Pundits of every stripe thought the Federal Reserve was out of ammunition to keep the economy afloat while the world battles the coronavirus.
However, over this past weekend the Fed pulled out all the stops.
All that's left to throw at the economy is the kitchen sink.
Wall Street liked what it saw.
At first.
Stocks bounced up on the news before sinking into the red by yesterday's close.
Pundits of every stripe thought the Federal Reserve was out of ammunition to keep the economy afloat while the world battles the coronavirus.
However, over this past weekend the Fed pulled out all the stops.
All that's left to throw at the economy is the kitchen sink.
Wall Street liked what it saw.
At first.
Stocks bounced up on the news before sinking into the red by yesterday's close.
But there's an even bigger problem...
The Fed's been taking some desperate measures lately in these desperate times.
But markets haven't fully priced in their rescue and recovery programs for what they really are, which is an admission that "this time is different" and it's too late to stop what's going to happen next.
If you think the Fed's going to fire hundreds of billions or trillions of dollars of "stimulus" rounds at the coronavirus crisis and pierce its grip on mankind, on the market, and on the economy, you're wrong.
This is an existential threat to humans, markets, and economies, which the Fed's ammo can't kill - but it sure can make it worse.
Here's what the Fed's doing, what it's going to do, why it won't work, how you'll know it's not working, and how it's going to make everything worse...
If you think the Fed's going to fire hundreds of billions or trillions of dollars of "stimulus" rounds at the coronavirus crisis and pierce its grip on mankind, on the market, and on the economy, you're wrong.
This is an existential threat to humans, markets, and economies, which the Fed's ammo can't kill - but it sure can make it worse.
We've seen this show before.
After the stock market hits a rough patch, almost on cue, riding a noble white stallion, comes the Federal Reserve to save the day with an interest rate cut.
But this rate cut was exactly the wrong move.
Here's why, and what you should be watching for instead...
Rumors of the Federal Reserve's demise - in part because it was "duped" by the biggest bank in the United States - have been greatly exaggerated, though headlines would have us believe otherwise.
MarketWatch declared in April, "The Federal Reserve Has Lost Control of the Financial Markets."
The Wall Street Journal asked in June, "Has the Fed Lost Its Mojo?"
Not only has there been no letup, but fearmongering headlines are being ratcheted up.
Just last week, on Dec. 18, The Economist, with a graphic of a fire extinguisher in the shape of a dollar sign poised over rising flames, cautioned, "Despite the Fed's Efforts, the Repo Market Risks More Turbulence."
Repos (repurchase agreements) are short-term borrowing facilities traded in the fed funds market, where banks and other systemically important financial players borrow from each other. It is frightening that they blew up in September - right under the Fed's nose.
It's even more frightening that the turn of the year could put exponentially more pressure on repo rates, and spiking rates could force selling - with continued selling as margin calls force asset prices lower and lower.
Once again, it looks like we're looking over the edge of an abyss at potentially huge market losses.
But the truth is, the Fed hasn't lost anything. At least not yet.
Maybe the Fed was duped by the biggest bank in the United States into restarting quantitative easing. Or maybe it saw what was happening and let it happen to scare the hell out of banks and overleveraged hedge funds.
No one knows the truth there. The Fed's never going to tell.
But the "Fed's lost control" narrative is fake news. Sure, one hand came off the tiller, but it still has control of the ship. At least for now.
I was online with some of my team members last Wednesday while the Fed was announcing a 25-basis-point cut to the Fed funds target rate.
As usual, the conversation was lighthearted, but I got thought-provoking questions: What did I think about the fact that central banks all around the world were pumping stimulus into their economies at essentially the same time? Are we getting set up for a global smackdown as some of the market preppers are suggesting?
Stocks are sitting at or near record highs, so, naturally, Jerome Powell's Federal Reserve is expected to do its part with another 25-basis-point rate cut this afternoon at 2 p.m.
After all, the stock market is up - the Fed's unofficial, unsanctioned signal to open the cheap-money taps a little wider.
If the Fed moves as markets are "expecting" (read: demanding), this'll be the third reduction in the Fed funds target rate since July, totaling 75 basis points in all, just as it did in 1995 and 1998.
The Fed would be cutting against a backdrop of sky-high stock valuations, decelerating economic growth and job gains, a deepening manufacturing recession, and a political situation that threatens to boil over into full-blown constitutional crisis at any minute.
So this is a really dicey time for investors, but there are some opportunities for savvy folks who understand how to play the Fed against Wall Street - and Wall Street against economic reality.
Let's talk about what to do... Full Story
The printing presses have barely cooled from the Federal Reserve's post-crisis $4.5 trillion quantitative easing binge. 2014 seems like a long time ago, but $4.5 trillion is still a lot of money, and that debt is still actively wreaking havoc down in the bedrock of the economy.
Unbelievably, they're firing up the printing presses yet again down in the bowels of the Marriner S. Eccles Federal Reserve Board Building.
This time, they're engaging in a $60 billion monthly bailout of the Treasury market, specifically in the short-duration (six months or less) T-bill space.
That's $60 billion a month, folks. Annualized, this money-printing adds up to another $720 billion in fiat money creation and nosebleed-level deficit financing.
This reeks of pure desperation - panic mode at the Fed. But for savvy investors, there are three unique, easy ways to cash in on the chaos.
Predicting what the Federal Reserve will do at any of its regular meetings has turned into a cottage industry.
But honestly, no one can. Money Morning Quantitative Specialist Chris Johnson can't.
But that hasn't stopped him from devising a strategy to profit from the Fed's mixed signals.
The central bank's latest move came Wednesday, with an interest rate cut of 25 basis points.
And even with President Trump breathing down their necks, the tone is hesitant with regard to future cuts.
As investors anxiously await tomorrow’s speech from the Federal Reserve Chair, the Fed rate cut threatens a recession.
Chief Investment Strategist Keith Fitz-Gerald answers investors’ questions on the current stock market climate, and giving two stock picks that are trading at fantastic prices…
See this video to get Keith’s insider opinion about what will happen next…
Everyone was waiting with bated breath to see how China would retaliate to the White House’s latest tariffs threat.
Well, we got it – the Chinese are making moves to devalue the yuan to its lowest level in a decade, sending stock prices, bond yields, oil prices, and overall optimism crashing through the floor.
But here’s one thing to note: Investors aren’t scared of the right things right now.
It’s really no surprise that stocks aren’t doing much of anything right now.
Sure, there’s the typical summer slowdown, but even with a Fed rate cut two days away and earnings season in full swing, it’s fairly quiet.
This is because the market has already priced in the rate cut and investors are giving it a 100% chance.
So Shah’s here to fill you in on what’s really happening and why…
For the market to work, bad ideas need to fail, and stocks need to go up and down - also known as volatility - for anyone to make any money.
Unfortunately, what's happening right now is regulators and big players tipping the scales and rigging the markets.
And the net effect of all this is strange - and dangerous.
The market was expecting nothing from the Fed, and it got nothing from the Fed.
That's more or less exactly what the market wanted.
That didn't stop stocks, which had been rallying nicely, from taking a morning breather ahead of Chair Jerome Powell's announcement. I guess investors wanted to hear it right from the horse's mouth, to make sure that the "nothing" they were counting on was actually official and actually nothing.
The Fed-investor love fest, which has been ongoing throughout the 10-year bull market, is obscuring an alarming truth...
The central bank is caught between a rock and a hard place... and a hard place... and a rock... and another rock - all very pointy and sharp.
That's no exaggeration, and I'll tell you what I mean in a second.
