FOMC’s Minutes Roils The Markets!

February 22, 2018   

* Fed minutes are the same-o, same-0 to Chuck!

* Another blow to Carney’s rate hike promises… 


Good Day… And a Tub Thumpin’ Thursday to you! I have an early date with the Honda Service garage this morning to deal with some brake adjustments… But… I truly believe that I’ll be on my way to a Tub Thumpin’ Thursday later today! Last night, I had one of the best meals I’ve had in years, and shared it with friends that made the meal even better! We feasted at the Okeechobee Steak House, the oldest steakhouse in Florida, and brother I ate more last night than I have since my Labor Day BBQ! That’s nearly 6 months ago, folks… I sure hope I don’t have to wait another 6 months before enjoying a meal like that again! I do have to admit though that during most of these past 6 months I’ve not felt like eating… I guess being off the chemo for a month now, has its benefits, eh? The group Live greets me this morning with their song: I Alone…  

The FOMC Meeting Minutes that  saw the light of day yesterday upset the stock market rally cart and brought about more dollar buying late in the day, and carried over in the overnight markets. So, I guess we have to dig into the Minutes to see what all this fuss is about, eh? 

Let’s see here… I see nothing new. The Fed Heads have been spewing this garbage to the markets and investors for some time now. They basically said, “that  they have revised upward the economic and inflation projections they made at the previous meeting in December. The Fed Heads  see increased economic growth and an uptick in inflation as justification to continue to raise interest rates gradually, according to minutes from the central bank’s latest meeting.  

Of course I disagree to a point, in that I do agree that inflation is going to become a real problem for the U.S. economy, but I don’t agree with the “increased economic growth”, unless that is you’re comparing today’s economy with that of 2008! And that’s where the Fed Heads get to hide behind their words… They didn’t say that that think the increased economic growth was compared to anything, and knowing them the way I do, they could very well be comparing today to 2008!  OK, maybe not that extreme, but you get the picture…  For the record, I’m calling for low growth, and high inflation going forward. Stagnation if you will.. 

Of course these minutes were recorded 6 weeks ago, and the Fed Heads certainly didn’t know that January Retail Sales would print negative, along with Industrial Production…  I’m just saying…  

So, more rate hikes are on the horizon and that spooked the stocks market, and sent the yield on the 10-year Treasury to a 4-year high if 2.93%. Gold held steady Eddie, but is getting sold in the early morning trading today by $7.   

Then, to top the FOMC Meeting Minutes, Fed Head,  Quarles, had this to say… “The U.S. economy appears to be performing very well and, certainly, is in the best shape that it has been in since the crisis and, by many metrics, since well before the crisis.”   Really? Tell that to all the malls that are closing up, the stores that have shuttered, and the car makers, who are about to see car sales go for a ride on the slippery slope, in my opinion, which could be wrong, of course! 

Poor Mark Carney… The other day, I looked up the definition of putting one’s foot in its mouth, and they had a picture of Mark Carney! For those new readers, Mark Carney is the Gov. of the Bank of England (BOE), and before that job he held a similar job at the Bank of Canada (BOC)…  And it’s there at the BOC that he got his reputation, called by me, of making promises to hike rates, and then never coming through with them. 

The sad thing is that recently when Carney called for rate hikes to come, it marked the 3rd time he has done so, having done one at the BOC, and now two at the BOE…  Yesterday, I told you that his rate hike call got a blow to the midsection with an increase in the Unemployment Rate, and today his rate hike call received an upper cut, from a weaker 4th QTR GDP than previously printed…  Yes, 4th QTR GDP was revised downward, as was the Year-on-Year data…  Where have all the rate hikes gone? Long time passing, eh, Mark Carney?   

And the pound gets caught up in all this, which is why, I continued to question the mental geniuses that keep buying the pound, whenever Carney speaks about rate hikes… They aren’t coming, any time soon, folks, and that’s all I’m going to say about that!  

That Indian rupee warning I gave you last week, sure seems to be playing out with the rupee trading to 65 handle (it’s a European priced currency so the higher the number the lower the value VS dollars) Crazy rupee traders that though the way to currency appreciation was through extended and increased Stimulus…  If they only listened to me! HA! 

