. To Antti Petajisto, who documented the so-called index effect — where stocks enjoy a bump in performance after being added to an index — as a finance professor at New York University in 2010, Li’s results show there’s a case for spreading rebalancing trades across the day or even a few days. But he stresses transparency is actually a win-win for both arbitrageurs and ETF providers.

relates to Brace for the Most Expensive, Manic Minutes of the Trading Year

Illustration of turnover on rebalance days from “Should Passive Investors Actively Manage Their Trades?” by Sida Li.

Fridays trading represented represented the biggest stock market trading gain since May 2020. With the DOW up 0ver 800 points. The S&P500 up 116 points and the NASDAQ100 up over 400 points. Of course the know everything Know nothing Wall Street talking heads called Friday a market reversal since the FEAD will not raise rates as mush as the market previously priced in. Al i can say is BULLSHIT!

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Significant downside risks to US economic outlook – IMF’s Georgieva

Experts of the International Monetary Fund (IMF) think that there are significant downside risks for the US economy this year and especially next year, IMF Managing Director Kristalina Georgieva said presenting the annual report on the state of the American economy in Washington.  “We see very significant downside risks [in the US economy] this year and especially next year,” she said. Georgieva noted that, according to the baseline scenario, which is being considered by the IMF, the US economy is unlikely to avoid a recession. High energy prices pose risks to the global economy and also affect the pace of its development, Georgieva told. “Where we see the snaring path ahead it and what are the biggest risks any of course, high energy prices. This is a risk for US economy and for the world economy as a whole. Not only because it affects inflation, but because it has a broader consequences for growth prospects. When we look at the potential for some withdrawal of oil supply, that of course, could create an it does create further pressure on oil prices,” the head of IMF said. According to her, the IMF assessed “what could that result into.” “We do see the need for a policy that would prevent further upward pressure on oil prices,” she said. Georgieva added that many developing countries were in a very difficult situation under the current circumstances. Georgieva said she had discussed with US Treasury Secretary Janet Yellen the importance of implementing policies that help keep this upward pressure on oil prices under control as much as possible. The Fund’s Managing Director also stressed that the situation around food in the world next year could become worse than this year, not only because of what is happening in Ukraine, but also because of crop failures in a number of countries. IMF finds it important to fight inflation in the US to bolster growth prospects for the future, but the necessary government action can affect US consumers in the short term, Georgieva told. “I want to say something that sometimes is left unthought and it is the importance to fight inflation today. This is a top priority for a reason because if we don’t secure price stability, it would be negative for growth and it will be negative for incomes will affect people. It will affect families dramatically. So, it is an important step to be taken and success. Over time will be beneficial for global growth. But some pain to get to that success can be a necessary price to pay,” she said. On Friday, the IMF cut its 2022 growth forecast for the US economy by 0.8 percentage points to 2.9%. For 2023, the IMF lowered its forecast from 2.3% to 1.7% and now expects growth of 0.8% in 2024. In October last year, the similar forecast of the fund for the current year was 5.2%. NN: This economic crises is far far from over. In fact the earth shattering depression has started as you are seeing… This is a ten year event. I am here for you.

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Dow jumps more than 800 points as U.S. stocks snap three weeks of losses

All three major U.S. stock benchmarks closed sharply higher Friday, with the technology-heavy Nasdaq Composite surging more than 3%, as investors reassessed the expected path of Federal Reserve interest-rate hikes. The Dow Jones Industrial Average, S&P 500 and Nasdaq each scored weekly gains, snapping three straight weeks of losses.

  • The Dow Jones Industrial Average DJIA, +2.68% gained 823.32 points, or 2.7%, to close at 31,500.68, its largest daily percentage gain since May 4.
  • The S&P 500 SPX jumped 116.01 points, or 3.1%, to finish at 3,911.74, its biggest daily percentage gain since May 18, 2020.
  • The Nasdaq Composite COMP, 3.34% surged 375.43 points, or 3.3%, to end at 11,607.62, its largest daily percentage gain since May 13.

For the week, the Dow booked a 5.4% gain, while the S&P 500 climbed 6.5% and the Nasdaq jumped 7.5%, according to Dow Jones Market Data. The Dow and S&P 500 each saw their biggest weekly gain since late May, while the Nasdaq had its best week since March.

The market now seems to be interpreting recent signs of slowing growth as a reason for the Federal Reserve to potentially have “a lighter touch” in its battle with inflation, said Dave Grecsek, managing director for investment strategy and research at Aspiriant, in a phone interview Friday. The thinking seems to be that maybe “we really can avoid a recession,” he said, with the Fed potentially needing to become less aggressive in hiking rates to bring down inflation as the economy slows. Commodity prices have been falling recently, and judging by Fed funds futures, investors now see a lower peak in the path of the Fed’s benchmark interest-rate target. “We’ve seen a two-week drop in commodity prices and now we are seeing Fed funds futures pricing in rate cuts out in 2023. The thing holding back the market was endless rate hikes, if we’ve found the terminal rate then stocks can make headway here,” said Mike Antonelli, a market strategist at Baird. “Hopes that inflation is peaking and that the economy is still on solid footing has some investors confidently buying up heavily discounted stocks,” said Edward Moya, senior market analyst for the Americas at OANDA, in an emailed note Friday.San Francisco Fed President Mary Daly on Friday joined others in signaling support for another big rate increase in July to slow inflation. Some market strategists also attributed the bounce in stocks this week to technical factors after the main benchmarks tumbled last week. Meanwhile, the rebalancing of the Russell U.S. equity indexes after the market’s close Friday  resulting in a surge of trading volume and price upwards as we headed toward the closing bell.

