Black Every Day?

The VIX is no longer the the Fear Index. It is the other F word. No not that F word, the FED word. All VIX measures is fear of rate hikes. Although, come to think of it, maybe it is the other F word.
 
This is turning into a potential nightmare. The DXY is indisputably getting weaker. Six months ago the markets would rally on that. Today, the markets are trying to hold on for dear life. So, now the SPX can't go higher on a weaker dollar, and it most certainly will get body slammed on a stronger dollar.

The FED is brewing new tricks, but they won't work because nothing works unless you get the core of the economy, the middle class, cooperating and engaged economically. The unemployment rate, strictly as a number, is hugely flawed. What people want is a life, not a job to keep up with higher rents or real estate taxes, bigger tax breaks for people that don't need it, escalating health care costs, exponential costs in education. All coupled with lower purchasing power than they had ten years ago. Congratulations, you have a job that makes you feel just slightly better than a cotton picker. But hey, you can work at Starbucks and Uber to make ends meet! And that is if you are lucky.

Worse, what will make it work is nearly impossible to achieve any more, bar major pain causing major changes. Normalizing markets again will not happen because the FED thinks the economy is about corporations. And stimulating the middle class requires a revolution in politics (fiscal changes), probably which requires a new paradigm shift in thinking away from current capitalist theory.

This (nearly here if not already here) will be one of the most interesting recessions in recent history.
 
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smallStops said:
Now, if you can come up with a profitable business that takes into account these
50 million Americans, you are set :)
More...
My guess is that before it gets there, there will be a massive shift from helping wall street to helping main street. For example, if we spent the same amount of money on infrastructure and lending to small business that the FED has poured into helping banks and used that money to repair our bridges and roads, it would probably singlehandedly rebuild the middle class. People should start small businesses RIGHT NOW to help fix roads, bridges, etc etc. It has to be a double whammy - job creation and small business creation. If it goes to Catepillar etc, it will help, but it won't help the same way if the same money goes to small business. Bernie Sanders is right and wrong at the same time. He blames Capitalism when what should be blamed is crony capitalism.

The problem with the above is that it is maybe a 10 year fix. It is a bootstrap. AT THE SAME TIME, some sort of solution to educating people has to be taken. If in addition to the above, we need to initiate a plan the way we did to go to the moon to inspire a whole generation of smart people, to educate America. If each generation of Americans is more educated than the previous, I would become the biggest bull in history, with DOW 50,000 possible.

The children of these middle class people that will benefit from above have to be encouraged not to spend their new found money from real job safety on crap. So interest rates have to be desirable to encourage saving, but not so high no one wants to buy anything. My guess is that the sweet spot is 4% IR, with a flattish yield curve so that banks make some money, but people still want to afford their own home. Also, we make it extremely desirable to save that money so that their children will be able to afford to be able to get an education through massive SAVE-FOR-COLLEGE incentives.

Once you get the dominoes tipped in the right way, it causes massive money multiplication throughout the economy. The odds of this happening all at once? Zero.

One final note. Wealth creates pollution. Some sort of plan so that as wealth goes up, environmental concerns also follow, is paramount. Otherwise we will all be rich in a dying world.
 
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Here should be a new American slogan: Every child knows not only how to read, but knows how to program computers.

People think that the goal is to create programmers. Not at all. There are very few things that helps build strong analytical minds than programming. STEM job creation is now 10x easier to achieve, not because you know how to program, but because the brain you built learning to program.
 
People way over-complicate this market. it is very simple:

  • FED on hold, companies borrow trillions of dollars to buy their stock back. They don't really have to grow their business. Why bother, they can drive the stock higher themselves. All the stats follow like P/E etc. This buyback obfuscates real growth.
  • FED raises rates, companies scale back on buy backs because money gets expensive, and everyone get nervous and starts buying treasuries and selling stocks. Markets go to FV somewhere around 1700 ish.

What is so complicated? In the absence of FED rates hikes with IRs at zero or even close to zero, this market would probably go to 2500 and beyond, not on real valuations, but on buybacks with nothing opposing the buying.

The one thing that does confuse me is, unemployment going down is real. That can't happen on smoke and mirrors alone. But what if it is concealed smoke and mirrors so that it is not as obvious? That there is a balancing equation when it comes to WORLD jobs growth? What if those jobs are really just the result of currency adjustments, so that it is not based on growth but on currency manipulation? Then we are perpetually in a teeter-totter of them vs us, and the FED will perpetually never raise rates because it is either their bad news or ours. And yet, the dollar has strengthened by about 30% during this recovery. Something doesn't add up.
 
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The EURUSD loses a penny, and SPX gains 40, or about $400,000,000,000 in market cap.

Funny! This is beyond crazy.
 
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