I mentioned above that I think car sales are going to begin to really drop. We could see an indication of that in the Retail Sales data that printed last week for January. When you took out the car sales, Retail Sales were flat, instead of negative.  My new fave economist, Danielle Di Martino Booth, sent out her weekly letter (that costs) yesterday, and it was titled: Clear and Present Danger: Will Autos Crash The U.S. Economy?  

She give us a teaser, saying: “This week I’ve taken the opportunity of being called out to make some calls to the best and the brightest covering the auto sector. The analysis and data they provided from multiple sources provided plenty of back-up to support my initial assessment. If anything, I fear forecasts calling for new car sales to decline to a 16.7-million annual rate are overly optimistic.”  

Yikes! I’ve said for sometime now, that I see new cars being driven all over, and sooner or later, everyone that wanted and could afford a new car and even those that can’t afford a new car have bought them, and there had to be a leveling off… And now Ms. Booth, agrees with me! YAHOO! I got someone to agree with me, that’s a real economist! YAHOO!  I’m going out on the deck that overlooks the beach and ocean and yelling this out loud! 

To recap… the Fed’s FOMC Meeting Minutes roiled the markets yesterday, and have sent stocks, currencies and metals down, and bond yields higher, as the Fed Heads are calling for more rate hikes…  The U.K. saw a downward revision to their 4th QTR GDP, and sterling got sold.  And Chuck doesn’t agree with the Fed Heads, go figure, right?  

For What It’s Worth….  I told you earlier this week that the only data that would print this week was some housing data, and yesterday was one of those housing data prints… Existing Home Sales, and brother is there a problem here… this appeared here:  

Or, here’s your snippet: “After new- and existing-home sales tumbled in December, expectations were for a modest 0.5% rebound in January (despite plunging mortgage applications and soaring rates). But that did not happen as existing home sales tumbled 3.2% MoM to its lowest level since Aug 2016.

(NOTE – this data is based on signed contracts from Nov/Dec, which means the recent spike in rates is not even hitting this yet)

The West (-5.0%) and Midwest (-6.0%) saw the biggest drop in sales and while the blame (see below) was put on inventories, data shows a 4.1% increase, in “available for sale” homes?

Of course NAR is careful to blame inventories – and not soaring rates affecting affordability: Lawrence Yun, NAR chief economist, says January’s retreat in closings highlights the housing market’s glaring inventory shortage to start 2018.

“The utter lack of sufficient housing supply and its influence on higher home prices muted overall sales activity in much of the U.S. last month,” he said.”  

Chuck Again…  Houston, we have a problem… I’m just saying…  

Currencies today 2/22/18… American Style: A$ .7820, kiwi .7332, C$ .7880, euro 1.2284, sterling 1.3877, Swiss $1.0661, … European Style: rand 11.6945, krone 7.8945, SEK 8.1372, forint 254.24, zloty 3.40, koruna 20.6187, RUB 56.60, yen 107.35, sing 1.3223, HKD 7.820, INR 65.05, China 6.3412, peso 18.78, BRL 3.2558, Dollar Index 90.05, Oil $61.49, 10yr 2.93%, Silver $16.49, Platinum $986.68, Palladium $1,026.65, and Gold… $1,325.70   

That’s it for today… Happy Birthday George Washington! I won’t get into my discussion I had on Lincoln’s Birthday, but it applies to today too! Congrats to the U.S. Women’s Hockey Team for their Gold medal win last night… This game was decided by a shoot out, and even though the U.S. won, I still say that it’s no way to decide a Championship! Sunday is getting closer… My first Spring Training game this year! The end of February next week will mean that my building friends will be leaving to go back home…  Hopefully we get to get together again next year! But March brings friends from St. Louis, then my Spring Training buddies, then darling daughter Dawn, Delaney, Everett and Jerry, so I’ll have plenty of company in March! YAHOO!    And with that, Cheap Trick takes us to the finish line today with their song: I Want You To Want Me…  Now, let’s go make this a Tub Thumpin’ Thursday, and remember to Be Good To Yourself!  

Chuck Butler