Don’t trust the stock-market bounce until S&P 500 is back above 3,800

The market is being driven by “this push and pull between inflation risk, recession risk and the Fed’s ability to navigate a path forward in terms of rate policy,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors, in a phone interview Friday. Investors are trying to work out “how quickly and how far” the Fed will need to go — or will “be able to go” — in terms of further tightening amid evidence the U.S. economy is slowing, he said. NN: the POP in the stock markets were little more then a dead cat balance. In part driven by the old Wall Street trick, throw the losers and add the current crop of winners. This time it was the Russel 2000 “rebalancing”. For the record we shorted into the close…….

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Fed’s Bowman favors additional 75 bps hike at next meeting…….. Increased inflation projections ‘worrying’ – Buba’s Nagel

Fed Governor Michelle Bowman  indicated that she believes an additional 75 basis point rate hike at the next meeting is “appropriate,” according to prepared remarks to be delivered at the Massachusetts Bankers Association conference that were revealed Thursday. According to the notes, she also calls for hikes of at least 50 basis points at the following meetings if supported by incoming data. Additionally, “since inflation is unacceptably high,” there is no point in having “the nominal federal-funds rate below near-term inflation expectations,” said Bowman, while stressing that she is “committed to a policy that will bring the real federal-funds rate back into positive territory.”

Increased inflation projections ‘worrying’ – Buba’s Nagel

Bundesbank President Joachim Nagel stated on Thursday, during an event in Eltville am Rhein, that the European Central Bank’s revision of inflation projections is “worrying.” “If the expectations of inflation become unanchored, there is a risk of high wage demands,” Nagel noted adding that central banks “need to give households and businesses clear and timely signals that we are committed to maintaining price stability” as this would “help bring inflation back to target” and assist with lowering inflation expectations. Nagel emphasized that authorities need to make sure “the increased inflation does not take hold in the medium term.” He further went on to say that central banks should not “react too late or too little at the moment.” NN: Their is no way a recession can be avoided. AND the FED is in panic mode and will be slamming on the brakes on a icy road.; Net result DISASTER … To later to late To much to soon!

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Balance sheet should be $2.5T-$3T lower….. Powell: Inflation expectations anchored

United States Federal Reserve Chair Jerome Powell revealed on Thursday that the central bank’s balance sheet should be “roughly” $2.5 trillion to $3 trillion lower compared to the current situation and down to a size where the Fed could conduct monetary policy. He also predicted the Fed’s asset portfolio will be reduced by up to $95 billion per month by September and that it is currently being scaled down by half of that number. There is no clear connection between a concentrated economy and inflation, he told the US House of Representatives Financial Services Committee. The effects of increasing interest rates will be felt in financial conditions, economic demand, asset prices and the exchange rate, Powell explain

Powell: Inflation expectations anchored

United States Federal Reserve Chair Jerome Powell stated on Thursday that the inflation expectations are anchored. Inflation is expected to be high in the “very near term”, but inflation will fall “fairly quickly” after that to levels consistent with the Fed’s price mandate, Powell underlined. Although the inflation expectations are anchored at the moment, Powell noted that this is not enough, as “inevitably, over time, these expectations are going to be under pressure” if people lose confidence in the possibility of lowering inflation. NN: We have gone from TRANSITORY inflation to  Embedded. And the Fed is to blame. This will end very badly

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Fed to cut balance sheet by $95B per month by Sept. – Powell

United States Federal Reserve Chair Jerome Powell predicted on Thursday that the central bank balance sheet will be reduced by up to $95 billion by September. The Fed’s asset portfolio is currently being scaled down by half of that number. There is no clear connection between a concentrated economy and inflation, he told the US House of Representatives Financial Services Committee. The effects of increasing interest rates will be felt in financial conditions, economic demand, asset prices and the exchange rate, Powell explained. NN: people hear what they want to hear. The Fed announced it will double the rate will reduce the balance sheet. That means liquidity will be drying up at a even faster rate. Bottom line this is the death knoll for the stock market,,,,,, Let me help you understand this. In the past few years the FED has purchased half 50% of the total government issued. it has also bought most of the home mortgages paper issued and a huge hunk of corporate debt. The feds balance sheet stands as of June 14, 2022, a eye popping 8.93 trillion U.S. The  Federal Reserve increased 1000% since 2007, when it stood at roughly 0.9 trillion U.S. dollar. This year the FED will reduce its balance sheet buy a trillion dollars. Net when you consider they were increasing their balance sheet by a trillion dollars a year will be 2 trillion less liquidity they last year. The markets from housing to bonds to corporate debt markets will be devastated.

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Biden calls on Congress to cancel federal gas tax for 3 months

United States President Joe Biden called Congress on Wednesday to suspend the federal gas tax for “the next 90 days.” During his televised speech on gas prices and Putin’s price hike, Biden said that the collaboration of the companies was also necessary to reduce the cost of fuel amid the crisis caused by the war in Ukraine. In this regard, he called on the industry to refine more oil into gasoline, thus lowering its price. Finally, he also expressed his desire for oil companies to use their profits to increase refining capacity instead of buying back shares. NN: with what is left of the free market i am SURE those Federal gas tax savings will not be passed along in full. Lets say they are its  only 18 cents per gallon. lets take the average and mean of US motorists gasoline consumption per month. Its between 50 to 100 gallons a month, that’s $9.00 to $20.00 a month. What a sick fucking joke. He should have been laughed out of the room. I am shocked!! That is a solution to run away inflation. How about unchaining the US oil industry. Do that and the US balance of trade would be surplus and crude oil would be $50 a gallon and gasoline $2.50 a gallon.